Start preparing for oil at $200 a barrel

The Kirit Parikh Committee is the third such committee to suggest decontrolling petroleum product prices. Probably politicians will again refuse to World's top oil exporting countries do so, and instead decree a modest increase in petrol and diesel prices.

Yet the key issue is not whether petrol and diesel prices should reflect today’s oil price of $75/barrel. It is that booming Asia will in a decade push oil to $200/barrel and maybe $300/barrel. India must prepare for a world of scarce, expensive oil instead of pretending that astronomical subsidies can ensure price stability.

Today, the “under-recoveries”, implicit subsidy, of oil companies is Rs 60,000 crore. The immediate price increases suggested by the Committee may cut this to Rs 30,000 crore. But if oil goes up to $200/barrel, the subsidy will rise astronomically up to Rs 500,000 crore, eroding funds for all other anti-poverty and development initiatives.

In the 1990s, oil cost $16-17/barrel. When it doubled to $35 by 2004, politicians refused to believe it was permanent, and decreed piecemeal price increases instead of price decontrol. When oil doubled again to $70/barrel by 2006, they cut excise and import duties and provided huge subsidies rather than raise prices proportionally. And when oil shot up to $147/barrel in mid-2008, they just closed their eyes and crossed their thumbs.

Luckily for them, the global financial crisis and Great Recession then sent oil crashing down to $40/barrel, saving them from facing up immediately to a future of scarce oil. But the global economy is now recovering, so that challenge must be faced.

The global recovery looks weak in Europe and North America, but is gathering steam in Asia. China and India look like powering ahead at 12% and 9% respectively in 2010-11. Other Asian countries are also buoyant. These developing countries are at a very energy-intensive stage of development.

Booming Asia is sucking in commodity imports from Africa and Latin America, fuelling booms there too. Slackness in rich countries has kept a lid on commodity prices, but the long-term trend is unambiguously upward.

China has already overtaken the US as the world biggest consumer of cars and emitter of carbon. India is following in China’s footsteps, one decade removed. So, even if oil consumption is muted in the West, even if rich countries drastically reduce carbon emissions (which is doubtful), oil consumption will rise stridently in developing countries.

The world’s old oilfields are in steep decline, and large new oil discoveries offshore in Brazil, Mexico and Africa are in deep waters that will take time to exploit.

Indian politicians say it is politically impossible to decontrol oil prices. They fear that freeing oil prices will stoke inflation, because of the impact on transport costs. But in countries with free oil pricing, like the US, inflation excluding food and energy has been less than 1% although oil prices have doubled in the last 12 months.

It is simply untrue that price decontrol leads to inflation. On the contrary it leads to efficiency, conservation and a switch to alternatives. It will also reduce the fiscal deficit, and that will tame interest rates and hence prices.

When I became a journalist in 1965, oil was decontrolled but steel was controlled on the ground that it was politically impossible to free a commodity so vital to the economy. But steel was decontrolled in the 1980s and proved no problem at all.

Why so? Because voters understand that commercial producers need to sell at market prices, but know that governments can subsidise goods indefinitely. As long as oil bears a political price, voters will resist any price increase. But if oil is decontrolled, voters will soon accept the realities of the market, as it already has for steel.

In 1974, when OPEC first flexed its muscle, the government doubled the price of petrol overnight. It was a big blow of course, but the economy adjusted to the reality of expensive energy. India adjusted again in the second oil shock of 1980.

We now face another huge energy crunch, and need to adjust to that reality too. After decontrol, we can replace the kerosene subsidy with solar and LED lanterns for the poor. Farmers should switch from diesel pumps to electric ones. Cooking gas cylinders can be replaced by piped gas. Buses can switch to compressed natural gas. The poorest can get cash transfers through smart cards to reduce their fuel bills.

We must stop massive subsidies for a non-renewable and polluting resource. Instead, we must prepare for the coming reality of oil at $200/barrel.

--- Courtesy Swaminomics

The Integrated Goods and Services Tax (GST)

During the presentation of the Union Budget 2007-08, erstwhile Finance Minister P. Chidambaram indicated that an integrated Goods and Services Tax (GST) would be implemented by April 1, 2010. Since then, the Finance Ministry and the Government of India have taken significant steps to keep to their commitment. However, come 2010 it seems unlikely that this could be effected by the proposed date. Not just that, but there also appears to be uncertainty as to when this GST legislation will precisely be implemented. However, it is certain that this will eventually be implemented, timing being the only area of indefiniteness. Given the importance of this piece of tax legislation, we will go over the key aspects relating to GST, how it is intended to work, benefits and challenges in its implementation and its implications on Indian economy and business.

Direct and Indirect Taxation
Taxes levied by the government can broadly be classified into two heads: Direct Taxes and Indirect Taxes. A direct tax is one which is collected directly by the government from entities, individual or corporate, on whom such taxes are imposed. For example, individuals are subjected to personal income tax, based on their total earnings for the year, and are taxed at a particular rate based on the tax-band they come under. Similarly, corporates are also taxed at the ruling corporate tax rate, which is around 30 percent in India, on the income they have earned for a particular year. Thus, a direct tax is one where the tax burden cannot be shifted by the taxpayer to someone else. However, an indirect tax, such as excise duty, value added tax (VAT), or goods and services tax (GST), is one which is collected and paid by the manufacturer or distributor of a product, but eventually the burden of tax is borne by some one else, say, the consumer. For example, let us suppose a motor car manufacturer first pays excise duty on the manufactured car as a result of which the cost of the car increases when it reaches the show room. When a consumer purchases the car from the showroom, he eventually pays for the duty component as well, which is included as part of the selling price of the car. Although the manufacturer initially paid the duty to the government, it is the consumer who bears the indirect tax burden.
Taxes are levied by both the central and state governments; which government bears what tax is an issue of constitutional definition and is clearly earmarked. At present, around 30 percent of central tax revenues are further transferred to states, with a greater share accruing to poorer states. An important anomaly also exists in that taxes, both from the perspective of incidence and in terms of rates, manufacturing and services sectors are treated differentially. There are also a host of taxes prevailing in the country; both at the national level and at the state level like octroi, central sales tax, state level sales tax, entry tax, service tax, stamp duty, turnover tax, tax on consumption of electricity, taxes on transportation of goods, etc.
Over the last few years, the government of India has been steadily rationalizing the country's taxation regime to bring them in line with international best practices; direct taxation has received its share of significant rationalization. Indirect taxes have also been rationalized over the last decade and schemes like value added tax (VAT) were introduced. However, implementation of an integrated goods and services tax (GST) is expected to position India's indirect taxation regime in line with global best practices.

History and Current Form of Indirect Taxation
Earlier, till the 1990s there was a burden of 'multiple-point' taxation with the central excise duty and the state sales tax systems. Manufactured products were subject to a series of tax burdens - first before the product was produced, inputs were taxed. Then, the final product was taxed again, which meant tax was calculated even on the earlier taxed component. This resulted in duplicate taxation, referred to as "a tax on tax," creating a cascading effect. Eventually tax payers were subjected to a very high level of tax burden. Such duplication resulted in lower tax collections as there was a reluctance to pay such unreasonable taxes; tax payers chose to evade taxes rather than promptly pay the same.

The Indian government realized this anomaly and introduced the Value Added Tax (VAT) at the central level, originally as MODVAT (Modified VAT) replacing the Central Excise Duty in 1986. In a phased manner, it completed the implementation of CENVAT (Central VAT) by 2002-03. By 2005, services tax was also added to CENVAT and this started emerging as a unified goods and services tax, applied by the Central Government, in the country. Introduction of CENVAT, to a certain extent, addressed the 'tax on tax' issue through a mechanism of providing a set-off on tax earlier paid. Tax compliance and collections also improved due to the fact that set-offs could be claimed only if sufficient proof existed that taxes had actually been paid on inputs.
Introduction of VAT at state levels became more of a challenge as various states were empowered through the Constitution for levying and collecting sales tax, and such tax rates varied vastly between states for the same commodities. The process commenced during 1995. After serious contemplation over the possibility of having a uniform tax rate across states for commodities and at the same time, preserving and accommodating certain state level distinctive differentials, a small flexibility in the rate structure was also agreed upon as a critical need. On this basis, state level VAT was introduced eventually by 2005 with deviations from the agreed VAT rates being very minimal across the states. This resulted in significant growth of tax revenue since the introduction of VAT.
Hence the introduction of VAT, to a large extent, helped harmonization of tax rates across the states and minimized the problem of 'tax on tax' to a certain extent. Then, what is the requirement for replacing VAT by GST? What further benefits will GST bring in?

Benefits of Introducing GST
Tax in the nature of an integrated goods and services tax, attracting the same rate of tax, has already been introduced in many countries the world over. This uniform rate is a fundamental premise of the GST concept. As compared to VAT, GST will result in further benefits consolidating a host of indirect taxes across the country. Benefits of the proposed GST framework will arise out of the following:

•GST is intended to be an integrated indirect tax framework covering manufacture, sale and consumption of goods, as well as services at the national level.
•CENVAT, in its current form, does not include several taxes which are levied separately such as additional customs duty, surcharges, etc. Further consolidation is thus required and hence the requirement for GST. Moreover, with the state level VAT, there are still many indirect tax components that are yet to be converged into VAT. This includes luxury tax, entertainment tax, etc. GST is expected to achieve this.
•More importantly, the CENVAT element is further taxed under the state VAT, duplicating the tax burden; in that sense, the 'tax on tax' component on the CENVAT element is still not eliminated in totality. In the proposed GST, such cascading effects of CENVAT as well as service tax are removed with set-off, and a continuous chain of set-off from the original producer's/service provider's point up to the retailer's level is established; this reduces the burden of all cascading effects. This is a critical improvisation in GST, which VAT lacked.
•As an outcome of removing the cascading effect on CENVAT, the burden of tax under GST on goods is expected to generally fall, being a positive driver for manufacturers, consumers and the industry, at large.
•There is also expected to be revenue increases for both the centre and the states, primarily through widening of tax base and possibility of a significant improvement in tax-compliance.
How does the proposed GST system work?
The tax burden on GST is applied across the entire 'value chain'; incidence of tax on entities is proportional to the value addition at each point. Let us take the example of a detergent manufacturer (see figure). Assuming a packet of this detergent is sold at Rs.380 in the retail stores, the GST on this packet of detergent is uniformly applied across the detergent manufacturing 'value chain'. By 'value chain' we mean, the process of raw materials being supplied to the manufacturer (by the raw material supplier), finished detergents supplied in a 'bulk' form to the whole sellers (by the manufacturers) and the packaged detergents being supplied to the retailers (by the whole sellers), and finally, the consumers purchasing the final packaged detergent at the retail stores.


The example illustrated in the figure shows that at the first stage the raw material supplier, who supplies raw materials worth Rs.200 to the manufacturer, has already paid GST of Rs.20. The manufacturer processes the raw materials and adds total value to the extent of Rs.50 (process value addition Rs.40 and profit margin Rs.10) and sells the bulk detergent to the whole seller at Rs.250. The manufacturer will then pay a GST on output of Rs.250, which will amount to Rs.25 (GST rate of 10 percent on Rs.250), but will get to set off a GST credit of Rs.20 (10 percent on Rs.200) thus paying a net GST of Rs.5. Similarly, as illustrated in the figure, the whole seller and the retailer will each pay a net GST of Rs.10 and Rs.3 respectively. In total, the raw material supplier, manufacturer, whole seller and the retailer, all put together, pay Rs.38 as GST, on the value additions along the entire value chain, from supplier to retailer, after setting off taxes paid at earlier stages. Hence, GST is a tax which has an incidence of tax burden only on the component of 'value additions' at each stage, and a supplier at each stage is permitted to set-off the earlier payment, through a tax credit mechanism.

What are the challenges in introducing GST?

•Given the current state level VAT variations, there are challenges in securing unanimous consent on the rate of the integrated GST; hence this is yet to be finalized. It is not only a matter of rate, but the states have to let go the powers of levying many forms of taxes, which will henceforth be converged into the proposed GST. Such loss of powers/ state revenues have turned out to be a major hurdle for securing unanimous approval from the state governments in implementing GST.
•The GST would have two components; a central component and a state component. The rates applicable for the central and the state components are under consideration by the expert committee. However, all other aspects are expected to remain uniform, as far as possible.
•As regards the proposed rate of GST, the task force of the 13th Finance Commission (TFC) has prescribed a GST rate of 12 percent; the states are refusing to accept this. Many other bodies that are working, in parallel, to come up with a rate have prescribed numbers that are different; one such rate is 11 percent for the state component, and other agencies establish an incremental rate of around 6 percent to 9 percent to cover the central GST component alone, taking the consolidated integrated GAST rate much above the 12 percent recommended by the TFC.
•There is likely to be significant loss of revenue to the state and the central governments on account of GST implementation; an equitable formula that will share this loss also needs to be mutually agreed upon.

Given these complications the implementation date needs to be finalized; it is unlikely to be 01 April 2010, as earlier committed to by the finance ministry. Stiff resistance has also been encountered from the opposition; the Bharatiya Janata Party (BJP) is opposing the implementation of GST on the grounds that sufficient discussions need to take place with all the stakeholders (central government, state governments, industry federations and academia) in order to ensure that interests of all are protected.
Overall, it is going to be a really tall task to design and implement an integrated goods and services tax framework that will be in line with international best practices, and at the same time, will take care of the unique complexities of the Indian central and state legislations. We have moved forward significantly in this initiative, but, when we would be in a position to actually implement this in entirety still remains a key question!

Budget 2010: What to expect

Expect higher tax rates and massive disinvestment in the coming Budget to help reduce the huge fiscal deficit from 6.8% of GDP this year to 3% over the next five years. Finance minister Pranab Mukherjee will package his higher indirect tax rates as an exit from the fiscal stimulus of 2008-09 and a return to the path of fiscal responsibility.

Such sound finance will not, however, be politically popular, and critics will complain that it is inflationary. Hence, the tax hikes are likely to be introduced in small instalments — increases of 1% or 2% at a time — over a long period.

The finance minister is entering that part of the political cycle that calls for fiscal toughness rather than populism. When a government serves a full five-year term, its fifth and last budget is typically a giveaway budget, attempting to buy votes in the coming election. The first budget of a new government is also typically populist, to thank voters. But the second and third budgets have belt-tightening measures to make up for the earlier populism. And we are about to witness the second budget of the UPA-II government.

No changes in direct tax rates are expected till the Direct Tax Code is fully discussed, and that will take another year. But, given the high inflation of the past two years, the income tax exemption limit could be raised a bit to provide relief to middle-class families.

The Goods and Services Tax (GST), to replace the existing spectrum of indirect taxes levied by the Centre and states, cannot be implemented by April this year, as earlier hoped by the finance minister. The target date may be put off by a full year. State finance ministers are yet to determine what GST rates they will levy.

Optimists hope for GST rates of 8% each for the Centre and states. In that case, the Central excise duty can stay at its current 8% level, making any rollback unnecessary. However, the FM shows no sign of being so optimistic.

The Budget will assume fast GDP growth of up to 9% for 2010-11, with a correspondingly high boost in tax collections. Tax revenues could rise by over Rs 1,00,000 crore. At the same time, outlays on the government’s flagship programmes such as Bharat Nirman and NREGA (National Rural Employment Guarantee Act) may be hiked only modestly, after steep increases last year.

The combination of these two factors, plus massive disinvestments of public sector shares, could reduce the fiscal deficit substantially.

The Budget may, however, have to provide a much higher sum for the food subsidy with the expansion of cheap food supplies under the proposed Food Security Act. Many state governments are already providing voters with cheap rice or wheat, and it is unclear how the burden of the Food Security Act will be shared by the Centre and states. The same is true for burden-sharing of additional costs entailed by the Right to Education.

Inflation is a political hot potato, and food prices have risen exceptionally fast. However, this cannot easily be countered as long as Indian food prices remain below global rates. Hopefully, a bumper monsoon, along with a good global crop, will bring down prices later in the year. However, metal and manufactured prices may continue to rise, as the world recovers from the recession. The base effect will tend to produce lower inflation figures as the year progresses. The FM may target an inflation rate of just 4% by the end of 2010-11.

Indian stock markets are likely to be buoyant, and this in turn should help the government raise unprecedentedly high sums by selling minority stakes in public sector corporations. Investment banker Uday Kotak expects inflows into the market of $15 billion (almost Rs 70,000 crore) each from foreign institutional investors and Indian insurance companies, plus another $5 billion (Rs 23,000 crore) from retail investors. This inflow can support disinvestments of well over Rs 50,000 crore, if the government gets its act together.

The Central sales tax is currently at 2%. Possibly, the finance minister will cut it to 1% in the Budget, and say it would be abolished when GST is introduced in April 2011.

There is no sign of the political will to abandon price controls — which translate into massive subsidies — for fertilisers, petrol, diesel and cooking gas. The Kirit Parikh Committee is looking into fuel pricing. But the recommendations of many earlier committees on the topic have been ignored, and the Parikh committee may not fare much better.

INDIA : 2009

It has been a strange year.

On the one hand, some stability returned to politics with the Congress party managing a fairly comfortable majority in the general elections. After the horrors of the 2008 Mumbai attacks, India actually went through 2009 without a terror strike. The economy appeared to have weathered the worldwide recession. Indian science and cricket scaled new heights.

On the other hand, the year held out ominous portents - Maoist rebels are threatening to go to war with the Indian state; food inflation is threatening to negate the gains of improved growth; and, egged on by the movement for Telangana, homegrown separatism is rearing its head again. There is growing suspicion that the country's natural resources are being bartered away cheaply. All this - and more - could turn 2010 into an extremely restive year.

Here's my pick of the defining events of 2009:

THE END OF HARDLINE HINDU NATIONALISM?

The Hindu nationalist Bharatiya Janata Party (BJP) proudly calls itself the "party with a difference". By the end of the year, India's main opposition was a party with many differences - within. When it was trounced by Congress at the general election, its fortunes hit rock bottom. Since then nothing has gone right: its leaders have bickered bitterly and openly; and one of them was banished , ostensibly for writing a book on Mohammed Ali Jinnah.

Party president and paterfamilias LK Advani looked jaded, and as the year wound down he handed over the baton as leader of the parliamentary party to a younger colleague. He also handed over the party presidency.

Whatever the changes, the BJP appeared lost. Critics say that ideologically, the party is past its sell-by date - still making noises about building temples, refusing to come to terms with the fact that India has grown up and strident Hindu nationalism has lost its vote-catching lustre.

Others say the BJP's only hope appears to lie in reinventing itself as a modern day, right-of-centre, Indian Conservative party. But observers find the leadership uninspiring. They say the party's best chance of revival is a dramatic slide in Congress fortunes.

RAHUL GANDHI'S SECOND COMING

He began as a gawky politician with a disarming smile that won him more female admirers than serious followers. But Rahul Gandhi, the latest scion of the Nehru-Gandhi dynasty, showed some serious political mettle this year.

Travelling through the northern Indian heartland - especially in Uttar Pradesh - Mr Gandhi quietly worked on rejuvenating his party's grassroots network and attracting younger talent, his supporters say. His party staged a comeback of sorts in Uttar Pradesh - a return from virtual politician oblivion after two decades.

Mr Gandhi has his work cut out for him - revitalising Congress and making it less of a family enterprise. Apparently he believes the party should go it alone, bucking the current narrative of coalition politics. Most analysts feel he may be wrong on this, and that coalition politics is here to stay in a complex country like India. 2010 will prove whether Mr Gandhi can help maintain his party's momentum - and even perhaps take up the cabinet position which he has repeatedly been offered.


BEATING THE RECESSION

India, by and large, escaped the ravages of the global recession. Its conservative banking system and lower exposure to the world economy possibly saved the day. But to be fair, thousands lost jobs and companies stopped hiring and slashed costs. Spending plummeted and the property bubble burst.

Now Prime Minister Manmohan Singh is holding out the hope of slightly higher growth - 7% plus - in this fiscal year. Companies have begun hiring again and spending is up. However, many economists believe that India's growth is not pulling enough people out of abject poverty, while deepening the divide between the haves and the have-nots. Even if India hits double-digit growth like China, there will be no reason to party when a third of its people live in dire poverty and milions of children go underfed. Why does an increasingly rich country treat its poor so shabbily?


SMALL IS BEAUTIFUL?


When Tata Motors unveiled the world's cheapest car, everyone sat up and took notice. The buzz around the rear-engined, four-passenger, 624cc Nano, whose basic model costs $2155, had been immense - one magazine wrote that it embodied a "contrarian philosophy of smaller, lighter, cheaper" transport.

The Nano is a nifty little car all right. User reviews have been mixed: most say it's great value for money, but caution that it may not be the safest car on the road. Others believe it's safer than the wobbly three-wheeled auto-rickshaw. Next year will tell whether Nano is a path-breaker or a risky gimmick. Customers seem to know what they want. The Nano's order books - more than 200,000 orders and counting - are full. Newsweek magazine, meanwhile, worries about potential "global gridlock" caused by Nanos and their ilk.


INDIA'S OSCAR MOMENT

In the days before the Big Hype, Bhanu Athaiya,a Bollywood costume designer, picked up India's first Oscar for costume design for her work in Gandhi. That was in 1982. Nine years later, the celebrated auteur Satyajit Ray was honoured with a Lifetime Achievement Oscar, joining such greats as Charlie Chaplin, Jean Renoir and Akira Kurosawa.

But India went truly Oscar-crazy only in 2009 when music director AR Rahman and sound recordist Resul Pookutty picked up a golden statuette each for their work in Slumdog Millionaire.

The redoubtable Rahman - dubbed the Mozart of Madras, where he lives and works - is India's finest music composer and a brilliant crossover musician. Pookutty's triumph showed how Indian movie technicians are today on a par with the best of the world - even the worst Bollywood tripe these days has a sheen and technical verve which is impressive.


AN ACCOLADE FOR INDIAN CRICKET

India defeated Sri Lanka at home to become Test cricket's reigning champions. The team's awesome batting line-up is difficult to match. The bowling has improved vastly. The fielding can be infuriatingly inconsistent though.

In a country where cricketers are worshipped like gods and are the highest paid in the world, India cannot afford to slip up. There seems to be talent aplenty: hungry, young players coming up from smaller towns and villages are flocking to the game. The only threat to India's cricketing fortunes, say critics, comes from the country's notoriously fractious and inept cricket officialdom and the riches of the shorter Twenty20 game. Will mammon crush nationalism in what a sociologist called an "Indian game accidentally discovered by the British"? Watch this space.


OVER THE MOON

When India pulled the plug on its inaugural Moon mission in August, 10 months after it was launched, some questioned whether it had "delivered the good science" it had promised. Two months later, Chandrayaan, as the mission was called, was hailed as a "grand success" after helping find evidence of water on the Moon. The mission cost less than $100m and fetched an enormous amount of goodwill for the country's bright space scientists. One newspaper crowed, One Big Step for India, A Giant Leap for Mankind. This time, few minded the hyperbole.

AN INDIAN ENRON

It had all the makings of an Indian Enron - one of the world's largest software companies, Satyam, found itself embroiled in India's biggest-ever corporate fraud. Its founder admitted exaggerating its cash reserves by nearly $1bn. That was in January. Thousands of jobs, millions of dollars worth of shareholders wealth and India's corporate reputation was at stake. The government waded in and appointed directors to run the beleaguered company.

Four months later, the fraud-hit firm found a suitor - a local company called Tech Mahindra - which picked up a stake of more than 30% in the company. And in June, the company, amazingly, announced a profit of more than $10m.

Rebuilding Satyam is a work in progress. But the fact that the company managed to stay afloat and fight back despite its founder and eight others facing charges of criminal conspiracy, cheating and forgery for stealing millions of dollars from the company is a testament to the spirit of its workers and a steely resolve by the government-appointed directors who refused to let the company crash.

THE TOP TEN

Top 10 scares
Y2K: A computer bug suggesting a theory that all computers would crash at the end of the 20th century.

Anthrax scare: In 2001, letters with anthrax spores were mailed to several news media offices in the US.

Global Warming: An increase in the Earth's temperature is the most debated topic in the last 30 years.

The Fear of 1984: Published in 1949, this dystopian novel concluded that life would intimate fiction.

Facebook and the CIA: A theory links the networking site to CIA and the US defence department.

Cellphones and Cancer: A Californian physician sued his phone company for giving him a tumour in 2002.

Trans Fat: Started in the US in 2006, banning trans fat became a worldwide movement eventually.

Doomsday 2012: According to the Mayan calendar, December 2012 is said to be the end of the world.

Recession: In 2008, stock markets and financial institutions all around the world collapsed.

Swine Flu: Hundreds of cases were reported in Mexico in 2009. Nations reviewed their health care policies.


Top 10 frauds

Harshad Mehta Scam: Arise was engineered in the stock exchanges in the Rs 600-crore scam in 1992.

Ramar Pillai: Claimed to have invented herbal fuel, which was actually kerosene laced water in 1996.

Fodder Scam: Exposed the nexus between bureaucrats, businessmen and politicians in Bihar in 1996.

Chandraswami: The self-styled godman is accused of cheating Lakhubhai Pathak of $100,000 in 1996.

Abdul Karim Telgi Scam: A fake stamp racket involving Rs 23,000 crore was busted in 1999.

Petrol Pump Scam: Kickbacks meant 297 outlets allotted by the NDA were cancelled by the apex court in 2002.

Kavya Vishwanathan: Was branded a literary fraud for her book How Opal Mehta Got Kissed, Got Wild, and Got a Life.

Cash for Questions: A 2005 sting operation showed ministers accepting cash to ask questions in Parliament.

Satyam Fraud: Pegged at Rs 14,000 crore, the fraud shook up corporate India last year.

Madhu Koda Scam: The former Jharkhand CM's money laundering ventures worth Rs 4,000 crore are being probed.


Top 10 global achievements

World Cup: The victory in 1983 brought attention to India and the sport among non-cricket playing nations.

Hotmail: Sabeer Bhatia created history when he created a web-based email system in 1996.

Nuclear Tests: India made it to the top news across the world for its nuclear tests in 1998.

Mother Teresa: She came to India at the age of 18 and founded the Missionaries of Charity.

Amartya Sen was the recipient of the Nobel Prize for his contribution to welfare economics in 1998.

M.F.Husain: He consistently raised the price of art works in India and was a big draw globally.

Tata-Corus Deal: The takeover of the Anglo-Dutch steelmaker in 2006 made Tata the 5th largest steel group.

Abhinav Bindra: The sharp shooter from Mohali put India on the global map with a gold at the 2008 Olympics.

Chandrayaan: India's first unmanned lunar probe brought its space programme global accolades in 2008.

Slumdog Millionaire: With three Oscars to two bonafide Indian citizens, it captured the attention of the world.


Top 10 conspiracy theories

Sanjay Gandhi's Death (1980): The Congress and Opposition suspected the other was responsible.

Pavagada Wolves (1983): Congress and Janata Party blamed each other as wolves carried off children.

Air India Bombing (1985): Some Khalistan separatists suspected Indian intelligence had engineered it.

Parveen Babi (1992): She believed Amitabh Bachchan ran the underworld. Was suffering from schizophrenia.

Plague from NATO Lab (1994): "Imperialistic forces" were widely suspected to be behind the Surat plague.

KFC(1996): The Karnataka Raita Sangha believed that KFC used genetically modified chicken with two heads.

T.A. Majeed (1997): Majeed feared that the allopathic lobby was out to kill him for developing a "cure" for AIDS.

Iodised Salt (2004): The Swadeshi Jagran Manch alleged it was a tool of MNCs to expose Indians to diseases.

Colgate (2004): Some RSS members claimed that the company channelled its profits to Christian missionaries.

Veerappan (2004): There is a rumour in the villages near Sathyamangalam Hills, Tamil Nadu, that he is still alive.


Top 10 disasters

Tangshan quake: China's mining city was devastated in 1976 with 6.55 lakh people dead.

African drought: Twenty nations hit from 1981-84; 20,000 people starved to death each month.

Armenian Earthquake: Spitak was destroyed, all its residents died. Over 1 lakh died in Leninakan.

Bangladesh Floods: The 1991 floods disrupted the lives of millions, killing 1.4 lakh people.

Gujarat Earthquake: Killed 20,000 people, injured 1.67 lakh in 2001 and destroyed nearly 4 lakh homes.

Indian Ocean Tsunami: Hit Indonesia, Sri Lanka, India and Thailand in 2004, killing 2.75 lakh people.

Kashmir Earthquake: Centred in PoK and NWFP. Killed 80,000, including 1,400 in J&K in 2005.

Hurricane Katrina: In 2005, 1,836 people were killed in the US, mostly in New Orleans, which was the worst-hit.

Sichuan Earthquake: Nearly 70,000 died and 3,74,176 were hurt in 2008 in China. Still missing: 18,222 people.

Sumatra Earthquake: Hit southern Indonesia in 2009; 1,115 dead, 1,214 hurt, lakhs of houses damaged.


Top 10 innovations

EVMs: Electronic voting machines changed the way people vote in the world's largest democracy.

Telemedicine: ISRO's rural satellite programme enabled healthcare reach remote Indian villages.

IT: With annual exports of over $50 billion, the outsourcing boom has made India a software powerhouse.

Tata Nano: The game in car manufacturing is changed forever by the world'smost affordable car.

Mobile ECGs: Portable,battery-operated cardiograph machineshave reduced the costof an ECG.

Manual Cow-milking Machines: The low-cost home-made machine is a steal for the 250 million Indian cattle.

Jugaad: The locally improvised rural transport vehicle runs on irrigation pumpsets used by farmers.

Simputers: These simple computers running on open hardware are bridging the digital divide in India.

Low-cost Sanitary Napkins: A Tamil Nadu entrepreneur's innovation rolls out 1,000 pieces, at Rs 2 a piece.

Artificial Weather Stations: They are satellite-linked weather monitoring and data sharing systems.

The India success story is an urban phenomenon and hence a myth

India has made rapid strides since the economic reforms of 1991 which has resulted in the economy opening up to foreign investment and has created a burgeoning middle class of 300 million people which is expanding at a rapid rate. At the same time, there are certain aspects that haven’t changed at all from the post independence era and an estimated 600 million people still live on 2 dollars a day or less. This clearly shows that India is a land of contrasts and it is important to examine both sides of the coin to get a balanced view of the topic proposed above.

For

India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are a major contributor to economic growth, accounting for more than half of India's output with less than one third of its labor force. About three-fifths of the work force is in agriculture but they make up less than a third of GDP and are characterized by low income levels, poor quality of life and a weak base of human development. Nearly one-third of the national income comes from villages, but there is a significant rural-urban divide.

The agricultural sector has been growing at less than half the pace of the other sectors. During the Seventh Plan, agriculture and allied sectors grew at a rate of 3.4 per cent, while the national economy grew at 6 per cent. In 1997-98, there was a negative growth of 2 per cent in the agricultural sector, although the national economy grew by 5 per cent.

Despite the advancements made, India remains one of the poorest countries in the world. Unemployment rate is 7.2% (2007 estimate). 85.7% of the population was living on less than $2.50 (PPP) a day as recently as in 2005, compared with 80.5% for Sub-Saharan Africa. Even though the Green Revolution brought an end to famines in India, half of Indian children are underweight - one of the highest rates in the world and nearly double the rate of Sub-Saharan Africa. One measure of the magnitude of poverty is the proportion of income spent on food — there is, as a rule, a direct correlation. According to the National Sample Survey results of 2001, 56 per cent of expenditure in rural areas and 44 per cent in urban areas was food related, which is quite high. In rupee terms, the all-India average monthly per capita consumer expenditure (MPCE) was Rs 495 in rural areas and Rs 914 in urban ones. The yearly rise in MPCE is also low in rural areas: Rs 9 from the previous year. That is a rise of just two per cent a year. The urban rise is seven per cent of Rs 60, a simple, if powerful, explanation for why the rural poor flock to urban India, even if the conditions of living are bad.

A fifth of rural households live precariously; while less than one per cent don't get enough to eat during some months of a year, another 19 per cent get enough to eat only during the busy months. When it's lean season, they join the "chronically hungry" category. The introduction of the policy of liberalization has affected non-farm employment in rural areas. In 1997-98, the annual increase in non-farm employment in rural areas was 4.06 per cent. In 1983-84 it was 3.28 per cent. During 1999-2000 it came down to 2.14 per cent. The consequence has been a very slow reduction in rural poverty. In 1993-94 it was 39.36 per cent, in 1999-2000 the figure came down marginally to 36.35 per cent. According to one estimate, the average income of an urban dweller is four times higher than that of a rural dweller.

Rural deprivation becomes crystal clear if we look at the data on rural India's contribution to GDP and what they areas get back. Rural contribution is 27 per cent but the return is 5 per cent. In 1999-2000 the per capita per month consumption expenditure in rural areas was Rs.486.08 while in the case of urban areas it was Rs.854.96, according to the Human Development Report 2002. Rural adult illiteracy is a matter of alarming concern. In 2001, the urban literacy rate was 80.06 per cent but the rural literacy rate was 59.21 per cent. Thus, the difference in rural - urban areas in terms of percentage points is 20.85. Data released by the Planning Commission shows that among illiterate people aged 60 years and above, 78.2 per cent live in rural areas. In urban areas the figure is 48.2 per cent. Of the illiterate people who are 15 years and above but not beyond 60 years, rural areas have 55.8 per cent and the urban areas 25.1 per cent.

The Indian state has the primary responsibility to supply safe drinking water to all people in the country irrespective of their place of habitat. But the situation is far from desirable. The National Sample Survey (NSS) data (1998, 5th round) shows that while 70.1 per cent of urban dwellers have access to piped water; in the case of the rural people it is as low as 18.7 per cent. Public health facilities are so inadequate in rural areas that the death rate per 1,000 is 9.6 per cent while in urban areas it is 6 per cent. In rural areas the infant mortality rate is 77 per 1,000 but in urban areas it is as low as 45. The same scenario emerges if we look at the data on households with access to toilets tabulated in the National Human Development Report, 2002, prepared by the Planning Commission. In 1991, such facilities were enjoyed by only 9.48 per cent of rural households; in the case of urban households it was 63.85 per cent. In India, according to the data tabulated in HDR 2002, only 30.54 per cent of rural households had electricity; in the case of urban areas it was higher: 75.78 per cent. The value for rural areas is 0.340, in the case of urban areas it is as high as 0.511.

Thus given the facts stated above, it would perhaps not be too divorced from the truth to state that the India success story is largely restricted to the urban areas and there is a need for more inclusive growth in the country.

Against

However, having brought notice to the above facts, it would also be fair to assess the developments that have taken place in the rural context. As stated at the outset, the Indian growth story began in 1991, when current Prime Minister Manmohan Singh (who was Finance Minister then) came up with a path-breaking budget and policies that sowed the seeds of growth that all of us are witnessing today. GDP at market prices has increased from US$ 20 billion in 1950-51 to US$ 912 billion in 2006-07 and is expected to cross a trillion dollars in the current year. In terms of purchasing power parity (PPP), India’s GDP at US$ 4 trillion in 2006-07 accounted for 6.3 per cent of global GDP. Average annual economic growth, which had been constant and tardy at 3.5 per cent during the first thirty years of Independence, increased to 5.7 per cent during the 1990s and, since 2003-04, the average rate has increased further to 8.6 per cent. 2006-07, in particular, was a splendid year with the GDP growing at 9.4 per cent.

This growth has not been jobless growth. During 1999-2000 to 2004-05, India added to its workforce about 12 million people each year. During this period, the rate of growth of employment was 2.9 per cent per year. India, today, is among the fastest growing economies of the world next only to China. The proportion of people living below the poverty line in India has declined from 51.3 per cent in 1977-78 to about 22 per cent in 2004-05. The Indian Govt has achieved an enrollment ratio of 95 per cent in primary education. Of the children in school, 73 per cent are now reaching Grade V.

A massive road building program is boosting connectivity and lowering transaction costs. The positive impact of flexible markets is already apparent in growing s to connect farmers directly with retail consumers. Deregulation, the building of rural roads and the growth of sophisticated commodity markets is already transforming Indian agriculture. The Pradhan Mantri Grameen Sadak Yojana was launched in December 2000 as a project aimed at improving rural roads and facilitating better connectivity for 160000 unconnected rural habitations with populations of 500 persons or more by the end of the Tenth period at an estimated cost of US$13.33 billion. The program aims at upgrading 500,000 km of rural roads.

Private firms are increasingly supplying more inputs and buying more output directly from the farmer, cutting out the middlemen. The ITC E-choupal initiative is a case in point. Financial institutions are becoming far more active in funding agriculture especially under new arrangements such as contract farming and futures markets. The recently started re-organization of farm production with better technology, more specialization, and greater quality control and facilitates the growth of agro-industry and better supply chains. Some of the schemes adopted by the current govt include Sarva Shiksha Abhiyan (education for all) as well as allocating funds for irrigation projects. It has increased spending on rural electrification and health and has also provided subsidies worth tens of thousands of crores for fertilizers, electricity and rural credit. In 2004, the UPA government launched Bharat Nirman, an ambitious infrastructure program for rural areas. It aims to provide connectivity by having a pucca road, electricity, telecom and drinking water in every village of over 1,000 people.

One can therefore hope that with the effective implementation of all these projects and given a reasonable time frame, there will definitely be an impact on rural prosperity which will make it impossible for one to view urban success in isolation.

The Copenhagen Conundrum

The international community in a bid to control the problem of GHG emissions, particularly that of carbon dioxide, hammered out the Kyoto Protocol in 1997, whereby 37 developed nations (called Annexe-I countries) agreed to roll back their GHG emissions by 5.2 percent (on an average) of their 1990 concerned levels. The US however did not ratify the protocol, though it announced some voluntary emission cuts.

Background and Objectives of the Summit
The Kyoto Protocol is to expire in 2012 and the 15th United Nations Climate Change Conference 2009, at Copenhagen, Denmark (December 7th to 18th) (COP 15) was held to chalk out the next phase of climate control actions, regarding GHG emissions, at a global level. Expectations were high with 192 countries participating in the international forum to decide the future of the Earth and that of mankind.
The United Nations Climate Change Conference held in Bali in 2007 agreed on negotiations for a stringent international climate change pact, to be finalized at the December 2009 Copenhagen meet.
The key issues up for consideration at the COP 15 meet included the following:

•Mitigation (reduction of GHG emissions)
•Adaptation ( coping with the effects of climate change)
•Finance and Technology ( provision of assistance to the developing nations, in their efforts at emission containment)

United Nations Framework Convention on Climate Change (UNFCCC)
A UNFCC report dated 21st October 2009, revealed that the rise in GHG emissions from the industrialized nations has continued unabated from 2000 to 2007, the overall growth figure being 3% in the concerned period for the 40 industrialized nations with reporting obligations to the Convention. From 2006 to 2007 the said increase was 1 percent.
The consistently upward trend of GHG emissions from developed nations, despite a decline in economic activities (as an after-effect of the recent global recession) is a serious cause for concern, according to UNFCCC Executive Secretary, Yvo de Boer. This highlighted the need for a global political consensus for reaching a comprehensive, effective and fair climate change deal at COP 15. UNFCCC data also supports the gradual build up of the global carbon trade market in 2008, as a means of addressing the emission issue, as suggested in the Kyoto Protocol.

Comparative Pollution Figures
China is the world's biggest GHG emitter (20.7 percent of global emissions) followed by the US (accounting for 15.5 percent of global emissions). Global emission percentages for the African Union, European Union, India, Japan, Gulf countries and island nations are 8.1percent, 11.8 percent, 5 percent, 3.3 percent, 2.3 percent and 0.6 percent respectively. Per-capita emission figures are considerably lower for countries like India and China as compared to that of the developed nations.

COP 15 discussions - A Round-up
Much drama unfolded in the two weeks of talks aimed at forging a new global climate treaty at Copenhagen, the high point being the face-off between the post industrialized developed economies (like Europe and the US) and the emerging, industrializing nations like China, India and Brazil.
The industrialized countries demanded all major developing nations to open up their domestic climate actions for international scrutiny or MRV (Monitoring, Review and Verification).
This proposal was met with strong resentment from the emerging economies, who stated that their internal climate action plans were all voluntary disclosures and that they were not bound by any international treaty. India specifically opined that the developed nations were first themselves responsible for the present environmental mess and deeper emission cuts were not feasible for India, as it needed faster and cheaper growth, for tackling issues like poverty and underdevelopment. However, it also made a declaration of voluntary reduction of 20-25 percent of its emission intensity, by 2020. Similar measures were also announced by Brazil and China. China echoed India's sentiments in speaking for the G-77 nations.
However, a difference of opinion arose in the group of 120 developing nations represented by the G-77 and China; one of its members, Tuvalu, a small Pacific island country, proposed a new international treaty on the lines of the Kyoto Protocol, ostensibly to make the US accountable via a global treaty. It also called for "verifiable, nationally appropriate mitigation" measures from major developing nations. The proposal was summarily rejected by G-77 and China. African nations voiced their concern about sinister efforts at the summit at abandoning the Kyoto Protocol (which put legally bound GHG emission limits on industrialized nations sparing the developing economies).
The developing nations demanded deeper emission cuts, ranging from 25 percent to 45 percent by 2020, from the wealthier countries, along with the availability of technology and resources from them to help contain the effects of climate change. The different parties steadfastly held on to their demands and talks almost hit a dead-end.
It should be noted that the Annexe-1 countries (the developed nations) have done precious little towards the realization of their obligatory 5 percent emission reduction by 2012 (under the Kyoto Protocol) and the US never ratified the Kyoto Protocol on growth considerations, but are part of the UNFCCC process.
Buckling under US diplomatic pressure, India finally agreed to sit for discussions regarding international scrutiny of its domestic GHG emission curbing actions at COP15. As if on cue, the US secretary of state, Hillary Clinton, announced America's commitment to work towards raising $100 billion annually for creation of a fund by 2020, for assisting the developing nations engaged in coping with climate changes.
Money pledged to the developing nations towards emission control was another key element of the global climate talks. The European Union pledged around $3.5 billion annually, for a period of 3 years and the US, around $1.2 billion in 2009. The US also announced multinational efforts worth $350 million for transferring clean technology to the developing nations.
However, the amount pledged is way below the requirement, as estimated by global agencies like the World Bank and the International Energy Agency. Differences in opinion also exist about the mode of grant financing; while donors want most of the sum to come from carbon trade levies, recipients want it to come from public money.

The Copenhagen Accord
The newly minted Copenhagen Accord is a broad, legally nonbinding, accord put together by China, India, South Africa, Brazil and the US. The Accord was finally accepted by the 'Conference of the Parties to the UN Framework Convention on Climate Change' on 19th December 2009, as reported by Reuters. UN Secretary-General, Ban Ki-moon announced that the accord would come into 'immediate operational effect'. He also opined that, the Copenhagen accord ought to transform itself into a legally binding treaty in 2010. The accord is still being hotly debated upon by nations the world over, and it is still not clear as to how many nations would finally become signatories to the deal.
The Copenhagen accord supports deep emission cuts aimed at limiting the rise in global temperatures below 2 degrees Celsius, as compared to the pre-industrial levels. [In June 2009, most developing nations including the G8 group agreed on containing the average global temperature rise within 2°C (3.6F), as compared to the pre-industrial level. However, some island nations have lobbied for a 1.5°C temperature bar and around 85 percent emission cuts by 2050].
No definite percentage of emission reduction has been declared on behalf of the European nations in the accord and the US still remains outside the purview of the Kyoto Protocol. The accord proposes a legally binding treaty on climate change by 2010. Mitigation plans (emission cuts for the developed nations and voluntary disclosures for developing nations) for both the developed and the developing nations are not legally binding under the current accord.
The accord pledges flow of adequate, sustainable and predictable financial aid and technology from the developed nations towards the developing countries to cater to their climate adaptation needs (in particular the LDCs, small island nations and the African countries). Developed nations have jointly agreed towards raising $100 billion annually, by 2020, for the developing countries. They are also to provide around US $ 30 billion in 2010-2012 to developing countries, towards their adaptation and mitigation needs, on the GHG emissions issue.
Funding will reportedly come from various sources, including private, public, multilateral and bilateral financing. A large chunk of funds are set to flow from the Copenhagen Green Climate Fund. The accord also announces the incorporation of a technology mechanism for accelerating the process of technology development and transfer to the developing nations.
Emerging economies have been asked to continuously monitor their climate mitigation efforts and report the same to the UN every 2 years. Some international checks have also been proposed, with due allowance for respecting the national sovereignty of nations. No deadlines have been given in this matter yet, reflecting China's hard-line stance on the issue.
Developed nations have also agreed to provide financial assistance for controlling deforestation in developing countries. The accord also speaks of the usage of the carbon markets as a cost effective climate mitigation measure, without going into any detailed analysis.

Political Observations
US president, Barack Obama has termed the agreement 'meaningful' and added that efforts would be on towards reaching a significant emission control regime in the near future. British prime minister, Gordon Brown has stressed on the need to quickly follow up the accord with a legally binding agreement on emission control. The accord has come under criticism from EU Commission President, Jose Manuel Barroso for its nonbinding nature. China expressed happiness with the deal, while Brazil marked it a disappointment, if not a total failure and called for the need to resolve unsettled issues like specific emission cuts at the earliest. Lumumba Stanislaus Di-Aping, heading the G-77 termed it as a suicide pact for the African nations. Similar sentiments were echoed by island nation Tuvalu and Maldives, who wanted the temperature bar to be 1.5 degrees, fearing imminent danger from rising sea levels if immediate stringent emission curbs were not laid. COP15 President, the Danish Prime Minister, Lars Løkke Rasmussen has expressed satisfaction at the developments but Yvo de Boer, Head of the UN Framework Convention on Climate Change secretariat was however not upbeat about the outcome.

An Overview
The Copenhagen accord can at best be termed as an operating framework for enabling future climate negotiations. The emergence of a weak climate declaration was also somewhat expected as per observations of political leaders attending the APEC (Asia Pacific Economic Cooperation) summit in Singapore in November 2009. US President Barack Obama observed, in the context of the Copenhagen talks that, more confidence building measures are required among the LDCs, developed and emerging nations before reaching a legally binding international treaty on climate change.
Considering the serious dimensions that our climate problems have reached, expectations were high on reaching a more meaningful deal; but two weeks of frantic discussions failed to resolve the conflict of interests among the LDCs, developed and developing nations and a watered down agreement was all that could be salvaged for keeping alive the line of hope for the future of our planet.