CLEARENCE TO FOREIGN NEWS MAGAZINES

Foreign news magazines can now come out with Indian editions with union cabinet clearing an information and broadcasting ministry proposal to review the print media policy to this effect. Till now,only indian editions of foreign scientific,technical and speciality periodicals & journals were allowed. However,unlike in the case of niche publications like scientific,technical and speciality periodicals-where cent percent foreign investment is allowed,publishers of Indian editions of foreign news magazines will be eligible only for 26% foreign investment. Only Indian companies registered under the "Indian companies Act,1956"will be allowed to bring out Indian editions of foreign news magazines.

WORLD ECONOMIC CRISIS

The world is facing a situation close to that of 1929,if not exactly the same. Paulson proposed bailout package of $700 billion mainly to purchase toxic assets off the books of the financial firms. However the total consumer debt in U.S. is now about $2.6 trillion(22% more than in 2000),while the mortgage debt is around $10.5 trillion. The problem is that this debt will not be written off by bailout plan. The estimated credit default swap market alone is about $62 trillion. This poses a considerable danger.This is particularly the case as the major banks and investment houses now consolidate into 4 companies (J.P morgan chase,citicorp,Bank of America and Wachovia wells fargo). The toxic fictitious sector and the equally unstable consumer debt bubble are within the balance sheets of these 4 entities.The bailout does not address this toxicity,which will inevitably corrode the remaining banks.

This all started with sub-prime crisis,housing bubble and finally its effects on banks. On october 15 the federal reserve released the BEIGE BOOK which showed that in september consumer spending had declined in retailing,auto sales and tourism. This is the first formal indication of the impact of the crisis.Things are so bad that GENERAL MOTORS released a statement that"bankruptcy is not an option"for the company.

One of the main reason of all this is the complex structure of the U.S. economy,which gives extremly high profits to the financial sector. The number of bank failures in U.S. increased after 1980s;the savings and loans crisis was precipitated by financial behavior induced by liberalisation;and the collapse of long term capital management pointed to the dangers of leveraged speculation. Afterwards came the effects of housing bubble. Because of the complex chain,institutions at every level assumed that they were not carrying risk or they were insured against it. But risk did not go anywhere and resides somewhere in the system. Given financial integration,each firm was exposed to many markets and most firms were exposed to each other as lenders,investors or borrowers. Any failure would have a domino effect that would damage different firms to different extents and unfortunately the same happened.

FAILED BAIL-OUT PLAN

The house of representatives has deafeated a $700 billion emergency rescue package for staggering U.S.financial industry.The vote against the rescue was 228 to 205,with 133 Republicans turning against president Bush to join 95 Democrats in opposition.The bill was backed by 140 Democrats and 65 Republicans.The vote was a poloitical defeat for president Bush who tried to muster national support for a recovery plan in a televised address recently,then lobbied wavering Republican legislators in intensely personal telephone calls before voting.Bush and his economic advisors,as well as congressional leaders in both parties had argued that plan was vital to insulate ordinary Americans from the effects of wall streets' bad bets.The version that was up for vote was the product of marathon closed door negotiations on capitol hill.It is alarming,how quickly tables can turn.Leading U.S.commercial bank WACHOVIA CORP.which was looking to acquire MORGAN STANLEY till a few days back,has now ended up being swallowed by CITIGROUP.

ANOTHER FEATHER IN THE CAP OF RELIANCE

Reliance industries has begun crude oil production from the nation's first deep sea oil field in the krishna Godavari basin. Reliance is the first to produce crude oil in the private sector. It is also worth mentioning that Reliance is the only player in the private sector that owns oil refinery(at jamnagar),rest all are owned by government of India.

Difference between WTO and GATT

WTO had its origin in Bretton woods conference after the end of second world war. It was founded in 1948 with 23 members by the name of GATT[General Agreement on Tariffs and Trade]. But in 1995,GATT was rechristined as WTO.
DIFFERENCES
1.GATT was a provisional legal agreement whereas WTO is an organization with permanent agreements.
2.WTO has members while GATT had only contracting parties.
3.GATT dealt only with trade in goods while WTO covers services and intellectual property rights as well.
4.The real critical distinction between GATT and WTO is creation of a binding dispute settlement system.Under GATT contracting parties could bring cases before international body but there was no effective enforcement mechanism. But in WTO an effective enforcement mechanism exists.

CURRENT INDUSTRIAL POLICY OF INDIA

Industrial policy of any country is in the form of certain rules and regulations issued by the government of that country for all the industries. These guidelines need to be followed by all the industries of that country.
When India got independence in 1947, the policy makers were well aware of the fact that Indian private sector is in its infancy. So, they decided not to rely upon private sector for industrial development. Hence almost all the industries were kept under government control under the “Industrial policy of 1948”.
By the “Industrial policy of 1956” government divided industries into three categories, schedule A, B and C. Schedule A industries were exclusively under the control of state. It included 17 industries. Schedule B industries were setup by state but private sector could supplement the efforts of the state. Schedule C industries were left for Private sector but were under the strict control of the state.
Slowly and gradually government went on a nationalization spree with nationalization of general insurance, life insurance and finally nationalization of banks (14 banks in 1969). But at the same time government also slowly started releasing its grip over private sector by Industrial policy statement of 1973 and 1977.
However due to stringent licensing system, not everyone could get a license for setting up an industry and as a result of this, money started accumulating in fewer hands(a direct violation of directive principles of state policy of the constitution). This was also indicated by “Hazari committee”, “Mehelinobis committee” and “Dasgupta committee”. Finally government decided to intervene in the mergers and acquisitions. Government could ask any big business house to break, if it feel that the business house has grown to such an extent that it is depriving others from making profit or the benefit of economy are not reaching to the ground level. At the same time government had the right to “say no” to a merger between two big business houses or industrial units, if it had a negative impact on others. So, practically speaking government got the rights of “marriage and divorce” of industries. However, even this step could not bring any benefit to industrial sector and Indian industries became uncompetitive internationally. So, finally government brought about a sea change in its industrial policy and came up with Industrial policy of july1991. Under this all industrial licensing were abolished except for 18 industries (like coal, alcohol, petroleum, hazardous chemicals etc...). So, about 85% of industries were taken out of licensing framework. Also, number of industries reserved for public sector was reduced from 17(in 1956) to 8(1991), (Now only 3). MRTP was also scrapped off as it was making Indian industries uncompetitive.
But as MRTP was scrapped off, so government had to come up with an alternative. Hence in 2002 government came up with “Competition Act 2002” under which government got the right of “Marriage and Divorce” of industries from the point of view of “Abuse of Dominance”. So before 1991 government had the right to stop the growth of any industrial house if it was dominant and depriving others from profit (even if it got dominant by fair means), but now government usually take action only if an industrial house has achieved dominance by unfair means (however it is alleged that this is more or less restricted to papers. The recent controversy of Anil Ambani-congress had supported this view in which reliance was alleged to take favor of government for gaining access to 3G spectrum).
However it is clear that after 1991, Indian industrial sector has achieved tremendous progress, which is clear from social and economic progress of India. But one should not compare India with developed nations like U.S, Britain, etc. United States got independence in 1776 and took more than 150 years to become superpower. James-I signed MAGNA CARTA in 1215, but Britain got the status of developed nation only in 20th century, after the industrial revolution (and everyone knows how they did it? By ruthless killings and plundering others). China got settled in 1949, but we cannot attain status of rich economy on the dead bodies of innocents as china did by communism, which is nothing but radical form of socialism.
India is a true democracy, so we may take a little longer to get status of developed country but we will surely achieve it and current Industrial policy of India is just a step forward towards achieving this goal.

RBI's NEW INITIATIVE

RBI has decided to increase the cap on advance remittances towords the import of services. Banks will now allow firms to make advance remittances upto $500,000 without a bank guarantee,against the previous limit of $100,000.