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Today's Hot Stories - April 29, 2010

10 Headlines for Today

(1) 2G spectrum allocation issue: Opposition seeks dismissal of Communications Minister A. Raja
(2) Maoist guerrillas killed a forest guard in Orissa's Nuapada district
(3) US panel names 13 countries as religious violators, includes China and Saudi Arabia
(4) BrandZ Top 100 list : ICICI Bank ranked 45th among the 100 most valuable brand in world
(5) Reliance Industries Ltd has made a fourth oil discovery in the Cambay Basin in Gujarat
(6) Coca–Cola will set up three new plants in China this year with an investment of $2 billion
(7) Chess: V. Anand scored a victory over Topalov to grab the lead in World Chess championship
(8) Asia-Oceania Junior Fed Cup under-16 girls tennis tournament: Japan outclassed India by 3-0
(9) Champions League Football: Inter Milan beat Barcelona on aggregate 3-2 in the Semi final
(10) India on Thursday commissioned its first indigenously-built stealth warship

5 Stories for Today

(1) Congress is not averse to form government in Jharkhand
(2) SAARC summit begins, climate change is top agenda
3) AT&T Inc sells 7% stake in Tech Mahindra Ltd for Rs 660 crore
(4) Apple now bigger than Microsoft in market capitalization
(5) RBI keeping a vigil on inflation front

(1) Congress is not averse to form government in Jharkhand

With the BJP withdrawing support to the JMM-led government in Jharkhand, Congress dropped enough hints that it is not averse to forming an alternative government in the tribal state.

"There is nobody untouchable in politics," AICC in-charge for Jharkhand K Keshava Rao told reporters outside Parliament while replying to questions.

Asked whether the party sticks to its stand that it will not form any alliance government in the state with Shibu Soren as the head, the Congress leader said, “In politics there is no last word."

Asked whether it means that the Congress was not averse to forming a government in the state, the AICC leader shot back, "Never averse to it. After all we contested the election there to form a government."

At the same time, he stated that the party would not make any such move unless it is sure that any such government would be stable.

"Stability does not come by numbers. It comes by leader," he said when asked where are the numbers to form any such alternative government.

On Soren voting for UPA during the cut motion, he said, "It came yesterday very naturally, very legitimately that he voted for us".

The Congress leader said that Soren is a "part and parcel" of UPA."Soren had a pre-poll alliance with us, he is a part and parcel of UPA. Two MPs from JMM support our government at the Centre from outside," Rao said.

Congress had not formed an alliance government in Jharkhand as it did not agree to Soren becoming the Chief Minister.

"It does not seem there is any stability even now the way they (BJP and JMM) are running the government...we are keeping a watch on the situation" Rao said.

In a last-ditch effort to salvage its government in Jharkhand JMM MLA and Soren's son Hemant last night extended an olive branch to BJP by asking it to review its decision and said Chief Minister Shibu Soren was ready to resign and a new leader could be installed, if the BJP so desired.

While the Bhartiya Janta Party is holding a party meeting at Sushma Swaraj's residence to discuss Shibhu Soren's son offer to re-consider BJP's decision to pull out support to JMM-led government in Jharkhand. BJP has called all MLAs in Delhi to take the final decision on Soren's offer.

(2) SAARC summit begins, climate change is top agenda

The 16th SAARC summit began in Thimpu the capital of Bhutan, today with heads of eight South Asian countries seeking a joint initiative to tackle climate change threats and also boost trade and regional cooperation among SAARC nations.

The conference got under way in this serene and pollution-free capital city of Bhutan the summit's key theme "Towards a Green and Happy South Asia" seems only apt.

Seeking a fresh approach to global climate talks the SAARC leaders would pitch for observer status to the bloc at the Mexico conference on global warming later this year. This would enable the eight South Asian nations - Afghanistan, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan besides India - to expressive their concerns collectively and effectively.

The next global climate talks after Copenhagen in September last are likely to be held in Cancun in Mexico in December.

The Thimpu summit marks the silver jubilee celebration of SAARC that was formed in Bangladesh in December 1985 with the aim of eradicating poverty and improving the living standard of 1.5 billion people of the region through mutual cooperation.

Foreign Minister S M Krishna hoped that the dialogue on climate change would be carried in a "meaningful manner" at the summit.

Prime Minister Manmohan Singh led South Asian Association for Regional Cooperation (SAARC) leaders in introspecting on the progress made by the eight-member regional association in its 25 years of existence.

“We have created institutions for regional cooperation, but we have not yet empowered them to be more proactive,” he said in his opening statement at the 16th SAARC summit, which began here on Wednesday.

In a candid speech, Dr. Singh said SAARC members must acknowledge that the glass of the grouping's accomplishments was half empty compared with the progress made by similar blocs in east and South-East Asia. On the positive side, new flora of cooperation such as a development fund, food bank, free trade agreement and a university were finding their feet and poised to grow in maturity.

Maintaining that declarations did not amount to regional cooperation, the Prime Minister said the SAARC's potential would be met only when freer movement of people, goods, services and ideas took place. “In other words, the region must be better connected, empowered, fed and educated.”

While SAARC members were able to cooperate individually in international forum, it was unfortunate that the people of South Asia did not have the voice they “should and could have” in the global polity.

(3) AT&T Inc sells 7% stake in Tech Mahindra Ltd for Rs 660 crore

AT&T Inc, the biggest US phone company, sold a 7% stake in Tech Mahindra Ltd, which controls India's Satyam Computer Services, after exercising an option to buy 8% last month.

AT&T raised Rs 660 crore ($147 million) selling shares in Tech Mahindra for Rs 762.4 apiece. Citigroup Inc advised AT&T on the stock sale. The phone company exercised an option to acquire Tech Mahindra shares by purchasing an 8.07% stake in the Indian software developer.

AT&T had the option to buy about 9.9 million shares before July 31 or when fees AT&T, a customer, paid to the software developer reached a certain level, according to the Pune, India-based Company’s initial share sale document in 2006.

AT&T paid Rs 898 crore ($34.5 million) for the stake. The Dallas, Texas- based company purchased a total of 9.87 million shares in an "off-market transaction," Tech Mahindra said last month, without disclosing the sale price. Mahindra BT Investment Co owned the shares, according to the sale document.

Tech Mahindra won control of Satyam at an auction last year. A state-appointed board sold the Hyderabad-based computer-services company at the centre of India's biggest corporate fraud investigation to prevent clients and employees from defecting. Tech Mahindra shares fell 4% to Rs 772 in Mumbai trading, while the benchmark Sensitive Index slid 1.3%. The stock has declined 22% this year.

Tech Mahindra, which employs 30,000 people, is a leading provider of solutions and services to the telecommunications industry. As on December 31, 2009, Mahindra and Mahindra, the utility vehicle and tractor maker, has 44% stake in Tech Mahindra, while UK's telecommunications company BT has 38% stake.

(4) Apple now bigger than Microsoft in market Capitalisation

In mid-1997, soon after his return to then-troubled Apple Computers, Steve Jobs, at the Macworld Expo trade show, announced to the astonishment of all assembled that arch-enemy Microsoft was investing $150 million in Apple.

He then famously told the booing crowd, ‘‘We have to let go of the notion that for Apple to win, Microsoft has to lose'' before calling up Bill Gates to tell him, ‘‘Bill, thank you. The world's a better place''.

Thirteen years later, on April 23, 2010 to be precise, Apple overtook the very same Microsoft in market capitalization to emerge as America's second most valued firm behind Exxon Mobil. Apple's market capitalization at $241.5 billion was ahead of Microsoft's $239.5 billion and trailed only the oil giant, which had a market cap of over $300 billion.

Obviously, the world is a better place at least for Apple — and for Apple to win, Microsoft had to lose, if not in the market place (the two are not strict competitors) then at least on the bourses. Such a stunning turnaround would have been unthinkable in July 1997, when Bill Gates literally rode to the rescue by picking up non-voting shares worth $150 million in Apple and promising to develop and ship future versions of Microsoft Office, Internet Explorer and development tools for Macintosh computers.

Then, Microsoft was the dominant desktop software company whose spectacular growth seemed guaranteed for years with no major rivals on the horizon. Jobs then needed Bill Gates far more than Gates needed Jobs.

Analysts had it that Gates, under intense anti-trust scrutiny, was investing in a rival with whom Microsoft had a contentious relationship — especially relating to whether the Microsoft Windows operating system infringed on some Apple patents — as a way of showing the world that his company wasn't seeking a monopolist position. That it could collaborate. Simply put, that it could be a good guy.

Jobs then desperately needed Gates' backing as Apple was still a small player in desktops with the path breaking i-pod still four years away from launch. Nobody then had any clue that Jobs would go on to fundamentally re-shape not one but three industries: music, animation and telecom. Apple and Jobs have been able to read the whispers in the wind better than the Seattle duo of Gates and his lieutenant, Steve Ballmer.

(5) RBI keeping a vigil on inflation front

Inflation and inflationary expectations were the concerns of the Reserve Bank of India (RBI) Governor D. Subbarao when he announced the monetary policy for 2010-11. A policy shift from growth to inflation was widely accepted by the central bank as well as bankers.

“We reacted to inflation slowly,” Dr. Subbarao admitted while addressing a press conference last Tuesday at the RBI headquarters. “The developments on the inflation front are, however, worrisome,” he added.

Headline wholesale price index (WPI) inflation accelerated from 1.5 per cent in October 2009 to 9.9 per cent by March 2010. There has been a significant change in the drivers of inflation in recent months. What was initially a process driven by food prices has now become more generalized. This is reflected in non-food manufactured products inflation rising from (-) 0.4 per cent in November 2009 to 4.7 per cent in March 2010.

Going forward, three major uncertainties cloud the outlook for inflation. First, the prospects for the monsoon in 2010-11 are not yet clear. Second, crude prices continue to be volatile. Third, there is evidence of demand side pressures building up. On balance, keeping in view domestic demand-supply balance and the global trend in commodity prices, the baseline projection for WPI inflation for March 2011 is placed at 5.5 per cent.

However, inflation is hovering near double digit at 9.9 per cent, well above RBI's fiscal-end (2009-10) projection of 8.5 per cent. Food inflation moved up further to 17.65 per cent for the week ended April 10 from 17.22 per cent in the previous week as prices of essential items such as rice, milk, fruits and vegetables are continuing to rule high.

The RBI's policy stance for 2010-11 has been guided by three major considerations:

First, recovery is consolidating. The quick rebound of growth during 2009-10 despite failure of monsoon rainfall suggests that the Indian economy has become resilient. Growth in 2010-11 is projected to be higher and more broad-based than in 2009-10. In its third quarter review in January, the Reserve Bank had indicated that its main monetary policy instruments are at levels that are more consistent with a crisis situation than with a fast recovering economy.

In the emerging scenario, lower policy rates can complicate the inflation outlook and impair inflationary expectations, particularly given the recent escalation in the prices of non-food manufactured items. Despite the increase of 25 basis points each in the repo and reverse repo rates to 5.25 per cent and 3.75 per cent respectively, the real policy rates are still negative. It also increased the cash reserve ratio (CRR) of banks by 25 basis points from 5.75 per cent to 6 per cent effective fortnight beginning April 24, 2010. As a result of the increase in the CRR, about Rs. 12,500 crore of excess liquidity will be absorbed from the system. “With recovery now firmly in place,” said Dr. Subbarao, “We need to move in a calibrated manner in the direction of normalizing our policy instruments.”

Second, inflationary pressures have accentuated in the recent period. More importantly, inflation, which was earlier driven entirely by supply side factors, is now getting increasingly generalized. There is already some evidence that the pricing power of corporate has returned. With the growth expected to accelerate further in the next year, capacity constraints will re-emerge. Inflation expectations also remain at an elevated level.

“There is a need to ensure that demand side inflation does not become entrenched.” Third, notwithstanding lower budgeted government borrowings in 2010-11 than in the year before, fresh issuance of securities will be 36.3 per cent higher than in the previous year. “This presents a dilemma for the Reserve Bank.” While monetary policy considerations demand that surplus liquidity should be absorbed, debt management considerations warrant supportive liquidity conditions. The Reserve Bank has to do a fine balancing act and ensure that while absorbing excess liquidity, government borrowing programme is not hampered.

The expected outcomes of these actions are: Inflation will be contained and inflationary expectations will be anchored; the recovery process will be sustained; government borrowing requirements and the private credit demand will be met; and policy instruments will be further aligned in a manner consistent with the evolving state of the economy.

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