NATIONAL AFFAIRS

Compulsory public float rule issued

On June 5, 2010, the Union government made it mandatory for all listed companies to have a
minimum public float of 25 per cent. Those below this level will have to get there by an annual
addition of at least 5 per cent to public holding.The move is expected to result in equity dilution of
about Rs 1,60,000 crore by 179 listed companies. These include Reliance Power, Wipro, Indian Oil
Corporation, DLF and Tata Communications.According to the notification, ‘public’ will not include the
promoter, promoter group, subsidiaries and associates of a company. ‘Public shareholding’ will
mean equity shares of the company held by the public and not the shares held by the custodian
against depository receipts issued overseas.A company can increase its public shareholding by less
than 5 per cent in a year if such increase brings its public shareholding to the level of 25 per cent in
that year. If the public shareholding in a listed company falls below 25 per cent at any time, the
company will have to bring the public shareholding to 25 per cent within 12 months from the date of
such fall, compared with the two years allowed at present.
Bhopal Gas Tragedy verdict
On June 7, 2010, nearly 26 years after the world's worst industrial disaster left more than 15,000
dead in the Bhopal gas tragedy, former Union Carbide India Chairman Keshub Mahindra and seven
others were convicted and sentenced to two years imprisonment.Chief Judicial Magistrate Mohan P.
Tiwari held the 85-year-old non-executive chairman of the Indian subsidiary of the US-based
company and gave them punishment under less stringent provisions of the Indian Penal Code for
causing death by negligence.The 89-year-old Warren Anderson, the then Chairman of Union Carbide
Corporation of USA, who lives in the United States, appeares to have gone scot free for the present
as he is still an absconder and did not subject himself to trial. There was no word about him in the
judgement.The US based company reacted to the judgement saying neither it nor its officials were
subject to the jurisdiction of the Indian court since they were not involved in the operation of the
plant, which was owned and operated by Union Carbide India Limited.In his 93-page verdict, Tiwari
said the accused were not sentenced under section 304 IPC (culpable homicide not amounting to
murder that provides a maximum of life imprisonment) since they were old age and were suffering
from serious ailments including heart disease.All the convicts applied for bail immediately after the
sentencing and were granted relief on a surety of Rs 25,000 each.Law Minister M. Veerappa Moily
described the verdict as an example of “justice buried” and said there was need for fast-tracking
such cases and ensuring proper investigation. The BJP termed the order as “painful” and said the
prosecution should appeal against the lower punishment. It also utilised the opportunity to
reconsider the provisions of the nuclear liability Bill.
ONGC, OIL get freedom to price natural gas
In a significant development, the Union government has given national oil companies, Oil and
Natural Gas Corp (ONGC) and Oil India Ltd (OIL), freedom to price any additional natural gas
produced from blocks given to them on nomination basis at market rates. So far, all gas—current
and future—produced from blocks given to ONGC and OIL was priced at government-controlled
rates, called administered price mechanism (APM).Even the price of APM gas from June 1 has been
more than doubled to $4.2 per million British thermal units, on a par with the rate at which Reliance
Industries sells gas from its eastern offshore KG-D6 fields.The government has also made a
significant departure from the previous practice of pricing natural gas in rupees and has now
decided to price it in US dollars.State-run ONGC and OIL produce 54.32 million cubic metres of gas
per day — about 40 per cent of the total amount originating from the country — through fields
given to them on a nomination basis.
Petrol, Diesel prices freed from government control
On June 25, 2010, the Union government announced that prices of petrol and diesel would become
market-driven, in line with the recommendations of a panel headed by former Planning Commission
member Kirit Parikh. An empowered group of ministers led by Finance Minister Pranab Mukherjee
agreed to raise diesel prices by Rs 2 a litre for now. The fuel will eventually be freed from State
control. Petrol has been freed fully.The panel also increased prices of liquefied petroleum gas (LPG)
by Rs 35 a cylinder and of kerosene by Rs 3 a litre, though both will remain under government
 control.The decision will help to cut fuel subsidies and limit losses of State-run refiners.
The market-driven mechanism would mean users would have to pay more whenever international
crude oil prices rise and less when they fall. The move would bring down the government’s huge
subsidy bill and relieve State-owned oil marketing companies of some of the burden they bear by
selling fuels much below the market prices. This burden, also called under-recovery, is estimated at
Rs 215 crore every day.
Jharkhand again under President’s rule
On June 1, 2001, Jharkhand came under Central rule with President Pratibha Patil accepting a
recommendation of the Union Cabinet after the Congress and the BJP gave up efforts to form an
alternative government following resignation of Chief Minister Shibu Soren.The State Assembly will
be kept in suspended animation during the President’s rule, which has been imposed for a second
time in two years.The Soren government was reduced to a minority on May 24 when the BJP, with
18 MLAs and the JD(U) with two, withdrew support to it. The JMM, with 18 MLAs and having the
support of seven other legislators, was short of the required 42 in the 82-member House. The BJP
took the decision after Soren voted against the cut motions sponsored by the opposition in Lok
Sabha on April 27.Jharkhand has seen seven CMs since its creation on November 15, 2000, came
under President’s rule for the first time on January 19, 2009.
India, Canada sign civil nuclear pact
On June 28, 2001, India and Canada signed a civil nuclear cooperation agreement. The pact was
signed during Prime Minister Manmohan Singh’s visit to Canada.The deal, the ninth signed by New
Delhi, significantly alters Canada’s stance towards India. The North American nation had led the
world in pushing for nuclear isolation after the 1974 tests in Pokhran.The US, France, Russia,
Mongolia, Kazakhstan, Argentina, Namibia and Britain are the eight countries that have already
signed similar pacts with India.Among other things, the India-Canada Agreement for Cooperation in
Peaceful Uses of Nuclear Energy provides for tie-ups in design, construction, maintenance, supply of
uranium and waste management. The two countries can also promote cooperation in the
development and use of applications related to health, industry, environment and agriculture.
Visit of South African President
On his maiden visit to an Asian country as the President of South Africa, Jacob Zuma was given a
rousing reception by the Indian leadership on June 4, 2010, as the two countries signed three key
pacts, including one on air services, and agreed to support each other’s candidature for the non-
permanent seat at the UN Security Council for the 2011-2012 term. A wide range of bilateral issues
as well as global developments, including reforms of the UN Security Council, closer cooperation
between the two countries at various international fora, particularly on climate change, and
increasing the volume of bilateral trade, came for discussions during the talks.
Apart from the pact on enhancing air connectivity, the two countries signed an MoU on agriculture
cooperation and another for linkages between the Foreign Service Institute of India and the
Diplomatic Academy of South Africa. Both India and South Africa are keen to increase the two-way
trade, which currently stands at $7.5 billion annually. Zuma said he wanted that to grow to $10
billion by 2012.
Visit of Sri Lankan President
Sri Lankan President Mahinda Rajapaksa visited New Delhi on June 9, 2010. During his talks with
Prime Minister Manmohan Singh, he sought to cool down tempers in India over the plight of Tamils
in his island nation by promising to quickly resettle displaced Tamils and expedite a political solution
to the ethnic issue.The two countries also signed seven agreements, including a treaty on mutual
legal assistance in criminal matters and an MOU on sentenced prisoners, after wide-ranging talks.
The two countries announced a major initiative to undertake a programme of construction of 50,000
houses for internally displaced persons (IDPs) in Northern and Eastern provinces of Sri Lanka with
India’s assistance. India would also be taking up several projects for the reconstruction of the North
and the East, including rebuilding of railway infrastructure, rehabilitation of Kankesanthurai harbour
and Palaly Airport, construction of a cultural centre in Jaffna and several vocational training centres,
renovation of the Duraiappaj stadium and rehabilitation of war widows.The two countries also
decided to resume the ferry services between Colombo and Tuticoran and between Thalaimannar
and Rameswaram. India would also establish consulates general in Jaffna and Hambantota. India
 would also assist the island country in setting up a thermal power plant at Trincomalee. At their
one-on-one meeting which was followed by delegation-level talks, the Indian PM and the Sri Lankan
President also discussed a wide range of bilateral issues, including the proposed comprehensive
economic partnership agreement (CEPA), as well as international issues. Sri Lanka supported India’s
case for inclusion in an expanded UN Security Council, as well as its candidature for a non-
permanent seat for the 2011-2012 term.The five other agreements, signed after the talks between
the two sides, were: renewal of MoU on SDP schemes, MoU on setting up of a women’s trade
facilitation centre and community learning centre, renewal of cultural exchange programme, MoU on
interconnection of electricity grids and MoU on Talaimannar-Madhu railway line.
Indo-US strategic dialogue
The Strategic Dialogue between India and US is another “milestone” in bilateral relationship with the
Obama Administration. External Affairs Minister S.M. Krishna and US Secretary of State Hillary
Clinton co-chaired the first Cabinet-level Indo-US Strategic Dialogue, which helped to set the pace
for the long-term strategic relationship between the two countries.
INTERNATIONAL AFFAIRS
Hatoyama resigns as Japan’s PM
Japanese Prime Minister Yukio Hatoyama, who ended five decades of single-party rule when he
swept to power in August 2009, but stumbled when he confronted a long-time ally, the United
States, resigned on June 2, 2010. Hatoyama quit at a meeting of leaders of the Democratic Party of
Japan in Tokyo, becoming the fourth straight Japanese leader to leave after a year or less in office.
“Since last year’s elections, I tried to change politics in which the people of Japan would be the main
characters,” he said later at a nationally broadcast news conference. But he conceded that his
efforts weren’t understood. Hatoyama ran for the premiership on a campaign platform of
maintaining a more equal relationship with the United States, which still enjoys enormous support
among most Japanese. His decision to challenge Washington over the details of a massive military
base relocation plan on the island of Okinawa befuddled Japanese and American analysts and
government officials alike.Hatoyama also called for Japan to become more of an “Asian nation,”
which sparked concern in Washington that he wanted to move away from the country’s pro-US
stance and closer to China.Finance Minister Naoto Kan succeeded Hatoyama as the new Prime
Minister.
Maoists force Nepal PM to resign
Nepal’s Prime Minister announced his resignation on June 31, 2010, bowing to pressure from
opposition Maoists who had been demanding his ouster in Parliament and on the streets. Prime
Minister Madhav Kumar Nepal said in a televised speech that he decided to resign to end political
deadlock and shore up the peace process.Mr Madhav Kumar had taken over the post in May 2009
after the previous government led by the Maoists resigned following differences with the President
over the firing of the army chief. He had the support of 22 political parties in Parliament and more
than half of the 601 members in the Assembly. However, the Maoists, who have the largest number
of seats in the Assembly, refused to support his government and instead staged protests to demand
disbanding the government.In May 2010, the Maoists had shut down the nation for more than a
week, imposing a general strike. The protests also delayed the writing of a new constitution, which
was supposed to be complete by May 2010. The deadline has now been extended by one year.
Landmark US Financial Reform Bill
On July 1, 2010, the US House of Representatives approved a landmark overhaul of financial
regulations. The Bill would impose tighter regulations on financial firms and reduce their profits. It
would boost consumer protections, force banks to reduce risky trading and investing activities and
set up a new government process for liquidating troubled financial firms.However, the Republicans
say the Bill would hurt the economy by burdening businesses with a thicket of new regulations.
They also point out that it ducks the question of how to handle troubled mortgage finance giants
Fannie Mae and Freddie Mac, which Democrats plan to tackle in 2011.
Ethic Riots in Kyrgyzstan
Russia sent hundreds of paratroopers to Kyrgyzstan on June 13, 2010 to protect its military facilities
as ethnic clashes spread in the Central Asian State, bringing the death toll from days of fighting to
97. Ethnic Uzbeks in a besieged neighbourhood of Kyrgyzstan’s second city Osh said gangs, aided
by the military, were carrying out genocide, burning residents out of their homes and shooting them
as they fled. Witnesses saw bodies lying on the streets. The interim government in Kyrgyzstan,
which took power in April 2010, after a popular revolt toppled President Kurmanbek Bakiyev,
appealed for Russian help to quell the riots in the south. Led by Roza Otunbayeva, the interim
government sent a volunteer force to the south and granted shoot-to-kill powers to its security
forces in response to the deadly riots, which began in Osh, before spreading to Jalalabad.
Renewed turmoil in Kyrgyzstan has fuelled concern in Russia, the United States and neighbour
China. Washington uses an air base at Manas in the north of the country, about 300 km from Osh,
to supply its forces in Afghanistan.
G-20 Summit meeting
A Summit meeting of Leaders from the Group of 20 economic powers was held in Toronto, Canada
on June 28, 2010. The leaders have agreed to halve deficits by 2013 and stabilise or reduce the
government debt-to-GDP ratio by 2016. At the same time, the bloc left it to individual countries to
decide on levying taxes on banks or adopting other means to fund future bailouts.
Along the way, the G-20 leaders who completed their fourth meeting since the global financial crisis
of 2008, also diluted their position on a number of problems they had decided to fix earlier. For
instance, while reinforcing their desire to move to a more stringent capital structure, the
communiqué issued after two days of discussions said countries would “aim” to put in place a new
framework by the end of 2012, which was earlier the target date. Members will also get flexibility in
phasing the new rules.The good news is that once these rules are implemented banks will have
more capital to deal with crises as the ratio of core Tier-I capital of a bank to its risk-weighted
assets is expected to double from the present level of 2 per cent.On trade, too, there was dilly
dallying. The G-20 leaders, who had earlier said that the Doha Round of trade liberalisation talks
should be concluded in 2010, have not mentioned any deadline now. All that has been said is that
they will now deliberate on the ways to take forward the talks when they meet in Seoul in
November 2010.G-20 members have also decided against erecting any new trade and investment
barriers.The decision to increase the quotas for developing countries in the International Monetary
Fund by the Seoul summit was touted as another gain. While many elements in the 19-page
statement were a reiteration of the earlier pledges, these were at least two new elements. One of
them was a proposal to set up a working group on development. The other was the desire to focus
on issues related to corruption with members urging to ratify and implement the United Nations
Convention against Corruption.However, the move by some developed countries to insert another
new element — a levy on bank transactions — did not find a mention in the final text as the focus of
the deliberations remained on reducing fiscal deficit levels. A key demand of European countries,
was resisted by the US and developing countries such as India and Brazil.Along with deficit
reduction, G-20 leaders also agreed on ushering in structural reforms by emerging surplus
economies, such as China. These countries, which can tailor their reform moves to strengthen social
safety nets, should increase infrastructure spending and enhance exchange rate flexibility to reflect
underlying economic fundamentals.
G-20 meeting of Finance Ministers
Finance Ministers and Central Bank Governors of G-20 countries met in Busan, South Korea on June
4, 2010.At the top of the agenda was Europe’s debt crisis. The Ministers also discussed medium-
term growth framework and how to solve economic imbalances which caused the global financial
crisis. Canada, the current G-20 President, hopes to secure an agreement in Toronto on the broad
suite of policies needed to reduce these imbalances. Individual countries would then commit
themselves to specific policies at the next G-20 summit in Seoul.Building on progress to date, the
leaders affirmed their commitment to intensify efforts and to accelerate financial repair and reform.
They also agreed that further progress on financial repair is critical to global economic recovery and
requires greater transparency and further strengthening of banks’ balance sheets and better
corporate governance of financial firms.The leaders also committed to reach agreement
expeditiously on stronger capital and liquidity standards as the core of our reform agenda and in
that regard fully supported the work of the Basel Committee on Banking Supervision.
The leaders also emphasized the need to reduce moral hazard associated with systemically
important financial institutions and reinforced their commitment to develop effective resolution tools
 and frameworks for all financial institutions on the basis of internationally agreed principles.
The G-20 was established in 1999, in the wake of the 1997 Asian Financial Crisis, to bring together
major advanced and emerging economies to stabilize the global financial market. Since its
inception, the G-20 has held annual Finance Ministers and Central Bank Governors’ Meetings and
discussed measures to promote the financial stability of the world and to achieve a sustainable
economic growth and development.
China announces plans to make its currency more flexible
Equity markets across the world made handsome gains on June 21, 2010, after China announced
plans to make its currency, the yuan, more flexible against the dollar. India’s benchmark equity
index, the Sensex, and the broad-based Nifty today touched their highest levels in more than two
months.Market analysts said China’s move would go a long way in lifting the global economic
sentiment that was under the weather due to the Euro crisis. China’s decision would result in a
higher growth rate, especially for countries that have a significant trade relation with the Asian
behemoth, as currency appreciation would make imports comparatively cheaper in China.
According to Barclays Commodities, there is a thinking that a stronger yuan will “increase Chinese
purchasing power” leading to an increase in its “purchases of base metals”. “This coincides with a
strong set of Chinese trade data for May 2010, which showed that the country turned a net importer
of aluminium and lead, while copper and zinc imports remained strong”.
UNSC slaps sanctions on Iran
On June 9, 2010, the UN Security Council slapped sanctions on Iran over its controversial nuclear
programme, targeting the powerful Revolutionary Guard, ballistic missiles, and nuclear-related
investments, despite opposition from Brazil and Turkey.In the 15-member Council, 12 countries,
including the US and Britain, voted in favour of the resolution, with Lebanon abstaining and Brazil
and Turkey voting against.The new resolution, which is fourth against Iran to be adopted by the
UNSC, creates new categories of sanctions like banning Iran's investment in nuclear activity abroad,
banning all ballistic missiles activities, blocking Iran's use of banks aboard and asset freezes for
members of the Islamic Revolutionary Guard Corps.The resolution blacklists entities that includes 15
enterprises of the Islamic Revolutionary Guards Corps, three entities owned by the Islamic Republic
of Iran Shipping Lines and 23 industrial companies. The international community accuses Iran of
seeking to develop an atomic weapon. But, Tehran has been maintaining that its uranium
enrichment program is for peaceful civilian purposes.India has been maintaining that it is opposed
to such kinds of sanctions as it will affect the common people more than the establishment. Russia
and China, which have previously raised objections against such sanctions, supported the resolution
and said they were happy with the text of the resolution as long as it did not have any negative
impact on the people.Iran voiced defiance, saying it would not halt uranium enrichment and
suggesting it may reduce cooperation with the UN nuclear agency.
SAARC nations pledge coordinated action to tackle terror
Members of SAARC have pledged to step up coordinated action against the common menace of
terrorism, including steps to apprehend or extradite persons connected with acts of terrorism and
facilitate real-time intelligence sharing. The meeting of the Interior Ministers of the South Asian
Association for Regional Cooperation, held on June 27, 2010 in Islamabad, Pakistan, also resolved
to step up cooperation in real time intelligence-sharing and to consider Pakistan’s proposal for
creation of SAARCPOL, an institution on the lines of Interpol.The ministerial statement on
cooperation against terrorism adopted at the meeting said the SAARC member States had
underscored their “commitment to apprehend and prosecute or extradite persons connected,
directly or indirectly, with the commissions of acts of terrorism”. They also reiterated their
commitment to strengthen SAARC’s regime against terrorism.The ministers resolved to ensure that
“nationals and entities” of SAARC States who commit, facilitate or participate in commission of
terror acts are “appropriately punished”.The SAARC members—Afghanistan, Bhutan, Bangladesh,
India, Pakistan, Maldives, Nepal and Sri Lanka—also acknowledged that linkages between terrorism,
illegal trafficking of drugs, human trafficking, smuggling of firearms and threats to maritime security
remained a “serious concern” and said these problems would be addressed in a comprehensive
manner.
 US-Russia ties improve
On June 25, 2010, US President Barack Obama declared he had succeeded in “resetting” the US-
Russia relationship, which he said had reached its lowest point since the Cold War at the end of
George W. Bush’s term in office. Obama was speaking to reporters in the East Room of the White
House following meetings with Russian President Dmitry Medvedev.Medvedev, meanwhile, agreed
to allow a resumption of US poultry exports to his country which Russia had banned earlier in 201,
claiming that a chemical used in the US violated its food safety rules.But despite the bonhomie
between the two leaders, who have met seven times since Obama took office, both Obama and
Medvedev acknowledged that they had differences over certain issues, including Georgia. Relations
between the two countries deteriorated after the Russian invasion of Georgia in 2008.The US and
Russian Presidents said they had resolved a majority of the obstacles in the path to Russia’s entry
into the WTO. They have instructed their negotiators to work as quickly as possible to wrap up what
Obama said were “difficult issues” that will require “some significant work”, but Medvedev described
as “minor problems”.The two sides released 11 joint statements at the end of their meeting. These
covered promotion and implementation of open government; Kyrgyzstan; energy efficiency;
strategic stability; counter-terrorism cooperation; inter-country adoption; Afghanistan; people-to-
people connections; strategic partnership in innovation; Russia’s accession to the WTO; US-Russia
Presidential Commission.
Canada government blamed for Kanishka crash
A long-awaited inquiry into the 1985 Air India Kanishka bombing, which killed 329 persons, mostly
of Indian origin, has blamed the Canadian government for its failure to prevent the tragedy and
recommended the appointment of a powerful security czar to resolve disputes between conflicting
interests among security agencies.“The government needs to take responsibility to avoid further
failure and to prevent a return to a culture of complacency,” Justice John Major, the head of the
Kanishka bombing inquiry commission, recommended on June 17, 2010, nearly 25 years after
Canada's worst terrorist attack.In the much-awaited final report from the commission that
investigated the bombing of Air India Flight 182 on June 23, 1985, he observed that the national
security continues to be badly organised between the RCMP and Canada's spy agency. He also
recommended radical transformation in prosecution.Meanwhile, Candian Prime Minister Stephen
Harper assured the family members of the victims of the 1984 Air India Kanishka bombing that the
government would respond “positively” to the recommendations made by an inquiry committee and
said compensation would be offered to all.Years of criminal investigation have yielded just one
conviction, for manslaughter, against a British Columbia mechanic Inderjit Singh Reyat, who
assembled bomb components.
G-8 leaders drop commitment to complete Doha round in 2010
On June 27, 2010, G-8 leaders met in Totonto, Canada for their annual Summit meeting. The
leaders decided to drop a commitment to complete the troubled Doha trade round in 2010 and
vowed to push forward on bilateral and regional trade talks until a global deal could be done.
In 2009, a G-8 summit in Italy and a Pittsburgh meeting of the Group of 20 both had committed to
a 2010 end date that now looks impossible to meet.Canadian Prime Minister Stephen Harper, who
chaired the G-8 summit, said Doha was not dead. “I don't think we can afford to say that. We’ve got
to find a path over time to get to a successful conclusion,” he told a closing news conference.Doha
round has been dogged by differences among trade powers who want more access to one another’s
markets but have struggled to lower their own trade barriers.
july 2010
NATIONAL AFFAIRS
Business takeover code re-written
The Takeover Regulations Advisory Committee under the chairmanship of C. Achuthan, in its 139-
page report to the Securities and Exchange Board of India (SEBI), has proposed sweeping changes
on critical issues, including the open offer trigger, offer size, indirect acquisitions, exemptions from
open offer obligations, calculating the offer price and competing offers. This comes nearly 16 years
after the guidelines were formally notified for the first time and after 23 amendments to the last
major review in 1997.The takeover panel, formed by SEBI in September 2009, has recommended
 an increase in the open offer trigger from 15 per cent to 25 per cent. Further, the open offer has to
be made for all the shares of the target company, instead of the current practice of an offer for
acquiring an additional 20 per cent. Analysts said the proposed rules would raise the financing
required for taking over a firm, but would encourage investors taking strategic stakes in companies.
The panel, which also had Tata Steel Ltd Chief Financial Officer (CFO) Koushik Chatterjee and
Larsen & Toubro Ltd CFO Y M. Deosthalee as members, concluded that since a holding level of 25
per cent permits the exercise of de facto control over a company, this could be fixed as the
appropriate open offer trigger threshold in the Indian context.The committee has also noted that
the 100 per cent open offer requirement could result in an acquirer ending in holding beyond the
maximum permissible non-public shareholding, which may require the acquirer to either de-list or
bring down his holding to meet the continuous listing requirements. The panel has recommended
that the acquirer may state upfront his intention to de-list if his holding in the target company were
to cross the de-listing threshold, pursuant to the open offer.In the absence of any such disclosure or
when the response to the open offer is below the de-listing threshold, the acquirer would be
required to either proportionately reduce both his acquisitions under the agreement that triggered
the open offer and the acquisitions under the open offer or to bring down his holding to comply with
continuous listing requirements.The committee has also recommended that a short public
announcement should be made by the acquirer on the date of entering in to an agreement followed
by a detailed public statement within five business days thereafter. The overall time-line for an open
offer has been brought down from 97 days to 57 business days.The committee, in its attempt to
enable transparent consolidation by persons already holding in excess of 25 per cent, has
recommended voluntary offers of a minimum size of at least 10 per cent and a maximum size of
such number of shares that would not result in any kind of breach of the maximum non-public
shareholding permitted under the listing agreement. Under the existing regulations, an offer for a
percentage lesser than minimum prescribed percentage can only be by shareholders holding more
than 55 per cent.The panel has also recommended that creeping acquisition be permitted only for
acquirers who hold more than 25 per cent of the voting capital, subject to aggregate post-
acquisition shareholding not exceeding the maximum permissible non-public shareholding. It has,
however, left the annual creeping acquisition limit unchanged at five per cent.In another
recommendation that is expected to enhance the corporate governance norms, the committee has
made it mandatory for the independent directors of the target company to give their
recommendation on the open offer. Also, no appointment of representatives of the acquirer to the
board of directors of the target company would be permitted unless the acquirer places 100 per
cent of the consideration under the open offer in cash in an escrow account.Major changes have
also been proposed in the manner minimum price payable is calculated. According to the
committee, the offer price would be the highest of (i) market price to be based on 12 weeks volume
weighted average of market prices as against higher of weekly averages of market prices for 26
weeks or 2 weeks; (ii) a qualitative improvement and expansion in the look back provision; (iii) in
the case of indirect acquisitions, ascription of value to the target company under certain
circumstances.Also, any kind of non-compete fee or control premium paid to promoters will have to
be factored in while calculating the open offer price for the minority shareholders.
PM’s panel pegs exports at $216 billion
India's exports are projected to grow by about 22 per cent to $216 billion in 2010-11, on the back
of recovery in global trade, according the Prime Minister's Economic Advisory Council.With
contraction in global merchandise demand, India's exports declined by 4.7 per cent to $176.6 billion
in 2009-10. However, in the first two months of 2010-11 exports grew by 35.7 per cent.The
International Monetary Fund has projected that exports, at constant price, from emerging and
developing economies would increase by 10.5 per cent in 2010. Exports from the advanced
economies are also expected to rise by 8.2 per cent.
India-Iran sign six pacts
In their first interaction after the UN imposed the fourth round of sanctions on Tehran in June 2010
over its controversial nuclear programme, India and Iran, on July 8, 2010, signed six pacts,
including one on cooperation in new and renewable energy and another on increasing the number of
flights between the two countries. The MOUs were signed at the end of the two-day meeting of the
 India-Iran joint commission.

The other four accords were: agreement on transfer of sentenced prisoners; MOU on cooperation in
small-scale industry between the National Small Industries Corporation (NSIC) and the Iranian
Small Industries and Industrial Parks Organisation (ISIPO); programme of cooperation on science
and technology; and MOU on cooperation between the Central Pulp and Paper Research Institute
(CPPRI) of India and the Gorgan University of Agricultural Science and Natural Resources
(GUASNR).The signing of the agreements clearly reflected New Delhi’s intention that it would pursue
an independent policy on Iran, notwithstanding the American pressure on it not to enlarge the area
of its engagement with Tehran.Although it is committed to abide by the UN sanctions on Tehran,
New Delhi maintains that the Iranian nuclear issue must be resolved through negotiations since the
sanctions would only hurt the common Iranian people. While recognising Iran’s right to develop
nuclear energy for peaceful purposes, it has also advised Iran to strictly abide by the IAEA
guidelines while pursuing its nuclear programme.The two sides also discussed the situation in
Afghanistan at length with both of them expressing their common stakes in the stability of the
violence-torn country. New Delhi is believed to have pressed for structured and regular
consultations with Tehran on defeating terrorists in Afghanistan and in the
Visit of Myanmar’s military ruler
Ignoring worldwide concerns over human rights violations in Myanmar, New Delhi rolled out a red
carpet welcome for Myanmar military ruler General Than Shwe on July 27, 2010. Top Indian leaders
held wide-ranging talks with him on a plethora of issues, including bilateral ties as well as
international developments.The increasing Chinese influence in the South East Asian nation is
apparently weighing heavily in the mind of the Indian leadership as it seeks to increase its
engagement with Myanmar, particularly in the vital energy sector and in fighting Indian insurgents
operating along the India-Myanmar border.The two countries signed five accords after talks
between Prime Minister Manmohan Singh and the 77-year-old leader of the military ‘junta’.
Simultaneously, the EXIM Bank of India extended a line of credit of $60 million to the Myanmar
Foreign Trade Bank.The treaty on mutual legal assistance in criminal matters is expected to help the
two countries combat transnational organised crimes, terrorism, drug trafficking, money laundering
and smuggling of arms and explosives. The MoU on Indian grant assistance for implementation of
small development projects is aimed at boosting Indian investments in energy, transport and
infrastructure sectors.Strategic observers say the change in India’s policy towards Myanmar was
prompted by China wooing the military ‘junta’ to make deep inroads into virtually every sphere of
Myanmar’s economic activity. Though China has its own strategic interests in engaging the ‘junta’ in
Myanmar, the military rulers are worried that their image outside the country is sullied because of
its poor record in protecting human rights.The military ruler wants to correct this image by
introducing some kind of democracy. His visit to India was also aimed at gaining global
respectability.
Visit of British Prime Minister
British Prime Minister David Cameron came visiting India in July 2010. Talking on terrorism affecting
the region, he said that Pakistan could not be allowed to harbour militants and promote terror
against India, Afghanistan and the rest of the world. On his first visit to India after becoming Prime
Minister in May 2010, he laid out the basis for a new “enhanced relationship” with India. Apart from
Cameron’s own tough talk on terrorism, his business minister Vince Cable announced the UK was
prepared to export civil nuclear technology to India, bringing Britain in line with the stance taken by
the United States, Russia and France.Travelling to Bangalore and then to Delhi, Cameron signed a
Rs 5,082 crore agreement for the Indian Air Force and Navy to buy an additional 57 Hawk Advanced
Jet Trainer aircraft from British Aerospace Systems. India and the UK also made announcements in
the field of immigration, education and signed an agreement on cultural cooperation.Cameron
welcomed India’s support to Afghanistan, Nepal and Bhutan, its “intellectual leadership” at the G20,
and said the time was ripe for India to find a place in the UN Security Council.

Unified Command to battle Naxals

In what is a first step at forming a common strategy for States hit by Naxal violence, the Centre
 announced, on July 13, 2010, setting up of a Unified Command in Chhattisgarh, Jharkhand, Orissa
and West Bengal. Realising that development and action in Maoist areas should be together, the
Centre also announced that over Rs 1,750 crore would be spent on developmental projects in the
four States.The Chief Secretary of each State will head the Unified Command, which will have a
retired Major-General as its member. The CRPF will depute an IG-level officer for ‘operations’ while
an equal rank officer from the State police force will coordinate the entire effort.The Home Minister
said that there was need for a Unified Command only in these four states and Andhra Pradesh,
Maharashtra and Bihar had been omitted for the time being. The Centre has also told the States
that the Member-Secretary of the Planning Commission will work to modify existing norms and
guidelines to ensure rapid development in the targeted 34 districts: Rs 800 crore will be spent on
strengthening police stations and another Rs 950 crore on road connectivity in these districts. The
government will fund the establishment and strengthening of 400 police stations in affected districts
at the rate of Rs 2 crore a police station on 80:20 basis over a period of two years.The Planning
Commission is also considering a special development plan for the affected districts and States with
emphasis on road connectivity, primary education, primary healthcare and drinking water.Already in
force in militancy-hit Jammu and Kashmir and Assam, the Unified Command structure includes
Army, paramilitary and State police, who work in coordination. The Army would not be involved in
anti-naxal operations for now. However, IAF helicopters would be used for supplies and evacuation.
INTERNATIONAL AFFAIRS
Cluster ammunition treaty comes into force
A landmark UN-sponsored treaty banning cluster munitions came into force from August 1, 2010,
but all major powers, the US, China, Russia, Israel and India have shunned it. The new instrument
is expected to be a major advance for global disarmament and humanitarian agenda.The convention
has been signed by 107 States and entered into force six months after 37 countries ratified the
treaty, which was concluded in 2008.Cluster bombs are both air dropped and used by artillery guns,
and the shells open before impact and scatter hundreds of shrapnel, causing widespread casualties
over a wide area. Many of such ammunition fail to explode and lie dormant for years killing or
maiming hundreds of civilians, long after the conflicts have ended.From Asia only five countries—
Afghanistan, Indonesia, Japan, Laos and Philippines—are the signatories.
Global community commits to peace initiative in Afghanistan
An international conference on Afghanistan was held on July 20, 2010 in Kabul, Afghanistan. The
international community reiterated its commitment to continue to support peace and reintegration
and said it looked forward to the local peace jirgas that included men and women at district and
provincial level to discuss elements of an enduring peace.The government of Afghanistan is to
engage with the UN Security Council and the international community for de-listing Taliban
elements from the sanctions list in accordance with agreed procedures and common Afghan and
international responsibility.The international community expressed its support for Karzai’s objective
that the Afghan national security forces should lead and conduct military operations in all the
provinces by the end of 2014.On the issue of security, the meeting recognised that civilian casualty
and protection of civilians are of great concern and noted that most civilian casualties are caused by
insurgent attacks. They also reiterated that the international military forces remain committed to
the objective of a steady reduction in the rate of civilian casualties.
Kyrgyzstan vote for parliamentary democracy
In a development that could have far reaching political impact in the region, Kyrgyzstan is all set to
become Central Asia’s first parliamentary democracy, with an overwhelming 90.55 per cent voters
backing a new constitution which strips the President’s wide ranging powers.After publishing the
official results of the June 27 referendum, the Kyrgyz Central Election Commission (CEC), on July 1,
2010, declared Roza Otunbayeva as the transitional President till December 31, 2011.It also
formally dissolved the Presidential parliament, which was in jeopardy in the wake of violent ouster
of President Kurmanbek Bakiyev’s regime in April 2010. In line with the new constitution, the 120-
strong Kyrgyz Parliament, after October 2010 elections, will appoint the Prime Minister and the
government.The referendum, the first step towards legitimacy of the present regime, took place in
the midst of inter-ethnic violence in the southern regions of Osh and Jalalabad and exodus of
hundreds of thousand refugees to neighbouring Uzbekistan.
Fresh US sanctions on North Korea
US Secretary of State Hillary Clinton announced on july 21, 2010 that Washington would impose
new sanctions on communist North Korea in a bid to stem the regime's illicit atomic ambitions.
The UN Security Council has imposed stiff sanctions on North Korea in recent years to punish the
regime for defying the world body by testing nuclear weapons and long-range missiles, and illegally
selling arms and weapons.With few allies and diminishing sources of aid, the impoverished North
Korea is believed to be turning to illicit ventures to raise the much-needed cash. Pyongyang also
walked away in 2009 from a disarmament-for-aid pact with five other nations that had provided the
country with fuel oil and other concessions.
Pakistan, China ink six pacts
Pakistan and China reiterated their resolve to further strengthen strategic relationship between the
two countries, increase the level of economic cooperation and take concrete measures to further
bring their people closer, during the visit of Pakistan’s President Asif Ali Zardari to China in July
2010. The two countries pledged to make joint efforts to fight terrorism, and signed six deals of
cooperation in the areas of agriculture, healthcare, justice, media, economy and technology.
US slaps toughest sanctions on Iran
On July 1, 2010, even as he signed into law the toughest sanctions against ever passed by the US
Congress at the White House, US President Barack Obama said the doors of diplomacy are still open
for the regime in Tehran.The Iran Sanctions Act affects the gasoline, financial, insurance and
shipping sectors, among others, as it seeks to impose a heavy economic cost on Iran for continuing
with its nuclear programme.The sanctions bar foreign countries from exporting refined petroleum to
Iran, as well as restrict access to US financial institutions for any entities that help Iran’s
Revolutionary Guard Corps.
Also, it prevents investment, transfer of technology and development of Iran’s energy sector, and
makes it easier for States and localities to divest from companies that do business with Iran.

CURRENT AFFAIRS: AUGUST 2010

NATIONAL AFFAIRS
Foreign Contribution Regulation Bill
Organisations of political nature and those involved in religious conversions will henceforth be barred from accepting foreign
funds. Also, persons holding political positions like MPs and MLAs can no longer enjoy foreign hospitality and must intimate the
government of their visits abroad, personal or official.After letting private organisations bring in unaccounted foreign remittances
for 34 years, the government has brought to the Lok Sabha the Foreign Contribution Regulation Bill, 2010, to regulate the
acceptance and utilisation of foreign contribution of hospitality by certain individuals or associations and to prohibit such
acceptances for activities detrimental to national interest. The Lower House passed the Bill, which the Rajya Sabha had already
cleared.At the root of the law is the concern that out of 40,173 NGOs (in 1993 there were just 1,500) accepting foreign funding,
only 18,796 have submitted their audited accounts. For the rest, the government doesn’t know the source of funding.
So far, Rs 12,000 crore has “officially” come through the foreign route, of which 60 per cent has come from religious
organisations, some from countries as small in population as Canada, Mauritius and Luxembourg.The government’s data shows
that in 2005 and 2006, there were over 32,144 organisations taking foreign funds in India. Only 18,000 declared their funding. In
2005-2006, of the Rs 7,000 crore that came from foreign sources, Rs 3,075 crore came for religious organisations. This explains
why the new law (which replaces the 1976 legislation) bans foreign funds for conversion purposes.Significant amounts (to the
tune of Rs 7,229 crore) have also come in for education, with no monitoring. In the run-up to the new FCR Bill 2010, the
government banned 41 outfits from taking foreign remittances; sealed accounts of 11 and asked 45 to take permission first.
With the new law, the government has also capped administrative expenses at 50 per cent of all inflows to NGOs (India has about
20 lakh).
Nuclear Liability Bill
On August 25, 2001, the UPA government successfully shepherded the Civil Liability for Nuclear Damage Bill, 2010, through the
Lok Sabha, with active support from the BJP and strategic absence of some fence-sitters such as the Samajwadi Party.
Quashing opposition from the Left Bloc and other critics, Prime Minister Manmohan Singh denied that the Bill was railroaded
through the House to serve US interests. “This Bill is a completion of a journey to end the nuclear apartheid, which the world had
imposed on India in the year 1974,” he said.”The government managed to bring the BJP on board in return for accepting
amendments to the controversial Clause 17(b) and dropping the word “intent”. The new formulation of 17(b), now states that
suppliers would be liable where “the accident has resulted as a consequence of an act of a supplier or his employees, done to
cause nuclear damage, and such act includes supply of equipment or material with patent or latent defects or sub-standard
services”.While his government achieved what appeared even a few months ago to be an impossible task—getting the Lok Sabha
to pass the Bill— Manmohan Singh announced that the government would give safety issues top priority. “Concern about nuclear
safety is one, which I fully share. I assure (you) we will do everything to strengthen the Nuclear Regulatory Board to ensure that
safety concerns receive the attention that they must, if we are to use nuclear power as a major source for generating and meeting
India’s need for energy,” he said.
The key points of the Bill are:
—Controversial Clause 17(b) amended by dropping the word ‘intent’.—Compensation cap to be paid by the operator at Rs 1500
crore provided in the Bill is not the ‘limit’.—Compensation will be decided by the Claims Commissioner and the operator will
have to pay.—Government assumes full liability for even a plant not operated by it.—The Bill is necessary for full
implementation of civil nuclear deal signed with the USA in 2006.
Bill to provide women equal guardianship rights
A Bill paving way for the women to get equal rights in guardianship and adoption of children has been passed by the Rajya
Sabha.The Personal Laws Amendment Bill seeks to amend the Guardians and Wards Act, 1890 and the Hindu Adoptions and
Maintenance Act, 1956. It also seeks to allow the mother, along with the father, to be appointed as a guardian, making the process
gender-neutral.Besides, it aims at removing hurdles in the way of a married woman to adopt. She can give a son or daughter for
adoption.For adoption and guardianship, under the existing Act, only the father is considered to be the natural guardian of the
child in a Hindu family and only unmarried, divorced women and widows are allowed to adopt a child. Women separated from
their husbands and engaged in lengthy divorce battles cannot adopt a child.
Annual Supplement to Foreign Trade Policy 2009-14
The government has extended sops worth Rs 1,052 crore to exporters, particularly for the labour-intensive textile, handicrafts and
leather sectors, to help them see through the fragile economic recovery globally. The revenue implication of these measures
would be Rs 1,052 crore. The government also made it clear that the popular Duty Entitlement Pass Book (DEPB) scheme, which
has been in vogue for over a decade, is being extended for the last time.Experts said drawing the curtains on the DEPB scheme
was inevitable as it was considered incompatible with the global trade rules under WTO.A number of additional products from
sectors like engineering, leather, textiles and jute have also been added to the existing two per cent interest subvention scheme.
Handloom, handicrafts, carpet and the SMEs have been getting this facility, which will now be available till March 31, 2011.
The government also extended the zero-duty Export Promotion Capital Goods (EPCG) scheme by one year to March 31, 2012.
The scheme, which was announced in August 2009, was to expire on March 31, 2011. Steps to reduce transaction cost of exports
too were announced in the policy.
India-Japan Strategic Dialogue
On August 21, 2010, visiting Japanese Foreign Minister Katsuya Okada held the fourth round of strategic dialogue with External
Affairs Minister S.M. Krishna. The two sides discussed the nuclear pact, comprehensive economic partnership agreement
(CEPA), other bilateral and international issues, including UN reforms and the situation in Afghanistan and Pakistan.However,
the focus was clearly on the nuke deal, the discussions on which the two countries propose to conclude as quickly as possible
without setting any time-line.Addressing a joint press conference with Krishna after the three-hour talks between the two sides,
Okada candidly admitted that initiating negotiations with India on the nuclear pact was the toughest decision he had taken during
his stewardship of the Japanese Foreign Ministry, given the fact that India was not a signatory to the NPT. He also acknowledged
that the proposal for a nuclear agreement with India was facing sharp criticism back home, since Japan is the only country to have
experienced a nuclear attack.He also told the Indian side that the philosophy of nuclear disarmament and non-proliferation must
be incorporated in the proposed accord on nuclear cooperation. Asked if Japan had advised India against detonating another
nuclear device, Okada said: “I don’t think we can suggest to India to refrain from conducting a test…but if such a thing were to
happen, we shall have no option but to suspend our cooperation with India (in the field).”The two countries will continue and
enhance consultations within the G-4 process for reforms of the UN, including the Security Council. They also welcomed the
inclusion of the US and Russia in the East Asia Summit (EAS).
National Innovation Council
Prime Minister Manmohan Singh has approved the setting up of a National Innovation Council to prepare a road map for the
'Decade of Innovation 2011-2020'. Sam Pitroda, adviser to the Prime Minister on public information infrastructure and
innovations, will head the National Innovation Council.The Council has been given the mandate to evolve an Indian model of
innovation focussing on inclusive growth and creating an appropriate eco-system conducive to fostering inclusive innovation.It
will delineate appropriate policy initiatives within the government required to spur innovation. It will also promote the setting up
of sectoral innovation councils and state innovation councils.While encouraging all important sectors of the economy to innovate,
the NIC will take special efforts to facilitate innovation by micro, small and medium enterprises.Innovation in public services
delivery and encouraging multi-disciplinary and globally competitive approaches for innovations would be focused on by the
council.
INTERNATIONAL AFFAIRS
China overtakes Japan as second-largest economy
After three decades of spectacular growth, China has passed Japan in the second quarter of 2010 to
become the world’s second-largest economy behind the United States. The milestone, though
anticipated for some time, is the most striking evidence yet that China’s ascendancy is for real and
that the rest of the world will have to reckon with a new economic superpower.The recognition
came on August 16, 2010, when Tokyo said that Japan’s economy was valued at about $1.28 trillion
in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the
quarter, substantially less than forecast. That weakness suggests that China’s economy will race
past Japan’s for the full year.Experts say unseating Japan—and in recent years passing Germany,
France and Great Britain—underscores China’s growing clout and bolsters forecasts that China will
pass the United States as the world’s biggest economy as early as 2030. For Japan, whose economy
has been stagnating for more than a decade, the figures reflect a decline in economic and political
power. Japan has had the world’s second-largest economy for much of the last four decades,
according to the World Bank. And during the 1980s, there was even talk about Japan’s economy
someday overtaking that of the United States. But, while Japan’s economy is mature and its
population quickly aging, China is in the throes of urbanization and is far from developed, meaning
it has a much lower standard of living, as well as a lot more room to grow. China is already a major
driver of global growth. The country’s leaders have grown more confident on the international stage
and have begun to assert greater influence in Asia, Africa and Latin America, with things like special
trade agreements and multi-billion dollar resource deals. Beijing is also beginning to shape global
dialogues on a range of issues; for instance, in 2009 it asserted that the dollar must be phased out
as the world’s primary reserve currency.While the United States and the European Union are
struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb
up the economic league tables by investing heavily in infrastructure and backing a $586
billion stimulus plan.There are huge challenges ahead, though. Economists say that China’s
economy is too heavily dependent on exports and investment and that it needs to encourage
greater domestic consumption—something China has struggled to do. The country’s largely state-
run banks have recently been criticized for lending far too aggressively in 2009, while shifting some
loans off their balance sheet to disguise lending and evade rules meant to curtail lending growth.
China is also locked in a fierce debate over its currency policy, with the United States, European
Union and others accusing Beijing of keeping the Chinese currency, the renminbi, artificially low to
bolster exports—leading to huge trade surpluses for China but major bilateral trade deficits for the
United States and the European Union. China says that its currency is not substantially undervalued
and that it is moving ahead with currency reform.Regardless, China’s rapid growth suggests that it
will continue to compete fiercely with the United States and Europe for natural resources but also
offer big opportunities for companies eager to tap its market.
US ends combat mission in Iraq
On August 31, 2010, US President Barack Obama announced an end to the US combat mission in
Iraq, not with a declaration of victory but rather a sombre admission that the US had paid a “huge
price.”Announcing an end to Operation Iraqi Freedom in a nationally televised speech from the
White House, the President said the Iraqi people now have lead responsibility for the security of
their country.But as US troops roll out of Iraq, the country continues to be locked in a political
stalemate with disagreement over who will lead it, after elections failed to throw up a clear winner.
Obama urged Iraq’s leaders to “move forward with a sense of urgency to form an inclusive
government that is just, representative, and accountable to the Iraqi people.” “And when that
government is in place, there should be no doubt: The Iraqi people will have a strong partner in the
United States. Our combat mission is ending, but our commitment to Iraq’s future is not,” he added.
Anthony Cordesman of the Center for Strategic and International Studies said while US troops may
have withdrawn, the Iraq war is not over, it is not “won,” and any form of stable end state in Iraq is
probably impossible before 2020.A transitional US force will remain in Iraq with a mission of
advising and assisting Iraq’s security forces, supporting Iraqi troops in targeted counter-terrorism
missions, and protecting US civilians.
Mid-East Summit
US President Barack Obama waded into a new round of Middle East diplomacy September 1, 2010,
seeking momentum for revived peace talks clouded by a flare-up of West Bank violence and a
deadlock over Jewish settlements.Obama met Israeli Prime Minister Benjamin Netanyahu as he
launched a series of one-on-one meetings with Middle East leaders attending a US-led peace
summit that culminated with the first direct Israeli-Palestinian talks in 20 months.With Obama's
peace bid facing broad skepticism and the clock ticking toward the September 26, 2010 expiration
of an Israeli settlement construction freeze, Israel's defence minister sounded a conciliatory note
about the prospects for sharing Jerusalem, an issue at the heart of the decades-old conflict. But big
obstacles remain to Obama's quest for a peace deal that eluded so many of his predecessors.Hamas
militants declared war on the talks even before they began, killing four Jewish settlers in the
occupied West Bank, vowing more attacks and underscoring the threat hard-liners pose to the
fragile peace process.The summit marked Obama's riskiest plunge into Middle East diplomacy, not
least because he wants the two sides to forge a deal within 12 months, a target many analysts call
a long shot.
Cricket shamed again
Yet another match-fixing scandal rocked Pakistan cricket on August 29, 2010, engulfing its captain
Salman Butt, brilliant pace duo of Mohammad Asif and Mohammad Amir and four other players,
leading to the arrest of a bookie in London and questioning of the players by the Scotland Yard after
a tabloid sting.The ‘News of the World’ tabloid alleged that a Pakistani man Mazhar Majeed had paid
bribes to the players to bowl no-balls in the series and the Lord’s Test. The video evidence that the
tabloid has presented also shows Majeed talking about his links with Indian bookies.The two
Pakistanis who bowled no-balls allegedly on directions from Majeed were Asif and Aamir. Both
bowlers delivered three no-balls during the Lord’s Test.

CURRENT AFFAIRS: SEPTEMBER 2010

NATIONAL AFFAIRS
RBI’s mid-term review
The RBI, in its first mid-quarter review of its monetary policy, increased repo and reverse repo rates leaving the cash reserve ratio
(CRR) unchanged as it battles to contain inflation.The central bank noted that food inflation has risen to 15.10 per cent for the
week ending September 4, thus making it necessary to rein in liquidity. As a result, RBI raised short-term borrowing rate (reverse
repo) by 0.50 percentage points to 5 per cent and lending rate (repo) by 0.25 percentage points to 6 per cent. The increased rates
aim to make financing costly thus curbing consumption.However, the RBI said that inflation rates have reached a plateau. The
apex bank also signalled banks to raise fixed deposit rates and also noted that the government was on target to contain the fiscal
deficit.
Unique Identification Authority of India
The Union Cabinet has cleared a new law providing for strict penal action and hefty fines going up to Rs 1 crore to guard against
misuse of data collected for allotment of a Unique Identity Card or a Aadhar number to Indian citizens.The proposed legislation,
titled the National Identification Authority of India Act, seeks to give statutory powers to the Unique Identification Authority of
India (UDAI), created as an attached office under the Planning Commission.The decision to enact a legislation was taken after
fears were expressed over the privacy and security of data collected by the UDAI. In addition, several civil rights groups had also
pointed out that actions of the UDAI could well be questioned in the absence of a legal framework.This scheme of providing
unique identity number to the citizens of the country took off on September 29 when Prime Minister Manmohan Singh presented
the first such number at a function in the tribal district of Nandurbar in Maharashtra.
Job scenario in India improves
According to the Ma Foi Randstad Employment Trends Survey, there is optimism in the economic scenario across all sectors of
India and most of the new jobs have been created are in services. Conducted among 650 companies across 13 industry segments
that included eight Indian cities, the survey revealed 418,000 jobs were created between January and June, 2010, with the
healthcare sector creating 121,000 jobs, and another 63,000 in the hospitality sector. The top five sectors leading the boom are
healthcare, hospitality, real estate and construction, information technology and IT-enabled services, and education, training and
consulting.Real estate and construction leads with the highest growth in number of people employed. It also expects growth in
average salary by about four per cent, followed by pharma (3.5 per cent) and healthcare (3.4 per cent) during the third quarter.
The estimated proportion of experienced workforce is the highest in the pharma sector, 87 per cent. Healthcare is estimated to
have the highest percentage of freshers,at 38 per cent. Kolkata has the highest estimated percentage of experienced workforce, at
82 per cent, and New Delhi the highest estimated percentage of freshers (35 per cent).
Fund to boost innovation
The National Innovation Council (NIC), a body to promote new ideas for inclusive development, has announced the setting up of
a Rs 1,000 crore fund to encourage innovation.“A major portion of the fund will come from the private sector and not the
government,” the chairman of the council, Sam Pitroda, said.One of the council members and renowned film-maker, Shekhar
Kapur, also mooted the idea of starting a television reality show that would provide a platform for the young minds to showcase
their innovative ideas for solving the problems of the economy.Set up by Prime Minister Manmohan Singh, the council is aimed
at energising innovation initiatives so as to make them part of the national effort aimed at reducing poverty, improving
governance and making development more inclusive.The aim of NIC is to herald a mindset change and create a push at the
grassroots level so that more and more people are involved in shaping a national-level innovation strategy.The council’s mandate
also includes formulating a roadmap on innovation for the 2010 to 2020 period, focusing on inclusive growth.
Munda sworn in as Jharkhand Chief Minister
On September 11, 2010, BJP leader Arjun Munda became the eighth Chief Minister of the 10-year-old Jharkhand State, as leader
of a coalition with, among others, the Jharkhand Mukti Morcha. Munda, who is having a go at the top job for the third time, will
have two deputies — Sudesh Mahato of the All Jharkhand Union and JMM patriarch Shibu Soren's son, Hemant Soren.Although
the function at the Governor's house showed the deep rift in the BJP over the tie-up with the JMM—the BJP's partner last time in
a government that lasted only for five months—Munda said he would focus on strengthening the party's grass-root level.
Visit of President of Mozambique
On September 30, 2010, during a meeting between President of Mozambique Armando Guebuza and Prime Minister Manmohan
Singh, India and Mozambique inked three pacts and a credit line of $500 million was extended to that country for infrastructure
projects, agriculture and energy.The two countries have also decided to create a partnership based on greater political
engagement, deepening of economic cooperation, strengthening of defence and security cooperation, specially to secure sea lanes
against piracy, and cooperation in capacity building and human resource development.India would also support establishment of
training and planning institutions in Mozambique to support capacity building in the coal industry, besides supporting capacity
building for the defence and police forces of that country, the Prime Minister said.Expressing concern over the safety and security
of sea lanes in the Indian Ocean, Guebuza assured to provide all possible assistance to protect them.
Dhaka okays crucial highway link to Kolkata
In major development, Bangladesh has finally agreed to start the construction of a highway that will not only provide transit
facilities, ensuring easy movement of goods, but also drastically shorten the circuitous route—crucial from the military point of
view—between north-eastern States and the port city of Kolkata.The project—to be primarily financed by India—is part of the
larger Asian Highway network project connecting the Asian nations. The highway project between India and Bangladesh had
been hanging fire for more than five years, with Dhaka stalling it for one reason or the other—primarily due to pressure from
Pakistan and China.The change came after the Sheikh Hasina Government came to power and in July 2009 Indian negotiators
managed to push Bangladesh to ink the inter-governmental agreement. The first route will enter from Bengal into Bangladesh at
the existing Benapole land port on the border and run across eastwards via Jessore and Dhaka; passing through Sylhet, located on
the north-eastern edge of Bangladesh, it will enter Assam/Meghalaya.The second axis will start from North Bengal and enter
Bangladesh at Panchgarh and run southwards via Srirajganj to Dhaka and further southeast to Cox Bazar and Chittagong before
entering into Myanmar. India will be able to use both routes.Once ready, the highway will solve India’s major problem of moving
goods into north-eastern States of Nagaland, Tripura, Mizoram and Manipur. At present, it can take up to five days for a truck
from Kolkata to reach these areas, adding up to the costs, besides the time delay.
Crucial military pact with South Korea
Signalling a dramatic change in its strategic positioning, especially vis-à-vis China, India, on September 3, 2010, entered into a
crucial joint research and manufacturing agreement with South Korea to co-develop and co-produce military equipment.Both
countries are neighbours of China and have a rather testy and tense relationship with it.On the military front the importance of the
agreement can be gauged from the fact that India has such agreements for co-developing and co-producing military equipment
with its traditional “friend” Russia and other ally, Israel. It also has product-based cooperation for joint production of key military
equipment with the French and Italians. Following the agreement, experts have placed India-South Korea military relations at par
with Indian relations with Russia and Israel.Memorandums of Understanding were signed following a 90-minute discussion
between high-level delegations led by Defence Ministers, AK Antony and Kim Tae-young, respectively. This was the first-ever
visit of an Indian Defence Minister to South Korea.
Visit of Polish Prime Minister
Polish Prime Minister Donald Tusk visited India on September 7, 2010. The Indo-Polish defence cooperation figured prominently
during talks between the visiting dignitary and Prime Minister Manmohan Singh. Since most of the Indian military hardware was
acquired in the 1970s from the then Soviet Union, Poland, which was a key ally of former USSR, has the spares and the
technology for upgrading the equipment with the Indian forces.Poland is keen to sell tank recovery vehicles to India. The proposal
was made during Antony’s visit to Warsaw in April for a meeting of the joint working group (JWG) on defence cooperation
between the two countries.A tank recovery vehicle is a type of armoured fighting vehicle used to repair battle or mine damaged as
well as broken down vehicles during combat operations, or to tow them out of the danger zone for more extensive repairs.Apart
from making these vehicles available to India, Poland has shown interest in providing to New Delhi its sophisticated military
hardware up-gradation and maintenance technology. It is also interested in joint ventures with Indian companies. Poland can also
help India upgrade Indian T-72 tanks, BMP II infantry combat vehicles and a variety of air defence systems purchased from the
former Soviet Union.But more than defence ties, it is the prospect of a quantum jump in economic ties with Poland that excites
New Delhi. Poland, a key member of the European Union (EU), is considered by India as a gateway to Europe and Central Asia.
Allahabad High Court Verdict on Babri Masjid-Ram Janambhoomi dispute
On September 30, 2010, the much-awaited judgement of the Lucknow Bench of the Allahabad High Court unanimously ruled that
the idols of ‘Ram Lalla’ in the makeshift temple at the disputed site in Ayodhya cannot be removed.
The three-judge Bench of Justices S.U. Khan, Sudhir Agarwal and Dharamveer Sharma separately delivered the historic verdict.
In a 2-1 majority verdict, Justices Khan and Agarwal decreed that the 2.7-acre land comprising the disputed site should be divided
into three equal parts and be given to Sunni Waqf Board, Nirmohi Akhara and the party representing ‘Ram Lala Virajman’ (Ram
deity).However, the third judge Justice D.V. Sharma ruled that that the disputed site is the birth place of Lord Ram and that the
disputed building constructed by Mughal emperor Babur was built against the tenets of Islam and did not have the character of the
mosque. The Bench directed maintenance of status quo at the site for three months and invited suggestions from all the parties for
demarcation of the land.The judges also dismissed the claims of the Sunni Central Waqf Board over the Babri Mosque due to
limitation or becoming time barred as well as the claim of the Nirmohi Akhara.With a 2-1 majority, the Bench held that all the
three parties, namely Muslims, Hindus and Nirmohi Akhara were joint titleholders of the property in dispute. Both Justices Sudhir
Aggarwal and SU Khan made it clear that the share of the Muslim parties shall not be less than one third of the total area of the
premises. “...If while allotting exact portions some minor adjustment in the share is to be made then the same will be made and the
adversely affected party may be compensated by allotting some portion of the adjoining land,” observed Justice Khan.The area
under the erstwhile central dome where the idols are placed in the makeshift temple has been allotted to the Hindus. The inner
courtyard has been given to both the communities “since it was being used by both since decades and centuries”, noted Justice
Aggarwal.The ‘Ram Chabootra’, ‘Sita Rasoi’ and ‘Bhandar’ area in the outer courtyard will go to the Nirmohi Akhara. The outer
courtyard is once again to be shared by the Nirmohi Akhara and the Muslim parties.
Highlights
—2.7 acre disputed site to be divided in three equal parts.—Two portions to be handed over to Hindus, Muslims will get one.
—All three parties—Muslims (Sunni Waqf Board), Nirmohi Akhara and the parties representing ‘Ram Lalla Virajman’—
declared joint title-holders.—The portion below the central dome, where the idol of Lord Rama is presently kept in makeshift
temple, belongs to Hindus.—All three parties may utilise the area to which they are entitled to by having separate entry for egress
and ingress of the people without disturbing each other’s rights. The parties may approach Centre which shall act in accordance
with the directions and also as contained in the SC verdict.
Historical Background
The ‘first title suit’ was filed on January 19, 1885. It was submitted by Mahant Raghubirdas in the court of Faizabad sub-judge,
seeking permission for “puja” (worship) rights over a “chabootra” (platform) in front of the mosque which he claimed was Ram’s
birthplace.In his February 24, 1885, order, the judge said: “It (chabootra) was so close to the existing masjid that it would be
contrary to public policy to grant a decree authorising plaintiff to build a temple as desired by him.”Sub-Judge Hari Kishan said:
“It is most unfortunate that a masjid should have been built on land specially held sacred by the Hindus, but as the event occurred
356 years ago, it is too late now to remedy the grievance. All that can be done is to maintain the status quo. In such a case as the
present one any innovation could cause more harm and derangement of order than benefit.”Then Raghubirdas moved to the
Faizabad district judge, Colonel J.E.A. Chambier, who, after a spot inspection, dismissed the appeal on March 17, 1886, on the
same grounds. Raghubirdas then filed an appeal before the Oudh Judicial Commissioner, W. Young, who also declined his plea in
his judgment of November 1, 1886.Young observed: “This spot is situated within the precincts of the grounds surrounding a
mosque erected some 350 years ago, owing to the bigotry and tyranny of the emperor who purposely chose this holy spot,
according to Hindu legend, as the site of his mosque.”
INTERNATIONAL AFFAIRS
Gillard manages to retain power in Australia elections
On September 7, 2010, ending weeks of political uncertainty, Australia’s first woman Prime Minister
Julia Gillard staked claim to form a new government after two king-maker independent MPs
extended support to her Labour party, giving it a wafer-thin one-seat majority in the first hung
Parliament in nearly 70 years.Labour now controls 76 seats in Parliament’s 150-member House of
Representatives, with the opposition Coalition of Liberal party leader Tony Abbott having 74
seats.Gillard said her minority government would be held to higher standards of accountability as a
result of the deal struck with the independents. She added that her government will spend $9.9
billion on development projects as part of the deal with the rural independents.
Political crisis in Nepal continues
On September 26, 2010, Nepal's Constituent Assembly failed for the eighth time, during the past
four months, to elect a new Prime Minister. The deadlock continues, partly because other
mainstream parties do not trust the single, largest party, Unified Communist Party of Nepal
(Maoist), because it continues to put its faith in one-party rule and continues to threaten it would
resume armed struggle.The last 20 years have seen Nepal move from a Hindu kingdom to a
democratic and secular republic. The 239 year old monarchy was cast aside in 2006 and people
voted for a Constituent Assembly and an interim government in 2008. Maoists emerged as the
largest single party but fell short of a majority.In the 601-member House, two seats are vacant and
if the Speaker and the Deputy Speaker are excluded, it has an effective strength of 597 members.
The break-up is as follows : Unified CPN (Maoists): 237, Nepali Congress: 114, UML: 108, four
Madhes based parties: 82, smaller parties & others: 56.Unified CPN (Maoist) continues to say it has
no faith in parliamentary democracy, believes in one-party rule and insists on absorbing its
underground militia into the Nepalese Army. It also tried to take arbitrary decisions and sought the
removal of the President and the Army Chief. Other parties are not sure it would change its
spots.The Constituent Assembly has failed to finalise the Constitution as mandated. The Assembly
extended its own life by one year to complete the task. But differences persist. In the absence of a
consensus between parties, there is a caretaker government with few powers.Having failed to sack
the then Army Chief over the integration of the armed Maoist guerrillas, Prachanda resigned as
Prime Minoster and Maoists pulled out of the government in 2009; then they forced the next
government headed by Madhav Kumar Nepal of UML to also quit.
China-Japan spat
China suspended high-level exchanges with Japan on September 19, 2010, and promised tough
counter-measures after a Japanese court extended the detention of a Chinese captain whose trawler
collided with two Japanese coastguard ships.The spat between Asia’s two largest economies has
flared since Japan arrested the captain, accusing him of deliberately striking a patrol ship and
obstructing public officers near uninhabited islets in the East China Sea.Beijing viewed the detention
as illegal and invalid.
UN convention on terrorism moves a step forward
Rocked by a wave of audacious terrorist attacks in the last two years, Pakistan has finally realised
the futility of opposing the proposed Comprehensive Convention on International Terrorism (CCIT)
just because India was in the forefront of initiating it at the United Nations in 1996.Pakistan, along
with some other Organisation of the Islamic Conference (OIC) countries, had led the campaign
against the proposed convention on various grounds. It had argued that self-determination should
be outside the purview of the convention. It had also insisted that international humanitarian laws
should be taken into account while finalising the text of the convention. Both these objections were
seen as aimed at embarrassing India on Jammu and Kashmir since Islamabad has been demanding
the right to self-determination for Kashmiris and seeking international intervention on the issue.The
opposition to the convention had also come from the US and Israel with the latter insisting that
acting against terrorists indulging in killing innocent people be brought under its purview. The global
treaty seeks to criminalise all forms of international terrorism and deny terrorists, their financers
and supporters access of funds, arms and safe havens.The situation has considerably changed with
just a handful of countries still not convinced why they should back it. “Most countries are now in
favour of the early adoption of the convention but there is a small number of holdouts, may be 10
to 15…efforts are on to convince them also to support it so that a strong message goes out to all
terrorist organisations that the international community is united and determined to jointly fight the
menace of terrorism.

CURRENT AFFAIRS: OCTOBER 2010

NATIONAL AFFAIRS
India trails in Global Hunger Index
The IFPRI’s Global Hunger index ranks India in the “alarming” group (the categories: moderate, serious, alarming and extremely
alarming), below many failed States ruled by tyrants and despots. The ranking considers the number of children under five who
are underweight, malnourished or wind up dead, particularly girls.In Asia, everyone, except Bangladesh, which is just one rank
below India, is doing better. China is at number nine, Pakistan at 59, Nepal at 56. India is bested by a host of tottering States,
including Guinea-Bissau, Togo, Burkina Faso, Sudan, Rwanda and Zimbabwe.India’s approach to hunger has been to throw a
programme at every failing. There is the world’s largest programme for nutritional, health and school needs of children under six,
the Integrated Child Development Services (ICDS), which runs 1.4 million centres nationwide with a budget of Rs 7,806 crore for
2020-11. Then, there is the world’s biggest cooked-meal programme, covering 119 million children in government schools up to
class VIII with a budget of Rs 9,440 crore. India also has the world’s largest public distribution system (PDS) for subsidised food,
with a budget of Rs 55,578 crore, and the world’s biggest cash-for-work programme, the National Rural Employment Guarantee
Act (NREGA), with a budget of Rs 40,100 crore. Hunger in India is definitely not a problem of resources. However, hunger
persists despite spectacular economic expansion, and it is disproportionate to rising incomes. Behind every story of hunger and
malnutrition is a collective national apathy towards the poor, an unreformed, struggling agriculture sector, the low status of
women and collapsing administration. In addressing hunger, the biggest question remains: who’s in charge? Evidence abounds in
leaky multi-billion dollar, anti-hunger programmes: a quarter of the money spent on mid-day meals never reaches the poor, a third
in the NREGA and more than half on the PDS. The failures of the PDS are especially acute. Only 36 per cent of its poor have
below-poverty-line (BPL) cards to access cheap food. Nearly 60 per cent of these cards are with people who are not officially
poor.
National Green Tribunal Notified
The National Green Tribunal (NGT) was officially notified on October 19, 2010 with its Chairperson, Justice Lokeshwar Singh
Panta taking charge of his office. The tribunal is exclusively dedicated to environmental issues. Established by an Act of
Parliament (the National Green Tribunal Act of 2010), it will have circuit benches across the country to try all matters related to
and arising out of environmental issues. The tribunal, which shall also consist of other members, who are experts in the field of
environmental and related sciences, has been empowered to issue directions for the compensation and restitution of damage
caused from actions of environmental negligence.This is the first body of its kind that is required by its parent statute to apply the
“polluter pays” principle and the principle of sustainable development.The erstwhile National Environment Appellate Authority
had ceased to exist with the launch of the NGT.
Tobacco India Report
Global Adult Tobacco Survey (GATS) for India, 2009-10, conducted on 99.9 per cent of India’s population in 29 States, UTs of
Chandigarh and Puducherry has submitted its report. According to it, India’s obsession with tobacco continues despite laws to tell
the users of its lethal consequences. Though 64 per cent of all adults believe tobacco leads to heart attacks, 35 per cent (one-third)
continue to consume tobacco in some form or the other.
Highlights of the report are:
—52 percent adults exposed to second hand smoke at home, highest in J&K (68%), lowest in Chandigarh (15%); 29 percent
exposed in public places.—Cigarette smokers’ monthly expense is Rs 400, as against Rs 94 for bidi smokers.—Monthly cigarette
expenditure is highest in Arunachal (Rs 1,265), lowest in Jharkhand (Rs 181.70).—Mizoram has highest tobacco use (67%), while
Goa (9%), Punjab (12%), and Chandigarh (14%) have lowest.—Mizo women are most addicted (62% use tobacco) as against
least addicted in Punjab (under 1%), Chandigarh, Himachal and Goa (under 5%).—Most tobacco use is in East (45%), Northeast
(44%), and lowest use is in North (19%).
India signs Convention on Supplementary Compensation at IAEA
On October 27, 2010, India signed the Convention on Supplementary Compensation (CSC) at the IAEA in Vienna that will
enable the country to undertake nuclear commerce.
The convention sets parameters on a nuclear operator’s financial liability in the event of a nuclear accident.The convention was
adopted in September 1997 and opened for signature at Vienna a few days later at the 41st General Conference of the IAEA. The
convention provides for compensation in case of transnational implications of a nuclear accident and has been signed by 14
countries. However, only four countries—USA, Argentina, Morocco and Romania—have ratified it so far.Upon entry into force,
the convention would establish a uniform global regime for compensation to victims in the event of a nuclear accident. The CSC
provides for the establishment of an international fund to increase the amount available to compensate victims and allows for
compensating civil damage occurring within a State’s exclusive economic zone, including the loss of tourism and fisheries-related
income.It also sets parameters on a nuclear operator’s financial liability, time limits governing possible legal action, requires that
nuclear operators maintain insurance or other financial security measures and provides for a single competent court to hear
claims.All States are free to participate in the convention regardless of their involvement in existing nuclear liability conventions
or the presence of nuclear installations on their territories. Notably, India is the only country to have such a provision, which was
added after wide political pressure.
ASEAN-India Summit
The 8th ASEAN-India Summit was held at Hanoi, Vietnam on October 30, 2010. Addressing the heads of the state of ASEAN
countries, Prime Minister Manmohan Singh said the conclusion of a “services and investment agreement” between India and
ASEAN would be an important step in “our goal of comprehensive economic cooperation”.With an aim to play a more significant
role in the growing economies of the region, India has been pushing its case for having a bilateral pact in services and investment
at the earliest. Through this pact, India wants to get a foothold in all ASEAN countries for its growing pharmaceutical industry,
besides allowing ease in visa regimes for its IT professionals, healthcare workers and teachers in Brunei, Cambodia, Laos,
Indonesia, Malaysia, Vietnam, Myanmar, Philippines, Singapore and Thailand (ASEAN nations). With an agreement in place for
free trade in services and investment, India can offer a bigger share of the pie to these countries in its infrastructure sector that is
poised for a major growth. Addressing the other leaders at the summit, which came out with a five-year ‘Plan of Action’ outlining
a roadmap for enhanced multi-faceted cooperation, Manmohan Singh said: “India’s economy is expected to witness a sustained
growth rate of 9-10 per cent in the coming years, which would offer many opportunities for trade and investment. Our experience
of implementation shows that we need to work very hard at all levels if we have to accelerate the pace of engagement as outlined
in the plan of action”.
Prime Minister Manmohan Singh’s Japan visit
Prime Minister Manmohan Singh visited Japan on October 25, 2010. The visit ended with the successful conclusion of
negotiations for the Comprehensive Economic Partnership Agreement (CEPA). As a first step in realising CEPA, both countries
agreed to a “sweeping” liberalisation of their bilateral visa regime.The successful conclusion of CEPA is expected to elevate trade
and economic relations between the two countries to the next level. Though the trade between the two nations remained almost
stagnant for decades, it has been growing rapidly since past three years. The agreement will foster new business opportunities,
enhance competitiveness of private sectors, and encourage closer partnership between the private sectors in India’s teeming SMEs
and Japan’s infrastructure and hi-technology enterprises.India is hoping that the CEPA coming into place will also balance out the
trade imbalance between the two countries. As of now, trade between the two countries is strongly in favour of Japan. India is
also hoping that its generic pharmaceutical and IT sectors will benefit largely as this agreement opens up the Japanese market for
India. While Japan exports marine products, iron ore and petroleum products to India, electrical and electronic goods, iron and
steel products, chemicals and auto components are exported by India.Since India-Japan CEPA is truly comprehensive for trade in
goods, investment and services, besides allowing movement of natural persons, it will improve the India-Japan partnership and
enhance their global partnership. This will also mean that goods being traded will become cheaper, with the lifting of trade
barriers.
Visit of Prime Minister Manmohan Singh to Malaysia
Prime Minister Manmohan Singh visited Kaula Lumpur on October 27, 2010. The highlight of the visit was agreement between
India and Malaysia to forge new ties on two of the most important issues for their economies—sealing the Comprehensive
Economic Cooperation Agreement (CECA) and contain the threat of terrorism through establishment of a Joint Working Group
on Counter Terrorism, besides collaboration in defence.The two leaders said that the Free Trade Agreement (FTA) will be signed
by January 31, 2011 and this will be implemented by July 1, 2011.Taking into account the India-ASEAN trade in goods
agreement, that came into effect from January 1, 2010, both sides have offered ASEAN plus market access in goods. India and
Malaysia have also agreed to provide access of each others’ services market across all modes and various sectors. The two
countries will now finalize areas of economic cooperation in infrastructure development, creative industries, tourism, SMEs,
business facilitation, science and technology and human resource development.Malaysia is the second largest trading partner for
India within ASEAN, and India is the largest trading partner for Malaysia in South Asia, excluding China. Bilateral trade between
the two countries is now estimated at $ 10.5 billion, and this has doubled in the past five years. The two leaders, while
condemning terrorism in all its forms and manifestations, agreed to enhance cooperation in counter terrorism, through information
sharing and setting up a Joint Working Group on counter-terrorism. This is of great importance for India as Malaysia is
understood to be emerging as a logistics, regrouping and fund raising hub for three militant groups—militants from Punjab, Tamil
Tigers and Al-Qaeda. Jamia Islamia, based in Indonesia, is an Al Qaeda affiliate, and is helping the latter in logistics and fund
raising there. India and Malaysia have also agreed to enhance defence exchanges and cooperation through regular exchanges
between the defence ministers and senior defence officials, chiefs of armed forces and regular service to service staff talks and
regular ship visits.The two sides also signed as many as five agreements. These include MoU on cooperation in field of traditional
systems of medicine; MoU on Cooperation in Terrorism; MoU for Cooperation in IT sector; Agreement between CSIR and UNIK
of Malaysia on Research and Development Collaboration; and, Cultural Exchange Programme.
India-Russia to jointly develop advance stealth jet
India and its old military partner Russia will soon ink a deal to jointly develop an advance stealth fighter. Defence Minister A.K.
Antony said during the visit of his Russian counter-part A.E. Serdyukov on October 7, 2010, that he has sorted out all issues
regarding the joint development of the fifth generation of fighter aircraft (FGFA).Apart from this, the joint development of the
multi-role transport aircraft (MTA) will be the other major military programme between the two nations over the next ten
years.Notably, the announcement balances out the “perceived” tilt in India’s decision to buy a series of aircrafts from the US. This
includes medium haul transporters, the C-130-J, long-range maritime reconnaissance aircraft, the P8-I, and some VVIP jets from
Boeing.The FGFA will be the IAF’s frontline fighter from 2016-2017 onwards and will cost the nation $25 billion, dwarfing the
much-hyped $11-billion deal for the purchase of another 126 fighters. With stealth technology, super manoeuvrability and
supersonic speed, it will match the F-22 raptor produced by the US.In case of the MTA, the two nations formed a $600 million
joint enterprise in September 2010, for designing and producing it. The planes will be designed at carrying load of around 20
tonne, with speeds in the region of 900 km, and will be an asset on shorter runways in Ladakh and the North East. Design
specialists from Ilyushin, maker of best-selling transport plane, IL-76, will be on board.
N-deal with South Korea
India and South Korea have struck a deal to finalise an agreement on civil uses of nuclear energy. This was a major success for
India during the Prime Minister Manmohan Singh’s Asia tour.The issue came up for discussion during the bilateral meeting of the
Prime Minister with the President of the Republic of Korea, Lee Myung-bak, at Hanoi, on the sidelines of the 17th ASEAN
Summit. The Korean President has invited the Prime Minister to Korea in 2011 and the deal is likely to be signed then.With this,
Korea becomes the ninth country with which India will be signing the nuclear agreement. Ever since the Nuclear Suppliers Group
(NSG) ended India’s isolation from global nuclear commerce mainstream in 2008, India has signed civil nuclear pacts with
U.S.A, France, Russia, Canada, Mongolia, Kazakhstan, Argentina and Namibia.
India strengthens ties with Vietnam
India has enlarged its scope of cooperation and relations with Vietnam—another “not-so-happy” neighbour of China. Defence
Minister A.K. Antony, during his visit to Vietnam, announced a slew of measures to expand cooperation as part of the nation’s
“look east policy” aimed at engaging key countries situated east of India. Under an arrangement, New Delhi will provide support
to Vietnam to enhance and upgrade the capabilities of its services in general and Navy in particular. Apart from capacity building
for repair and maintenance of its equipment, most of which are of Russian origin, the armies of the two countries will also
cooperate in areas like IT and English training of Vietnamese Army personnel.In return, Hanoi has offered maintenance and
repair facilities at Vietnamese ports and called for more ships of the Indian Navy to visit them. The navies of the two nations often
exercise together.To take their ties to the next level, both the armies will also have joint training in mountain and jungle warfare in
India in 2011 and will also work towards developing cooperation among defence institutes.
CWG Corruption probe
Prime Minister Manmohan Singh has appointed a high-level committee headed by a former Comptroller and Auditor General,
V.K. Shunglu, to go into allegations of corruption related to the Commonwealth Games held in New Delhi in October 2010.
The developments came as opposition parties, which had held their fire during the 12-day event, stepped up their demand for
thorough probe into corruption charges so that those guilty can be brought to book.
INTERNATIONAL AFFAIRS
EU bows to German call for debt mechanism
German Chancellor Angela Merkel has won European Union backing for a rewrite of EU treaties to
create a permanent debt-crisis mechanism by 2013, to prevent a repeat of the Greece-led shock
that jolted the Euro. As the biggest contributor to Euro 860 billion ($1.2 trillion) in loans and
pledges to stem 2010-s debt crisis, Germany wants to spare taxpayers the costs of any future
operations to rescue financially distressed States.Bonds in Greece, saved from the brink of default
by EU and International Monetary Fund loans in May, led a decline by so- called peripheral European
securities as Germany’s triumph spurred concern that the EU mechanism will force bond holders to
bear the costs of future bailouts. The extra yield investors demand to hold Greek 10-year debt over
German equivalents rose to 813 basis points. German bonds advanced as investors sought safer
assets, paring their weekly drop.
G-20 raises developing nations’ quota in IMF
The Group of 20 Finance leaders struck a landmark deal on October 22, 2010, to boost developing
countries’ power in the International Monetary Fund, even as they failed to set targets for a wide-
ranging global economic rebalancing. The IMF deal was hailed by fund MD Dominique Strauss-Kahn
as a ‘historical’ moment that will see Europeans give up two seats on its 24-strong board to
powerful developing countries and transfer 6 percent of votes to them.
India is world’s third largest carbon emitter
India is now world’s third biggest carbon dioxide emitting nation after China and the US. The new
emission data from the United Nations was a cause of worry for India’s climate negotiators at the
next round of talks in Tianjin in China, held in October 2010.China, in 2009, moved to the top
position while contributing 23 per cent of the total global emissions and India, in 2010, surpassed
Russia to take the third position with five percent.The saving grace is that the difference in total
carbon emissions between the US (22 per cent) and India is still huge. Russia's emissions have
been falling because of economic slowdown.India's per-capita carbon emission is still lowest in the
world (about 4.5 tonnes) but the demand for energy is rising, especially among the middle-
class.The pressure on India and China to reduce emissions is rising. US chief climate negotiator
Todd Stern told a meeting of major economies forum that a legally binding climate treaty was not
possible until India and China take “obligation” to reduce emissions.
ASEAN Summit
The 17th ASEAN Summit was held in Hanoi, Vietnam, on October 28-30, 2010. The meeting was
considered a success, with all members agreeing to cooperate with one another in solving the
 region’s economic downturn.The 17th ASEAN Summit focused on the contents of building the
community and implementing the ASEAN Charter, external relations and key role of the body,
sustainable development and coping with global challenges.

Business News
After three decades and more than 220 million units, Sony has stopped selling itsWalkman cassette player in Japan, admitting the
gadget could not keep up in the digital age. Cherished by a generation of joggers, school children and music fans since its launch in
1979, the Walkman evolutionised the way people listened to music but has since been overtaken by another icon of the modern era
—the iPod. The July 1, 1979, roll-out of the portable cassette player helped transform Sony into a global electronics powerhouse.
The Japanese giant sold 30,000 Walkmans in the first two months after its launch, and 50 million within a decade.
Eurocopter, a company owned by European consortium, European Aeronautic Defence & Space Co. NV (EADS), has become the
first global chopper company to open an office in India.
Pfizer Inc has decided to acquire King Pharmaceuticals, a move that will bolster the pharma major’s presence in the pain treatment
segment.
Hewlett-Packard has appointed former SAP AG CEO Leo Apotheker as its CEO and President.
Bharti Airtel will partner telecom equipment suppliers Ericsson and Huawei to expand and manage its mobile network in
Bangladesh.

URRENT AFFAIRS: NOVEMBER 2010

NATIONAL AFFAIRS
Nitish wave sweeps Bihar
Voters in Bihar delivered a memorable and truly massive mandate to the NDA, led by Nitish Kumar of the Janata Dal (United).
The NDA together cornered as many as 206 (JDU 115 and BJP 91) of the 243 seats in the Assembly, a landslide that had eluded
even Lalu Yadav at his peak.Even more spectacular was the strike rate of the BJP, which contested 102 seats and won 91 of them,
winning virtually 9 of the 10 seats the party contested. The BJP appears to have done equally well in urban as well as rural
constituencies, riding piggyback on the public image of Nitish Kumar.The share of votes polled by different parties, however, tell
a slightly different story. While the NDA got 40 per cent of the votes polled, up 2 per cent from the 38 per cent of the votes polled
in the general election in 2009 and from 36 per cent polled by them in the last Assembly election in 2005.Drastic improvement in
Law and Order situation, speedy trials to convict 50,000 criminals, some from his own party, empowered women, reservation of
half of the seats in local bodies and primary school teachers category for women were some of the major reasons for Nitish
Kumar retaining power in Bihar.Absence of local leaders and lack of ground work, and sudden decision to contest all 243 seats
dissipated the focus and let to the dismal performance of Congress party.On November 26, 2010, Nitish Kumar was sworn in as
the Bihar Chief Minister for the second consecutive term and the third time at a simple ceremony at the sprawling Gandhi
Maidan, Patna. Senior BJP leader Sushil Kumar Modi was sworn in as a Cabinet Minister and designated as Deputy Chief
Minister.
NRIs to get voting rights
It’s celebration time for nearly 11 million Non-Resident Indians (NRIs) across the globe. They will now be able to exercise their
franchise in the elections in the country of their origin. Both Houses of Parliament had passed the Representation of People
(Amendment) Bill in the Winter Session of Parliament to grant voting rights to NRIs.Citizens of India who have not acquired the
citizenship of any other country and were living abroad owing to employment, education, or otherwise, are now eligible to
register their names in the electoral rolls in the constituency of the address shown in their passport and to vote when and if they
are physically present when polls are held.Until now, an NRI’s name got deleted from the voters’ list if he or she stayed outside
the country for more than six months at a stretch.
India’s first eco-sensitive zone on a major river
The Union government has decided to declare the natural course of the Ganga in 135 km stretch from Gaumukh to Uttarkashi in
Uttarakhand as India’s first “eco-sensitive” zone on a major river. This means that part of the river cannot be disturbed for any
projects. Following this decision, Prime Minister Manmohan Singh approved a proposal of scrapping three big hydel projects—
Loharinag Pala, Bhairon Ghati and Pala- Maneri—and providing 2,000 MW of free power to Uttarakhand as compensation for the
same.The decision is direct fallout of Environment Minister Jairam Ramesh’s assurance to religious gurus, including senior BJP
leaders, and environment experts that river Ganga will be allowed to run its natural flow in the 135-km stretch. The minister had
support of non-official members of the authority, who had been advocating that no dams—small or big—be allowed on the river.
Mahadayi Water Disputes Tribunal
The Union government has constituted the Mahadayi Water Disputes Tribunal with a sitting Supreme Court judge, Justice J.M.
Panchal as its Chairman. Justice Viney Mittal of the Punjab and Haryana High Court and a former judge of Andhra Pradesh High
Court, Justice P.S. Narayana, have been appointed as members. The Tribunal has been constituted on a request sent by Goa in
July 2002, for adjudication of the water disputes with Karnataka relating to Mahadayi River. Maharashtra also stands to benefit
from its adjudication. The need for setting up the three-member tribunal was being felt since the Union Ministry of Water
Resources had tried to resolve the dispute, but was not successful.
Visit of President Patil to Abu Dhabi
Indian President Pratibha Patil made a goodwill visit to Abu Bhabi and Dubai in November 2010.India’s economic aspirations
and strong growth make it an ideal destination for foreign investment, President Pratibha Patil told members of the Abu Dhabi
Chamber of Commerce.All religions of the world unite was the President’s second message in Abu Dhabi.At an interaction with
students of Indian schools from the UAE at the Abu Dhabi Indian School, the President advised them to build friendships and
develop the ability to work constructively as a team. She opined that education was not merely necessary to secure a job but an
investment into the future and a way to imbibe the concepts of peace, harmony and tolerance.Inaugurating the Indian Islamic
Centre, the President said that it was a tribute to the collective efforts of the Indian Diaspora and would serve as a cultural bridge
between India and the UAE. The President arrived in Dubai to a grand reception given by the Indian community. She also
launched a long-awaited 24-hour helpline for distressed Indian workers facing problems with their employers or contracts.
President Patil’s visit to Syria
Indian President Pratibha Devisingh Patil arrived on November 26, 2001, on a four-day state visit to the Syrian Arab Republic.
Her visit assumed special significance since this was the first ever visit of by an Indian President to Syria. Several Memoranda of
Understanding (MoUs), including those on cultural exchange, were signed during the visit. Her talks with President al-Assad gave
a new momentum to the bilateral relations in all fields, particularly on expanding economic and commercial cooperation. The
President’s visit was aimed to bolster a political dialogue between the two countries and discussions were held on bilateral,
regional and international issues, including West Asia peace process.President Patil will also meet Syrian businessmen and
industrialists to find new prospects for bolstering and developing economic and commercial relations between the two countries.
Syria is an important country for India’s energy security needs.Syria has already backed India’s demand for a permanent
membership of the United Nations Security Council and has always tried to act as a moderator for toning down Pakistani rhetoric
in the meetings of Organisation of Islamic Countries.
Visit of President Obama of USA
US President Barack Obama reached India for a three-day official visit on November 6, 2010. He arrived in Mumbai where he
paid homage to the 26/11 Mumbai terror attack victims. Later, addressing the Indian and American entrepreneurs he said several
landmark deals worth US $ 10 billion have been signed between Indian and American companies shortly before his arrival. These
deals, he said, will help in creating more than 50,000 jobs back home in USA.Among the biggest deals announced included
Reliance Power’s purchase of 2,400 MW plants from GE and Spicejet’s deal to buy thirty three Boeing 737 aircraft.President
Obama landed in Delhi on November 7, 2010.On November 8, President Obama addressed the Indian Parliament. The US
President’s speech, which was interspersed with several India-specific references and continuously underlined the fast-improving
partnership between New Delhi and Washington, was attended by a packed House, which included Vice-President Hamid Ansari,
Prime Minister Manmohan Singh, Lok Sabha Speaker Meira Kumar, UPA chairperson Sonia Gandhi, Cabinet ministers and
members of the two Houses of Parliament.If Obama’s support to India for a permanent seat on the UN Security Council was
aimed to please the hosts, the visiting President was equally forthright when he reminded India that this membership also comes
with greater responsibilities which require it to spell out its position on issues like human rights violations.Obama, who was given
a standing ovation at the end of his mesmerising speech, also pleased his hosts with a specific mention to the terrorist
organisations being harboured by Pakistan. While speaking on Iran’s nuclear programme, he said the US and India “can pursue”
the goal of securing the world’s vulnerable nuclear material. “We can make it clear that even as every nation has the right to
peaceful nuclear energy, every nation must also meet its international obligation, and that includes the Islamic Republic of Iran,”
he said.India and the United States pledged to defeat all terrorist networks, including the Pakistan-based Lashkar-e-Taiba (LeT),
and strengthen international cooperative activities that will reduce the risk of terrorists acquiring nuclear weapons or
material.Condemning terrorism in all its forms, Prime Minister Manmohan Singh and US President Barack Obama, in a joint
statement, issued at the end of the American leader’s official engagements in India, called on Pakistan to bring to justice the
perpetrators of the 26/11 Mumbai terror attacks.They reiterated that success in Afghanistan and regional and global security
required elimination of safe havens and infrastructure for terrorism and violent extremism in Afghanistan and Pakistan. The two
leaders also emphasised the importance of close cooperation in combating terrorist financing and in protecting the international
financial system.Deciding to strengthen and expand the Indo-US global strategic partnership, the Indian PM and Obama called for
an efficient, credible and legitimate United Nations to ensure a just and sustainable international order. Singh welcomed President
Obama’s affirmation that in the years ahead, Washington looked forward to a reformed UN Security Council that included India
as a permanent member.Singh and Obama also expressed a commitment to strengthen international cooperative activities that
would reduce the risk of terrorists acquiring nuclear weapons or material without reducing the rights of nations that played by the
rules to harness the power of nuclear energy to advance their energy security. This sentence in the joint statement is obviously
aimed at justifying the Indo-US civil nuclear deal under which India will develop nuclear energy with the assistance of major
world powers to meet its growing electricity needs. Both sides expressed deep concern about the threat of biological terrorism and
pledged to promote international efforts to ensure the safety and security of biological agents and toxins.On the civil nuclear deal,
they reiterated their commitment to build strong bilateral cooperation through the participation of American energy companies in
India on the basis of mutually acceptable technical and commercial terms and conditions that enabled a viable tariff regime for the
electricity generated. The two leaders also decided to take mutual steps to expand US-India cooperation in civil space, defence
and other high-technology sectors commensurate with India’s non-proliferation record and commitment to abide by multilateral
export control standards.Key health and Education pacts singed: A promise to help India battle old and emerging infections and
another of forging collaborations in higher education were the high points of US President Barack Obama’s India visit, which saw
two key pacts being inked in the sectors.On the health front, President Obama and Prime Minsiter Manmohan Singh announced
the setting up of the Global Disease Detection India Centre to come up under the MoU between the National Centre for Disease
Control (NCDC), Delhi, and the Centre for Disease Control (CDC), Atlanta.On the education front, the two sides committed
themselves to a higher education summit in New Delhi in 2011 to develop “collaborations” in the area. Building lab capacity at
home for diagnoses of emerging infectious diseases using well characterised reference materials and advanced technology transfer
that meets CDC and global standards will be the other major takeaways from health MoU.India and the US also launched a joint
initiative for an ‘Evergreen Revolution’ in agriculture to promote food security across the world. As part of the food security
initiative, India’s expertise in agriculture sector will be shared with farmers in Africa. An agreement was also reached between the
two nations for cooperation on forecast of monsoon, the most crucial weather feature for a good crop.Obama said, “like the earlier
collaboration between two countries in agriculture that ushered in ‘Green Revolution’ in India, he expected the ‘Evergreen
Revolution’ to enhance food security for the world”.
Loan scam
On November 24, 2010, the CBI arrested R.R. Nair, Chief Executive Officer (CEO) of LIC Housing Finance, and four other
senior officers of public sector banks and financial institutions, including the LIC, the Bank of India, the Central Bank of India
and Punjab National Bank, on bribery charges to facilitate corporate loans.The arrests and the subsequent talk of a housing scam
spooked stock markets that fell in the last hour of trading by 232 points with financials and real estate stocks, which were directly
related to CBI’s action, bearing the maximum brunt.The CBI said it had busted a racket wherein the private financial services
company, its CMD and other associates were allegedly bribing senior officials of public sector banks and financial institutions for
facilitating large-scale corporate loans. They were also gathering confidential business information from financial
institutions.Officials of various public sector banks and financial institutions, namely the Bank of India, the Central Bank of India,
Punjab National Bank, LIC and LIC Housing Finance Limited were receiving illegal gratification from the private financial
services company that acted as mediator for corporate loans and other facilities from financial institutions.
Post independence, India lost $462 bn in illicit financial flows
Post independence, India lost a staggering $462 billion in illicit financial flows due to tax evasion, crime and corruption, a
research and advocacy group has said in a report. The report, released by Washington-based Global Financial Integrity (GFI),
found that the faster rates of economic growth since economic reform started in 1991 led to a deterioration of income distribution
which led to more illicit flows from India.According to the primary findings of the report titled “The Drivers and Dynamics of
Illicit Financial Flows from India: 1948-2008”, India lost a total of $213 billion in illicit financial flows (or illegal capital flight).
These illicit financial flows were generally the product of: tax evasion, corruption, bribery and kickbacks, and criminal
activities. From 1948 through 2008 the Indian private sector shifted away from deposits into developed country banks and moved
more of its money into offshore financial centres (OFCs). The share of OFC deposits increased from 36.4 per cent in 1995 to 54.2
per cent in 2009, the report said.The total present value of India’s illicit assets held abroad accounts for approximately 72 per cent
of India’s underground economy. This means that almost three-quarters of the illicit assets comprising India’s underground
economy—which has been estimated to account for 50 per cent of India’s GDP (approximately $640 billion at the end of 2008)—
ends up outside of the country.
Telecom spectrum scam
On November 16, 2010, the CAG indicted former telecom minister A. Raja for ignoring the advice of Prime Minister, Finance
and Law ministries to allocate 2G spectrum to new players in 2008 causing a whopping revenue loss of over Rs 1.76 lakh crore.
In the report, tabled in both houses of Parliament, the CAG noted that the ministry of communication and IT “decided to go ahead
with arbitrarily deciding that the cut-off date for issuance of Letters of Intent would be advanced to September 25, 2007, and
applications received would be decided on FCFS (first-come-first-served) basis.”In November 2007, Prime Minister Manmohan
Singh had written to the telecom ministry suggesting introduction of “transparent methodology” of auction, “revision of entry fee”
in the “backdrop of inadequate spectrum and large number of applications received for fresh licences.”The CAG highlighted that
the Law Ministry had suggested setting up of an Empowered Group of Ministers to discuss the large number of applications and
spectrum pricing, but the telecom ministry rejected it saying “the need for forming and EGoM arises when a new policy is being
framed and on this particular issue no new policy for grant of UASL (unified access service licences) was being framed.”The
auditor, however, said the “contention of the DoT is untenable as the rejection of the advice” of the Law Minister to have detailed
deliberations on the issues in the EGoM on the ground that changes in policy might lead to litigation “goes against the well-
established and time-tested procedures of functioning of the government and the collective responsibility of the Union
Cabinet.”The report said the presumptive loss caused to the exchequer through spectrum allocation to 122 licencees and 35 dual
technology licences in 2007-08 was Rs 1,76,645 crore. It pegged the figures on the basis of 3G auction held earlier this year in
which the government mopped up over Rs 67,000 crore.In the 77-page report, the CAG said the figure of the presumptive loss has
been determined on the basis of various indicators like 3G auction and a price offered by an operator in 2007, besides scarcity
value, nature of competition, business plans envisaged, number of operators and growth of sector.The auditor pointed out that
spectrum was allotted by DoT to the existing operators beyond the contracted limits (6.2 Mhz) without imposing any upfront
charge for such allotment.On the values determined through various indicators, the presumptive value of 2G spectrum on account
of grant of 157 licences in different circles during 2007-08 would be in the range of approximately Rs 58,000 crore to Rs 1,52,038
crore.The value of spectrum held by 13 operators for 51 circles based on the 2001 rates works out to be Rs 2,561 crore, while its
value based on above indicators like 3G auction would be Rs 12,000 to Rs 37,000 crore.The CAG said that 85 out of 122 new
licences issued to 13 companies in 2008 were granted to ineligible companies as all of them (85) did not have stipulated paid-up
capital at the time of application. Further 45 out of 85 licencees were issued to companies which failed to satisfy conditions of
main object clause in the memorandum of Association (MoA), the government auditor said.The CAG said the process of giving
dual technology licences to leading telecom firms including Reliance Communications and Tata Teleservices “lacked
transparency and fairness”, and equal opportunity was denied to other similarly placed operators who could apply for use of dual
technology only after formal announcement of the policy.Noting that this approval (dual technology use) had violated Cabinet
decision of 2003 to allow additional spectrum at 2001 prices, the auditor said, “Deviation from a Cabinet decision should
normally be with the approval of Cabinet.
INTERNATIONAL AFFAIRS
Tentative deal in Iraq keeps Maliki in power
Iraq’s political leaders reached a tentative deal on November 10, 2010, to form a new government
by giving a second term to Shiite Prime Minister Nouri al-Maliki, thus breaking the eight-month
political stalemate that had plagued the country. The unexpected compromise, after a more than
seven-hour meeting, came after the largely Sunni-backed bloc of Iraqiya, which won the most votes
in March polls, begrudgingly agreed to back Maliki.But even as the deal was announced, some Sunni
leaders expressed dissatisfaction, a potentially troubling sign for the US as it moves toward the
planned withdrawal of all of its forces by the end of 2011. A feeling of exclusion among Sunnis could
prompt them to abandon the political process and renew an insurgency that has quieted
significantly in recent years, although steady levels of violence continue.US officials had been
pushing a power-sharing agreement between Iraqiya leader Ayad Allawi, a secular Shiite, and
Maliki, whom they tacitly backed for PM, as a way to break the Shiite leader’s monopoly on
government authority and give the Sunni Arab minority a powerful role in Iraq’s next
government.Under the new agreement, it was agreed to appoint a speaker from Iraqiya, then name
the current Kurdish President, Jalal Talabani, as President of Iraq. He, in turn, named Maliki as
Prime Minister.
Junta’s proxy seeps Myanmar poll
Myanmar’s military-backed party captured 77 per cent of the Parliamentary seats contested in the
November 7, 2010 elections, following polling widely decried as manipulated and unfair.The results
point to an overwhelming victory, but there has never been much doubt about the outcome because
the junta-proxy, the Union Solidarity and Development Party (USDP), fielded candidates in nearly
every district, whereas the largest opposition party was able to contest only 164 of the 1,159
parliamentary seats.The government said the elections, the country’s first in two decades, were a
major step towards democracy, but critics, including US President Barack Obama, said they were
neither free nor fair.The polling also sparked violence and some fears of an outright civil war among
Myanmar’s ethnic minorities, who make up about 40 per cent of the population. Some have been
fighting the central government since Myanmar gained independence from Britain in 1948.The West
denounced army-ruled Myanmar’s first election in 20 years while State media in China, a key ally of
the regime, struck a discordant note by hailing the polls as a sign of progress.Led by US President
Barack Obama, numerous countries decried the vote as neither free nor fair and called for the
release of political prisoners, including democracy icon Aung San Suu Kyi, who was sidelined in the
polls.China has long helped economically dysfunctional Myanmar to keep afloat through trade ties,
arms sales, and by shielding it from UN sanctions over rights abuses as a veto-wielding member of
the UN Security Council.Backgrounder: Elections are very rare events in Myanmar. In the last half
a century there was only one—in 1990, followed by the latest held on November 7). A devout
Buddhist politician, U Nu, set up an unstable administration on the withdrawal of the British,
survived the first two elections, but voluntarily retired after the second. His successor asked the
army, soon after, to stand in for some time in the capacity of a caretaker. Nu returned for a second
try at governing the multiple insurgency-ridden country, by decisively winning the 1960 election.
Yet, in less than two years, the army dethroned the elected government in a coup.The first military
dictator, General Ne Win, was toppled by a students-led agitation in 1988, but another General took
power and the military has since then showed no intention of loosening its grip on the country.
Currently, Senior General Than Shwe is the top boss and nearing 80 in age. The Generals did try to
create a democratic façade for their rule at one stage by organizing a general election in 1990, but
did not know how to tailor it to their desired narrow self-interest and watched their own make-
believe civilian political party crushed by the voters. That largely fair election, witnessed by foreign
journalists, gave only 10 of 492 seats to the army’s party and 392 to Aung San Suu Kyi’s National
League for Democracy (NLD).The junta responded with iron fist. The result of the election was
annulled. Suu Kyi and her NLD were turned into targets for unceasing persecution. Suu Kyi has
been under house arrest for 15 of the 20 years since then. She could not collect the Nobel Peace
Prize she was awarded. Nor could she participate in the November 7 election because the military
junta’s electoral laws were largely directed against her and her party. Twenty years after that failed
election, the army has staged another. This is an attempt no doubt at easing the growing pressure
of adverse world opinion. As could be expected, the Generals were careful this time not to make the
mistakes of 1990. A new constitution was framed and adopted by a referendum in which 99 per
cent of the voters participated and over 92 per cent of them cast “yes” votes. The constitution
reserves for the army one-fourth of the seats in each of the two Houses of Parliament and the more
important ministries. Also, no constitutional change will be possible without a majority of more than
three-fourths. A political party has been created with leading roles in it for about a score of men
who were military officers till sometime back.Prime Minister General Thein Sein resigned from the
army to lead the civilian-looking outfit named the Union Solidarity and Development Party
(USDP). The electoral laws ruled out Aung San Suu Kyi’s participation. Neither convicted persons
nor individuals opposing the State organizations could stand for any seat. Roughly 300,000 Buddhist
monks representing the religious order were disenfranchised. So were the people in some rebellious
ethnic minority areas. No one whose spouse or children are foreign citizens can become the head of
the Myanmarese State. Suu Kyi’s British husband is now dead and her two sons are also British
living in the UK. Suu Kyi and the National League for Democracy found the dice so heavily loaded
against them that they only had one choice—boycotting the sham election. Yet the junta wanted to
be doubly sure; it ordered the dissolution of NLD and a few other parties on the ground that they
failed to apply for permission to continue political activities.There were no election observers from
abroad and unlike in 1990, when 60 foreign journalists were granted visas a few days before the
polling, no news-person from outside was let in.
Democrats lose control of US House of Representatives
A disenchanted American electorate, in a snub to President Barack Obama, handed a bruising defeat
to his Democratic Party and put the Republican Party back in control of the US House of
Representatives in mid-term elections on November 4, 2010.The loss of Democratic control of the
House will be an obstacle to Obama’s ability to push through his agenda over the next two years.
However, it is by no means an indicator of the President’s own fate. In 1994, the Republicans took
control of Congress under Bill Clinton’s Presidency. Clinton, a Democrat, went on to serve for a
second term. Besides Clinton, Harry Truman and Dwight Eisenhower both lost control of at least one
house of Congress in the mid-terms. No President in the past century has lost his bid for a second
term in office after losing the majority in the mid-term elections.However, Republicans are in no
mood to work with the Democrats and the party’s leaders have vowed to do everything possible to
ensure that Obama is only a one-term President.
Ireland becomes second Euro nation to seek aid
On November 22, 2010, Ireland became the second euro country to seek a rescue as the cost of
saving its banks threatened by a re-run of the Greek debt crisis that destabilized the currency.
The aid, which Irish officials said as recently as November 15 they didn’t need, marked the latest
blow to an economy that more than doubled in the decade ending in 2006. The bursting of the real-
estate bubble in 2008 plunged the country into a recession and brought its banks close to collapse.
With Irish bond yields near a record high, policy makers are trying to keep the crisis from
spreading.The package for Ireland will total as much as 60 percent of gross domestic product,
compared with 47 percent for Greece.The bailout follows two years of budget cuts that failed to
restore market confidence as the cost of shoring up the financial industry soared.
UNDP Human Development Report
India is ranked 119 out of 169 countries on the Human Development Index (HDI) of the UNDP’s
2010 Human Development Report.This marks an improvement of just one rank between 2005 and
2010 though the report, a special 20th anniversary edition, places India among top 10 performers
globally in terms of HDI measured on income growth. The category is led by China. India comes
10th after Botswana, South Korea, Hong Kong, Malaysia and Mauritius.China has improved eight
notches (from 2005 to 2010) to secure the 89th position. In South Asia, Nepal has gained five
places to reach the 138th rank. Maldives has risen four places to 107; Sri Lanka at 91 too has
beaten India in the rankings, though Pakistan has lost two ranks to fall to 125, while Bangladesh is
up one at 129.Though high on GDP growth, India reports severe inequalities (the report for the first
time measures inequalities, gender gaps and multidimensional poverty as markers of human
development) while several low-income nations have posted huge profits by investing in education
and health. Nepal is the only South Asian country, which despite low income, stands as the third
best performer in the top 10 movers the report highlights.These movers are the 10 nations (out of
135 studied for development indicators) that made the largest HDI improvements over the past 40
years. Oman leads the pack having invested its energy earnings in health and education. Except
China, which is second on this list thanks to income gains (recording 21 fold jump in per capita
income since 1980), all other nine countries are top movers due to health and education benefits.
These are Nepal, Indonesia, Saudi Arabia, Lao PDR, Tunisia, South Korea, Algeria and Morocco.
India is 16th in the category.While India’s HDI value has increased from 0.320 in 1980 to 0.519 in
2010, higher than South Asia’s average of 0.516, India still lags behind among medium HD nations.
South Asia, particularly India, post shocking percentage losses in HDI values if inequalities are
counted.The best HDI ranker in the world, Norway, loses just 6.6 per cent to inequality while China
loses 23 per cent and Bangladesh 29.4 per cent.
Global giants join hands to save climate
On November 29, 2010, the first day of the Cancun Climate Summit, the global consumer goods
industry announced two major initiatives on climate protection: to halt deforestation practices and
phase out climate damaging refrigerants that have high global warming potential.In a statement
issued from Paris, this was announced by the Consumer Goods Forum, a CEO-level organisation of
400 global consumer goods manufacturers and retailers with combined revenue in excess of $ 2.8
trillion. The initiatives were announced by the board of directors, comprising 50 CEOs and co-
chaired by Muhtar Kent, CEO, The Coca-Cola Company and Lars Olofsson, CEO of Carrefour.On
deforestation, the Consumer Goods Forum decided to mobilise their collective resources to help
achieve zero net deforestation by 2020.On refrigeration, the Forum agreed to begin phasing out
hydrofluorocarbon (HFC) refrigerants as of 2015 and replace them with non-HFC
refrigerants.Deforestation is one of the principal drivers of climate change, accounting for 17 per
cent of greenhouse gases today. The consumer goods industry, through its growing use of soya,
palm oil, paper and board, creates many of the economic incentives which drive deforestation.
Refrigeration plays a vital role in the retail and consumer goods industry but is also a significant and
growing source of greenhouse gases. HFCs are powerful greenhouse gases that are thousands of
times as potent as carbon dioxide. While they currently have a relatively small aggregate impact on
global warming, HFC emissions are projected to represent 9-19 per cent of projected greenhouse
gas emissions in 2050. The US government has targeted HFC reduction as a priority climate action
under the Montreal Protocol, and garnered support from 91 nations at 2010 Montreal Protocol
conference in Bangkok.
World mayors sign climate change pact
Mayors from around the world have signed a voluntary pact in Mexico City to reduce greenhouse
gas emissions. The pact was signed at a meeting meant as a precursor to the UN-sponsored talks in
Cancun.Participants from some 135 cities and urban areas signed the pact committing them to
adopt a number of measures to stem climate change.Meanwhile, a new study has found that fossil-
fuel gases edged back less than hoped in 2009, as falls in advanced economies were largely
outweighed by rises in China and India.Annual emissions of carbon dioxide from the burning of oil,
gas and coal were 30.8 billion tonne, a retreat of only 1.3 per cent in 2009, compared with 2008, a
record year.USA, Australia ink space surveillance pactOn November 8, 2010, Australia and the US
signed a pact to increase space surveillance over the Asia-Pacific region by expanding the reach of
US military satellites.The two countries signed a ‘space situational awareness’ partnership at the
conclusion of the annual US-Australia security and military dialogue, under which Washington would
place more satellite tracking sensors in Western Australia.The network would give Americans a
strategic surveillance capacity over the southern hemisphere to track space and missile launches
from China as well as Korea.The signing of a space pact comes as US and its allies in the Pacific
region have accused China of trying to militarise space by investing heavily in space technology.A
space situational awareness partnership statement issued at the conclusion of the security meet
said that the US and Australia shared a deep concern about the “congested and contested nature of
outer space”.
G-20 Summit
The Seoul Action Plan, agreed at the end of the two-day Summit of the G-20 leaders, called for
moving towards more market-determined exchange rates. An undervalued Yuan or a weak Dollar
also has ramifications for India and several other countries in terms of their exports becoming
uncompetitive. The G-20 group includes India, the US, China, Germany, France, Brazil, Russia and
Japan.In the face of a currency war between the US and China, global leaders, including Prime
Minister Manmohan Singh, agreed to refrain from ‘competitive devaluation’ and bring in exchange
rate flexibility to ensure that no country gets undue advantage.These measures, the leaders said,
would help mitigate the risk of excessive volatility in capital flows facing some emerging market
economies.
Cablegate Crisis in USA
The United States was catapulted into a worldwide diplomatic crisis on November 29, 2010, with the
leaking to various international media of more than 250,000 classified cables from its embassies,
many sent as recently as February 2010. At the start of a series of daily extracts from the US
embassy cables Arab leaders are privately urging an air strike on Iran and that US officials have
been instructed to spy on the UN leadership.The cables include comments on a shift in relations
between China and North Korea, high-level concerns over Pakistan’s growing instability, and details
of clandestine US efforts to combat al Qaeda in Yemen. The cables also contain specific allegations
of corruption, as well as harsh criticism by US embassy staff of their host governments, from
Caribbean islands to China and Russia.The State department’s legal adviser wrote to the founder of
WikiLeaks, Julian Assange, warning that the cables were obtained illegally and that the publication
would place at risk “the lives of countless innocent individuals … ongoing military operations … and
co-operation between countries”.The electronic archive of embassy dispatches from around the
world was allegedly downloaded by a US soldier and passed to WikiLeaks. The US embassy cables
are marked “Sipdis”—secret internet protocol distribution. They were compiled as part of a
programme under which selected dispatches, considered moderately secret but suitable for sharing
with other agencies, were automatically loaded on to secure embassy websites, and linked with the
military’s Siprnet internet system.More than 11,000 are marked secret, while around 9,000 of the
cables are marked noforn (no foreigners).
North Korea shells South Korean island
On November 23, 2010, North Korea fired scores of artillery shells at a South Korean island, killing
two soldiers, in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.
South Korea was conducting military drills in the area at the time but said it had not been firing at
the North.The attack came as the reclusive North, and its ally China, were pressing regional powers
to return to negotiations on its nuclear weapons programme and revelations that Pyongyang is fast
developing another source of material to make atomic bombs.It also followed moves by leader Kim
Jong-il to make his youngest, but unproven, son his heir apparent, leading some analysts to
question whether the bombardment might in part have been an attempt to burnish the ruling
family’s image with the military.At least 200 North Korean shells hit Yeonpyeong, which lies off the
west coast of the divided peninsula near a disputed maritime border. Most landed on a military base
there. Photographs from Yeongyeong island, just 120 west of Seoul, showed columns of smoke
rising from buildings.South Korean President Lee Myung-bak, who has pursued a hard line with the
North since taking office nearly three years ago, said a response had to be firm following the attack.
But he made no suggestion the South would retaliate further, suggesting Seoul was taking a
measured response to prevent things getting out of hand.The two Koreas are still technically at war
—the Korean War ended only with a truce—and tension rose sharply early 2010 after Seoul accused
the North of torpedoing one of its navy vessels, killing 46 sailors.The US strongly condemned the
attack and called on North Korea to “halt its belligerent action,” and urged nuclear-armed North
Korea to “fully abide by the terms of the Armistice Agreement” that ended the Korean War.Russian
Foreign Minister Sergei Lavrov condemned the shelling, warning of ‘colossal danger’ from Korean
tensions and calling for an end to any hostilities.

Business News
Institute of Microbial Technology (IMTECH), a Chandigarh based biotechnology laboratory, has signed a $150-million
licensing agreement with Nostrum Pharmaceuticals, a US company, for new-generation clot busters developed by it.
According to a scheme approved by the Ministry of New and Renewable Energy (MNRE), the union government will provide
financial incentive for each electric vehicle sold in India during the remaining part of the 11th Plan—2010-11 and 2011-12.
The scheme envisages incentives of up to 20 per cent on ex-factory prices of the vehicles, subject to a cap of Rs 4000 for low-
speed electric two-wheelers, Rs 5000 for high-speed electric two-wheelers, Rs 60,000 for seven-seater three-wheeler and Rs
one lakh for an electric car.
Axis Bank has acquired investment banking arm of Enam securities for Rs 2,067 crore. Asset Management Company and
insurance broking arm of Enam are not part of the deal.
State-owned Indian Oil Corporation (IOC) has surpassed Reliance Industries to regain its position as India’s biggest refiner.
This was achieved after completion of expansion of its Panipat refinery.
Tatas have launched first indigenously manufactured helicopter cabin from the aero-space special economic zone near
Hyderabad. The TAS project for the cabin was conceived in collaboration with US-based Sikorsky Aircraft Corporation, a
subsidiary of United Technologies Corp., USA.
On November 1, 2010, the Reserve Bank of India raised the repo and reverse repo rates by 25 basis points (100 basis points
equals one per cent), reflecting the continued government and RBI concerns over inflationary pressures. Repo rate is the rate at
which RBI lends to banks and that now stands at 6.25%. Reverse repo is the rate at which RBI borrows from banks and that
now stands at 5.25%.
Paris-based BNP Paribas has become the world’s biggest bank, with assets rising 34 per cent in last three years, reaching
$3.23 trillion.

CURRENT AFFAIRS: FEBRUARY 2010

CURRENT NATIONAL AFFAIRS

AGRICULTURE
Scientists slam study behind Bt Brinjal ban
A vital study cited by Environment Minister Jairam Ramesh to justify his decision to
disallow the commercial cultivation of Bt brinjal in India is flawed, claim top European
scientists. Mr Ramesh had referred to the findings of France-based Caen University
professor Gilles-Eric Séralini and his team, which had branded Bt brinjal—India’s first
genetically modified (GM) food crop—“unsafe”. Experts claim that Séralini was unduly
influenced by the renowned international NGO Greenpeace—with its aggressive green
agenda—which sponsored the study, and never carried out a peer-reviewed laboratory
study on GM crops he called hazardous, including Bt maize and Bt brinjal, its gene or
seeds.The European Food Safety Association, a risk assessment body, has trashed
Séralini’s findings on Monsanto’s MON 863, a variety of Bt maize.

On February 9, 2010, the Union government decided to freeze the introduction of Bt

Brinjal in India till independent scientific studies established health and environment
safety of the product to the satisfaction of both public and experts.

Bt Brinjal is a genetically modified vegetable that is infused with Cry1Ac gene from a
bacterium, bacillus thuringiensis, to make the plant resistant to fruit and shoot borers and
certain pests.

The Environment Ministry has appointed a Genetic Engineering Approval Committee

(GEAC) to regulate research, testing and commercial release of genetically modified
crops, foods and organisms. The GEAC had cleared Bt Brinjal for commercial release in
October 2009. According to GEAC Bt Brinjal would reduce farmers’ dependence on
pesticides and enable higher yields.

EDUCATION
Uniform Math and Science content for Class 11 and 12
From the 2011 academic session, students of Classes XI and XII across the country will
study a uniform science and math curriculum. Currently, course content of these critical
subjects varies with the State school board an institution is affiliated to.

The idea is to have for every student a level playing field for entry to professional
colleges. The government has also received the approval of all school boards—including
State boards—to work towards a single, national-level entrance exam for all engineering
and medical courses in India from 2013. Gradually, such an exam would be extended for
entry to colleges of other disciplines, such as law.

One test would mean the end of plenty like IIT-JEE, AIEEE and State exams for
engineering colleges and various State-level PMTs, beside national level PMT, which the
CBSE conducts. This, the Human Resource Development (HRD) Ministry believes,
would lessen the burden on students, who have to prepare for different exams, which
bring their own levels of stress.

ENVIRONMENT
India to launch mission to cut emissions
India will spare no efforts to contribute to the success of post-Copenhagen process, Prime
Minister Manmohan Singh declared on February 6, 2010, as he announced the launch of a
National Mission on Enhanced Energy Efficiency, aimed at cutting carbon emissions by
99 million tonnes. Within the ambit of our National Action Plan on Climate Change, India
has already unveiled one of the world's most ambitious plans for promoting solar energy,
targeting an installed capacity of 20,000 MW by the year 2022. The initiative is expected
to lead to avoidance of capacity addition of nearly 20,000 MW and reduce carbon dioxide
emissions of almost 99 million tonnes.

LAW POINT
Courts do not need nod for CBI probe: SC
On February 17, 2010, the Supreme Court upheld the constitutional validity of courts’
powers to order CBI probe without the consent of State governments but with a rider: the
powers should be used cautiously and sparingly. The five-judge Constitution Bench,
headed by Chief Justice K.G. Balakrishnan, said that such powers have to be used
sparingly in exceptional and extraordinary circumstances in cases having national and
international ramifications. Otherwise, the CBI will be flooded with such directions in
routine cases. Such powers are vested with the apex court and High courts to ensure
protection of fundamental rights of citizens under Article 21 of the Constitution, it said.

LEGISLATION
Judicial Standards and Accountability Bill
The proposed Judicial Standards and Accountability Bill, which will replace the four
decade-old Judges Inquiry Act, has laid down 14 guidelines for judges. These guidelines
will be called judicial standards.

Major highlights of the Bill are:

• No judge shall give an interview to the media in relation to any of his judgement
delivered, or order made, or direction issued, by him in any case adjudicated by him.
• No judge shall enter into a public debate or express his views in public on political
matters, except views expressed by a judge in his individual capacity on issues of public
interest, other than as a judge during a private discussion or at an academic forum.
• The Bill bars the judges from allowing any member of his family, who is a practising
lawyer, from using the residence in which the judge actually resides or use of any other
facilities provided to the judge, for professional work of any family member.
• The proposed law expects judges not to delay delivering a judgement beyond three
months after conclusion of arguments and have bias in judicial work or judgements on
the basis of religion, race, caste, sex or place of birth.
• Any wilful breach of judicial standards could be treated as misbehaviour and lead to a
disciplinary panel initiating proceedings against the erring judge.
• A complaint alleging misbehaviour or corruption would be referred to a scrutiny panel
 comprising three judges. If the panel finds merit in any complaint, it would be
forwarded to an Oversight Committee, which after investigating the matter can refer it
to the President for initiating action against the judge.

N-liabilities Bill
In an important step towards the implementation of the Indo-US civilian nuclear deal, the Union
government is to introduce a Bill to facilitate the entry of American companies in the nuclear
sector. The Civil Liability for Nuclear Damage Bill, 2009 is commonly known as the nuclear
liability Bill.

The Bill aims at limiting the liability of a nuclear plant operator to Rs 300 crore in the
eventuality of an accident and provides for appointing a claims commissioner with powers of a
civil court to arbitrate such cases. It also provides for the penalty to be paid by the operator
and not the supplier companies, which would mainly be American in this case.

The operator would not be liable for any nuclear damages if the incident is caused by “grave
national disaster of exceptional character”, armed conflict or an act of terrorism and is
suffered by the person on account of his own negligence.

The Bill also provides for the establishment of the Nuclear Damage Claims Commission, which
will have one or more claims commissioners for a specified area. The claims commissioner shall
have all the powers of a civil court for the purpose of taking evidence on oath, enforcing
attendance of witnesses, compelling the discovery and production of documents and other
material objects.

Environment activists have described the attempt to cap the level of compensation for victims
of a nuclear accident as a violation of fundamental rights. Currently, the Atomic Energy Act,
1962, allows the government-owned Nuclear Power Corporation of India to operate nuclear
power plants in the country.

PLANNING & ECONOMY

Union Budget, 2010
On February 26, 2010, Finance Minister Pranab Mukherjee presented a Budget that broadly
focused on fiscal stabilization. The Union Budget was presented at a time when the Indian
economy was on the path of revival and almost all demand indicators had turned significantly
positive. Investment and consumption demand was also on a revival mode. The buoyancy in the
manufacturing sector and up-tick in import and export were also working well for economic
growth prospects. In the current economic scenario, what was required from the Budget was a
further push for consumption and investment. The Budget announcements tried to do just that.

Highlights:

• Additional Rs 1,65,000 cr for bank re-capitalisation

• Rs 3000 cr for agricultural impetus
• Farm loan payments to be extended for six months
• Fertilizer subsidy to be reduced
• Rs 100 cr woman farmer fund scheme
• Coal regulatory authority to be set up
• Clean energy fund to be established
• Interest subvention of 2% to be extended for handicrafts and SMEs
• Rs 200 cr for Tamil Nadu textile sector
• Interest subvention for housing loans up to 1 lacs
 • Allocation to defence raised to Rs 1.47 lakh cr
• Defence capex raised to Rs 60,000 cr
• Divestment target of Rs 25,000 cr
• Rs 1200 cr assistance for drought in Bundelkhand
• Rs 48000 cr for Bharat Nirman
• NREGA scheme allocation raised to Rs 41,000 cr
• Allocation to health Rs 22,300 cr
• Allocation for school education up from Rs 26,800 cr to Rs 31036 cr
• Allocation to power sector at Rs 5130 cr
• Rs 10,000 cr allocated for Indira Awaas Yojna
• Social Security Fund to have corpus of over Rs 1000 cr
• Rs 2400 cr for MSMEs
• Government to contribute Rs 1000 per month for pension security
• Rs 5400 cr allocated for urban development
• Rs 66100 cr allocated for rural development
• Rs 1900 cr allocated for UID project
• Gross tax receipts Rs 7.46 lakh cr
• Government to set up National Mission for delivery of justice
• 15% rise in planned expenditure
• Fiscal deficit target of 5.5% in FY11
• Excise on all non smoking tobacco raised
• Televisions to be costlier
• Mobile phones to become cheaper
• Cement to be costlier
• Refrigerators to be costlier
• Jewellery to be more expensive
• Monorail granted project import status
• CDs to be cheaper
• Excise duty on CFL halved to 4%
• Bank farm loan target: Rs 3.75,lakh crore
• Nutrient based fertiliser subsidy scheme to come into force from April 1, 2010
• To build 20 km of highway every day
• Income tax on income upto Rs 1.6 lakh: Nil
• Income tax on income above Rs 1.6 lakh and upto Rs. 5 lakh: 10 per cent
• Income tax on income above Rs.5 lakh and upto Rs. 8 lakh: 20 per cent
• Income tax on income above Rs. 8 lakh: 30 per cent

Economic Survey 2010

• Economy likely to grow by up to 8.75 per cent in 2010-11.

• Full recovery; return to 9 per cent growth in 2011-12.
• Broad recovery gives scope for gradual stimulus roll back.
• High double-digit food inflation in 2009-10 major concern.
• Signs of food inflation spreading to other sectors.
• Farm & allied sector production falls 0.2% in 2009-10.
• Need serious policy initiatives for 4% agriculture growth.
• Moots direct food subsidy via food coupons to households.
• Favours making available food in open market.
• Favours monthly ration coupons usable anywhere for poor.
• Gross fiscal deficit pegged at 6.5 pc of GDP in 2009-10.
 • India 10th largest gold holding nation at 557.7 tonnes.
• Exports in April-December 2009 down 20.3 per cent.
• Imports in April-December 2009 down 23.6 per cent.
• Trade gap narrowed to USD 76.24 bn in April-December.
• 32.5% savings & 34.9% investment (of GDP in 2008-09) put India in league of world's
fastest growing nations.
• Government initiates steps to boost private investment in agriculture.
• Wants credit available at reasonable rates on time for private sector to invest in
agriculture.
• Slowdown in infrastructure that began in 2007, arrested.
• Domestic oil production to rise 11 per cent in 2009-10.
• Gas output up 52.8 per cent to 50.2 billion cubic meters with RIL starting production.
• India world's 2nd largest wireless network with 525.1 million mobile users.
• Virtually every second Indian has access to phone.
• Auction for 3G spectrum to provide existing and foreign players to bring in new
technology and innovations.

Railways Budget, 2010

Union Railways Minister Mamata Banerjee presented the Railways Budget, 2010, on February 24.
No change in passenger fares was announced—Planning Commission was pitching for a hike—and
the freight rates on select, but significant items such as kerosene and food grains, were cut to
keep prices down.

54 new trains, including 10 Durantos, were announced. The Minister also promised to construct
over 1,000 km of new rail lines over next one year.

The operating ratio, proportion of expenses to earnings, which was a healthy 75 per cent in
2007-08, was up to 94.7 per cent in 2009-10. The Railways hope to bring it down to 92.3 per
cent in 2010-11. Though the budget proposes to raise net surplus from Rs 951.03 crore in 2009-
10 to Rs 3,173 crore in 2010-11, these figures were called “peanuts” by experts when compared
to the figures of some years ago.

Only Rs 373.09 crore was provided for new projects. Many projects come with riders: they’re
either proposed in the public-private partnership (PPP) mode or are “subject to sanction by the
Finance Ministry and Planning Commission”.

Highlights:

• No increase in passenger fares.

• Rs.100 reduction in freight per wagon for fertilisers and kerosene.
• Free travel for cancer patients in 3rd AC classes.
• Cost-sharing in public-private-partnership (PPP) mode in some gauge-conversion
projects.
• Further extension of Kolkata Metro on priority basis; stations to be named after Bahadur
Shah Zafar, Tagore family.
• Karmabhoomi trains to be introduced for migrant labour.
• New Janmabhoomi train between Ahmedabad and Udhampur.
• Special 'Bharat Teertha' train to be run around India to commemorate Rabindranath
Tagore's 150th birth anniversary. A special train to be run from West Bengal to
Bangladesh to commemorate the anniversary.
• Railway line to be extended from Bilaspur in Himachal Pradesh to Leh in Jammu and
 Kashmir.
• Andaman and Nicobar Islands to get railway line from Port Blair to Diglipur.
• Sikkim capital Gangtok to be connected by rail from Rangpo.
• Impact of Sixth Pay Commission recommendations placed at Rs.55,000 crore.
• Gross earnings in 2009-10 estimated at Rs.88,281 crore.
• Working expenditure in 2009-10 estimated at Rs.83,440 crore.
• Expenses during 2010-11 estimated at Rs.87,100 crore.
• Thrust on expansion in 2010-11 with allocation of Rs.4,411 crore.
• Net profit of Rs.1,328 crore in 2009-10.
• Ten automobile ancillary hubs to be created.
• Policy decision to employ one member of family whose land is requisitioned for railway
projects.
• North-south, east-west dedicated freight corridors to be created.
• Centre for railway research to be established with Indian Institutes of Technology and
Defence Research and Development Organisation.
• Design, development and testing centre for railway wheels at Bangalore.
• Five sports academies to be set up; astroturf to be provided for development of hockey;
employment opportunities for sports persons.
• Railways to be lead partner for Commonwealth Games.

13th Finance Commission

The Union government has accepted most of the recommendations of the Thirteenth Finance
Commission headed by former Finance Secretary Vijay Kelkar.

The Commission has told governments at the Centre and States to set their fiscal house in
order, even as it raised the share of taxes that the States would be entitled to receive over the
next five years by 1.5 percentage points.

In addition, the Commission, a Constitutional body that is appointed every five years to
recommend a tax-sharing formula between the Centre and States, has suggested a roadmap for
the introduction of a single-rate goods and services tax (GST), the key indirect tax reform to
create a common market in India.

Its stringent new roadmap for fiscal responsibility suggests, among other things, that the overall
debt of the Centre and States be capped at 68 per cent of gross domestic product (GDP) from
the current 82 per cent, and 75 per cent recommended by the Twelfth Finance Commission.

The Finance Commission has recommended that the Centre reduce debt to 45 per cent of GDP
by March 2015, against 54.2 per cent at present. For States the reduction in debt is
recommended at 2 percentage points to 25 per cent. The relatively less stringent condition for
States comes with the rider that the Fiscal Responsibility and Budget Management Act allows
the Centre to borrow on behalf of the States to help them counter macro-economic shocks.
During the financial crisis, the Centre had relaxed the cap on the fiscal deficit.

The Finance Commission has said the Centre should transfer 32 per cent of the taxes it collects
to States, against 30.5 per cent at present. The overall ceiling— including transfers to local
bodies—on transfers from the Centre’s gross revenue has been raised from 38 to 39.5 per cent.

Among proposals that provide a thrust to fiscal federalism, the commission has recommended
that local bodies receive up to 2.5 per cent of the divisible tax pool. Of this, up to 1 per cent
can be incentive-linked.
While there is more reason for the States to cheer since the commission proposes an increase in
grants, much of it is tied to specific spending programmes such as those for elementary
education and environment. There is, however, a performance incentive of Rs 1,500 crore for
Assam, Sikkim and Uttarakhand and a grant of Rs 51,800 crore to meet the deficits of Jammu &
Kashmir, Himachal Pradesh and the north-eastern States (excluding Assam).

Like its predecessor, the Thirteenth Finance Commission has recommended a debt relief
scheme for the States. The first element is to cap the interest rate on a part of the loans from
the National Small Savings Fund at 9 per cent from up to 10.5 per cent. This will translate into a
benefit of Rs 28,360 crore to the States. In addition, there is a Rs 4,506 crore benefit with the
government accepting the suggestion to write off central loans that are not administered by the
finance ministry but were outstanding at the end of 2009-10.

Including the higher grants-in-aid, Madhya Pradesh, Uttar Pradesh and Maharashtra would be
the biggest beneficiaries in terms of share of transfers. Himachal Pradesh, Uttarakhand and
Jammu and Kashmir would be the top losers.

The Finance Commission has projected that tax receipts would see a compounded annual
growth rate of over 17 per cent between March 2010 and March 2015, while nominal GDP
growth is estimated at 13.2 per cent.

Prescribing a zero revenue deficit as the golden rule, the Commission has recommended that
the endeavour for all States should be to reach that level by 2014-15.

Union Cabinet raises Urea prices

On February 18, 2010, the Union government decided to raise urea prices by 10 per cent. It also
allowed the industry to fix retail prices of other subsidised fertilisers, while limiting the
government’s subsidy burden under a new policy that will determine the subsidy on phosphorus
and potash based on their nutrients.

The decision, to take effect from April 1, 2010, will help the government reduce its fertiliser
subsidy bill, estimated at Rs 50,000 crore for 2009-10. But, the move will hit farmers, even as
fertiliser companies will stand to gain. The latest decision does away with the practice of
government fixing a maximum retail price and aims at replacing the current system of giving
subsidy to the industry with direct assistance to farmers.

The switch to the nutrient-based fertiliser plan is significant as companies will now be able to
change retail prices of only nutrient-based fertilisers (nitrogen, phosphorus, potash and
sulphur), which will help the government cap the subsidy on these fertilisers. The move is also
expected to attract fresh investment in the fertiliser industry.

The government’s annual subsidy bill on fertilisers in 2008-09 was estimated at Rs 75,849 crore,
which was expected to be brought down to Rs 49,980 crore in 2009-10. The bulk of the increase
in the fertiliser subsidy is on account of the sale of decontrolled fertiliser with concession to
farmers. Urea accounts for about 30 per cent of the total fertiliser subsidy burden.

POLITICAL
Justice Srikrishna committee to look into formation of Telangana
The Union government has set-up a five-member committee headed by Justice B.N. Srikrishna
to look into the modalities of forming the separate State of Telangana. The committee has been
given time till December 31, 2010 to consult all sections of the society and submit report. The
terms of reference of the committee are:

• Examine the situation in Andhra Pradesh with reference to demand for separate
Telangana State, as well as the demand for maintaining the present status of a united
Andhra Pradesh.
• Review developments in the State since its formation and their impact on the progress
and development of different regions of the State.
• Examine the impact of recent developments in the State on different sections of people
such as women, children, students, minorities, OBCs, SC and STs.
• Consult all sections of people, especially political parties and elicit their views on a
range of solutions that would resolve the present difficult situation.
• Identify the key issues that must be addressed.
• Consult organisations of other civil societies such as industries, trade unions, farmer
organisations, women students.
• Make any other suggestion and recommendations that the committee may deem
appropriate.
• The protagonists of separate State, however, rejected the terms of reference of the
Justice Srikrishna committee and vowed to intensify their agitation. The Telangana
Rashtra Samithi (TRS), which has been spearheading the statehood agitation, struck a
belligerent note and announced that its MPs, MLAs and MLCs would resign in protest.
• Rejecting the terms of reference and the ten-month time frame given for the
committee, the TRS chief said the Centre had once again cheated the people of
Telangana by backtracking on its December 9, 2009 statement announcing initiation of
the process for formation of separate State.

Taking serious objection to the inclusion of the demand for continuation of united Andhra
Pradesh among the terms of reference, he said: “what is the point in looking into the demand
for united Andhra Pradesh when it already exists now? There is only one popular movement
going on in the State and that is for separate Telangana State.”

However, the leaders from coastal Andhra and Rayalaseema regions found comfort in the open-
ended nature of the panel’s terms. “We welcome the terms of reference, which are fairly
balanced. It will give an opportunity for a thorough assessment of the ground situation,” a
ruling Congress MP from coastal Andhra region said.

FOREIGN RELATIONS
Asian group endorses seat to India in UN Council
India's candidacy for a non-permanent seat in the Security Council has been endorsed by all 53
member States of the Asian group in the UN General Assembly. Nineteen countries, including
Nepal, Sri Lanka, Afghanistan and Bangladesh, spoke in favour of giving India a slot on the
Security Council table from January 2011.

In January 2010, India's path to a non-permanent seat got cleared after its sole competitor from
Asia, Kazakhstan, backed out of the race.

The Security Council is made up of 15 States—five permanent members who have the veto
power and 15 non-permanent members elected for a two-year term. To win, India needs two-
thirds of the General Assembly vote, which adds up to about 128 counties saying yes to India's
presence in the Council.

Running after more than a decade, India orchestrated a year-long campaign led by India’s envoy
to the UN Hardeep Singh Puri, who campaigned in New York and at multilateral events at the
United Nations.

The last time India had a seat at the Council was in 1992. In 1996, Japan won with India trailing
behind with approximately 40 votes.

Visit of Nepalese President

President of Nepal Ram Baran Yadav visited New Delhi from February 15, 2010. In an effort to
make the visit a truly successful event, India offered a 250-million dollar soft loan through EXIM
Bank and signed four major accords with the Himalayan nation.

India also offered to supply 50,000 tonne of wheat, 20,000 tonne of rice and 10,000 tonne of
yellow peas to its neighbour. An additional 2,000 tonne of wheat would be provided to Nepal, if
required.

The four accords signed by the two countries are: new air services agreement, MOU on
development of railway infrastructure at five border points, MOU on development of India-
Nepal friendship polytechnic at Hetavda in Makwanpur district of Nepal; and MOU on
establishment of India-Nepal friendship convention centre at Birgunj in Nepal.

During the delegation-level talks, the Indian Prime Minister hoped that the peace process and
drafting of the constitution would be completed in Nepal as per the schedule. Sixty-two-year-
old India-educated Yadav expressed his gratitude to the Indian leadership for assisting his
country in its economic development.

The Presidential visit came on the eve of a new constitution the Nepal government has pledged
to promulgate in May 2010. Nepal's fragile peace process that began after a decade of
insurgency is expected to be consolidated by the new statute. However, hiccups continue, with
the Maoists now saying they will agree to the rehabilitation of their guerrilla army, the People's
Liberation Army (PLA), only after the new statute came into effect.

Talks with Pakistan end without much headway

A breakthrough eluded India and Pakistan at the Foreign Secretary-level talks with New Delhi
rejecting Islamabad’s plea for the resumption of the composite dialogue process (CDP) and
handing over three fresh dossiers to the neighbouring country linking elements in Pakistan,
including JuD chief Hafiz Saeed, with terrorist activities on the Indian soil.

At the first official dialogue between the two countries after a 14-month hiatus, on February
25, 2010, India focused on terrorism emanating from the Pakistani territory, while Pakistan
raised the Kashmir, water and Baluchistan issues.

The three-hour talks, seen by diplomatic observers more as an exercise in scoring brownie
points by the two sides, ended with Foreign Secretary Nirupama Rao and her Pakistani
counterpart Salman Bashir announcing at separate press briefings that they would remain in
touch and continue endeavours to restore trust in the relationship. However, it was quite clear
from the statements of the two top diplomats that they would have to cover a lot of distance in
putting the peace process between the two neighbours back on track.

Prime Minister Manmohan Singh’s visit to Saudi Arabia

On February 26, 2010, Prime Minister Manmohan Singh became the first Indian Prime Minister in
28 years to visit Saudi Arabia. During the visit, Saudi Arabia expressed concerns over extremism
in Pakistan as New Delhi and Riyadh firmed up a strategic partnership.
Prime Minister Manmohan Singh unveiled a roadmap for comprehensive economic partnership as
he addressed captains of industry from both the countries.

Foreign Minister Prince Saud al-Faisal, who had a discussion with Singh, later spoke of the
“dangerous trend” of extremism in Pakistan and made it clear that Riyadh had nothing to do
with the Taliban. Saudi Arabia and Pakistan were among the few countries that had recognised
the Taliban regime in Afghanistan.

The Saudi minister said, “Pakistan is a friendly country. Therefore, any time one does see
dangerous trends in a friendly country, one is not only sorry but worried. And it is indeed the
duty of all political leaders in Pakistan to unite to see that extremism does not find a way to
achieve its aim in the country and this can only happen with united political leadership in
Pakistan. This, we hope, Pakistan will possibly achieve.”

India sees Saudi Arabia as a strategic partner for promoting peace, stability and economic
development. Such a partnership will bring benefits not only to the two countries but to the
region. After discussions between Mr Singh and King Abduallah, the two sides signed the Riyadh
declaration.

The Delhi Declaration, signed during the historic visit of King Abdullah to India in 2006 as the
chief guest on India's Republic Day, had charted out a new path of cooperation between India
and Saudi Arabia across a range of fields including security, bilateral trade and investment,
culture, science and technology. According to the new declaration, keeping in view the
development of relations between the two countries, and the potential for their further growth,
the two leaders decided to raise their cooperation to a strategic partnership covering security,
economic, defence and political areas.

Visit of President of Turkey

The Turkish President, Abdullah Gul, visited India on February 9, 2010 and held wide-ranging
talks with Prime Minister Manmohan Singh on all issues of mutual interest, including the
international situation. Apart from the declaration on terrorism, the two countries issued a
document on cooperation in the field of science and technology.

Days after keeping New Delhi out of the Istanbul conference on Afghanistan at the instance of
Pakistan, Turkish President Abdullah Gul sought to placate India by strongly endorsing its
position on the issue of terrorism.

Turkey is the first Organisation of Islamic Conference (OIC) member to support India’s call for
early conclusion of a comprehensive convention on international terrorism, which finds a
mention in the joint declaration on terrorism. Turkey’s position is being seen as a major
departure from that of OIC, which is not willing to exclude armed forces from the purview of
the convention.

On Afghanistan, the Turkish President praised the role being played by India in the
reconstruction plan in the embattled nation.

India, UK ink N-pact

On February 11, 2010, India signed a civil-nuclear cooperation declaration with Britain, making
it the eighth country to sign such a pact with New Delhi after India secured approval of the
Nuclear Suppliers’ Group (NSG) to undertake nuclear commerce in September, 2008. It is a
general umbrella agreement on civil-nuclear cooperation between the two countries.
India has already signed nuclear deals with France, the USA, Russia, Kazakhstan, Namibia,
Mongolia and Argentina. A nuclear agreement between India and Canada has also been
finalised. Germany and South Korea have also expressed their desire to cooperate with India in
the field of civil-nuclear energy.

The pact is expected to provide legal framework to British companies to export components and
products.

RESERVATIONS
Andhra HC quashes quota for Muslims
In a major setback to the Andhra Pradesh government’s Muslim reservation policy, the High
Court, on February 8, 2010, struck down a legislation providing four per cent quota for the
minority community in jobs and educational institutions.

A seven-member constitutional bench headed by Chief Justice A.R. Dave found fault with the
way the survey was conducted by the Backward Classes Commission, whose recommendations
had formed the basis for quota policy.

The State Assembly had passed the legislation in July 2007 providing four per cent reservation
for socially and educationally backward Muslims by including them among backward classes. The
quota was made applicable to 15 Muslim groups identified by the Andhra Pradesh Backward
Classes Commission as socially and educationally backward. These were categorised as BC-E
Group for the purpose of providing reservation.

Acting on a bunch of writ petitions filed by several individuals and organisations challenging the
legislation, the court—in a majority verdict—termed the commission’s survey as “irrational and
unscientific” and held the legislation as “unsustainable”.

TERRORISM; LAW & ORDER

Maharashtra, West Bengal ‘poor performers’ in fight against naxalites
Maharashtra and West Bengal, which have been hit by terrorist and Maoist violence, are among
the seven States that have fared poorly in modernising their police force. According to official
documents, put together by the Home Ministry, Maharashtra and West Bengal have been
labelled as “poor performing States” as they failed to use the funds sanctioned to them by the
Centre for upgrading their police force and intelligence apparatus.

The Centre earmarked Rs 1,230 crore for 2009-10 for the scheme for modernisation of the State
police forces (MPF), which is meant primarily to equip State governments to deal with emerging
challenges to internal security like terrorism and naxal violence.

The poor performing States have outdated and obsolete weapons and even the extremist-prone
police stations are often not supplied with modern weapons, and even when it is supplied police
personnel are not trained to use them. Their police communication network does not function
efficiently, they do not have enough vehicles and their forensic laboratories lack proper
infrastructure.

CURRENT INTERNATIONAL AFFAIRS

DISASTER
Chile hit by 8.8 magnitude earthquake
On February 27, 2010, more than two million people were affected in some way and more than
300 people were killed as an 8.8-magnitude earthquake hit coastal Chile. Santiago, capital of
Chile, is 200 325 km northeast of the epicentre.

The quake was 700 to 800 times stronger, but at a greater depth—35 km—compared to the
shallow 14 km depth of the Haiti quake, which contributed towards much of the damage there.

Coastal Chile has a history of deadly earthquakes, with 13 quakes of magnitude 7.0 or higher
since 1973. As a result, experts said that newer buildings are constructed to help withstand the
shocks. Still, the damage from Chile's earthquake was widespread. A 15-story high rise near the
southern city of Concepción collapsed; the country's major north-south highway was severed at
multiple points; and the capital city's airport was closed after its terminal sustained major
damage.

The epicentre was just a few kilometres north of the largest earthquake recorded in the world:
a magnitude 9.5 quake in May 1960 that killed 1,655 and unleashed a tsunami that crossed the
Pacific.

WORLD ECONOMY
US Fed signals end to emergency liquidity
On February 20, 2010, the US Federal Reserve Board sent its most explicit signal yet that the
emergency supply of liquidity to financial markets is done and the most aggressive monetary
policy easing in its 96-year history will eventually reverse. Chairman Ben S Bernanke and his
colleagues at the Board of Governors raised the rate charged to banks for direct loans by a
quarter-point to 0.75 per cent. It was the first increase in the discount rate since June 2006.

The Fed portrayed the decision as a “normalization” of lending that would have no impact on
monetary policy. The assurances didn’t stop investors from increasing bets that the Fed would
tighten policy in the fourth quarter. The dollar rose and US stock futures fell after the
announcement.

US central bankers closed four emergency lending facilities in February 2010 and are preparing
to reverse or neutralize the more than $1 trillion in excess bank reserves they have pumped into
the banking system. The discount-rate increase will encourage banks to borrow in private
markets rather than from the Fed. In any case, financial institutions have reduced their reliance
on the Fed window. Banks had borrowed $14.1 billion as of February 17, 2010, representing less
than 1 per cent of the central bank’s $2.28 trillion in total assets. A year ago, borrowing stood
at $65.1 billion.

Greek debt crisis tests euro zone

The euro, the single currency that 16 EU (European Union) countries share, is usually
highlighted as one of the main achievements of the European project; a rare example of
“success” in what has increasingly become a beleaguered tale of EU infighting and lack of
vision. But, a threatening debt crisis, with Greece as the main offender, has put the euro-zone
to test like never before in its 11-year-long history. February 2010 saw the euro coming in for a
pummelling, sending ripple across global markets.

However, it is the political crisis that is posing a question mark before the very future of the
EU. The result is a monetary union that features a common currency without a matching fiscal
or political union. Thus, although the European Central Bank sets interest rates for the euro-
zone, it does so in a vacuum, with constituent governments retaining control over fiscal and
economic policy.

The large disparities between euro-zone nations have been thrown into sharp relief by the
global economic crisis. On the one hand, you have the unflatteringly named PIGS (Portugal,
Ireland, Greece and Spain), all of whom are finding accruing debt increasingly expensive,
leading to the spectre of State bankruptcy. The worst of the lot is Greece. Its economy shrank
by 1.2 per cent in 2009. Having been found out to be cooking its books for years, Greece’s
public debt is expected to break 120 per cent of output.

The poor economic condition of the PIGS, in particular Greece, has thrown up a conundrum for
the large, surplus economies of the euro-zone like France, Germany and the Netherlands.

There are three options on the table, none of which are finding immediate takers. The first is to
issue a common euro-zone bond, which would be placed at Greece’s disposal. But countries
with good credit, like Germany, are opposed to the idea because of the higher interest rates
that would result.

An alternative is giving bilateral financial aid with economically healthy countries in the euro-
zone taking out loans on the financial market at good rates and passing these on to Greece.

The final option is an old-style IMF bailout, perhaps the most sensible of the choices. But, for
the IMF to come to Greece’s rescue would be a slap in the face of EU, implying that it cannot
take care of its own house and requires an institution that has always been sceptical of the euro
to act as saviour.

Basic Capabilities Index 2009

The Basic Capabilities Index (BCI), 2009, has found that South Asia will get 80 points on the
index by 2015, 10 points higher than the present value of 70. India received 68 points in the
index, an increase of meagre four points since 2004.

The global NGO Social Watch’s index of 130 countries says 100 points defines well-being of the
citizens based on children getting education till primary level, child mortality rate and
percentage of births attended by skilled labourers. The BCI does not use income as an indicator.

According to the index, South Asia, a region with worst BCI in 2004, has been making fast
progress, but the situation is still “extremely critical”. Since 2004, the report said, one-third of
the countries failed to raise their BCI value by more than one per cent and only one out of six
countries showed significant progress.

The index also tells about the increasing gap in living standards of rich and poor in the world.
The highest BCI is 97 of Iran and lowest is 44 of Chad in Africa, followed by Afghanistan,
Ethopia, Bangladesh and Nepal.

Japan still world’s second largest economy

Retaining its position as the world's second largest economy, the Japanese economy grew at a
faster-than-expected pace of 1.1 per cent in the last three months of 2009.

China, the fastest-growing large economy, clocked a growth of 10.7 per cent in the December
2009 quarter, bringing it at a sniffing distance to surpass Japan as the second largest economy
in the world.

Japan’s economy, which is primarily exports-driven, rose 1.1 per cent in the fourth quarter of
2009. On an annual basis, GDP expanded a much higher pace at 4.6 per cent. For the whole of
2009, the Japanese economy shrank 5 per cent and is valued at 474.92 trillion yen (about $5.1
trillion). The better-than-expected Japanese growth in the December 2009 quarter was mainly
 driven by better exports and effects of stimulus measures. To bolster the recession-hit
economy, Japan had unveiled stimulus measures worth over $130 billion.

NUCLEAR PROLIFERATION
Iranian President declares Iran a nuclear State
Iranian President Mahmoud Ahmadinejad declared on February 11, 2010, that Iran had produced
its first batch of 20 per cent enriched uranium, amidst a growing view in the West that Tehran
is bluffing.

“Iran was now a nuclear State,” Ahmadinejad told a huge rally of supporters on the 31st
anniversary of the Islamic Revolution. Experts say that once Iran can enrich uranium to 20 per
cent it should move relatively quickly toward 90 per cent purification, weapons-grade fuel.

Former U.S. officials and independent nuclear experts say continued technical problems could
delay—though probably not halt—Iran’s march towards achieving nuclear-weapons capability,
giving the US and its allies more time to press for a diplomatic solution.

While Iran says its nuclear program is entirely peaceful, Western nations suspect that the
country is intent on developing an atomic bomb.

CURRENT AFFAIRS: MARCH 2010

CURRENT NATIONAL AFFAIRS

BANKING & FINANCE

RBI raises repo, reverse repo
On March 19, 2010, the Reserve Bank of India (RBI) surprised banks and money market players by raising key
policy rates 25 basis points. The move, aimed at taming inflation and anchoring inflationary expectations, marked a
reversal in the easy monetary policy regime amid signs of strong economic revival.

The central bank said the repo rate, or the rate at which banks borrow from RBI, is being increased 25 basis points
to 5 per cent. Similarly, the reverse repo rate, or the rate at which surplus cash is parked with the central bank, was
increased to 3.5 per cent, from 3.25 per cent earlier.

This was the second action since January 2010, when RBI announced a 75-basis point rise in the cash reserve ratio
(CRR) to 5.75 per cent.

But, unlike CRR, which is used to manage liquidity in the system, an increase in the repo and reserve repo rates is
aimed at signalling an increase in interest rates.

RBI joined central banks in Australia and Malaysia, which raised rates in March, while Norway and Israel did so at
the end of 2009. The US Federal Reserve and the European Central Bank are among those waiting for evidence of a
more concrete recovery before they unwind record low borrowing costs.

DEFENCE
Delhi High Court orders for Permanent Commission for Women Officers
On March 12, 2010, in a path-breaking judgement, the Delhi High Court has directed the Centre to offer within two
months Permanent Commission (PC) to Short Service Commissioned (SSC) women officers of the Air Force and
the Army at par with male SSC officers with all consequential benefits, including promotion.

At present, the Indian Army offers permanent commission to women after 10 years of SSC. This is applicable to
those who were recruited after March 2009 and that too only in two streams — the Judge Adjutant General (JAG)
branch and the Education corps. Women are also recruited in Signals, Engineers, Ordnance and Air Defence but are
not eligible for PC.

In the IAF, women are offered a permanent option in the Legal, Accounts and Education corps. Women chopper and
transport pilots, engineering corps, Logistics and Meteorological streams are not eligible for permanent commission.
At present, there are about 1,050 and 827 women officers in the Army and the IAF, respectively. Separately, the
Navy has 280 women.

The benefit would be extended to women officers recruited prior to change of policy (March 2009) and the PC shall
be offered to them after completion of five years. However, these benefits would be available only to women
officers in service or who approached the HC but retired when the case was pending in the court, the Bench
clarified.

The court made significant remark on having women in combat roles saying “the claim of absorption in areas of
operation not open for recruitment of women officers cannot be sustained being a policy decision.”

LAW POINT
Live-in not an offence: SC
The Supreme Court has opined that a man and woman living together without marriage cannot be construed as an
offence. “Living together is not an offence. It cannot be an offence,” a three judge bench of Chief Justice K.G.
Balakrishnan, Deepak Verma and B.S. Chauhan observed.

The court said even Lord Krishna and Radha lived together according to mythology. The apex court made the
observation while reserving its judgement on a special leave petition filed by noted south Indian actress Khusboo
seeking to quash 22 criminal cases filed against her after she allegedly endorsed pre-marital sex in interviews to
various magazines in 2005.

The judges grilled the counsel for some of the complainants in the case and repeatedly stressed that the perceived
immoral activities cannot be branded as offence.

The apex court further said the views expressed by Khusboo were personal. “How does it concern you. We are not
bothered. At the most it is a personal view. How is it an offence? Under which provision of the law ?” the bench
asked the counsel.

Khusboo had approached the apex court after the Madras High Court in 2008 dismissed her plea for quashing the
criminal cases filed against her throughout Tamil Nadu.

Promotion fundamental right: SC

The Supreme Court has ruled that governments at the Centre and States should “act as model employers” and that
all eligible employees virtually had a “fundamental right” to promotion as guaranteed under Article 16 of the
Constitution.

A Bench comprising Justices R.V. Raveendran and Asok Kumar Ganguly made the clarification while directing the
Centre and the Union Public Service Commission to grant promotion with retrospective effect to members of the
Uttar Pradesh State Civil Service (SSC) who had been affected by a delay of more than two years in the cadre
review following the creation of Uttaranchal (now Uttarakhand) in 2000.

The Centre and the UPSC contended that the statutory mandate of a cadre review exercise every five years “is
qualified by the expression ordinarily” and as such it was not necessary to undertake it every five years. The Bench,
however, did not buy this argument. “We hold that the statutory duty which is cast on the State government and the
Central government to undertake the cadre review exercise every five years is ordinarily mandatory subject to
exceptions which may be justified in the facts of a given case.
“Surely, lethargy, inaction, an absence of a sense of responsibility cannot fall within the category of just
exceptions,” the apex court ruled, obviously indicting the UP government for not responding to the Centre’s
reminders.

The court accepted the government’s arguments that Rule 4(2) did not have retrospective effect, but refused to
interfere with the Delhi HC order which had, by using its special power under Article 142 of the Constitution,
directed the Centre to “mitigate the hardship and denial of legitimate rights of the employees” in view of the “facts
and circumstances of the case.”

LEGISLATION
Foreign Education Bill
After several years of debate, the Union Cabinet, on March 15, 2010, unanimously approved a Bill that would allow
foreign education providers to set up campuses in India and offer degrees. A Bill to this effect was first introduced
in the Rajya Sabha in August 1995. The new one is expected to be introduced in Parliament and be voted into law
by the monsoon session of 2010.

This is a milestone which will enhance choices, increase competition and benchmark quality. A larger revolution
than even in the telecom sector awaits us,” said Kapil Sibal, Union Minister for Human Resource Development
(MHRD).

The Foreign Educational Institutions (Regulation of Entry and Operations, Maintenance of Quality and Prevention
of Commercialisation) Bill will allow foreign universities to invest at least 51 per cent of the total capital
expenditure needed to establish the institute in India. Such institutes will be granted deemed university status under
Section 3 of the Universities Grants Commission (UGC) Act, 1956.

The Bill aims to regulate the entry, operation and maintenance of quality assurance and prevention of
commercialisation by foreign educational institutions, besides protecting the interest of the student community from
sub-standard and ‘fly by night’ operators.

The Bill is aimed at not only bringing in investment in the education sector, but also draw in foreign students,
besides helping check the flight of Indians to study (then work and settle) abroad.

PLANNING & ECONOMY

India’s food security goals in danger
An alarming new report by the World Bank has shown that an increasing number of aquifers in India are reaching
unsustainable levels of exploitation, endangering long-term food security goals. If current trends continue, in 20
years about 60 per cent of all aquifers in the country will be in a critical condition, putting at risk over a quarter of
the harvest, concludes the report “Deep Wells and Prudence: Towards Pragmatic Action for Addressing
Groundwater Overexploitation in India”.

The report rings alarm bells for policy makers, warning them against status quo. A rainfall deficit in 1963-66 had
decreased India’s food production by 20 per cent, but a similar drought in 1987-88 had very small impact on food
production due to widespread prevalence of groundwater, which is now declining.

India is the largest groundwater user in the world, exploiting 230 cubic kilometres of groundwater every year—over
a quarter of the global total. Today, groundwater supports 60 per cent of irrigated agriculture and more than 80 per
cent of rural and urban water supplies.

Even though there is a major dependence of many sectors on groundwater and it is being overexploited, there is
little investment in its management. This inaction has arisen mainly because the solutions often proposed for
groundwater management are very controversial, including “command-and-control” regulation of wells and curbing
the supply of free or cheap power for groundwater irrigation.

FOREIGN RELATIONS
India to sign extradition treaties with Iran, Sri Lanka, Brazil, France & Israel
After signing extradition treaties with Saudi Arabia and South Korea, India has finalised draft agreements with five
more nations—Iran, Sri Lanka, Brazil, France and Israel. The government is now working out the dates on which
the treaties can formally be signed.

The treaty with Saudi Arabia was signed in February, during Prime Minister Manmohan Singh’s visit to Riyadh.
Another such treaty was signed with South Korea when its President, Lee Myung-Bak, visited New Delhi in January
2010.

With bilateral cooperation in security and counter-terrorism measures assuming significance, India has stepped up
efforts to formalise agreements with other nations so suspects can be brought back to the country to be tried under
Indian laws. Indian government is giving extradition treaties the utmost importance as intelligence inputs suggest
that some nations could be used as safe heavens by terrorists and the underworld.

India has extradition treaties with several countries, including Nepal, Belgium, Netherlands, Canada, UK,
Switzerland, Bhutan, USA, UAE and the Russian Federation.

Loan agreement with Japan

India has signed an agreement for Rs 10,500 crore (Yen 215.611 billion) Official Development Assistance (ODA)
from Japan. This includes Rs 1,648.36 crore for the second phase of Delhi mass rapid transport system project
(DMRTS), Rs 4,422.83 crore for the dedicated rail freight corridor and Rs 2,933 crore for Chennai metro.

Six projects will be covered under the loan, including Sikkim Biodiversity Conservation and Forest Management
Project, Kolkata East-West Metro Project (II) and Rengali Irrigation Project (III). With this, the cumulative
commitment of ODA from Japan has reached Rs 15,5840 crore.

Visit of Prime Minister Putin of Russia

Russian Prime Minister Vladmir Putin’s one-day visit New Delhi on March 13, 2010, has gone some distance in
adding a strong economic dimension to ties between the two nations. The visit helped in building a roadmap to
strengthen economic ties, including in the pharmaceutical sector, getting Russian investments in infrastructure
projects and accessing Russian markets for Indian services.

Demonstrating the solidity of their strategic relationship to the world, India and Russia sealed multi-billion dollars
deals in key areas like defence, nuclear energy, diamond, petroleum and aviation as Russian Prime Minister
Vladimir Putin reaffirmed Moscow’s support to Delhi in its fight against terrorism.

The visit is noted for the success in taking this vital strategic partnership forward, giving the much needed economic
impetus. A host of steps aimed at scaling up the current $7.5 billion bilateral trade to $20 billion by 2015 were set in
motion.

Besides agreement on nuclear reactors, an MoU for cooperation in Russia’s satellite navigation system was also
agreed upon during the visit.

Russia announced its readiness to build 16 nuclear reactors for power stations in India. An important agreement was
the umbrella pact between the National Power Corporation of India Limited (NPCIL) and the Atom Stroy for
Kudankulam III and Kudankulam IV nuclear reactors as part of the nuclear cooperation accord between the two
sides. The agreement on peaceful uses of nuclear energy is expected to open more avenues of nuclear cooperation
between the two countries. The two sides also signed a pact on serial construction of Russian designed nuclear
reactors.
The most significant accords between the two sides were on the Admiral Gorshkov aircraft carrier that was approved
by the Union Cabinet for the purchase of the vessel at $ 2.33 billion and the supply of 29 MIG 29K—the sea variant
of the fighter used by the IAF—valued at $ 1.5 billion.

India-USA agree on N-reprocessing

India and the United States have reached a deal on reprocessing American-origin spent nuclear fuel to be supplied to
India under the landmark civil nuclear agreement signed in September 2008.

The talks were wrapped up well before the August deadline. The US statement noted that these arrangements will
enable Indian reprocessing of US-obligated nuclear material under IAEA safeguards. Completion of these
arrangements will facilitate participation by US firms in India’s rapidly expanding civil nuclear energy sector.

The reprocessing arrangements were negotiated pursuant to Article 6 (iii) of the US-India civil nuclear cooperation
agreement, also called the 123 Agreement. Under the 123 Agreement, India will construct new facilities dedicated
for reprocessing the safeguarded nuclear material under IAEA safeguards.

The advanced consent agreement is only the third of its kind ever undertaken by the US. The US has such
agreements with the European consortium EURATOM and Japan. China, Brazil, Indonesia, South Korea, which
have 123 Agreements with the US, do not have such agreements.

RESERVATIONS
SC okays quota for Andhra Muslims
On March 25, 2010, the Supreme Court okayed religion-based reservation in government jobs and educational
institutes in Andhra Pradesh but referred the matter to a constitution bench to decide on its constitutional validity.

In an interim order, a bench headed by Chief Justice K.G. Balakrishnan extended the benefit of four per cent
reservation in jobs and education to 14 other backward classes of Muslims in the State. In the process, it stayed the
February order of the State High Court that had quashed the Andhra Pradesh Reservation for Socially and
Educationally Backward Classes of Muslims Act, 2007.

But the apex court refused to grant quota benefit to a 15th category of Muslims mentioned in the Act as the social
groups were not specified. It also made it clear this was a temporary measure. The constitution bench is expected to
take up the case in August 2010.

According to Andhra government, the reason for giving four per cent quota to backward Muslims was because they
constitute 5-6 per cent of the State's population. The creamy layer—those who earn over Rs 4 lakh annually,
children of class-I officers working with the State/Central governments and those who hold constitutional posts—
are not entitled.

All parties barring the BJP welcomed the decision.

Rajya Sabha passes historic Women’s Reservation Bill

Fourteen years after it was envisaged, the Rajya Sabha, on March 10, 2010, passed the landmark Women’s
Reservation Bill that will pave the way for reserving 33 per cent seats for women in Parliament and State
Assemblies. But prior to that, the legislation has to be seen through in the Lok Sabha.

Of the 186 members present in the Rajya Sabha, 185 voted in favour of the Bill. Barring the parties from the Hindi-
belt—Samajwadi Party, Rashtriya Janata Dal and BSP—all other parties that included the constituents of Congress-
led UPA and BJP-led NDA supported the Bill that was to carry out the 108th amendment to the Constitution for
enabling reservation.
The Congress-led UPA, the BJP-led NDA and also the Left parties were on the same side as the Parliament authored
the “historic move”, which could upstage several well ensconced politicians but ensure proper representation of
women, which languishes at 11 per cent in Lok Sabha.

SP and RJD MPs walked out even before the discussion began. BSP’s leader in Upper House Satish Chandra Misra
walked out after expressing his party’s point of view: “We support the cause of reservation, however, oppose the
Bill in its present form.”

The proposed legislation to reserve 33.3 percent seats in Parliament and State Legislatures for women was drafted
first by the H D Deve Gowda-led United Front government. The Bill was introduced in the Lok Sabha on September
12, 1996. Though it has been introduced in Parliament several times since then, the Bill could not be passed because
of lack of political consensus.

Main points of the legislation

• Seeks to reserve one-third of seats for women in Lok Sabha and State Assemblies.
• Allocation of reserved seats shall be determined by the authority prescribed by the Parliament.
• One-third of the total seats reserved for SCs and STs shall be reserved for women from these groups in
LS and Assemblies.
• Reserved seats may be allotted by rotation to different constituencies in the State or Union Territory.
• Reservation of seats for women shall cease to exist 15 years after the commencement of the Act.

TERRORISM; LAW & ORDER

Union Cabinet okays tougher laws to deal with hijackers
With terror threats in the aviation sector looming large, the Union government has decided to make the Anti-
Hijacking Act of 1982 tougher by including death sentence as a punishment for hijacking a plane with intention of
creating a terror strike.

A cabinet meeting headed by Prime Minister Manmohan Singh approved the amendments to be incorporated in the
existing Act, which at present only provides for life imprisonment and fine.

The anti-hijack policy that was revised and approved by the Cabinet Committee for Security in 2005 could not be
made a law primarily due to lack of consensus on the punishment for the hijacker, having intent of creating terror
strike and caught alive.

The policy also has provision for immobilisation of the plane and disallowing it to take off, if the hijack occurs on
the Indian soil. Notably, during the Kandahar hijack in December 1999, in which passengers and crew members
were exchanged for four dreaded terrorists, security forces had failed to immobilise the plane when it had landed at
the Amritsar airport. The CCS, in August 2005, had cleared the proposal to shoot down a commercial plane if it was
hijacked. It also strictly ruled out any negotiations with hijackers on meeting any of their demands.

According to the policy, if a rogue aircraft paid no heed to ATC warnings and deviated from its specified path or
headed towards any strategic spot, a decision on shooting it down would come into play. In case of an emergency
situation, the shoot down orders could be given by the Prime Minister, the Defence Minister or the Home Minister,
whoever could be contacted first.

CURRENT INTERNATIONAL AFFAIRS

USA
Law on healthcare passed
On March 23, 2010, US President Barack Obama signed into law the landmark Health Care Bill that introduces
sweeping reforms in the USA’s healthcare system, capping a historic legislative victory that had eluded several of
his predecessors. It will take four years to implement fully many of the reforms.

Obama said that henceforth insurance companies will no longer be able to drop people's coverage, when they get
sick or they won't be able to place lifetime limits or restrictive annual limits on the amount of care they can receive.

The President said once this reform is implemented, health insurance exchanges will be created, a competitive
marketplace, where uninsured people and small businesses will finally be able to purchase affordable quality
insurance.

Obama said this legislation will also lower costs for families and for businesses and for the federal government,
reducing deficit by over $1 trillion in the next two decades.

WORLD ECONOMY
IMF paints grim picture of fiscal tightening needs
Developed countries with big budget deficits must start now to prepare public opinion for the belt-tightening that
will be needed starting 2011, says John Lipsky, the International Monetary Fund’s first deputy managing director.
He added that the scale of the adjustment required was so vast that it would have to come through less-generous
health and pension benefits, spending cuts and increased tax revenues.

Policy-makers should already be making it clear to their citizens why a return to prudent policies is a necessary
condition for sustained economic health, Lipsky said.

The IMF estimates that, by raising real interest rates, maintaining public debt at its post-crisis levels could reduce
potential growth in advanced economies by as much as half a percentage point annually.

Second, fiscal institutions must be strengthened to withstand adjustment fatigue. Options include reinforcing fiscal
responsibility legislation and improving tax collection.

Third, entitlement reforms such as increases in the retirement age would have favourable long-term fiscal effects but
do little near-term damage to aggregate demand.

RBI to buy IMF notes worth $10 bn

The Reserve Bank of India (RBI) has signed an agreement with the International Monetary Fund (IMF) to purchase
notes worth up to $10 billion to improve the ability of the international lender to provide timely and effective
balance-of-payment assistance to member countries. IMF will issue the notes in the special drawing rights (SDR)-
denominated form. The pact is a temporary bilateral arrangement for one year, which might be extended to two
years.

The pact is part of the international effort to support IMF’s lending capacity following the decision of the Group of
20 nations at its London Summit (held in April 2009) to treble IMF’s resources to $750 billion.

Generally, IMF will give a five-day notice to RBI about its intention to issues notes, including the amount. It will
restrict issuance to a principal amount not exceeding SDR 500 million in any calendar week.

At the beginning of each quarter, IMF will also provide estimates for the amount for which notes will be issued
during a three-month period.

Permanent increases in IMF’s resources are expected to take place through an increase in quotas and standing
borrowing arrangements currently under negotiation.

ENVIRONMENT
India and China Okay Copenhagen Pact
On March 9, 2010, India and China formally backed the Climate Change Accord hammered out in Copenhagen in
2009, calling for voluntary cut in greenhouse gas emissions. Both the countries submitted official letters to the UN
Climate Change Secretariat saying that they agreed to being listed in the preamble of the Accord, subject to certain
conditions.

India made it clear, however, that the accord is a political document and not a legally binding one.

INTERNATIONAL RELATIONS
Google leaves China
Late on March 23, 2010 night, the Internet giant Google shut its Chinese website and shifted its search engine
services to uncensored Hong Kong after two months of confrontation with Beijing over censorship and alleged
hacking attacks. But those re-routed to Hong Kong still couldn’t access sensitive websites as these were blocked by
Chinese filters.

Google’s bold censure of the business environment in the world’s number three economy—and the biggest online
market of 384 million netizens— had left the fate of its future China operations in doubt.

Soon after Google’s announcement, Beijing lashed out by calling the action “totally wrong” and saying it “violated
the written promise” it made four years ago, when it arrived, promising to self-censor online services as required by
Chinese law.

Chinese Foreign Ministry spokesman Qin Gang said the exit would not affect Sino-US relations unless someone
politicised the issue.

China believes its citizens need strict censorship. It blocked YouTube after the Tibet riots in March 2008, fearing the
spread of mass unrest through the Internet. Facebook and Twitter were blocked after the Xinjiang riots in July 2009.

US President Obama’s visit to Afghanistan

On March 28, 2010 US President Barak Obama sneaked into Afghanistan under the cover of darkness, to avoid
being targeted by militants. This was his first visit to the country since taking office. For security reasons, the trip
was cloaked in secrecy.

Obama met Afghan President Karzai in the palace’s outdoor grounds and stood under a pavilion for a brief
welcoming ceremony. The President spent roughly six hours in the country.
During their meeting the Afghan leader was invited to the White House on May 12, 2010. Mr Obama also tackled
Mr Karzai on his failure to make any meaningful reforms since he narrowly won a second term in fraud-ridden polls
in 2009.

Mr Karzai made grandiose promises in his inauguration speech but so far he has failed to deliver. At the time, US
officials said he had six months to reform or risk losing American support.

Mr Obama also addressed 2,500 US troops at Bagram air force base, nine miles from Kabul. He praised them for
their courage, sacrifice and focus, and warned of tough days ahead.

US, Russia seal N-arms cut deal

US President Barack Obama and Russian President Dmitry Medvedev sealed a landmark arms-control treaty on
March 28, 2010 to slash their countries’ nuclear arsenals by a third.

After months of deadlock and delay, a breakthrough deal on a replacement for the Cold War-era START pact
marked Obama’s most significant foreign policy achievement since taking office and also bolsters his effort to
“reset” ties with Moscow.
 Russia made clear, however, that it reserved the right to suspend any strategic arms cuts if it felt threatened by future
US deployment of a proposed Europe-based missile defence system that Moscow bitterly opposes.

The agreement replaces a 1991 pact that expired in December 2009. Each side would have seven years after the
treaty takes effect to reduce stockpiles of their most dangerous weapons—those already deployed—to 1,550, from
the 2,200 now allowed, and also cut their numbers of launchers to half.

INTERNATIONAL TERRORISM
Chechen insurgency re-surfaces in Russia
During the six years since the last suicide bomb attack on the Moscow subway, Muscovites came to think of
themselves as insulated from the guerrilla warfare. Terror, however, returned to the heart of Russia on March 30,
2010, with two deadly suicide bombings on the Moscow subway at rush hour, including an attack at the station
beneath the headquarters of the secret police. At least 40 people were killed and more than 60 wounded in the blasts.

Russian police had killed several Islamic militant leaders in the North Caucasus recently, which raised fears of
retaliatory strikes and escalating bloodshed by the militants. The bombings showed that the beleaguered rebels are
still strong enough to inflict harm on an increasingly assertive Russia, and they followed a warning in February 2010
from Chechen rebel leader Doku Umarov that “the war is coming to their cities.”

Prime Minister Vladimir Putin, who built much of his political capital by directing a fierce war against Chechen
separatists a decade ago, promised to track down and kill the organizers of what he called a “disgusting” crime.

Headley pleads guilty to all 12 charges

In a volte-face, Pakistani-American LeT operative David Coleman Headley, accused of plotting the 26/11 Mumbai
terror attacks and conspiring to target a Danish newspaper, has pleaded guilty before a US court. Charged on 12
counts, he admitted guilty in all of them.

Headley (49), who was arrested by FBI's joint terrorism task force on October 3, 2009, told US District Judge Harry
Leinenweber that he wanted to change his plea to guilty, in an apparent bid to get a lighter sentence than the
maximum death penalty.

Headley, son of a Pakistani diplomat and a Philadelphia socialite, admitted to using his friend Tahawwur Rana's
immigration company as a cover for surveillance activities in India and Denmark on behalf of Pakistan-based
terrorist groups, including LeT.

Headley admitted guilty in all six counts of conspiracy involving bombing public places in India, murdering and
maiming persons in India and providing material support to foreign terrorist plots and LeT; and six counts of aiding
and abetting the murder of US citizens in India.

CURRENT AFFAIRS: APRIL 2010

NATIONAL AFFAIRS

RBI hikes key rates to tame inflation

On April 20, 2010, the Reserve Bank of India announced a 25 basis points increase in repo and reverse repo rates as part of
monetary tightening measures to rein in inflation. The apex bank also announced a 25 basis points increase in the Cash Reserve
Ratio (CRR) for banks. Following the hikes, the CRR now stands at 6 per cent while the repo and reverse repo rates stand at 5.25
per cent and 3.75 per cent, respectively.

The RBI expected the hike in CRR to absorb Rs 12,500 crore from the banking system. The apex bank said it was tightening
liquidity in a bid to rein in inflation which was hovering in double digits. The RBI, however, expected inflation to remain at 5.5
per cent during FY 11 with the GDP growing at 8 per cent.
FDI on Tobacco banned
On April 8, 2010, the Union government notified the ban on Foreign Direct Investment (FDI) in cigarette manufacturing.
Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes have been put under the list of
sectors where FDI is prohibited.

The government took the decision to enhance public accountability towards proliferation of the anti-smoking regime in the
country. The decision to ban FDI is the latest in the government's long-standing drive against smoking. In 2008, the government
had banned smoking at public places and put a curb on tobacco advertisements.

Earlier, 100 per cent FDI was permitted in cigarette manufacturing, but an industrial licence was needed and the proposals
required to be approved by the Foreign Investment Promotion Board (FIPB).

New foreign investment policy document

The Union government has launched a new policy document consolidating the plethora of rules and norms governing foreign
investment in the country under one comprehensive document. The move is aimed at making available all information on FDI
policy in one place.

It will lead to simplification of the policy; greater clarity of understanding of foreign investment rules among foreign investors
and sector regulators, as also predictability of policy direction.

Having a single policy platform that would subsume the 178 press notes would also ease the regulatory burden for government; it
will be updated every six months. This consolidated press note will be superseded by a press note to be issued on September 30,
2010 to ensure that the framework document on FDI policy is kept updated.

Chinese hackers crack India’s top defence secrets

The computer systems of scores of Indian embassies, military establishments and corporate bodies, as well as the email account of
the Dalai Lama, were hacked by a Chinese cyber spy ring between September 2009 and April 2010.

Hundreds of documents, including classified files, were stolen, says a Canadian cyber-security team that monitored the ring—the
Shadow Network—for eight months.

The Shadow Network focussed on India, especially its military. The Canadians, in effect, hacked the hackers and saw many
documents themselves.

The Chinese hackers stole foreign ministry reports on India’s policy in West Africa, Russia and West Asia. They got National
Security Council secretariat assessments of security situations in Assam, Nagaland, Tripura and Manipur, as well as the Maoist
problem.

The penetration of India’s defence establishments was remarkable. Three air force bases, two military colleges and an array of
military institutes like the Army Institute of Technology, Pune, were broken into.

The hackers seemed interested in any defence information they could find: from sensitive issues like live fire exercises
and Project Shakti—the army’s artillery command system—to more innocuous material like personnel files.

“This is a very serious, broad spectrum assault,” said strategic technology expert Ajay Lele, whose own agency, the Institute for
Defence and Security Analysis (IDSA), was robbed of 180 documents.

The ring is believed to be based in Chengdu, in China’s Sichuan province. The cyber-sleuths, based at the University of Toronto’s
Munk School of Global Affairs, avoided saying this was government-approved but did say it was “possible”.

The Indian security establishment has little doubt the Shadow Network is cast by Beijing. Says K. Santhanam, former IDSA head:
“These rings are normally consortia in which Chinese academia, intelligence and military work together.”
Education becomes a basic right
The Right of Children to Free and Compulsory Elementary Education Act came into force in the country from April 1, 2010,
amid an emotional appeal of collective effort by Prime Minister Manmohan Singh and loads of applauses for the government
from various parties, including those in the Opposition—the BJP and the Left.

Prime Minister Manmohan Singh recalled the 100-year old resolve of Gopal Krishna Gokhale, who urged the Imperial Legislative
Assembly to confer on the Indian people the Right to Education.

With the RTE Act coming into force, the fundamental right to education as incorporated in the Constitution under Article 21 A
also became operative.

Right to Education (RTE) Act has, however, come into force amid a whopping shortage of 5.3 lakh school teachers. Add to this,
an additional seven lakh teachers that would be required for proper implementation of the Act that gives a three-year window
period to States to make education a fundamental right of children in 6-14 age group and mandates setting up of neighbourhood
schools with full infrastructure.

Uttar Pradesh tops the list, contributing 32 per cent of all existing teachers’ vacancies in the country. Next is the Left Front-ruled
West Bengal, where 53,000 posts were lying vacant, as per MHRD records. Bihar has 51,000 vacancies, the figure for Chattisgarh
and Orissa, the other educationally backward States, is 37,000.

Single-teacher schools are another big challenge for the RTE law. Currently, 9 per cent (about one lakh) of the total 12 lakh
schools at primary level have only one teacher, whereas the RTE Act specifies that any school with enrollment of up to 60
students must have at least two teachers.

Union Budget passed after Rs 400 crore tax relief

On April 29, 2010, Finance Minister Pranab Mukherjee announced changes in tax proposals that will benefit coffee growers, new
hospitals and construction sector while making it clear that service tax on domestic travellers would be Rs 100 per domestic
journey and a maximum of Rs 500 for international travel.

Mukherjee announced these concessions that would cost the exchequer Rs 300-400 crore a year but did not touch the demand for
rolling back the hike in petroleum and fertiliser prices on which the entire opposition walked out before Lok Sabha passed the
Finance Bill, 2010.

Explaining the reasons for his inability to concede the opposition's demand, he said the financial position was such that oil
marketing companies faced an under recovery of Rs 85,000 crore in 2010, apart from heavy outgo on account of subsidies,
interest and other payments.

Five years of National Rural Health Mission

As India celebrated completion of five years of National Rural Health Mission on April 12, 2010, Assam won the best performing
State award among the north-eastern State category for implementing the programme well.

Rajasthan was adjudged the best performing State among the high-focus areas, while Tamil Nadu claimed the award in the
category of non-focus States.

Claiming credit for arresting the infant mortality rate (down to 53 in 2008 from 58 in 2005 when NRHM started) and maternal
mortality rate (down to 254 in 2004 as against 301 in 2003), Health Minister Ghulam Nabi Azad said the government was in the
process of designing a comprehensive programme on population stabilisation in consultation with the State governments.

For the record, India has missed the goal of reaching 2.1 total fertility rate by 2010, as envisaged in the National Population
Policy of 2000.

For the future, five challenges have been listed for NRHM—transition from curative to preventive health care, human resource
management, setting of output and outcome targets, convergence and inclusive growth and approaches to public health that look
at the different stages of health transition at State and district levels so that appropriate strategies can be adopted.

SC quashes expulsion of Amarinder Singh by Punjab Assembly

In what is being viewed as a major political victory for former Punjab Chief Minister and Congress leader Capt Amarinder Singh,
the Supreme Court has ruled that his expulsion from the State Assembly on September 10, 2008 was “constitutionally invalid”
and ordered restoration of his membership.

If Amarinder had committed any irregularities in the allotment of land to a private builder when he was Chief Minister during the
tenure of the 12th House of the Vidhan Sabha, the proper course of action for the State government should have been to move the
criminal law machinery, a five-member Constitution Bench headed by Chief Justice K.G. Balakrishnan held.

Further, the alleged improper exemption of land from the Amritsar Improvement Scheme “was an executive act” in his capacity
as Chief Minister which “did not distort, obstruct or threaten the integrity of legislative proceedings in any manner”, the apex
court ruled.

Also, the exemption had taken place during the 12th term of the Vidhan Sabha, whereas the constitution of the Special Committee
to inquire into it took place during the 13th term. “It was not proper for the Assembly to inquire into actions that took place during
its previous term, especially when there was no relatable business that had lapsed from the previous term.”

The court clarified that its judgment would not act as a hurdle against the investigation, if any, into the alleged role of Amarinder
Singh in the Amritsar Improvement Scheme notified on January 13, 2006.

Visit of Afghan President Karzai

Afghan President Hamid Karzai, during his two-day trip to New Delhi on April 26, 2010, sought to allay India’s concerns over
the proposed re-entry of the Taliban in the Afghanistan government.

Karzai indicated that his government would enter into a power-sharing arrangement with those elements of Taliban who had
accepted the country’s constitution and were not part of the Al Qaida.

His meeting with Prime Minister Manmohan Singh came in the backdrop of moves being initiated by the Afghan government to
enter into a power-sharing arrangement with the so-called “moderate” elements of the Taliban. New Delhi is worried that such a
development will lead to the increased influence of Pakistan in Afghanistan.

In a statement issued after the meeting, Karzai said they had discussed the upcoming Afghanistan peace consultative jirga that, he
explained, should “comprise people of Afghanistan, those from all walks of life to advise on how to move forward for
reintegration and reconciliation of those elements of Taliban and others who have accepted the Constitution and are not part of the
Al Qaida or any terrorist network.”
The Afghan President also requested Prime Minister Singh to send representatives to the follow-up to the London conference in
Kabul so that “India can participate once again in Afghanistan’s reconstruction”.

India was forced to backtrack on the Taliban issue after the US and other European countries encouraged Karzai to do business
with the Taliban at the London conference held in early 2010. While the US and NATO countries are looking for an exit route
from war-ravaged Afghanistan, India is worried that that this will have an adverse impact on the security and stability of the
region.

Bangladesh lifts ban on Indian films

On April 24, 2010, Bangladesh announced that it has lifted an almost four-decade ban on Indian films in a bid to boost
attendances at cinemas. The move, however, drew loud complaints from local actors and directors.

Films produced by Bollywood were banned from cinemas in Bangladesh since the country’s independence in 1972 in a bid to
protect the local movie industry.

The lifting of the ban comes amid warming relations between India and Bangladesh after ties worsened between the neighbours
when an Islamist-allied government was in power in Dhaka from 2001 to 2006.

But not everyone supports the move. “Indian films will completely destroy our film industry and our culture. At least 25,000
people will be jobless,” said Masum Parvez Rubel, a leading star and a co-coordinator of a front against Indian films.

India, China Prime Ministers to connect via hotline

On April 7, 2010, India and China signed an agreement to establish a hotline between Prime Ministers of the two countries, as
External Affairs Minister S.M. Krishna and his Chinese counterpart Yang Jiechi resolved to take the bilateral relationship to new
heights.

The agreement, under which dedicated phone lines will be set up in the Prime Minister's office of the two countries, was signed
by Krishna and Yang after their talks in Beijing. This would enable Prime Minister Manmohan Singh and his Chinese counterpart
Wen Jiabao to hold direct conversations whenever they want.

This is the first time in recent years that India has established a dedicated hotline facility with any country. The two countries also
decided to strengthen their cooperation in regional forums and on addressing issues like global financial crisis and climate change.

Summit meeting between India-Pak Prime Ministers

On April 29, 2010, Prime Minister Manmohan Singh and his Pakistani counterpart Yousaf Raza Gilani held their first bilateral
meeting in nine months to end the diplomatic stalemate in ties between their two nations since the 26/11 Mumbai terror attacks.

At their hour-long meeting, described as an “exercise in soul searching” by Indian officials, the two leaders decided to upgrade
the bilateral dialogue to the political level, something which Islamabad had been insisting upon for months.

After the Pakistani premier assured Manmohan Singh that his government would not allow the misuse of the Pakistani territory
for launching terror attacks in India, the two PMs instructed their foreign ministers and foreign secretaries to meet “as soon as
possible” to work out the modalities to pave the way for a “substantive dialogue” on all issues of mutual concern to restore trust
and confidence in the relationship.

Political analysts, however, pointed out that this was not the first time that the Pakistani leadership has promised not to allow the
misuse of the country’s soil for anti-India activities. This commitment has been given to India time and again by Islamabad since
January 2004 when Pervez Musharraf was at the helm of affairs.

The two PMs did agree that there was lack of mutual trust that was impeding the normalisation process and it was time to think
afresh on the way to move forward.

ISI mole in MEA held

Madhuri Gupta, a promotee officer of the Ministry of External Affairs who was posted as Second Secretary at the Indian mission
for the last three years, was arrested by Delhi police on April 25, 2010, on the charge of passing sensitive information to her
contacts in Pakistan’s ISI.

“We have reasons to believe that an official at the High Commission of India in Islamabad had been passing information to
Pakistan intelligence agencies. The matter is under investigation. The official is cooperating with our investigations and
inquiries,’’ MEA spokesman Vishnu Prakash.

Fifty three-year-old Madhuri, who is a spinster, was summoned to New Delhi on the pretext of discussions on the SAARC
Summit when she was taken into custody.

Medical Council Chief held for taking bribe

The Central Bureau of Investigation (CBI) has arrested Medical Council of India (MCI) president Ketan Desai in Delhi on
charges of corruption.

Desai and an associate, J.P. Singh, were picked up for allegedly demanding Rs 2 crore for granting recognition to a private
medical college in Punjab. It is the MCI’s responsibility to maintain standards in medical education and in the profession.

Desai is also accused of granting recognition to several colleges that didn’t meet required criteria. In 2001, he had stepped down
as MCI president after the Delhi High Court indicted him on corruption charges.

Meghalaya gets its 9th CM in 12 years

Meghalaya Chief Minister D.D. Lapang submitted his resignation to Governor R.S. Mooshahary on April 19, 2010, paving the
way for his deputy Mukul M. Sangma to take charge.

Sangma, elected as leader of the Congress Legislature Party (CLP), was sworn in as the 25th CM since Meghalaya acquired
Statehood in April 1970.

Political instability in Meghalaya has seen eight CMs coming and going in the past 12 years. Only two CMs have completed five-
year terms since the State was formed.

The Congress-led ruling alliance has a comfortable majority of 44 in the 60-member Assembly, though the Congress has 28
MLAs of its own. Its partners are the United Democratic Party with 10 MLAs and six others, including three Independents.

Sangma, known to be a Lapang loyalist, is a four-time MLA from Ampatigiri Assembly constituency. More importantly, he is
believed to be the counter of Congress to Nationalist Congress Party veteran and former Lok Sabha Speaker Purno A. Sangma in
the Garo Hills half of Meghalaya. This Garo tribe-inhabited half has a traditional ambivalent relationship with the other half
dominated by Khasi-Jaintia tribes.

Trouble began for Lapang after some Congress MLAs wanted him to drop three Independents and the lone regional party
(KHNAM) MLA from the Cabinet. Lapang declined, saying he could not betray “friends” who helped him form the Congress-led
Meghalaya United Alliance (MUA) government.

The Independents and some regional party MLAs had broken away from the NCP-backed Meghalaya Progressive Alliance to
help Lapang cobble together the MUA government on March 19, 2008, after voters delivered a fractured verdict in the Assembly
elections that year.

Naxals kill 73 security personnel in the deadliest attack ever

In the biggest Naxal strikes in the country, the Left-wing extremists killed 76 jawans of the Central Reserve Police Force (CRPF)
and critically wounded eight others in the restive Dantewada district of Chhattisgarh on April 6, 2010.

The rebels had meticulously planned the entire operation; inviting security personnel to walk into the trap laid on the Chintalnaar-
Tademetla road, about 100 km from the district headquarters and some 540 km south of the State capital.

The Naxalites, who were reportedly 1,000 in number, had planted landmines and created temporary bunkers on the hilltops to
easily target the jawans. The kaccha road where the incident took place had been surrounded by hilly terrains and dense forests.

The CRPF jawans did not get much time to take position and retaliate. The Naxalites opened indiscriminate fire from the bunkers
located at strategic points and detonated a series of landmines.

A key reason for the CRPF’s dismal response to the Naxal attack has been their lack of training. As CPO units poured into
Chhattisgarh for Operation Green Hunt, 5 battalions of the Border Security Force (BSF), 5 battalions of the Indo-Tibet Border
Police (ITBP) and 2 battalions of the Sashastra Seema Bal (SSB) were all put through jungle warfare orientation courses at
Chhattisgarh’s well-reputed Jungle Warfare College in Kanker. The CRPF, inexplicably, refused to undergo this training.

Training at the Jungle Warfare College, as every organisation except the CRPF seems to have known, has underpinned anti-Naxal
operations in Chhattisgarh since 2005, when the college was set up with the help of the Indian Army. Over the last five years,
Chhattisgarh has trained 12,700 policemen (including 3700 from other States) at this institution. The college’s credo: Fight the
guerrilla like a guerrilla.
Instead of providing adequate training to each battalion that is sent into counter-insurgency operations, the CRPF has relied
heavily for success on “elite” units, like its feared “Naga Battalion” which was based in Bastar for several years before being
pulled out. In 2008, the Home Ministry authorised the CRPF to raise 10 COBRA (Commando Battalions for Resolute Action)
units, for counter-Naxal operations. But the regular battalions remain largely untrained, pushed at will from election duty, to
counter-insurgency, to patrolling riot-affected areas, to anti-Naxal operations. The Home Ministry’s approach has always centred
on getting the CRPF to the trouble-spot. After that, it is left to the harried battalion or company commander to deliver the goods.

The answer clearly lies in carefully training CPOs, especially before they go into counter-insurgency operations.

New strategy to counter Naxals

The Union government is tweaking its strategy to deal with Naxals. The list of changes includes: segregation within the CRPF to
have specialist anti-insurgency units, which will be trained to “attack first”; introduction of unmanned aerial vehicles (UAVs) for
surveillance; more choppers; and re-training of men on the pattern of Indian Army before induction.

“Operations will go on…rather they are still on,” said well-placed sources, adding that 10 such battalions had been trained
specially for the “attack first” policy which is the dictum of the Army and the BSF in dealing with adversaries.

The training will include ramping up of infrastructure with firing ranges and also the use of the existing training facilities of the
Army in Jungle warfare. The Army’s jungle warfare expertise is such that even the Chinese Army conducted a joint exercise with
India in 2009.

For effective use, the CRPF—comprising 2.30 lakh personnel—will be segregated into two parts. One will help the State
governments in maintaining law and order duties, while the other, comprising younger men, will deal with insurgents.

The CRPF has also made it clear that the State governments have to start raising special operations groups of its local policemen,
like in Andhra Pradesh and J&K. The local boys know the population and glean out good information from villagers which comes
handy.
INTERNATIONAL AFFAIRS

Interim government formed by Opposition in Kyrgyzstan

Opposition alliance headed by former Foreign Minister Ms Roza Otunbayeva formed an interim
government in Kyrgyzstan on April 8, 2010, dissolving Parliament and asked the toppled President
Kurmanbek Bakiyev to quit as they shored up global diplomatic support for the new regime.

Announcing that they would run the turbulent Central Asian nation for six months, Ms Otunbayeva
said the new alliance proposed to hold new elections within this period.

In her first action, Ms Otunbayeva, designated the head of the interim government, said that a US
airbase outside the capital Bishkek, which is seen vital to the NATO campaign in nearby Afghanistan
would remain open despite the shift in power.

Historic Bill to clip powers of Pakistan’s President

On April 19, 2010, President Zardari signed into law sweeping constitutional reforms relinquishing
key powers designed to bolster parliamentary democracy weakened by military rule. The 18th
Amendment had earlier been cleared by Pakistan’s Parliament and sent to him for his signature.

The amendment removes the head of State’s power to sack the Prime Minister and dissolve
Parliament. It also removes many of the sweeping powers amassed by military dictators Pervez
Musharraf and Zia-ul-Haq. The Bill also abolishes a clause barring the election of a Prime Minister
for more than two terms. This would allow the Nawaz Sharif, who was toppled by Musharraf in
1999, to become Prime Minister again.

The amendment effectively makes the President of Pakistan a titular head of State who can only
formally appoint heads of the armed forces, dissolve the National Assembly and appoint Provincial
Governors on the advice of the Prime Minister. The law also takes away the President’s power to
appoint and dismiss the heads of the Election Commission and the Public Service Commission.
UPFA returns to power in Sri Lanka
President Mahinda Rajapaksa's UPFA impressively returned to power on April 9, 2010, bagging 117
of 225 seats in the first post-LTTE era Parliamentary polls in Sri Lanka, with its closest rival UNF
securing just 46 and detained ex-army chief Sarath Fonseka's DNA failing to touch even a double
digit mark.

In Sri Lanka, the general elections directly decide 196 seats while the remaining 29 members are
chosen based on the percentage of votes secured by each party.

The UPFA, which campaigned to get a two-third majority in the House, fell short of just six members
to get the magic figure which is needed to bring about constitutional changes that the President
wants to put in place. These changes include the scaling down of the executive powers vested with
the President, as well as a change in the country’s proportional representation (PR) system of
elections.
The main opposition United National Party (UNP) saw much of its voter base eroded in the poll, the
first since the defeat of the Tamil Tigers, winning only 60 seats, down from the 82 it had won in the
2004 general election.

A third party led by detained former Army Commander Sarath Fonseka won seven seats, including
one for the retired general, while the majority of the seats in the north and east were won by the
Tamil National Alliance.

Civil strife in Bangkok

Thailand has been sliding to anarchy for the last few months with the capital Bangkok turning out to
be a virtual battlefield. The current violence is the culmination of a political strife that has been
brewing ever since Prime Minister Thaksin Shinawatra was overthrown in a military coup in
September 2006.

The protests looked like they had ended when Democrat Party leader Abhisit Vejjajiva became the
Prime Minister in December 2008. But in March, the pro-Thaksin group launched a new wave of
protests to bring down the government.

The tension has escalated in recent months as the protesters laid siege to the capital Bangkok. As
security forces launched a crackdown, violence escalated, leaving many dead.

Apart from the pro-Thaksin angle, the protests are also seen as an initiative to bring in more
participation for the common people—read rural mass—in government formation.

In the December 2007 elections, held 18 months after the coup, Thaksin's vote bank remained
loyal, though he was in exile. His allies came to power but fell following sustained protests by Yellow
Shirts and unfavourable court rulings. In March 2009, Thaksin's supporters in red shirts poured into
the streets of Bangkok, forming the United Front for Democracy Against Dictatorship.

Though it was mostly made of the rural poor, students and pro-democracy activists joined them.
Claiming that the judiciary was biased against Thaksin, they question the legitimacy and credibility
of the current government. What began as innocuous sit-in protests outside government offices
quickly turned violent when they stormed the venue for ASEAN summit, forcing its cancellation.

The Yellow Shirts, called the Peoples' Alliance for Democracy, who are bitterly opposed to Thaksin,
were behind the street protests that led up to the military coup of September 2006. They were also
instrumental in forcing Thaksin's allies out of power in 2008.

If the Red Shirts are mostly rural poor, the Yellow Shirts comprise royalists, businessmen and the
urban middle-class. They wear yellow because it is the Thai King's colour. Media-baron Sondhi
Limthongkul and General Chamlong Srimuang are seen as the leaders of this outfit. In 2006, as the
Yellow Shirts shut down the capital, the army ousted Thaksin.

US, Russia ink pact to cut N-arsenal

On April 8, 2010, the United States and Russia signed a landmark strategic nuclear disarmament
treaty. Presidents Barack Obama and Dmitry Medvedev signed the pact at a ceremony in the
mediaeval Prague Castle after talks that covered nuclear security, Iran's atomic programme and an
uprising in the Central Asian State of Kyrgyzstan, where both major powers have military bases.

The treaty will cut strategic nuclear arsenals deployed by the former Cold War foes by 30 per cent
within seven years, but leave each with enough to destroy the other.

Obama said the agreement had “ended the drift” in relations between Moscow and Washington and
sent a strong signal that the two powers that together possess 90 per cent of all atomic weapons
were taking their disarmament obligations seriously.

Icelandic Volcano causes air travel mess in Europe

Europe saw air traffic chaos in April 2010 as a plume of ash from the Icelandic volcano that erupted
under the Eyjafjallajokull glacier, made northern Europe a no-fly zone. An estimated 63,000 flights
were cancelled, effecting more than five million passengers who were trying to get in and out of
major cities of Europe. The eruption of the volcano caused the greatest air travel chaos since the
Second World War II.

Goldman Sachs, another US financial behemoth in trouble

Goldman Sachs, the most profitable securities firm in Wall Street history, released more than 70
pages of email and other documents on April 25, 2010, ahead of a US Senate sub-committee
hearing on the firm’s actions throughout the mortgage meltdown. The firm disputes the US
Securities and Exchange Commission’s (SEC’s) claim that Goldman Sachs misled investors in a 2007
collateralised debt obligation (CDO) about the role played by hedge fund Paulson & Co, which bet
the CDO would collapse.

SEC has accused Goldman Sachs of “making materially misleading statements and omissions” in
connection with a synthetic collateralised debt obligation (CDO)—Abacus—that the firm structured
and marketed to investors.

Goldman Sachs is said to have created marketing material about Abacus and invited its clients—
investment managers of banks, insurance companies, pension funds, etc—to invest in the CDO. It is
said to have given an impression to the investors that the residential mortgage-backed securities
that made up the CDO were hand-picked by ACA Management—then seen as a reputable fund
manager, looking after dozens of CDOs. Goldman clients invested in the CDO, believing these loans
were of good quality.

SEC claims Goldman deliberately hid from its clients John Paulson’s involvement, which was a huge
conflict of interest. Since Paulson was looking to short the sub-prime market, he was most likely to
have picked the worst possible bonds.

Within a year, 99 per cent of the assets within Abacus were downgraded. Paulson, who was by this
time betting against Abacus by buying $15 million worth of credit default swaps (CDS) on Abacus,
earned around $1 billion from the trade.

Bonn climate talks

Delegates to the first UN climate talks after Copenhagen met in April 2010 in Bonn and agreed to
intensify their negotiations on curbing greenhouse gases before 2010’s decisive ministerial
conference in Cancun. As representatives of the 192 countries that are party to the UN Framework
Convention on Climate Change (UNFCCC), they had a messy task. In the end, the parties to the
UNFCCC merely “noted” the existence of the accord, as some were utterly opposed to it.

The aim of the negotiators was to pick up the broken pieces of the Danish meeting and see what
could be salvaged and turned into a proper global agreement at the next UNFCCC conference, in
Cancun, Mexico in December 2010.

The United States seems to be the only country that still sees the Copenhagen accord as having a
life of its own. Almost all the rest, including countries that have “associated” themselves with the
accord have insisted that the UNFCCC remains the only agreed decision-making forum. Hence the
discussions in Bonn revolved around which bits of the accord could be brought into the UNFCCC and
how.

The Bonn talks were mainly about procedures—for example, which texts to start with, how many
meetings to hold before Cancun, whether to mandate the chair to prepare draft text, and so on—but
there was also much informal stock-taking about which pieces could be put together by Cancun.

While some countries continued to call for an all-or-nothing approach, most feel that it is more
realistic to aim for a number of less ambitious, partial agreements on several elements. These
include ways to transfer climate-friendly technologies and funds for adaptation to climate change
from rich to poorer countries, as well as a deal that would compensate countries for keeping their
forests intact.

This would mean delaying the more difficult decisions on ambitious targets for countries to reduce
their greenhouse gas emissions, and an overall legally binding agreement to the conference in
South Africa at the end of 2011 or beyond.

Over 110 nations back Copenhagen climate deal

More than 110 nations, including top greenhouse gas emitters led by China and the United States,
back the non-binding Copenhagen Accord for combating climate change, according to a first formal
UN list.

The list, of countries from Albania to Zambia, helped to end weeks of uncertainty about support for
the deal, agreed at an acrimonious summit in the Danish capital in December 2009. The list was
compiled by the UN Climate Change Secretariat.

The accord, falling short of a binding treaty sought by many nations, sets a goal of limiting global
warming to below 2 degrees Celsius. But, it does not spell out what each nation has to do.

It also promises almost $10 billion a year in aid for poor nations from 2010-12, rising to at least
$100 billion from 2020, to help them slow emissions growth and cope with impacts such as floods,
droughts and rising sea levels. Apart from China and the United States, the list also includes top
emitters such as the European Union, Russia, India and Japan.

The accord was merely “noted” by the 194-nation summit after objections by a handful of
developing nations, including Venezuela, Nicaragua, Cuba and Sudan. The United Nations then
asked all countries to say if they wanted it to be listed. Many big emerging economies were initially
reluctant to sign up after the deal failed to gain universal support, even though the original text was
worked out by President Barack Obama with leaders of China, India, Brazil and South Africa.

Nations not on the list include many Organization of Petroleum Exporting Countries nations such as
Saudi Arabia, which fear a loss of oil revenues if the world shifts to renewable energies, and some
small island States which fear rising sea levels.

BASIC countries seek environment treaty by 2011

India, China, Brazil and South Africa, jointly called BASIC countries, have said that the legally
binding climate treaty on reduction of carbon emission should be finalised latest by 2011 as the
“world could not wait indefinitely”.

The third meeting of BASIC ministers concluded in Cape Town April 25, 2010.

The statement also said that the developing countries strongly support international legally-binding
agreements, as the lack of such agreements hurts developing countries more than developed
nations.

The ministers said that negotiations should follow a two-pronged approach. One track is on long-
term cooperative action to combat climate change. The other is for developed countries to commit
to what extent they will reduce their greenhouse gas emissions after 2012, when the current
commitment period of the Kyoto Protocol runs out.

The next BASIC ministerial meeting will be held at the end of July 2010 in Brazil, followed by one
hosted by China at the end of October 2010.

International Conference on Nuclear Disarmament

Iran hosted an international conference on nuclear disarmament on April 17, 2010. Delegates from
more than 60 countries, including as many as 25 foreign ministers or deputy foreign ministers,
attended the conference, ignoring attempts by the West to dissuade them from attending the meet.
The presence of so many countries came as a pleasant surprise to Iran itself. Iranian Foreign
Minister Manouchehr Mottaki said the response to the conference was overwhelming. He said the
conference would go a long way in achieving the goal of nuclear disarmament and presenting to the
international community the true nature of his country’s nuclear programme.

Even as the US was making a strong pitch for further sanctions against Iran, China and Russia, two
permanent members of the UN Security Council, attended the meet. India, another key global
player, was also present at the conference, though it was only represented by the Joint Secretary
(Disarmament) in the External Affairs Ministry.

Iran showcased the two-day event to demonstrate that its nuclear programme was aimed at
meeting its growing energy needs and that it has no military agenda.

Iran moots establishment of independent global group under the UN to plan nuclear disarmament
and suspension of membership of the US and others which from the board of governors.

India opposes sanctions against Iran and feels that Tehran should enjoy all rights to develop N-
energy for peaceful purposes.

Plot to sell Uranium foiled by Georgia

Georgian security forces have foiled a criminal plot to sell weapons-grade uranium in the black
market, the country’s President told a gathering of world leaders on April 13, 2010.

The revelation brought a sense of urgency to the Washington summit on nuclear security, where
Barack Obama called on the rest of the world “not simply to talk, but to act” to destroy vulnerable
stockpiles of nuclear material, or to safeguard them against theft by terrorists.

Georgian sources said the highly-enriched uranium HEU was intercepted in a sting operation carried
out by the Tbilisi authorities in March 2010. They said the uranium was more than 70 per cent
enriched and appeared to have been pure enough to use in a crude nuclear weapon.

The amount seized was small, but Georgian officials said the gang was offering the HEU as a sample
of a bigger quantity available for purchase.

“The Georgian ministry of interior has foiled eight attempts of illicit trafficking of enriched uranium
during the last 10 years, including several cases of weapons-grade enrichment. Criminals associated
with these attempts have been detained,” the Georgian President said.

Visit of Chinese President to USA

Chinese President Hu Jintao, during his visit to USA in April 2010, told US President Barack Obama
that their two nations should defuse economic strains through negotiations, but neither leader
touched on the yuan dispute. Hu also covered the Iran nuclear dispute and China’s demands over
Tibet and Taiwan, two areas that recently flared as sore-spots in US-China relations.

The potentially touchy issue of China’s currency, the yuan, did not appear in either country’s public
account of the chat. Domestic US political pressure has been building on the Obama administration
to label China a “currency manipulator”.

The relationship between Beijing and Washington has been dragged down in recent months by
disputes spanning China’s currency and internet controls, US arms sales to the self-ruled island of
Taiwan, and Obama’s meeting with exiled Tibetan spiritual leader the Dalai Lama.

Both leaders agreed to work hard to ensure positive results at a second round of their Strategic and
Economic Dialogue in May.

The United States welcomed Hu’s decision to attend the nuclear security summit, saying it would
allow them to address a “shared interest in stopping nuclear proliferation and protecting against
nuclear terrorism”.

SAARC Summit, 16th

The 16th SAARC summit began at Thimpu, Bhutan, on April 28, 2010, with India’s Prime Minister
Manmohan Singh and leaders of seven other member nations pledging to combat extremism and
terrorism, launch joint initiatives to deal with climate change and boost intra-regional trade.

The Summit ended on April 29, 2010, with leaders adopting the ‘Thimphu statement’ on climate
change, signing an agreement on trade in services and expressing their firm resolve to stamp out
terrorism from the region. The next summit would be held in the Maldives in 2011.

Facing criticism for the slow pace of development in the region, the SAARC leaders reiterated their
commitment to implement the South Asian Free Trade Agreement (SAFTA) in letter and spirit to
boost intra-regional economic cooperation for the prosperity of their people. The closing ceremony
of the summit was attended by leaders from all the eight SAARC countries—India, Pakistan,
Bangladesh, Nepal, Afghanistan, Bhutan, Sri Lanka and the Maldives. Representatives of nine
observer countries—Mauritius, South Korea, China, Japan, Iran, the US, the EU, Australia and
Myanmar—were also present.

The seven-page ‘Thimphu Silver Jubilee Declaration-Towards a Green and Happy South Asia’’
emphasised the importance of reducing dependence on high-carbon technologies for economic
growth and hoped promotion of climate resilience will promote both development and poverty
eradication in a sustainable manner.

In line with India’s position, the SAARC countries underlined that global negotiations on climate
change should be guided by the principles of equity, and common but differentiated responsibilities
and respective capabilities as enshrined in the UN framework convention and conducted in an open,
transparent and inclusive manner. They also underscored the need to initiate the process to
formulate a common SAARC position for the Mexico conference on climate change in December.

The SAARC leaders agreed to establish an inter-governmental expert group to develop clear policy
directions for regional cooperation as envisaged in the SAARC Plan of Action on Climate Change.
The leaders directed the SAARC Secretary-General to commission a study aimed at accreditation of
SAARC with the Kyoto Protocol’s Adaptation Fund as a regional entity for undertaking adaptation
projects in South Asia.

IBSA Summit
The 2nd India-Brazil-South Africa (IBSA) Summit was held in Brasilia on April 15, 2010. Speaking at
the Summit, Prime Minister Manmohan Singh said the grouping of leading developing economies
must speak against the protectionist policies, “which are only short-sighted and self-defeating in the
long run”. IBSA can contribute to the shaping of the global agenda and highlighting the issues of
concern to developing countries, he added.

Underlining that the world must ensure that “we do not repeat the mistakes of the past”, the Prime
Minister said for the global economic recovery to be sustainable, it must be anchored in the real
economy.

He also underlined the need for the IBSA to coordinate its positions in the G-20 and continue to
pursue the early conclusion of the Doha round of trade negotiations “because a fair and rule-based
multilateral trading system is in our interest”.

Nuclear Security Summit

World leaders, including Indian Prime Minister Dr Manmohan Singh, attending the Nuclear Security
Summit in Washington D.C., on April 12, 2010, set a stiff four-year target to secure all vulnerable
nuclear material in the world to prevent terrorists from laying their hands on any of them.

In a communiqué issued at the end of the summit, the leaders emphatically stated: “Nuclear
terrorism is one of the most challenging threats to international security” and agreed that “strong
nuclear security measures are the most effective means to prevent terrorists, criminals or other
unauthorised actors from acquiring nuclear material.” Another summit would be held in 2012 in
South Korea to review the progress.

At a press conference after the summit, US President Barack Obama, under whose initiative the
summit was convened, acknowledged that the task was tough but had to be done. Obama said:
“This is an ambitious goal, and we are under no illusions that it will be easy. But the urgency of the
threat, and the catastrophic consequences of even a single act of nuclear terrorism, demand an
effort that is at once bold and pragmatic. And this is a goal that can be achieved.”

Indian Prime Minister Dr Manmohan Singh said he was satisfied with the outcome of the summit
and that it had endorsed what India had been pressing for at various international forms in the past
several years.

The summit also recognised that even as nations fulfil their national responsibilities these could not
addressed by countries working in isolation. What was needed was a sustained, effective
programme of international cooperation. The leaders agreed that at the international level the need
was for compliance with existing key conventions and initiatives.

CURRENT AFFAIRS: MAY 2010

NATIONAL AFFAIRS

RBI measures to boost liquidity

The Reserve Bank of India (RBI) has announced special measures to provide liquidity in the system, which may face a cash
crunch because of huge outgo on third generation (3G) telecom spectrum licences and payment of advance tax by companies.

On May 27, 2010, RBI allowed banks to avail of additional support under the liquidity adjustment facility (LAF). Till July 2,
banks have been permitted to avail of support of up to 0.5 per cent of their net demand and time liabilities, which will provide an
additional liquidity support of over Rs 20,000 crore.

In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25 per
cent statutory liquidity ratio (SLR) while availing the temporary facility.

Decks cleared for first Defence University

More than 40 years after it was mooted, the Union Cabinet, on May 13, 2010, gave its approval to set up the nation’s first defence
university at Binola, around 20 km from Gurgaon. It would aim at imparting education on strategic challenges to armed forces
officials, bureaucrats, academicians, parliamentarians and trainees at military academies.

To be established at an estimated Rs 300 crore, the institute would come up on an area of about 200 acres. A sum of Rs 100 crore
has been earmarked for land acquisition. The existing defence educational institutions like the National Defence College, New
Delhi, College of Defence Management, Secunderabad, National Staff College, Wellington, and National Defence Academy,
Pune, would also be affiliated to the INDU. At present, these institutions are attached to various universities across the country.

The proposed university, which would be fully autonomous and constituted under an Act of Parliament, would promote policy-
oriented research on all aspects of national security as part of the strategic national policy-making. The university was first
mooted in 1967 and the matter was accorded all seriousness after the 1999 Kargil conflict.

The government had set up a Kargil Review Committee, headed by strategic expert K. Subrahmanyam, which had recommended
establishment of such a university to exclusively deal with defence and strategic matters. It will encourage awareness of national
security issues by reaching out to scholars and an audience beyond the official machinery.

No law practice without clearing exam

From September 2010, law graduates will have to clear an entry-level exam to be eligible for legal practice. In a widely
anticipated move, the Bar Council of India—the regulator for the legal profession—has decided to implement its decision of
making aspiring lawyers walk the extra mile.

Till now, a law degree from a recognised university or a law institute was the sole eligibility criterion for getting registered as a
lawyer.

Emissions up, but way lower than US, China

Driven by higher industrial growth, energy production and transport, an environment ministry report says the annual GHG
(greenhouse gas) emission of India increased by around 58 per cent from 1994 to 2007, but per capita emissions were still much
less than those of US or China. Greenhouse gas emissions per unit of the GDP, however, declined by more than 30 per cent
during 1994 and 2007, says the country’s updated emission inventory “India: Greenhouse Gas Emissions 2007”.

The country’s net GHG emissions in 2007 were 1.9 billion tonnes compared to 1.2 billion tonnes in 1994. However against 1.5
tonnes of CO2 per capita in 1994, the per capita GHG emission was estimated to be 1.7 tonnes of CO2 in 2007.

Even though India is ranked fifth in aggregate GHG emissions after US, China, the European Union and Russia in its contribution
to global warming, emissions of US and China are almost four times that of India.

China and the US are the world's top emitters of greenhouse gases and disagreement between the two on slashing their carbon
dioxide output was a major cause of the failure of the UN-sponsored climate change talks in 2009. At the Copenhagen Summit,
India announced its intent to further reduce the emission intensity of the GDP by 20-25 per cent between 2005 and 2020 even as it
pursues the path of inclusive growth.

No lie detector tests: SC

In a verdict expected to weaken cases against terrorists, other dreaded criminals and high-profile offenders, the Supreme Court
has cited “mental privacy” to rule that police and other prosecuting agencies cannot forcibly conduct lie detector tests—narco-
analysis, polygraph or brain electrical activation profile (BEAP, popularly known as brain mapping)—on accused, suspects or
witnesses.

“Compulsory administration of any of these techniques is an unjustified intrusion into the mental privacy of an individual. It
would also amount to cruel, inhuman or degrading treatment with regard to the language of evolving international human rights
norms,” a Bench comprising Chief Justice K.G. Balakrishnan, R.V. Raveendran and J.M. Panchal held.

Further, placing reliance on the results gathered from these techniques would come into conflict with the right to fair trial.
“Invocations of a compelling public interest cannot justify the dilution of constitutional rights such as the right against self-
incrimination” guaranteed under Article 20(3) of the Constitution, the Bench said in the 251-page verdict.

The apex court also observed that the scientific validity of the techniques “has been questioned and it is argued that their results
are not entirely reliable…empirical studies suggest that the drug-induced revelations need not necessarily be true”.

The Bench said that before arriving at the conclusion it also assessed the “tensions between the desirability of efficient
investigation and the preservation of individual liberties” and the reasoning that these techniques “are a softer alternative to the
regrettable and allegedly widespread use of third degree methods by investigators”.

At the end, the apex court made it clear that the eight-point guidelines issued by the National Human Rights Commission in 2000
for conducting narco-analysis tests should be strictly adhered to. Among the guidelines were: No lie detector tests should be
administered except on the basis of consent of the accused. If the accused volunteers for a lie detector test, he should be given
access to a lawyer and the physical, emotional and legal implication of such a test should be explained to him by the police and
his lawyer. The consent should be recorded before a judicial magistrate.

OECD warns inflation will remain high

The Organisation for Economic Cooperation and Development (OECD) has argued that the Reserve Bank of India’s (RBI’s)
process of raising policy interest rates is “still very low by historical standards”.

In a global economic outlook report, the Paris-based grouping warned: “With inflation remaining elevated and the recovery
appearing to have taken root, there is a risk that price increases for inputs will flow through to second-round increases and that
inflationary expectations will become destabilised. To mitigate this risk, sizeable further monetary tightening will be required
through 2010 and into 2011.”

OECD projected the inflation rate to be 7.7 per cent in 2010 and 6.1 per cent in 2011. It expected the consumer price index rise to
be at 10.2 per cent in 2010 and still hovering at 6.3 per cent in 2011. The trade deficit has been projected at $80 billion (imports of
$405 billion) in 2010 and going up to $101 billion (imports of $478 billion up 13.1 per cent from 2010) in 2011 and real GDP
growth in 2010 at 8.3 per cent and at 8.5 per cent in 2011.

OECD Chief Economist Pier Carlo Padoan said: “The outlook for inflation remains the main downside risk, especially if
monsoonal rainfall is again deficient. In that case, food inflation would likely begin to risk anew. More generally, the strong state
of domestic demand could lead to persistently higher inflation and an upward drift in inflationary expectations.”

Adding the context of anticipated deficit reduction being underpinned on “expected revenue growth, asset sales and some more
modest tax measures”, Padoan added “the expected rebound in agricultural activity should help limit further increase in food
prices, which have been a major contributor to high inflation. However, underlying inflationary pressures are likely to persist
given the strong outlook for demand. Timely policy action to limit the scope for second-round price increases is, therefore,
required. Monetary policy normalisation is also important in the light of relatively modest fiscal consolidation”.

National Water Mission gets Cabinet nod

The Prime Minister's Council on Climate Change has approved the National Water Mission, focusing on making water
conservation a peoples' movement in the country.

Prime Minister Manmohan Singh, who chaired the meeting of the Council, highlighted the need to create a general consciousness
of the need to use water in the most sustainable manner in view of its scarcity and assess the impact of climate change on water.

The Council felt that to make the Mission a peoples' movement it was essential to make available all data on water in the public
domain, to be able to mobilise citizens, local bodies and State governments for focused action on water conservation and
augmentation.

Members felt incentives should be provided for using water in a sustainable manner and that the Research and Development
requirements of the mission should be focused upon.

Water Mission is one of the eight missions in the National Action Plan on Climate Change launched by the Prime Minister in
2009 to tackle the threats of global warming.

The government has already launched Energy Efficient and Solar Mission while a draft of Green Mission has been prepared for
public consultation.

Economic growth better than expected

The Indian economy roared past estimates to post a whopping growth rate of 8.6% in the January-March quarter of 2010. The
quarter's strong showing also helped India end the fiscal year with 7.4% growth, beating the earlier estimate of 7.2%.
Manufacturing led the way, with a whopping 16.3% growth in the quarter and 10.8% overall, while even agriculture, which was
expected to decline, ended with marginal growth of 0.2% year-on-year after growing 0.7% in Q4.

The GDP growth rate had slowed to 6.7% in 2008-09 following the global economic crisis, after topping 9% in the previous three
years.

The first quarter growth in the gross domestic product (GDP) is better than expected. In February, the Central Statistical
Organisation (CSO) had estimated that the Indian economy would grow at 7.2% in 2009-10, with growth of 7.7% in the fourth
quarter. But the unexpectedly strong performance in the fourth quarter helped boost the final figure to 7.4%.

The fourth-quarter showing is particularly commendable in the light of a sudden dip in the third quarter to 6.5% from 8.6% in the
second quarter due to the impact of a drought-like situation in the country.

China is the only large economy with a higher growth rate at 11.9% in the January-March quarter. The rest of the world is
witnessing a fragile recovery, which is now under threat due to the brewing Euro-zone crisis. The sixteen developed countries in
the Euro-zone expanded by just 0.2% in the quarter. At the same time, the Organisation for Economic Cooperation and
Development (OECD)—a grouping of mostly developed countries including Europe that account for over 60% of the global
economy—grew at only 0.7% in the quarter, against 0.9% in the previous quarter. US and Japan grew at 0.8% and 1.2%,
respectively.

The 7.4% growth in 2009-10 also showed that stimulus provided by government yielded results.

Visit of President Patil to China

Indian President Pratibha Patil visited Beijing from May 27, 2010. She is the first Indian Head of State to visit China in a decade.
She had been invited by her Chinese counterpart Hu Jintao and her trip coincided with the 60th anniversary of the establishment
of diplomatic relations between India and China.

During her visit, Patil inaugurated China’s first Indian-style Buddhist temple in Luoyang city in Henan province.

Skirting contentious issues, she held discussions with the top Chinese leadership. Controversial issues such as Chinese border
incursions, stapled visas for Kashmiris, Indian visas for Chinese telecom companies and Sino-Pak ties did not figure in the
discussions. Patil sought Chinese support for New Delhi's permanent membership of the UNSC during talks. The Chinese leaders
supported India's aspirations for UNSC permanent seat and assured the Indian leader that Beijing would back India’s bid in
2011’s election for a non-permanent membership of the UNSC.

Rs 67,000 crore 3-G bonanza for government

The bidding frenzy for third generation (3-G) spectrum came to an end on May 19, 2010, with leading operators Bharti Airtel,
Reliance Communications and Aircel winning licences for 13 circles each. This was the 34th day of the auction and it saw the
price of a pan-India, or nationwide, licence touching Rs 16,828 crore, nearly five times its base price. No single operator could
garner enough cash to win bids for all the 22 circles that went under the hammer.

The government emerged as the biggest winner. The sale of wireless airwaves would make it richer by at least Rs 67,719 crore,
the double of what it had targeted in the Union Budget 2010 and about 1 per cent of the country’s gross domestic product.

The proceeds from the sale of 3G and BWA spectrum will together help the government plug its fiscal deficit, projected at 5.5 per
cent of GDP in the Budget. The winning operators said if the government allots them spectrum as promised, by September 1, they
will be able to roll out 3G services in four to six months.

Seventy per cent of the revenue for spectrum comes from only six circles, while locations such as West Bengal, Himachal
Pradesh, Assam and Jammu and Kashmir saw licences being awarded at virtually the base price. The surprise package was Bihar
where the bids closed at Rs 203.46 crore, seven times its base price.

Ajmal Kasab convicted of 26/11 attacks

On May 3, 2010, a Mumbai court found 22-year-old Pakistani national, Mohammad Ajmal Kasab, guilty of mass murder and
waging war against India, while acquitting two other accused, Fahim Ansari and Sabahuddin Ahmed for want of evidence, in the
November 26, 2008 attacks on the city. Kasab is the lone surviving gunman from the attacks that killed 166 people. He has been
given the death sentence.

“It was not a simple act of murder. It was war,” judge M.L. Tahiliyani said in a summary of the 1,522 page judgement. “This type
of preparation is not made by ordinary criminals. This type of preparation is made by those waging war.”

The court also held 20 other accused, including Lashkar-e-Tayiba founder Hafiz Saeed, its operations chief Zaki-ur-Rehman
Lakhvi and Abu Hamza, guilty of conspiracy.

Pakistan withdraws objection to J-K power projects

In a significant development, Pakistan, on May 30, 2010, withdrew its objection to construction of Uri-II and Chutak hydel power
projects in Jammu and Kashmir. At the Indus Water Commissioner-level talks in New Delhi, the Pakistani side said it had no
objection to the designs of the two power projects after the Indian side provided details of these.

Pakistan had earlier raised objections over the 240 MW Uri-II project being constructed on Jhelum river in Kashmir valley and
the 44 MW Chutak plant being built on Suru, a tributary of Indus river in Kargil district of Jammu and Kashmir's Ladakh
province. Pakistan had claimed that the projects would deprive it of its share of water.

NTERNATIONAL AFFAIRS

Hung House in Britain after 36 years

On May 7, 2010, Britain woke up to a hung Parliament, an election outcome that this country last
experienced in 1974 when the then Prime Minister Edward Heath tried and failed to persuade the
Liberal Party to join him in a coalition.

The Conservatives under David Cameron emerged as the single largest party with 306 seats in the
650-member House of Commons, while Labour bagged 258 and Lib Dems 57.

Eight NRIs won elections, four each from the Labour Party and the Conservatives. Likewise four
Pakistani-origin MPs, Sadik Khan, Khalid Mahmood, Anas Sarwar and a woman lawyer Shabana
Mahmood, were successful on behalf of the Labour Party.

The LibDems play an extremely important role in the formation of the next government, although
they have not been able to attract as many votes as they hoped for. They were expecting to win
more than 100 seats, but they had to be satisfied with less than 60. However, despite the poor
show, they still hold the trump card and are destined to play the role of king-makers.

On May 11, Conservative leader David Cameron (43), who favours a ‘new special relationship’ with
India, took charge as Britain’s youngest Prime Minister in nearly 200 years, heading a coalition with
the support of centrist LibDems, and vowed to put aside party differences and provide a strong and
decisive government. He made Liberal Democrats leader Nick Clegg Deputy Prime Minister.

EU steps to halt economic crisis

On May 10, 2010, European policy makers unveiled an unprecedented loan package worth almost
$1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to
shatter confidence in the euro. Following the announcement, stocks surged around the world, the
Euro strengthened and commodities rallied.

The 16 Euro nations agreed in a statement to offer as much as 750 billion Euro ($962 billion),
including International Monetary Fund backing, to countries facing instability and the European
Central Bank said it will buy government and private debt. The rescue package for Europe’s
sovereign debtors came little more than a year after the waning of the last crisis, caused by the US
mortgage-market collapse, which wreaked $1.8 trillion of global credit losses and write-downs.
Under US and Asian pressure to stabilise markets, Europe’s governments bet their show of force
would prevent a sovereign-debt collapse and muffled speculation the 11-year-old Euro might break
apart.

The new war chest would be used for countries like Portugal or Spain in case their finances buckle.
Deficits are set to reach 8.5 percent of gross domestic product in Portugal and 9.8 percent in Spain
in 2010, above the Euro region’s 3 percent limit. Both countries pledged “significant” additional
budget cuts in 2010 and 2011.

The vow to push budget shortfalls below the Euro's 3 percent limit echoes promises that have been
regularly broken ever since governments in 1999 set a three-year deadline for achieving balanced
budgets. The Euro region’s overall deficit is forecast at 6.6 percent of gross domestic product in
2010 and 6.1 percent in 2011.

Britain, the EU’s third-largest economy, won’t contribute to a Euro rescue fund, though it backs
efforts to restore stability.

Now Spain struggles

Spain’s socialist government is seeing its political power erode as it struggles to chart a path out of
deep financial trouble, failing so far to satisfy conflicting demands to cut its budget and stimulate
job creation.

The coming months could bring far more problems as Prime Minister Jose Luis Rodriguez Zapatero
reforms the country’s labour market, risking national strikes and the loss of support from trade
unions, a core source of his centre-left party’s strength.

Zapatero’s minority government is already running into serious trouble, although there appears to
be no immediate threat of it falling.

A package of austerity measures was passed by only one vote in the Parliament’s lower chamber on
May 27, 2010. Opposition parties have called for new elections.

The austerity package aims to cut spending by Euro 15 billion ($18.4 billion) over two years by
freezing pensions and cutting civil servants’ wages.

But investors and lenders such as the International Monetary Fund are demanding that Spain
reform its labour market, overhauling hiring and firing rules and moving to find jobs for the long-
term unemployed and the young.

Europe’s top job creator only two years ago, Spain now has the highest unemployment rate—just
over 20 per cent—of the 16 nations that share the Euro currency.

The resulting austerity package, nicknamed the “scissors action” by Spanish media, was welcomed
by the European Union and the IMF, which said Spain’s “ambitious fiscal consolidation is under way
to reach the three percent GDP deficit target by 2013”.

US asks Pak, China to follow NSG rule

The US administration has said that civil nuclear cooperation between Pakistan and China must be
in compliance with rules of the Nuclear Suppliers Group (NSG) if China proceeds with plans to set up
two new nuclear reactors in Pakistan.

China’s decision to sell nuclear reactors to Pakistan, which has not signed the nuclear Non-
Proliferation Treaty, is proving to be a litmus test for President Barack Obama, who has championed
the cause of curbing the spread of nuclear technology.

China has helped Pakistan set up nuclear reactors since 1991 when China National Nuclear
Corporation (CNNC) entered into a contract with the Pakistan Atomic Energy Commission (PAEC) to
build Chashma-1, a 325 MW nuclear power reactor. When it joined the NSG in 2004, China cited a
Sino-Pakistan framework agreement that committed it to set up a second reactor, Chashma-2, for
Pakistan.

CNNC and PAEC have also worked out a deal to set up two separate 650 MW reactors—Chashma-3
and Chashma-4.

Analysts say the Obama administration is reluctant to press China on the matter in case Beijing
responds by dropping its tentative support for sanctions on Iran.

NSG rules prohibit the sale of sensitive nuclear technology and materials to nations that have not
joined the Nuclear Non-Proliferation Treaty (NPT) and do not allow international monitoring of their
nuclear activities.

Daryl Kimball, executive director of the Arms Control Association, says the agreement between
China and Pakistan is “deeply troubling because we have China engaging in civil nuclear trade with
a country that does not meet the requirements of the NSG for such trade.” He said the Obama
administration should insist at the NSG that the Chashma -3 and -4 projects be discussed and it be
determined that they not be permitted.

Iran ready for nuke fuel swap

It’s being regarded as a major diplomatic coup that could spell the beginning of the end of the
isolation of Iran from world affairs. On the sidelines of the G-15 summit in May 2010, Iran
dramatically announced that it has arrived with Brazil and Turkey a deal that could possibly break
the nuclear stalemate, stave off sanctions being contemplated by the UN and the US against Iran
and bring the contentious issue back to the negotiating table.

Under the agreement Tehran will ship 1,200 kg of low-enriched uranium (LEU) to Turkey in
exchange for fuel for a research reactor. Turkey will keep Iran’s LEU and the IAEA and Iran can
monitor the fuel.

Iran is a signatory to the Nuclear Non-Proliferation Treaty regime (NPT) which had enabled it to
received nuclear technology for civilian use from other NPT signatories, including the US in return
for committing that it would not be diverted or misused for military purposes. In 2002, Iran was
discovered to have clandestinely set up a uranium enrichment plant and a heavy water unit without
informing the IAEA. Since then major powers led by the US have got the UN to impose severe
sanctions and refuses to lift them till Tehran's comes clean and puts an end to all clandestine use.

Apart from curbs on banking and trade, heavy sanctions had been imposed on some key public
sector enterprises of Iran and the Iranian Revolutionary Guard Council, the striking arm of the
current regime.

Currently Iran is estimated to have 1,500 kg of 3.5 per cent (low) enriched uranium. For running
research reactors like the Tehran facility for medical purposes, the uranium needs to be medium
enriched to 20 per cent. According to a deal, Iran would swap 1,200 kg of its stockpile of low-
enriched uranium in exchange for 120 kg of medium-enriched uranium that is to be supplied by the
Vienna Group.

For making weapons grade material, uranium has to be enriched to at least 90 per cent. At least
300 kg of this highly enriched uranium is needed to develop an atom bomb. By keeping Iran’s low
enriched uranium stockpiles to around 3,000 kg, the world hopes that it would prevent it from
crossing the threshold of nuclear material needed to make a bomb.

Reacting to the Iran’s deal with Brazil and Turkey, the US pointed out that Tehran’s decision to
continue with some enrichment of nuclear fuel is a direct violation of UN Security Council and that
the details of the agreement must be conveyed to the International Atomic Energy Agency before it
can be considered by the international community.

UK responded by saying that Iran’s actions remain a serious cause for concern. “There is a need for
a continued effort to impose sanctions.”

EU responded by saying that “this is a right direction but it does not answer all the concerns raised
over Iran’s nuclear programme.

Tension between Koreas escalates

On May 24, 2010, South Korea announced steps to tighten the vice on the North’s already
stumbling economy in punishment for sinking one of its navy ships, with both sides stepping up
their war-like rhetoric.

The United States, which backs Seoul, warned that the situation was “highly precarious”. China, the
North’s only major ally, urged calm. The mounting tension followed report by international
investigators accusing the North of torpedoing the Cheonan corvette in March 2010, killing 46
sailors in one of the deadliest clashes between the two since the 1950-53 Korean War.

The United States, which has 28,000 troops on the peninsula, threw its full support behind South
Korea and said it was working hard to stop the situation from escalating.

Few analysts believe either Korea would dare go to war. The North’s military is no match for the
technically superior South Korean and US forces. And for the South, conflict would put investors to
flight.