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Newspaper Analysis and Summary 05
th
October 2014
NATIONAL NEWS
ISRO to launch Canadian satelliteTheHindu
In view of the international restrictions on Russia over Ukraine, Canada has decided to sign
a contract with Antrix, the Indian Space Research Organisation (ISRO)s commercial arm,
for the launch of its satellite, industry sources said here on Saturday.

At the inauguration of the International Astronautical Congress in Toronto on Monday,
Canada announced that Antrix would be given the contract for the July 2015 launch of its
M3M (Maritime Monitoring and Messaging Micro-Satellite) communications satellite.

Launch in July
Confirming the development, the Canadian Space Agencys website said the M3M, built for
the Department of National Defence, was to be launched with a Soyuz rocket in July this
year but the federal government decided not to proceed with the contract.

Ageing fleets robbing IAF of its edge: RahaTheHindu
The Chief of the Air Staff, Air Chief Marshal Arup Raha, expressed concern on Saturday
over the delay in key acquisition and development projects, and hoped that the government
would put in place a faster system.

At an interaction with presspersons ahead of the 82nd anniversary of the Indian Air Force,
he said almost all key acquisition and development projects were behind schedule, and
sounded a note of caution over its implications for the forces fighting capability.

We have quite a few fleets which are on their last legs. The drawdown has to be prevented
by quick induction of the medium multi-role combat aircraft and the light combat aircraft,
he said.

Every project, be it acquisition or design development, is taking longer than it ideally
should. We have lost timelines. Time overrun is much more than it should have been. It is a
concern. After all, Indian Air Force is Indias air force, not my air force. It is the
governments responsibility, the responsibility of the nation to provide whatever is
necessary. We are concerned that it is not coming on time.

He, however, hoped that the National Democratic Alliance government would take steps to
rectify the situation. They are reviewing every project. Accountability is being fixed. There
is a great urgency, he said adding that all three service chiefs can meet Prime Minister
Narendra Modi one-on-one every month to discuss matters of importance. He described as a
mystery the Chinese incursion into Ladakh and how it coincided with the visit of Chinese
President Xi Jinping to India.


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ECONOMY
India should aim at $40 b gold jewellery export by 2020: WGCTheHindu
India, the worlds largest gold consumer, should target five-fold increase in gold jewellery
exports to $40 billion by 2020 from the current level of $8 billion, according to the World
Gold Council (WGC).

The country should also put to use about 22,000 tonnes of gold lying idle with households
and temples and reduce its dependence on imports in the next five years, it said.

Besides, it should aim creation of five million new jobs across the gold value chain
manufacturing, retailing, assaying and recycling areas, it added.

Our vision for gold is that it should be put to work for the economy, creating jobs,
developing skills, generating exports and revenues an essential part of the financial,
economic and social structure of the country, WGC said in its Vision 2020 for the country.

In the next five years, India should target to be jeweller to the world and gold jewellery
exports from here should increase five-fold to $40 billion from the current level of $8
billion, it said in a statement.

WGC said that the country should meet 40 per cent of gold demand from its domestic stocks
and the rest 60 per cent through imports and mining.

That apart, India should target 75 per cent of gold sold to be standardised and hallmarked in
the next five years. It should also provide higher loan to value ratio for hallmarked jewellery
and ensure mandatory hallmarking for pieces above a designated selling price, WGC said.

On high interest ratesTheHindu
One more bi-monthly monetary policy review has come and gone, and the now not-so-new
Reserve Bank of India Governor Raghuram Rajan and his team have chosen to sit tight. No
change in the benchmark repo rate, no change in the CRR or SLR. This is the fourth
consecutive policy review in which the repo rate has been left untouched at 8 per cent. This
decision, not to lower interest rates as many sections have been demanding and not to infuse
additional liquidity into the system, occurs at a time when growth is sluggish, but consumer
price inflation on a point-to-point basis stood at a high 9.5 per cent in August. So the RBIs
decision is seen as reflecting an emphasis on combating inflation, even if that is at the
expense of growth.

The repo rate, being the interest rate at which the central bank accommodates the short terms
liquidity needs of the banking system, is an important influence on the structure of interest
rates in India. High interest rates can adversely affect growth by discouraging industrial and
agricultural investment as well as curbing the volume of debt financed household investment
and consumption. This explains why interest rate reduction is expected when growth is

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sluggish. But the problem, the RBI argues, is that inflation is high. And reducing rates can
aggravate inflation, which in its view can be worse for growth. Hence the stubborn
insistence on holding interest rates steady.




This refusal to use the monetary policy lever to revive growth because of the fear of inflation
is expressed in a context of fiscal conservatism. The government is committed to pruning
expenditures in order to reduce the fiscal deficit and ensure fiscal consolidation. Since that
implies a fiscal stance that does little to raise demand, the macroeconomic policy framework
as a whole (or the combination of fiscal and monetary policies) is biased against spurring
growth.

Unfortunately, this monetary policy stance is being adopted at a time when interest rates are
high by recent historical standards. As the accompanying Chart shows, the repo rate has
ruled at between 7 and 8.5 per cent for more than three years now, and the last time it was in
this range was for about a year and half starting mid-2006. So what we are seeing here is not
just a policy of holding nominal rates steady, but of sticking with a high nominal interest rate
regime for a longish period. In fact, taking a longer view, other than for the 2009-10 period
when the government was responding to the affects of the global crisis, the benchmark
nominal interest rate has been relatively high for much of the last decade.

Interestingly, this has not helped rein in inflation, especially food price inflation, which has
also been ruling high for a considerable period. All that the RBI can claim (but cannot
prove) is that high interest rates have prevented inflation from being even higher. They have

CURRENT AFFAIRS

not helped bring down the rate of inflation. The RBI governor made a feeble effort to argue
they have by pointing to the steady decline in inflation excluding food and fuel by a
cumulative 111 basis points since January 2014, to a new low. The governor may find that
significant, but those having to spend much of their incomes on food and fuel are bound to
disagree. The fact that this failure on the inflation front combined with the pressure to do
something for growth has not pushed the RBI to cut rates suggests that there could be factors
other than inflation influencing the central banks interest rate policy.

One such influence can be the effect interest rates have on inflows of foreign portfolio
investment. As noted earlier, the benchmark rate influences the structure of interest rates.
And that structure in turn influences returns in financial markets. So a high interest rate
regime is one way of encouraging foreign investments inflows and preventing outflows.
That relationship seems to be confirmed by the large net inflows of foreign portfolio capital
into India during the period of high interest rates. More recently, close to $14 billion has
been invested in Indian equity markets since January this year, raising the Sensex by a
lucrative 26 per cent. Moreover, a rising share of institutional investor inflows goes now into
the debt rather than equity market (Refer Bond Rush in Indian Markets, Business Line,
September 2, 2014). Investors are clearly cashing in on the much higher interest rate in India
than elsewhere and the impact that has on overall financial returns.

Reducing interest rates can have a damaging impact on these inflows and it is hard to believe
that the RBI has not factored that into its decision on interest rates. If the RBI governor can
express worry about the impact that the US taper and the consequent rise in US interest rates
can have on investment flows to emerging markets like India, he is bound to be worried
about the impact that lower interest rates in India can have on such flows. This then can be
an important, even if not the sole, influence on the RBIs monetary policy stance.

Many governments pursue fiscal consolidation to appease foreign financial interests that
abhor deficits. A restrictive monetary policy with high interest rates also seems to be
influenced by foreign finance. Clearly then, foreign finance is not good for growth, contrary
to what the government seems to believe.

EDITORIALS
Are we asking for it, really?TheHindu
The past month saw Netizens flocking in support of Deepika Padukone after her
photographs were reduced to a showpiece on the female anatomy by one English language
newspaper. Whether the publication in print of the photograph in the first instance was more
appalling or the editors vehement defence of it afterwards is a moot point. If a celebrity is
judged by the way she dresses, then its no surprise that an ordinary person is also judged
likewise.

Recently, I decided to head to a pub that my work-mates were insisting on checking out. Not
thinking twice about it we headed to the place for a bite and to catch up on office gossip.

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As it was still the early hours of the evening, the dimly lit pub was occupied by college
students out for a bout of underage drinking, the odd couple or two in the love booths, and
other usual sundry characters.

Not long after we settled into our seats, a young girl from the table beside ours approached
us to enquire if we were teachers. One of my colleagues replied in the negative and asked
her why she asked. To this she very sweetly replied that since it was Teachers Day she and
her friends thought maybe we had come out to celebrate. Coming from a college student the
question was an innocent one as most of us were dressed in our office attire and some even
in formal Indian clothes. Most of my friends were amused and one even joked about S.
Radhakrishnan sitting in heaven and scoffing at the suggestion of our being academicians.
As she turned back to return to her friends, a doubt flashed through my mind, but I quickly
pushed it aside as the server arrived with the menu.

Our orders placed, we were just about warming up into the conversation when the server
arrived by my side with the menu card in his hand and politely informed me that the Tom
Collins that I had ordered was actually an alcoholic beverage, and checking if that is what I
had actually wanted. Because, how could an Indian girl in a traditional outfit hanging out in
an all-girls teetotaller group could possibly be someone who consumes alcohol, much less
know that Tom Collins is a cocktail? Of course he didnt say that out aloud, but that is
exactly what he meant. To say I didnt feel denigrated at his question would not be
completely true. I gave him the most indignant stare I had ever given someone in my life,
but my inherently mild disposition prevented me from articulating my ire. Nonetheless I
confirmed to him that it was indeed the cocktail that I wanted.

So to sum up, a server and a bartender standing in the prime business district of Indias
capital city totally ignored the fact that I could be an articulate, confident working woman
whos completely at ease in their pub which is by no means an inexpensive one. Instead,
they chose to focus on my attire, which for them probably screamed out of place. That is
also perhaps what went through the collective minds of the college kids sitting beside us,
which prompted one of them to ask us a question.

A womans education, her financial and societal statuses are all secondary to her gender. It
seems there is an unwritten societal code for women in India which each member of my sex
is expected to abide by. And if, heaven forbid us, we are to breach this imaginary code then
we should be prepared to face the consequences.

So that is what we do every day of our lives from when we are born to the day we die. The
countless girls and women who go out of their houses daily are all open invitations for men
to ogle at, to touch, to make passes and to presume that we are dying to be the object of their
fantasies. Not to mention the social condemnation for seemingly innocuous choices.


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None of us is spared. Not Deepika Padukone who, in the words of her contemporary Sonam
Kapoor, asked for it by dressing irresponsibly. Nor the girl whose senile boss cant help
himself from dropping hints that he wants to go out with her simply because she is
unmarried. And most definitely not the countless nameless girls, who according to a few
senile lunatics, seemingly have fallen prey to love jihad the religious propaganda tool de
jure because clearly these girls couldnt love a Muslim man out of choice. In the minds of
the menfolk, and unfortunately some women too, we are ourselves asking for it by dressing,
behaving, thinking, choosing or acting in a certain manner.

Yes, all of us are asking for it. But its not what you think. We are asking you to just let us be
ourselves carefree and without apprehensions. Afford us the opportunity to live with
dignity and respect. If thats too much to ask for, just give us indifference. If that were to
happen, I for one will be happy to finally enjoy my Tom Collins in peace.

Going beyond interest rate changes TheHindu
Entirely in line with expectations, the Reserve Bank of India in its fourth bi-monthly mone-
tary policy review did not change the policy repo rate, which remains at 8 per cent.

The main determinant of monetary policy has been to get a handle on inflation. This has
been very well articulated by the RBI Governor both through the policy statements and out-
side. In fact, this time the Governor had amply made it clear that a rate cut was out of the
question given the inflation scenario. The RBI has not only explained why a rate cut was not
possible this time but has also more than hinted as to why there might not be any change for
quite sometime. The pause may well extend to the greater part of 2015. The reason, of
course, is inflation. While the RBI is fairly confident of reaching its target of 8 per cent retail
inflation by January, 2015, it is far less certain about its medium-term target of 6 per cent by
January, 2016. The central banks views on the glide-path for inflation are the same. How-
ever, the risks to attaining the 6-per cent target by January, 2016, remain even though they
have lessened compared to August. As to why achieving a 6 per cent inflation target by
January, 2016, may be so difficult, the RBI Governor explained that lots of things can hap-
pen in the world.

The present softening of commodities prices, especially of oil now trading below $100 a
barrel might not last indefinitely. Food prices may spike. The impact of the recent mon-
soons has not been assessed fully.

Incidentally, it is on the basis of the Urjit Patel committees recommendations (January,
2014) that the targets for inflation based on the CPI rather than the WPI were first formal-
ised. The bi-monthly policy review format is also based on the same committee. However,
till now, the government and the RBI have not formally accepted the committees recom-
mendations.


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The major implication of the fourth bi-monthly policy review is that the RBI framework puts
a higher weight on promoting macroeconomic stability and pursuing real interest rates. On
the latter, the financial savings of households could certainly do with inflation beating real
returns. After a long time, bank depositors are poised to get a real return (nominal interest
rates adjusted for inflation). In that context, the moves to reduce the deposit rates by leading
banks will nullify the impact of falling inflation.

Another clear inference is that the RBI expects the government to tackle the supply side is-
sues relating to food. Food inflation accounts for a significant part of retail and wholesale
inflation indices. In the CPI index, food inflation at 9.5 per cent is still high although in the
WPI, it has shown improvement. The RBI has to wage a relentless war in keeping down in-
flation expectations.

Recent policy statements and clarifications by the Governor and senior officials are meant to
downplay the overweening focus on rate actions in the policy review. The policy announce-
ments ought to be viewed for the structural changes they propose. This time, there is a fur-
ther calibrated move to cut the held-to-maturity (HTM) ceiling by banks. This will pave the
way for a more orderly development of institutions. By tweaking the norms for calculating
the liquidity coverage ratio (LCR), banks are allowed greater access to funds for their nor-
mal deployment. The announcement to create a central repository for frauds is another wel-
come step. The decline in credit disbursements by banks it has dropped to below 10 per
cent on year-on-year basis is a worrisome development. The RBI, however, thinks it is
not due to high interest rates. The base effect may be at play. Besides, companies may be
mobilising money from outside the banking system. Oil companies have not been fully util-
ising the limits allotted to them.

The RBI has emphatically stated that future policy changes will be entirely dependent on
data. Its projections on medium-term inflation 6 per cent by January, 2016 will be the
pivot around which other policy changes will devolve.

In sum, the latest monetary policy review carries forward the main tenets of recent state-
ments, namely, inflation, especially retail inflation, remains a worry ruling out a rate cut for
quite sometime. It is more difficult to achieve the 8 per cent near-term target by January,
2015 than the 6 per cent medium-term target by January, 2016. All these lead to the conclu-
sion that monetary policy reviews need not be and as recent ones show focussed only
on rate changes.


CURRENT AFFAIRS

Anachronism in the Succession Act TheHindu
Section 213 of the Indian Succession Act, 1925, lays down that no right as executor or
legatee can be established in any Court of Justice, unless a Court of competent jurisdiction in
India has granted probate of the will under which the right is claimed, or has granted letters
of administration with the will or with a copy of an authenticated copy of the will annexed.
Further, the section shall not apply in the case of wills made by [a] Muhammadan or [an]
Indian Christian. It shall only apply in the case of wills made by a Hindu, Buddhist, Sikh or
Jaina where wills are of the classes specified in section 57; and by a Parsi dying, after the
commencement of the Indian Succession (Amendment) Act, 1962, where such wills are
made within the local limits of the ordinary original civil jurisdiction of the High Courts at
Calcutta, Madras and Bombay and where such wills are made outside those limits, insofar as
they relate to immovable property situate within those limits.

The words Indian Christian were inserted by the Indian Succession (Amendment) Act 26
of 2002, following pressure from Christians of Kerala. It was done by means of the Indian
Succession (Kerala Amendment) Act, 1996 (Act 1 of 1997). Thus, Christians of Kerala were
exempted from the applicability of Section 213.

In Kalari Thresslamma v. Kathidukkanamikhal Joseph (AIR 1998 Ker 116) it was held that
Christians of Kerala did not require to get their wills probated, by virtue of the Kerala State
Amendment Act 1 of 1997. But the amendment did not give immunity from Section 213(1)
to wills executed by Christians of Kerala involving property outside Kerala: in such cases
they still required probate or letters of administration to establish rights. Clarence Pais v.
Union of India (AIR 2001 SC 1151 @ 1152), was filed by a Christian residing in Kerala who
was the beneficiary of a registered will executed by his aunt in 1986 bequeathing him a flat
in Delhi. After she died in 1991, the housing society refused to hand over the flat to him
without a court direction. He could not get relief from the court as he was a Christian bound
by the restriction provided under Section 213. He challenged the constitutional validity of
Section 213 as being discriminatory against Christians, but the court held that historical
reasons may justify differential treatment of separate geological regions, that Christians
alone had not been discriminated.

The Government of India conceded the demand made by the Christian community and
enacted Amendment Act 26 of 2002 inserting the words or Christians after the word
Mohammedans in sub-section (2) of Section 213 as was done in the Kerala Amendment
Act 1 of 1997.

As a result, the provisions of Section 213(1) which necessitate the grant of probate of the
will or letters of administration with the will or with a copy of the authenticated copy of the
will annexed by a court of competent jurisdiction in order to establish the right as executor
or legatee is now not applicable to wills made by Mohammedans and Christians. The
provision, however, continues to apply in the case of wills made by any Hindu, Buddhist,
Sikh or Jaina where such wills are of the classes specified in Section 57.

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The exemption for Muslims under the parent Act stemmed from Muslim Personal Law. The
stipulation imposed in Section 213(1) in respect of wills made by a Christian, Hindu,
Buddhist, Sikh or Jaina was the legacy of colonial rule; it was extended to Parsis in 1962.
Wills executed by Christians have been exempted across India, while the provision remains
for Hindus, Buddhists, Sikhs, Jainas or Parsis in a limited form.
An article by this writer, published in Law Weekly (2003 (2) LW 35 (JS)), challenged the
validity of Section 213. An appended Editorial Note said: If in regard only to properties in
Chennai, Mumbai or Kolkata or in the event of the testator having executed the testament
while within these cities, is a probate made requisite by this provision leaving aside the
entire country does not this provision appear an anachronism?

The Law Commission headed by Dr. AR. Lakshmanan, in its 209th Report (2008), referred
to the article and recommended the deletion of Section 213. But the Ministry of Law and
Justice seems to have put the matter in cold storage. MPs from Maharashtra, West Bengal
and Tamil Nadu have not raised the issue either. The subjects of wills and succession are
in the Concurrent List, and the three States are free to pass amendments to the Succession
Act deleting Section 213, as was done by Kerala.

ADDITIONAL READING
Initiatives of the New Government in the Textiles SectorPIB
The new government, under the leadership of Prime Minister Shri Narendra Modi has
stressed an economic vision based on increasing production, export and generating employ-
ment giving particular attention to:
Generate productive employment opportunity for the youth
Inclusive and participative growth
Skill, Scale and Speed
Make in India brand.
Zero defect - Zero Effect (on environment)
Adarsh Gram

Indias textiles and clothing industry is one of the mainstays of the national economy. It is
also one of the largest contributing sectors of Indias exports contributing nearly 13.25% of
the countrys total exports basket. The textiles industry is labour intensive and is one of the
largest employers. Textile industry has realized export earnings worth of 41.57 billion USD
in 2013-14

The Textile industry has two broad segments, namely handloom, handicrafts, sericulture,
powerlooms in the unorganized sector and spinning, apparel, garmenting, made ups in the
organised sector.

New Government has taken many initiatives for the development of the textiles sector. Some
of the initiatives are as follows.


CURRENT AFFAIRS

Setting up Integrated Textile Parks
The Scheme of Integrated Textile Parks is one of the flagship schemes of the Ministry of
Textiles. It aims to assist small and medium entrepreneurs in the textile industry to clusterize
investments in textile parks by providing financial support for world class infrastructure in
the parks.
The implementation of the scheme was held up during the last one year due to administra-
tive bottlenecks and no sanction was given for new parks. The new government moved
swiftly to resolve the issues and 13 new textiles parks were approved by the Project Ap-
proval Committee (PAC) chaired by the Minister of State for Textiles (independent Charge)
Shri Santosh Kumar Gangwar. While these 13 textile parks will receive a grant to the extent
of Rs 520 crores from government for infrastructure development, they are estimated
to bring in private sector investment of about Rs 3240 crores into the sector and gener-
ate direct employment for about 35,000 persons over the next three years. Besides, a
fresh advertisement would be issued calling for proposals for more ITPs for utilization of the
balance provision during the 12
th
plan period.

Exports
During April-Aug 2014, the textile exports registered a growth of 9.5% against the cor-
responding period of last year, while RMG exports grew 17.7% and carpets 22.2%,
With a vision to create an export friendly economy the government introduced several initia-
tives
Duty free entitlement to garment exporters for import of trimmings, embellishments and
other specified items increased from 3% to 5%. This initiative is expected to generate an
additional RMG exports estimated at Rs.10,000 Crore.
The government has also proposed to extend 24/7 customs clearance facility at 13 air-
ports and 14 sea ports resulting in faster clearance of import and export cargo.
The proposal for imposing duty on branded items was dropped providing relief to the
entire value chain.

Development of Handloom
Specific steps have been initiated for revival of handloom industry based on its inherent
strength for production of high value items. Focus is on assisting weavers with designs,
marketing and improved wages. National Institute of Fashion Technology and leading
members of the fashion industry have been roped in for design support to weavers. At
the same time equipment and raw material for producing clothes for the high end customers
and niche market are also being provided. Higher wage coming from high value production
and reducing level of transactions in marketing would enhance the wage of the handloom
weavers substantially.

In order to provide better marketing reach, the Ministry has launched an E-commerce ini-
tiative Flipkart. This will strengthen the existing Primary Weaver Cooperative Society by
assisting entrepreneur from the weavers families for taking up production and supply di-
rectly to the customers. Proposed Trade Facilitation Centre and a Craft Museum will also

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provide much needed visibility to handloom products. Lakme fashion week this year dedi-
cated a day showcasing the vibrancy and magic of Indian weavers and crafts.

Synergy of handloom, handicraft with tourism has been worked out in consultation with
Ministry of Tourism. State Chief Secretaries have been requested for identify-
ing traditional handloom weavers/handicraft artisans villages for development as
Adarsh Gram as tourists destination.

Development of Tassar handloom products like sarees, dress material and wide range of
home furnishing fabric for exports typical to Bhagalpur in Bihar has been initiated un-
der Handloom Mega Cluster Scheme. Another mega cluster is being developed at Trichy,
Tamilnadu. Over 15,000 handloom weavers will be directly benefited under each these two
clusters. The remaining new megaclusters at Surat, Bareilly, Lucknow, Kutch and Mysore
announced in the Budget Speech are at various stages of implementation.

Handicraft
Promotion of major crafts of Varanasi namely wood carving, carpet and durry weaving,
meenakari and zardozi and pottery etc. have been taken up by providing assistance to the
artisans with better skill, design and supply of toolkits etc. This was formally launched by
the Textiles Minister on 26.9.2014. A Skill Development Programme for training 5000
carpet weavers has been taken up through the Carpet Export Promotion Council (CEPC). An
Integrated Design Project of 5 months duration for wooden toys would be organized by Na-
tional Centre for Design and Product Development (NCDPD). Electric wheels were given to
potters under the Design and Technological Upgradation Scheme of Handicrafts in Delhi
and later at Bareilly.

Silk and Pashmina
India is the 2
nd
largest producer of Silk in the world and employs large number of skilled and
unskilled tribal women. During his recent visit to Jammu & Kashmir the Honble Prime
minister declared a scheme for the development of nomads.
Provision of Rs. 30 crore for same was made in the 2014-15 Budget, which would be
utilized for
Promotion of Pashmina in Leh, ladakh region of Jammu and Kashmir
Setting up a dehairing plant in Ladakh to increase productivity
Setting up Solar Powered Community Centers, Sheds for animals and Pucca shelters for
nomads.
Recognizing their contribution and efforts the Textiles Minister felicitated 54 women
engaged in sericulture.

NIFT Srinagar
With a vision to encourage and train the youth of Jammu and Kashmir for fashion design
and thereby generate employment opportunities the Government has increased its Financial
Support for setting up NIFT center from 50% to 90%.

CURRENT AFFAIRS

Need to revive Iran-India energy ties IDSA
With the recent report of two American companies Chevron and ExxonMobil dropping
out of the race for the long-struggling TAPI gas pipeline project, on the grounds that Ashka-
bad had refused to give them equity stakes in the fields supplying the gas in exchange for
funds for constructing the pipeline, has put the project in further doubt. Even though two
other firms Frances Total and Malaysias Petronas have offered to step in without de-
manding any stakes in Turkmenistans gas fields, at best, the project will be delayed for sev-
eral months.

Interestingly, an earlier report had also said that Pakistan was now mulling over an alterna-
tive proposal whereby it would buy liquefied gas (LNG) from Iran, in lieu of natural gas
through the suffering IPI pipeline project. Although Iran has been aspiring to build a lique-
faction facility since the 1970s, it has not been successful and has had to cancel or delay
LNG projects because of the US-EU sanctions regime that has made it impossible to obtain
financing and to acquire the requisite technology for the same. As a result, Iran is now look-
ing at the possibility of exporting natural gas to Oman, which has two liquefaction facilities,
from where the Iranian gas could be converted to LNG and then exported to Pakistan. The
report said that Pakistani officials were planning to hold negotiations with Iranian counter-
parts at an upcoming meeting.

The fact that Oman and Iran have reportedly finalised a heads of agreement whereby Iran
will export 20 million cubic meters per day (mcmd) of gas to Oman through a pipeline over
25 years from 2015, does make the Pakistani proposal viable. Significantly, at the time the
agreement was being negotiated a year ago, Oman had stated that approximately 50 per cent
of the gas could be allotted for export to other markets including Japan, South Korea and
India.

Of all the proposals that have been making the rounds over the last few decades, the latter
appears to be the most feasible as it would resolve Indias security concerns associated with
the IPI and TAPI projects, and would avoid the unstable and insecure route transiting Af-
ghanistan and Pakistan. However, the success of the under-sea pipeline from Oman would
be contingent upon a pipeline between Iran and Oman being constructed. Although an Iran-
Oman gas agreement has been doing the rounds since 2007 and a MoU was signed in 2013,
as of now, only a heads of agreement has been signed between these countries, which is
essentially a checklist of issues that the parties have decided must be resolved. Nonetheless,
the fact that Oman has taken this preliminary step is significant given the pressure that it has
been subjected to by the US to purchase gas from other suppliers, like Qatar.

In fact, several countries and companies, including European ones, are eagerly waiting for
signs that the sanctions imposed on Iran will be lifted so that they can access not only the
countrys vast energy resources, but also enter its lucrative market. In particular, European
companies, which had exited from Iran four years ago, when the sanctions were tightened,
are at the forefront leaving their American counterparts behind. Many are already holding

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exploratory talks with Iran. Within weeks of the Joint Plan of Action (JPA) being announced
in November 2013, Iranian Oil Minister Bijan Namdar Zanganeh met with the chief execu-
tives of some European oil companies. With the US and EU imposing sanctions on Russia
for its Ukraine operation, although as of now these do not include the energy sector, con-
cerns are increasing that Russia may retaliate by cutting off supplies to Europe, lending
weight to Europes search for a non-Russian supply alternative. Although the JPA set a July
20, 2014 deadline for a final settlement on Irans nuclear programme, the deadline was
pushed to November 24, 2014. While the negotiations are inching along with both sides tak-
ing hard positions, Tehran seems optimistic that by November a decision to lift the sanctions
will be taken.

If indeed Iran and the Western countries do come to an understanding or even possibly an
agreement on the formers nuclear programme resulting in the sanctions being lifted, it will
lead to a rush for a share of the lucrative Iranian energy pie similar to Myanmars opening
up last year. India cannot afford to be left behind.

India earned Tehrans wrath when it voted against Iran in the IAEA in 2005 and although it
continued to buy Iranian crude despite the sanctions, it reduced its off-take drastically, rele-
gating Iran to seventh position as an oil import source, down from second position. More-
over, India has all but opted out of the IPI gas project although officially it remains on the
table and has instead showed more enthusiasm for the rival TAPI project.

None of this could have gone down well with Tehran and may reflect on energy ties once
Iran returns to the international communitys fold. No doubt, India can, and has been finding
alternative sources for its oil imports, both in West Asia and other regions. However, with
the potential growth in its demand for gas seen to increase over the next few years, Iran is an
ideal source. Not only does it have huge natural gas reserves, which have remained unex-
ploited, unlike its rivals in the region such as Qatar and Oman, its geographical location is
well suited for exporting gas to India, either through pipeline or as LNG as and when Iran
gains access to the technology.

On the other hand, Iran has recently put its Farzad-B gas block on its auction list, citing de-
lays in development by the Indian firm. The block, which holds an estimated 21.68 tcf of in
place reserves, of which 12.8 trillion cubic feet (tcf) can be recovered, was acquired by OVL
in 2008, but left undeveloped due to fear of sanctions. Earlier too, in February 2012, Tehran
issued an ultimatum to OVL, but had not carried out the threat of cancelling the allocation.
The general belief is that the recent auction notice is to put pressure on India to develop the
field. With reports of India negotiating with other gas producers, including the US and Rus-
sia for LNG as well as pipeline, Iran too is keen to tie up sensing the potentially huge Indian
market. However, if OVL continues to show tardiness, it may lose the block, given that sev-
eral suitors are waiting in the wings to enter Irans energy sector. Moreover, once the sanc-
tions are lifted, Iran may prefer to send its gas to the more lucrative European market.


CURRENT AFFAIRS

India has recently been trying to revive its energy links with Iran and has even increased its
oil imports. It has also recently agreed in principle to pledge $100 million for upgrading
Irans Chabahar port, and is believed to have revived interest in piping gas from Iran, al-
though not necessarily through the IPI project. Whatever the outcome of the nuclear negotia-
tions between Iran and the western interlocutors, India needs to keep its long-term energy
security interests in mind and engage with Iran before it becomes too late.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of
the Government of India.

Dynamics of Income Inequality in India EPW
The Reality of Special Category States EPW
ISRO's Mars Mission EPW

To rein in inflation, RBI keeps major rates unchangedGovernanceNow
Rates unchanged due to risks from food price shocks and geopolitical developments that
could materialise rapidly, says RBI governor Raghuram Rajan.

As anticipated by the economists and market leaders, Reserve Bank of India (RBI) in its
fourth bimonthly monetary policy statement left untouched all major rates affecting the
economy.

In its policy statement released today (September 30), the apex bank stated that on the basis
of an assessment of the current and evolving macroeconomic situation, repo rate under the
liquidity adjustment facility (LAF) has been kept unchanged at 8 percent. Also, the cash re-
serve ratio (CRR) of scheduled banks is kept unchanged at 4 percent of net demand and time
liabilities (NDTL).

Further, the reserve repo rate under the LAF will remain unchanged at 7 percent, and the
marginal standing facility (MSF) rate and the bank rate at 9 percent. By leaving all the major
rates unchanged, the RBI has made it clear that it is not going to allow any cuts in the inter-
est rates until it is confident of controlling the consumer inflation and bringing it down to 6
percent the target set by RBI by January 2016.

Talking about the reason behind keeping the major rates unchanged, RBI governor
Raghuram Rajan said, There are risks from food price shocks as the full effects of the mon-
soons passage unfold, and from geopolitical developments that could materialise rapidly.

The decision of keeping the rates unchanged has not been fully appreciated by the industry.

Commenting on RBIs decision, Chandrajit Banerjee, director-general, Confederation of In-
dian Industry ( CII) said, RBIs decision to maintain status quo on policy rates is not fully
unexpected as in the growth-inflation dilemma, the concern is to guard against the anticipa-
tion of upside risks emerging from inflationary expectations.

CURRENT AFFAIRS
www.indiancivils.com
An Online IAS Academy Page 15
However, he added, By all indications, the twin deficits fiscal and current account are
well under control and core inflation has been trending downwards. While on the other hand,
industrial production has been muted. This could have been a good opportunity for the RBI
to reduce rates. According to a statement issued by the CII today, industrial sector is at the
threshold of the busy credit season when the demand for bank credit is anticipated to go up
and with the festive season demand for consumer goods is likely to increase.

In this context, the infusion of liquidity at this juncture, through a reduction in policy rates,
would have provided an impetus to the feel good factor brought on by the recent burst of
policy announcements made by the government, read the CII statement.

India's double challengeDownToEarth
While climate change is increasing the frequency of extreme weather events, traditional sys-
tem of flood management through lakes and connected water channels has been forgotten.
This makes flood and devastation inevitable.

The floodwaters devastating large parts of the Himalayan state of Jammu and Kashmir
caught the people and the government unawares, it is said. But why should this be so? We
know every year, like clockwork, India grapples with months of crippling water shortage
and drought and then months of devastating floods. This year offers no respite from this an-
nual cycle but something new and strange is afoot. Each year, the floods are growing in in-
tensity. Each year, the rain events get more variable and extreme. Each year, economic dam-
age increases and development gains are lost in one season of flood or severe drought.

Scientists now say conclusively that there is a difference between natural variability of
weather and climate change, a pattern brought about by human emissions that is heating up
the atmosphere faster than normal. Scientists who study the monsoons tell us that they are
beginning to make that distinction between normal monsoon and what is now showing up in
abnormal extreme rain events. Remember, the monsoons are known to be capricious and
confounding. Even then scientists can see the change.

This is further complicated by the fact that multiple factors affect weather and another set of
factors affects its severity and impact. In other words, the causes of devastation following
extreme eventslike droughts or floods are often complicated and involve mismanage-
ment of resources and poor planning.

The Jammu and Kashmir floods are because of unusually high rainfall. This is only part of
the problem. It is also clear we have destroyed drainage in floodplains everywhere through
utter mismanagement. We build embankments believing we can control the river only to
find the protection broken. Worse, we build habitations in floodplains. Urban India is mind-
less about drainage. Storm water drains are either clogged or just do not exist. Our lakes and
ponds have been eaten away by real estateland is what a city values, not water. In all this
what happens when extreme rainfall events happen? The city drowns.

CURRENT AFFAIRS

It is no different in Jammu and Kashmir. The traditional system of flood management was to
channelise the water from the Himalayas into lakes and water channels. Dal and Nageen
lakes in Srinagar are not just its beauty spots, but the sponge. The water from the massive
catchment comes into the lakes, which are interconnected.

More importantly, each lake has its flood discharge channel which drains the spillover. But
over time, we have forgotten the art of drainage. We only see land for buildings, not for wa-
ter. The attitude is it will rain for only a few days, so why waste land to manage that wa-
ter. This is what has happened in Srinagar. Residential buildings have come up in the low-
lying areas of the city, flood channels have been encroached upon or neglected.

Now when it rains heavilyand with greater frequency and intensity because of climate
changethe water has nowhere to go. Flood and devastation are inevitable. All this makes
for a double whammy. On the one hand, we are mismanaging our water resources, thus, in-
tensifying floods and droughts. On the other hand, climate change is increasing the fre-
quency of extreme weather events, making the country even more vulnerable.

Indians know that the monsoon is their real finance minister. Clearly, the opportunity is to
make sure that every drop of rain is harvested and used in the prolonged dry season. But this
rain will come in the form of more ferocious events. We must prepare for that. Holding and
channelising rain must become the nations mission. It is our only way to the future.

This means every water body, every channel and every catchment has to be safeguarded.
These are the temples of modern India built to worship rain.

Pursuing a nationalist IPR policyDowntoEarth
India has enough laws to protect its intellectual property rights. It is the implementation that
is wanting.

IT was an unexpected announcement that conveyed a strong message. We are very strong
in IPR (intellectual property rights) and we want to protect our national interest. That does
not mean we are going to be regressive or restrictive, but it is the duty and right of the gov-
ernment to protect the IPR of our country. That was Union minister for commerce and in-
dustry Nirmala Sitharaman at a recent meeting where she outlined the objectives her minis-
try had set for itself. When we are going for arbitration on IPR, others are picking holes
because we dont have an IPR policy. The lack of policy has really curbed us from establish-
ing our rights in a forceful way.

It was a statement that also left many bemused. Surely, India had debated its policy on IPR
thoroughly before amending its laws thrice since 1999? And had the country not brought
about the biggest change to its 1970 Patent Act by allowing product patents almost 15 years
ago? Sitharaman was clearly alluding to the persistent attacks on Indias patent regulations
by US business lobbies and their supporters in the Congress. But the statement failed to clar-

CURRENT AFFAIRS
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An Online IAS Academy Page 17
ify why a policy however sharply enunciated by the new NDA government would mollify
the US industry, in particular the big pharma companies.

These companies are miffed with sections 3d and 3e of the patent law which bars them from
extending or evergreening patents on their original discovery by seeking fresh IPR on in-
cremental innovations. The lobbies are seeking a repeal of these troublesome sections
through a propaganda war rather than taking the country to the disputes settlement body of
the World Trade Organization (WTO) as they should if the law is not compliant with its re-
quirements.

India is perhaps the only developing country with a long history of patent lawmaking start-
ing with the colonial times. The turning point came in 1957 when the government appointed
the Justice N Rajagopala Ayyangar Committee to provide a road map for revising the patent
system. In September 1959, the Ayyangar Committee submitted its well argued 397-page
report which recommended the retention of the patent system despite its shortcomings.
However, there was a significant caveat in the national interest: there would be no product
patents in two key sectorspharmaceuticals and agricultural chemicals. This report formed
the basis of the Patents Act, 1970, which was passed after much deliberations outside and
inside Parliament.

Critics have termed this a defensive patent policy but it helped to foster the development of a
pharma industry that provided inexpensive generic versions of high-cost medicines devel-
oped by the innovator drug companies in the developed world. Indian companies became
adept at developing new production processes and novel formulations that brought about the
generics revolution that was admiredand reviledacross the world. The process-only law
passed in 1970 served the country well until it signed the Trade Related Intellectual Property
Rights Agreement or TRIPS mandated by WTO rules.

What will a new IPR policy look like? Indias stated position at several international forums
is that it favours open source innovation. It is also strong on protecting its traditional knowl-
edge in a more focused way. This is all to the good since the current patent system of grant-
ing monopolies to the innovatorusually for a 20-year periodignores the social cost of
providing public goods in a variety of sectors.

The problem, however, is not with the policy or the laws. India has enough laws and more to
protect its IPR-even in biodiversity and traditional knowledge. Its the implementation that
is wanting with regulators such as the National Biodiversity Authority and the National Bu-
reau of Plant Genetic Resources failing to safeguard our natural resources and the IPR on
these. Will a policy fill the shortcomings of the system?