5 Stories for Today(1) CEC inspects mining areas in Ramghad forest range
(2) NATO to take immediate command of Libya campaign
(3) ‘Levy of service tax on legal profession a retrograde step'
(4) Japan: luxury goods suffer setback
(5) Significance of RBI's policy statements
(1) CEC inspects mining areas in Ramghad forest range
The Supreme Court appointed Central Empowered Committee today inspected mining areas of nine firms in Ramghad forest range in the district to ascertain whether illegal mining was being carried out.
The three member team, headed by P V Jayakrishnan, inspected mining maps and other records, official sources said.The Committee will leave for Bangalore later today and is expected to meet the Chief Secretary and officials of mining department tomorrow.
The CEC will submit its report to the Supreme Court by the first week of April.
Following a petition filed by “Samaj Parivartana Samudaya”, the Supreme Court had on February 25 asked CEC to submit a report on alleged illegal mining in Karnataka in six weeks.
The CEC held its first hearing in Delhi on March 10 and based on the deliberations, had sent a nine-page questionnaire to the State government on 14 points.
On March 25, the CEC held a meeting with Karnataka Chief Secretary S V Ranganath and sought details of the steps taken to curb alleged illegal mining in mineral-rich Bellary district.
(2) NATO to take immediate command of Libya campaign
The 28-member NATO has announced to take over all the international operations in Libya, including military operations to enforce no-fly-zone, enforcement of arms embargo and the civilian protections.
“NATO Allies have decided to take on the whole military operation in Libya under the United Nations Security Council Resolution. Our goal is to protect civilians and civilian-populated areas under threat of attack from the Qadhafi regime. NATO will implement all aspects of the U.N. Resolution. Nothing more, nothing less,” said NATO Secretary General Anders Fogh Rasmussen.
Terming it as a very significant step which proves NATO’s capability to take decisive action, Mr. Rasmussen said that the alliance has put together a complete package of operations in support of the United Nations Resolution by sea and by air. “We are already enforcing the arms embargo and the no fly zone, and with today’s decision, we are going beyond. We will be acting in close coordination with our international and regional partners to protect the people of Libya. We have directed NATO’s top operational Commander to begin executing this operation with immediate effect,” he said on Sunday in a statement in Brussels, the NATO headquarters.
With this, U.S. President Barack Obama has accomplished his earlier announcement that the United States would hand over its operations on Libya within days, a senior Administration Official told in Washington.
“From this moment on forward, NATO will be in command not only of the no-fly zone, not only of enforcing the arms embargo, but now also of the civilian protection mission,” the official said.
“We did what the President wanted. We were going to take the lead in the initial period, providing our unique capabilities to shape the battlefield, but then within days, we would hand over control of that operation to others,” he said.
“That’s what we accomplished today in NATO, with all 28 allies now agreeing that not only the no-fly zone, not only the arms embargo, but also the civilian protection mission would come under NATO — under NATO command, under NATO control, and on NATO political guidance,” he said.
At its meeting in Brussels, NATO changed and amended the existing no-fly zone plan to include the mission for civilian protection.
Supreme Allied Commander Europe General Admiral Jim Stavridis is in charge, as he is of all NATO operations. The joint task force commander is a three-star General from Canada, General Charles Bouchard. He is in-charge of all aspects of the NATO operation, including the arms embargo.
The U.S. official said that the mandate is to protect civilian and civilian-populated areas from attack. “Any forces that are attacking or threatening to attack civilians will be subject to targeting by NATO in exactly the same way they’re subject to targeting by the coalition today, or up to this point,” he said.
(3) ‘Levy of service tax on legal profession a retrograde step’
The Society of Indian Law Firms (SILF) and the All-India Bar Association (AIBA) have expressed serious concern over the levy of ‘service tax’ on the legal profession and urged the Centre to withdraw it immediately.
In a statement, SILF president Lalit Bhasin said, “Service tax on the legal profession is a retrograde step and SILF fully supports the strike call given by lawyers.”
“The legal profession is an integral and important part of our system of administration of justice, so much so that a lawyer is considered as an officer of the court. A lawyer renders service to the court as a vehicle for effective administration of justice. He provides his expertise and assistance to clients as a part of over all service to the court. Can a Service Tax be legally and justifiably levied on services rendered to the court,” he asked.
“No rational basis”
“Service tax had no rational basis”, Mr. Bhasin said and added that if it was not withdrawn, the profession would seek redress from the courts.
AIBA Vice-Chairman S. Prabakaran recalled how a similar attempt to levy service tax on lawyers when P. Chidambaram was the Finance Minister in 2007 was withdrawn due to opposition from the legal fraternity. What was withdrawn had now been re-imposed.
He said that by no stretch of imagination could it be said that legal assistance provided by lawyers to their clients would amount to rendering a ‘service' to warrant imposition of tax.
(4) Japan: luxury goods suffer setback
At age 23, Maki Kusaka, an office worker in Tokyo, has 10 Gucci handbags lining her wardrobe, the fruits of an obsession she has shared with countless other Japanese to collect the world's hottest luxury brands.Japan has one of the world's largest economies and its consumers account for an outsize portion of all luxury goods sales. Last year, nearly a quarter of luxury products were bought by the Japanese, according to Deutsche Bank, more than any other single region. But life's priorities have taken on a starkly different cast after the devastating earthquake, tsunami and nuclear disaster.
“I realise how much I have wasted,'' Ms. Kusaka said as she hurried with her boyfriend one recent evening through empty streets in the normally glittering Ginza shopping district, where streetlamps were still darkened to save electricity two weeks after the earthquake. “This whole incident has changed people's outlook,'' she said.Indeed, a broad dimming of consumer optimism in Japan is affecting many industries automakers and cell-phone companies, among them.
In the luxury industry, however, nearly every company Louis Vuitton, Hermes, Coach and Tiffany still counts on Japan for an average of 13 per cent of total profit, even as they open boutiques in China at a breakneck pace. Japanese consumers at home and abroad accounted for 24 per cent of all luxury goods sales in 2010, according to Deutsche Bank, compared with 22 per cent in Europe, 20 per cent in North America, 19 per cent in China and 15 per cent in other markets.
Though luxury products are viewed as a sign of the upper class in other countries, in Japan, they have long been seen as an integral part of middle-class life. Middle-class consumers often skimped on vacations or expensive meals so they could buy luxury clothes or handbags. Now, analysts say, the triple disaster has jolted the Japanese into a new reality, sapping the materialist, feel-good spirit and replacing it with a focus on helping others and a mood of back to basics.
It is impossible to say whether the shock of recent events will lead Japanese consumers to retrench for a long period, or whether the impact will be more short-term, as it was after September 11 in the U.S. Analysts are rushing to reduce their projections for growth and earnings in the luxury sector, on expectations that Japanese demand could tumble as much as 30 per cent this year and remain tepid for up to five years.
Deutsche Bank is one of several banks that slashed its outlook in large part because of the predicted drop in Japanese consumption. It now expects growth in luxury sales worldwide this year to average just 2.1 per cent, down from the 8.9 per cent that it predicted just a few months ago.
Some analysts say that the picture in Japan is unlikely to be so dire. After the smaller 7.2 magnitude earthquake razed parts of the Kobe region in southern Japan in 1995, for example, luxury sales declined for just one quarter before rebounding. “The impact tends to be very emotional and strong in the short term,'' said Luca Solca, a senior luxury goods analyst at Sanford C. Bernstein & Co. “But as we learned from Kobe, things tend to go back to the normal trend, so I'm a bit sceptical that this will cause a dent in luxury goods for the years to come.''
Shares regain losses
In a sign that some of the concern may be overdone, shares in major luxury companies have regained at least half of the 7 to 14 per cent declines which they suffered in the days after the March 11 earthquake.
Given the larger magnitude of the current disaster, however, the impact this time could unfold in a variety of ways, and over a more drawn-out period. Among the most exposed are Hermes, Bulgari, the Gucci Group, Richemont and LVMH Moet Hennessey Louis Vuitton, which derived 9 to 19 per cent of total sales from Japan last year.
“We expect the luxury volumes sold in Japan and to Japanese consumers elsewhere in the world to tank significantly,'' Edouard Crowley, an analyst at Exane BNP Paribas, wrote in a recent report. “The negative news flow coming from Japan should not be underestimated.''
Uncertainty remains particularly high about the Fukushima Daiichi nuclear plant. Fears of radiation have prompted evacuations from Tokyo, a locus of high-end shopping, and kept free-spending tourists especially from China away from the lucrative Ginza district, home to one of the biggest luxury enclaves in the world.
On Friday last, officials began encouraging people to evacuate a larger area around the plant, a sign that the crippled facility may not be brought under control soon.
“Ginza is totally empty,'' said G. C. Amarit, an employee at an Indian restaurant normally buzzing with Ginza shoppers. “People don't come here anymore,'' he said. “We are getting 50 per cent less customers.''
Kusaka, the office worker, did not rule out eventually buying another Gucci product. But for now, she said, the disaster has jolted her into focusing on personal relationships and on people in need. “I want to devote more of myself to those who are suffering from the earthquake,'' she said.
Louis Vuitton, Gucci, Hermes, Tiffany and many other top brands began to reopen hundreds of stores they shuttered in Tokyo and across the northeast regions of Japan affected by the tsunami and nuclear concerns. Some, like Tiffany, are prepared to continue with periodic store closings, or reduced hours, amid rolling blackouts or other uncertainties that might emerge. None of the companies would discuss their outlook or comment on whether the events would change their strategy for the Japanese market, other than to indicate that they were reviewing the situation.
“We remain vigilant and continue to monitor the situation, as it is continuously changing,'' said a spokesman for PPR, which owns Gucci, Bottega Veneta, Yves Saint Laurent and many other high-end brands.
Tiffany earlier this week reduced its first-quarter earnings guidance amid expectations that sales in Japan would fall by 15 per cent.
Nonetheless, over time, any drop-off in Japanese purchases will be made up for by the industry's continued expansion in China and the fast-growing economies of India, Brazil and Russia.
China has become the new El Dorado for every major brand, and is expected to pass Japan as the world's top consumer of luxury goods by 2015. But a decline in Japanese demand for goods made in China could then affect the Chinese economy, further distorting the near-term outlook.
Many of the luxury brands have been rushing to put down stakes in dazzling shopping malls across China, including the second- and third-tier cities where growing numbers of Chinese are stepping into the middle-class and thirsting for visible logos to broadcast their ascent.
“I hope for Japan that the impact will be less serious than some people fear,'' said Yuval Atsmon, an associate principal at McKinsey & Co. in Shanghai and the author of a recent report on China's luxury market.
“At the same time, despite how big luxury consumption is in Japan, it is doubling in China today, so China will be of massive importance going forward,'' he said.
(5) Significance of RBI's policy statements
The Reserve Bank of India recently released its mid-quarter monetary policy review. A review between quarterly announcements is a recent innovation of the central bank and has been prompted by a need to communicate more often with the markets in a structured fashion. The total number of policy statements is now eight — the annual policy statement, half yearly, two quarterly and four mid-quarter reviews — in a year.
Not long ago there were only two policy statements — the annual policy statement and a half-yearly review. The central bank's interface was subsequently enlarged to four, with two quarterly reviews added to the policy statement and the half yearly review.
Has the more frequent reviews altered the basic structure of the reviews? Obviously, with more opportunities to communicate, the RBI will have less to say each time. The annual statement is bulkier than the others, as it covers substantial issues besides the core monetary issues.
It is the forum for the RBI to announce its annual targets — relating to inflation and growth, for instance. Along with the half yearly review and the other two quarterly statements, the annual policy statement is first announced by the RBI Governor at a meeting of banks' heads in Mumbai. The mid-quarterly statements are in the nature of press statements.
The latest mid-quarter review on March 17 is the last of the eight statements for this fiscal. Coming between the Union budget and the next year's annual policy statement (for 2011-12), the review probably has its own significance. In a widely anticipated move, the RBI hiked the short-term policy rates, the repo and the reverse repo rates, by 0.25 percentage point each. The new repo and reverse repo rates are 6.75 per cent and 5.75 per cent, respectively. The total number of policy interest rate hikes including the latest one, is eight. Among the central banks of major developing economies, the RBI has been in the forefront of moves to tighten monetary policies.
The big worry, of course, is inflation. In fact, right through the year, the RBI was focussed on inflation. In January, it appeared that the RBI was prepared to frame its monetary policy, taking into account the totality of circumstances and not just on inflation. However, in a short while thereafter, inflation has re-emerged as the major concern.
After a slight moderation in January, Wholesale Price Index-based inflation reversed itself in February. There has been a sharp increase in non-food products inflation, which has more than offset the fall in the prices of food articles since January. However, even among food articles, the prices of milk, fish, eggs and meat have remained high, suggesting structural demand and supply mismatches. Fuel prices remain high and the prognosis is not good even over the medium-term.
Even more worrying is the fact that non-food manufactured products inflation, an indicator of demand side pressures, rose sharply from 4.8 per cent in January to 6.1 per cent in February, well above its medium-term trend. Inflation has, therefore, become more generalised. No longer can supply side factors be blamed. The rise in non-food manufactured prices is the principal reason behind the RBI's move to hike its WPI inflation target to 8 per cent for March from 7 per cent.The latest budget plans to bring down the fiscal deficit sharply by compressing expenditure estimates and anticipating buoyant revenue. This should aid the monetary policy's anti-inflation stance. However, the budget may have underestimated certain expenditure items such as subsidies. It may be over optimistic on revenue growth.
The RBI, which had expressed concern over the widening current account deficit (CAD), is less worried now. The CAD is expected to be at a lower than expected level of 2.5 per cent of the GDP. However, concerns over the means of financing the CAD remain. It is necessary to take measures to attract these capital flows such as foreign direct investment, which are more stable. The dependence on short-term, volatile, portfolio flows should be reduced.
The CSO's estimate of 8.6 per cent growth for the current fiscal is in line with the RBI projections. Agricultural production is likely to be sustained at a high level. The Index of Industrial Production (IIP) remains volatile while other indicators such as direct and indirect tax collections, merchandise export growth and bank credit expansion suggest that the growth momentum persists. However, there is continuing uncertainty over energy and commodity prices. This may vitiate the investment climate and threaten the current growth trajectory.
The global economy presents a mixed picture. Growth in emerging economies remains strong while that in the U.S. and the Euro area is gathering momentum. However, the unrest in the Arab world and the consequent uncertainty over oil supplies has cast doubts over the recovery process. Since commodity and food prices remain at elevated levels, there are apprehensions over inflation returning to those economies. Headline inflation has, in fact, risen noticeably in a number of advanced economies, especially in the Euro area and the U.K.
Finally, it may be early days to assess the macroeconomic consequences of the natural disaster in Japan. According to the RBI, expenditure on reconstruction may give a boost to the economy. However, if thermal power is going to replace nuclear power in Japan, there will be a further upward pressure on global petroleum prices.