Retrenchment in Recession. LPG Hits G...

Retrenchment in Recession. LPG Hits Generation Next Most and It Is Globalisation of Hunger. American Dream Balance Sheet Yet to Be Opened as Europe Replicates Asia in Plunge.Chavez Mocks George W. Bush as a Comrade and Lauds Nationalisation! Global Shares Fall as Recession Fears Take Grip.Barack Obama Has a 5-point Lead Over Republican John McCain. How May India Decouple with US Economy Continuing the Copulation?

Troubled Galaxy Destroyed Dreams: Chapter 87
Palash Biswas

 

25N. CONDITIONS PRECEDENT TO RETRENCHMENT OF WORKMEN. - (1) No workman employed in any industrial establishment to which this Chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until, - (a) the workman has been given three months' notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; and

(b) the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf.

(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

(3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.

(4) Where an application for permission has been made under sub-section (1) and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.

(5) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (6), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.

(6) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (3) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication :

Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(7) Where no application for permission under sub-section (1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him.

(8) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such establishment for such period as may be specified in the order.

(9) Where permission for retrenchment has been granted under sub-section (3) or where permission for retrenchment is deemed to be granted under sub-section (4), every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months.
 
Industrial Disputes Act | Laws India

Top most Firing IT companies in India

1) IBM — Right now this is the most firing company for IT professionals. In the last 6 months, this company has fired nearly 20% of their employees because of BG check and performance issues. This is the most insecure company from an IT professional’s point of view. They don’t have any strategic plans at HR policies regarding employee security. No appraisals (maximum 10%).

2) Accenture — This is second top most firing company. The firing rate is around 5%. This depends upon outsourced projects; they have a unique system where Accenture development centers around the world bid for a project coming into the company. Currently Philippines centre is taking the cake and the Indian centers are in a firing mode.

3) WIPRO — Firing people with very frequent back ground checks and firing them with out even experience letters and relieving letters (will mention as terminated from services)but will promise the employees that they will retain them. After the project is over they will fire away. Will threaten of criminal cases against such employees if they oppose the move and has also filed against some.

4) Intel — Recently joined the league. Running in heavy losses, hence firing 3000 employees in the Banglore center in a phased out manner.

5) CTS — Has a steady firing policy (checking the Educational background and previous employment and also employee performance in work). In a Recent HCL walk-in, around 50% attendees were from this company. Sadly the I-pods have not helped them.

6) CSC — Excellent package but fires folks in Background check and those on bench regularly. Recently fired 400+ employees from its subsidiary Covansys.

7) Satyam — Currently stopped firing. The Attrition rate is very high. No firing from 2005 until now when 1000 employees were fired in Hyderabad.

8. Patni —- They fired so many employees that currently they are facing understaffing and deficiency with number of employees. Very high attrition rate.

9) Keane India —- This USA based company is always involved in firing employees. Although they proudly say that they dont have hire and fire policy. Recently they fired java and as400 professionals after which most of the employees have started to pack their bags. Employees change this company within 1 year.

So take care before accepting offers from these companies.

Secure IT companies in India

1) Microsoft — Has projects till 2050.

2) EDS — Most secure company in India. Not laid off any of its employees even during 2001. Has lots of projects in Defense and financial areas

3) HP — Dream Company. In-house and outsourced projects

4) TCS — A govt. Company.

5) AOL, Google and Yahoo - Best companies to work with, great job satisfaction as well as great salary and work environment. Rarely fires an employee. As they are internet based companies’ they offer lots of opportunities to grow.

6) HCL — A good company to be in. Called as a retirement company.

7) HSBC— This is the most secure company. It has never fired any employee, even when they know that the employee is showing fake experience.

8. Aricent— a communication based software company, has never fired any employee and gives great perks & incentives, lot of projects in kitty. Minimal level of attrition.

9) KPIT Cumminns Infosystems Limited —- This is the most secure company not known to many. It has presently acquired CG Smith, Bangalore and has lots of projects in pipe line. Acquisitions plans will continue.

Source - Savitha
http://enagar.com/2007/10/31/top-most-hire-and-fire-it-companies-in-india/

  

Bank bailouts don't avert recession
(02:09) Report
Oct 15 - British Prime Minister Gordon Brown said the International Monetary Fund must be reshaped to help regulate the world's financial system and avoid a repeat of the global credit crisis.

Brown was speaking ahead of a summit meeting of EU leaders. The summit comes as countries around the world pledge funds to bail out banks ailing banks. But though the banking crisis may have been averted - recession has not.

Stefanie Mcintyre reports.
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Asian markets slump
(00:56) Report
Oct 16 - Asian markets slid on Thursday as fears grew that bank rescue measures will not be enough to stave off a global recession.

Tokyo's benchmark Nikkei posted its biggest loss since the stock market crash of 1987.

Anthony Trotter reports.
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Many economists see a recession as inevitable now. Several factors will decide how widespread it is, how painful it is and how long it lasts.

The Balance sheet of american dream is yet to be opened! The great recession exposes the Globalisation of Hunger worldwide. Jet Airways Retrenchment has just opened the Pandora`s Box as Air India plans a cruel Lay Off for at least 15,ooo employees. IT sector would be hit next. Personally, I would not be a little surprised if the FDI in Indian Media industry withdrawn and scribes go jobless on largescale as the psuedo intellectul mediacre mass of Indian population allowed HIRE and FIRE set in. NDA degruped Media houses and minor papers turned out to be multi edition Giants paying least. Neoliberalism introduced by Washington Planted Dr Manmohan Singh and company way back in 1991 and the nacked dance on LPG tune set the Moods of Sensex Freesex XXXXX Shining India, now hits Generation next who knows nothing but a few computer progrrams and may speak English with American accent. It is disastrous. Indian Great Real Reality Show of Jobless Drug Addict youth with Personality Disorder is yet to be launched! Big Boss may prove to be the best trend setter!U.S. industrial production fell a sharp 2.8 percent in September, the biggest decline since December 1974, according to a report on Thursday that was likely to reinforce fears of a recession. India has no option but to follow the core country as the ruling Hegemony in India has turned it into a periphery!

India opened up the economy in the early nineties following a major crisis that led by a foreign exchange crunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic and external sector policy measures partly prompted by the immediate needs and partly by the demand of the multilateral organisations. The new policy regime radically pushed forward in favour of amore open and market oriented economy.

A growing middle-class is being developed, but are others being left behind? Organisations concerned with equitable trade met in Bern today to look at how the free trade deal between Europe (in the form of the European Free Trade Area) and India is affecting the latter country

Major measures initiated as a part of the liberalisation and globalisation strategy in the early nineties included scrapping of the industrial licensing regime, reduction in the number of areas reserved for the public sector, amendment of the monopolies and the restrictive trade practices act, start of the privatisation programme, reduction in tariff rates and change over to market determined exchange rates.· As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entity has been interacting with the outside world throughout history and still continues to do so. It has to adapt, assimilate and contribute. This goes without saying even as we move into what is called a globalised world which is distinguished from previous eras from by faster travel and communication, greater trade linkages, denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

 

Over the years there has been a steady liberalisation of the current account transactions, more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom, roads, ports, airports, insurance and other major sectors. It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all the talk, we are now where ever close being globalised in terms of any commonly used indicator of globalisation. In fact we are one of the least globalised among the major countries – however we look at it.

Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2 billion of the developing world 4.8 billion people still live in extreme poverty.

Globalisation is the new buzzword that has come to dominate the world since the nineties of the last century with the end of the cold war and the break-up of the former Soviet Union and the global trend towards the rolling ball. The frontiers of the state with increased reliance on the market economy and renewed faith in the private capital and resources, a process of structural adjustment spurred by the studies and influences of the World Bank and other International organisations have started in many of the developing countries.Also Globalisation has brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer hold out promise improved productivity and higher living standard.It is true, of course. But globalisation has also thrown up new challenges like growing inequality across and within nations, volatility in financial market and environmental deteriorations. Another negative aspect of globalisation is that a great majority of developing countries remain removed from the process. Till the nineties the process of globalisation of the Indian economy was constrained by the barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the nineties has progressively lowered the barriers to competition and hastened the pace of globalisation.

In India, State-owned Air India on Thursday said it was open to letting as many as 15,000 workers go on leave without pay for 3-5 years, but it would be voluntary action on the employees part. On the other hand, Jet Airways, India's top private domestic carrier, was considering returning some of its leased aircraft due to a decline in demand and and a halt on its expansion plans, a senior executive said on Thursday. The dreams of thousands of young men and women —from small town to big cities — aspiring to don the smart uniforms of cabin crew have hit an air pocket.

Times of india reports:
For the aviation training schools in Kolkata, the post-Durga Puja takeoff couldn't have been more bumpy and training institutes are in a quandary over the future of their students in Chennai in the aftermath of job-cuts by Jet Airways. The pink slips set in motion by private airlines tackling desi fallouts of the global financial meltdown has led to a wave of anxiety in the string of airhostess training institutes in Chandigarh, for long a magnet to the hordes of wannabe flight attendants streaming in from small towns in Rajasthan, Himachal Pradesh, Punjab, Haryana and J&K.

Often coming from dusty towns in the interiors of Punjab, many of the trainees who have taken loans and either sold or mortgaged their properties to pay course fees ranging between Rs 16,000 and Rs 2 lakh are a worried lot. Close to 2,000 students are currently enrolled in aviation, travel, tourism and hospitality courses in airhostess training schools in Chennai.

"We've been flooded with queries on future prospects. This industry, like any other, has a cyclical nature. We are trying to explain that it will eventually fly out of the air-pocket. But concerns persist," said Ankan Das, Kingfisher Training Academy sales and marketing head in Kolkata. "It is the placement cell that will face the toughest challenge. They have to woo recruiters back to the table," he added.

"I always wanted to be an airhostess. The scenario is upsetting. I have already cleared the first round of interview with a major airline and am hopeful of landing a job as cabin crew in a months time," said Frankfinn Institute of Airhostess Training student Paulomi Roy.

The institutes are casting the net wide. They are talking about the prospects in the hospitality industry to offset the downturn in the aviation sector. Avlon Aviation Academy (AAA) in Kolkata has just introduced a new course in hospitality to spread the risk. "Cabin crew recruitment has been hit. There are lots of opportunities in aviation beyond the aircraft. We expect recruitment of ground staff in new airports to continue unabated. That should be 25,000 new jobs across categories each year," said AAA regional head Warinder Singh in Kolkata. Air Hostess Academy, too, is talking in terms of the entire service industry.
http://timesofindia.indiatimes.com/India/Retrenchment_sparks_anxiety_in_training_academies/articleshow/3600930.cms

PepsiCo, the US soft drinks and food company, yesterday announced a $1.2bn costcutting drive with the loss of 3,300 jobs, amid growing uncertainties over the outlook for global consumer demand.

The job cuts represent just 1.7 per cent of the group's global workforce, but reflect a symbolically significant retrenchment by one of America's best-run companies in response to the gathering macroeconomic gloom.

The company also declined to give earnings guidance for its coming 2009 financial year, underlining the impact of the current turmoil in global markets on business planning.

Indra Nooyi, chief executive, said PepsiCo was "facing challenges that are really out of our control, and that affect others as well".

The latest joke is all about Indian labour laws and the impotent ministery!

While the Govt Sector prepares for Direct Indirect RETRENCHMENT and Mass Lay OFF, how it may intervene in the so called sovereign Market and the corporate affairs?

But the Union Labour Minister Mr Oscar Fernandes said on Thursday his ministry was looking into the issue of mass retrenchment of Jet Airways' cabin crew. The minister who returned after attending a labour conference in Bali said here that the iss ue is already under the scanner of labour ministry and its details are being collected by the ministry.

“The issue has been brought to my notice. There is a problem in the aviation industry, specifically Jet Airways, and we are enquiring into the matter,” Mr Fernandes said. The Chief Labour Commissioner's office is learnt to have sought contract details of the 1900 employees who have been retrenched by Jet Airways to ensure savings of $1 million per month.

Ministers criticised it, sought a report on it and sympathised with those at the receiving end of it, but hinted there was little the government could do about Jet Airways decision to sack 1,900 employees.

"There is no responsibility of the government in this case. Our responsibility is only to ensure that the economy is functioning well," Science and Technology Minister Kapil Sibal said at a briefing on decisions taken by the Union Cabinet.

He said the Cabinet did not discuss Jet's sack order at its meeting, although Petroleum Minister Murli Deora separately criticised the timing of the decision - right in the middle of the festival season.

"I appeal to (Jet Chairman Naresh) Goyal not to retrench people and try to find some solution. We have supported Goyal several times (but) this is not the right time to retrench people, particularly before Diwali," he said.

Labour Minister Oscar Fernandes said he had asked the Chief Labour Commissioner to submit a report (on Jet Airways sacking workers).

How may India decouple with US Economy continuing the Copulation?

India's enhanced non- proliferation commitments under the landmark Indo-US civil nuclear deal constitute a "net gain" for the global non- proliferation regime, the Bush administration said on Thursday, adding there were "powerful" strategic, political, economic, and environmental reasons" to support the Initiative.

Detailing the benefits of the Initiative launched by Prime Minister Manmohan Singh and US President George W. Bush on July 18, 2005, the State Department in a Fact Sheet said the steps taken by India, a non-signatory to the NPT, would enhance the global non-proliferation regime and prevent the spread of weapons of mass destruction (WMD).

"India's enhanced non-proliferation commitments strengthen the nuclear non-proliferation framework and constitute a net gain for the global nonproliferation regime," it said on the "unprecedented three-year effort" by the two governments to get all the necessary approvals, including that of the IAEA and the NSG for the deal as it welcomed New Delhi to the non-proliferation "mainstream."

"Together, they constitute a dramatic change in moving India into closer conformity with international non-proliferation standards and practices, and form a firm foundation for the U.S. and India to strengthen our efforts in the future to prevent WMD proliferation and to combat terrorism," the Fact Sheet said, nearly a week after New Delhi and Washington completed all formalities on the deal.

"There are powerful security, political, economic, and environmental reasons to support this Initiative," it said.

Unemployment is rising, sapping the client base of restaurants and hotels, but nervous suppliers are often demanding more money up front, squeezing businesses on both.US$700 billion bank bailout in the US to the coordinated cutting of interest rates by central banks last week — have had little effect on freeing up money and getting banks to lend to each other or their customers.

Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital and goods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation not only includes opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC’s, population migrations and more generally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and pollution

 

 Nearly half the U.S. workers polled in a survey released on Tuesday said they were worried their jobs are at risk amid the current economic crisis.

With job fears in mind, 25 percent said they were scanning help-wanted ads or updating their resumes, according to the survey commissioned by Workplace Options, a provider of work-life employee benefits based in Raleigh, North Carolina.

Forty-seven percent of respondents said news of the financial crisis made them fear for their jobs, the survey said, and 53 percent said they were not concerned about their job security.

The same number, 53 percent, said they were cutting back on spending due to concerns about the financial crisis.

The survey was the first about job security in the current economic crisis commissioned by the company, and responses to the crisis and job security have not been regularly tracked by the company in previous surveys.

The nationwide survey was conducted by Public Policy Polling on Sept. 26 and 27. It polled 452 working adults in the United States and had a margin of error of plus or minus 3.7 percentage points.

With its distinguished workforce and talented human power it is spearheading to global expansion. Undoubtedly, India is riding on the back of considerable growth of IT and ITeS segment which is the major reason for high GDP growth from past few years. But, the so far well doing sector seems badly influenced by the US economic crunch. The KPO and BPO sector, considered flourishing segment is also going through rough phase with add-ons facilities like meals, cabs being offered to employees being truncated or ended. The recent happenings in US financial sector like bankruptcy of Lehman Brothers and acquisition of Merrill Lynch by Bank of America to let former sustain the bankrupt condition, has forced Indian IT industry to face the heat of US economic downturn. BPO and KPO segment will face the heat for forthcoming two or three quarters, indicated NASSCOM study.Also, the GDP growth has been lowered to 7% coampred to 8%+ last year and the anticipated 9% this year.The GDP forecast for the next year has also been reduced to 7%. A recent syudy indicated that overall economic growth will be around 3% globally for all economies accumulated.

The short-lived notion that Asia had decoupled from the US, and was now operating independent of the American business cycle, is all but dead. Asia is the biggest beneficiary of the rise in global trade over the last two decades. Its corporate earnings, real estate prices and much more are dependent on a steady inflow of US dollars and euros through exports to the West.

But the IMF predicts growth in the 15 nations that use the euro will fall during the second half of this year and barely rise next year. (And that estimate was prepared in advance of last weekend’s IMF and World Bank meetings in Washington and was already considered out of date by many experts.) Britain, the only major European economy outside the euro zone, is expected to shrink through next year.

Many in Asia, despairing of help from the West, are looking toward Beijing.
True, for the last six years, the Chinese economy has charged ahead despite every obstacle. In fact, Beijing was more concerned about the economy overheating and spurring inflation. So China ran a budget surplus, repeatedly raised interest rates and required banks to deposit a remarkable one-sixth of their assets as reserves to the central bank.

But facing slower growth, Beijing is suddenly trying to goose its economy by cutting interest rates and taxes and lowering reserve requirements. But the government is finding the economy is already looking a little out of breath.

Economists see annual growth slowing from 12 percent a year ago to 8 percent or 9 percent this winter.

South Korea is already hurting.

US is in slumping stage as concluded last year, but initially it was expected that it will not hit Indian IT at high node as Indian companies are more dependant on domestic market. Considering last year's scenario, our 13% goods were sold in overseas market thus increasing the FDI. This indicates that our dependancy on foreign markets is increasing. Nevertheless, it is coming true as of now factually Indian economy is also facing the blues. US is the major market for Indian outsourcers and around 60% of software industry is based on the project being outsourced from that end.

With US, facing high economic downturn, Indian software industry is on the reality check; what is stored for them in this economic slump. Barring some top shots, it seems whole IT industry is crippling with projects ended and future deals in abeyance. The companies are facing the billing pressure indicating that meltdown is cracking the backbone of strong Indian GDP growth and aim of being reckoned as global power in coming few years.

What was considered as the golden period for Indian BPOs to prove their worth seemingly is haunting them the worst. At initial stage, many well known personalities like Narayana Murthy and P. Chidambram stated that India will not get highly disturbed from this downturn of market, yet will not be able to meet the targets of 10% annual GDP growth.

Accounting the current wretched scenario of market, all those words prove to be a condolence speech. Registering annual growth rate of more than even 50%, suddenly Indian IT has come to a halt and crisis which was never thought and considered.  But to some, Nandan Nilekani of Infosys, the phase is temporary and challenging for short term but is positive for future outlook in long term consideration.

Getting on to some practical instances will throw a much clear light on the current Indian IT situation. Just a month ago, Satyam Computers decided to lay off as much as 4500 software engineers in wake of restructuring and cutting down the IT costs (lay-offs were India oriented).

Moving further, HP, the largest PC maker, to go well with its EDS integration (which it acquired few months back) announced to lay off substantial jobs numbering to around 26,000. Maximum of these pink slips are decided to get distributed in Indian centers.

Further, Indian biggies like TCS, Infosys, and Wipro which were considered immune to this retrenchment have deferred promotions, cut off hiring fresher and even have shown pink slips to many who are one or two year experienced.

READ with concern the report that about 300,000 Malaysians working in Singapore might face possible retrenchment with the island republic sliding into recession (The Star, Oct 13).

According to data released by the Singapore Ministry of Trade and Industry, Singapore is the first Asian economy to fall into a technical recession.

This further proves that we are not entirely insulated against the current global economic crisis.

Volvo said it would eliminate 2,700 jobs in Sweden and an additional 600 abroad in response to what it called the “rapidly deteriorating market situation.” Opel, the German subsidiary of General Motors, temporarily shut down two plants to accommodate the steep falloff in demand.

Carlos Ghosn, the chief executive of Renault, said bluntly last week that the credit crunch left him with no choice but to start hoarding money. He predicted a “prolonged and strong” recession.

 

 U.S. retail sales post biggest drop since August 2005

* Producer prices dip but core remains elevated

* New York state factory activity gauge hits record low

* Data reinforces recession worries; stocks plummet (Updates with market close, Fed's Bullard)

U.S. retail sales last month dropped the most in more than three years while a measure of New York state manufacturing hit its lowest since the index started in 2001, intensifying recession fears and punishing stocks.
"We have an all-out consumer retrenchment under way," said Richard DeKaser, chief economist at National City Corp in Cleveland.

In South Korea, exporters are suddenly struggling. In India, industrial growth has slowed substantially. In Sweden, Volvo is cutting thousands of jobs. In Japan, which thought it was immune to the current market chaos, a credit squeeze seems to be forcing small companies into bankruptcy.

Around the world, fears of recession have fed a stock market panic, as worries about toxic assets spread from the financial sector to the credit markets and now to the broader economy. Companies from Germany to Asia are hoarding cash because credit markets are tight. The sheer uncertainty of it all is upending plans for businesses to expand. Consumers have pulled back, just as they received some relief from high oil prices.

Even credit-worthy companies cannot get money in Europe. And across Asia, export growth has slowed to a crawl or started declining in real terms — and that was before US retailers announced steep sales declines last Wednesday.

The US, once the engine of the global economy, is ailing and in no position to inspire confidence, much less point the way around or out of recession. Americans are seen as both the root of the problem and powerless to solve it.

But no government effort has been able to stanch the bleeding — even the unprecedented coordination of central banks on three continents, which only generates more fear.

The liquidity provided by the European Central Bank, for instance, seems to be going through a revolving door. After releasing billions of euros into the market, the bank took in a record 102.8 billion euros (US$139.3 billion) on Sept. 30 and 64.4 billion euros last Thursday for banks. Instead of lending their spare cash to each other or the rest of the economy, banks have parked it with the central bank at ultra-low interest rates.

Last week showed the first concrete signs that the financial crisis may be starting to damage Japan’s broader economy. On Wednesday, Tokyo Shoko Research, a market research company, released data showing the number of corporate bankruptcies jumped 34.4 percent last month from a year earlier, to 1,408 failures, a five-and-a-half-year high. Economists said the increase might reflect a growing credit squeeze in which Japanese banks cut back on loans to smaller, lesser-known companies.

Since the middle of last month, lending to even credit-worthy companies has dried up in Europe.

 Socialist Venezuelan President Hugo Chavez mocked George W. Bush as a "comrade" on Wednesday, saying the U.S. president was a hard-line leftist for his government's intervention of major private banks in the U.S. financial crisis.The Bush administration, which has promoted free-market policies throughout Latin America, resisted taking equity in banks for weeks. But, faced with a spiraling financial crisis, it reversed course this week with a $250 billion plan.Chavez, who the United States labels an autocrat, is popular among his supporters at home for criticizing Bush and sometimes wins praise abroad for voicing anti-U.S. opinions.Despite the ideological differences between the two governments and the diplomatic sparring that led weeks ago to the countries expelling each other's ambassador, Venezuela remains a major oil supplier to the United States.

Global Hunger Index shows developing countries making poor progress in reduction of hunger and child mortality. The sub-Saharan nations are worst affected with DRC having highest rate of hunger followed by Eritrea, Sierra Leone, Ethiopia and Liberia.According to estimates, to reach the 2015 development goal, investment to the tune of $14 billion will be required annually. The Sub-Saharan countries will require $5 billion to be pumped into their economy annually. A complete restructuring of the methods of productivity and research, nutrition and social protection and market and trade could help in feeding millions of hungry mouths worldwide.

India, ranked 66 among 88 countries, shows that despite of economic growth, the hunger scenario of the country is worse than about 25 Sub-Saharan nations and worst among all countries of Asia, with only Bangladesh lagging behind it. Madhya Pradesh is the hungriest state in the country followed by Jharkhand and Bihar. According to the Global Hunger Index 2008, over 200 million Indians are unsure about accessing their daily bread.

The deepening poverty rate, extreme hunger and unemployment are crippling communities and plunging the country into a "state of emergency", according to Archbishop Njongonkulu Ndungane.

He gave the keynote address on the first day of the national dialogue on poverty between the government and civil society organisations in Boksburg on Wednesday.

The dialogue, hosted by the department of social development and the National Development Agency, has been dubbed "All hands on deck - war against poverty", with the focus on the role that civil society can play in alleviating poverty in South Africa.

Ndungane said that while the current state of poverty was "dire", there were a number of options available to turn the situation around - beginning with reflecting on how people living in poverty experience life.

However, IFPRI reports that India has made notable progress in reducing hunger and child mortality and is very close on being on the track to reach the 2015 development goal target.

WHILE THE international community is boggled by the global financial downturn, triggered by the US sub-prime crisis, another global crisis is seemingly being brushed aside as a typical problem pertaining to the poor countries – the problem of hunger. The International Food Policy Research Institute (IFPRI) in collaboration with German Agro-Action and Concern Worldwide has released the Global Hunger Index 2008 that shows most countries making a slow progress to cut down hunger and reduction of child mortality rate.
As part of the Millennium Development Goal, signed by leaders from 189 countries in September, 2000, the international community has set targets to cut hunger by half and under-five mortality rate by two-thirds by 2015. However, given the current slow level of progress in the developing world coupled with the current global inflation and financial crisis, the possibility of reaching the Millennium Development Goal by 2015 appears bleak.

The Global Hunger Index is made according to three indicators – the proportion of people who are calorie deficient, child malnutrition and child mortality. The countries in the Latin American and Caribbean and East Asia and Pacific regions have, however, made significant progress on this front while the Sub-Saharan African countries are worst affected by malnutrition and child mortality. Thirty-eight out of the 42 Sub-Saharan countries rank, show dismal progress with the Democratic Republic of the Congo (DRC) being the country with the highest rate of hunger followed by Eritrea, Sierra Leone, Ethiopia and Liberia. Despite the overall gloomy picture of the African continent, Mozambique, Ghana and Malawi have made considerable progress in reducing hunger.

 Fears grew on Wednesday that the financial crisis will mutate into a worldwide recession with leaders calling for new global action to counter slowing economies and market troubles.

As EU leaders gathered for a summit devoted to the financial turmoil, a top US central bank official, backed by new data, said the United States appeared to be in recession.

 With financial crisis gripping the developed world, Prime Minister Manmohan Singh on Wednesday raised the pitch for reforms in the UN, G-
8 and other international institutions of governance and emphasised that the voice of the developing countries should be heard.

Inaugurating the India-Brazil-South Africa (IBSA) Summit here, he said the Doha round of WTO talks should be approached purposefully so that these negotiations are concluded in a "manner that promotes development and inclusive growth".

On the other hand republicans have no esacape route to come out of mourning Mode as Democrat Barack Obama has a 5-point lead over Republican John McCain in the U.S. presidential race, according to a Reuters/C-SPAN/ZOGBY poll released on Thursday. Nevertheless, the zionist white apartheid hegemony, an interesting replication of indian caste System would hardly allow a balck to be the Next US President as at home in India, we see how the Dalit Queen is jointly blocked by UPA, NDA and Left! With opinion surveys making Obama the favorite over McCain less than three weeks before the November 4 election, attention has turned to the question of how many white Americans might be lying to pollsters about their willingness to vote for a black president.

The phenomenon is known as the "Bradley effect," after Tom Bradley, an African American who narrowly lost the 1982 California governor's election despite leading in polls.His defeat surprised observers who concluded many white voters had not been honest about their intentions. Ever since, pollsters have tried to factor in the Bradley effect in elections featuring black candidates.

 For supporters of Democratic presidential candidate Barack Obama it is a nightmare scenario -- his apparent lead in the battle for the White House suddenly evaporates on Election Day. The cause? Race.

As Republican rival John McCain celebrates victory, it emerges that a small but decisive percentage of white voters who had declared to opinion pollsters they supported Obama actually chose differently in the privacy of the ballot booth.

While, in New York, Federal investigators have opened an investigation into the collapse of Washington Mutual Inc, the largest U.S. banking failure.

Jeffrey Sullivan, U.S. attorney for the western district of Washington, said in a statement on Wednesday that he has set up a task force that includes investigators from the FBI, the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp and the Internal Revenue Service's criminal investigations unit.

Chavez, who calls capitalism an evil and ex-Cuban leader Fidel Castro his mentor, ridiculed Bush for his plan for the federal government to take equity in American banks despite the U.S. right-wing's criticism of Venezuelan nationalizations.

Bush is to the left of me now," Chavez told an audience of international intellectuals debating the benefits of socialism. "Comrade Bush announced he will buy shares in private banks."

Chavez, who has insulted Bush in the past as a drunkard or the devil, called him clueless on Wednesday. He accused him of simply parroting the words of his aides without understanding the new policies that rely on heavy state intervention.

"I am convinced he has got no idea what's going on," said Chavez, who has nationalized swaths of the OPEC nation's economy in recent years and is in negotiations to take over a Spanish bank in Venezuela.

Chavez lauds his nationalizations for allowing the state to refocus companies' activities on helping the poor rather than creating value for their shareholders.

 New York:Stocks rose in volatile action after the open on Thursday, as investors were encouraged by signs of further thawing in the credit markets, but worries about a prolonged U.S. recession persisted.

The Dow Jones industrial average rose 98.92 points, or 1.15 percent, to 8,676.83. The Standard & Poor's 500 Index was up 11.40 points, or 1.26 percent, at 919.24. The Nasdaq Composite Index added 22.23 points, or 1.37 percent, to 1,650.56.

Wall Street fluctuated on Thursday, seeking a direction after the previous session's steep dive and after a reading on consumer prices came in better than expected.

Investors were highly anxious after the market plunged on Wednesday on a stream of bad economic news that underscored the likelihood that the country is either in a recession or will be in one — and that the downturn will be severe.

The flat reading on September's Consumer Price Index compares with August's 0.1 percent decline, which was the first in nearly two years. Investors are relieved to see any economic pressures ease on consumers.

Meanwhile, a weekly snapshot of the job market showed that first-time claims for unemployment declined last week, rather than increased as had been expected.

The flat reading on September's Consumer Price Index compares with August's 0.1 percent decline, which was the first in nearly two years. The core index, which eliminates food and energy prices, rose 0.1 percent. Economists had been expecting CPI would rise to 0.1 percent and that core CPI would increase 0.2 percent.

The Labor Department said claims for unemployment benefits fell 16,000 last week to a seasonally adjusted level of 461,000 — below the 475,000 that had been anticipated. Still, total unemployment remains above economists often associate with recession.

The Reserve Bank of India (RBI) said it was too early to say if more steps were needed to ease cash conditions in its strained financial markets, after freeing up 1 trillion rupees ($20.5 billion) of funds in a series of measures. The BSE Sensex pared losses to 2.1 percent on Thursday after slumping to its lowest in more than two years in early trade, with lingering fears of a global economic recession keeping investors jittery.India's inflation rate would remain in double digits for some time, but it is now on an easing trend and policy can be focused towards growth, a top economic adviser said on Thursday.The near-term policy priority has shifted to ensuring enough liquidity in financial markets as the turmoil in global markets has spread to India, and with that there have been calls to shore up growth against the risks of a global recession.

Industrial output grew at an annual rate of just 1.3 percent in August, its slowest pace in nearly 10 years, as rising prices, the aggressive rate rises of June and July, and slowdowns in key export markets such as the United States and Europe have bit.

Finance Minister Palaniappan Chidambaram has said the fundamentals of Asia's third-largest economy are strong and growth in the current financial year would be close to 8 percent.

European Union leaders called on Thursday for action to preserve growth and jobs and maintain industrial competitiveness as the worst financial crisis for 80 years raised fears of a deep recession.

The 27 leaders said a forthcoming international summit to reform the global financial system should take early decisions on transparency, global standards of regulation, cross-border supervision and an early warning system to restore confidence.

Despite the crisis the EU agreed to stick to a December deadline for adopting ambitious legislation to fight climate change. But in a concession to Poland, worried at the cost of greenhouse gas curbs to its coal-based economy, the final decision will be taken by unanimity and not majority voting.

French President Nicolas Sarkozy said he and European Commission President Jose Manuel Barroso would travel to meet U.S. President George W. Bush on Saturday to help prepare for a summit that would decide on a "refoundation of capitalism."

Having won the backing of other major economies including the United States for the meeting, EU leaders turned their attention to the likely impact of the credit crunch on their own real economies.

A Reuters poll of economists on Thursday found 34 out of 41 surveyed believe the euro zone is already in recession and most say it will last between six months and a year.

"Of course we see that the economic crisis is there, and the question I asked was: if we can bring coordinated answers to the financial crisis, can we not bring a coordinated answer to the economic crisis?" Sarkozy said, pledging that current EU president France would take initiatives on the matter.

Prime Minister Gordon Brown said market uncertainty would continue until action to rescue banks and stabilise the financial system had been finalised around the world.

Switzerland's two largest banks -- UBS and Credit Suisse -- became the latest to say they were receiving emergency funding as the country's government and other investors moved to shore them up.
Switzerland's top two banks took emergency measures to shore up their finances on Thursday, with the state taking a near 10 percent stake in UBS while Credit Suisse raised new funds from private investors.

UBS AG is getting 6 billion Swiss francs ($5.3 billion) from the state in return for a 9.3 percent stake, while Credit Suisse Group AG (CS) said it would raise 10 billion francs from investors including Qatar.

In America, Citigroup Inc, battered by the global credit crisis, posted its fourth straight quarterly loss on Thursday, hurt by more than $13 billion of credit costs and write-downs tied to complex and low-quality debt.The bank said it was making good progress on shedding assets and cutting costs. But tight credit conditions and potential recessions globally could cut into its other businesses, from retail brokerage to credit card lending.

Merrill Lynch & Co reported a third-quarter net loss of $7.5 billion on Thursday -- worse than analysts had expected -- on write-downs and credit losses on complex debt securities.

The brokerage house, which last month accepted a takeover bid from Bank of America Corp, also said it would issue $10 billion of non-voting preferred stock and related warrants to the U.S. Treasury under the government program that gave Bank of America a $25 billion capital injection earlier this month.

In addition, because of the Bank of America deal, Merrill said it was no longer seeking to sell a controlling stake in its Financial Data Services subsidiary.

Meanwhile, U.S. and Europe Union leaders agreed on Thursday to meet at the weekend to prepare for a global summit to overhaul the world's financial system, while fears of global recession continued to rattle markets.

Central banks renewed efforts to free up liquidity and unblock frozen lending, with further action from Switzerland, Britain and the European Central Bank.

French President Nicholas Sarkozy, currently representing the EU on the world stage, said at an EU summit in Brussels he would meet U.S. President George W. Bush on Saturday.

"If we can bring coordinated answers to the financial crisis, can we not bring coordinated answers to the economic crisis?" Sarkozy asked.

British Prime Minister Gordon Brown said the EU leaders had agreed on the need to reform the international financial system as the world faced its worst financial crisis in 80 years.

Underlining the problems, U.S. bank Merrill Lynch reported net writedowns of $5.7 billion from toxic assets and Citigroup reported a quarterly net loss of $2.8 billion.

Japan's Prime Minister, Taro Aso, said Washington may need to push yet more cash into its banks to restore investor confidence, shattered by a crisis that began with a U.S. housing market collapse and now threatens economies worldwide.

American Dreams set to crash worldwide as washington reports reflect the most volatile Job crunch and social Insecurity. Consumer prices were unexpectedly flat in September as energy costs fell while the latest jobless claims data indicated the labor market was still under pressure, government reports showed on Thursday.

Analysts polled by Reuters were expecting the Consumer Price Index to rise 0.1 percent after a 0.1 percent slide in August.

Another Labor Department report showed initial claims for state unemployment insurance benefits fell a more-than-expected 16,000 last week but a four-week moving average of claims rose to its highest level since October 2001.

Beaten down stocks looked set to open higher a day after their worst day since the 1987 crash, as futures extended gains. Treasuries held steady at lower levels and the dollar edged higher against the yen on the reports.

Analysts said moderating inflation and a soft job market give the Federal Reserve room to cut interest rates further to boost a flagging economy.
"With companies cutting back ... the outlook for payrolls and the unemployment rate is terrible," said Ian Shepherdson, chief economist for High Frequency Economics in Valhalla, New York.

"Even with the banking crisis easing, the Fed will be under pressure from the macro data to keep cutting rates," he said.

So-called core prices, which exclude volatile food and energy costs, were also milder than expected, gaining 0.1 percent in the month instead of the 0.2 percent consensus forecast. Fed officials watch core prices carefully as a sign of future trends in inflation pressures.

Energy costs declined 1.9 percent in September after a 3.1 percent drop the previous month. Energy services prices, which include costs for natural gas and electricity, tumbled by 3.2 percent, the biggest decline in the 61-year history of the data series.

A problem bigger than financial crisis

Behind the global financial crisis lies the bigger problem of inadequate food worldwide, with over 850 million people already living in hunger, an international aid group said this Thursday, which has been declared World Foodless Day.

And the number could double in the next few years if governments around the world would not prioritize agriculture programs that would motivate farmers to plant crops instead of migrating to urban areas for their livelihood, said Dr. Ines Smyth, Gender Adviser of Oxfam International.

"This is an opportunity to revise investment fundamental policies like investment in agriculture," said Smyth, noting that governments must learn from the recent food crisis that affected most countries, including the Philippines where the price of rice reached a record-high.

Smyth, quoting an Oxfam paper entitled Double-edged Prices: Lessons from the Food Crisis that tackled the recent food problem in most developing countries, also said agriculture programs took a backseat as most countries eyed globalization as solution to poverty.

The Oxfam report said global aid to agriculture dropped from 18 percent to 4 percent while food businesses like Chareon Pokphand Foods in Thailand forecast revenue growth of 237 percent this year. In the Philippines, public investments also declined in the last three decades.

For the Philippines, local Oxfam said the country must monitor the National Food Authority's (NFA) rice import operations, noting that import overstocks are "now competing for warehouse space" which would in turn threaten "to drive down farmgate buying prices for palay."

"This [food problem] requires structural changes in the ways that governments, international institutions, and donors address poverty and development, address the crucial role that smallholders play in poverty reduction," according to the Oxfam paper.

Smyth also said governments must strengthen their social protection system to meet the public's basic needs and to protect their source of income from potential threats.

Other recommendations cited in the international paper were: adoption of trade measures that would protect small-scale producers, strategic agricultural sectors, and emerging companies; support for the creation of trade unions, producer organizations and women's groups so they could take part in the design, implementation and monitoring of food and agricultural policies; promotion of access to assets and services like land, water, seeds, fertilizers, technology, loans, infrastructure and energy, particularly for women farmers; development of labor legislation for rural workers and establish guaranteed employment; and building of community-level resilience to climate change to ensure that poor would producers benefit from higher food prices.

Global shares fall as recession fears take grip!

Shares across the world fell for the second straight day on Thursday, pummeled by signs the world's biggest economies were headed for recession after a month of financial sector turmoil.

European stocks fell 3 percent by midday after Wall Street and Japan's Nikkei both suffered their worst one-day losses since the stock market crash of 1987, and the MSCI World stock index traded 3 percent lower.

U.S. stock index futures were up 1 percent higher, suggesting a pause in the hemorrhaging even as Citigroup and Merrill Lynch posted big third quarter losses.

Oil fell $1.70 a barrel, trading at less than half the record high of $147 a barrel it hit in July, as fears of a sharp fall in demand took grip, and the dollar gained as risk-weary investors sold higher yielding currencies, unwinding carry trades.

Sharp equity gains on the first two days of the week were quickly forgotten after dismal U.S. retail sales and the Beige Book report underlined concerns about the economy. Federal Reserve Chairman Ben Bernanke said it faced a "significant threat" from credit markets.

"The whole cliche of Wall Street arriving on Main Street is so true now, with recession in the U.S., the UK, Europe and probably Japan, and significant slowing elsewhere," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.

"Things have rapidly changed on the real economy and that has implications for earnings," he said.

Handset maker and technology bellwether Nokia, eyed for clues as to how a global financial crisis has hit consumer spending, posted results that were below analyst expectations. But its outlook soothed worried investors.

Air India crisis

"We are planning to offer leave without pay for three to five years. We can consider it for about 15,000 employees," Air India CMD Raghu Menon said.

He said those who take up the offer to go on leave would be taken back, if they so desire, at the same seniority and last drawn pay.

An official of National Aviation Company of India Ltd, the holding company of Air India, clarified that this was not tantamount to retrenchment as was being done by private carriers Jet Airways and Kingfisher Airlines.

Jet laid off 1,900 jobs as it tries to ward off the impact of the financial crisis in the aviation sector.

The official said that a proposal for leave without pay could be brought before the company's Board soon.

The government on Wednesday had ruled out any job cuts in Air India, which employs nearly 25,000 people, with Civil Aviation Minister Praful Patel saying that there were no plans to prune staff strength.

"No...Air India is not going to have any job cuts. Certainly it (the aviation crisis) will affect the growth plans, it will affect the future employment opportunities which would have come the way of Air India in case the aviation industry was in a much better financial health," Patel said.

"But as of now I do not have the luxury to say beyond the fact that those who are working for the Air India shall continue to do so and we shall not have any issue of people being laid off," he said.

Jet Airways hostesses protest layoffs

About 200 employees fired by top Indian private carrier Jet Airways staged a noisy protest on Thursday, while politicians weighed in on their side, demanding an inquiry into job losses in the struggling industry.

Jet Airways said on Wednesday it would lay off 1,100 staff in the next few days, on top of the 800 flight attendants already retrenched, as part of efforts to cope with slowing demand, high fuel prices and the global credit crunch.

The job losses and protests have struck in an industry at the heart of India's economic modernisation, with millions of middle-class Indians taking to the skies and carriers employing thousands of young men and women in glamorous jobs.

The airlines are asking for the government to bail them out, but the government, already facing a fiscal squeeze, has so far done nothing to help.

Nevertheless, Petroleum Minister Murli Deora said it was the wrong time for Jet to be laying off employees, while Labour and Employment Minister Oscar Fernandes asked for a urgent report.

A spokeswoman for Jet Airways, which had a total staff of around 13,000 people, declined comment.

"We want our jobs back," shouted Jet employees, dressed in the airline's canary yellow and navy blue uniform, pumping their fists in the air, outside the office in Mumbai.

Analysts and activists said the sudden layoffs left the employees, who were mostly on contract or probation, with few options.

India Inc's deal activity slips by 30 per cent
 India Inc's deal activity has witnessed a significant downturn in the month of September this year, with merger and acquisition transactions volume as well as private equity deals, together plunging nearly 30 per cent in just one month.
The total number of M&A deals announced in the month of September 2008, stood at 35 with a total announced value of USD 3.69 billion, while, there were 31 deals amounting to USD 4.63 billion in August, a decline of 20.30 per cent, Global consultancy firm Grant Thornton said in its latest issue of Dealtracker.

Similar trend was witnessed in the private equity investment scenario, as only 16 deals with total value of USD 600 million were announced, against 31 deals amounting to USD 944 million in the previous month, a dip of 36.44 per cent, Grant Thornton added.

However, in year-on-year corporate India has witnessed an upsurge in value terms as there were 71 M&A transactions with a total announced value of USD 0.84 billion and 29 PE deals with a total value of USD 0.99 billion in September 2007.

Total number of M&A deals during the first nine months of this year stood at 381, with an announced value of USD 26.43 billion, against 527 deals amounting to USD 49.33 billion during the corresponding period in 2007, the report added.

The most significant deals during this period have been Daiichi Sankyo Co increasing its stake to 58 per cent through open offer in Ranbaxy Laboratories for USD 1.70 billion followed by UAE based Emirates Telecommunications buying 45 per cent stake in Swan Telecom for USD 0.90 billion.

While Suzlon Energy increasing its stake to 86 per cent in REpower Systems AG for USD 0.39 billion was the third most significant M&A deal of September, the report added.

Sensex rebounds, ends 227 points down

The Bombay Stock Exchange benchmark Sensex on Thursday closed lower by more than 227 points, but managed to erase huge intra-day losses caused by negative cues from Asian and other markets.
The 30-share Sensex, which dipped by over 790 points to a more than 2-year low in intra-day trade, ended with a loss of 227.63 points at 10,581.49.

Similarly, the wide-based National Stock Exchange index Nifty declined by 69.10 points at 3,269.30.

The market remained weak following reports of more European governments offering blanket bank deposit guarantees, as regulators from Washington to Seoul scrambled to contain the fiancial crisis, brokers said.

Asian markets plummeted for the second day in a row, with key Japanese index Nikkei 225 reportedly falling over 11 per cent while Hong Kong's benchmark Hang Seng declined by 4.80 per cent to 15,230.20 points.

The marketmen added that a third cut of one per cent in cash reserve ratio by the Reserve Bank last night failed to influence trading sentiment this morning, as did lower inflation numbers released on Thursday.

However, later in the day, the market rebounded to prune early losses following reports of Europe emerging from lows and US stock futures indicating a higher opening.

The market recovered nearly 465 points during the day backed by surging realty, banking and FMCG stocks. The realty sector gained the most rising 137.79 points at 2,813.26 followed by FMCG index by 32.43 points at 1902.51.

Banking index gained 25.16 points at 5866.76.

Indian rate swaps fall as cbank infuses liquidity

 Indian overnight indexed swaps fell on Thursday as a cut in banks' cash reserve ratio (CRR) eased cash conditions, dealers said.

At 3:45 p.m., the five-year swap rate was at 6.86/6.94, compared with 6.99/7.07 at close on Wednesday.

"Increased cash availabilty in the system after the CRR cut has in fact, pushed the swaps rates lower," said Anoop Verma, an associate vice president with Development Credit Bank.

The Reserve Bank of India late on Wednesday cut banks' CRR, or the proportion of deposits bank's have to keep with as cash, by 100 basis points to 6.5 percent effective immediately.

This is a second successive move after it cut rate from 9 percent to 7.5 percent last week. The two cuts combined have released 1 trillion rupees into the financial system, pushing overnight rates lower.

Overnight cash rates <INROND=>, a barometer of cash supplies in the inter-bank money market, were quoting at 6.90/7.00 percent, much lower than its previous close of 10.00/10.25 percent. (Reporting by Boby Michael and Swati Bhat; Editing by Ramya Venugopal) ((boby.michael@thomsonreuters.com; Tel: +91-22-6636 7377; Reuters Messaging: boby.michael.reuters.com@reuters.net))

Bernanke says credit crisis menacing U.S. economy
Federal Reserve Chairman Ben Bernanke on Wednesday gave a dour assessment of the U.S. economy, citing a "significant threat" from shuttered credit markets in remarks that indicated he was open to cutting interest rates further.

Together with dismal data on retail sales and factory growth, the remarks helped send U.S. stocks on their greatest one-day percentage slide since the 1987 crash.

Bernanke said it will take some time to restore normal credit flows and pledged the U.S. central bank would continue to act aggressively to fight the crisis. Importantly, he said inflation risks were ebbing, which suggests Fed officials see latitude to lower borrowing costs further.

"By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," Bernanke told the Economic Club of New York.

"We will continue to use all the tools at our disposal to improve market functioning and liquidity," he said, adding that policy-makers' aggressive and quick response crucially distinguished this episode from the crisis of the 1930s.

Still, Fed Vice Chairman Donald Kohn, speaking separately in New York, said escalating mistrust among financial institutions has hampered the immediate benefits of lower interest rates. At the same time, he said, inflation was likely to move lower as the banking crisis dragged on growth.

St. Louis Fed President James Bullard said the unexpectedly sharp 1.2 percent drop in September retail sales reported on Wednesday increased the risk of recession. "The third quarter, I think, will be flat to slightly negative," he told reporters in Little Rock, Arkansas. "That is going to push up the probability that it will later be named a recession."

China vows to help Pakistan tackle economic woes
Thu Oct 16, 2008 6:25pm IST  Email | Print | Share| Single Page[-] Text [+]  
1 of 1Full SizeBEIJING (Reuters) - China Premier Wen Jiabao pledged to help Pakistan overcome its economic troubles, Chinese state media reported on Thursday, though details of the assistance were not disclosed.

Pakistani President Asif Ali Zardari was expected to seek $500 million or more in soft loans from its neighbour as it struggles to come to grips with a financial crisis.

Premier Wen said the two countries were ready to advance their strategic relationship a day after Zardari and China President Hu Jintao signed 11 agreements on trade and economic cooperation.

Zardari, on his first foreign trip as president, had made clear that commercial ties with China were foremost on the Pakistani delegation's agenda, according to Xinhua news agency.

Pakistan is facing a critical shortfall in its balance of payments, along with inflation at close to 25 percent and heavy government borrowing from the central bank to cover a budget deficit.

Analysts believe the central bank's reserves are barely enough to cover two months of imports and that the country urgently needs $3 billion to $4 billion.

"That Zardari would choose China as his first country to visit as president shows the high emphasis he places on developing friendly, cooperative Sino-Pakistani relations," Premier Wen was quoted as saying by Xinhua.

"Whether it's confronting the present financial crisis or fighting terrorism, China and Pakistan must strengthen their bilateral cooperation," Wen said.

China agreed to provide $500 million in a concessional loan to help Pakistan meet its balance of payment needs in April. Zardari hopes to secure another concessional loan of $500 million to $1.5 billion, the Financial Times reported.

Iran blames U.S. 'hegemony' for financial crisis
Thu Oct 16, 2008 3:12pm IST  Email | Print | Share| Single Page[-] Text [+]  
1 of 1Full SizeASTANA (Reuters) - Iran blamed the United States on Thursday for triggering global financial meltdown, saying the "hegemonic" nature of the U.S. economy affected other economies.

Speaking on the sidelines of a conference in Kazakhstan, Iranian Foreign Minister Manouchehr Mottaki said it was time to set up a "fair international financial system" to curb the impact of the U.S. economy on world finances.

"The economic crisis in America had an immediate impact on the economies of other countries," said Mottaki.

"We believe that this (crisis) was caused by moves to impose one hegemonic economy on all the other economies."

Iran is at loggerheads with the United States and other Western nations over its nuclear programme which Tehran says is for peaceful purposes but which the West fears is aimed at developing atomic weapons.

OPEC-member Iran says it would survive the global crisis better than others because its economy had grown more independent since the 1979 Islamic revolution.

But economists disagree, saying Iran cannot stay immune from a possible world economic downturn because of its reliance on oil revenues to fund its budget.

"Unfortunately only one economy in the world continues to receive revenue even when other parts of the world are suffering from the crisis," Mottaki said, referring to the United States.

"We believe the only way out of this is to set up a fair international financial system."

Karl Marx and the world financial crisis: Bernd Debusmann
Thu Oct 16, 2008 2:43am IST  Email | Print | Share| Single Page[-] Text [+]  
1 of 1Full SizeBernd Debusmann is a Reuters columnist. The opinions expressed are his own.

By Bernd Debusmann

WASHINGTON (Reuters) - Capitalism as we used to know it is on its deathbed. And those who predicted that the old brand, the unfettered, American-promoted system, was a danger to the world, are being vindicated. They include Karl Marx, whose thinking on banks seems oddly contemporary these days.

The credit crisis that began in August last year and turned into near-catastrophe this month is not over, despite the hundreds of billions of dollars that governments are spending to save banks in the United States and Europe from collapse and thereby prevent a global depression. But there is an emerging consensus that capitalism needs a 21st century overhaul, not just emergency rescues, to save it from itself.

When that will happen is not clear. "What we are seeing right now looks like a very slow train wreck," says James Boughton, the historian of the International Monetary Fund, or IMF.

British Prime Minister Gordon Brown has suggested an international meeting on the pattern of the 1944 Bretton Woods conference that resulted in the post-World War II financial order and created the IMF and the World Bank. That system was dominated by Washington.

The United States, from where the credit crisis spread like a virulent epidemic, is not likely to play as large a role in whatever new "financial architecture" world leaders construct. As Peer Steinbrueck, the German finance minister, put it: "One thing seems probable ... The U.S. will lose its status as the superpower of the global financial system."

"The world is at risk of losing its anchor ... the United States," U.S. financial strategist David Smick writes in his just-published book on financial globalization, The World is Curved: Hidden Dangers to the World Economy.

The opening chapter is darkly entitled The End of the World. Smick said in an interview he thought a global depression was still possible despite the steps taken by the United States and Europe to restore confidence.
http://in.reuters.com/article/columnistNews/idINTRE49E9SR20081015

End the war on reality
Wed Oct 15, 2008 6:45pm IST  Email | Print | Share| Single Page[-] Text [+] -- James Saft is a Reuters columnist. The opinions expressed are his own --

By James Saft

LONDON (Reuters) - Having conclusively lost, it is about time that officials on both sides of the Atlantic propose a truce in their long running war on financial reality.

The plans to inject government capital directly into ailing banks, to guarantee further bank deposits and to stand behind interbank lending are excellent first steps. They implicitly recognize the seriousness of the situation and, by putting governments' deep pockets directly behind proposals, they win confidence by concrete action rather than obfuscation or misdirection.

But continued assaults on mark-to-market accounting standards and short sellers show that many in positions of authority still apparently think that suspension of disbelief is the key to fighting the crisis.

The approach now is a heck of a lot better than it has been recently.

Britain stands out for aggressively recapitalizing its banks in a 37 billion pound ($64 billion) program and for starting a bank borrowing backstop plan likely to set the pattern for Germany and France. This isn't sufficient in itself, but it cuts to the heart of the problem: bank solvency and liquidity. It also provides a measure of protection to the comparatively innocent (taxpayers) and a measure of punishment to the comparatively guilty (shareholders and bank employees).

Euro zone countries too took positive steps: guaranteeing new bank debt issuance temporarily and committing to recapitalize "systemically" important banks if needed.

Even the United States is on board and will use some of its $700 billion bailout package to inject capital into banks, money that will be far better spent than if it had been used to buy up lousy debt at farcical "hold-to-maturity" prices. (Yes, I realize they were going to use a sophisticated auction process to ensure that fair prices were paid for debt. No, I don't think that was going to work any better than the sophisticated processes that came before.) 
http://in.reuters.com/article/columnistNews/idINTRE49E51L20081015

Falling oil demand puts OPEC in a bind
Wed Oct 15, 2008 7:21pm IST  Email | Print | Share| Single Page[-] Text [+] -- John Kemp is a Reuters columnist. The opinions expressed are his own --

By John Kemp

LONDON (Reuters) - For the last two years, analysts have argued about how far oil demand would respond to the rise in prices.

But in the past few weeks evidence of a sharp decline in demand has become incontrovertible, resulting in big cuts in forecast oil demand, and posing a sharp dilemma for OPEC about how to respond when ministers meet on Nov 18.

The International Energy Agency (IEA) has been steadily dropping its demand forecasts for more than a year, as surging prices have forced conservation measures and substitution for cheaper fuels, while a slowing economy, especially in the United States, bites further into demand.

Back in July 2007, the agency forecast global crude consumption would hit 89.8 million barrels per day (bpd) in Q4 2008. Fifteen months later, the forecast had been cut by a massive -2.2 million bpd (-2.4 percent) to just 87.6 million bpd. Most of the reduction has been concentrated in North America, where the IEA has cut its prediction by -1.6 million b/d (-6.1 percent).

The IEA still believes crude consumption will be higher than in the same period last year (+400,000 bpd) -- but it would be the slowest rate of growth in more than five years, and the forecast increase relies on continued growth in China (+500,000 bpd) and the Middle East (+400,000 bpd) to offset projected declines in North America (-900,000 bpd).

It is not clear how well emerging market demand will hold up if the advanced economies tip into recession.

OPEC therefore faces an awkward choice over how to respond. It is under pressure to allow prices to settle at lower levels as its own contribution to stabilizing financial markets in consumer countries and averting a deep and prolonged worldwide recession.
http://in.reuters.com/article/columnistNews/idINTRE49E5EZ20081015

Economic activity weak across U.S.: Fed Beige Book
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¥ € $ - Learn. Practice. Trade.WASHINGTON (Reuters) - Economic activity weakened across the United States in September as businesses revised capital investments, consumers curtailed spending and the general outlook darkened, the Federal Reserve said on Wednesday.

"Economic activity weakened in September across all twelve Federal Reserve Districts," the Fed said in its Beige Book report on the state of the economy through October 6.

The Fed said retailers were seeing consumers pull back while businesses were anxious about the future economic outlook, and that weighed on their capital spending decisions.

"Several districts reported that capital spending decisions were being influenced by economic uncertainty," read the anecdotal report that the Fed uses to help it shape monetary policy.

Markets widely expect the Fed to trim interest rates by a quarter percentage point at the next scheduled meeting of October 28th and 29th in the face of a wrenching credit crunch and broader economic woes.

"Credit conditions were characterized as being tight" across the country, the report stated.

Inflationary pressures moderated a bit in September, the Fed said, while labor market conditions weakened in most areas. The report had a bright spot for agriculture and reported "conditions remained favorable" in most districts. Reports on natural resources were also upbeat, the report said.

(Reporting by Patrick Rucker; Editing by Neil Stempleman)
U.S. plan may slow fire sales but spur bank mergers
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Trading will never be the same.By Paritosh Bansal

NEW YORK (Reuters) - A U.S. government plan to inject capital directly into banks could slow the recent spate of distressed sales but is likely to set the stage for a new wave of bank mergers.

U.S. officials announced a plan on Tuesday to inject $250 billion into the troubled banking industry by acquiring preferred stock and warrants in a number of banks.

Half that amount will go to nine banks: Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), Goldman Sachs Group (GS.N: Quote, Profile, Research, Stock Buzz), Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz), Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz), State Street Corp (STT.N: Quote, Profile, Research, Stock Buzz) and Bank of New York Mellon (BK.N: Quote, Profile, Research, Stock Buzz).

The rest of the money will be offered to an as yet undetermined number of smaller banks and thrifts across the country.

A direct injection of capital could keep more banks from failing, giving them the option to seek deals on better terms than distressed sales like the takeover of Washington Mutual Inc's banking assets (WAMUQ.PK: Quote, Profile, Research, Stock Buzz) by JPMorgan and the sale of Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) to Wells Fargo, experts said.

But depending on how the government decides to invest the money, it could divide the industry into haves and have nots, with banks that get government support better off than those that do not, leading to a wave of consolidation as stronger banks take over weaker competitors, they said.

"It creates the prospect of the government acting as a source of strength to banks that would otherwise be forced into mergers," said James Murray, head of Houlihan Lokey's financial institutions group. "In the longer run, it probably is going to act as a catalyst for mergers."

FACTBOX - Highlights of UK financial reform proposals
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More Business & Investing News... LONDON (Reuters) - Prime Minister Gordon Brown called for a shakeup of global supervision of financial markets on Wednesday to crack down on excessive risk-taking that he believes contributed to the credit crunch.

A British document circulated at a European Union summit said the world needed a new financial and regulatory architecture to update the global financial institutions established by the 1944 Bretton Woods conference.

Among the main points, Brown called for the following steps by the end of the year:

-- Changes by the International Accounting Standards Board must be rapidly implemented to address concerns that the application of fair value accounting may be exacerbating the downward spiral of asset prices. The EU adopted the change on Wednesday and it takes effect immediately, backdated to July

-- Banks should make further best practice risk disclosures in their financial reports. Banking supervisors are already monitoring reports and calling for improvements

-- The Basel Committee of banking supervisors should immediately set forth strengthened capital requirements for banks' securitisation activities to restore confidence and enable a market to be re-established. The Basel Committee is already consulting on beefing up aspects of capital requirements and the European Commission has proposed tougher rules on securitisation at banks

-- National authorities should set up 30 supervisory colleges that would cooperate on regulating major cross-border financial institutions. Attempts to set up colleges to oversee insurers have floundered as nearly half of EU states balk at giving up powers to a cross-border company's home regulator. A similar system has also been proposed for banks.

By the spring 2009 meetings of the International Monetary Fund and World Bank, Britain said urgent work was needed to:

-- prepare proposals to tackle executive pay that encourages excessive and irresponsible risk-taking by financial institutions. The European Commission is already studying this.

-- ensure that firms have incentives to properly assess risks in products they sell, through tough disclosure and due diligence requirements.

It also called for:

-- action by market participants to enhance transparency in relation to the assets underlying structured products

-- the creation of a forum of regulators and central banks to identify and address macro-financial and systemic risks.

-- a new global financial architecture that would deliver a global early warning system of risks to financial stability, globally accepted standards of regulation, effective cross-border supervision of global firms and mechanisms for cooperation in a crisis.

It said the International Monetary Fund must work more closely with the Financial Stability Forum -- a group of top financial regulators -- to provide a clear warning of risks to global macroeconomic and financial stability.

The Financial Stability Forum should become the key coordinating body to provide strategic guidance and focus to regulators, it added.

(Reporting by Adrian Croft; editing by Jon Boyle)

India, China strengthen business ties at Guangzhou trade fair
16 Oct, 2008, 1950 hrs IST, IANS

NEW DELHI: Indian and Chinese exporters Wednesday signed a pact at a trade fair in Guangzhou, China, to promote bilateral trade cooperation. 

"This (agreement) is an attempt to realise the target of $60 billion bilateral trade by 2010," said Ajay Sahai, director general of the Federation of Indian Exports Organisations (Fieo) at the 104th China Import Export Fair in Guangzhou.

Fieo, the apex body of various export promotion councils in India, signed the agreement with the China Council for Promotion of International Trade.

Chinese companies had Oct 11 signed trade contracts worth millions of dollars with their Indian counterparts in New Delhi, which according to Chinese Vice Minister of Commerce Gao Hucheng is the first major step to close the yawning trade gap between the two countries.

Over 30 agreements worth $350 million were inked between Indian and Chinese companies. Sahai in a statement said better wages in China and constant appreciation of its currency created an ideal condition for Indian companies to market in that country.

Fieo is taking part in the Guangzhou fair, China's biggest business expo, with an over 70-member delegation from top India companies. Over 55,000 companies are participating in the above mega event from across the globe.

Indian companies have also received ample response especially in sectors concerning consumer goods and engineering items, said Fieo in the statement. Fieo has also planned to set up a warehouse facility in Guangzhou in China, which will become operational shortly.

Kamal Nath hints at `hire and fire' in special economic zones
Our Bureau

 

New Delhi , April 23

THE Commerce and Industry Minister, Mr Kamal Nath, has indicated that the Central Government would not come in the way of States that are keen on adopting some form of hire and fire labour policies in special economic zones (SEZs).

Mr Kamal Nath, who is expected to introduce a comprehensive Bill on SEZs in the current session of Parliament, told the BBC programme Hard Talk India that there are proposals from the State Governments that they should be able to have the labour policies that they would like for the export-oriented units and SEZs.

"The State Governments asked for it. The question now is should the Central Government stand in the way of the State Governments implementing labour laws that they think are more befitting and more employment generating? I don't think so," Mr Nath said.

He also made it clear that the Centre would in the SEZ Bill enable States to decide which of the labour laws they would like to have. "We (Centre) are not relaxing labour laws," he said.

Asked specifically if this would enable the States to have some form of hire and fire, Mr Kamal Nath replied, "Absolutely. It's for the State Governments to decide."

On allowing foreign direct investment (FDI) in retail trade, Mr Kamal Nath insisted that he would not permit foreign investment unless he had a model that would suit India's purposes and not create unemployment.

"I am saying we need to look at a model. I don't have that model (as yet)... I'm the Minister responsible for this. I have said this very clearly that we will only have FDI in retail when we have a model that takes care of the incrementality in retail and create jobs... There are models, which we are examining and if there is a model that suits me (then) sure we are going to have it. (But) if there is a model that is going to create unemployment we are not going to," he said.

When asked whether he would create laws that would determine the location and size of foreign retail outlets, Mr Kamal Nath said, "I will have a law that ensures that the model that could be worked works. First, I have to have a model and then think of the law."

Explaining the way he approached the issue of allowing FDI into the country's retail sector, Mr Kamal Nath said, "When I talk about retail and allowing FDI in retail I talk of what is incremental. Today our retail sector is growing at 20 per cent and incremental retail which does not replace or displace the existing retail structure we have is what we are looking at ... We are looking at a model for opening up the retail sector to FDI that does not

risk, displace or replace my existing retailer. We are looking at incremental employment."

On the sort of retail sector he would want to see in the future, Mr Kamal Nath said: "I want to see that our retail sector which comes in future is modern, creates a cold-chain for my fruits and vegetables and trickles down to my agri sector. That's what I want to see."
http://www.thehindubusinessline.com/2005/04/24/stories/2005042401560300.htm

NCEUS for conditional hire and fire policy
 
Agencies
Posted: Jan 31, 2008 at 1454 hrs IST
Updated: Jan 31, 2008 at 1511 hrs IST

 Making a case for liberalizing labour laws, the National Commission for Enterprises in the Unorganised Sector suggested adoption of conditional hire and fire policy, while safeguarding the interest of workers.

"There is no harm in liberalising labour laws with a quid pro quo... unemployment insurance," NCEUS Chairman Arjun Sengupta said, while addressing the eighth Editor's Conference on social sector issues.

NCEUS, which has undertaken a review of the Indian labour law, is likely to present its report to the government by February after consulting trade unions and industry chambers, he said.

The suggestions would include amendments to the Industrial Dispute Act, which prohibit retrenchment of workers by enterprises employing over 100 persons without permission from the government.

In addition, NCEUS would also be suggesting creation of a labour code to simplify labour laws in the country.

Explaining the proposals being prepared by the Commission, NCEUS member K P Kannan said part of the unemployment insurance could be provided by the employers to ensure that retrenched worker has some kind of social security till he manages to find another job.

Sengupta also dismissed the general apprehension that rigid labour laws are preventing employment generation but added, "flexible labour laws are needed as they would be good for the workers."
http://www.financialexpress.com/news/NCEUS-for-conditional-hire-and-fire-policy/267456/

Probationers lack protection 
SAMANWAYA RAUTRAY
 
Laid-off Jet employees outside the Calcutta airport Citu office. (Pradip Sanyal) 
New Delhi, Oct. 15: India’s labour laws leave no room for hire and fire, a grouse of foreign investors venturing into the country, but they won’t be of much help to the laid-off Jet Airways staff.

If the 1,900 employees “released” by Jet are probationers as the airline said, the company has the power not to confirm their services on the ground that their performance was unsatisfactory, lawyers familiar with labour laws said.

“Services of such probationers can be easily terminated,” said senior lawyer Raj Birbal, who is also a specialist in labour laws.

Some of the Jet employees today said their contract mentioned they could be sacked only for misconduct. But lawyers said that as long as employees are on probation, employers are free to ease them out citing the “unsatisfactory performance” reason.

Constitutional lawyer Rajeev Dhavan, however, held out a thread of hope for the retrenched employees.

“It is true that probationers can be easily removed from service,” he said. “But such a massive removal — whether on probationary contract (or not) — shows absolute non-application of mind. Such en-masse removal is ex facie (apparently) arbitrary.”

In such cases, he said, courts could set aside the termination orders on the ground of non-application of mind.

Before terminating the service of any probationer, Dhavan said, an employer has to embark on an “individual exercise”.

“Each individual case of a probationer has to be carefully scrutinised before the employer can actually say, ‘Thank you, but your services need not be confirmed’.”

Otherwise, Dhavan added, hire and fire was virtually impossible under existing labour laws. He also cited a landmark Supreme Court judgment in 1991 which said hire and fire was an “unfair exercise of contract” and, therefore, arbitrary and illegal.

Under law, no fixed-term contract employee can be dismissed except according to the terms of the contract, lawyer Raavi Birbal said.

Once probation is over, dismissals are tough to enforce. Even non-workmen — defined as those holding managerial or supervisory positions — on regular employment can be sacked only in accordance with the terms of employment specified in their contracts, Birbal said.

Workers in regular employment can only be sacked under Section 25f of the Industrial Disputes Act, 1947, which mandates that the employer has to give them a month’s notice indicating reasons for doing so and also payment in lieu of such notice.

Workers have to be terminated on the basis of last to come, first to go. Plus they have to be paid an additional 15 days’ wages for every year of service they have put in, she said. If the organisation has more than 100 employees on its rolls, it has to also seek permission of the government before sacking.

For years now, the government has been planning to make an official nod a must for only those units that employ more than 1,000 employees.

It has also been thinking of changing Section 10 of the Contract Labour Act, which prohibits contract labour if the nature of the job is perennial. But like the rest of the ambitious labour law reforms, they have remained stuck on paper.

Successive governments have tried to overhaul the labour laws to make India a more attractive destination for foreign investors, but none has taken off.

In 2001, the Atal Bihari Vajpayee government had announced plans to revamp the laws to allow hire and fire, but it couldn’t make any headway.

Three years later, the Manmohan Singh government also made clear its intention to change the laws, but hasn’t had much success — something blamed on its former Left allies.

Labour minister Oscar Fernandes had gone out of his way to warn private industry against adopting hire-and-fire policies. Days after sacked workers bludgeoned their CEO to death in Noida last month, Fernandes asked companies not to push employees “so hard”, only to retract under fire from industry.

The workers — mostly contractual — were demanding higher wages and permanent jobs.

Japanese company Hero Honda, operating from Gurgaon, was also forced to take back all 57 employees it had sacked after a three-month-long workers’ unrest.

The flip side of such a strict regimen has been a tendency among some employers to keep recruitment down to the minimum and wages depressed.
 http://www.telegraphindia.com/1081016/jsp/frontpage/story_9974842.jsp

Job Security Fears Grow Amid Economic Crisis
Triangle - Workplace Options Survey Shows Value of Work-Life Services in Uncertain Times

RALEIGH - A national survey of working adults commissioned by Workplace Options (WPO), the largest provider of work-life employee benefits in America, revealed that employees are growing increasingly concerned about job security amid the current economic crisis. As the situation continues to broaden, they are also preparing for setbacks by cutting back on personal spending. 

Nearly half of the employees surveyed said they are worried that their jobs are at risk, and over half are cutting back on their spending because of that fear. Forty percent of respondents said that their employer has not done enough to explain how the financial crisis could affect their workplace. In addition, nearly a third of respondents said they are working more hours and taking less time off, and 25 percent said they are actively looking for a new job or updating their resume that because of the growing unease.

With the instability of stock market other financial indicators, workers may find themselves more distracted and struggle with personal and financial worries. Because of the current economic pressures, employers are recognizing the value of work-life services to maintain morale among employees and protect their bottom line. Work-life services, provided by WPO, can help reduce worker anxiety over the competing daily demands of work, finances and family by saving time and facilitating proactive solutions.  WPO provides personalized assistance over the phone, and a Web site allows employees to search for information independently. Employees can get access to financial management resources --including debt management, budgeting or foreclosure prevention, as well as resources for counseling, day care and other services that meet their specific needs. Employers also reap the benefits of these tools because they help maintain productivity and morale during national, workplace and personal crises.

"The economic situation is a major distraction for everyone right now," says Alan King, president of Workplace Options. "Employees are worried about their jobs, finances, families and even health. Because of these pressures, WPO is experiencing a surge of calls about financial and emotional counseling. Now more than ever, employers are recognizing the value and convenience of work-life services to help workers navigate these tough times, empower their workforce and maintain productivity."

The national survey, conducted by the North Carolina firm of Public Policy Polling on Sept. 26-27, polled 452 working Americans. The survey has a margin of error of +/- 3.7%.

About Workplace Options
Workplace Options (WPO) is America's largest provider of work-life services. WPO's market-leading products are recognized for their innovative Web delivery, flexibility and affordable pricing. WPO also offers network management solutions and 24/7 call center services that help EAPs run their businesses more profitably and efficiently. For more information about WPO, please visit www.workplaceoptions.com.

It’s a time of uncertainty … there are real fears about job security’BRIAN DONNELLY October 14 2008
Comment | Read Comments (1)Royal Bank of Scotland workers yesterday had "real fears" for jobs as warnings of further nationalisation in the UK banking sector emerged.

The Unite union said that while it was expected there were would be redundancies if HBOS and Lloyds TSB merged, there had been reassurances there would be no wholesale jobs cuts at RBS.

But concern was still high among the 16,000-plus staff with the bank in Scotland.

advertisementAlison McLean, Unite RBS representative, said last night: "It is early days in terms of what the impact is going to be. We've been given reassurances from the bank that they want to get together with the union and engage and that there will be no wholesale redundancies.

"It is a time of uncertainty for our members. There are real fears about job security. We will be raising those issues at the highest level."

Political economists at Glasgow University said further nationalisation may be necessary and also urged against moving RBS businesses out of Scotland.

One academic said "champions" such as RBS are central to the success of Edinburgh's and Glasgow's financial districts.

The university's professor Ronald MacDonald, who is also a fellow of the Royal Society of Edinburgh, said: "It is not good news for the Scottish financial sector with two of our leading banks essentially going bust.

"I suspect we may need a more wholesale nationalisation of the banking sector. That way the government can step in and find out exactly how much toxic debt is on the books of the banks."

Professor Gabriel Talmain, director of the university's centre for economic and financial studies, said: "For people seeking individual credit it might not change that much.

"What is much more worrying is not the immediate future of the users but how these banks and the finance industry is going to look in the next few years. These are major employers and major contributors to the Scottish industry."

Garry Clark, of Scottish Chambers of Commerce, said: "RBS remains an extremely important part of the Scottish economy. The retention of headquarters and decision-making functions in Edinburgh is important in this regard."

Scottish Secretary Jim Murphy said: "The Chancellor has saved Scotland's historic banks. I am now focused firmly on preserving Scottish jobs and head office functions."

Tavish Scott, leader of the LibDems in Scotland, said: "The proposed takeover of HBOS by Lloyds TSB was conceived when no taxpayers' money was involved. That has now changed.

"HBOS should remain an independent financial institution. The government, with taxpayers' money, can now make that happen."

Grahame Smith, Scottish Trades Union Congress general secretary, said: "This partial nationalisation must mark the end of the era of banking irresponsibility."

© All rights reserved. Reproduction in whole or in part without permission is prohibited.

http://www.theherald.co.uk/news/news/display.var.2460202.0.Its_a_time_of_uncertainty_there_are_real_fears_about_job_security.php

     

SELECT SPEECHES

India and Globalisation
This is a truly momentous occasion in the life of this Institute, its students, its teachers, and its friends. Let me begin by conveying my heartiest congratulations to the students who are receiving their degrees today. For all of them, it is a culmination of years of hard work, and a recognition of their high academic merit.

All the teachers of this great Institute, who have put in so much time and effort to make this day possible, also deserve our gratitude.

I would like to specially welcome the parents of the students, who are present at this Convocation. Without some sacrifice and a good deal of support, successful completion of higher studies by young men and women, who are here today, would not have been possible.

I am personally grateful to the President of the Indian Statistical Institute, Prof. M.G.K.Menon and Director, Prof. K.B.Sinha, for inviting me to be a part of this occasion. A scientist, a scholar and a public figure, Prof. Menon has led this Institute with great distinction. He has been a source of inspiration for all those connected with ISI and its teachers and students. It is a particular privilege and honour to deliver this address in his esteemed presence.

On this important occasion, I would also like to pay homage to the memory of Professor P.C.Mahalanobis, founder of the ISI and the builder of the modern statistical system in India. His technical contribution to the development of statistics as a science are fundamental and well known all over the world. What was even more remarkable, in a developing country context, was his desire to use statistical methods including sample surveys to understand and solve the problems of an underdeveloped economy, including low productivity agriculture.

The high quality, the depth, and the breadth of research and teaching in statistics and other inter-related subjects at this Institute are tributes to the vision of Prof. Mahalanobis and his confidence in our country’s future.

While I am thankful for being here on this occasion, I am also a little daunted by the task of having to say something useful which may be of interest to this varied audience from so many different walks of life. After some reflection, I have chosen to speak to you on "India and Globalisation", or how we in India should look at the process of so-called "globalisation" that the world has been passing through in recent years. I had an occasion to speak on this subject at Mumbai University Convocation a couple of weeks ago. This is a matter of considerable contemporary debate, and I thought some reflection on this may also be of interest here in Kolkata.

There is a debate not only in India but all over the globe about the pros and cons of "globalisation". There is hardly any important global meeting which does not witness vigorous protest marches or picketing by the opponents of the globalisation process.

Equally, on the opposite side, there are those who regard it as panacea for all the world’s problems and key to unmixed prosperity and well being for all the countries and all the people. If you take a poll in any assembly, including I am sure this one, you will find some are strongly for and some are strongly against globalisation.

To my mind, neither view – for or against – is correct. The only rational view is to accept it as an emerging and powerful global reality which has a momentum of its own. Our job as an independent nation / state is to ensure that we maximise the advantage for our country and minimise the risks. It has both pluses and minuses like any other major global economic change – say, the industrial revolution of the 18th century. Some countries gained, some lost – partly because of the then prevailing political circumstances. India, for example, lost because of colonialism and fragmented nature of our polity. U.K., Europe, U.S. – and later Japan prospered. Same is the case with globalisation. One big difference, however, is that unlike the olden days, today our destiny is in our own hands.

Before we look at our opportunities and challenges from globalisation, it is good to be certain of facts – where exactly India is in terms of globalisation. If we look at some of our own debate, it would seem as if we were already well on the way to globalisation, which was shaking up our economy. A most common measure of globalisation is openness to trade and a country’s participation in trade. By this measure, the extent of India’s globalisation is insignificant – it is one of the lowest in the world. India’s share in world trade is a meagre 0.7 per cent or so. If a map of the world were drawn on the scale of a country’s participation in trade, India with a population of more than 1,000 million will occupy a smaller area than Singapore with a population of only 3 million. You would need a magnifying glass to locate India on that map!

A second commonly used measure of globalisation is a country’s participation in international capital flows, particularly Foreign Direct Investment (FDI). As you know, annual flow of FDI across the globe is more than $ 1 trillion, i.e., $ 1,000 billion. Annual FDI inflows into India is $ 3 – 4 billion only or 0.3 – 0.4 per cent of the total – that is all. Same is true of Foreign Institutional Investment (FII).

Therefore, the first point that I would like to emphasise is that despite all the talk, we are nowhere even close to being globalised in terms of any commonly used indicator of globalisation. In fact, we are still one of the least globalised among major countries – however we look at it.

An equally important point is that whether the so-called globalisation is considered to be good or bad for a country depends crucially on the sense in which the word is used. The word may be used in a purely descriptive sense to describe a "shrinkage" of distance among nation states due to technological changes in transport and communication and closer integration of product and financial markets across the world.

Another sense in which the word may be used is the effect of such changes on different countries or groups of countries, such as, developed and developing. In yet another sense, the word may also represent a "globalisation of ideas or ideology" and may be used as a synonym for triumph of capitalism or dominance of unfettered markets.

In discussing the issue of globalisation in the Indian context, I propose to confine myself largely to the factual and descriptive sense in which the word is used, i.e. the technological changes, and associated policy changes, that have brought the world economies closer and made them more integrated with each other.

In this particular sense, I believe that the changes that have occurred in the patterns of trade and capital flows in recent years are to India’s advantage – although, unfortunately, so far we have not made much use of it. Today, in terms of the potential benefits of globalisation, India is in a very different position than would have been the case 50 or even 20 years ago.

This is because the sources of what economists call "comparative advantage" have changed dramatically in India’s favour in the 1990s because of the technological revolution. In the old days, comparative advantage was largely determined by "factor endowments", i.e. land, labour and capital. Geographical location and early starts in industry also conferred greater advantages.

Thus, at one time, a country’s trade pattern, was determined by its natural resources and the productivity of its land. Leaving aside political and institutional factors, a country’s level of income was also largely determined by the global demand for its natural resources and its relative efficiency in exploiting them. The importance of land as a source of comparative advantage, however, changed dramatically after the industrial revolution. Today, it is almost insignificant. Thus, except for the United States, countries accounting for a predominant share of the world GDP have a relatively small share of global land area.

After the industrial revolution, the availability of "capital" or investible resources became the most dominant source of comparative advantage. At this Institute, established by the great Prof. P.C.Mahalonobis, I hardly need to elaborate on the importance that was attached to domestic capital accumulation in early development economics. In fact, scarcity of capital and low domestic savings were considered to be, and rightly so, as principal causes of a country’s underdevelopment.

Today, availability of capital and productivity are still crucial in determining a country’s growth rate. However, there has been a dramatic change in the global mobility of capital, and national boundaries are no longer important determinants of sources and uses of capital. A dramatic illustration of this is the fact that the most developed country in the world, which enjoyed unprecedented growth during the 1990s, is actually a capital-importing country, i.e. the United States. Similarly, the fastest growing developing country, i.e. China, is one of the largest recipients of capital from outside.

Similary, labour is no longer an important element in cost of production and in determining a country’s comparative advantage. In most manufacturing industries in the world, it is no higher than 1/8th of total costs. In India, it may be somewhat higher because of our domestic laws, but the important fact to note is that India no longer needs to specialise only in the production of labour-intensive plantation crops or primary commodities.

A related development which is linked to the above changes, is the "Services Revolution". The focus of attention in conventional economics, was on production of goods – manufactured products and agricultural commodities. It was, of course, recognised that the services sector (which includes transport, communication, trade, banking, construction and public administration, etc.) was an important source of income and employment in most economies. However, overall, the growth of services was perceived at best as a by-product of developments in the primary and secondary sectors, and at worst as a drag on the prospects for long-term economic growth.

In the last few years, there has been a phenomenal change in the conventional view of services and their role in the economy. This change has been facilitated by unprecedented and unforeseen advances in computer and communication technology. As a result, the development of certain services is now regarded as one of the preconditions of economic growth, and not as one of its consequences.

The boundary between goods and services is also disappearing. Many industrial products are not only manufactured, but they are also researched, designed, marketed, advertised, distributed, leased and serviced.

An important aspect of the "services revolution" is that geography and levels of industrialisation are no longer the primary determinants of the location of facilities for production of services. As a result, the traditional role of developing countries is also changing – from mere recipients to important providers of long-distance and high value services.

From India’s point of view, these developments provide opportunities for substantial growth. For example:

The fastest growing segment of services is the rapid expansion of knowledge-based services, such as, professional and technical services. India has a tremendous advantage in the supply of such services because of a developed structure of technological and educational institutions, such as this one, and lower labour costs.

Unlike most other prices, world prices of transport and communication services have fallen dramatically. By 1960, sea transport costs were less than a third of their 1920 level, and they have continued to fall. The cost of a telephone call fell more than ten-fold between 1970 and 2000. Moreover, the cost of communication is also becoming independent of distance. The most dramatic example in this area is, of course, provided by the "Internet". India’s geographical distance from several important industrial markets (for instance, North America) is no longer an important element in the cost structure of skill-based services.

It is now feasible to "unbundle" production of different types of goods and services. India does not necessarily have to be a low-cost producer of certain types of goods (e.g., computers or discs) before it can become an efficient supplier of services embodied in them (e.g., software or music).
At the same time, it must be recognised that the "death of distance" and the growing integration of global product, services and financial markets in recent years have also presented new challenges for management of the national economy – not only in India but all over the world. The trend towards integration of markets, particularly financial markets, is by no means an unmixed blessing. Unlike the old days, a heavy price may have to be paid by national economies for somnolence, sloth and non-conformity to generally accepted international norms and standards of macro-economic management, disclosure, transparency and financial accountability.

Another consequence of recent global trends is the greater vulnerability of national economies to developments outside their own borders. A crisis in any one or a group of countries, can be transmitted to other countries – including countries which may not have any strong economic linkages with crisis-affected countries. Thus, the ’nineties have been marked by a large number of currency crises (for example, in Mexico, Russia, East Asia and Brazil – and currently Argentina and Turkey); substantial swings in exchange rates (including the exchange rate of three leading currencies – the dollar, the Euro and the Yen); and run ups in asset prices followed by sharp collapse (for example in Japan and East Asia earlier and the United States last year). While the crises initially occur in one or two specific countries, their adverse effects are felt across the world.

While we must be careful, on the whole, in my view, – the death of distance, the services revolution, and the mobility of capital – which characterise globalisation – present unprecedented opportunities for India. The primary source of comparative advantages today are : skills and ability to adapt and change. And, India has the advantage – of skills, of entrepreneurship and of managerial competence in taking advantage of these changes.

If what I have said is correct, then, why are we not jumping with joy and optimism? Why are we so "unglobalised" in terms of our share in trade, investment or communication?

Transition from a closed to a vibrant, open and a more globally dominant economy will certainly take time and will not be painless.

As of now, we also have much greater tolerance for waste, non-work and survival of the inefficient, and the self-seeking than other fast growing countries. Somehow to make this transition – from a less productive and less challenging economy to a more work-oriented and competitive economy – is the real challenge of globalisation.

If we continue in our old ways, I see real social problems and inequalities emerging in our society. We will have islands of prosperity and excellence – IT, beauty parades and media entertainment amidst growing disparity, rising unemployment and immiserisation. And as has happened in several countries in the 1990s, including Turkey and Argentina - just now, those who are with us today will be the first to leave.

The principal lesson of recent economic and technological developments, and growing tensions and inequalities within and across countries, is that our fate is in our hands. Our public policies have to respond to our own requirements rather than to any fixed global ideology or a pre-determined and internationally prescribed model of economic progress. In my view, this is the real lesson of the 1990s.

My fervent hope is that as you – the best and the brightest of our country – go out and face a "globalising" world, you will keep India’s interest, its integrity, its indivisibility and its future potential close to your hearts and your minds. I have no doubt that, with your help, India of 2025 will be a very different place, and a much more dominant force in the world economy, than was the case twenty five years ago or at the beginning of the new millennium.

Thank you.

http://www.bimaljalan.com/speech150102.html

 Why India's globalisation has failed

By Prem Shankar Jha

The outcry from all sections of the population against Yashwant Sinha's budget for 2002-03 has hidden not one but two failures of the Indian economy. The first, which I discussed in a previous column was the inability to control the fiscal deficit and thereby break the stagnation of the economy. The second is the failure to reform the structure of the economy in order to assure sustainable growth in the future. This could prove the greater failure in the long run. This failure is reflected by two indices — a relatively small change in the composition of exports away from agricultural and light manufacturing products towards the more complex, higher value added sectors, and the low and declining inflow of foreign direct investment.

In 1990-91, the last year of the old economy, agriculture contributed 24 percent and sophisticated manufactures 21.8 per cent of exports, while light manufacturing's share having gone up to 54.2 per cent. By 1999-2000, the share of agriculture had declined to 17 per cent, and sophisticated manufactures had gone up to 29.8 per cent. Light manufacturing remained at 54.2 per cent. There was, therefore, a glimmer on the horizon, but compared to the transformation that took place in East Asia in a comparable period in the 1980s, it was only a glimmer. What is more important, very little of the change has been contributed by foreign and joint ventures. Their contribution to exports is not identified separately in official statistics, but is known to be very small.

As for FDI, inflows have never exceeded a measly $3.3 billion. India remains a country inveterately hostile to FDI in practice even if not in theory. Between 1991 and 1998, only 21.7 per cent of the $55 billion of FDI approvals actually materialised as inflows. Other than some investment in telecommunications and the much maligned Dabhol power project, the bulk of this has gone into resuming majority shareholding in existing foreign enterprises that were already doing business in India. That business was, and remains, concentrated in the home market.

The main, but not only, cause of this failure is the absence of comprehensive structural (what Mr. Sinha calls "second generation'') reforms, that is, reforms of the factor market and the administrative system under which enterprises have to work. FDI flowed into developing countries in the 1980s and the 1990s like a flood tide because of the asymmetry between the progressive unification of the global product markets and the increasingly rigid separation of the national labour markets. This created wage differentials of 20 to 60 times between the highly industrialised countries on one hand and India, Thailand, Indonesia, China and Vietnam (earlier also Hong Kong, Singapore and Malaysia) on the other. But for an investor from the mature industrial economy to want to exploit this labour cost advantage, he must feel reasonably sure that it will not get offset by higher non-labour costs. All the above countries were able to offer this assurance. India failed.

The contrast with China, where foreign and joint ventures accounted for more than 40 per cent of exports in the 1990s and 51 per cent in the first half of 2001, could not be greater. It would be unreasonable to expect India to duplicate China's success in gearing its economy to the global production system. Despite that there were a large number of lessons India could have and did not learn from China.

First, even after 22 years of liberalisation, China too has not been able to complete its reform of the factor markets or loosen the control of its gargantuan bureaucracy on industry. But it did successfully create large islands in which the laws that made the factor market rigid were suspended. These were its special economic and development zones. The Vajpayee Government announced the conversion of the export promotion zones (EPZs) into special economic zones (SEZs) only last year. But all they did was to redesignate the existing EPZs such as Kandla and Santa Cruz, and relax a few more of the laws that govern investment and production within them.

Second, New Delhi has still not understood the purpose that China had in mind, when it created its first SEZs in 1979,. This was to create a work environment within a limited area that was as close a replica of what foreign investors would find in Singapore and Hong Kong Circa 1970, or Petaling Jaya in Malaysia. It was this holistic approach, and not a penchant for giganticism that led the Chinese to establish SEZs that covered several hundred sq. km. each.

They needed this space to create not only factories, but power stations that gave assured, high quality power, residential areas, commercial and business centres, parks, hospitals, schools, custom warehouses and container ports, and to equip these with a special administration that was free of the labour and social welfare laws that weighed down the state owned enterprises.

India also failed to learn from China's experience that to mesh one's national economy into the global one it was necessary to attract investment not into "sophisticated'' industries but into simple ones. Sophisticated industries were not only the most difficult to set up, but with rare exceptions were also the ones in which labour costs (as against capital, technology, marketing, sales and servicing costs) were the least important. That is why manufacturers in the advanced countries had the least incentive to look for offshore, cheap labour, production platforms in these industries. China, therefore, began by drawing FDI into the simplest of products, like toys, garments and simple electrical goods. In India, all these were and to a large extent still remain reserved for the small-scale sector.

India has thus fallen between two stools: it has failed to minimise non-labour costs by creating the infrastructure and institutions of advanced capitalism in the country as a whole, and it has not tried to do so in the limited area of special economic zones either. China too could not do the former, but speedily did the latter because it understood instinctively the cardinal change that globalisation had wrought in the world economy. Several years later the author and management Guru, Kenichi Ohmae, formulated this by pointing out that the one thing the `network States' of the future would not need was a large geographical hinterland.

http://www.hinduonnet.com/2002/03/27/stories/2002032701681600.htm

Surjit S Bhalla: RBI cites experts, they cite RBI!

REAR-WINDOW ECONOMICS ? I
Surjit S Bhalla / New Delhi October 16, 2008, 0:01 IST
 

The RBI focuses on WPI and so outside experts like the IMF who think other indices are more reliable turn around and say Indian inflation is high, says Surjit S Bhalla

When asked whether the $ 700 billion dollar package to save US banks, and the US economy, would do the trick, Fed Chairman Ben Bernanke replied “I don’t know; and I have been wrong recently”. This kind of an admission, in front of millions, can only come from a secure and first rate mind. It is time that policy makers in India also learn to practice a little humility — and learn from their mistakes for the sake of themselves, and the Indian economy.

The credit crisis has made geniuses out of most commentators. Oh, there is a liquidity crunch and therefore what needs to be done is to provide liquidity. What about the high level of interest rates in India, should we also not be reducing them, and reducing them drastically? You’ve got to be joking, is the refrain of the experts. With credit growth at 24 per cent and money supply growth at 19 per cent, and inflation at 12 per cent, how can you cut rates? Are you not going to cause even more inflation, cry out the we-know-what-to -do-about- the-crisis experts? So how come there is a liquidity crunch if credit growth is so high? That falls on deaf ears, because the mind of the experts is made up — and made up by the RBI. And then when you ask the RBI as to whether it has made a mistake, the refrain is why don’t you look at what the non-RBI experts are saying — don’t you see, they all agree we are doing the right thing. The vicious circle continues and the forces of globalisation hide the mistakes when the going is good — which was until last year.

In this two-part article about monetary policy making in India I want to comment on what has been wrong about monetary policy in India, and what can be done to put policy, and India, on the path towards stable growth and low inflation. First, and most importantly, RBI policy in India since 1991 has been of the rear-view window type — that is, backward-looking, and reactive. [There is an important exception to this which occurred during the Bimal Jalan period as Governor in 1998-2003, but that is a subject of another article. Given this exception, I will term RBI policy as the Rangarajan-Reddy or RR policy]. Monetary policy, by definition, has to be forward-looking, and even then, as events in the US have shown — the US Fed started anticipating the crisis as early as August of 2007 — the policy need not be successful. But a backward-looking policy almost guarantees failure, in addition to being not very enlightened. Second, RR policy has used the wrong indicators on both the inputs to policy and the outputs ie both on what the policy should be (money supply growth) and what indicator should be used to assess the impact of policy (inflation as measured by the wholesale price index or WPI). This RR policy then feeds into the expectations of the analysts of the Indian economy, who then regurgitate the RR analysis, and mistakes.

All experts and policy makers face the problem of “identification” in making assessments: how does one know that some unknown other cause is not causing the mistakes that are being ascribed to RR? In an absolute sense, one doesn’t but there are identifying factors. And such factors are two — first, the same expert when assigned to work on a different country (and this is not a virtual expert, but rather your friendly IMF, World Bank, or pink newspaper, or investment bank representative scholar) will not use either money supply growth or WPI inflation to assess monetary policy! The second identifier is what has happened to the Indian economy prior to the world wide liquidity crisis that started in September. Since August all bets are off regarding the causes of failure of the Indian economy, but that certainly is not the case for before August. Especially if one considers the last Reddy policy of increasing interest rates and the CRR on July 29; he even argued on September 7 that if he had had his way, he would have tightened monetary policy even more!

The only other central bank governor making the same noises, and wrong policy, was Jean-Claude Trichet of the European Central Bank (ECB). He also raised rates in July and just two weeks ago claimed that the financial crisis was an exclusive American problem and that the crisis revealed both how bad American regulatory system was and how good the European central bank was. A week after this unseemly gloating based on fictitious facts, Jean-Claude Trichet admitted that the ECB had “under-estimated” the crisis. A few days later, the ECB had to intervene to save European banks; and a few days later, Europe announced a larger than American package to save European banks! When will Indian policy makers admit that they over-estimated the strength of the Indian economy, or the non-fragility of their own banking system?
  Indicators of growth, and policy
  Inflation
 
Figures in %
Decade GDP
growth  M3
 growth GDP
deflator CPI  WPI 
1950-1959 3.7 6.7 1.9 1.4  
1960-1969 4.2 9.3 6.0 6.4 6.3
1970-1979 2.9 17.4 8.1 7.5 8.6
1980-1989 5.9 17.2 8.6 9.2 8.0
1990-2002 5.4 17.0 7.5 8.3 7.3
2003-2008 8.9 16.8 5.3 4.9 5.3
Average 4.9 14.3 6.4 7.5 6.4

On money supply or credit growth as a primary indicator of policy direction: There is a reason why most central banks in the world do not use these two indicators as “information” — the data are very noisy and most importantly fail to provide any statistical confidence. The table shows the pattern of money supply growth etc for the last 60 years. What is noteworthy is the constancy in money supply growth, the favorite policy indicator of the RBI, at 17 per cent since the 1970s, ie for the last 40 years. During this period, the world has changed, oil prices have gone up 10 to 20 times, India’s GDP growth has accelerated from 4 per cent to 9 per cent, and inflation has collapsed from 8 to 9 per cent to an average of 4 to 5 per cent. The government, and RBI, and RR should now ask — of what use is this indicator, and why has it been misleading itself, and the economy?

But the RR policy has been doubly flawed because of the emphasis on WPI inflation as an indicator of inflation. The circle of error goes as follows. RBI has made it clear to the world, and anybody watching, that it is looking at WPI inflation, and also year-on-year (yoy) WPI inflation. As even the RBI knows, yoy inflation includes all the inflation that has happened for the last 12 months. In that sense, to follow yoy inflation is backward-looking policy at its worst. Even worse is the fact that the RBI does not recognise that “outside” experts look at this error and extrapolate. How else can you explain the fact that even as prestigious a set of analysts as those at the IMF will look at India’s monetary policy and say that it has been too loose over the last year? If one looks at the latest IMF World Economic Outlook (WEO), the inflation rate for India for 2008 is forecast to be 5.3 per cent for the CPI and (what is likely an error) only 3.8 per cent for the GDP deflator! The WEO does not supply any data on money supply growth, or WPI, for any country in the world, though it does supply data on the GDP deflator and CPI. So why does the IMF use the WPI data to determine its policy conclusion that Indian monetary policy was too loose? Accountability, anyone?

The author is Chairman Oxus Investments, a New Delhi-based asset management company. The views are personal
http://www.business-standard.com/india/storypage.php?autono=337503&chkFlg=
New wave of globalisation sweeping through India Inc
14 Oct, 2008, 0000 hrs IST,Ramkrishna Kashelkar, ET Bureau
 Indian economy has gone through a dramatic transformation in the last five years or so. And nowhere is this more visible than the boardrooms of India
Inc. The high brow discussions on economic and business issues in board meetings has given way workshops on abstract topics such as integration, cultural fit and diversity management. What's more these discussions are often moderated by exexpat CEOs who are most likely to be affected by its outcome. Blame it on the new wave of globalisation that is sweeping through India Inc.

Though globalisation is now a cliché, this new wave is unlike any other. While in the past Indian companies participated in it as low-cost exporters, or say technology seekers or at best a local partner to MNCs, the same companies now found these strategies stifling. They are now breaking free to seek a place at the global high table. This is the new face of India Inc and we have captured in its full glory in the latest edition of ET500, which will hit the stands two days from now.

And we don't bring you just heaps of data and analyses. India's Inc top minds will be there to tell you the story of their globalisation drive, its strategic rational and the ways to make it successful. When talking about lobalisation the first name that comes to mind is Tata Group. Their recent acquisitions -be it Corus or Jaguar Land Rover or General Chemicals-has put India on the global map.

So it was but natural for us to begin the journey the with an hour-long interview with Mr Alan Rosling, Tata Son's executive director and the brain behind the Group's globalisation drive. And we start from the ground zero, the genesis of the group's recent moves in the international market. If he is to be believed, Indian companies are better placed to make their overseas acquisitions successful. "Thanks to their unique history and culture, Indians find it easy to assimilate with new people and cultures. They don't usually force their way of life on others and this makes integration easier," says Mr Rosling.

The softer issues play a key role in the success of an acquisition. And no one is better placed to flag the subject than Tata Group's HR head Mr Satish Pradhan, who is tackling this issue on everyday basis. Next we turn our attention to individual companies -Tata Chemicals and Tata Communications, to get their side of the story.

However globalisation fever is not limited to Bombay House only. One of the most talked about globalisation stories have been that of Avantha Group (formerly L M Thapar Group). Under the leadership of Mr Gautam Thapar, the group has transformed itself from a laggard to one of fastest growing and the most globalised of its peers. We caught up with Mr Thapar to get a first hand account of this journey. We followed it up by chatting with Mr Sudhir M Trehan, managing director of Crompton Greaves, the group's flagship company.

Globalisation is not only about having production facilities abroad, it also involves tapping global sources of finances and most importantly creating a global talent pool. We tackle the issues in two separate features.
Last year, we changed the ranking parameters to make its simpler and brought it in line with the globally accepted definition of size i.e revenues in last financial year.

We have stuck to it and its amazing to see the resulting dynamism in ET500. Many companies made it the list this year thanks to IPOs. And as we found out some of most prominent of them are public sector undertakings, just another indicator of the rising presence of PSUs in India Inc. A long-term investor should keep a close watch on them.

 http://economictimes.indiatimes.com/Corporate_Trends/New_wave_of_globalisation_sweeping_through_India_Inc/articleshow/3591726.cms

 Tanzania at extremely alarming level of hunger, Index reveals
 
2008-10-16 10:35:05
By Lydia Shekighenda and Agencies

Tanzania is among 33 countries in the world, which has extremely alarming levels of hunger. The 2008 Global Hunger Index indicates that the Democratic Republic of Congo scored the worst, followed by Eritrea, Burundi, Niger, Sierra Leone, Liberia and Ethiopia.

According to the index released by the International Food Policy Research Institute (IFPRI) in conjunction with Welthungerhilfe and Concern Worldwide, the index ranks countries according to the prevalence of child malnutrition, rates of child mortality and the proportion of people who are calories deficient.

The global Hunger Index has been released for the World Food Day which is marked today (October 16).

IFPRI Director General Joachim von Braun said the world has made only slow progress in reducing hunger in past decades with dramatic differences among countries and regions.

``Population and income growth, high energy prices, bio-fuels, science and technology, climate change, globalisation and urbanisation are introducing drastic changes to food consumption, production and markets.
``The current financial crisis complicates the picture.

It actually brings some short-term relief for hungry people, as it contributes to reduced commodity prices.

But the credit crunch makes access to capital difficult, including for agriculture and that adds another obstacle for overcoming the food crisis.`` Braun said.

He said IFPRI recommends three areas for high-priority policy actions to address the current food crisis and improve the long-term functioning of the world food system which are productivity and research, nutrition and social protection markets and trade.

He noted that governments and the global community should begin to correct previous failures in agricultural policy by investing in agriculture and food production, setting up reliable systems for assisting the most vulnerable people in a timely way, and establishing a fair global trading system and a conductive investment environment.

SOURCE: Guardian

Asia and the crisis

Here we go again
Oct 16th 2008 | TOKYO
From The Economist print edition

The world’s financial meltdown stirs uneasy memories across Asia

Illustration by David Simonds
ASIAN stockmarkets were among the most exuberant of the celebrants who briefly rejoiced at the massive financial interventions by American and European governments. In relief that global finance seemed to have survived its near-death experience, Hong Kong’s equities climbed more than 10% on October 13th. Next day, Tokyo’s soared a record 14%. But as elsewhere, these rallies proved an interlude in the sharp downward lurch. On October 16th Tokyo’s Nikkei index slumped 11%. Relief that catastrophe seemed to have been averted was no substitute for economic confidence. A region itself buffeted by financial crisis in 1997-98 has not forgotten that economic pain long outlasts financial-market rout.

That earlier crisis started with local worries about Thailand’s widening current-account deficit and a property bubble in Bangkok. It astonished the world with the speed and extent of the contagion that spread to other Asian countries, and emerging markets elsewhere, such as Russia and Brazil. This month’s panic had spread even further in Asia, shaking countries that by and large sailed through the late 1990s such as India and Australia.

On October 14th Kevin Rudd, Australia’s prime minister, cited “the economic equivalent of a rolling national-security crisis” and announced that his government would guarantee all deposits in Australian banks and other savings institutions for three years. He followed this with a spending stimulus worth A$10.4 billion ($7 billion), much of it directed at people likely to spend the money rather than hoard it: first-time homebuyers, the poor and pensioners. On October 14th Hong Kong issued a blanket guarantee of all bank deposits, with the aim of preventing the kind of capital flight that wrought havoc with the territory’s capital markets during the 1997-98 crisis. Its monetary authority also announced a new facility for providing capital to the territory’s banks, even though they look robust enough. But it was in the countries worst affected last time—Thailand, Indonesia, Malaysia, the Philippines and South Korea—that the echoes seemed most eerie.

In many ways, the region is far better placed to withstand the present shock. Its banks are stronger, its currency regimes less rigid, its foreign-exchange reserves bigger. On the other hand, a decade of accelerated globalisation has seen every country integrated even more closely into the world economy. None can hope to be immune from a global slowdown. The region may not face the sort of meltdown experienced at the end of the 1990s. But prospects for growth look much bleaker than they did even a fortnight ago. Exports to rich countries still matter, albeit less than they did. And so does trade finance, which lubricates Asia’s trading machinery. Ships are sitting empty in big Asian ports, their cargoes piled up on the dockside because no bank will guarantee them. Despite strong balance sheets, Asian banks may need more capital if they are to make up for a shortage of Western trade credit.

Facing such worries, anger at the apparent hypocrisy of governments in America and Europe has been muted. Asian leaders have complained that they were blamed for bringing the last crisis on themselves, with their misguided exchange-rate policies, opaque financial systems, profligate spending and corrupt politics. The bail-outs by the IMF demanded fiscal austerity at a time of economic hardship. But, since international institutions offered the only financial lifeline, most Asian governments were forced to suck up IMF orthodoxies.

True to form, Mahathir Mohamad, a former Malaysian prime minister, who was among the West’s harshest critics a decade ago, has not resisted gloating. On his blog, he recalls how “the Americans” said Asian companies should have been allowed to go under, but now Americans are preparing bail-outs and nationalisation for their own firms.

China, too, which survived the last crisis fairly unscathed thanks to capital controls and a state-run banking system, has indulged in a bit of point-scoring. Its refusal to allow a faster appreciation of the yuan has been blamed by some for helping build up the huge global financial imbalances that now seem to be unwinding so fast. From China’s perspective, the meltdown vindicates the cautious pace of its liberalisation. But its officials have tried not to sound too smug. Like their counterparts elsewhere in the region, they know it is too early to declare victory. Chinese journalists say the official media have been ordered to tone down or avoid reports about the economic impact on China. As during the earlier crisis China is trying to appear helpful. On October 8th it timed its latest interest-rate cut (of 0.27 percentage points) to coincide with concerted rate-cutting by other central banks. With its massive foreign-exchange reserves, China, like Japan, the other big Asian creditor nation, has too big a financial stake in the global system to feel anything other than anxiety at the possibility of an implosion.

Marking markets
So across Asia, governments have taken measures to allay disquiet (see article). In China the stockmarket has lost two-thirds of its value since last October; the property market is wobbling and growth is slowing. These trends all predated the latest panic. But the government has had to go further to shore up confidence. It tried to revive the stockmarket by abolishing a tax on share-buying and investing in the market itself. Japan, despite the giddy plunge of the stockmarket from October 8th-10th and the bankruptcy of a middling life insurer, Yamato Life, is confident that its financial system, recapitalised at massive public expense a decade ago, is robust enough to survive the latest shocks.

Japan’s money markets have gummed up far less than those in America and Europe. Even so, at a time when its economy is almost certainly in recession, the authorities are taking few risks. Backed by $1 trillion of reserves, the Bank of Japan has promised unlimited dollar funds to the markets. And the government has announced measures to support regional banks. It has also promised not to sell its remaining shares in the country’s biggest banks for the time being, and eased conditions for companies to own shares in each other as a way to support the stockmarket.

This year South Korea’s won has sunk more than any other Asian currency. The country’s current account, in surplus for many years, has slid into deficit. Banks have made a high number of loans in proportion to their deposits. Households are deep in debt and so are many smaller companies (many in dollars). In a radio address on October 13th President Lee Myung-bak insisted that the banks were sound and pointed out that the currency was backed by far larger foreign reserves than it was a decade ago. He begged South Koreans to cut down on foreign spending and energy use, and to increase spending at home.

In India, the closeted banking system is not heavily exposed to the financial crisis. Its most adventurous bank—ICICI—is the only one so far to cause jitters. Long lionised for financial sophistication, the bank is now associated with Western financial sophistry. After its share price halved in a month, it had to send text messages to its depositors reassuring them that their money was safe. Statements of support from the Reserve Bank of India, India’s central bank, and the rating agencies have helped restore confidence.

Indonesia’s government intervened more drastically, halting share trading for three days after sharp falls in share prices and the rupiah. When the stockmarket reopened on October 13th, the government strengthened its guarantee of bank deposits to deter a run on banks.

Reasons for gloom
In the less panicky mood that prevailed this week, such measures appeared to have bolstered confidence. They did little, however, to ease two longer-term worries.

The first concerns countries that are embroiled in political upheaval and which may be ill-placed to cope with the economic storms to come. The second is how severe those storms are going to be.

Thailand, riven by conflict between the elected government and powerful protesters (see article) is especially vulnerable. But Malaysia, whose prime minister says he will step down, also has its political worries. In the Philippines, the latest in a series of doomed but distracting attempts to impeach the president, Gloria Macapagal Arroyo, is gathering steam.

Even if these dangers can be skirted, the region is going to experience a sharp slowdown, though perhaps only Japan and Singapore are already in recession. In China, the slowing of the economy, caused mainly by a fall in net exports, could become a serious worry in the months ahead. Most economists expect GDP growth to fall only to 8-9% next year (from 10.1% in the second quarter of this year and 12.6% a year earlier)—hardly a grinding halt. Most Chinese economists are confident that if the slowdown is sharper, the government can still spend its way out of trouble. But an article last month in a magazine published by a government think-tank warned that a severe slowdown could present China with the kind of social turbulence that ravaged Indonesia in 1998.

China’s growth is increasingly important for the region. This month Australia ’s Mr Rudd rang the Chinese prime minister, Wen Jiabao, to ask about projections for China’s growth, and whether its strong demand for Australia’s minerals was likely to continue. On getting an upbeat answer, Mr Rudd concluded that China was now “critical for Australia’s continued economic performance”. It is also the biggest trading partner for Japan and India. But, according to the Asian Development Bank, 60% of Asia’s exports (not including Japan’s) still go to America, the European Union and Japan. A decline of one percentage point in America’s growth rate, the bank calculates, knocks 0.3 percentage points off Asia’s. That may be optimistic.

To date, one constant since the 1997-98 crisis has been the absence of a co-ordinated regional response. Out of that crisis, a self-help initiative among the region’s central banks known as the “Chiang Mai initiative” was launched. But it seems designed to fight the last war—a concerted attack on a country’s currency—rather than today’s wider financial malaise.

Coincidentally, Asia’s leaders will be meeting counterparts from Europe in Beijing on October 24th for the biennial “Asia-Europe” meeting, ASEM. The Philippines’ Mrs Arroyo has in vain suggested holding a crisis summit of the Asian countries on its margins. She also boasted this week of an agreement to set up a fund to buy toxic debts from banks in South-East Asia, China, South Korea and Japan. But the World Bank, the alleged source of some of the money, and the other countries involved, could not recall such an agreement. So she managed only to heighten the impression of ill-co-ordinated floundering. At least China, the host of the ASEM talk-shop, has overcome its initial reluctance to put impending financial collapse on the agenda. It seems to have realised that it would seem odd indeed if Asian leaders spent much time talking about anything else.

http://www.economist.com/world/asia/displaystory.cfm?story_id=12437723
 

 Experts discuss global importance of Silk Route 
News Agency of Kashmir 10/16/2008 8:45:55 PM
 
Srinagar, Oct 16(NAK): Kashmir University vice-chancellor, Prof Reyaz Punjabi on Thursday chaired a special session on Kashmir at the 4-day international conference titled “Dynamics and Revival of Silk-Route: Perspective, Challenges and Opportunities.”

Speaking on the occasion, Prof Punjabi said the revival of Silk Route with special reference to Kashmir has a great significance for the peace and stability in the South Asian regions. “It is high time to assess the economic gains leading to human security and peace among India and Pakistan,” he said, adding that China and Pakistan in general and Kashmir in particular would accrue with the revival of this route.

The V-C said that with the onset of globalization, the revival of Silk Route has a great potential to accelerate the processes of globalization in South Asia. “There is urgency to open up this road up to Gilgit and beyond on the one side and through Ladakh on the other,” Prof Punjabi said.

He said the revival of these routes would give a boost to the trade, business and commerce of Kashmir. The conference is being organized by the KU’s Centre of Central Asian Studies.

In his presentation, the director, CCAS, highlighted the economic gains to India, Pakistan, Afghanistan, China and Kashmir with the revival of Silk-Route. “The revival of silk route can have great economic benefits to all these regions,” he said in his presentation titled “Structure and Revival of Silk Route across Kashmir.”

Noted historian, Prof Muhammad Ishaq Khan dwelt at length on the Silk Route and Kashmiri Identity Consciousness. Others who spoke in the special session included Dr Aijaz Ahmad Banday, Prof G M Mir, Prof GR Jan and Dr Aafaq Aziz of the CCAS.

Earlier, experts from different parts of the world discussed the global importance of the Silk-Route and the role it played in building different Central Asian regions. More than 20 papers were presented on various aspects of Silk-Route on 2nd day of the conference, which is being attended by scholars of eminence from different parts of Central Asia.
In his paper titled "Nisapur on the Silk Route ", a professor of Eurasian Studies at the University of Mumbai, highlighted the role Silk-route played in the development of Nisa, an ancient city on the Turkman territory. "Due to centrality of its location along the Silk-Route, all sorts of trade like handicrafts, agriculture, textile and so on flourished in the city," said Prof. PL Dash.

All these activities, Dash added, facilitated further growth of Nisa as the city development a lot in terms of infrastructure.

Prof Valeriy S Khan of the Academy of Sciences and Uzbekistan said the Silk-Road was of global importance. "Firstly, the Great Silk Road was the first in the history of humanity integration model of the international trading-cultural long-distance communications based on the account of interests of the various states (in modern sense of the word)," he said in his paper titled "The Golbal Importance of the Great Silk Road."
Valeriy said the interest of restoration of the Great Silk Road was associated with expansion of tourism along its routes. "It is one of the most attractive routes and largest in the world, having 12800 kms in extent," he said, adding that since 1994, the World Trade Organisation has initiated international meetings, seminars and projects on the "Great Silk-Road."

The Director, Valikhanov Institute of History and Ethanology at Almaty, Kazakhstan, said that Kazakistan was located on the Great Silk Route and had paid attention to the problems of its revival. "The search of arguments in this direction became one of the priorities for Kazakhstan. The focus is on the revival of the cultural aspects of the Silk Route ," Prof Sattar F Mazhitov said in his presentation, " Silk Route and Kazakhstan: A Historical Perspective."

Azad Shamatov, Professor and Head, South Asian Languages at the Institute of Oriental Studies, Tashkent, said the ledgendary Silk Route played an outstanding role as the cultural bridge among civilizations, including Central Asia and India.

Shamatov, in his presentation titled “Silk Route and its Contribution to the exchange of Folk-Tradition between India and Central Asia" highlighted several modes of historical interactions between the regions in the sphere of folklore with special emphasis on Kashmir, Sindhi, Punjabi and Uzbek literary traditions. Dr Shi Lan from the Xinjiang Academy of Social Sciences, Institute of Central Asia, Urmchi China, stressed on the role Xinjiang can play in the re-construction of modern age Silk-Route in her presentation titled "Silk Route Structure: The contribution of Xinjiang to its Growth."

Prof Tian Weijiang from China gave a presentation on the "Review of Archive Materials about Marc Aurel Stein Stored in Xinjiang Local Archives". He highlighted the multi-dimensional personality of Archaeologist Marc Aurel Stein, and his tremendous contribution in the field of archaeology and culture of Kashmir, India and Central Asia.

Others who presented their papers included Chinara Rustomova from Turkmenistan (Turkmenistan on the Silk Route: Past and Present); Prof Zardy Khan Kinayadyly (The Silk Route Under the Mongols); Dr Mahesh Ranjan Debata (Importance of Turfan as a Silk route City: A Historical Perspective); Zianura Rysalieva (Kyrgyz Diaspora in the countries of Great Silk Road: Holistic Profile); Prof Meruyert Abusseitov (Silk Route: Inter-relation of Cultures): Prof Dilorom Alimova (Heritage of Great Silk Road and Uzbekistan); Prof Valeria Piancentiei Fioran (The Contribution of Silk Route to Religious Syncretism.

Its Reflection on Painting and Architecture during 14th to 17th centuries); Dr Jean Marc Arakelian (Silk Road as an inspiration to a Specific Mughal Artist); Dr Ranjana Mishra (Buddhism Along the Silk Route), Prof Ismagulov Orazak (Ethno-anthropological Aspects of the Silk Route in Kazakhstan); Prof Valeiry Khan (The Revival of Great Silk Road in the context of Globalisation); Prof Gulshan Dietl, Prof Hafeez Malik, Dr Bushra Hameed, Prof Bolat Tatibekov, Dr Nicklas Norling, Prof Iihan Sahin, Tajamul Hussain, Dr GM Shah.(NAK)

 http://naknews.co.in/newsdet.aspx?17235

 Third World America
The US financial crisis, based on and accentuating a catalogue of neglect, blind greed and misguided policy, may propel the world's most developed state into oblivion, writes Gamil Mattar*

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In a matter of three or four weeks the US became the butt of sarcasm and schadenfreude, as criticism rained down on Washington from angry investors and frightened people who felt the rug of security being pulled from under their feet. Such emotions were fed by opinion pundits and economists who blew the stock market collapse out of proportion and distorted the image of the US. Such was the flood of malicious, though not unrealistic, commentaries that I began to view the whole of the US, the world's greatest power, solely in terms of the state of Wall Street, the world's most important financial marketplace, and the following words rang in my head:

I used to rule the world
Seas would rise when I gave the word
Now in the morning I sweep alone
Sweep the streets I used to own

The mockers, the alarmists and even the exaggerators may be excused. The questions raised by the financial quake have no clear answers. What will happen to the global economic order, to the investment- banking sector, to the capitalist system? What is to become of privatisation now that the greatest capitalist power has stepped in to nationalise a number of financial enterprises? What will happen to that financial class that has managed within a few decades to dominate political, economic and social policy in many countries, not least of all in Egypt and most other Arab countries?

Will some countries revert to isolationism in order to protect their developmental aspirations from the wild fluctuations of the international marketplace? Will India lead the way in this respect or will it, like China, slow the pace of its capitalist progress? What will happen to the fabric and garment manufacturing industry in Egypt now that it is linked to that sector in Israel and the US? Similarly, what will be the fate of this industry in Southeast Asia from which the US imports two-thirds of its clothing needs?

What will the poor in America and elsewhere do? How will they vent their anger and frustration? Will they say that Washington and other wealthy nations have never acted so rapidly and generously in a crisis as they have to save Wall Street? Will they ask what actions officials from those rich and powerful governments took to help the victims in the US and the Caribbean from hurricanes Katrina, Ike and others, or to come to the aid of the Tsunami victims in the Indian Ocean and Persian Gulf apart from undertaking a few high-profile visits and, relatively speaking, dropping a few pennies in the hat? Here's what one American who was hit by the mortgage crisis had to say: "They've taken my home away. I live in the street now. The people who caused this are now being rescued while I still have no roof over my head."

Frequent, too, are the commentaries these days that remark upon how the US managed to collect hundreds of billions of dollars in order to save bankrupt companies to the detriment of the capitalism that it holds so sacred and how similar this is to the American tendency to support dictatorships in order to secure its own interests but at the expense of another sacred principle, democracy.

Over recent years, the US has disseminated a Wall Street culture, sometimes making it a prerequisite for assimilation into the global economy. The "money culture" is now a globalised culture. It is not only in the US that the greatest ambition of top university students is to work in the stock exchange, manage investment projects and become heads of departments in major banks. Here, too, our youth no longer dream of becoming an officer, an engineer, a doctor or an astronomer, but rather a stockbroker. Even many years ago people realised that this culture was rife with risks for all countries, the US included. As early as 2002, in the wake of the Enron and Global Crossing scandals, US Federal Reserve Chairman Alan Greenspan cautioned, "Capitalism has stopped working. There's something going on that is spoiling the financial system." Others have observed that the bankruptcy of those two companies in 2002 was a warning that was tragically ignored by the ruling elite in the US as was the warning implied in the attempt to bomb the World Trade Center in 1993.
Decades of the prevailing socio-political economic culture have made businessmen and financial experts the masters of the world. This is how they were billed in Davos and this is how they have behaved in the many meetings in which they lay down the new moral code in accordance with which private gain takes priority over the public interest and which is founded on two pillars: the worship of money and the worship of the individual. No one can pretend not to have been aware, neither here nor in the West, or in the US in particular. Commentators had long since warned that globalisation had given the best it could and that now it was giving the worst, and that some of the worst had begun to wreak havoc on the American economy itself.

After hundreds of pens have futilely warned of the pernicious consequences of the widening income gap, hundreds of new articles are appearing in the major newspapers of Berlin, Paris, Frankfurt, London, New York and Washington and are casting a portion of the blame for the financial crisis on the irrational complacency of the big-spending financial class, especially the senior management of major banks and companies. The excesses of this class have never been morally acceptable, they write, and now are politically and economically unacceptable. Economists whose pro-capitalist credentials are above suspicion now confess that they had wrongfully ignored major criticisms of the era of unbridled free trade and admit that it was unjust -- that even in the colonialist era of international trade wealthy nations had never been as tyrannically exploitative of Third World countries as they are today.

Since we are living in a world in which economies are so intertwined that people's fates are closely bound together, it is easy to understand why the world is so concerned about the future of that country that has the largest economy in the world. What will become the country that controls, one way or another, the lion's share of the resources of might and energy is a legitimate line of inquiry. Indeed, it could be the most important question which politicians, economists and others of various walks of life and of all shades of opinion, should ask themselves. Is it true, for example, that the crisis exposed darker sides of the US of which many there were unaware and which had been completely hidden from people abroad?

It is common knowledge that the US and other industrialised nations have not experienced an economic crisis of this magnitude since the stock market crash of 1929. All are simultaneously aware that south, east and part of western Asia were experiencing an unprecedented economic surge at a time when officials in Washington were trying to conceal the initial signs of economic meltdown in their country.

We also know that the American people's confidence in capitalism has been deeply shaken. However, they have no alternative to this long cherished national creed. It will do little to tell them that capitalism without failure is like religion without sin. They were born and raised on a moral and ideological diet that refuses to recognise the possibility of a total or partial breakdown of the capitalist system. This probably accounts for the thick mist of American aphorisms and adages that have surrounded the crisis since it first erupted, all evocative of the American dream and way of life, and of the immutability of the American rock and of America's might to ride out all storms. These are the homilies that are so deeply rooted in the American experience since its emergence as an economic power that they are difficult to shake. But the recent crisis has cast a shadow over the ability of each and every one of these to remain a pillar in the edifice of American political culture.

Many political leaders, as we know as well, were dissatisfied with the American prescription for economic progress. Most of them, however, never ventured to voice this openly until Bush went to the UN to appeal for the aid of the international community. At that point Brazil's da Silva, Argentine's de Kirchner, France's Sarkozy and dozens of heads of state and politicians from Germany, Britain, Russia, China and India lashed out at the American model. These were joined by African politicians who went to New York to ask for $72 billion to rescue the poorest continent in the world only to hear the US ask for $700 billion to rescue companies whose financial mismanagement shook their financers' confidence and brought them to bankruptcy. Even UN Secretary- General Ban Ki-Moon, to the surprise of all, broke with tradition and called for a new code of ethics for the global economy. The rules of play that the US had elevated to a charter for the way international institutions work collapsed with the same resounding crash as the American financial system.

Meanwhile, in the US the American Society of Civil Engineers has deplored the US's deteriorating infrastructure and demanded urgent national attention to this vital field of public policy. According to a report issued by this society and cited in the last edition of The New York Review of Books, nearly 30 per cent of the nation's 590,750 bridges are "structurally deficient or functionally obsolete" and it will take "$9.4 billion a year for 20 years to eliminate all bridge deficiencies". The number of unsafe dams has risen by 33 per cent to more than 3,500. Public transit facilities -- including buses, subways, and commuter trains -- are "dangerously under-funded", even as demand for them has increased faster than any other mode of transportation. Current funding for safe drinking water amounts to "less than 10 per cent of the total national requirement", while "ageing wastewater management systems discharge billions of gallons of untreated sewage into US surface waters each year." Yet government investment in these vital facilities is generally held to be below the level needed simply to maintain them in their current poor state. With regard to air transport, there were 1.8 million hours of flight delays in the US in 2007, many of which were caused by demands for runways that exceeded supply. The American Society of Civil Engineers further claimed that it would take over $0.25 trillion to bring the nation's public school buildings up to "good" condition.

According to The New York Review of Books article, while private investors and states and cities are devoting more attention to this need, "the federal government has failed to provide the leadership it alone can supply. Federal spending on infrastructure, corrected for inflation, is actually lower than it was in 2001... and this level of spending, as a share of GDP, is much lower than it was two or three decades ago." By way of contrast, the article cites The Economist which reports that China will spend $200 billion on its railways between 2006 and 2010 -- the largest investment in railroad capacity made by any country since the 19th century -- and that the Chinese plan over the next 12 years to construct 300,000 kilometres of roads in rural China, as well as 97 new airports. "The Chinese understand that economic power depends on these investments," the authors remark pointedly.

The authors, Everett Ehrlich and Felix Rohattyn, relate that Congressman John Mica, the ranking Republican member of the House Transportation Committee, recently called for a $1.5 trillion infrastructure-spending programme, under both public and private sponsorship. But, they ask, where would the money come from? "The Iraq war drains our national resources, and the 2001 cuts in personal income, capital gains and inheritance taxes have slashed federal revenues." Therefore, Ehrlich and Rohattyn, both prominent economic experts, have appealed for the creation of a National Infrastructure Bank that would be funded by the federal and state governments and by the private sector. The bank would work along the lines of the World Bank, which is to say that it would only grant loans to entrepreneurs who wish to take part in "rebuilding America" on the basis of certain guarantees, an evaluation of the relevant feasibility studies and an assessment of the ethical and professional qualifications of those undertaking the project. Their appeal was echoed in a more general way by New York Times columnist Thomas Friedman who wrote that American society needed to break away from its dependency on "financial engineering" and to return to "real engineering".

The financial crisis that jeopardises the US's stability, security and future, we know now, is little more than a glitch in a national order threatened with even more serious crises. We do not want to say, "Welcome, America, to our developing world." With better ethics, a stronger economy and greater respect for other nations, the US is worth far more to the developing world and to itself than if it collapsed and deteriorated into a developing country.

* The writer is director of the Arab Centre for Development and Futuristic Research

 http://weekly.ahram.org.eg/2008/918/op2.htm