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Today's Hot Stories - March 18, 2011

10 Headlines for Today

(1) LS,RS adjourned over Wikileaks expose
(2) PM to make statement on Wikileaks expose
(3) UN authorizes all necessary measures to stop Gadaffi in Libya
(4) Home, auto loans set to get costlier
(5) Tata to hike costs of passenger vehicles
(6) Vodafone hints at paying $2bn tax
(7) Nadal holds off Karlovic to reach semis
(8) Doeschate falls after brilliant hundred
(9) I will run for FIFA Presidency: Hanuman
(10) Swimming for long hours in pool can cause cancer

5 Stories for Today

(1) US was concerned over Pranab’s appointment as Finance Minister: Wikileaks
(2) Radiation creates salt panic in China
(3) SBI arms merger bill cleared
(4) Will tsunami push Japan back into recovery?
(5) Pension bill okayed, reforms get a leg-up

(1) US was concerned over Pranab’s appointment as Finance Minister: Wikileaks

A day after WikiLeaks disclosure indicated that the Congress had paid lawmakers to survive a vote of confidence in Parliament in 2008, another Wikileaks exposure reveals Washington's interference in Indian political decisions.

US secretary of state Hillary Clinton is said to have questioned Pranab Mukherjee's appointment as finance minister and also asked its embassy in Delhi why Mukherjee was preferred to Montek Singh Ahluwalia.

In a cable to the US Embassy in Delhi in September 2009, Clinton asked, "To which business groups is Mukherjee beholden?' Why was (he) chosen over Montek?"

It further adds: "To which industrial or business groups is Pranab Mukherjee beholden? Whom will he seek to help through his policies? What are Mukherjee's priorities in the upcoming budget...?"

These questions appear to indicate that the White House was expecting either P Chidambaram to return as finance minister or Montek Singh Ahluwalia to be elevated to that post.

The September 14, 2009 cable asks: "What are Mukherjee's primary economic concerns and his views on Prime Minister Singh's economic reform agenda? How quickly does he plan to pursue these reforms? What is his ability to enact reforms?"

Clinton was interested in knowing about how much importance does Mukherjee attach to the US-India bilateral economic relationship and where he saw the relationship heading.

(2) Radiation creates salt panic in China

Panic spread through China's main cities as word spread that salt can guard against radiation exposure, and people geared themselves to face the remote possibility of fallout from Japan's nuclear plant leaks.

People bought large stocks of salt and it vanished from shops after rumors spread that radiation had leaked in the sea from Japan's Fukushima Daiichi nuclear power plant, and salt taken from the sea would not be safe in near future.

The panic was also boosted by text messages over mobile phones that iodized salt can help protect people from radiation poisoning. Large scale hoarding by merchants who saw it as a profit making opportunity complicated the situation further.

The country's National Development and Reform Commission ordered price control authorities at provincial and municipal levels to take "immediate action to monitor the market prices and resolutely crack down on illegal acts including spreading rumors to deceive the public."

Reports from different cities said that prices of salt jumped five or ten-fold in places where it was available. Michael O'Leary, head of the World Health Organization in China, appealed to the government to "take steps to halt these rumors, which are harmful to public morale."

The WHO "would like to assure governments and members of the public that there is no evidence at this time of any significant international spread from the nuclear site," he said.

(3) SBI arms merger bill cleared

The government on Thursday cleared a bill to empower itself to effectively manage the affairs of subsidiary banks of State Bank of India. The move will also help facilitate the merger of the five subsidiaries with SBI, for which the government has indicate a timeframe of 12-18 months.

While SBI executives said that they were in favour of merging the remaining associate banks-State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore-the timing would depend on clearance from the government.

SBI, the country's largest lender, has already merged two of its associate banks-State Bank of Saurashtra and State Bank of Indore-with itself to improve overall functioning and is ready with the template to merge the remaining five subsidiaries. Among other things, the bill that was supported by the parliamentary standing committee on finance seeks to empower the government to fix the authorised capital of associate banks and appoint managing directors.

These amendments were necessitated as these powers were vested with the Reserve Bank of India from whom the ownership of these banks was transferred to the Centre a few years ago.

The bill is among the six financial sector legislations being pushed by the government.

(4) Will tsunami push Japan back into recovery?

Japan's economy seems to be in a state of almost suspended animation as its nuclear crisis shows no sign of ending, sorely testing analysts' hopes for a swift rebound led by reconstruction efforts.

Indeed, with trillions of yen wiped off share markets and a surging yen currency squeezing the all-important export sector, economists fear that an extended slump is inevitable.

"Japan will fall into a temporal recession," wrote Susumu Kato, Credit Agricole's chief economist for Japan in a note. He expects GDP to shrink this quarter and next, making three straight quarters of contraction. He estimated the devastating earthquake and tsunami which struck last Friday would take 0.6 percentage points from GDP in the first quarter and as much as 1.5 percentage points in the second.

Kato expects first quarter real GDP to fall 0.4% from the previous quarter, and second quarter GDP to drop 1.2%. Even with spending on rebuilding then feeding though, the economy might show no growth at all for the fiscal 2011 year.

Kato, like many analysts, suggested the damage could amount to $188 billion, or around 3% of GDP. While a country as rich as Japan was well able to bear the cost, it still represented a terrible loss of wealth. "Earthquakes not only curb effective demand, through, but also lower potential growth through damages to tangible fixed assets and human capital," said Kyohei Morita, at Barclays Capital. Compounding the pain, losses from the quake had been outstripped by wealth wiped out in the markets, with over $600 billion lost at one stage on Tuesday.

(5) Pension bill okayed, reforms get a leg-up

You would not expect a government that has skeletons tumbling out of its closet to push the reforms agenda. But UPA-II seems to be beating the conventional wisdom. The Union Cabinet on Thursday approved the introduction of the long-pending Pension Regulatory Fund & Development Authority (PFRDA) Bill in Parliament.

The bill, first conceived in 2003, seeks to provide statutory backing to the pension regulator, besides allowing 26% foreign investment in the sector. During its five years in office, UPA-I could not push the Bill as the Left parties, its key ally then, was unwilling to support its passage.

By providing statutory powers to PFRDA, the pension regulator, the government will enable it to issue guidelines for fund mangers and other players in the business. So far, the business is being run through a contract between NPS Trust and service providers. The regulator will also have powers to levy penalties.

But with top industrialists, economists and investors suspecting the government's commitment to reforms, the Manmohan Singh government, which has been battling a spate of scandals, is pushing key economic legislation even though consensus still eludes them. Just last week, the cabinet had approved an amendment to the Constitution which will pave the way for shifting to a goods and services tax (GST) regime, the most ambitious tax reform proposal initiated since the Independence. Finance Minister Pranab Mukherjee has decided to go ahead with the amendment despite 10 state governments-mainly ruled by the Opposition still opposing the move.

Similarly, a fortnight ago, the government had decided to amend Banking laws to help attract more foreign investment in local banks.

The proposal envisages lifting the 10% cap on voting rights in private banks and aligning it with the shareholding pattern. This proposal, like the Pension Bill, was put on the backburner as the Left parties had staunchly opposed a move to provide greater play to foreign banks in India.

The three Bills, along with amendments to the Insurance Act to increase the foreign investment ceiling in the sector from 26% to 49%, were part of the reform proposals announced by Mukherjee in his February 28 Budget speech.

The government has also outlined its intent to ease restrictions on foreign investment in multi-brand retail trading, hitherto closed to overseas investors such as Wal-Mart and Carrefour. The Centre is seeking to liberalise the foreign direct investment regime to check the falling trend in inflows.

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