16th March

Debate over MTM

The article depicts the fundamental difference in the debates over MTM rules in India and US. As the nature of the problem in both the economies is different, so should be the solution.

Over the last few weeks there is a demand from corporates, both in India as well as US, to provide relaxation in Mark-to-Market rules of accounting. Corporates in India have suffered huge losses on account of depreciating rupee which, if reflected in their balance sheet, could be harmful to the future of the company. In US, the Congress has forced that it will force the regulators to relax the rules if the latter fails to act. However, the corporates over there have suffered losses due to sudden evaporation of the mortgage-backed securities market. Marking such assets at non-existent prices has been a major reason of their losses. Thus, there is a need for change in valuing illiquid assets. For India, the corporates have failed on their bets on exchange rate which actually holds them liable for any losses occurred. While corporates argue that such losses/profits should only be reported at the time of contract maturation, fair value accounting proponents argue that MTM rules help investors know the financial position of the company at a particular instant and help them make more informed decision. 

It should be noted that MTM profits/losses are only notional and on the positive side they may also reflect inflated profits at times. 

An iffy opinion

The article contemplates on the issues currently faced by the Third Front regarding the stability and core agenda post-elections.

Third Front doesn’t have any single big issue at the core. The fragmented politics in the last one decade has accumulated a lot of regional parties with their own agendas and interests dear to them. The current coalition, even if manages to gain 150+ seats in LS and forms a govt at the centre with support from either BJP or Congress, wouldn’t last long owing to its leadership tussle. Mayawati has already said that she would support TF at Centre only is she becomes PM. Although CPI(M) leader Prakash Karat has tried to give direction to the front by saying that TF would fight for true decentralization of governance, it has been observed that there is already a good amount of decentralization presently. Several regional parties enjoyed a significant clout over Congress and BJP govt at the centre on various issues. The only common objective of TF coalition parties is to gain power. However, the previous non-Congress non-BJP has failed to provide stability with examples like H D Deve Gowda and I K Gujaral. 

What is needed presently for India is political stability in order to fight convincingly against the current global economic crisis as well as the political crisis currently in its neighborhood. 

Election largesse

The article advocates the handing out of gifts on festivals as Indian tradition and that EC should not consider it as electoral stunt. 

Indian polity has been always dominated by unethical ways to attract voters by politicians. Hooch, ladoos and even plain cash has been the modes through which the mai-baaps of Indian politics have tried to delight the aam-aadmi. When we see the cash appearing right in the Parliament, we do have sympathy for the minister who was accused of violating the EC code of conduct on handing out the cash to the poor on the occasion of Holi. Also the same for the minister in Rajasthan who was charged by EC for violation as mere 20k people turned up on a mundane ceremony-cum-feast of his grandson. It is to be understood that in states like UP, rich are obliged to hand out money to poor on festivals and to the large extent true for India as well. 

Festivals and ritually important days should be spared by EC from using its whip on ministers. This would help parties to convince that festive season is best for elections as some might even amend familial rituals to suit this time. Election time then would be a joyous coalescence of personal, communitarian and political.