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As another budget looms, here is the goodnews: India’s fiscal situation has improved beyond the expectations of most people. Further, the improving trend is set to continue. It doesn’t matter that subsidies are on the rise and the Sixth Pay Commission’s impact will have to be factored in. The sea-change in our fiscal fortunes calls for a rethink of long-held attitudes towards government spending. Many find it difficult to digest the improvement in the first place. There is plenty of quibbling about the correct fiscal numbers. The most commonly heard whine is that the Centre’s budgetary numbers understate the fiscal deficit because some of the oil, fertiliser and food subsidies are being met through the issue of bonds.

This sort of quibbling misses the point. The key figures to focus on are, one, the combined deficit of the Centre and the states; and, two, the total liabilities of the Centre and the states. In respect of these two key figures, we are pretty much on target, if not ahead of it. Start with the Centre’s fiscal position. The fiscal deficit was to be brought down to 3.3% of GDP in 2007-08 from 3.7% in 2006-07.For 2006-07, the provisional figure is down to 3.5%. On top of this, GDP growth for 2006-07 has been revised from 9.2% to 9.6%. In 2007-08, GDP growth is likely to above the budget’s estimate of around 7.5 %.Putting together all these, the fiscal deficit target of 3% mandated for 2008-09 by the FRBM Act is likely to be met in 2007 -08 itself.

In the 2008-09 budget, the Sixth Pay Commission impact has to be taken into account.This is expected to be around 0.5% of GDP.Despite this; there is a good chance of meeting the FRBM target for 2008-09. But we would still have off -budget bonds which the IMF estimates at 1.2% of GDP. So, yes, the sceptics are right up to a point - induding off-budget bonds, we will be missing the FRBM target. But that is because the sceptics focus only on the Centre’s fiscal position. To some extent, the slippage at the Centre is on account of improvements in the states, thanks to higher transfers from the Centre to the states and forgiveness of state debt by the Centre. We should be looking at the combined fiscal deficit of the Centre and the states instead. The budget estimate for this figure was 5.5% of GDP in 2007-08. It is likely to be closer to 5 % given the trends in revenue receipts and GDP growth.

The Twelfth Finance Commission (TFC) had held that a reasonable limit for the combined fiscal deficit for India would be 6 %. In 2008-09, there is a good chance that the combined deficit will fall within this limit even after factoring in the Pay Commission effect. By 2009-10, the combined deficit should be around 6% after taking into account off-budget bonds as well. The year 2009-10 is of some significance because, in positing a combined fiscal deficit of 6%, the TFC had in mind an overall debt GDP ratio of75% in2009-10 (external debt being measured at historical exchange rates). But this target, the RBI’s latest figures show, will have been met in 2007 -08 itself!

The fiscal deficit limit is a means to the end, which is an acceptable debt/GDP ratio. In setting the combined fiscal deficit limit at 6%, theTFC had assumed a nominal growth rate of 12%. Nominal GDP has exceeded this figure in the past five years. As a result, we are ahead of the time- table when it comes to meeting the debt/GDP ratio. The IMF expects the debt/GDP ratio to decline by 2012 to 62% - or close to the European Union’s own prudential limit of 60%. This could happen even sooner. India’s fiscal turnaround is remarkable because it is overwhelmingly the result of booming revenues and very little expenditure compression. This is quite unlike the experience of many other economies. It is also remarkable because it has happened without any big contribution from disinvestment. 50 large has been the increase in valuation of public sector companies that a mere 10% sale of government stakes in P5Us stands to fetch the government nearly 2 % of GDP.

It is time to bid goodbye to fiscal pessimism. This does not mean tax giveaways. India’s tax-to-GDP ratio is lower than that of many developed and developing economies. Tax efforts must continue. But the improved fiscal position certainly gives room for stepping up public investment, which has languished for long. Everybody knows we need huge investments in infrastructure. There is merit in public-private partnerships. But this cannot become a mantra. A case must be made in every context - and the old argument about paucity of government funds is no longer as valid. In some cases, there are difficulties in putting in place norms that ensure that PPP does not turn into private loot at public expense. In others, say roads in certain regions, PPPs may not even be an option. Government needs to invest more. If this means moving to a new fiscal rule that permits public investment within a band above the 3 % limit, so be it.

Interest rates have started coming down. Large public sector banks like SBI and Canara bank have slashed key lending rates twice in the last one month and home and consumer loan rates have been cut across the board. And all this without the RBI signaling any rate easing in its last monetary policy. While the RBI did urge banks to consider changing rates without any direct cue from itself and the Finance minister has been requesting bank chiefs to lower rates, there could be a couple of other important reasons why banks have started cutting rates proactively. 

One, growth is slowing down. In early 2007, the furious pace of credit growth was a problem. Now that the central bank has effectively cooled this tear away credit growth with higher interest rates, we have come to the other end of the spectrum because growth could be lower than desired: The economy is slowing, many sectors are witnessing lower off-take and banks do not want to be in a situation where their bread and butter is affected by their inability to lower interest rates pending fiat from the RBI.

Therefore, they are simply doing what is best for their own business, lowering the price of money: Now, why have they not waited for an explicit cue from the central bank this time? Perhaps because of inflation. Even a casual glance at commodity prices will tell you the story. Crude is $100 a barrel, gold is at a high of $950 an ounce and silver at a 27-year- high, base metals have had an incredible run of late and even soft agricultural commodities are stubbornly high. 

The US Fed, staring at a recession, does not have the luxury of looking at inflation but the RBI does. Particularly so, with this being a pre-election year and the Finance Ministry is surely not missing any opportunity to remind it of the fact. It is entirely possible then that another couple of monetary policy meetings may pass without the RBI pressing the rate trigger. Banks don’t want to keep waiting only to realise halfway down the year that slower growth has started denting credit off-take in a serious manner. That is the way it should be: the RBI does what it thinks is good for the nation, balancing inflation and growth, while banks do what is good for their business of lending. Generally interest rate cuts are hailed by equity markets. Yet, interestingly, serial interest rate cuts by the US fed have not sparked off any meaningful rally in global equities and clear signs of rate easing in the domestic market have failed to produce any positive impact either. 

Rate sensitives are lying particularly quiet: banks have come off on margin worries, real estate stocks have settled 30-50 % lower than recent highs and there’s no great buying in autos either. Maybe it’s the global turmoil clouding sentiment, the reason why the market is ignoring the interest rate cues or maybe it’s worried that the growth slowdown is worse than what is built into stock prices today. Once the global clouds clear a bit, hopefully the stock market will spot this ray of sunshine. 

From an obscure house in Gurgaon to a remote jungle resort in Chitwan, Nepal, where he has been finally nabbed, we have been through a horrific roller coaster ride with the man who is allegedly one of India’s leading kidney dealers. With almost vicarious fascination, we learn day after day of his enormous wealth, he was carrying hundreds of thousands of rupees as loose change when caught, and his palatial homes both in India and abroad. Of his fascination with luxury cars and failed beauty queens. Of his extensive contacts across the world where he found recipients for his gruesome racket.

While this ghastly drama was unfolding, reports surfaced of the organised trade in blood right outside premier hospitals in the capital. As each scandal surfaces, we see the nefarious collusion between sections of the medical community and organ traffickers like kidney kingpin Amit Kumar. But that apart, the one piece in the macabre jigsaw that we rarely bother about is that of the victims. It is no secret that unscrupulous touts exploit the grinding poverty; and often illiteracy; of their victims in order to lure them to clinics where they are deprived of their kidneys. In the Gurgaon clinic that has been busted, we learn that at least 500 kidney transplants had taken place over the past few years. The question then arises, what happened to the donors? We can be fairly certain that they did not receive the requisite postoperative care without which the donor is condemned to a life of debilitating ill health and even early death. The police seem to have made no effort to trace these unfortunate people. In Chennai, the hub of the kidney trade in India, over 2000 people sell their kidneys each year. Many victims are trafficked from Nepal and once the deal is through sent back home.

It is clear that there is also political pressure on the medical fraternity to either collude in or turn a blind eye to this illegal trade. According to 1994 legislation, a State-approved ethics committee must approve all transplants. But, as many tsunami survivors who sold their kidneys testified, getting around such committees was relatively easy. The testimony of the victims is crucially in the legal procedure against charlatans like Kumar. If it is proved that coercion was used to trap a donor, then the penalties are that much higher. The state that was caught napping while people were being deprived of vital organs, owes it to them to listen to their side of the story.

So it is official now: time is running out for the India-US civilian nuclear deal. A three-man team of US senators led by Joseph Biden, who heads the influential Senate Foreign Relations Committee, disclosed this at a press conference in Delhi. Much water has flown down the Yamuna and the Potomac since Prime Minister Manmohan Singh and President George W. Bush inked the deal in July 2005. It focuses on developing India’s civilian nuclear power programmes in exchange for placing its civil nuclear facilities under International Atomic Energy Agency (IAEA) safeguards.

But controversy has dogged it from the word go, with detractors - chiefly the Left partners of the government - deriding it as a potential ’sellout’ of India’s interests.

The truth, of course, is that the Bush administration staked an unprecedented amount of political energy on this agreement, which represents a big change in US policy. Apart from revising domestic law, the US would have to convince its 44 Nuclear Suppliers Group (NSG) partners to waive guidelines prohibiting the supply of nuclear material or technology to States that don’t accept IAEA safeguards on all its nuclear facilities. Never mind India’s credentials as “a responsible State with advanced nuclear technology”. According to the deadline identified by the Biden team, the US Congress will only consider the deal if it reaches Capitol Hill before July. This effectively means that New Delhi must finalise the India-specific safeguards agreement with the IAEA and get the nod of the NSG in the next few months.  

 In the event the US Congress doesn’t ratify it, the deal almost certainly runs the risk of being renegotiated by the next Congress. And going by the campaign rhetoric of the two Democratic Party presidential candidates, neither Barack Obama nor Hillary Clinton is likely to back a deal initiated by Mr Bush.There is no guarantee, either, that the Republican candidate John McCain will endorse President Bush’s overture towards India. So it would be unfortunate if the agreement were to fall through because of political reasons than due to any technical ones, as both countries have staked so much political capital on it. As many experts have pointed out, there are no technicalities in the deal that can’t be sorted out with more discussion, which makes it all the more a shame that critics oppose it just for the sake of opposing it.

Amidst so much talk and analysis of what is going wrong in the economic world today, the one thing that has not been stressed enough is what impact it may be having on the “feel-good” factor for stewards of the Indian economy. The one strong underpinning of this multi-year bull market has been how confident businessmen and investors have felt about the future. This is not as tangible or quantifiable as other economic metrics but every bit as important. After all, businesses and markets are run by human beings. When they feel less confident, they go into a shell, which often compounds the problems which made them less confident to begin with. 

Put yourself in the shoes of the CEO of an Indian company and ask what he must be feeling today. Just one quarter back he had unlimited access to capital, the economy was cruising at 9 per cent and the global economy was expected to deal with a US slowdown and come out of it relatively unscathed. Now, it appears the US is probably already in recession, economists are talking about a serious Asian slowdown, Indian GDP growth is grinding closer to the 8% mark by next year, industrial production has turned sluggish, interest rates are stubbornly high with the Reserve Bank of India reluctant to cut yet and access to equity capital is drying up with big IPOs being pulled out. Global investors are also getting risk averse so access to private capital and even global market access may be constrained for companies. All this is happening at a time when Indian companies are in the midst of executing fairly significant expansion plans requiring large capital expenditure. 

For managements to take on more risk and for investors to fund it, sentiment needs to be strong. Yet, everything that has happened in the last few weeks points in the opposite direction. Not to mention the state of the stock market. Never believe a CEO when he tells you market movements do not concern him. A large part of the feel-good in any economic environment is derived from the capital market, make no mistake about it. Do you doubt that business sentiment will be crippled if the Sensex goes to 12,000 and stays there for some time? Sentiment is a fickle thing, it turns all so easily. Once managements start withdrawing, it is a slippery slope. Guardians of the Indian economy must recognise the risks of a souring of sentiment and do everything in their power to stop it.  

Admittedly, the influence of policy makers on business sentiment is limited yet small steps can have surprising effects. Have we not all seen how a mere pat on the shoulder from a captain galvanises a young fast bowler? In our maze of numbers we forget we are all so human. Can the RBI signal lower interest rates and I stoke demand? Can the finance minister cut taxes and provide a fiscal stimulus? Could a few large issuers hit the market with some really attractively priced IPOs and revive sagging primary market sentiment? I do not know the answers but shoulders are sagging a bit. One can see it. We just cannot afford to let the old feel-good fade away.

Dr. Manmohan Singh was worried. No, not worried, but concerned. No, not concerned, but agitated. Yes. When curiosity starts biting viciously, the mind cannot but get agitated. He was, of course, curious. And there seemed to be no way of quenching that curiosity.

The media were agog with rumours about an impending cabinet reshuffle. If it had been an official announcement, the PM would not have bothered. He knew that a formal denial would follow.

This was a rumour featured in all gossip columns. The greatest gossip of them all, the visual media, were also forecasting a cabinet reshuffle. One can ignore news, but the man who disregards a rumour, does so at his own peril.

So the cultured Doctor was sure that there was going to be a reshuffle. But who was going to barge in and who was going to be kicked out? Will the portfolios of the ministers be changed?

Who will get what? The PM was anxious to know. Of course, being only the PM and not Sonia Gandhi, he had no right to expect to know anything in advance. His lot, he knew, was to wait and watch.

He would come to know, when the ministers would be sworn in by Abdul Kalam. No, no, not Abdul Kalam. He was no longer the President. That woman - what was her name? - Some Patel, Ahamed Patel? No, a woman. Some other Patel. Ah! Pratibha Patil! When she would say ‘I…’ and rest her office, the ministers - at least the new ones if any - would have to confess their names and admit their identities: Then the Prime Minister would know.

But curiosity is something that cannot wait to be killed at the last moment. He wanted to know in advance, at least before the invited audience at the Rashtrapati Bhavan came to know the names and the faces. What faces? Does it matter at all? After all, whatever the face is now, it will be lost once the person joined the cabinet. But that is a side issue. Who are going to become ministers? That is the question now. Curiosity, earlier biting the PM, now started eating into him. He had to do something about it.

He could ask Karunanidhi. At least he would know, whether his daughter was going to be inducted into the cabinet or not. But if Dr. Manmohan Singh talked to him, Karunanidhi would definitely talk about the Ram Sethu issue. He would want to know the Centre’s position on it and the line it was going to take before the Supreme Court. And what could the PM say? If the government knew what it was going to tell the Supreme Court, it would have already done so. The government, being a secular one, had nothing but contempt for Rama. But he seemed to carry some votes in his pocket. If there was a way of keeping the votes and letting Rama go, the government would have embraced the idea with enthusiasm.

But Karunanidhi would not listen. He wanted the bridge to go along with Rama, making way for T.R. Balu, the Shipping Minister to sail in the Palk Straits. So talking to Karunanidhi would only be inviting acrimony.

Lalu Prasad Yadav might know all about the cabinet reshuffle. But if the PM asked Lalu to satisfy his curiosity, Lalu may use the occasion to demand a Bharat Ratna for Rabri Devi. Sure, anyone who would be prepared to accept the award from the hands of the present President would be making the ultimate sacrifice. The sacrifice of self-respect. That itself, being an act of the highest form of humility, would make the person deserving of the highest award. But then, if Rabri was given the Bharat Ratna, the next in line would be Mrs. Deve Gowda. And Sonia Gandhi would not like that. So Lalu cannot be approached. Who else?

Pranab Mukherjee? He was already considering himself to be more important than the PM. Why confirm it by seeking enlightenment from him?  Chidambaram could know some particulars, as his son was close to DMK circles, thus being in a position to know Sonia Gandhi’s mind.

But, after the recent coronation by a TV channel as the Indian Politician of the Year, Chidambaram would be assuming airs. Not that he did not have any earlier. But the air assumed by him now could be so dense that he may be causing a low pressure area around himself. And worse, under the pretext of mentioning in passing the next budget, he may start giving lessons in economics to Dr Manmohan Singh. That being the ultimate in humiliation, would be the limit. No, no Chidambaram. Anyway who knew what was going to happen to him in the reshuffle? The Leftists were already baying for his blood.

Talking of Leftists, Prakash Karat would certainly be posted with all details about the reshuffle. But if he was approached, he may start talking about the nuclear deal. It was already exploding in the PM’s face, and he did not want to invite another blast. The effects of radiation had started to tell.

Arjun Singh may be expected to find out at least some aspects of the reshuffle. But he would carry tales to Sonia Gandhi, accusing the PM of being a nosey sort of man, exhibiting an inquisitiveness, totally unbecoming of his office.

The PM was by now a man resigned to his fate. He wrote on a piece of paper lying on his table, “Who am I to aspire to know anything in advance? I am only a Prime Minister. There are higher powers.” He studied it to steady himself, and stifle his curiosity. And to divert his mind, he switched on the TV set. Someone was giving a pitch report prior to a one-day fixture and pointing to a spot on the pitch said, “Look… over here, yes over here…” The other words were lost on the PM. The words “over here” had an electrifying effect on him. Yes. That’s it! One can ‘overhear’! Sonia and Rahul Gandhi would definitely be discussing the cabinet reshuffle, to decide who was going to be made what. If only he could go to Sonia Gandhi’s residence, hide in a convenient corner, and listen, he could get all details. But could he? The hiding part of it, he could carry out with consummate skill, having perfected the art by sheer practice.

After all, whenever the communists came to discuss the proposed pact with the US, he had successfully hidden himself. When he started weighing the pros and cons of attempting to overhear the conversation between Sonia and her son, his enthusiasm diminished. There were no pros, but plenty of cons. Just then, he heard some footsteps. Someone was approaching. No, there were two of them, somebody talking to somebody. Yes. They were Sonia and Rahul approaching his room.

Dr Manmohan Singh was shaken. Their arrival on the scene, just as he was considering the outrageous act of overhearing their conversation, disconcerted him. He felt as if he was already eavesdropping. His conscience castigated him. He felt guilty. He also knew, that his face would reveal all.

His was the face of a nobleman, and it would not hide his inner secrets. One look at him, and she would know. He must avoid the mother and the son. He took a decision. His face would not hide anything, but he could hide himself. He jumped 

from his chair, jumped around the sofa set, jumped over a table, and the final jump led him behind a wardrobe. As he stood motionless, a practice which had grown on him through his years of prime-minister-ship Sonia and Rahul seated themselves near the table where he had been sitting and brooding. They thought that he had gone to the restroom, and would be returning shortly.

Just then, Sonia Gandhi’s eyes fell on the piece of paper on which he had been scribbling. The words, “Who am I to aspire to know anything in advance? I am only a Prime Minister. There are higher powers,” stared at her.

She was impressed and showed it to Rahul. He too was impressed. “Could’ we ever hope to get a Prime Minister like him? Whoever comes or goes, he must stay.” As he heard these words of Sonia Gandhi, Dr Manmohan Singh, heaved a silent sigh of relief. Whatever the blasted reshuffle did, it would not touch him.

What a shame. The stock that was supposed to double on listing actually lost a fifth of its market value on Day One. One sincerely hopes this ends the mindless flipping game that has dogged the IPO market through this Bull Run. When Anil Ambani and his investment bankers proudly spoke about how $190 billion had come in by way of subscription money; creating history; I had a sinking feeling this was coming. Now the truth is out.

Yesterday, all of $2.5 billion of Reliance Power stock got traded, cash and derivatives put together, and even that stock could not be absorbed. Where were those billions that had rushed in to subscribe it? If indeed that had come in to buy the great growth story in Indian power, has it all changed in barely a month? I said it then and I will say it again; these institutional bidders are a bunch of flippers with no regard for the paper they are buying. So, the next time you get all excited about a foreign cited about a foreign fund buying a stock at a lofty price, do remember that all of them had egg on their face with Reliance Power. They are suckers who promoters and bankers have wrapped around their little fingers.

So now Anil Ambani has his cash sitting nice and pretty in the bank, raised at Rs 450, while you are holding the baby at Rs 370. Truly sad. Yet, do not feel even for a second that great “value” has emerged ill that stock after the first cut. Rs 370 is lower than Rs 450, but not fair value for the stock. It still trades at just under five times expected book value for 20012-13 that is five years forward. You can buy NTPC today, with larger capacity on the ground at three times the book value. Reliance Power can fall to Rs 300 and still be expensive. It probably will, if it is not supported.

Anil Ambani has fabulous businesses in his group, in Reliance Communications and Reliance Capital. Yet, I think he has played his cards all wrong with this IPO and severely dented the image of his ADA Group. The next time he approaches the market to raise capital; the memory of this debacle will haunt him.

When a momentum party ends in the stock market, the biggest hangover is always felt by the “themes” that emerged as most popular during the heady days of bullishness. One theme that gained a lot of currency in late 2007 was “embedded value” or sum of parts (SOTP) valuations. Stock prices that could never be justified by current earnings were easily explained by ascribing value to future business streams of the company. Promoters were only too happy to play along: they merrily announced value “unlocking” strategies from diverse businesses and plans to raise humongous amounts of money in these subsidiaries using the then prevalent market euphoria. So analysts and promoters played this game of make believe to the hilt and investors made money for a while, till the music stopped. One look at the screen today will reveal the carcasses of those great SOTP stories.

Power was the area that promoters wanted to exploit the most. Their eyes must have lit up at the IPO valuation of Reliance Power and even more so at the prospect of it doubling on listing.

So it became the perfect cue for companies like Sterlite and JP Associates to announce the hiving off of their power businesses and plan placements/listings for them at valuations benchmarked to Reliance Power. Analysts did not waste any time in revising price targets upwards based on this ingenious unlocking of embedded value. REG and Jindal Steel and Power floated around in similar SOTP bubbles.

Sadly, the script did not play to plan. The list is long: Punj Lloyd was rerated to include Pipavav Port valuations, IDFC and ICICI got great rub-off s from their brokerage holdings as brokerage stocks soared to ridiculous valuations and countless stocks derived embedded, value premiums from their real estate holdings. Now the scales have fallen from investors’ eyes but too late, stock prices of these companies have collapsed.

In hindsight, which is perfect, it was sheer madness. One bit of insanity led to another. First, outlandish valuations were ascribed to a sector, and then those valuations were used to pump up stock prices of another company holding fragments of that business. Nobody questioned the fact that the starting point or the very foundation of such “derived” value was completely out of whack. I suppose 

all things pass in a bull market, at least for a while. It is great that investors and analysts will now get real and come back to the world of tangible earnings. I doubt if this SOTP madness will resurface anytime soon. The next time you hear the word “unlocking”, you know what to do. Run.

When does childhood end and adulthood begin? The International Convention on the Rights of the Child defines a child as any human being below the age of 18. But in India, a signatory to the Convention, there has always been a great deal of confusion on the age below which one is considered a child. For example, the legal age of marriage for a girl is 18 but the age of sexual consent is 15. So, in effect, the law accepts that it is possible for a girl to be married by 15, even though that is in violation of the Prohibition of Child Marriage Act, 2006. The Child Labour Prohibition Act defines those below 14 as children and those between the ages of 14 to 18 are permitted to work in hazardous industries. It is with a view to clear this muddle that the Law Commission has sought to make the marriage age a uniform 18 for both boys and girls and the age of sexual consent 16. Of course, this still leaves much to be desired but is a welcome first step. .

The bewildering cornucopia of laws governing children and juveniles with their varying definitions of age has made it easy for abusers and offenders to exploit the loopholes and get away with crimes against children. In a country like India with its appallingly poor system of recording births and deaths, millions of children do not know their real age. This creates several problems. One, it denies access to children into the school system where a birth certificate is mandatory. Two, it once again allows the exploitation of children by unscrupulous people who can claim that the child is actually of the age of consent.

The Law Commission’s next step should be to recommend that the age of the child in all laws should be the same and based on scientific parameters and the definitions laid down in the Convention on the Rights of the Child. Local laws should also follow the same age guidelines as the national ones, so that there is no doubt as to who is or is not a child. India is bound to do so under the Convention on Child Rights that states that all signatories ensure that all legislation is fully compatible with the Convention. As with all our social sector laws, the devil lies in the implementation. We can only hope that the Law Commission’s efforts will not fall by the wayside and will translate into a real weapon against the exploitation of children.

Those who are adept at reading the tea leaves on the Kashmir issue may well find that the configuration is looking far better than it has for some years now. Even as winter tightens its grip over the volatile Valley, the militants find that they are skating on thin ice. The Hizbul Mujahedeen militants, once the undisputed overlords of Kashmir, are in tatters today after their ranks have been decimated by the security forces. Many of its cadres have surrendered and its top leadership, or what is left of it, is at loggerheads with each other. The other militant groups are also somewhat directionless today following the turmoil in Pakistan after Benazir Bhutto’s assassination. Pakistan’s Inter Services Intelligence, widely credited with orchestrating militancy in the Valley, appears to be lying low in light of the renewed international scrutiny on terrorism emanating from the region.

While it is odious to draw comparisons, the contrast between an economically buoyant India and a strife-torn Pakistan has never been more stark. The result has been that many of the Valley’s youth no longer consider Pakistan as a viable option to throw their lot in with. Rather, they are eager to make the best use of the opportunities offered by a new age India. This is not to suggest that the era of militancy is behind us. There is no doubt that on seeing the ground slipping from underneath their feet, the militants will try to mount spectacular attacks in different parts of India. But the dream of wresting Kashmir away from India is now a mirage. Given these factors, the situation is very much advantage India. The challenge now is for New Delhi to capitalise on these favourable developments and take measures to win over the sections in the state that still remain alienated from it. So far, successive governments have singularly failed to read the mood in the Valley and act accordingly. The time is ripe to deliver on the promises of developing infrastructure and industry in the state.

So fat, all efforts have been piecemeal and subject to political vagaries. Sticking points like the final resting place of Jammu and Kashmir Liberation Front founder Maqbool Butt’s remains - he was hanged in Tihar Jail in 1984 for the murder of an intelligence officer should be resolved. If the government fails to act now, the mood could well change as we have seen in the past. The story of Kashmir has been one of squandered opportunities. This time round, the government must not add to that score.

Last week I was travelling work. On my flight I saw an interesting impact of bird flu. The aircraft steward reached the person sitting next to me and announced that he had run out of vegetarian meal! My neighbour was understandably very upset, and did not mince words while expressing his displeasure. He did not take time moving from his frustration to a sermon on how the overall service of the flight was deteriorating and how disorganised they were. As he went on with his complaints, our extremely patient steward kept apologising and kept offering him other goodies that he could possibly catch hold of from the pantry: From the slowly rising to the peaking and then tapering of the passenger’s tone, the steward’s creativity was at its hilt. He finally managed to give some croissant butter, cookies, etc, to my irate neighbour. I’m sure at the exit he would also have beamed an extra smile at his customer thanking him for flying with their airlines.

This reminded me of another incident, I was sitting with the owner and CEO of a large company one day. Suddenly; his PA entered and announced that the purchase manager of a ‘customer’ had walked in a little earlier than scheduled. He immediately invited the ‘guest’ in and started with pleasantries. The purchase manager did not spend too much time before lashing out his complaints.

Each time the purchase manager shot a complaint Mr. CEO smiled and reassured the manager that he understood the inconvenience caused and that he would surely look into it. Very interestingly; Mr. CEO’s equal, if not more, emphasis was on serving tea and snacks to the customer.

Each time he offered an empathetic note, he also offered some munchies from the vast spread on the table. Once the manager cooled off, their conversation moved on to future business and commitments from both sides.

Barring the stature of the parties involved, both the above cases had a lot in common. Both the people managed to pass over the unpleasant and progress towards a solution. Be it with a customer or in any other professional or personal relationship, you do face times of test. What you do at that time would go a long way in deciding how the relationship looks in future.

These two incidents could be looked at as cases for good customer service however I look at them as maturity in handling relationships. This maturity partly comes from knowledge of ‘customer service’ or ‘assertive communication’ skills and techniques. It comes more intuitively where the stakes are high. For the airlines or the hospitality industry; an upset customer or for a businessman a large buyer sure means high stakes. In the face of loss of a huge amount of business or serious jeopardy to one’s career progress, managing this relationship comes very naturally.

However, when stakes are not high then one has to put special effort at managing relationships. Our natural response in slightly more comfortable relationships is to snap and say, “It’s not because of me!” or “Why me always!” etc. Only if we would take a minute and understand that the other person is just reacting to the temporary feeling of frustration and not necessarily has anything against me. If ‘I’ comes in between, then there are two complications rather than one.

The bottom line is: to manage any relationship well, at the point of confrontation or conflict; in that ‘moment of truth’ keep your complete focus on the other person and the difficulty he/she is facing. This is the time to exhibit nurturance in any relationship and to take it to a higher level. Once you’ve achieved this skill you’re sure to sail through that uneasy or difficult moment and move on.

Let me suggest a short test for yourself, are you continuing with your school friendships through your college and career life? Do you continue to call your earlier boss for advice or views? If your team has changed, are you still in touch with your earlier team members? Do you have long standing customers or clients?

Do you have a consistent loving relationship with your near ones? In any long relationship, you face moments when you choose between snapping and nurturing… what have you been choosing?

Have you been seeing red lately? Well, what else would you see with Valentine’s Day upon us floating on a crimson tide? In great Indian assimilation mode, we have taken to this day bf romance in the unique manner in which we have taken to all sorts of days like Halloween’s Day, Friendship Day, Groundhog’s Day and so on. And in direct proportion to our desire to revel in Valentine’s Day comes the ire of our friendly neighborhood Shiv Sena moral police who are lurking behind bushes to snuff out any attempts by couples to canoodle.

Indeed, the valiant Sena vows each year to smash shops selling Valentine’s Day cards and gifts. But will all this stop us from plunging into Valentine’s Day festivities with gusto? Not on your love life. But while we will defend to our death the right to celebrate love and take on the Sena on the beaches in trenches and in shopping malls, many of us seem to have forgotten exactly what the day is all about.

So you can imagine how disconcerting it is to receive tender Valentine’s Day messages from one’s female friends and male friends, please note those one is not romantically attached to.

While reading a few such messages, I happen to mention to the spouse how peculiar it sounded to me. Fearing that I was fishing for gifts, and seeing a heart-shaped hole in his bank balance, he denounced the whole thing as a clever marketing gimmick of which he would have no part.

While the messages come thick and fast from odd quarters, I could not help but think of the origins of Valentine’s Day. Though there are differing versions, St. Valentine as he later become known, was put to death by the Romans in 269 AD for refusing to give up Christianity. Before he pegged off, he apparently wrote a letter to his jailer’s daughter with whom he had become friendly and signed it ‘from your Valentine.’ Now here we really take all this to heart. So for those who do not wish to stop at roses and candlelight, a spa experience may be in order. Or, a meal at an up market restaurant. Very much like the shakahari burger at McDonald’s, we have added our own bells and whistles to this day.

Be sure, that come Valentine’s Day next year, we will have added further embellishments to it. Just as we celebrate Halloween’s Day, an occasion where once the dead were thought to come back to earth. So the message is clear, the Sena has little chance to cast a dampener on our spirits when even the living dead cannot pull it off. But let us remember that Valentine’s Day messages are not for your buddies, whether male or female. So let a thousand romances blossom, and steer clear of the enthusiastic Shiv Sena spoiler.

Oil India Limited (OIL) has received nod from the Government of India to make an initial public offer (IPO) to mobilise resources to fund its growth plans in exploration and production of crude oil and natural gas. The IPO, which is awaiting SEBI approval, will be part of the year-long golden jubilee celebrations of the second largest oil company in the country that begins on February 18.

Chairman and managing director, OIL, M.R. Pasrija informed that the government, which holds 98.13 per cent stake in the company has approved OIL’s proposal to issue IPO that will constitute 11 per cent of the fully diluted post-issue paid up capital of the company. Out of these, one per cent will be on the offer for the OIL employees.  “OIL will offer an IPO of 2,64,49,982 equity shares of Rs 10 each for cash at a price to be decided through book-building process. The shares that will be offered are proposed to be listed on the NSE and the BSE,” Pasrija informed.

Moreover, the government will also disinvest another IO per cent of its holding in OIL to the Indian Oil Corporation (IOC) and Hindustan Petro-Chemicals Limited (HPC). This will leave the government with 78.5 per cent of stake after the issue of shares and disinvestment. Opening up of shares to public and disinvestment are aimed at mobilising OIL’s plan outlay of Rs 4,575 crore for two years to fund its ambitious ventures in exploration and production activities.

OIL was incorporated on February 18, 1959, and subsequently transformed into a wholly owned the Government of India enterprise in 1981. It is now pursuing its aspiration to become a global exploration and production player on the strength of its core competency in exploration, production and transportation of crude oil and natural gas. The company now produces 10 per cent of the total crude oil produced in the country and 7 per cent of the country’s total natural gas production. It has a presence in seven countries -Libya, Nigeria, Gabon, Iran, Yemen, Sudan and East Timor - in joint venture projects in areas of exploration, production and transportation.

It won highest six blocks offered under the sixth round of bidding offered’ by the Government of India under NELP. Out of these two blocks are located in Assam, two in Rajasthan, one each in Mizoram and Krishna-Godavari on-shore block.

Since the disastrous January derivatives expiry, the technicals of the Indian market would appear to have improved considerably, at least in a relative sense. The froth in the futures market has been washed away with the stock futures position standing at only Rs 30,000 crore, a fraction of what it had risen to last month. The other ostensible reason for the January crash–constricted money supply because of IPO subscription–has also been corrected. IPO refunds are in from both Reliance Power and Future Capital. In fact, even the listings are done so the flippers have had an opportunity to book out. Curiously, none of this has led to any visible relief for the market, contrary to general expectations. Despite improved technicals, the trend remains southward, volumes are pathetic and every rally is getting sold into.

The obvious culprit is sentiment. Local sentiment has been crippled by the savage January sell-off and more recently by the dismal events of the IPO market. Global sentiment is not much better with investors getting into a shell fearing the onset of a recession-fuelled bear market.

The not-so-visible and talked-about reason is core fundamentals. One wonders though whether the market, in its wisdom, is bracing itself for disappointment on the fundamental front. So far, the market is assuming 18-20 percent earnings growth this year. Given that, the current price-earnings ratio of 16 times 200809 seems comfortable. However, as this growth–led by sectors like metals, realty and power—slows down, valuations will need to be revisited. Particularly so, if other emerging markets see a contraction in valuations led by bearish global constraints. Could that be the reason for stocks getting de-rated in many sectors?

I hope that is not the case but am inclined not to close my mind to that possibility. Analysts are often in denial when the rot first starts seeping in. Stocks move first, headlines follow later. Hopefully, it is just sentiment, not fundamentals, where the problem lies.

The biggest merger in Indian banking is about to happen. HDFC Bank will take over Centurion Bank of Punjab in an all-stock deal. The respective bank boards are likely to meet on Saturday to consider the merger proposal. In the pecking order, the merged entity will be way below India’s biggest private sector bank, ICICI, in terms of assets but will be significantly bigger than Axis Bank. 

On Wednesday, officials of both the banks held marathon meetings with a leading investment banker to discuss the finer points. ET had first reported on February 13 that Centurion Bank was exploring a merger, and HDFC Bank was one of the institutions it was in talks with. The share-swap deal, worth over Rs 10,000 crore, may be worked around the current market price of Rs 57 a share of CBoP. This is the second time after almost six years that the two banks are discussing a merger. While the last time it fell through on valuation reasons, what has worked this time is the personal equation between the brass of the two banks.

HDFC Bank MD Aditya Puri, CBoP chief executive Shailendra Bhandari and CBoP chairman Rana Talwar are all ex-Citigroup bankers. Mr Bhandari was also a pan of the core team that set up HDFC Bank in ‘94. Interestingly, Citigroup is also the single-biggest shareholder in HDFC-the mortgage giant and parent of HDFC Bank. Mr Bhandari will join the board of the new bank while speculations are that Mr Talwar will be its non-executive chairman. Sources said the HDFC group had a far more ambitious deal in mind: a three-way merger between Centurion, HDFC Bank and promoter HDFC. However, they decided to go ahead merging the two banks first with RBI unwilling to relax the reserve requirements (like CRR and SLR).