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Today's Hot Stories - March 22, 2011

10 Headlines for Today

(1) Court extends custodial interrogation of Hasan Ali
(2) Indian scientists to lead global study on quakes at Koyna
(3) Crisis deepens in Yemen
(4) AT&T to buy T-mobile for $39bn
(5) PepsiCo signs up Sharman Joshi as 7UP brand ambassador
(6) World markets rise as Japan nuclear crisis eases
(7) Sammy hails Tendulkar for walking
(8) Vulnerable Aussies will still be tough for India
(9) Knockouts will bring out ecstasy and heartbreak
(10) Obesity kills more people than AIDS

5 Stories for Today

(1) Wikileaks cash-for-votes expose paralyzes Parliament
(2) Japan tsunami survivors face long wait to go home
(3) Media, entertainment units poised for giant leap
(4) Testing time for global supply chain
(5) Widening gap between FDI, FII inflows causing concern

(1) Wikileaks cash-for-votes expose paralyzes Parliament

The WikiLeaks’ expose on the cash-for-votes issue paralysed proceedings in Parliament on Tuesday, with the Opposition demanding an immediate discussion on Prime Minister Manmohan Singh’s statement on the matter.

The Rajya Sabha witnessed three adjournments and the Lok Sabha one as an aggressive Opposition insisted on taking up the debate straightaway notwithstanding the government’s plea that the Finance Bill be taken up first in the Lok Sabha. Speaker Meira Kumar told Leader of the Opposition Sushma Swaraj that her notice of Breach of Privilege against the Prime Minister was being examined by her.

This prompted Ms. Swaraj to press for discussion on the Prime Minister’s statement noting that she along with Sharad Yadav (JD-U) and Yashwant Sinha (BJP) have given notice for such a debate under Rule 193, which does not entail voting. Leader of the Lok Sabha Pranab Mukherjee wanted the Finance Bill to be taken up first to ensure it being taken up early in the Rajya Sabha as per Constitutional requirement.

“I do not think heaven is going to fall if we take up the Finance Bill first. I assure you that we will have the discussion after the Finance Bill is passed. I am not making it a prestige issue,” Mr. Mukherjee said. In the Rajya Sabha, as soon as Leader of the Opposition Arun Jaitley rose to say that he had given two notices — one on privilege motion against the Prime Minister and the other seeking a discussion under Rule 176, which does not entail voting - Congress members were on their feet.

Deputy Chairman K. Rahman Khan said that Chairman Hamid Ansari was seized of the matter and a decision was yet to be taken on the two notices given by the Leader of the Opposition.

However, BJP members persisted that Mr. Jaitley be allowed to speak.

In the meanwhile, Congress members began waving a weekly news magazine, which carried reports on alleged irregularities during the NDA regime when senior BJP leader Arun Shourie was the Disinvestment Minister. Mr. Khan had a tough time in persuading Congress members to allow Mr. Jaitley to speak. Though he repeatedly said that the Leader of the Opposition should be allowed to speak as it is his privilege, the ruling side members were unrelenting and shouted “no, no“.

Mr. Khan then adjourned the House for 15 minutes.

However, when the House reassembled, members from both sides once again engaged in a heated exchange of words. Mr. Jaitley said that the government should agree for an immediate discussion under Rule 176, as the Opposition also wanted the House to run.

Minister of State of Parliamentary Affairs Ashwani Kumar took strong objection to BJP members trooping into the Well, saying that though the government always favoured a discussion on all issues, an atmosphere has to be created for it. As the din continued, the Chair adjourned the House till 12 noon.

But similar scenes were witnessed when the House met at noon and it was again adjourned till 2 p.m.

(2) Japan tsunami survivors face long wait to go home

Temporary housing is beginning to go up for the hundreds of thousands of people who lost their homes in last week’s tsunami in Japan.

Construction workers in Rikuzentakata were screwing in the corrugated aluminum rooftop of one of the first houses on Monday. The metal-sided structure rises on wooden stilts above the mud of a soccer field.

Thousands of similar houses will go up in the coming months outside shelters scattered across Rikuzentakata’s hilly outskirts. Residents will likely be staying in them for a couple of years until more permanent homes are ready.

(3) Media, entertainment units poised for giant leap

The Indian Media & Entertainment (M&E) industry, which now stands at Rs.65,200 crore, registered a growth of 11 per cent over 2009 and is likely to grow 13 per cent in 2011. Overall, the industry is expected to register a cumulative annual growth rate (CAGR) of 14 per cent to touch Rs.1.28 lakh crore by 2015, a report by the Federation of Chambers of Commerce & Industry (FICCI)- KPMG said.

Overall for the M&E industry, 2010 was a year of great dynamism, with growth across all sectors other than film. The report highlights a strong recovery in advertising spends as a key driver for growth. Advertising spends grew by 17 per cent to Rs.26,600 crore and accounted for 41 per cent of the overall industry size.

While television and print continued to dominate, sectors such as gaming, digital advertising and animation VFX grew at a faster rate and showed tremendous potential.

FICCI Secretary General Amit Mitra said “the key industry highlights are growing potential of the regional markets, increasing media penetration and per capita consumption and increasing importance of New Media driven by changing media consumption patterns.''

TV households to surge

The report said that TV households are likely to surge to 15.60 crore homes by 2015, advertising and subscription revenues to touch Rs.21,400 crore and Rs.41,600 crore, respectively, and the overall print industry is likely to see a CAGR of 10 per cent to touch Rs.31,000 crore in five years, with regional print likely to grow at a rate of 12 per cent. The radio industry is expected to grow at 20 per cent and become more profitable. Films had a challenging 2010 but with better content, increase in multiplexes, and continued cost corrections, the industry can grow from Rs.8,300 crore to Rs.13,200 crore by 2015.

Digitisation continues to be a key growth driver and was more pronounced in 2010. Film studios saw greater adoption of digital prints over physical and it was the first time in India that digital music sales surpassed that of physical unit sales. Direct to Home (DTH) grew 75 per cent in the net subscriber base by adding 1.20 crore subscribers in 2010, giving a net subscriber base of 2.8 crore in 2010. The TV industry, which grew 15.5 per cent in 2010 and is expected to grow at CAGR of 16 per cent to touch Rs.63,000 crore by 2015, is likely to account for half of Indian M&E industry revenues. Regional media consumption is expected to grow. In print, revenues from Hindi and vernacular segments are likely to catch up with English which today has significant share.

(4) Testing time for global supply chain

Tony Prophet, a Senior Vice-President for operations at Hewlett-Packard (HP), was awakened at 3:30 a.m. in California and was told that an earthquake and tsunami had struck Japan. Soon after, Prophet had set up a virtual ‘situation room,' so managers in Japan, Taiwan and America could instantly share information. Prophet oversees all hardware purchasing for HP's $65-billion-a-year global supply-chain, which feeds its huge manufacturing engine. The company's factories churn out two personal computers a second, two printers a second and one data-centre computer every 15 seconds.

While other HP staff members checked on the company's workers in Japan none of whom were injured in the disaster, Prophet and his team scrambled to define the impact on the company's suppliers in Japan and, if necessary, to draft backup plans. “It's too early to tell, and we're not going to pretend to predict the outcome,” Prophet said in an interview last week. “It's like being in an emergency room, doing triage.”

The emergency-room image speaks volumes. Modern global supply chains, experts say, mirror complex biological systems like the human body in many ways. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness as if a tiny tear in a crucial artery were to cause someone to suffer heart failure. Day in and day out, the global flow of goods routinely adapts to all kinds of glitches and setbacks. A supply breakdown in one factory in one country, for example, is quickly replaced by added shipments from suppliers elsewhere in the network. Sometimes, the problems span whole regions and require emergency action for days or weeks. When a volcano erupted in Iceland last spring, spewing ash across northern Europe and grounding air travel, supply-chain wizards were put to a test, juggling production and shipments worldwide to keep supplies flowing.

But the disaster in Japan, experts say, presents a first-of-its-kind challenge, even if much remains uncertain. Japan is the world's third-largest economy, and a vital supplier of parts and equipment for major industries like computers, electronics and automobiles. The worst of the damage was northeast of Tokyo, near the quake's epicentre, though Japan's manufacturing heartland is farther south. But greater problems will emerge if rolling electrical blackouts and transportation disruptions across the country continue for long.

Throughout Japan, many plants are closed at least for days, with restart dates uncertain. Already, there are some ripple effects worldwide: for example, a General Motors truck plant in Louisiana announced last week that it was shutting down temporarily for lack of Japanese-made parts. More made-in-Japan supply-chain travails are expected. “This is going to be a huge test of global supply chains, but I don't think it will be a mortal blow,” says Kevin O'Marah, an analyst at Gartner-AMR Research. The good news for the world's manufacturing economy is that the sectors where Japan plays a vital role are fairly mature, global industries.

Japan's importance in the semiconductor industry as a whole has receded in recent years, as more production has shifted to South Korea, Taiwan and even China. Japan accounts for less than 21 per cent of total semiconductor production, down from 28 per cent in 2001, according to IHS iSuppli, a research firm.

Still, Japan produces a far higher share of certain important chips like the lightweight flash memory used in smart phones and tablet computers. Japan makes about 35 per cent of those memory chips, IHS iSuppli estimates, and Toshiba is the major Japanese producer. But South Korean companies, led by Samsung, are also large producers of flash memory. Apple, like all major companies these days, treats its supply-chain operations as a trade secret. But industry analysts estimate that Apple buys perhaps a third of its flash memory from Toshiba, with the rest coming mainly from South Korea. The lead time between chip orders and delivery is two months or more. A leading customer like Apple will be first in line for supplies, and it has inventories for several weeks, analysts say. So there will be little immediate impact on Apple or its customers, but even Apple will likely be hit with supply shortages of crucial components in the second quarter, predicts Gene Munster, an analyst at Piper Jaffray.

That geographic and technological evolution, in theory, should make adapting to the disaster in Japan easier for corporate supply chains. Most of anything can be tracked, but it takes smart technology, investment and effort to do so. And as procurement networks become more complex and supply lines grow longer ‘thin strands,' as the experts call the phenomenon the difficulty and expense of seeing deeper into the supply chain increases. Indeed, supplies of larger, more costly electronic components, like flash memory and liquid crystal displays, tend to grab the most attention.

But, says Tony Fadell, a former senior Apple executive who led the iPod and iPhone design teams, “there are all kinds of little specialised parts without second sources, like connectors, speakers, microphones, batteries and sensors that don't get the love they deserve. Many are from Japan.”

Lacking some part, even if it costs just dimes or a few dollars, can mean shutting down a factory, Fadell adds. A recent analysis by IHS iSuppli, taking apart a new Apple iPad2, identified five parts coming from Japanese suppliers: flash memory from Toshiba, random-access memory for temporary storage from Elpida Memory, an electronic compass from AKM Semiconductor, touch-screen glass from Asahi Glass, and a battery from Apple Japan. Further down the supply chain lie raw materials. Trouble for a supplier to a company's parts supplier can cascade across an industry. For example, reports that a Mitsubishi Gas Chemical factory in Fukushima was damaged by the tsunami have fanned fears of a coming shortage of a resin bismaleimide triazine, or BT used in the packaging for small computer chips in cell phones and other products.

Two Japanese companies are the leading producers of silicon wafers, the raw material used to make computer chips, accounting for more than 60 per cent of the world's supply. The largest is the Shin-Etsu Chemical Corp. Its main wafer plant in Shirakawa was damaged by the earthquake, and the factory is down.

“The continuing violent aftershocks are complicating the inspection work,” said Hideki Aihara, a Shin-Etsu spokesman in Japan, on Friday. “Right now, we can't say how badly it was damaged or how long it might take to get started.” Shin-Etsu does have factories outside Japan. “But the most advanced manufacturing and silicon-growing processes are done in Japan,” says Klaus Rinnen, a semiconductor analyst at Gartner. And growing silicon ingots, which are then sliced into wafers, is a lengthy, delicate process that will be hampered by power failures or other disruptions, he says. Big chip makers like Intel, Samsung and Toshiba typically hold inventories of silicon wafers for four to six weeks of production.

“But after that, it will get tougher,” Rinnen says.

The Japan quake, some experts say, will prompt companies to re-evaluate risk in their supply chains. Perhaps, they say, there will be a shift from focusing on reducing inventories and costs the just-in-time model, pioneered in Japan to one that places greater emphasis on buffering risk a just-in-case mentality.

Adding inventories and backup suppliers reduces risk by increasing the redundancy in a supply system. It is one way to enhance resilience, experts say, but there are others.

For global operations managers like Prophet of HP, the Japanese disaster will be a severe test of their supply networks and systems. Once the triage stage is passed, though, it will be a learning experience as well. “We'll do a retrospective on what worked best and what didn't, and how to change things to make our supply chain more resilient,” he says.

(5) Widening gap between FDI, FII inflows causing concern

With slowdown in FDI by 25 per cent, India’s dependence on FII inflows, considered as hot money for maintaining its current account, has increased this fiscal.

Moreover, the gap between the foreign direct investment (FDI) and the inflows from foreign institutional investors (FIIs) mainly in the stock market, has grown to $ 14 billion in 2010-11, according to the latest official data.While FIIs invested $ 31.03 billion during April-January 2010-11, India received FDI of $ 17.08 billion during the same period, showing a gap of about 45 per cent between the two.

In 2009-10, the difference between FII and FDI was only $ 1.9 billion.

However, in the previous years of 2007-08 and 2008-09, FDI inflows were way ahead of the money coming through the share market.

Although the country’s current account deficit (CAD) has been kept under check due to large capital flows coming through the FII route, the quality of the inflow remains an issue.

In its mid-quarterly policy review, the RBI had estimated the CAD for 2010-11 at around 2.5 per cent of the country’s Gross Domestic Product (GDP).

“It is necessary to focus on the quality of capital inflows with greater emphasis on attracting long-term components, including FDI, so as to enhance the sustainability of the balance of payments (BoP) over the medium-term,” RBI had said while expressing concerns on the decline in FDI.

The drop in FDI inflows to $ 17.08 billion during the ten months of the current fiscal from $ 22.96 in the corresponding period (April-January) of the previous financial year is attributed to the financial troubles in several European economies.Germany, France, the Netherlands and the UK are the main investors in India.

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