1 The New York Times on more banks being downgraded. Standard & Poor’s on Tuesday downgraded some of the world’s largest financial institutions, another blow to an industry that continues to struggle three years after the darkest hours of the financial crisis. The agency lowered by one notch its long-term credit ratings on some of the biggest and best-known banks in the US, including Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan Chase. The action, the result of S&P applying new standards to 37 financial firms around the world, prompted a downgrade of 15 banks. Among the eight largest banks in the US under review by S&P, only Boston-based State Street was spared. Rating agencies, which were criticized for being too slow to sound the alarms about the 2008 financial crisis, have recently been carrying out an aggressive wave of downgrades. In September, Moody’s cut its credit ratings on three large banks: Bank of America, Citigroup and Wells Fargo.
On Tuesday, S&P left 20 other banks unchanged and actually increased the ratings on two Chinese firms, the China Construction Bank and the Bank of China. But for most financial institutions in the US and Europe, it has been tough sledding this year. “Bank of America is a microcosm of the crisis of confidence in the industry — in the numbers, the managers and the regulators,” said Mike Mayo, a banking analyst with Crédit Agricole. Bank of America is not alone in watching its stock price fall. Shares of Goldman Sachs have dropped more than 47% so far this year. Its stock closed Tuesday at $88.81.
2 The Guardian on why India needs western supermarkets. Critics of the Indian government’s retail policy make five points. One, India doesn’t need foreign retailers, since homegrown companies and traditional markets are doing the job well. Two, independent stores will close, leading to job losses. Three, profits will go to foreigners. Four, there will be sterile homogeneity and Indian cities will look like cities anywhere else. And five, the government hasn’t built consensus.
None of the objections has merit. India’s retail sector of $28bn is expected to grow by a factor of nine within a decade. Domestic demand is rising, and it is simply not possible for India’s archaic retail sector to meet that demand. Inbuilt inefficiencies and wastage in distribution and storage account for why, according to some estimates, as much as 40% of food production doesn’t reach consumers. Fifty million children in India are malnourished. Food often rots in antiquated state-run warehouses, or in transit. Profit-driven, cost-conscious companies will avoid waste and loss, the government hopes. While some retail stores may have to close, and some jobs may be lost, superstores will need workers. Some 70% of Indians claim to be farmers, but one of the country’s worst-kept secrets is the extent of disguised unemployment in Indian agriculture. Many farmers work in the countryside on small, unproductive tracts, earning minimal income, and are heavily in debt. Organised retail will absorb some of this labour force in better-paying jobs.
3 Khaleej Times story, “Global, not Arab, spring’. It ain’t over till it’s over,” is an oft used line to qualify an unfinished sporting event that could go either way. The same is equally true of the economic and political events that have unfolded around the world during the last year, surprisingly starting with the Arab world. While at least four Arab leaders have been forced out this year, even more governments in Europe have been ousted. The unrest and political events in Britain, Italy, Greece, Portugal, Ireland and the US (Occupy Wall Street has inspired similar protests around the world) begs the question: does politics determine economy or economy determines politics?
What these then underline is that the nature of governance is more important than the nature of government. As much as the fall of several Arab regimes has brought cheer to the people and advocates of democracy, history is also replete with examples of how eliminating one government does not necessarily guarantee better governance. and therein lies the danger. Of what use is the right to vote that gives people the choice to choose who governs, but cannot guarantee the right to a good life? To elicit a practical answer, don’t approach political pundits, approach the jobless and hungry. It remains to be seen which way out the ongoing crises – both economic and political – around the world would take in the months and years ahead – economic or political? With the world tipped to create less than half of the 80 million jobs required over the next two years, it ain’t over till it’s over.
4 Sanjay Srivastava writing in The Times of India about the common man’s infatuation with the Indian state. (Winner of the KBC quiz show) Sushil Kumar’s announcement that – notwithstanding the fact that his material future would seem to be well secured – he intends to prepare for the civil services examination should caution us against making quick judgments about the declining prestige of the state, particularly in small towns where state-power exudes an aura all its own. Though market forces might be in ascendance, our relationship with the state is not a unilinear one such that what once we have loved, we now hate.
There continues to be a magic to the state that is nowhere as clearly obvious as in the loving detail with which our newspapers report transfers of bureaucrats and police officers from district to district, department to department, and ministerial favour to disfavour. Though we may publicly rail against the great power that the state has exercised over our lives, there is lingering affection for this power, as well as a desire to be part of it. Our desire to be part of the state is based on something more than the fact that, unlike western states, ours exercises far more arbitrary authority over us. There is almost a certain magic attached to it – as if it also transforms us into supernatural beings when we become part of its higher echelons. The market might make us billionaires, but we are still partial to the mystique of the state.
5 The Economic Times on defaulters owing more than Rs 470bn. Defaulters of Rs 10m and above owe over Rs 470bn to banks and financial institutions as on March 31, 2011, India’s Parliament was informed on Tuesday. According to the list of people who defaulted over Rs 1om and above in payments to various lenders, a total of 4,102 defaulters owe Rs 475.94bn, finance minister Pranab Mukherjee said in a written reply in the Rajya Sabha.
6 The Hindu on Amit Mitra’s U-turn on the FDI issue. As head of the Federation of Indian Chambers of Commerce and Industry, Amit Mitra was once at the forefront of a campaign by Indian companies to liberalise the norms for foreign direct investment in retail. But as finance minister in Mamata Banerjee’s West Bengal government, the industry lobbyist-turned politician has been forced to bite his tongue and even sing a different tune. “There are deep concerns regarding the small and medium enterprises,” he is reported to have said in New Delhi on Monday on the issue of opening up the country’s retail sector to FDI. Mitra’s stand is a departure from the position he advocated in his FICCI days and has dismayed the corporate sector that saw him as a trusted representative. However, political observers in West Bengal are not surprised at the u-turn. There are few if any, in the Mamata Banerjee-government who would dare to controvert the official line taken by the Trinamool Congress supremo.
7 Business Standard’s editorial, that the ruckus over FDI in retail signals that the political class in India is anti-reform. The political drama over the opening up of the retail sector to foreign investment is significant, not on account of whatever might happen to the immediate issue, but for what it says about the prospects of any kind of economic reform. In and of itself, the opening up of the retail sector is not hugely important, except as a signal that the government is still capable of taking decisions. The real message is that it has become impossible to reform India. If an innocuous decision on retail creates near-unanimous opposition, including from members of the ruling alliance and important people in the Congress itself, what prospects can there possibly be for labour reform, or cutting out the waste in all the government boondoggles dished out in the name of poverty alleviation? The larger message is that India’s political class has no time for economic reform, and no understanding of the need for it in an uncertain world where China becomes more powerful day by day on the strength of its superior economic performance.
8 Financial Chronicle cartoon showing a politician: “I’ve committed to a TV show at 11. Hope the House gets adjourned by then”.
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