Sunday, July 1, 2012

Mukesh Ambani to meet Montek on Monday

Mukesh Ambani to meet Montek on Monday

RIL Chairman Mukesh Ambani is scheduled to meet Planning Commission Deputy Chairman Montek

Singh Ahluwalia on Monday.

"Reliance Industries (RIL) Chairman and Managing Director

Mukesh Ambani will meet Planning Commission Deputy Chairman

Montek Singh Ahluwalia in the morning on Monday

The meeting comes at a time when RIL is facing hurdles

in getting clearances for its oil and gas exploration

projects. Also, it is facing resistance for approval of its

gas price.

RIL is also seen as a bidder in the fortcoming auction of

telecom spectrum.

Yojana Bhawan, the Ahluwalia's office, is being throned

by industry top brass ever since Prime Minister Manmohan

Singh took direct charge of the portfolio.

Earlier this week, Vodafone India Chairman Analjit Singh

and Chairman of UB Group Vijay Mallya had called upon


Officials in the Planning Commission said many more top

industrialist are expected to visit Yojna Bhawan in the coming

days as Ahluwalia is being seen as key policy maker.

"Ahluwalia is considered close to the Prime Minister and

being an important functionary in the government. It is

obvious that industrialists will meet him," a Planning

Commission official said.

When Singh, as a Finance Minister ushered India into

economic reforms in early 1990s, Ahluwalia was Finance


Besides Ahluwalia, Prime Minister's Economic Advisory

Council chairman C Rangarajan too is likely to play more

proactive role as the government is struggling to put India

back on path of high growth path.

However, some others in Yojna Bhawan said that top

corporates visiting Ahluwalia is a routine affair. In past

also when Mukherjee was Finance Minister top industrialists

used to visit him

Exchange rate: Fixed or floating?

Exchange rate: Fixed or floating?
The RBI does not have sufficient cushion to adhere to a fixed rate regime. 

The Reserve Bank of India’s selective control in the forex market has been unable to control the free fall in the value of rupee in the recent months. This raises a fundamental question as to whether the RBI should consider alternative exchange rate policy options.
Specifically, would moving towards a completely fixed or floating exchange rate regime offer immediate help to the country? 
Currently, by following a mid-path — that is, by selectively controlling foreign capital movement and partially regulating exchange rate prices — the RBI does not seem to successfully combine the best of both regimes. 
So what are the feasible options available outside of the one we currently follow? 

Value of a currency

The value of currency, like the price of any other good or service, depends on its demand and supply. And demand for a currency, say, the US dollar, typically comes from Indian importers, people or institutions that invest in the US (FDI or FII outflows) and travellers to the US. All these agents require dollars for transacting in the US.
Analogously, exporters to the US, travellers to India, FDI and FII inflows supply US dollars in return for rupees to transact in India. If the demand for the rupee decreases compared to, say, the US dollar, the value of the rupee goes down, and vice-versa. How does the central bank ensure that a parity, say for instance, one rupee  equals 0.25 US dollar, is maintained? The answer lies in how it moderates demand and supply of local and foreign currency. 
To explain, assume that the demand for US dollar increases. Consequently, its value  increases, such that each dollar can now buy 10 rupees instead of  four previously. To offset such an increase, the RBI pumps in sufficient amount of dollars into the market to meet the increased demand. This process ensures that the value of the dollar is restored to its original one. The central bank can supply and draw dollars from forex reserves, which is its official kitty.

Indian scenario

Currently, the RBI controls foreign money flowing in and out of the country through different routes. At the same time, it selectively engages in buying and selling of foreign currencies to mediate demand and supply in the forex market.
In effect, the RBI regulates the forex market intermittently. 
But its ammunition to defend the value of the rupee at any particular level is not sustainable for several reasons. First, India’s forex reserves, which stand at $260 billion approximately, cannot defend the falling rupee eternally. Even worse, much of the reserves are liabilities than assets, implying that our ownership in reserves is that much lower to help moderate currency demand and supply. 
To explain, let us assume that one bad day, all foreign investors (FDI and FII holders) in our country decide to take back their money (which is extremely unlikely). In that dire situation, the RBI would have to borrow to a tune of $215 million to pay them all back. 
Also, the increasing oil imports and falling export share in the recent months have contributed significantly towards draining (the already concerning levels of) our forex reserves. The arguments above indicate that the RBI does not have sufficient cushion to adhere to a fixed rate regime.

What is the way out?

Proponents of the RBI’s current (midway) policy argue that if the rupee is completely let free to the market, it would worsen the import bill (particularly through our oil imports)  and might potentially deter economic growth. 
There are potentially few weak links in the claim above. First, such an argument is purely based on the assumption that if the rupee is completely left to market forces, then its value would only depreciate, which does not “have” to be the case. 
But even such a scenario provides a good scope for domestic industries to invest on import substitutive industries. Also, this sets the stage for harnessing the abundant natural energy sources such as solar, wind, and thermal power domestically instead of depending on imported oil. We also need to bear in mind that the RBI’s selective intervention in the currency market feeds into the heavy subsidy in crude oil prices. This combination hurts our economy in several ways. 
To explain, if the entire price increase in crude oil was allowed to pass through (with no subsidy) to consumers, they would have, perhaps, used the commodity more efficiently. If this was combined with a “floating” exchange rate system, the rupee’s value would have deteriorated even further, and the pinch would have been felt all the more. This would have only made us more efficient in using oil. 
Also, our fiscal deficits in this case would not have soared to the current concerning levels owing to huge subsidies. 
Moreover, monetary policy tends to be more effective under coordinated efforts from fiscal discipline — and fiscal discipline becomes an unachievable objective, with the level of subsidies that our government currently provides in the oil and fertiliser sectors.
So arguments against letting the rupee’s value to be determined by market forces do not seem to factor in the structural positive changes from which the country could benefit from. 
Of course, if the RBI lets the value of rupee to be entirely market-determined, and eases out current restrictions on capital flows, there would be temporary displeasures from several corners. Particularly, those who have to repay in US dollars would have to bite the bullet if the market-determined value of the rupee turns out to be much lower than the current levels (and vice-versa).
However, the trade-off is pretty healthy in the long run, for the reasons mentioned above. 
Under these circumstances, we might want to ask ourselves the following question: Who knows better about the price of a good — government or the buyers and sellers? 

NASA Explains Why Clocks Will Get an Extra Second on June 30

NASA Explains Why Clocks Will Get an Extra Second on June 30
How will you spend your bonus time on June 30?

Distances on Earth can be measured with great accuracy by using the technique of Very Long Baseline Interferometry, which was originally developed to study distant astronomical objects called quasars. (Credit: NASA's Goddard Space Flight Center)
› Download in high resolution from NASA Goddard's Scientific Visualization Studio

If the day seems a little longer than usual on Saturday, June 30, 2012, that's because it will be. An extra second, or "leap" second, will be added at midnight to account for the fact that it is taking Earth longer and longer to complete one full turn—a day—or, technically, a solar day.

"The solar day is gradually getting longer because Earth's rotation is slowing down ever so slightly," says Daniel MacMillan of NASA's Goddard Space Flight Center in Greenbelt, Md.

digital clock readout showing 23:59:60
June 30 will be one second longer than the typical day. Rather than changing from 23:59:59 on June 30 to 00:00:00 on July 1, the official time will get an extra second at 23:59:60.Credit: NASA

A radio telescope used in ICRF2
With this antenna at Kokee Park on the Hawaiian island of Kauai, NASA makes regular VLBI (Very Long Baseline Interferometry) measurements that are used in the time standard called UT1 (Universal Time 1). Credit: U.S. Navy/PMRF
› Larger image
Scientists know exactly how long it takes Earth to rotate because they have been making that measurement for decades using an extremely precise technique called Very Long Baseline Interferometry (VLBI). VLBI measurements are made daily by an international network of stations that team up to conduct observations at the same time and correlate the results. NASA Goddard provides essential coordination of these measurements, as well as processing and archiving the data collected. And NASA is helping to lead the development of the next generation of VLBI system through the agency's Space Geodesy Project, led by Goddard.

From VLBI, scientists have learned that Earth is not the most reliable timekeeper. The planet's rotation is slowing down overall because of tidal forces between Earth and the moon. Roughly every 100 years, the day gets about 1.4 milliseconds, or 1.4 thousandths of a second, longer. Granted, that's about 100 or 200 times faster than the blink of an eye. But if you add up that small discrepancy every day for years and years, it can make a very big difference indeed.

"At the time of the dinosaurs, Earth completed one rotation in about 23 hours," says MacMillan, who is a member of the VLBI team at NASA Goddard. "In the year 1820, a rotation took exactly 24 hours, or 86,400 standard seconds. Since 1820, the mean solar day has increased by about 2.5 milliseconds."

By the 1950s, scientists had already realized that some scientific measurements and technologies demanded more precise timekeeping than Earth's rotation could provide. So, in 1967, they officially changed the definition of a second. No longer was it based on the length of a day but on an extremely predictable measurement made of electromagnetic transitions in atoms of cesium. These "atomic clocks" based on cesium are accurate to one second in 1,400,000 years. Most people around the world rely on the time standard based on the cesium atom: Coordinated Universal Time (UTC).

Another time standard, called Universal Time 1 (UT1), is based on the rotation of Earth on its axis with respect to the sun. UT1 is officially computed from VLBI measurements, which rely on astronomical reference points and have a typical precision of 5 microseconds, or 5 millionths of a second, or better.

"These reference points are very distant astronomical objects called quasars, which are essentially motionless when viewed from Earth because they are located several billion light years away," says Goddard's Stephen Merkowitz, the Space Geodesy Project manager.

For VLBI observations, several stations around the world observe a selected quasar at the same time, with each station recording the arrival of the signal from the quasar; this is done for a series of quasars during a typical 24-hour session. These measurements are made with such exquisite accuracy that it's actually possible to determine that the signal does not arrive at every station at exactly the same time. From the miniscule differences in arrival times, scientists can figure out the positions of the stations and Earth's orientation in space, as well as calculating Earth's rotation speed relative to the quasar positions.

Originally, leap seconds were added to provide a UTC time signal that could be used for navigation at sea. This motivation has become obsolete with the development of GPS (Global Positioning System) and other satellite navigation systems. These days, a leap second is inserted in UTC to keep it within 0.9 seconds of UT1.

Normally, the clock would move from 23:59:59 to 00:00:00 the next day. Instead, at 23:59:59 on June 30, UTC will move to 23:59:60, and then to 00:00:00 on July 1. In practice, this means that clocks in many systems will be turned off for one second.

Proposals have been made to abolish the leap second and let the two time standards drift apart. This is because of the cost of planning for leap seconds and the potential impact of adjusting or turning important systems on and off in synch. No decision will made about that, however, until 2015 at the earliest by the International Telecommunication Union, a specialized agency of the United Nations that addresses issues in information and communication technologies. If the two standards are allowed to go further and further out of synch, they will differ by about 25 minutes in 500 years.

In the meantime, leap seconds will continue to be added to the official UTC timekeeping. The 2012 leap second is the 35th leap second to be added and the first since 2008.