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Warren Buffett’s advice for 2009

New Page 25.
Warren Buffett’s advice for 2009

We begin this New
Year with dampened enthusiasm and dented optimism. Our happiness is diluted and
our peace is threatened by the financial illness that has infected our families,
organisation and nations. Everyone is desperate to fine remedy that will cure
their financial illness and help them recover their financial health. They
expect the financial experts to provide them with remedies, forgetting the fact
that it is these experts who created this financial mess. Every new year, I
adopt a couple of old maxims as my beacons to guide my future. This
self-prescribed therapy has ensured that with each passing year, I grow wiser
and not older.

This year, I invite
you to tap into the financial wisdom of our elders along with me, and become
financially wiser.











Hard work
: All hard work
brings a profit, But mere talk leads only to poverty.


Laziness


:


A sleeping lobster is carried away by
the water current.


Earning


:


Never depend on a single source of

income.(At
least make your investment get you second earning.)


Spending


:


If you buy things you don’t need,

you’ll soon sell things you need.


Savings



Don’t save what is left after spending. Spend what is
left after saving.

Borrowings


:

The borrower becomes the lender’s slave.

Accounting

:

It’s no use carrying an umbrella, if your shoes are leaking.

Auditing

:

Beware of little expenses. A small leak can sink a large ship.

Risk-taking

:

Never test the depth of the river with both feet. (Have an alternate plan ready)

US economy crisis — $ 1 salary for Citi Group chief

New Page 24. US economy
crisis — $ 1 salary for Citi Group chief

Faced with national outrage at
the financial meltdown in the US channelled through a hearing by angry
law-makers, the India-born CEO of Citigroup Vikram Pandit said he will take a
salary of $ 1 and no bonus until the bank, which has accepted $ 45 billion in
government bailout money, returns to profitability.

People lined up from 6 a.m. in
the Rayburn office building for the 10 a.m. hearing, an indication of how deep
the economic crisis is now cutting into society. The testimony was also reviewed
extensively on line. About Pandit’s $ 1 offer, one blogger commented, “He’s
still overpaid.” Such is the anger in America.

(Source : The Times of India,
13-2-2009)

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Recession ignites unrest People worlwide take to streets as economies crash

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50 Recession ignites unrest People worlwide
take to streets as economies crash


In the grand sweep of the current financial crisis, a few
riots here and there may not seem to add up to much. But it is a sign of things
to come : a new age of rebellion. The financial meltdown has become part of the
real economy and is now beginning to shape real politics. More and more citizens
on the edge of the global crisis are taking to the streets. Bulgaria has been
gripped this month by its worst riots since 1997 when street power helped to
topple a Socialist government. Now Socialists are at the helm again and are
having to fend off popular protests about government incompetence and
corruption.

 

Iceland, Bulgaria, Latvia : these are not natural protest
cultures. Something is going amiss. The LSE economist Robert Wade recently
warned the world was approaching a new tipping point. Starting from March-May
2009, we can expect large-scale civil unrest, he said. “It will be caused by the
rise of general awareness throughout Europe, America and Asia that hundreds of
millions of people in rich and poor countries are experiencing rapidly falling
consumption standards; that the crisis is getting worse not better; and that it
has escaped the control of public authorities, national and international.”

 

Governments have so far managed to deflect attention from
their role in the crash, their slipshod monitoring, by declaring themselves to
be indispensable to the solution. This may save the skins of politicians in
wealthier countries who can expensively try to prop up banks and sickly
industries. But it does not work in countries that are heavily indebted, with
bloated and exposed financial sectors.

(Source : The Times of India, 2-2-2009)

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Personal touch : Name cow to get more milk

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49 Personal touch : Name cow to get more
milk


By just giving a cow a name and treating it as an individual,
farmers can increase their milk yield substantially. The study by Catherine
Douglas and Peter Rowlinson of Newcastle University found that when each cow was
called by name on farms, the overall milk yield was higher than where they were
herded in a group.

“Just as people respond better to the personal touch, cows
also feel happier and more relaxed if they are given a bit more one-to-one
attention,” explained Douglas, who works at the Newcastle School of Agriculture,
Food and Rural Development.

“What our study shows is what many good, caring farmers have
long since believed. By placing more importance on the individual, such as
calling a cow by its name or interacting with the animal more as it grows up, we
can not only improve the animal’s welfare and her perception of humans, but also
increase milk production.”

Douglas and Rowlinson questioned 516 British dairy farmers
about how they believed humans could affect the productivity, behaviour and
welfare of dairy cattle. Almost half or 46% said the cows on their farm were
called by name. Those that called their cows by name had a 258 litre higher milk
yield than those who did not, said a Newcastle release.

Sixty-six percent of farmers said they “knew all the cows in
the herd” and 48% agreed that positive human contact was more likely to produce
cows with a good milking temperament. Almost 10% said that a fear of humans
resulted in a poor milking temperament.

(Source : The Times of India, 29-1-2009)

(Compiler’s remark — This is practised in India since
ancient times.)

 

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CBI seeks HC nod to prosecute judge

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47 CBI seeks HC nod to prosecute judge



The CBI has sought approval to prosecute a Punjab and Haryana
HC judge, Justice Nirmal Yadav, in the cash-at-Judge’s-door scam which came to
light in August last year. The agency said it has completed investigations in
the case and sent a report to the Union Government and the SC.

The Judge, Nirmal Yadav is accused of taking money from a
Delhi-based hotelier. Sources said that a report had been sent also to the DoPT
by the agency because the allegations against the Judge have been substantiated
by enough evidence and it now needs the approval to prosecute the Judge. In this
case the go ahead can be provided by President Pratibha Patil in consultation
with CJI K. G. Balakrishnan.

(Source : The Times of India, 24-1-2009)

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Vatican demands closure of tax havens

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Vatican demands closure of tax havens

Pope feels closure of
such offshore banks is the first step out of the current crisis

While international
pressure is mounting on offshore banks to relax secrecy rules, the Vatican, the
seat of the Catholic Church, wants all offshore tax havens to be closed. The
official statement from the Vatican, called an encyclical, is expected to ask
for a closure of such tax havens. The encyclical is scheduled to be released on
March 18 by Pope Benedict XVI.
The Catholic Church periodically issues the encyclical on various issues it is
concerned with. It had planned to come out with an encyclical on tax havens last
year, but postponed the date following a decision to do a thorough research on
global economics and the reasons that have led to the current slowdown.

The paper, in a
scathing attack on “unhealthy and inequitable financial practices,” also pointed
to the alarming figure of global deficit caused by offshore banking. The size of
global deficit is estimated to be around $ 255 billion, almost three times the
aid given to developing countries globally. Closure of these offshore banks,
according to the Pope, should be the first step out of the current global
economic crisis. It is also reliably learnt that the encyclical sees the tax
havens as the main conduit for transferring money from poverty-stricken nations
to the rich world and the consequent impoverishment of the people in developing
and under-developed countries.

The Vatican looks at
the huge amounts siphoned off to these offshore banks as the money that the
governments in developing countries could have utilised for helping the poor.
The Church’s concern on offshore banking also coincides with the global
awareness of fiscal dangers caused by tax havens. Such havens have also featured
in issues raised during the recent US presidential campaign. Democratic
presidential candidate John Edward had said that deposits worth $ 1.5 trillion
were held by US citizens in various offshore banks.

Current US president
Barrack Obama has vowed to check tax evasion by US citizens, estimated to be
around $ 100 billion every year. UK, too, has promised to review ‘offshore
centres’ under its jurisdiction. Unofficial estimates suggest that money stashed
away in these tax havens could be anywhere between $ 11-12 trillion.

According to a recent
report submitted to the Central Board of Direct Taxes, (CBDT) by a former
revenue official, the value of deposits held by Indians in Swiss Banks alone
could be over $ 1 trillion.

(Source : The
Economic Times, 23-2-2009)

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US infrastructure on shaky ground America’s roads, dams, bridges, schools are in dire straits, according to a report by the American Society of Civil Engineers, which assigned an overall ‘d’ grade to the nation’s infrastructure

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48 US infrastructure on shaky ground
America’s roads, dams, bridges, schools are in dire straits, according to a
report by the American Society of Civil Engineers, which assigned an overall ‘d’
grade to the nation’s infrastructure


America’s roads, public transit and aviation have gotten
worse in the past four years. Water and sewage systems are dreadful. The basic
physical backbone of American society is barely above failing, a report by top
engineers says. It’ll cost $ 2.2 trillion to fix America’s ailing
infrastructure, according to highlights of a report being released early, just
as the House of Representatives readies its first vote on President Barack
Obama’s call for a massive economic stimulus spending package. The country’s
roads, dumps, dams, bridges, schools and rail systems need lots of that money,
say the engineers, who would get a piece of the pie in working on the repairs.
Government officials are already aiming billions of dollars at those physical
needs as part of a $ 825 billion economic stimulus package. But the engineers
say that’s not enough. Overall, the American Society of Civil Engineers gives
the US physical backbone for everything from schools and parks to dams and
levees a D. That’s the same overall grade as the last time the group gave a
report, in 2005, but it really is slipping from a ‘high D’ to a ‘low D’, said
report chairman Andrew Herrmann.

(Source : The Times of India, 29-1-2009)

 

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Chinese restaurant has robots as waitresses !

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39. Chinese restaurant has
robots as waitresses !


A new restaurant has opened
in Shandong province of China which has robots as waitresses. The Dalu Robot
Restaurant, in Jinan, has six robot waitresses and can cater to up to 100
diners. The website Orange reported that the restaurant’s 21 tables are set in
circles and the robots follow a fixed route to serve diners in rotation. After
serving, the robots return to the kitchen to refill their carts for the next
round. Restaurant spokeswoman Wang Xianwei said all of the waiting on tables is
done by robots. However, the food is prepared by humans, and people are also
employed to welcome customers.

(Source : The Economic
Times, dated 11-12-2010)

“Many bought into the idea
that America could go from a technology-based, export-oriented powerhouse to a
services-led, consumption-based economy — and somehow still expect to
prosper . . . . That idea was flat wrong . . . . Our economy tilted instead
toward the quicker profits of financial services.”

— Jeffrey R. Immelt, Chairman
and Chief Executive, GE.

“Even if you’re doing a good
job, it doesn’t always get reported that way.”

— Steven A. Ballmer, Chief
Executive, Microsoft.

It takes about 1,000 litres
of water to produce a kg of grain, while it takes over 100,000 litres to produce
a kg of beef.

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Intel-Tech giant plans creating ‘Sub-Atom’ chip In India

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37. Intel-Tech giant plans
creating ‘Sub-Atom’ chip In India


Efforts to take PCs to the
masses in India hasn’t had a great record. Yet, Intel is taking new initiatives
in that direction.

The company’s chief
technology officer, Justin Rattner, said that he’s starting what he calls a
‘frugal engineering’ effort at its India facility. “It’s intended to bring high
technology to these huge populations, to those whom our products for the most
part do not touch today. And India seemed to be the perfect place to do that
kind of work,” he said.

Rattner said his lab was
‘kicking around ideas’ in the space. “We want to do very low-cost PCs, very
power efficient, very robust in the face of unreliable power sources. So we are
moving from a US/European audience, with hundreds of millions of customers, to
an audience of a billion or two billion. Give them online reach, but at a price
point that is unprecedented,” he said.

For this, he is even looking
at developing a new processor, a ‘Sub-Atom’ as he called it. Atom is currently
Intel’s cheapest processor and is used for netbooks, net tops, smartphones and
the company’s smart TV platform.

Rattner expects the India
lab to do a lot of rethinking on how to provide various functions on a chip.
“The India lab is currently working on absolutely leading-edge technologies, now
moving from 32 nanometre chips to 22 nm ones. What if we backed off, and used
chips of two generations back, say 65 nm ? Now, those plants are fully
depreciated, so the wafer costs are dramatically lower. But for a very high
volume, low-cost product, that technology may be sufficient. It’s a big mental
shift for Intel”, he said.

(Source : Extracts from
an article written by Mr. Sujit John in The Times of India, dated 13-12-2010)

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Cell towers likely sources of radiation, disease : Study of DoT says India should tighten norms

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38. Cell towers likely sources
of radiation, disease : Study of DoT says India should tighten norms


Cellphone operators have
long denied their transmitting towers atop buildings or on highways have any
adverse bearing on the health of humans or animals, despite several studies
across the world concluding the contrary. Now a report for the Department of
Telecommunication by a faculty of the Indian Institute of Technology, Powai,
reinforces what scientists have long held : that areas around cellphone towers
are high-radiation and consequently high-risk zones. Moreover, it recommends
that India, which has very ‘relaxed radiation norms’, must raise the safety bar.

Girish Kumar, professor,
electrical engineering department of the Powai institute, said : “These towers
transmit radiation 24×7, so people living nearby will receive 10,000 to
10,000,000 times stronger signal than required for mobile communication. In
India, crores of people reside in these high radiation zones.”

Kumar noted that the cell
phone industry was becoming “another cigarette industry, which for long kept
claiming smoking is not harmful. In fact, cellphone/tower radiation is worse
than smoking as one cannot see it or smell it, and its effect on health is noted
after a long period of exposure. Unfortunately, all of us are absorbing this
slow poison unknowingly.”

Cell shocking :



(1)
Cancer risk :



Use of mobile phones for
more than years poses a risk of brain cancer. Children and teenagers are five
times more susceptible as their brain is not fully developed and radiation
penetration is much deeper.

(2)
Infertility :



Studies confirm cell phone
radiation can drastically affect male fertility. Studies have found 30% sperm
decrease in intensive mobile phone users, in addition to damage of sperms.

(3)
Neurodegenerative diseases :



People living near mobile
phone base stations are also at risk of developing neuropsychiatric problems
as headache, memory loss, nausea, dizziness, tremors, muscle spasms, numbness,
tingling, altered reflexes, muscle and joint paint, leg/foot pain, depression,
and sleep disturbance. More severe reactions include seizures, paralysis,
psychosis and stroke.

(4)
Skin damage :



Radiation from cell towers
and mobile phones affects human skin. It can result in an increase in mast
cells, leading to the clinical symptoms of itch, pain, edema and erythema. It
also may be instrumental in higher concentration of the transtyretin protein,
which has an important role in causing nerves diseases like Alzheimers.

(5)
Interference with other gadgets :



Radio frequency exposure
from cellular phone base antennas and mobiles can affect patients with
pacemakers, implantable cardiovascular defibrillators and impulse generators.

(6)
Melatonin reduction :



Melatonin, a vital
neurohormone, regulates our circadian rhythm. Studies with animals show a
reduction in melatonin levels following radio frequency radiation exposure
from cell phones and cell towers. Turning off transmitters resulted in a
significant increased melatonin levels within few days.

(7)
Ear & eye damage :



Radiation emitted by
mobiles may damage the delicate workings of the inner ear, and long-term and
intensive use for more than four years and for longer than 30 minutes a day
creates high risk of irreversible hearing loss. Frequent use of mobiles can
also damage the visual system.

(8)
Sleep disorders :



Use of handsets before
going to bed delays and reduces sleep, and causes headaches, confusion and
depression. The findings are especially alarming for children and teenagers as
they use cell phones at night and keep the phone next to their head, it may
lead to mood and personality changes, depression, lack of concentration and
poor academic performance.

(Source : The Times of
India, dated 7-12-2010)

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Not the worst of times

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36. Not the worst of times


As 2010 draws to a close,
the opening lines of Dickens’ A Tale of Two Cities seem appropriate. What we see
is an unusual combination of bad headlines and good economic data — not just in
India but the world as a whole. The headlines talk of Europe being in a
debt-cum-currency crisis, and President Obama battling slow growth and high
unemployment. What the headlines don’t catch is that the International Monetary
Fund has upped its global growth forecast for (calendar) 2010, from 4.2% in
April to 4.8% in October. That is not very far from the average of about 5%
growth achieved in the three years from 2005 to 2007, before the Great Recession
hit. Note also that all talk of a double-dip recession has evaporated.

This combination, of
negative headlines masking good economic data, is evident in India too. The
Government is in crisis, corruption scandals rock the nation, and Parliament is
non-functional. But the economy chugs along, with GDP growth in April-September
at 8.9% — higher than forecast. The full year could see a return to 9% growth,
buoyed by a bumper kharif harvest. Tax revenue is doing well, the foreign
exchange reserves continue to climb, and the inflation curve is dipping. As Jack
Nicholson might say, this is as good as it gets.

If the macro-economic
numbers are so good, what explains the general sense of crisis ? The answer in
the West is that the problem is not growth per se, but its distribution.
While India and China grow at 9% to 10%, the developed economies are managing
barely 2% — not fast enough to reduce the unemployment numbers that surged
during the recession of 2009. The bigger worry is that many of the rich
economies, having piled up massive debt, fear a decade of slow growth as they
pay off the debt; in other words, there will be no quick exit — not just for
Greece and Ireland but also for Britain and others.

In India, the issues that
dominate the headlines can be licked more easily, provided one decides that
every crisis can be made into an opportunity. The Raja scandal can be used to
clean up the telecom rules once and for all. The mining and land acquisition
scandals have already provoked new Bills to clean up policies in these
problem-ridden sectors. All that one needs then is for the Government to decide
that, if it is willing to have the Supreme Court oversee the investigation of
the telecom scandal, it can live with a fully independent Central Bureau of
Investigation. Manmohan Singh must see that it is not enough for him to be
honest, his Government must be honest too. The only way he can ensure that is by
having an effective crime investigation agency that is immune to political
influence.

(Source : Extracts from
an article written by Mr. T. N. Ninan in Business Standard, dated 11-12-2010)

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Short of judges, govt. to start 2 IAS-like services

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35. Short of judges, govt.
to start 2 IAS-like services


The Centre is finalising the
creation of two all India services Indian Judicial Service (IJS) and Indian
Legal Service (ILS) to fulfil its promise to create 15,000 additional courts by
2012 and meet the demand for services of legal professionals from various
departments of the Union and State governments.

We will create two all-India
services IJS and ILS mainly aimed at capacity building at the lower levels of
the judiciary and to provide professional legal advice to various departments,
Law Minister M. Veerappa Moily told TOI.

Though he was tight-lipped
about the time frame of the plan, the Minister said the IJS would help attract
talent from all over the country for
appointment at the sessions judge level.

The ministry’s Vision
Document prepared last year had promised the creation of 15,000 posts of judges
for two years to tackle the backlog of nearly 2.5 crore cases in the trial
courts. But with that apparently not working out, the Government is keen to add
to the number of nearly 17,000 trial court judges by creating the IJS.

Law leash on lawyers conduct
likely soon :

The Government has proposed
a law, the Legal Practitioners (Regulations and Maintenance of Standards in
Professions, Protecting the Interest of Clients and Promoting the Rule of Law)
Act, 2010, to oversee the conduct of more than one million legal professionals
and supervise legal education. It also envisages a Legal Services Board that
will establish a panel to represent the interests of clients of legal
professionals.

(Source : The Times of
India, dated 5-11-2010)

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Govt. proposes super regulator for lawyers

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34. Govt. proposes super
regulator for lawyers


The Centre came out with a
proposed legislation to create a super regulatory body to oversee the ethics and
conduct of more than one million advocates and legal professionals as well
supervise the legal education system.

Given the flexing of muscle
by the Bar Council of India (BCI) in the recent past by being the sole
regulatory body for advocates, the ministry’s move is seen by experts as one
that would clip the wings of BCI.

Importantly, the proposed
law Legal Practitioners (Regulations and Maintenance of Standards in
Professions, Protecting the Interest of Clients and Promoting the Rule of Law)
Act, 2010 aims to control the conduct of legal professionals solicitors not
appearing in courts, those appearing in tribunals or even representing clients
in departmental inquiries who had not been within the ambit of the regulatory
mechanism of BCI.

It aims to protect clients
from harassment at the hands of those legal professionals who are not covered
under the Advocates Act, 1961, having not been registered by the concerned State
Bar Councils. The ministry has sought comments on the proposed law from the
public and the legal fraternity.

In addition, the Legal
Services Board (LSB), proposed to be set up under the Act in line with the one
functioning in the UK, would establish and maintain a panel of persons to be
known as consumer panel to represent the interests of consumers and clients of
the legal professionals. This move is meant to check exploitation of litigants
and clients by legal professionals, including advocates. The consumer panel
shall have a fair degree of representation of both the consumers/clients of the
legal professionals and those who are using or may be contemplating using the
services of the legal professionals as consumers/clients, the proposed law
mentioned.


(Source : The Times of
India, dated 5-11-2010)



 

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The right to privacy

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33. The right to privacy

For a government that has
been busy granting the people of India rights to employment, education and food,
the United Progress Alliance has been lackadaisical in protecting the citizens’
right to privacy. Industrialist Ratan Tata was, therefore, right to seek the
protection of the Supreme Court in the matter relating to leaked tapes of
telephone tapping undertaken by the Union Government’s tax authorities. After
finishing its internal investigations, the Government must tell the Parliament
as to why the Income-tax Department ordered the tapping of the telephone of
public relations professional Niira Radia, what relevant information was
procured and what action taken and, most importantly, how those secret tapes got
leaked. A government has the right to gather information about illegal and
anti-national activities of a citizen, provided due procedure is followed. Even
so, there can be no justification for leaking such tapes to the media and making
private conversations public. If the tapes have revealed any act of criminality,
illegality and such like penal offences, the Government is duty-bound to take
action against such offenders. However, no government should allow its
intelligence arms to be used to play favourites with corporate houses, the media
or political rivals.

When conversations taped are
purely private in nature, perhaps malevolent, perhaps in bad taste, perhaps
revealing a lack of integrity or judgement on the part of the interlocutors, but
not pointing to any criminal misconduct, agencies of the Government have no
business to go public. The Government has correctly decided to probe the leak of
these tapes and the guilty ought to be punished.

The leaking of the tapes
has, of course, contributed to some soul-searching within the media and the
corporate world, and that is a good thing. A positive consequence of the ongoing
controversies could be that new norms of corporate, political, governmental and
media conduct will be adopted by all concerned. While the consequences of an
illegal act, namely the leaking of the tapes, have been positive both for the
media and public life, the act itself should not go unchallenged. There have
been far too many instances of a breach of privacy and governmental intrusion
into a citizen’s private life in recent months. An atmosphere of fear is being
generated. People worry if they are being spied upon and their privacy intruded.
What’s troubling is that rather than any national interest, such investigations
seem to serve political and corporate interests. There has to be a greater
degree of transparency in the functioning of revenue and intelligence agencies.
These agencies should not be seen as handmaidens of vested interests and those
in power. Shades of the ignominious Emergency Era are being painted, with
detractors of the ruling dispensation finding themselves in difficult
situations. These tendencies should be nipped in the bud. Hopefully, the Supreme
Court will do its bit to empower the citizen, defending the right to privacy
without in any way coming in the way of the normal functioning of various arms
of the Government. For their part, both the media and the corporate world have
their lessons to learn.

(Source : The Business
Standard, dated 1-12-2010)

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Bihar : Victory for hope

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32. Bihar : Victory for hope


Governance trumps caste
politics as NDA sweeps Bihar. One hopes that political parties across all
colours pay heed to development agenda and jettison caste-based politics.

In this season of scams, the
Bihar assembly election outcome comes as welcome relief. The massive endorsement
given to Nitish Kumar, who sought a fresh mandate for his record in office and
emphasised a politics of governance over caste and communal paradigms, has
far-reaching implications not just in Bihar but also for the rest of the
country. A better-governed Bihar, one of India’s most populated and
underdeveloped states, will have a positive impact on the social and economic
profile of the country.

The Bihar verdict is
extraordinary for a variety of reasons. The scale of the result itself is
astounding because no political party or coalition has swept assembly elections
in Bihar in this manner in recent times. The success of the Janata Dal (United)-BJP
combine is comprehensive. The wins have come from across the state, and a
three-fourths majority could not have been possible but for support cutting
across caste and communal divides. Clearly, Nitish Kumar’s tenure as chief
minister has been a departure from the chaos under Lalu Prasad and Rabri Devi.

Nitish didn’t radically
transform Bihar, but gave Biharis hope of a better future. The turnaround in the
law and order situation, a prerequisite for state building, was the first step
towards realising that. A beginning was made in building infrastructure in the
state. Roads, bridges and culverts were built which made it possible for people
to travel and made small businesses viable. School education got a fillip with
massive recruitment of teachers, while school-going girls were given uniforms
and bicycles. The rise in enrolment figures and fall in school dropout rates
indicate that these interventions have succeeded. Women have been major
beneficiaries of these interventions and they voted in large numbers, presumably
for Nitish and allies.

The challenge now is to
deliver on the mandate. The current consensus in Bihar is for social peace and
economic development. Hopefully, the opposition in Bihar too will take the cue
from the election results and reorient its politics accordingly.

(Source : Times of
India, dated 25-11-2010)

(Comment : One hopes
that political parties across all colours pay heed to development agenda and
jettison caste-based politics)

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What will India do with UNSC membership ?

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31. What will India do with UNSC membership ?


Now that India has been
elected as a non-permanent member of the United Nations Security Council (UNSC),
for a two-year term, the Government and India’s diplomatic and strategic policy
community have to decide what to do with it. There is no doubt that India has
come a long way from the ignominious defeat of 1996, when India lost the UNSC
Asian seat to Japan 40 : 142 votes, winning this time 187 : 5 votes. India’s
economic rise in the past decade and its new strategic relationships with
several major and rising powers have all contributed to this impressive vote in
its favour. However, getting into the Security Council is only the first step.
India’s problem is that on many vital global and regional issues, there is no
genuine national consensus at home. Given the weakness of inherently fractious
and myopic coalition politics, there is always the danger that on vital issues,
the Government may find its hands and feet tied when it comes to taking a
position at the UNSC.

Hence, now that India is a
UNSC member, the Government should pro-actively seek to build a national
consensus on foreign policy issues of vital concern to India. In a democracy,
there will always be some critics of Government. That is both a necessary and
valuable aspect of a democracy. However, within the national mainstream, there
has to be some consensus on important international and regional issues where
India would be required to articulate its views at the UNSC. Apart from building
political consensus on international issues, the Government must also revitalise
and strengthen its foreign policy machinery. India has one of the smallest
foreign offices among major and rising powers. Its institutional capacity and
capability for diplomacy has not kept pace with the challenges of the new
post-Cold War and increasingly multipolar world that India now deals with.
Increasing recruitment at the entry level will not suffice. India needs a
quantum increase in manpower and intellectual capability in its foreign policy
machinery in a short period of time. This can only come from lateral entry of
professionals from other walks of life into diplomatic service. This challenge
will become even more pressing once India takes over the UNSC Asia seat from
Japan.

(Source : The Business
Standard, dated 14-10-2010)

(Comment : We also
need lateral entry of professionals in other areas of policy making !).

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Any bona fide measures taken by revenue to prevent circulation of black money, cannot be objected as interference with personal liberty or freedom of a citizen — SC

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  1. Any bona fide measures taken by revenue to
    prevent circulation of black money, cannot be objected as interference with
    personal liberty or freedom of a citizen — SC



The carrying of a huge sum itself gives rise to a
legitimate suspicion; the intelligence officers of revenue are, therefore,
entitled to satisfy themselves, not only that the money is from a legitimate
source, but also satisfy themselves that such a large amount is being carried
for a legitimate purpose; therefore, even if the carrier is not guilty of any
offence in carrying the money, the verification or seizure may be warranted to
ensure that the money is not intended for commission of a crime or offence.

Rajendran Chingaravelu v. R. K. Mishra, Addl. CIT,
(Civil Appeal No. 7914 of 2009) dated November 24, 2009.

(Source : Internet & Media Reports, dated 14-12-2009)

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Foreign investment proposals — via Mauritius

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  1. Foreign investment proposals — via Mauritius

As per recent press reports, the Foreign Investment
Promotion Board (FIPB) has rejected the view of the Tax Authorities to reject
foreign direct investment (FDI) proposals where such investments are proposed
to be made via Mauritius. The FIPB is said to have taken a policy decision not
to overrule such FDI proposals merely because they are proposed to be made
from Mauritius. The Tax Authorities are suspecting that ‘Treaty shopping’ is
being done by foreign investors by using Mauritius jurisdiction for investing
in India.

This question came up before the FIPB while considering a
proposal by a Mauritian holding company which wanted to invest a large sum of
money in a fund in India (India Value Fund). It is reported that rejecting the
‘Treaty shopping’ objection of the Department of Revenue, Ministry of Finance
(Revenue Department), the FIPB has approved this proposal and the proposal
will now be placed for final approval before the Cabinet Committee of Economic
Affairs (CCAE) of the Government of India.

The Revenue Department was having a generic objection to
foreign investment routed through Mauritius, with which India has signed a
DTAA. The concern of the Revenue Department is that Treaty shopping by a
resident of a third country results in loss of tax revenue for the Indian
Government by claiming capital gains tax exemption in India under the DTAA. It
is worth mentioning here that a large portion of FDI in India comes from
Mauritius.

The view of the FIPB is that since India has signed a DTAA
with Mauritius which is in force, the Revenue Department cannot take a generic
objection of ‘Treaty shopping’ for denying the foreign investment proposed via
Mauritius.

[It will be pertinent to note here that the Revenue
Department has issued a clarification dated 13 April 2000 (Circular No. 789)
clarifying that Foreign Institutional Investors (FIIs) and other foreign
investors who hold a valid ‘Tax Residency Certificate’ granted by Mauritius
Tax Authorities, will be regarded as residents of Mauritius and also the
beneficial owners of shares, etc. for granting of capital gains tax exemption
in India as per the India-Mauritius DTAA. The legal validity of this Circular
was later approved by the Supreme Court of India in its landmark ruling in the
case of Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706.]

(Source : Business Standard, New Delhi, dated
7-11-2009)

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Non-residents can work on Indian projects only on employment visa; Business visa norms to be tightened.

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  1. Non-residents can work on Indian projects only on
    employment visa; Business visa norms to be tightened.

In the present liberalised economic environment, Indian
companies are awarding work for execution of projects/contracts to foreign
companies, including Chinese. This has resulted in inflow of foreign
nationals, including Chinese, for execution of projects/contracts in several
sectors e.g., steel, power, etc. It has come to the notice of the
Government that a large number of foreign nationals, including Chinese were
coming for execution of projects/contracts in India on Business Visas instead
of the Employment Visas.

The matter has, therefore, been reviewed by the Government
and it has been decided that henceforth Business Visa will be issued only to
bona fide foreign businessmen who want to visit India to establish an
industrial/business venture or to explore possibilities to set up
industrial/business venture in India or who want to purchase/sell industrial
or commercial products or consumer durables, etc. according to provisions of
Visa manual.

It has also been decided that all foreign nationals coming
for execution of projects/contracts in India will have to come only on
Employment Visa and that such Visa will be granted only to skilled and
qualified professional appointed at senior level, skilled position such as
technical expert, senior executive or in a managerial position, etc. and will
not be granted for jobs for which a large number of qualified Indians are
available. Suitable instructions/guidelines have been issued to the Indian
Missions abroad to effectively regulate Employment and Business Visa regimes
and ensure that these are issued strictly as per prescribed norms.

As per the guidelines issued by the Government, Employment
Visa for foreign personnel coming to India for execution of projects/contracts
may be granted by Indian Missions to highly skilled and professionals to the
extent of 1% of the total persons employed on the project, subject to a
maximum of 20. However, this has been raised to 1% or maximum of 40 for power
and steel sector projects till June 2010. In case more foreign nationals are
required for any project then clearance of Ministry of Labour & Employment is
required.

(This information was given by the Minister of State for
Labour and Employment Shri Harish Rawat in a written reply in the Rajya Sabha.)

(Source : Internet & Media Reports, dated 16-12-2009)

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Anti-money laundering Act : RBI tightens KYC norms for politically exposed persons

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  1. Anti-money laundering Act : RBI tightens KYC norms for
    politically exposed persons

With the Prevention of Money Laundering (Amendment) Act,
2009 (No. 21 of 2009) coming into force from June 1, the RBI has advised all
NBFCs to maintain records of clients for a period of 10 years from the date of
transaction. The NBFCs will have to keep records of the identity of the
clients, both domestic or international, which will permit reconstruction of
individual transactions so as to provide, if necessary, evidence for
prosecution of persons involved in criminal activity.

However, records pertaining to the identification of the
customer and his address (e.g., copies of documents like passports,
identity cards, driving licences, PAN card, utility bills, etc.) obtained
while opening the account and during the course of business relationship would
continue to be preserved for at least 10 years after the business relationship
is ended as required under Rule 10.

RBI has further issued detailed guidelines on Customer Due
Diligence (CDD) measures to be made applicable to Politically Exposed Persons
(PEP) and their family members or close relatives. It is further advised that
in the event of an existing customer or the beneficial owner of an existing
account, subsequently becoming a PEP, NBFCs (including RNBCs) should obtain
senior management approval to continue the business relationship and subject
the account to the CDD measures as applicable to the customers of PEP category
including enhanced monitoring on an ongoing basis.

(Source : Internet & Media Reports, dated 17-11-2009)

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Fin panel moots dual rate for GST, end to all sops

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  1. Fin panel moots dual rate for GST, end to all sops

A task force on GST set up by the Thirteenth Finance
Commission has recommended that the tax on all goods and services be dropped
to 5% at the Centre and 7% at the state level, and that all exemptions be
scrapped. It does not, however, recommend a concessional rate for essential
items, as is the norm at present with the central excise and state value-added
tax.

The task force recommendations need not form the basis of
any decision on GST framework made by the Centre and states, both of which are
at an advanced stage of finalising their proposals for a dual GST. However, it
would serve as an input for the Finance Commission to work out the formula for
sharing Centre’s tax revenues with states. The report suggests that states as
well as the Centre completely give up their discretion to effect any changes
to tax rates unilaterally.

The changes will have to be approved by a council of
ministers, which would have the state finance ministers and the Union finance
minister as members. States would see this as an encroachment on their fiscal
autonomy. The council is to be a constitutional body, unlike the empowered
panel of state FMs which is a toothless body.

The panel has recommended that exemptions given to SEZs be
scrapped, and instead all goods and services exports be zero-rated. Only
public services provided by all levels of government, unprocessed food covered
by the PDS, education and health are to be exempt.

Other far-reaching recommendations include bringing real
estate into the ambit of GST. Thirteenth Finance Commission Chairman Vijay
Kelkar had been keen on this, and said as much at various fora. GST on real
estate would benefit homebuyers. Prices would fall as developers would get
credit for taxes paid on all inputs.

The impact of broadbasing the tax and dropping the rate
would be mixed. At one level, tax rates on most items will plummet,
translating into lower prices for buyers. The report suggests the transition
to the ‘flawless GST’ would result in a 1.22-2.53% drop in the prices of most
manufactured goods. Conversely, a host of items that are currently outside the
tax net or enjoy concessional rates — such as agri commodities and services —
may become slightly expensive.

(Source : The Economic Times, dated 16-12-2009)

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The CAG report on public sector units is a scandal in numbers.

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  1. The CAG report on public
    sector units is a scandal in numbers.

  • 419 number of Central public sector undertakings.

  • Rs.4,77,191 crore invested in equity and loans in
    government companies, corporations and institutions.

  • 284 companies and corporations audited by CAG. Of these
    185 earned profits, 70 were in the red and 24 were not operational.

  • 30 number of PSUs that were defunct or under liquidation.

  • 13 number of companies recommended for closure, winding
    up.

  • 72 number of companies with a negative net worth.

  • Rs.94,428 crore accumulated losses of the 72 companies in
    2007-08.

(Source : Business India Magazine, dated 8-11-2009)

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No entry for foreign law firms : Bombay High Court

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  1. No entry for foreign law
    firms : Bombay High Court

Foreign law firms have finally got a firm no-entry sign for
India. Almost 15 years after the RBI permitted three foreign law firms to set
up shop in India, the Bombay High Court said the decision of the bank was
unjustified under the existing laws that governed advocates and their practice
in the country.

Putting a full stop on the ‘can-they-can’t-they’ arguments
over entry of foreign law firms into India even for practice on only
non-litigious matters, the HC Bench headed by the Chief Justice held that
foreign law firms were barred from practising in the country under the
existing Advocates Act of 1961 and the various bar councils under it.

The HC disposed of a public interest litigation filed by
Lawyers’ Collective way back in 1995 against the permission given by the RBI
to the three foreign law firms. In 1995, the HC had stayed the bank’s
decision, but then the matter lay in cold storage for years before a lengthy
and heated hearing on the issue took place in Court for and against the
proposition. The Government said that practice by lawyers under the law meant
only litigious practice in Court, but dismissing that argument, the HC held
that, “It would mean that advocates debarred for professional misconduct would
then merrily carry on with practice in litigious matters.’’

“When efforts are being made to see that the legal
profession stands tall in the fast-changing world, it would be improper to
hold that the 1961 Advocates Act and the bar councils have limited role to
play in the field relating to practice of law,’’ the Court held.

But on the issues of reciprocity and other rules to enable
practice by foreign law firms in India, the HC directed the Central Government
which has been dealing with the issue for the last 15 years, to take an
appropriate decision ‘expeditiously’. The Centre was all for paving the way
for foreign law firms, but the Bar Council of India (BCI) was against letting
them in.

Till the Government decides to come out with a new law or
amend the existing laws, the HC said that persons practising the legal
profession whether in litigation or non-litigation work will be governed by
the Advocates Act, the Bar Council of India and the various state bar councils
as well as Courts to take action for professional misconduct.

Non-litigious practice of law in India is not unregulated
said the HC, quashing an argument made by the pro-foreign law firms’ lobby
that the law in India only covered practice in Court.

(Source : The Times of India, dated 17-12-2009)

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Fill vacant OBC quota seats with general category candidates : SC

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34 Fill vacant OBC quota seats with general category
candidates : SC

The Supreme Court today declared that the seats re-served
for ‘other backward classes’ (OBC) in Central educational institutions that
remain unfilled can’t be carried over to the next year and would have to be
filled in the same year from the general category.

The Court also ruled that the relaxation of marks for the OBC
category should not be more than 10% of those fixed for the general category.

These orders will come into effect this year itself.

The Constitution Bench headed by Chief Justice K. G.
Balakrishnan passed the orders while hearing an application seeking
clarifications in a recent judgment on the OBC quota in Central educational
institutions, especially the ones like the IITs and IIMs. In that judgment, a
few Judges had made certain observations on the limit for relaxation of rules
for the OBC candidates. Today’s order puts to rest doubts over the issue in
Government circles, educational institutions’ managements and students.

Moving the application, senior counsel K. K. Venugopal raised
another controversial issue, namely, the economic criterion for identifying the
OBC community. He referred to a reported decision of the Union Cabinet to make
every family with income up to Rs.4.5 lakh eligible for the reservation.

The counsel said that this was contempt of Court as it was
intended to circumvent the ‘creamy layer’ rule. He recalled the declaration of
the Kerala Government some time ago that there was no ‘creamy layer’ to be kept
out of the benefit in that State. The Supreme Court had struck down the
Notification.

The Judges told the counsel that this was a separate issue
and if a petition was moved regarding this, they would consider it. Venugopal
said he would move a petition challenging the Cabinet decision.

(Source : Business Standard, dated 15-10-2008)

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A reader’s feedback in Outlook Business dated 18-10-2008

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33 A reader’s feedback in Outlook Business dated 18-10-2008


“Your story says that India Inc is suffering unfairly because
of imbroglios such as Singur. But, remember villagers who have no other means to
make a living are affected by such uncontrolled indus-trialisation. Progress
should be equitable, with no one left behind.”

— Anirbhan Dasgupta, Kolkata

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Greenspan admits to ‘flaw’ in his

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31 Greenspan admits to ‘flaw’ in his market ideology

Former Federal Reserve Chairman Alan Greenspan said a
“once-in-a-century credit tsunami” has engulfed financial markets and conceded
that his free-market ideology shunning regulation was flawed.

“Yes, I found a flaw,” Greenspan said in response to a
grilling from the House Committee on Oversight and Government Reform. “That is
precisely the reason I was shocked because I’d been going for 40 years or more
with very considerable evidence that it was working exceptionally well.”

Greenspan said he was “partially” wrong in opposing
regulation of derivatives and acknowledged that financial institutions didn’t
protect shareholders and investments as well as he expected. Forecasting is an
inexact science, he said.

In May 2005 speech, Greenspan said that “private regulation
generally has proved far better at constraining excessive risk-taking than has
government regulation.”

Committee Chairman Henry Waxman, a California Democrat, said
Greenspan had “the authority to prevent irresponsible lending practices that led
to the sub-prime mortgage crisis.”

“You were advised to do so by many others,” he told
Greenspan. “And now our whole economy is paying the price.”

Greenspan opposed increasing financial supervision as Fed
Chairman from August 1987 to January 2006. Policy makers are now struggling to
contain a financial crisis marked by record foreclosures, falling asset prices
and almost $ 660 billion in writedowns and losses tied to US sub-prime
mortgages.

(Source : Business Standard, dated 24-10-2008)

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US Court verdict on software process patent stirs debate

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29 US Court verdict on software process patent stirs debate

A US Federal Court judgment disallowing business method (or
process) patenting, may have a direct impact on the ongoing debate over
amendments to the Indian patents manual. The US judgment could help in
interpreting whether business processes or software written in India can be
patented or not.

While large IT players like Microsoft, IBM have given a
thumbs up to the Bilski judgment, Indian companies like Infosys had been
lobbying for patents on software systems and methods. A US Federal Court for
appeals in Washington ruled against Bernard Bilski, who wanted to patent a
method for managing weather-related risk through commodities trading. The Court
said that business methods (like Amazon.com Inc’s one-click to buy goods on the
Internet, which was quashed later) cannot be patented.

Sun Microsystems’s director, Jaijit Bhattacharya said that it
was a positive move towards an appropriate interpretation of innovation and
patentability of software. “It would allow a more open regime and would help in
wider access to computing technologies,” he said.

Companies like IBM, Microsoft lobbied against business method
patenting. But companies like Accenture, Royal Philips Electronics NV, Bain
Capital LC were asking for more protection for business method patenting.

However, the ruling does not significantly impact large
Indian IT services companies, as none are majorly into product development and
patenting, at least at present. India’s largest IT services company TCS said
that it’s reviewing its stand on software patenting in the light of the current
judgment.

“The ideas and frameworks for business processes should not
be patentable but the content written within those frameworks should be allowed
to be copyrighted. Indian law is also within boundaries of the US Court
judgment,” said Nasscom President Som Mittal. There are few world famous Indian
IT products — like Flexcube and Finacle. But the judgment may affect smaller
companies which want to innovate, but were earlier being strangled by large
corporations on account of patenting of a process.
The judgment may also be used in the larger debate on software patenting in the
country. Venkatesh Hariharan, founding member of Knowledge Commons, an NGO,
said : “Business method patents are seven times more likely to be litigated as
compared to other patents, because it’s difficult to determine the boundaries of
abstract patents categories like business method and software patents. Indian
law is against software patents, but in practice, several software and business
method patents have been granted and these will need to be weeded out to prevent
future litigation. Overall, this is a good decision because it will reduce the
risk of litigation that hangs over users and developers of software.” Knowledge
Commons is lobbying for ‘no patents on software in India’ if it (the software)
is not tied to a specific hardware.

According to S. 3(k) of the Indian Patent Act : “A
mathematical or business method or a computer programme per se or
algorithms are not patentable.” But software in conjunction with hardware is
patentable in accordance with Indian law, which is giving rise to ambiguity. The
Bilski judgment may however be used as a reference for drafting the amendments
to the Indian Patents Manual and will also help in interpretation of the Indian
Patent Act. While rulings over the years have used different methods to
determine if a process is patentable, the Federal Court ruling said the sole
analysis should be the ‘machine-or-transformation’ test — which requires showing
that the claimed invention is either tied to a particular machine or that it
transforms an ‘article’ (such as a substance or data).

(Source : The Economic Times, dated 1-11-2008)

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Declare war on terror

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30 Declare war on terror

We, the people of India,

Declare war on terror today.

We face the gravest threat as a nation.

We pledge to


Fight against those who kill the innocent


Support measures that insure our safety


Expose corruption and incompetence that endanger

our security



Defeat the enemy by having zero tolerance of terror


Eliminate the forces which propagate hate


Be united in our resolve

Till victory is ours

(Source : India Today, dated 15-12-2008)

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Freedom from economics — Olympics in numbers

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28 Freedom from economics — Olympics in numbers

91,000 :

The number of seats available in the Bird’s Nest.

50 :

In minutes, the time it took to send all the athletes present
back to the Olympic Village after the ceremony.

10,000 :

The number of raincoats prepared for the athletes in case of
rain.

22,000 :

The number of performers and advisors for the ceremony.

314,224 :

Couples tied the knot across China on 8-8-2008, a one-day
record for marriages since 1949, when the People’s Republic of China was
founded. In Beijing alone, the host city of the Olympics, 15,646 couples were
married, 23 times the daily average.

75 :

In minutes, the time it took for the audience to leave after
the ceremony, which was 15 minutes less than expected.

(Source : The Economic Times, 11-8-2008)

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India and China — A comparison

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  1. India and China — A comparison

The government simply has to find a way to deliver the
basics. That is what will defeat the Maoists and hold off China.

Tensions with China and the challenge posed by Maoists have
had their share of headlines these past few weeks. They are seemingly
unconnected issues, but they come into focus together when one looks at key
statistics on economic growth and human development. Take China first, for it
has acquired massive strategic advantage in terms of global economic impact,
diplomatic reach, military might and a hold on the world’s imagination because
it has performed spectacularly over three decades. Its economy has grown
10-fold since 1978, while its foreign trade has multiplied 70-fold in the last
decade alone; its exports are now more than India’s GDP. By way of comparison,
India’s GDP has multiplied about six-fold in the same period. It will take
India a full decade to reach China’s current level of per capita income. By
then, China will have overtaken the United States as the world’s largest
economy (calculated on the basis of purchasing power parity).

When it comes to human development indicators, the gap is
even greater. China’s human development index (calculated by the UNDP on the
basis of three factors — income, life expectancy and education) was 0.772 in
2007; India’s was 0.612, which was the level China had reached in 1990 ! At
the present rate of progress on the index (1.3% a year for India, about the
same as China’s), it will take two decades for India to get to where China is
today. As for economic development, China creates 10 times the power
generation capacity that India does in a year. Whichever indicator you choose,
China is one to two decades ahead of India, and on a rapid ascendancy curve.
Naturally, it will flex its muscles.

All this is history, and explains power disparities between
the two countries today. What of the future ? Some answers come in the World
Competitiveness Report, put out by the International Institute of Management
Development (IMD). Among 57 countries, China ranks 20th, India comes in 30th.
What is revealing is why India ranks so low. Of four primary factors, the
country does very well on economic performance (12th) and business efficiency
(11th). But on government efficiency it ranks 35th, and on infrastructure 57th
(i.e., last !). Go into the details and the rankings become even more
instructive : the last rank is on account of education, and health and
environment, while on business legislation India comes in 42nd. In other
words, the primary challenges are in areas where action is required most of
all from the government.

(Source : T. N. Ninan in Business Standard,
24-10-2009)

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Stop consuming these medicines — Popular cold, pain drugs face ban

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  1. Stop consuming these medicines — Popular cold, pain drugs
    face ban

Popular and widely-used medicines like phenylpropanolamine
or PPA (found in cough and cold remedies like Vicks Action-500, Solvin,
Wincold), gastrointestinal tegaserod (marketed as Ibsinorm, Tegod, Tegibs),
anti-bacterial gatifloxacin (Gaity) and painkiller nimesulide (Nice and
Nimulid) are under government scanner on concerns raised about their adverse
reactions. The drug technical advisory board (DTAB) will take a decision next
month to ban or restrict the usage of these and other drugs whose combined
market sales are pegged close to Rs.400-500 crore a year.

Other ‘controversial’ drugs, letrozole (used for
infertility treatment in women; letroz), emergency contraceptive drug
levonorgestrel (I-pill and Unwanted 72), and human placenta extract (Placentrex
lotion and gel sold by Albert David) will also be examined by the health
ministry. Besides taking a decision on banning certain drugs or restricting
the use of some, DTAB will examine next month whether emergency contraceptive
pills should be available over-the-counter (OTC) as reports of their misuse
are frequent. It will also take a decision on whether letrozole, approved for
use in breast cancer, should be used for infertility treatment or not, a
health ministry official told TOI.

Earlier this year, the DTAB banned anti-obesity drug,
rimonabant, on account of its serious side effects.

(Pending a formal ban, doctors should stop prescribing and
we should stop using these medicines)

(Source : The Times of India, 1-11-2009)

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Security body sniffs at PN path to havens — Measures to Trace origin of funds thru PNs — NSC

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  1. Security body sniffs at PN path to havens — Measures to
    Trace origin of funds thru PNs — NSC

The National Security Council Secretariat has called for
measures to trace the origin of inflows through participatory notes (PNs) and
entities registered in tax havens like Mauritius, Cyprus and Cayman Islands, a
move that can impact both portfolio flows and foreign direct investment (FDI).

Unchecked flow of funds through these routes could result
in country-specific restrictions being rendered useless, the council has
informed top guns in the government. If the traceability condition does not
materialise, the government should make prior government approval mandatory
for investment from all known tax havens, the Council has suggested.

This means that investment in sectors where 100% FDI is
allowed through the automatic route would also need approval from the Foreign
Investment Promotion Board (FIPB) if the government accepts the Council’s
suggestion.

In the case of PNs, the Council has called for more
disclosures since actual source of funds remains unknown even after extensive
investigation. There is also a need to distinguish investment by private funds
as compared to sovereign funds, the Council has said in a note, recommending
measures to step in security screening of FDI in view of increase in
cross-border terror attacks and escalation in money laundering.

PNs are used by overseas investors, who are not registered
with SEBI, to invest in the Indian market through registered foreign
institutional investors (FIIs). Despite recent efforts to discourage
investments through PNs, flows through this route continue.

Almost 44% of the equity FDI inflows into the country
originate from Mauritius while Cyprus accounts for nearly 2.93% of the FDI
flowing into India. Cayman Islands is the 12th largest source of FDI flows
into India, accounting for nearly 0.71% of the foreign investment into India.

The revenue department has also been objecting to FDI from
tax havens on grounds of ‘treaty shopping’ or use of these destinations to
route funds flows with the objective of gaining a tax advantage.

(Source : The Economic Times, 23-10-2009)

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CVC for major penalty against 4 from CBEC and 3 from CBDT in August

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  1. CVC for major penalty against 4 from CBEC and 3 from CBDT
    in August

The Central Vigilance Commission disposed of 536 cases
during August 2009 referred to it for advice. The Commission advised
initiations of major penalty proceedings against 106 officers. Of these, 21
were from M/o Railways, 21 from public sector banks, 13 from MCD, 8 from
Northern Coalfields Ltd., 5 from Central Coalfields Ltd., 4 each from CBEC,
MHA & Ministry of Urban Development, 3 each from P.G. Institute of Medical
Education & CBDT, 2 each from D/o Telecommunications, Ministry of Labour and
ESIC. The remaining 7 cases pertained to different departments of the
Government of India and PSUs.

The Commission also advised imposition of major penalty
against 68 officers including 14 from National Aluminum Co. Ltd., 12 each from
Central Coalfileds Ltd. & Public Sector Banks, six from Ministry of Railways,
5 each from National Insurance Co. Ltd. & DDA, 2 each from Border Roads
Development Board & Central Board of Excise and Customs. Remaining 10 cases
pertained to different departments of the Government of India and PSUs.

On the Commission’s recommendations, the competent
authorities issued sanctions for prosecution against 20 officers including 16
from CBEC. Major penalty was imposed on 77 officers. These included 10 from
FCI, 9 from Ministry of Railways, 8 from New India Insurance Co. Ltd., 7 each
from Public Sector Banks & Oriental Insurance Co. Ltd., 6 each from Department
of Telecommunications & ICAR, 5 from Eastern Coalfields Ltd., 3 each from DDA,
Council for Development Peoples & CBDT, 2 each from Central Warehousing Corp.
Ltd. & Ministry of Water Resources. The remaining 6 cases pertained to
different departments of the Govt. of India and PSUs.

Recoveries to the tune of Rs.29.15 crore were affected
after Commission conducted technical examination of some departments.

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7,500 offshore tax evaders come clean

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  1. 7,500 offshore tax evaders come clean

Some 7,500 wealthy Americans turned over information about
hidden overseas assets, including some valued at more than $ 100 million,
ahead of a tax amnesty program’s deadline, the top US tax collector said. Doug
Shulman, commissioner of the Internal Revenue Service, said his agency would
expand its crackdown on offshore tax evasion and will open new criminal
investigation offices in Beijing, Panama and Sydney, Australia. The amnesty
plan revealed accounts in 70 countries.

Under the amnesty program that began in September, tax
cheats can declare offshore accounts and income, pay reduced fines and, in
general, get immunity from criminal prosecution. The program turned up
undeclared offshore accounts ranging from $ 10,000 to more than $ 100 million.
At the heart of the US offshore tax effort is the government’s investigation
of UBS AG (UBSN.VX). The giant Swiss bank earlier this year settled a criminal
probe by paying $ 780 million and admitting it helped US citizens evade taxes.
In August, the bank agreed to turn over 4,450 names of clients with
undisclosed offshore accounts to end a related civil lawsuit.

Senator Carl Levin, a Democrat and chairman of the Senate
Permanent Subcommittee on Investigations, has estimated the US loses $ 100
billion annually from international tax evasion. He questioned how many of the
individuals came forward without nudging from banks.

(Source : www.financialexpress.com, 20-10-2009)

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Govt. readies biz vigilance system

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  1. Govt. readies biz vigilance system

Having failed to detect the Satyam scam, the government has
embarked on a new vigilant system to track corporate frauds. As a part of
this, it has decided to look into companies whose financials are found to be
suspicious.

There will be several triggers to generate any suspicion on
the activities of a corporate. These include things like unusually high jump
in profits, suspect related party transactions, and huge amounts of unutilised
cash and bank balance, the official said.
Once a list of suspect companies is drawn up, these would be looked into by
the RDs and the RoCs who would look into their filings and financials further.

However, this would be a noninvasive document verification exercise, the
official said, pointing out that there was no intention of hounding the
corporate sector.

The technology-driven initiative comes as the government is
taking steps to further strengthen the MCA21 programme, which was initiated in
2006 and enables electronic filings, storage, retrieval, processing and
transmission of transactions, including incorporation of a company, and filing
of annual and statutory returns. The exercise to upgrade MCA21 has started,
ministry officials said.

(Note : Let us keep our fingers crossed & see how
the system actually works. People behind the system are more important than
the technology involved. Corruption can subvert any sophisticated & advanced
system.)

(Source : The Times of India, 27-10-2009)

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PwC wants early Satyam settlement

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  1. PwC wants early Satyam settlement

Price Waterhouse, the Indian affiliate of global accounting
firm PricewaterhouseCoopers, has filed a consent application with capital
market regulator SEBI as part of an effort to reach an early settlement to the
ongoing investigation into the accounting fraud at Satyam Computers, renamed
as Mahindra Satyam, after the Mahindra group acquired the troubled company
earlier this year.

Price Waterhouse was the statutory auditor for Satyam
Computer, whose founder Ramalinga Raju confessed in January this year to
having fudged accounts to perpetrate a Rs.7,000-crore financial fraud. A probe
into the scam revealed that documents were forged to back fake bank deposits.

Price Waterhouse filed an application late last week in response to the show
cause notice that SEBI had issued in February 2009. This consent application
is in line with SEBI’s regulations and does not acknowledge Price Waterhouse’s
alleged wrongdoing in the Satyam fraud.

A Price Waterhouse spokesperson confirmed that the firm has
decided to pursue consent proceedings in relation to SEBI proceedings on the
audit of Satyam Computer Services rather than engage in a potentially long
drawn out legal proceedings with the regulator.

Under SEBI rules, after a consent application is filed,
representatives of SEBI meet up with the company to arrive at some sort of a
settlement, which could also include payment of a fine. After both parties
agree to a settlement, a high powered committee of SEBI passes a consent
order.

(Source : The Economic Times, 24-10-2009)

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Rules under Information Technology Act notified

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  1. Rules under Information Technology Act notified

The Information Technology (Amendment) Act, 2008 has come
into force today. The Rules pertaining to S. 52 (Salary, Allowances and Other
Terms and Conditions of Service of Chairperson and Members), S. 54 (Procedure
for Investigation of Misbehaviour or Incapacity of Chairperson and Members),
S. 69 (Procedure and Safeguards for Interception, Monitoring and Decryption of
Information), S. 69A (Procedure and Safeguards for Blocking for Access of
Information by Public), S. 69B (Procedure and safeguard for Monitoring and
Collecting Traffic Data or Information) and notification u/s.70B for
appointment of the Indian Computer Emergency Response Team have also been
notified.

With proliferation of information technology enabled
services such as e-governance, e-commerce and e-transactions; data security,
data privacy and implementation of security practices and procedures relating
to these applications of electronic communications have assumed greater
importance and they require harmonisation with the provisions of the
Information Technology Act. Further, protection of Critical Information
Infrastructure is pivotal to national security, economy, public health and
safety, thus it had become necessary to declare such infrastructure as
protected system, so as to restrict unauthorised access.

So, penal provisions were required to be included in the
Information Technology Act, 2000. Also, the Act needed to be
technology-neutral to provide for alternative technology of electronic
signature for bringing harmonisation with Model Law on Electronic Signatures
adopted by United Nations Commission on International Trade Law (UNCITRAL)
Keeping in view the above, Government had introduced the Information
Technology (Amendment) Bill, 2006 in the Lok Sabha on 15th December 2006. Both
Houses of Parliament passed the Bill on 23rd December 2008. Subsequently the
Information Technology (Amendment) Act, 2008 received the assent of President
on 5th February 2009 and was notified in the Gazette of India.

(Source : Internet & Media Reports, 28-10-2009)

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New cyber law casts its net wide

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  1. New cyber law casts its net wide

The country’s cyber law has finally caught up with cyber
criminals. Eight months after it received presidential assent, the amended
Information Technology Act of 2008 came into force on October 27. The amended
Act has spread its net to tackle more offences, including cyber terrorism,
Wi-Fi hacking, sending and viewing child pornography, video voyeurism,
identity theft and even spam. But at the same time, it allows the government
to intercept information and snoop on its citizens. The original Act had
effectively just one criminal S. 66 for cyber crime and it was widely worded,
but vague. The new Act covers a range of crimes that attract punishment from a
three-year jail term to a life sentence.

Critics say the flip side is that it gives unfettered power
to the government to monitor all e-traffic. The information could be misused,
say cyber activists. The central government, though, says safeguards have been
put in place to check misuse.

(Source : The Times of India, 28-10-2009)

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One-third of 80,000 public limited companies not filing annual returns

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  1. One-third of 80,000 public limited companies
    not filing annual returns

The Corporate Affairs Ministry said that around 30% of the
80,000 public limited companies are not filing their annual returns. The
Ministry has asked the Registrar of Companies (RoC) not to strike off the
names of companies by classifying them as defunct, even if they have not filed
their annual returns for three years. This is to find out if any of such
companies have committed violations of law.

The Ministry has developed an Early Warning System to find
out if any Satyam-like frauds are happening in any company. The Early Warning
would be sounded if a company’s profits show an absurd jump (that is, if they
exceed a certain threshold limit) or if companies cite absurd values regarding
their related party transactions. Besides, the warning would be sounded if a
company has huge cash balances remaining unutilised for several years, he
said. The official said the Ministry has asked RoCs and Regional Directors to
spread awareness about the advantages of getting a company listed. “Listed
companies have a better corporate profile and they have more borrowing
opportunities,” he said.

(It appears that the Authorities were sleeping all these
years — they acted only as filing clerks !)

(Source : Internet & Media Reports, 28-10-2009)

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Changes to RTI Act will make it toothless

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  1. Changes to RTI Act will make it toothless

This is the second time in the past four years that the
Right to Information (RTI) Act, which has made a difference to the lives of
millions of ordinary people, is under the threat of becoming toothless.

This time around, the Centre has proposed several
amendments to the sunshine act, including denial of information about file
notings where decision is yet to be taken and adding clauses that allow a
public information officer (PIO) to deny information by deeming it as
frivolous or vexatious in nature.
Shailesh Gandhi, who is now the Central Information Commissioner, Delhi,
emphasised that the RTI Act must not be touched as its provisions empower
citizens to procure information without delay and harassment from state
officials. “Any kind of change will only cause confusion and it will be used
as a ploy by PIOs to deny information.’’

“The DoPT had proposed amendments such as defining
institutions which have substantial finance funding and even adding
sub-sections to S. 4 of the Act. S. 4 of the RTI Act empowers citizen to suo
moto inspect government files and documents and there is no need to add a
citizen charter to it. Similarly, quasi-government organisations and
charitable trusts partly funded by the government come within the ambit of the
RTI Act,’’ Gandhi said.

The RTI seminar was organised by the Bombay Chartered
Accountants’ Society (BCAS) along with Mahiti Adhikar Manch and Public Concern
for Governance Trust. About 50 RTI activists and citizens participated in a
discussion on future course of action to oppose these amendments.

(Source : The Times of India, 21-10-2009)

 

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A buffet of wisdom

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  1. A buffet of wisdom


Like the saying of some ancient Chinese, philosophers,
Warren Buffet’s worldly wisdom is deceptively simple and powerful in
application.

Buffet’s investments achievements are unparalleled. He owes
his success to hard work, integrity and that most elusive commodity of all —
common sense. Here are some of his smartest, funniest and very memorable
saying :


  • You can’t make a good deal with a bad person.



  • The fact that people are full of greed, fear or folly is predictable. The
    sequence is not predictable.



  • Never ask a barber if you need a haircut.



  • In
    looking for someone to hire, you look for three qualities : integrity,
    intelligence and energy. But the most important is integrity because if they
    don’t have that, the other two qualities are going to kill you.



  • With enough inside information and a million dollars you can go broke in a
    year.



  • It
    is easier to stay out of trouble than it is to get out of trouble.



  • You should invest your money in a business that even a fool can run, because
    someday a fool will !



(Source : From the book The Tao of Warren Buffett
by Mary Buffet and David Clark — quoted in ‘Fireside’ — The House magazine
of the Thermax Group Volume 39 No. 3 July-September, 2009)


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Independence breach costs E&Y $ 2.9 million

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23. Independence breach costs E&Y $ 2.9 million


Ernst & Young LLP agreed to pay more than $2.9 million to the
Securities and Exchange Commission to settle charges that it violated auditor
independence rules by co-producing a series of audio CDs with a man who was also
a director at three of E&Y’s audit clients.

According to the SEC, Ernst & Young collaborated with Mark C.
Thompson between 2002 and 2004 to produce a series of audio CDs called The Ernst
& Young Thought Leaders Series. The CDs featured E&Y partners interviewing CEOs
and CFOs in various different industry sectors, which the SEC says was part of
an effort by E&Y to promote its partners as experts in specific industries.

That relationship, said the SEC, violated independence rules
because Thompson was serving on the boards at several of E&Y’s clients during
the period when the CDs were produced. The SEC censured Ernst & Young and fined
the firm $ 2,918,987. It also censured partner John F. Ferraro for setting up
the relationship, and partner Michael G. Lutze for failing to alert one of his
audit clients — apparently Best Buy — after learning of the relationship. Lutze
was also suspended from practising before the commission for one year. The SEC
also issued a cease-and-desist order against Thompson. E&Y, Thompson, Ferraro,
and Lutze settled with the SEC without admitting or denying its findings in the
case.

Among the several reasons the SEC said the relationship did
violate independence rules was that fact that “unbeknownst to E&Y,” the
$ 377,500 that Thompson was paid for his work amounted to approximately half of
his net income at the time.

(Source : CFO.com US 7-8-2008)

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UK to limit liability for audit firms as a result of Enron, but US declines to do so

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22. UK to limit liability for audit firms as a result of Enron,
but US declines to do so


The UK is limiting its liability for audit firms because of
Enron, but the US does not want to do the same, arguably for the same reason.

The UK has won the battle in persuading government that
allowing auditor liability arrangements will serve the greater good in securing
a vital part of the profession which serves UK plc.

But it was a battle fought long and hard, mired with mistrust
of whether firms were exaggerating the risk, as well as outright annoyance that
the profession needed protecting in the first place.

In the UK, the good sense that prevailed over limiting
liability had much to do with the transparent approach of the UK firms, who went
out of their way after the Enron collapse to exhibit by way of
their financial statements the extent of the risk they faced in the event of
similar litigation.

Financial Reporting Council Chairman Paul Boyle said UK firms
generally had higher levels of transparency than their US counterparts, which
contributed to securing more support for limiting their liability. He suggested
that US firms reconsider
their stance.

One of the points they are arguing is that firms should not
publish their financial statements. There is a link here, which they might want
to think about, between them not wanting to publish these state-ments and the
lack of support for limiting liability.

The US firms may want to stick to private reports for now.

But if they want their proposals for limiting auditor
liability to be taken seriously, they should equally consider providing the
proof of the risk that they claim to face.

And if the risk is as serious as they say it is, it should
not be too hard to prove.

(Source : Internet, 12-9-2008)

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China shuns Paulson’s free market — As US Treasury Secretary Plans $ 700-B Bailout

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21. China shuns Paulson’s free market — As US Treasury Secretary
Plans $ 700-B Bailout


Eighteen months ago, US Treasury Secretary Henry Paulson told
an audience at the Shanghai Futures Exchange that China risked trillions of
dollars in lost economic potential unless it freed up its capital markets.

An open, competitive, and liberalised financial market can
effectively allocate scarce resources in a manner that promotes stability and
prosperity far better than governmental intervention,” Paulson said.

That advice rings hollow in China as Paulson plans a
$ 700-billlion rescue for US financial institutions and the Securities and
Exchange Commission bans short sales of Insurers, banks and securities firms.
Regulators in the fastest-growing major economy say they may ditch plans to
introduce derivatives, and some company bosses are rethinking US business
models.

“The US financial system was regarded as a model, and we
tried our best to copy whatever we could,” said Yu Yongding, a former adviser to
China’s central bank. “Suddenly we find our teacher is not that excellent, so
the next time when we’re designing our financial system we will use our own mind
more.”

(Source : The Economic Times, 25-9-2008)

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Failed corporations under FBI lens

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20. Failed corporations under FBI lens


The FBI has now opened preliminary investigations into
possible fraud involving the four giant corporations at the centre of the recent
turmoil — Fannie Mae and Freddie Mac, Lehman Brothers and the American
International Group, the Associated Press reported.

(Source : Business Standard, 25-9-2008)

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Failed Superhero : Ineffective rescue acts of US in 100 years

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18. Failed Superhero : Ineffective rescue acts of US in 100 years

The 1907 panic :

In October that year, a run on the knickerbocker Trust after
it failed to corner the market in United Copper shares caused panic on Wall
Street. Stocks plummeted, threatening major banks with failure. The calming
influence came not from the Fed — which did not exist — but from banker John
Pierpont Morgan, who organised a consortium of bankers to provide funds to prop
up banks and buy up stocks.

Great Depression, 1930s :

Some 9,000 banks failed after a stock market collapse
triggered severe restriction of credit, massive loan failures and ‘runs’ by
depositors to withdraw funds. President F. D. Roosevelt’s first act after his
1933 inauguration was to declare a 3-day bank holiday to cool things off. He
later signed into law the Glass-Steagall Act, creating Federal Deposit Insurance
Corp (FDIC), to restore depositors’ confidence in banks.

Commonwealth Bank, 1972 :

This was the first bank with over $ 1 billion in assets to be
bailed out. Being essential to Detroit’s inner city, so FDIC provided $ 36
million in loans — never to be repaid.

First Pennsylvania, 1980 :

Established in 1782 as one of the first US private banks,
First Penn was among many banks in the 1970s made insolvent by high deposit
interest rates that outstripped earnings from lower-yielding assets. It was
FDIC’s first large-scale bailout.

Continental Illinois, 1984 :

Once the seventh-largest US bank, Chicago-based Continental
Illinois National Bank and Trust was deemed ‘too big to fail’ and remains the
largest commercial bank taken over by the Fed and FDIC. The $ 40 billion-asset
bank became insolvent due to bad oil and gas exploration loans.

Bear Stearns, 2008 :

US Fed and treasury brokered a weekend deal for JPMorgan
Chase & Co to buy Bear Stearns at a rock-bottom price, with the Fed agreeing to
guarantee $ 29 billion in Bear Stearns assets taken on by JPMorgan.

Fannie Mae, Freddie Mac, 2008 :

The government seized control of mortgage finance firms
Fannie Mae and Freddie Mac to stabilise them after massive falls in their share
price made it impossible for them to raise needed capital to sustain mounting
mortgage losses.

AIG, 2008 :

Fed stepped in to rescue AIG, one of the world’s largest
insurers, with an $ 85 billion injection of taxpayer money. Under the deal, the
government will get a 79.9% stake in AIG.

(Source : The Times of India, 18-9-2008)

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Audit firms found deficient during PCAOB inspections.

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19. Audit firms found deficient during PCAOB inspections.


Audit firms that were found deficient during PCAOB
inspections usually accepted the way a client company accounted for sales in the
past, rather than checking for updates.

As U.S. and international accounting standard setters work to
fix, and then converge, rules related to revenue recognition, preparers and
auditors still struggle with proper real-world application of the regs. Indeed, during a meeting held in New York last week, a top official at the
Public Company Accounting Oversight Board noted that revenue recognition issues
regularly trip up audit firms. Further, a new survey of senior finance executives concluded that revenue recognition is
one of the most complex and risky accounting issues of the day.

At the meeting, sponsored by the New York State Society of
Certified Public Accountants, revenue recognition topped the list of
deficiencies uncovered by the PCAOB in their inspections of audit firms, said
Paul Bijou, the Deputy Director of Inspection at PCAOB.

Bijou noted that in virtually every review performed by the
PCAOB, inspectors “see elements that audit work could be better” with regard to
revenue recognition.

Bijou said that trouble spots included the way auditors
assessed multi-element contracts, contracts that lead to revenue, revenue
‘cut-offs,’ and timing related to acceptance of product.

Bijou said that the PCAOB team once had a top-ten list of
“significant or frequent auditing or quality-control deficiencies” that it
culled from its five years of inspections. But this year, the list grew to 11
items. The areas are : revenue, related-party transactions, equity transactions,
business combinations and impairment of assets, going concern considerations,
loans and accounts receivable (including allowance accounts), service
organisations, use of other auditors, use of work prepared by specialists,
independence issues, and concurring partner review.

The survey, conducted by RevenueRecognition.com and IDC,
polled 586 senior finance executives, and found that 42% of the respondents
believe that revenue-recognition reporting causes the most errors and
inaccuracies in financial statements. Contract management, which gained only 14%
of the vote, came in second, with planning and budgeting (11%), and account
reconciliations (10%) rounding out the top four answers.

Thirty-five percent of the respondents thought that revenue-recognition reporting was the most complex corporate accounting process
to manage, while 57% asserted that revenue-recognition errors had the highest
level of materiality in financial-statement reporting.

(Source : Internet, 20-9-2008)

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Is India poor, who says ? Ask Swiss banks

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26 Is India poor, who says ? Ask Swiss banks

With personal account deposit bank of $ 1500 billion in
foreign reserve which have been misappropriated, an amount 13 times larger than
the country’s foreign debt, one needs to rethink if India is a poor country ?

Dishonest industrialists, scandalous politicians and corrupt
IAS, IRS, IPS officers have deposited in foreign banks in their illegal personal
accounts a sum of about $ 1500 billion, which have been misappropriated by them.
This amount is about 13 times larger than the country’s foreign debt. With this
amount 45 crore poor people can get Rs.1,00,000 each. This huge amount has been
appropriated from the people of India by exploiting and betraying them.

Once this huge amount of black money and property comes back
to India , the entire foreign debt can be repaid in 24 hours. After paying the
entire foreign debt, we will have surplus amount, almost 12 times larger than
the foreign debt. If this surplus amount is invested in earning interest, the
amount of interest will be more than the annual budget of the Central
Government. So even if all the taxes are abolished, then also the Central
Government will be able to maintain the country very comfortably.

Some 80,000 people travel to Switzerland every year, of whom
25,000 travel very frequently. “Obviously, these people won’t be tourists. They
must be travelling there for some other reason,” believes an official involved
in tracking illegal money. And, clearly, he isn’t referring to the Commerce
Ministry bureaucrats who’ve been flitting in and out of Geneva ever since the
World Trade Organisation (WTO) negotiations went into a tailspin !

Just read the following details and note how these dishonest
industrialists, scandalous politicians, corrupt officers, cricketers, film
actors, illegal sex trade and protected wildlife operators, to name just a few,
sucked this country’s wealth and prosperity. This may be the picture of deposits
in Swiss banks only. What about other international banks ?

Black money in Swiss banks — Swiss Banking Association
report, 2006 details bank deposits in the territory of Switzerland by nationals
of the following countries : Top five

India … … … $ 1,456 billion

Russia … … … $ 470 billion

UK … … … $ 390 billion

Ukraine … … … $ 100 billion

China … … … $ 96 billion

Now do the maths — India with $ 1456 billion or $ 1.4
trillion has more money in Swiss banks than rest of the world combined. Public
loot since 1947 : Can we bring back our money ? It is one of the biggest loots
witnessed by mankind — the loot of the Aam Aadmi (common man) since 1947,
by his brethren occupying public office. It has been orchestrated by
politicians, bureaucrats and some businessmen.

The list is almost all-encompassing. No wonder, everyone in
India loots with impunity and without any fear. What is even more depressing is
that this ill-gotten wealth of ours has been stashed away abroad into secret
bank accounts located in some of the world’s best known tax havens. And to that
extent the Indian economy has been stripped of its wealth. Ordinary Indians may
not be exactly aware of how such secret accounts operate and what are the rules
and regulations that go on to govern such tax havens. However, one may well be
aware of ‘Swiss bank accounts,’ the shorthand for murky dealings, secrecy and of
course pilferage from developing countries into rich developed ones.

In March 2005, the Tax Justice Network (TJN) published a
research finding demonstrating that $ 11.5 trillion of personal wealth was held
offshore by rich individuals across the globe. The findings estimated that a
large proportion of this wealth was managed from some 70 tax havens.

Further, augmenting these studies of TJN, Raymond Baker — in
his widely celebrated book titled ‘Capitalism’s Achilles Heel : Dirty Money and
How to Renew the Free Market System’ — estimates that at least $ 5 trillion have
been shifted out of poorer countries to the West since the mid-1970.

It is further estimated by experts that one per cent of the
world’s population holds more than 57% of total global wealth, routing it
invariably through these tax havens. How much of this is from India is anybody’s
guess.

What is to be noted here is that most of the wealth of
Indians parked in these tax havens is illegitimate money acquired through
corrupt means. Naturally, the secrecy associated with the bank accounts in such
places is central to the issue, not their low tax rates as the term ‘tax havens’
suggests. Remember Bofors and how India could not trace the ultimate beneficiary
of those transactions because of the secrecy associated with these bank
accounts ?

(Source : Internet, 8-9-2008)

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IMF — India’s growth strategy

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68 IMF — India’s growth strategy

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Fearing jail, thousands of laid-off migrants flee Dubai

New Page 22. Fearing
jail, thousands of laid-off migrants flee Dubai

Sofia, a 34-year-old
Frenchwoman, moved here a year ago to take a job in advertising. Confident about
Dubai’s fast-growing economy, she bought an apartment for $ 300,000 with a
15-year mortgage. Now, like many of the foreign workers who make up 90% of the
population here, she has been laid off and faces the prospect of being forced to
leave this Persian Gulf city — or worse. “I’m really scared of what could
happen, because I bought property here,” said Sofia. “If I can’t pay it off, I
was told I could end up in debtors’ prison.”

With Dubai’s economy in free
fall, newspapers have reported that more than 3,000 cars sit abandoned in the
parking lot at the Dubai airport, left by fleeing, debt-ridden foreigners (who
could in fact be imprisoned if they failed to pay their bills). Some are said to
have maxedout credit cards inside and notes of apology taped to the windshield.

Some things are clear : real
estate prices, which rose dramatically during Dubai’s six-year boom, have
dropped 30% or more over the past two or three months. Last week, Moody’s
Investor’s Service announced that it might downgrade its ratings on six of
Dubai’s most prominent state-owned companies, citing a deterioration in the
economic outlook. So many used luxury cars are for sale, they are sometimes sold
for 40% less than the asking price two months ago, car dealers say.

But Dubai, unlike Abu Dhabi,
Qatar and Saudi Arabia, does not have its own oil, and has built its reputation
on real estate, finance and tourism. Now, many expats here talk about Dubai as
though it were a con game all along.

(Source : The Times of India,
16-2-2009)

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Soon, you can lodge online FIRs

New Page 21. Soon, you
can lodge online FIRs

In new system, complainants can
track their cases on net

The Government is in the
process of introducing a police station-based computerised programme through
which one can register complaints online.

One can also monitor the
progress of the case, like how far the probe has gone and if a charge-sheet has
been filed, among other facilities. “The erstwhile computerised intelligence
police system (CIPA) has been converted into the crime and criminal tracking
network system (CCTNS) to facilitate police stations in discharging their duties
and to try and make the system a little more citizen friendly.’’

“Our aim is to shortly provide
Internet connectivity to all police stations. Hence, information on each case
registered would be sent from the police station to district level, from
district to State and State to the Centre,’’ said the official, who is part of
the team working on implementation of the project.

“It is a very ambitious
project. It was approved last year with an outlay of about Rs.2,000 crore and
the MHA is in the process of finalising the details.’’ It is likely to be
entirely implemented by the end of 2010.

(Source : The Times of India,
9-2-2009)

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Rotation of audit partners compulsory from 2009

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8. Rotation of audit partners compulsory from
2009


In what could be a significant deterrent to corporate frauds,
the concept of rotation of partners received a green signal from the apex body
for chartered accountants, Institute of Chartered Accountants of India (ICAI),
and mandates change of partners after seven consecutive years with a listed
company.

The step, cleared by ICAI, will be operational from April
2009 and is expected to significantly reduce complexity between individual
partners in audit firms and their assigned companies, something that has been a
cause behind many of the big corporate frauds to have hit the financial world.

(Source : Times News Network, 25-2-2008)


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Moodys (MCO) dismisses PricewaterhouseCoopers as auditor

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7. Moodys (MCO) dismisses PricewaterhouseCoopers as auditor


The Board of the Moody’s Corporation (NYSE : MCO) approved
the recommendation of the Audit Committee of the Company’s Board to dismiss
PricewaterhouseCoopers LLP (‘PwC’) as the independent registered public
accounting firm.

(Source : Internet New briefs, 28-2-2008)

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A New Vision for Accounting Robert Herz and FASB are preparing a radical new format for financial statements

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5. A New Vision for Accounting Robert Herz and FASB are
preparing a radical new format for financial statements


Last summer, McCormick & Co. controller Ken Kelly sliced and
diced his financial statements in ways he had never before imagined. For
starters, he split the income statement for the $2.7 billion international
spice-and-food company into the three categories of the cash-flow statement :
operating, financing, and investing. He extracted discontinued operations and
income taxes and placed them in separate categories, instead of peppering them
throughout the other results. He created a new form to distinguish which changes
in income were due to fair value and which to cash. One traditional ingredient,
meanwhile, was conspicuous by its absence : net income.

Kelly wasn’t just indulging a whim. Ahead of a public release
of a draft of the Financial Accounting Standards Board’s new format for
financial statements in the second quarter of 2008, the McCormick controller was
trying out the financial statements of the future, a radical departure from
current conventions. FASB’s so-called financial statement presentation project
is ostensibly concerned only with the form, or the ‘face,’ of financial
statements, but it’s quickly becoming clear that it will change and expand their
content as well.

Some major changes under discussion : reconfigur-ing the
balance sheet and the income statement to follow the three categories of the
cash-flow statement, requiring companies to report cash flows with the
little-used direct method; and introducing a new reconciliation schedule that
would highlight fair-value changes. Companies will also likely have to report
more about their segments, possibly down to the same level of detail as they
currently report for the consolidated statements. Meanwhile, net income is
slated to disappear completely from GAAP financial statements, with no obvious
replacement for such commonly used metrics as earnings per share.

FASB, working with the International Accounting Standards Board (IASB) and accounting standards boards in the UK and Japan,
continues to work out the precise details of the new financial statements. “We
are trying to set the stage for what financial statements will look like across
the globe for decades to come,” says FASB Chairman Robert Herz. (Examples of the
proposed new financial statements can be viewed at FASB’s website.) If the
standard-setters stay their course, CFOs and controllers at every publicly
traded company in the world could be following Kelly’s lead as soon as 2010.

(Source : CFO Magazine, 1-2-2008)

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PwC pays $ 30 M to settle claim of faulty audit

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6. PwC pays $ 30 M to settle claim of faulty audit


PricewaterhouseCoopers agreed to pay $ 30 million to settle
claims stemming from its audit of Metropolitan Mortgage & Securities Co., a
financial conglomerate that went out of business four years ago.

The Big Four accounting firm was accused of helping
Metropolian Mortgage disguise its problems by creating an offshore investment
scheme that wound up being what was called “a cleverly disguised tax shelter,”
according to the trust that brought the lawsuit against PwC.

The paper said the $ 30 million would be distributed to
thousands of investors who lost more than $ 460 million in debentures when
Metropolitan collapsed. Most investors were retirees and their family members
living in the Northwest.

(Soruce : CFO.com, US, 4-3-2008)

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Man jailed for attempting to launch ‘Jihad on accountants’

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4. Man jailed for attempting to launch ‘Jihad on accountants’


A 44 year-old man from Sittingbourne, Kent, England, who
failed in his accounting exams, has been sentenced to two years’ imprisonment
for urging Moslems to launch terror attacks on accountants. Malcolm Hodges, 44,
had failed an exam set by the Association of Chartered Certified Accountants (ACCA)
ten years ago, and had been arguing about it with the Association ever since.
The grudge festered over time, and Hodges widened his one-man campaign by
writing a series of letters to the British royal family, the Chancellor, and the
Prime Minister, outlining the “grave injustice” behind his low marking.

Hodges’ mission changed from farcical to dangerous in
November 2006, when he began writing to UK mosques, claiming to be a follower of
Osama Bin Laden.

“Brothers, you are right to kill the infidels, but you are
making a mistake to try and attack planes and other targets,” he wrote. Instead
Islamists would be better off declaring a ‘jihad’ against the four accountancy
bodies.

(Source : AccountingWEB.co.uk, 26-2-2008)

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India, Mauritius in talks to counter treaty shopping

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3. India, Mauritius in talks to counter treaty shopping


India has kicked off talks with Mauritius to rework a 25-year
tax-treaty that spares FIIs based in that country from paying capital gains tax
on sale of shares of Indian companies. Indian revenue authorities have proposed
a ‘source-based’ taxation regime on capital gains made from sale of shares.
India wants Mauritius-based residents and FIIs to pay a tax on capital gains
here if they make profits by selling Indian shares.

However, the proposed tax treatment will apply only on future
investments in equities. Past investments will be spared. It will come into
force only after the two governments arrive at a consensus on the issue and
agree to revise the treaty. However, it is not yet clear whether Mauritius has
agreed to renegotiate the treaty.

(Source : The Economic Times, 15-2-2008)

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Accountants must sharpen up on climate

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2. Accountants must sharpen up on climate


Accountants have been ‘part of the problem’ in contributing
to climate change and now need to become part of the solution, Sir Michael Peat,
the Prince of Wales’ Private Secretary has warned.

Addressing a CIPFA sustainability conference on February 27,
Peat said accountants had ‘failed to develop the new accounting systems and
techniques needed to address the sustainability revolution’.

‘The accountancy profession’s failure to point out that
mankind is living off the world’s capital is the greatest accounting failure
ever seen,’ Peat told delegates.

All organisations needed to have a connected reporting
framework to ensure sustainability performance was reported more clearly,
concisely and consistently. ‘If it is not measured, it is not done,’ he said.

Peat called on all organisations to look at their decision-making processes and
policies that require senior management sign-off and ensure that sustainability
factors were clearly set out. ‘Are you giving equal weight to sustainability as
to general financial factors ?’ he asked.

(Source : Internet Editions, 29-2-2008)

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Behave yourself

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1. Behave yourself


Figures compiled for the Budget session alone for the past
seven years show that time lost to interruptions has varied from 13 hours to a
shocking 74 hours. Our legislators are obviously not doing what they have been
elected for. Most of the Govern-ment’s expenditure plans and policy initiatives
are being passed without any discussion whatsoever.

The Budget session is not an exception. The number of
sittings of the Lok Sabha has come down from an yearly average of 124 in the
first decade of 1952-61 to 81 between 1992 and 2001, a decline of 34 per cent.
This has meant that much of the discussion of legislation goes on behind the
scenes in parliamentary committees while the floor of the House is used for
shouting and heckling.

The Vice-President of India recently proposed that Parliament
sit for a minimum of 130 days a year. Somnath Chatterjee, who has presided over
a fractious Lok Sabha for the past four years, has suggested that MPs who
disrupt House proceedings be docked a day’s pay. But these proposals have
unsurprisingly been ignored.

(Source : The Times of India, 1-3-2008)

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Landmark US financial reform Bill passed

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51 Landmark US financial reform Bill passed

The Bill would impose tighter regulations on financial firms
and reduce their profits. It would boost consumer protections, force banks to
reduce risky trading and investing activities and set up a new government
process for liquidating troubled financial firms.

Republicans say the Bill would hurt the economy by burdening
businesses with a thicket of new regulations. They also point out that it ducks
the question of how to handle troubled mortgage finance giants Fannie Mae and
Freddie Mac, which Democrats plan to tackle next year.

Fannie Mae and Freddie Mac, which own or guarantee half of
all US mortgages, have received a total of about $ 145 billion in taxpayer
bailouts since being seized by the government in September 2008. Their regulator
has said he does not know how much more taxpayer support they will need.

(Source : Business Standard, dated 2-7-2010)


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Giving and accepting compliments

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40. Giving and accepting compliments


In this insecure world that we live in, people often feel
awkward receiving compliments, viewing them as unearned praise and start
questioning their motive, running the risk of appearing defensive or
unintentionally rude by not responding graciously.

The following steps will help you give and take compliments
easily :

Listen :

Focus on the person giving the compliment, allowing him/her
time to complete their sentence. Silence your inner critic, which may question
the motive or genuineness; instead, accept the compliment at its face value.

Positive body language :

Don’t frown, shrink or look away when accepting compliments.
Instead smile and maintain a direct gaze, even if you don’t believe the
sincerity.

Accept, not reject :

A simple ‘thank you’ is the only reply expected and no
lengthy explanations. When paying a compliment, one frequently encounters such
avoidable comments in return.

Objecting :

“Oh no, I look like a mess . . . !”

Minimising :

“Oh, it was no big deal . . . “

Arguing :

“No, I spotted several weak points in my
presentation . . . !”

Acting cocky :

“Thanks ! I paid an arm and a leg, it better be nice . . . “

Changing the topic :

“So, how is business ?”

At a complete loss for words

Give, not just take :

Giving compliments improves our relationships greatly, as
they force us to focus on the positive attributes of another person. While most
people are good at complimenting their bosses and clients, try doing the same
with your staff and peers and see them enjoy that extra dash of unexpected
praise.

Culture :

Culture has a role to play in giving and accepting
compliments. Eastern cultures use an indirect mode of giving compliments and
excessive compliments make them suspect an ulterior motive. Japanese tend to
downplay giving and accepting compliments about themselves, preferring to
compliment achievements. Chinese feel they are showing humility by rejecting
compliments. On the other hand, Americans are a direct compliments-driven
culture, showering compliments on personal appearances. At times, the American
exuberance appears insincere to other cultures. Although Indians are not
comfortable complimenting on a person’s appearance, especially between genders,
socially, we are expected to compliment the hostess/lady of the house.

Lastly, while women give more compliments, men tend to take
them more seriously.

(Source : Shital Kakkar Mehra

— The Economic Times, dated 19-12-2008)

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Fast track courts for dishonoured cheques : Govt. examining report

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39. Fast track courts for dishonoured cheques : Govt. examining report


The Law Commission of India in its 213th Report on “Fast
Track Magisterial Courts for Dishonored Cheque Cases” has made the following
recommendations :

(i) Fast Track Courts of Magistrates should be created to
dispose of dishonoured cheque cases S. 138 of the Negotiable Instruments Act,
1881;

(ii) The Central Government and State Governments must
provide necessary funds to meet the expenditure involved in the creation of
Fast Track Courts, supporting staff and other infrastructure. The report is
under examination of the Government. This information was given by Mr
K.Venkatapathy, Minister of State in the Ministry of Law and Justice in the
Lok Sabha today.

(Source : Internet, 22-12-2008)

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ICAI — A seat at the high table

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38. ICAI — A seat at the high table


Last month witnessed two significant events essential for the
coming of age of the Indian accounting profession. To start with, The Institute
of Chartered Accountants of India (ICAI) signed an MoU with the Institute of
Chartered Accountants of England & Wales (ICAEW) permitting the members of
either institute to acquire membership of the other by clearing a minimal number
of exams. This, definitely, is a great achievement for the ICAI, and the entire
leadership behind it deserves to be congratulated. This is a goal which was
being pursued for more than one and a half decade. Mutual recognition between
India and the UK was undone in the early ‘90s by measures taken by the Board of
Trade in the UK and the Indian leg of the recognition was withdrawn in the mid
‘90s. At the same time when industry, trade & commerce was increasingly becoming
borderless, Indian accountants were fenced within the political boundaries of
India. This MoU has the potential of defeating the isolation decade and making
the Indian profession become a truly global player. The European Commission (EC)
made a landmark announcement last week. The Generally Accepted Accounting
Principles (GAAP) of six countries of the world — United States, Japan, Canada,
India, China and South Korea — were declared to be equivalent to International
Financial Reporting Standards (IFRS). This followed a positive opinion given by
the European Parliament and all member states to the European Securities
Committee in the previous month. While this is a testimony to the application
and rigor of accounting standards in India, it also acknowledges the fact that
the fundamental genetic material of Indian accounting standards are the purveyor
of IFRS. Though these developments would definitely bring cheer in these gloomy
times, but at the same time, there is a pertinent clause added to it. In its
announcement, the EC said that the situation in four of these six countries,
i.e.,
India, China, Canada and South Korea, would be reviewed no later than
2011. Also the EC would regularly monitor the ongoing status of equivalence and
report to the member states and Parliament. Thus, we cannot remove our foot from
the accelerator of convergence to global standards. India’s growing clout in the
accounting world has a lot to do with its status as an emerging economy with a
strong growth rate and deep-pocket investors who are venturing abroad. It is a
matter of pride that India has more than 200 companies, many of them medium
sized, whose debt or equity is listed in Europe. Membership of this exclusive
club brings many responsibilities and expectations. In addition to converging
with IFRS by 2011, and continuing to satisfy EC equivalence criteria in the
forthcoming equivalence tests, we would have to converge our auditing standards,
—particularly the standards for joint audits. The market place, regulators and
ICAI will have to move towards the international goal of ‘qualification free’
public balance sheets, where accounts are recast in order to remove audit
qualifications before they are accepted in a public domain. The MCA in its new
Companies Bill has proposed independence requirements, which would help in
achieving convergence with global independence standards. The logical extension
of all such convergences is to encourage multi-disciplinary partnerships and the
Government has already done its bit by amending the CA Act to permit it. The
Securities Exchange Commission (SEC) has also voted on the necessity of its 500
largest companies to file financial reports from 2009 using the Extensible
Business Reporting Language (XBRL). Similar adoption of XBRL by a number of
other developed countries would mean that India would also have to soon walk on
that path. Sebi has already constituted a committee and this will be the next
big thing that will occupy our attention. A seat at the high table comes with a
lot of obligations, but also with unique opportunities. Opportunities to place
the concerns of the emerging economies on the world stage; opportunities to take
leadership in developing SME (Small, Medium Enterprise) focussed standards;
opportunities to highlight the talent in the country; opportunity to open up new
horizons of global mobility for our professionals.

(Source : Internet, 22-12-2008)

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Chartered Accountant held in I-T graft case

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37. Chartered Accountant held in I-T graft case


The anti-corruption bureau (ACB) of the Central Bureau of
Investigation (CBI) arrested chartered accountant Rakesh Makhija in connection
with the corruption case involving Additional Commissioner of Income-tax R. K.
Gupta. According to the CBI, Gupta had invested Rs.50 lakh in benami properties
through Makhija, an associate of another chartered accountant, Chandan Parmar.
Earlier, Parmar had been under the scanner of the Delhi CBI in connection with
another corruption case, involving A. K. Gautam, Commissioner of Income-tax.

His laptop has also been seized. Gupta, an Indian Revenue
Officer of the 1994 batch, was arrested on charges of accepting a bribe of Rs.4
lakh from a tax consultant for clearing a pending assessment.

Gupta had demanded Rs.10 lakh and asked the assessee to pay
the remaining Rs.6 lakh the next day, officials said. Later, the Central Bureau
of Investigation found another Rs.8 lakh stashed away in his office drawer.

Joint Director of CBI Rishi Raj Singh told that Gupta had
investments running into over Rs.3 crore. “We have identified five flats
belonging to him and further investigations are on,’’ Singh added.

(Source : The Times of India, 24-12-2008)

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New tax code to stop treaty shopping

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36. New tax code to stop treaty shopping

The Government may introduce provisions in the new direct tax
code to prevent misuse of double taxation avoidance agreements India has with
other countries. The new code is likely to be unveiled before the year ends. A
Government official said a discussion paper on the code, a major initiative
undertaken under the guidance of the former Finance Minister and present Home
Minister P. Chidambaram, is being fine-tuned. “A discussion paper on the code
explaining the rationale behind every change would be placed in the public
domain,” the official added. A draft bill on the code may also accompany the
paper to enable everyone to express their views on the proposed changes. Double
taxation treaties are essentially agreements between two countries that seek to
eliminate the double taxation of income or gains arising in one country and paid
to residents/companies of the other country. The idea is to ensure that the same
income is not taxed twice. In many instance, however, these agreements are
misused to evade taxes. This is called ‘treaty shopping,’ where usually
residents of a third country take advantage of a tax treaty between two
countries. For example, many companies in other countries route their
investments into India through Mauritius or Cyprus to take advantage of the tax
treaty that these countries have with New Delhi. Both, India-Mauritius and
India-Cyprus tax treaties provide that capital gains arising in India from the
sale of securities can only be taxed in Mauritius and Cyprus. This means no
capital gains tax on investments in securities routed through Mauritius and
Cyprus, as they do not levy tax on capital gains. The discussion paper on the
code would explore ways to check this treaty- shopping. Mr. Chidambaram was
actively involved in the exercise of drafting the code. At the Economic Editors
Conference in November, he had said the draft code would be placed in the public
domain soon. Some options like a general anti-avoidance rule(GAAR), provisions
allowing examination of the real nature of a transaction and a limitation of
benefits clause are being actively examined. Many countries like Singapore and
Canada have a general avoidance provision, GAAR in their domestic income-tax
laws to ensure that treaty benefits accrue only to genuine investors. Singapore
also allows examination of the real nature of a transaction. Earlier, an
internal panel in the Income-tax Department, which examined the issue of treaty
abuse and ways to prevent it, had also made recommendation in favour of GAAR and
a special provision for examination of real nature of transaction.

(Source : Media reports & Internet, 22-12-2008)

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The Indian Elections — Comments in New York Times

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  1. The Indian Elections — Comments in New York Times

It is truly the greatest show on Earth, an ode to a diverse
and democratic ethos, where 700 million + of humanity vote, providing their
small part in directing their ancient civilisation into the future. It is no
less impressive when done in a neighbourhood which includes de-stabilising and
violent Pakistan, China, and Burma.

Its challenges are immense, more so probably than anywhere
else, particularly in development and fending off terrorism — but considering
these challenges and its neighbours, it is even more astounding that the most
diverse nation on Earth, with hundreds of languages, all religions and
cultures, is not only surviving, but thriving.

The nation where Hinduism, Buddhism, Jainism, and Sikhism
were born, which is the second largest Muslim nation on Earth; where
Christianity has existed for 2000 years; where the oldest Jewish synagogues
and Jewish communities have resided since the Romans burnt their 2nd temple;
where the Dalai Lama and the Tibetan government in exile reside; where the
Zorastrians from Persia have thrived since being thrown out of their ancient
homeland; where Armenians and Syrians and many others have to come live; where
the Paris-based OECD said was the largest economy on Earth 1500 of the last
2000 years, including the 2nd largest only 200 years ago; where 3 Muslim
Presidents have been elected, where a Sikh is Prime Minister and the head of
the ruling party a Catholic Italian woman, where the President is also a
woman, succeeding a Muslim President who as a rocket scientist was a hero in
the nation; where a booming economy is lifting 40 million out of poverty each
year and is expected to have the majority of its population in the middle
class, already equal to the entire US population, by 2025; where its optimism
and vibrancy is manifested in its movies, arts, economic growth, and voting,
despite all the incredible challenges and hardships; where all the great
powers are vying for influence, as it itself finds its place in the world.
Where all of this is happening, is India, and as greater than 1/10 of humanity
gets ready to vote, it is an inspiration to all the World.

(Source : Media Reports & Internet, 20-5-2009)

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International convention on tax frauds

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  1. International convention on tax frauds

Mobility of international capital coupled with access to
tax havens has facilitated amnesty and global tax holiday for owners of such
capital — said an anonymous tax administrator. To strike at the very root of
what OECD also refers to as harmful tax practices pursued by jurisdictions
encouraging tax evasion, it has done pioneering work in the past few decades
by prescribing standards and directives, including ranking countries on their
transparency and willingness to share information on tax defaulters.

The debate has surfaced with last year’ reports that the
German government had in its possession data on possible tax evaders and has
offered to provide such information to countries. What has added fuel is the
US IRS move to overcome the Swiss banking secrecy code to unearth information
on US tax defaulters.

Back home, a public interest litigation petition was filed
in the Supreme Court seeking suitable directions to the government to initiate
action against Indians who have illegally siphoned off monies and deposited
unlawfully in Swiss banks. The Apex Court is yet to admit the PIL.

Swiss banking secrecy code :

The Swiss Banking Laws date to the early ’30s and owe its
origin to prevention of Nazi authorities’ attempts to investigate assets held
in Switzerland and belonging to Jews and ‘enemies of the state’. The secrecy
law firstly does not protect private ban-king information; instead, the
protection is similar to confidentiality protection between an attorney and
his client. The Swiss administration views the right to privacy as a
fundamental principle which ought to be protected by all democratic countries.
While secrecy is protected, in practice all bank accounts are linked to an
identified individual, and a Swiss prosecutor or judge may issue a ‘lifting
order’ to grant law enforcement agencies access to information relevant to a
criminal investigation. Swiss law distinguishes between tax evasion and tax
fraud. International legal assistance and cooperation is also granted for
criminal investigations. Banking secrecy may be lifted by a court order in
cases of ‘tax fraud’ or ‘severe cases of tax evasion’. However, information is
not provided if the request constitutes a mere fishing expedition. On part of
Switzerland, no legitimate stance is spared to ensure that the confidence of
the world’s richest is maintained by the Swiss banking community which
constitutes the backbone of the economy.

Exchange of information clause under the tax treaty, The
OECD and UN model tax conventions underscore the importance of exchange of
information by earmarking a separate article titled ‘Exchange of information’
which provides a statutory recognition to a process by which treaty partners
share information.

The information exchange should be relevant to carrying out
provisions of the convention or domestic laws of the contracting state
concerning only taxes. Generally, the convention cannot impose an obligation
to collect and exchange information where administrative measures are at
variance with the law of the other contracting state.

In other words, a contracting state is not bound to
exchange information, which is not obtainable in the normal course of the
administration of its state. For instance, if India views an act as an
exchange control violation or money laundering and such acts are not
considered as an economic offence in the treaty partner jurisdiction,
information clause for such acts cannot be invoked under international
convention.

Tax treaties also provide for secrecy of information and
govern its usage. This is based on the premise that reciprocal assistance
between tax administrations is feasible only if each administration is assured
that the other will treat the information with adequate confidentiality. The
UN model specifically stipulates that exchange of information should be ‘in
particular, for the prevention of fraud or evasion of such taxes’. However,
this phrase is not present in the OECD Model convention. Indian tax treaties
are predominantly based on the UN model convention.

Is the US IRS action against Swiss banks unilateral ?
Under the US-Swiss 2003 amended treaty, provisions that allow exchange of
information protected by the banking secrecy code is permitted only where the
information is necessary for the prevention of ‘tax fraud or a similar
offence’.

What drove the IRS was the administration’s multi-pronged
investigation in 2008 to uncover the identity of US citizens with secret
accounts in a Swiss bank. This was followed by a Federal Grand order in
January 2009 declaring the Swiss banks’ head of wealth management a fugitive
after he failed to surrender on charges of conspiracy for helping Americans to
conceal assets and avoid paying taxes. On threat of prosecution, the Swiss
bank agreed to pay a hefty fine and reveal details of Swiss accounts.

The US IRS simultaneously filed another suit against the
bank to reveal its 52,000 American client details by issuing ‘John Doe’
summons. A ‘John Doe’ summons is issued when the prosecution does not know who
might be violating the law. Some US legal experts believe that if it were
intended that the summons power could be used to obtain information, which
could not be obtained under the tax treaty, it is expected that such intent be
discussed in treaty negotiations. Hence, legal experts are circumspect about
IRS overzealous actions. And more recently, the Obama administration endorsed
a legislation to crackdown on offshore tax havens, raising the stakes in a
showdown between the US and bank secrecy nations.

What could be India’s challenge ? The Swiss-India tax
treaty provides for a standard exchange of information clause by virtue of
which both countries can exchange information under their respective laws in
the normal course of administration, as is necessary for carrying out the
provisions of treaty in relation to taxes.

Attempts made by India in the past suggest that the Swiss
authorities have refused to provide information (with regard to bank deposits)
on the ground that such information was not at the disposal of the tax
competent authorities and that the requisition was only for the enforcement of
Indian domestic law such as FEMA or anti-money laundering.

Recognising the policy on ‘banking secrecy law’ and
‘information exchange’ has come under criticism. In March 2009, Switzerland
agreed to renegotiate more effective tax cooperation with the United States to
bolster tax information exchange.

SC pending cases breaches 50,000

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  1. SC pending cases breaches
    50,000

In a blow to the concept of ‘speedy justice’, the number of
cases pending at the Supreme Court has gone over 50,000 for the first time in
a decade. With computerisation of the Supreme Court registry and the use of
infotech in docket management, the backlog in the 1990s was brought down from
over one lakh to a manageable 20,000. But as of March 31, 2009, the figure
stood at 50,163, the highest in the last decade.

It shows that the rush of litigants, despite an increased
disposal rate, has proved more than a match for the judges, who often hear 80
cases or more every day. The pendency has steadily crept upwards since 2006,
when it stood at 34,649. In January 2007, it rose to 39,780, a jump of over
5,000 cases. Justice K. G. Balakrishnan took over as the Chief Justice of
India at this time and tried to put in place mechanisms to arrest the
spiralling wait-list. Despite quicker clearance, the Court failed to cut down
on the pending list as the number of new cases swelled every year. By January
2008, the figure had registered a steep jump of over 7,000 cases to reach
46,926. Exactly a year later, it was 49,819, and the 50,000 figure was
breached in March. A similar trend was seen at the level of High Courts and
Trial Courts. The 21 High Courts, working with a strength of 635 judges as
against a sanctioned strength of 886, reported a pendency of 38.7 lakh cases
on January 1, 2009. It’s a rise of 1.3 lakh cases from January 2008, when the
figure was 37.4 lakh. The Trial Courts, with a judge strength of 13,556 as
against a sanctioned strength of 16,685, were burdened with an additional ten
lakh cases by January 2009, when the pendency figure was 2.64 crore. It stood
at 2.54 crore cases exactly a year ago.

CJI Balakrishnan has been repeatedly requesting state
governments to induct additional 10,000 judges to tackle the huge backlog, but
most of them have brushed aside the only practical solution by citing a funds
crunch.

(Source : The Times of India, 28-5-2009)

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Current account — Judging a book by its cover ?

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62 Current account — Judging a book by its cover ?


The branch staff of a PSU bank in Bandra, Mumbai immediately
smelt a rat when a slumdweller deposited a cheque for Rs.75 lakh and sought to
withdraw a couple of lakhs soon thereafter. Although his account was a decade
old and properly introduced, the account holder’s shabby outfit and his
downmarket residential address was enough to set off alarm bells and the matter
was brought to the notice of the regional office. The general manager then
contacted the bank which had issued the cheque, which in turn contacted the
issuer. It turned out that the cheque was indeed in order and the slumdweller
was given Rs.75 lakh by the builder as compensation for his hutment under a slum
redevelopment scheme at Bandra.

(Source : The Economic Times, 18-6-2008)

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Auditing to be made mandatory for exchanges and depositories

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60 Auditing to be made mandatory for exchanges and depositories


The SEBI has decided to make it mandatory for stock exchanges
and depositories to annually audit their transactions as per new code of conduct
evolved by the market regulator.

Cases of exaggerated IPOs were also being looked into from
all possible ethical practices and those corporates that were found guilty for
insider trading would be dealt with strict provisions of the law and other
statutes, he added.

Providing a major relief to big corporates, market regulator
SEBI on Friday proposed to increase the time period for submitting consolidated
financial statements to stock exchanges at the end of each quarter.

“It is proposed that the existing timeline (within one month
at the end of each quarter) may be extended to two months for those companies
which opt to submit to stock exchanges the consolidated financial results in
addition to standalone financial results,” SEBI said while seeking comments on
the same by July 26.

(Source : Internet newswires, 14-7-2008)

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Understanding the importance of IFRS

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61 Understanding the importance of IFRS


Here are ten questions/points to attain ‘IFRS Nirvana’.
Determine the scope of companies in your group that would need to converge and
assess what you want to achieve by when and agree with the Audit Committee
Chair ? Do you want to merge your internal reporting and IFRS to avoid multiple
financial closures ? Considering that this would be a change in primary GAAP, do
you want to go down the path of systems based conversion ? Identify a team and
treat this as a project — evaluate how you would bridge any gap in technical
skill sets by training or seeking assistance. Evaluate the relevant principles
and arrive at the choices after involving the Audit Committee, CEO and CFO.
Identify issues that may require large amount of data gathering and evaluate the
best method to get it —set separate teams at work on this. Prepare a sample
financials for your company and educate the relevant stakeholders on
differences. Do an impact assessment not just on financials but also people,
processes and IT.

(Source : Internet newswires, 14-7-2008)

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EU to propose ‘Robin Hood taxes’ to help poor

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59 EU to propose ‘Robin Hood taxes’ to help poor


The European Commission will look at changing taxes to boost
energy efficiency and help poor people hit by high fuel costs but tread
carefully on possibly taxing energy firms’ ‘windfall profits’, spokesman
Johannes Laitenberger said. He added that the European Union executive would
urge member states at a summit next week to take ‘targeted measures to help
citizens that are hardest hit by the current situation’ without giving
inappropriate incentives.

(Source : The Economic Times, 12-6-2008)

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U.S. spending for all energy research — nuclear, wind, coal, solar and biofuels — was a meager $3.2 billion in 2006. The Pentagon spends that much in about 40 hours.

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58 U.S. spending for all energy research — nuclear, wind, coal,
solar and biofuels — was a meager $3.2 billion in 2006. The Pentagon spends that
much in about 40 hours.

(Source : Time, 9-6-2008)

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We need a Power Surge

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57 We need a Power Surge


The key to heading off devastating climate change — and to
sidestepping out-of-sight oil prices along the way — is to improve technology.
We need good alternatives to fossil fuels, not the ersatz variety in which we
convert corn to ethanol and then face soaring food prices. We need to harness
vast amounts of solar power and start storing the carbon dioxide emitted by
coal-fired power plants underground. We need green buildings that demand less
energy for heating and cooling, and automobiles that get vastly more miles per
gallon.

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China to build 1 million houses for quake survivors in three months

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55 China to build 1 million houses for quake survivors in three months


The Chinese government had mobilised state-owned enterprises
to build 1 m prefabricated houses in three months for survivors of last month’s
devastating earthquake.

The government faces the daunting task of providing food and
shelter to at least 5 million people made homeless by the disaster, as well as
rebuilding flattened towns and cities, some of which will have to be relocated.

(Source : Business Standard, 7-6-2008)

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It is good to be a dog

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56 It is good to be a dog


New York hotelier and real estate magnate Leona Helmsley left
millions to her beloved dog, Trouble, but she has left billions for the care of
dogs in general. Helmsley left instructions that an entire charitable trust
valued at $ 5 billion to $ 8 billion and amounting to virtually all of her
estate be used for the care and welfare of dogs.

(Source : The Economic Times, 3-7-2008)

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India likely to pitch for deeper tax information exchange at G-20 meet

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50 India likely to pitch for deeper tax information exchange
at G-20 meet

New Delhi is expected to present a detailed paper on the
issue at the forthcoming Seoul meeting, urging that domestic laws of countries
must support such agreements for effective information exchange.

In some countries, for instance, domestic laws relating to
privacy protection tend to come in the way of sharing information with other
countries, defeating the very purpose of such pacts.

The proposal for a multilateral information exchange comes
even as India has initiated talks with Switzerland for revising its tax treaty
to include tax information exchange agreements, or TIEA, to get details on
likely tax evaders.

New Delhi also wants the current system of peer review under
the global forum to ensure that such agreements are meaningful and have not been
entered into just to get a tax haven struck off from the list of non-compliant
countries of the Organisation for Economic Cooperation and Development. Nearly
500 such bilateral pacts have been signed so far since last April, after the
G-20 pledged to crackdown on tax havens at the London summit.

Immediately after the G-20 pledge, the OECD came out with a
list of non-compliant countries, based on compliance with international tax
standards. Since last April, as many as 28 jurisdictions have joined the list of
countries that have substantially implemented the international tax standards.
Going by the latest OECD list, there are no jurisdictions that have not
committed to international tax standards where there were four countries — Costa
Rica, Malaysia (Labuan), the Philippines and Uruguay — in that category last
April.

(Source : The Economic Times, dated 7-7-2010)

[Does India have the necessary and adequate infrastructure and
trained personnel in the Finance Ministry/CBDT to process the information
received and the political will to take necessary action against the offenders
who receive political patronage ?]

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SC wants a break from frivolous pleas

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48 SC wants a break from frivolous pleas

The Supreme Court has called for effective laws to stop
frivolous litigants. It asked the Legislature and Law Commission to revisit laws
relating to imposition of cost meant to curb the menace of frivolous litigation.
There are more than 3 crore cases pending in the country. The Apex Court,
however, set aside an innovative order of the Delhi High Court, which directed
the litigant to give an undertaking to pay a huge sum to the other party in
event of rejection of the case. “The lack of appropriate provisions relating to
costs has resulted in a steady increase in malicious, vexatious, false,
frivolous and speculative suits, apart from rendering S. 89 of the Code (Civil
Procedure Code) ineffective. Any attempt to reduce the pendency or encourage
alternative dispute resolution processes or to streamline the civil justice
system will fail in the absence of appropriate provisions relating to costs.
There is therefore an urgent need for the Legislature and the Law Commission of
India to re-visit the provisions relating to costs and compensatory costs
contained in S. 35 and S. 35A of the Code,” said a bench comprising Justice R.
V. Raveendran and Justice R. M. Lodha.

(Source : The Economic Times, dated 8-7-2010)

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State of our Mumbai University — 130 teaching posts lie vacant

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49 State of our Mumbai University — 130 teaching posts lie
vacant

The faculty of Mumbai University are always complaining that
they are short-staffed. Now, positions sanctioned by the University Grants
Commission (UGC) are lying vacant.

Around 30 teaching positions were sanctioned under the 11th
Five-year Plan. Three years of the plan period have already gone by, but the
varsity has not started the appointment process. Burdened faculty members blame
red tape and also the fact that ever since the university has been headless, no
major decision has been made.

Around 100 additional teaching positions, recommended by the
Joint Director of Higher Education, have been pending with the Government since
2009.

(Source : The Times of India, dated 5-7-2010)

[Note : Can we hope that it will ever regain its premier
position in the academic world ?]

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US tax crackdown extends to residents with Indian ties

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47 US tax crackdown extends to residents with Indian ties

In a crackdown on offshore tax evasion, American authorities
have begun a criminal probe into HSBC individual account holders, who may not
have disclosed their accounts in India. Indian Finance Ministry officials
admitted that authorities in New Delhi “must have passed on the information to
their US counterparts as part of bilateral or multilateral agreements”. It was
reported that the US Justice Department has initiated a criminal investigation
of HSBC Holdings’ clients who may have failed to disclose their accounts in
India or Singapore to the US Internal Revenue Service (IRS). “The information
about the accounts is unlikely to have come from the HSBC Bank and is also very
unlikely that US authorities or its agencies would have gone fishing for the
individual accounts which are outside their country,” he said. In India, the
financial information is gathered by different authorities such as Reserve Bank
of India, various banks, Financial Intelligence Unit and the Income-tax
Department. “It is possible that one of these authorities passed on the
information about the bank accounts of foreigners in India to the US IRS under
an exchange of information programme,” the official said. In the US, it is
obligatory for any citizen to provide details regarding any financial
transaction he or she may have carried out overseas.

(Source : The Economic Times, dated 7-7-2010)

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Govt. gets ball rolling on FDI in retail

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46 Govt. gets ball rolling on FDI in retail

The Union Government has initiated a move to open the
country’s multi-brand retail segment to foreign investment, without revealing
its mind on details such as how much investment will be permitted.

In a 21-page discussion paper, it has sought comments from
stakeholders on a dozen issues, ranging from allowing retail chains with foreign
capital to open stores in select cities to government approval for opening each
store, mandatory hiring of rural population and sourcing from small and medium
enterprises.

(Source : The Economic Times, dated 7-7-2010)

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FEMA violations — India Inc breathes easy as RBI ready to forgive

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Even a few months ago, businessmen and corporate honchos
shuddered to visit Mint Street whenever they found themselves on the wrong side
of foreign currency regulations. Frosty conversations with hard-nosed officials
of RBI inevitably ended with grim penalties — at times stiff enough to cripple
business for some time. Not any longer.

The same officials are more willing to listen and quick to
forgive the violations as ‘technical’ errors. What’s more interesting is the
drop in the amount of fines. Earlier, these could be anything from Rs.20 lakh to
as high as Rs.3 crore, today the figures have plummeted to Rs.25,000-40,000.

(Source : The Economic Times, dated 6-7-2010)

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New online system for judicial cases of income tax

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  1. New online system for judicial cases of income tax

The Income-tax Department is set to start an online
‘judicial reference system’ in order to streamline thousands of Departmental
cases being fought in various Courts and I-T Tribunals across the country. The
facility, to be used by I-T Department officials initially, will put in place
all the cases, petitions and Special Leave Petitions (SLPs) in an online
server which will be developed by private vendors, a senior I-T official said
today.

Taxpayers can also avail the facility to check the orders
and judgments given by the various I-T Tribunals like the Income Tax Appellate
Tribunal (ITAT) and Courts after the successful implementation of the system.

“The Tax Department handles volumes of cases with a long
time span at present being heard at various courts in the country. With this
maiden service all the Assessing Officers and Regional Commissioners will be
able to know the exact status of the cases and take references from older
cases,” the official said.

However, the status of cases, replies filed by the
Department and other specific information can be accessed by the Department
officials only, the official said.

(Source : Media Reports & Internet, 9-6-2009)

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Tax Dept. sees Rs.800 cr evasion through diversion of profits

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  1. Tax Dept. sees Rs.800 cr evasion through diversion of
    profits

The Income-tax Department is probing tax evasion to the
tune of Rs.800 crore by some stockbrokers who are believed to be diverting
profits earned on trading in NSE, BSE and commodity markets, to
‘non-deserving’ clients through manipulation of client-specific codes.

Sources said profits earned or losses suffered by
individual market players are being diverted to ‘non-deserving’ clients who
have allowed his trading code to be used by a stockbroker. The Department has
estimated that around Rs.800 crore has been siphoned off this way.

“The losses suffered or profit earned by an individual or a
company in a day are being diverted to such an entity who is not monitoring
his trade regularly and has given his proprietary code to a broker for playing
in the market,” sources said.

Brokers and other players who receive these benefits are
evading huge taxes and are manipulating their genuine capital earned in a
day’s trade, they said.

Sources said the Income-tax Department will now communicate
the probe report to market regulator SEBI to gain access to the suspicious
codes and other details from the stock exchanges for further action.

(Source : Media Reports & Internet, 9-6-2009)

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Citings

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54 Citings


Go green, live rich

If I have learned one thing in my nearly twenty years as a
financial advisor, it is this : it’s not what you earn that makes you rich or
poor; it is what you spend. We burn up money every day while squandering the
planet’s non-renewable resources and polluting the environment in ways that lead
to global warning and climate change. We buy a car because we like the way it
looks and handles. We build a house with as many square feet as the bank’s
mortgage officer will allow.

When you change your mindset to a green way of thinking, you
will change your actions, and those actions will put money back in your pocket.
And over time, the money you save will make your rich — while helping to protect
the Earth. Go Green, Just Do One “Green Thing Today.’ It will lead to more. See
how it all adds up. Calculate your savings from breaking the bottled water
habit. The best solution is to carry your own water in a reusable container.
Small changes such as not buying coffee in a disposable cup or water in a
plastic bottle not only are good for your wallet, they actually better the
planet in the same way that ‘little things’ add up to drain your wealth, ‘small
changes’ add up to make a big difference for the Earth.

(Source : The Economic Times, 4-7-2008)

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SC Notices by E-Mail

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81 SC Notices by
E-Mail

With the pendency
of cases refusing to come down, the Supreme Court decided to experiment with
email notices to respondents to cut the delay in the traditional method of
serving notices.

The traditional
method — registered post with acknowledgement due — usually takes a long time
and mostly results in adjournment of hearings because of non-service of the
notices on the
respondents. Chief Justice of India S. H. Kapadia, sitting with Justices K. S.
Radhakrishnan and Swatanter Kumar, realised the difficulty and took immediate
action by asking all the lawyers present in the Court about putting in practice
the serving of notice through emails, at least to start with in commercial
matters. When Attorney General
G. E. Vahanvati and senior advocate Harish Salve welcomed the idea, it took
Justice Kapadia no time to dictate an order to that effect — sending notices
through email in commercial cases.

To help speed up
the process, Vahanvati volunteered to give within two weeks details of email
addresses of every Central Government department, which is the single largest
litigant in the Court. The AG said : “The cabinet secretariat will provide email
addresses of each and every department and regulatory authorities and names of
nodal officers.”

But the
traditional method of serving notices would not be given up. “We hereby direct
the SC registry to send additional notice at the email addresses of respondents,
whenever the advocate . . . furnishes them with a soft copy of the petition or
appeal,” the Bench said.

(Source : The Times of India, dated 27-7-2010)

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Many of India’s billionaires have made money from proximity to government.

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80 Many of India’s
billionaires have made money from proximity to government.

The proliferation
of dollar billionaires in India in recent years has often been cited as evidence
of the country’s growing economic might, but Raghuram Rajan, previously chief
economist of the International Monetary Fund and now an economic advisor to the
Prime Minister said he had no problems with wealth creation, “but I do think
there is a problem if much of this wealth comes from proximity to government’’.

Pointing out that
India had the second largest number of billionaires per trillion dollars of GDP
in the world (after Russia) prior to the crisis, and now possibly the largest,
Rajan said “If you look at the areas where we have so many billionaires, many of
them are not software entrepreneurs, it’s things like land, real estate, natural
resources and areas that require licences.’’

While conceding
that some of these people have genuinely created entrepreneurial firms that have
done wonderful things, in telecom for instance, Rajan added, “There are other
areas which are less competitive and where proximity to government helps. That’s
a worrisome factor.’’

India, he said,
faced the danger of sliding into some sort of oligarchic capitalism like Mexico.
“I would argue that there is a danger that if we let the nexus between the
politician and the businessman get too strong, we could shut down competition.
That could slow us down tremendously and also maybe create questions eventually
for our democracy,’’ he warned.

Rajan, said there
has been a ‘privatisation by stealth’ of the state in India. Expanding on that
phrase, he said “I worry that in the areas where there isn’t adequate
governance, we are letting the private
sector determine things that should naturally be the prerogative of the state.’’

As with the
billionaires, so too with India’s membership of the G-20 — Rajan is not overly
impressed by this apparent sign of the country having arrived at the high table.
First, he maintained that international meetings rarely achieved anything
concrete.

Characterising the
NREGS as a stop-gap measure, Rajan said at least four elements were needed to
move the bulk of the population in the rural areas to the modern economy —
infrastructure to connect them to towns, education and healthcare to enable them
to participate in a modern economy, and financial inclusion. Without these, he
warned, India’s much-touted ‘population dividend’ could turn into a ‘population
curse’.

(Source : The Times of India, dated 31-7-2010)

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CIC raps govt. on Himachal CJ posting ‘Why was he promoted despite then prez Kalam’s objection’

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46 CIC raps govt. on Himachal CJ posting
‘Why was he promoted despite then prez Kalam’s objection’


In a further setback to the judicial secrecy, The Central
Information Commission has ordered the Centre to disclose how Jagdish Bhalla
could become Chief Justice of Himachal Pradesh even after he had been found
unfit to head another High Court by the then President, A. P. J. Abdul Kalam.


The order directing disclosure of documents related to
Justice Bhalla’s promotion came on an appeal filed by RTI activist Subhash
Chandra Agrawal, the very same activist at whose instance the CIC had already
told the SC to give out information related to declaration of assets by judges.

CIC member A. N. Tiwari asked the Justice Department to
disclose within four weeks ‘the file, records or documents germane’ to Bhalla’s
appointment as Chief Justice of the Himachal Pradesh HC in February 2008.

His promotion was unusual as just a year before, President
Kalam had returned the proposal to appoint Bhalla, as Chief Justice of the
Kerala HC. Justice Bhalla was then in the Allahabad HC and Kalam’s reservations
were on account of the Uttar Pradesh Revenue Department’s report that a land
mafia embroiled in litigation had sold the Judge’s wife a 7,200 sq.metre plot in
Noida for no more than Rs.5 lakh (as against the then prevailing market value of
Rs.7 crore.)

Justice Bhalla could still make it to the top judicial job in
Shimla because after Kalam’s retirement, the SC collegium (committee of senior
Judges) made a fresh recommendation for his promotion. At the time of his
promotion, Bhalla happened to be serving as Acting Chief Justice of the
Chattisgarh HC on account of a discretionary power exercised by Law Minister H.
R. Bhardwaj. The order of the CIC requires the Justice Department to disclose
the correspondence between the Law Minister and the CJI along with the file —
notings made by various authorities, including Kalam’s observations. If this
order is implemented, it could lay bare for the first time the manner in which
Judges appoint themselves under the existing system in which the judiciary
wrested primacy from the executive in the
name of protecting the independence of the judiciary.

(Source : The Times of India, 24-1-2009)

 

 

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How many bad eggs ?

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45 How many bad eggs ?



The terrorist attacks on Mumbai in November and in past years
have showed up the weaknesses of India’s internal security system, but also laid
bare the fact that security failures are linked inextricably to broader issues
of governance and corruption (policemen who allow smuggling of commercial
contraband also allow RDX to come in). In the same way, the Satyam scandal
points to the dirty underbelly of India’s corporate world, and of its regulatory
and legal framework. The fact is that Satyam would not have happened without the
failure of the company’s independent directors, auditors and bankers, not to
mention senior executives not linked to the guilty promoters. Such broad-based
failures do not come together by accident; they have to be pointers to broader,
systemic failures.


In the Satyam case itself, the valuation of one of the Maytas
firms for purposes of the aborted merger was done by a leading accounting firm
on the promise of secrecy — an unheard of procedure that the independent
directors accepted without demur. Evidence of broader systemic problems has also
surfaced, with news reports pointing to the pathetic record so far of the
Serious Fraud Investigation Office (virtually no convictions till date) and of
the Institute of Chartered Accounts of India (which has a poor record of
penalising guilty accountants, and has not yet taken action in the auditing case
involving Global Trust Bank, despite the lapse of four years).

Everyone knows that business is not a morality play. There
are always good and bad eggs. The question is, what is the mixture, and is it
palatable ? When the World Bank is pointing fingers at even marquee corporate
names, does anyone recall that Transparency International polled international
businessmen to come up with the finding that Indian businessmen are the No. 1
bribe-payers abroad ?

We can respond to a scandal by brushing uncomfortable
questions under the carpet, and hope that business can go on as usual. But that
would be the worst possible way to deal with the problem. If we want to clean up
rather than simply wait for the next scandal to erupt, we had better start
looking for systemic correctives.

(Source : Business Standard, 17-1-2009)

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Good posture for a healthy you

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16 Good posture for a healthy you


Most of us work at a desk or on a computer, and it’s very
easy to slip into poor sitting habits. Make sure you follow proper techniques
for sitting, standing and driving.


Benefits : Many of us have a variety of bad postural
habits. Examples include shoe heels of more than two inches, carrying a heavy
bag over one’s shoulder, cradling the phone between your shoulder and ear, and
not sitting all the way back in a chair for proper support. Says Dr. Manish
Dhawan, Consultant, Sir Ganga Ram Hospital, New Delhi : “A good posture can
contribute to increased energy and stamina, better breathing, proper blood
circulation, and improved overall health. It reduces stress, fatigue and general
aches and pains in overstressed joints and overused muscles.”


Sitting : Sit with your shoulders back and backbone
upright. Your legs should be at a 90 degree angle to your thighs. Says Dr.
Harshvardhan Hegde, Consultant, Artemis Health Institute, Gurgaon : “Keep your
neck, back, and heels in alignment. Avoid the urge to slouch at your desk, and
do not sit in the same position for more than 30 minutes at a time.” A small,
rolled-up towel or a lumbar roll can help maintain the normal curves of your
back.


Standing : Says Dr. Dhawan : “Keep most of your weight on
the balls of the feet and not on the heels or toes. Your arms should hang
naturally.”


Driving : Says Dr. Hegde : “Sit with the back firmly
against the seat. The seat should be at a proper distance from the pedals and
steering wheel.” The headrest should support the middle of the head to keep it
upright. Tilt the headrest forward to make sure that the head-to-headrest
distance is not more than four inches.


Precaution : If back pain lasts for more than three days,
visit an orthopaedic specialist.

(Source : Business Today, 23-3-2008)

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UCBs rattled as farmers stop repaying loans

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15 UCBs rattled as farmers stop repaying loans


The Rs.60,000-crore debt waiver has left urban cooperative
banks (UCB) and credit cooperative societies (CCS) baffled. Despite having a
large exposure to agriculture lending, the UCBs and CCS are unsure of any
benefits the loan waiver has offered to other larger banks.

Maharashtra Cooperatives Minister Patangrao Kadam declared a
fortnight ago the waiver package would be applicable to all cooperative
institutions thus going beyond the ambit of the three-tier cooperative credit
structure. There are 28,000 CCS in Maharashtra. About 70% of them are in rural
areas and 80% of their members are small farmers. Their deposits are Rs.32,000
crore and loans amount to Rs.26,000 crore. The UCBs have deposits of Rs.78,000
crore and loans of Rs.44,000 crore.

Mr. Kadam’s statement has not helped the UCBs and CCSs as
there is no word either from Nabard, or the State’s Co-operative Department or
the Central Government. But the loanees have stopped paying back their
instalments to the UCBs and the CCS. The Institutions are worried that the
non-payment may end up widening their NPAs ahead of the closure of the current
financial year. These institutions are demanding that the Government should make
its stand clear on the issue or give relaxation in the prudential norms.

(Source : The Economic Times, 18-3-2008)

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Global golmal

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14 Global golmal


The Food Corporation of India may be much maligned for
pilferage. But then, pinching from government stocks seems to be irresistible
for just about everyone, everywhere. Especially when it comes to the essentials
of life. A recent US Congressional audit has found that over the past six years,
some 32,000 barrels of crude oil worth $ 1 million have been filched from the
high-security Strategic Petroleum Reserves (SPR) of the United States. The
barrels would do the vanishing act in transit between the oil refineries and the
SPR tanks. Apparently, poor audit systems were to blame. Since new and tighter
systems are now being put in place, the government is hoping to plug this leak.
But with oil prices on fire, it is unlikely to be too long before bootleg
barrels are on the market again.

(Source : Business Standard, 18-3-2008)

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Indian students spend $ 13 bn a year on education abroad, says Assocham

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13 Indian students spend $ 13 bn a year on education abroad, says Assocham


Industry body Assocham today said over $ 13 billion is spent
every year by about 450,000 Indian students on higher education abroad as they
are not accommodated by domestic institutions.

Over 90% of students appearing for IIT and IIM entrance
examinations are rejected due to capacity constraints, of which the top 40% pay
to get admission abroad.

(Source : Business Standard, 18-3-2008)

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Former I-T officer forms new party

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11 Former I-T officer forms new party


Tired of the corruption in government machinery, he quit his
job as an Income-tax official and on Friday he announced the launch of a
political party to fight the ills. But A. C. Tejpal, ex-Commissioner of
Income-tax, has not yet decided if any candidate from his party will stand for
the next Lok Sabha elections as he awaits a response from the general public on
this move.

Tejpal put in his papers as Income-tax chief on March 28 and
has now actively jumped into politics with the launch of the Common Man Party of
India (CMPI). In a press meet, he said, “Our members have toured many villages
and there is a demand for a party that offers solutions to uproot corruption
from government functioning. The party has chalked out an agenda to check the
menace of injustice and corruption,’’ he said. He also said every member will be
contributing to the party fund.

(Source : The Times of India, April 2008)

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Thoughts on the business of life

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12 Thoughts on the business of life


All our talents increase in the using, and every faculty,
both good and bad, strengthens by exercise.

— Ann bronte

There are two kinds of talent, man-made talent and God-given
talent. With man-made talent you have to work very hard. With God-given talent,
you just touch it up once in a while.

— Pearl bailey

Genius does what it must, and talent does what it can.

— Owen meredith

A genius ! For 37 years I’ve practised 14 hours a day, and
now they call me a genius !

— Pablo de Sarasate

I have no talent; it’s just a question of working, of being
willing to put in the time.

— Graham Greene

Talent is nothing but a prolonged period of attention and a
shortened period of mental assimilation.

— Constantin Stanislavski

We are told that talent creates its own opportunities. But it
sometimes seems that intense desire creates not only its own opportunities, but
its own talents.

— Eric Hoffer

The great law of culture is : Let each become all that he was
created capable of becoming.

— Thomas Carlyle

A true talent delights the possessor first.

— Ralph Waldo Emerson

(Source : Forbes Asia, 10-3-2008)

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Development — Oriented Tax Policy for India

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53 Development — Oriented Tax Policy for India


According to the recent publication by the World Bank,
‘Paying Taxes 2008 : The Global Picture,’ the Indian tax system is one of the
most unfriendly to businesses in the world. India ranks at 165 among the 178
countries and among the South Asian countries, it is the lowest. The real
question is whether the Indian tax system is really that bad or is it another
advocacy by businesses or simply a sensational finding which merely deserves to
be ignored.

(Source : Business Standard, 6-5-2008)

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Skills

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52 Skills


India cannot forget that its human capital development is
coming from Wall Street and the audacious entrepreneur mode has led to an
acquisition spree. “We cannot afford to stretch our human capital. There is a
glaring and keenly felt starvation of leadership at the top. There are 900
listed skills the world over, China has 600 but India has only 90.” Further, the
benefits of India’s growth have not led to competitiveness of the workforce and
the fruits of growth are not reaching those who are outside the ken of this
development.

(Source : Business India, 23-3-2008)

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Corruption

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51 Corruption



“You (the MPs) are working overtime to finish democracy”

Somnath Chatterjee, Lok Sabha Speaker.

(Source : India Today, 17-3-2008)

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Order in the jungle

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50 Order in the jungle


Economists became fascinated by the rule of law after the
crumbling of the ‘Washington consensus’. This consensus, which was economic
orthodoxy in the 1980s, held that the best way for countries to grow was to ‘get
the policies right’ — on, for example, budgets and exchange rates. But the Asian
crisis of 1997-98 shook economists’ confidence that they knew which policies
were, in fact, right. This drove them to re-examine what had gone wrong. The
answer, they concluded, was the institutional setting of policy-making,
especially the rule of law. If the rules of the game were a mess, they reasoned,
no amount of tinkering with macroeconomic policy would produce the desired
results.

Pretty quickly, ‘governance’-political accountability and the
quality of bureaucracy as well as the rule of law — became all the rage.
Economists got busy calculating what it was, how well countries were doing it
and what a difference it made. Mr. Kaufmann and his colleague Aart Kraay worked
out the ‘300% dividend’ : in the long run, a country’s income per head rises by
roughly 300% if it improves its governance by one standard deviation. One
standard deviation is roughly the gap between India’s and Chile’s rule-of-law
scores, measured by the bank. As it happens, Chile is about 300% richer than
India in purchasing-power terms. Economists have repeatedly found that the
better the rule of law, the richer the nation.

A report by a new research group, the Hague Institute for the
Internationalisation of Law, argues that people routinely use two quite
different definitions, which they call ‘thick’ and ‘thin’.

Thick definitions treat the rule of law as the core of a just
society. In this version, the concept is inextricably linked to liberty and
democracy.

Thin definitions are more formal. The important things, on
this account, are not democracy and morality but property rights and the
efficient administration of justice. Laws must provide stability.

(Source : The Economist, 15-3-2008)

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Ten Commandments

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48 Ten Commandments


The UPA Government may have been liberated from the clutches
of the Communist Parties and managed to cross the metaphorical Red Sea. But
before entering the Nuclear land of Canaan, the coalition has been handed over a
rule book cast in stone by its new-found saviour.

The Ten Commandments will replace the CMP (Common Mad
Programme) that has been hanging like the Sword of Damocles above UPA’s head.

(i) I and my rustic boss are the Lords of the ring who
brought you out of the land of the Communists; thou shall not owe allegiance
to any other gods (especially those that may seem like Maya).

(ii) Thou shall not let the names of thy Lords be taken in
vain (even by the so-called Central Bureau of Investigation).

(iii) Thou shall declare a minimum support level of 20,000
for the Sensex just as thou provideth support price for various commodities.
Thou shall create a mechanism by which thy government would ensure that the
index remains above that level. To help thy cause, thou shall replicate the
tactics used by some honourable corporate houses, like buybacks, bonus, et al.

(iv) Fix the value of thy currency at 40 versus that of thy
new-found nuclear partner. Thou shall not let the so-called market forces
determine the rupee value. (A fluctuating rupee disturbs our personal foreign
exchange earnings arithmetic, you see).

(v) Thou shall not let thy Reserve Bank chief lord over
that alluring pile of $ 300 billion-plus forex earnings. Why should a
bureaucrat get to manage such enormous wealth which ought to be kept at the
disposal of jet-setting politicians. It is criminal to accumulate a large pool
of dollars, especially when the rest of the pariwar aren’t allowed to raise
deposits.

(vi) Thou shall not adulterate the gas flowing from the KG
Basin, especially that’s supposed to flow into the plants of similar sounding
corporate biggies.

(vii) Thou shall not steal in public, but we shall not
condemn if thou doth it through innovative schemes like windfall tax, envy
tax, export tax, fast-growing conglomerate tax or any other which your
lawyer-finance minister and his cronies can come up with.

(viii) Honour the first family of Bollywood, that thy days
may be long upon the land which thy Lords have given thee. The fortunes of all
the members of this family being susceptible to the vagaries of Box Office,
thou shall frame a policy that would ensure that all the members of this
family are employed throughout their lifetime. Thou shall delight us to no end
if thy FM declares tax concessions for all movie productions where at least
one member of this family has a role.

(ix) Thou shall not covet your neighbour’s (we mean
corporates) goods. (All coveting shall be done by us).

(x) To celebrate the Passover from the clutches of your
erstwhile masters and to atone for thy past sins, thou shall throw a party
where thou shall raise a toast to our extended pariwar and the gates shall
remain closed for your estranged partner.

(Source : The Economic Times, 12-7-2008)


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