Editorial Notes

Editorial Notes 14th July 2016

FDI in Print; Predictability In Monetary Policy; H-1Bs Visas; ‘Kashmir Formula’
By By IT's Editorial Notes Team
July 14, 2016



  • Proposing 49% FDI in print: too little, too late
  • The importance of policy predictability

International Relations

  • Visa as the master card

Defence & Security Issues

  • Living in denial on Kashmir



GS (M) Paper-2 Topic: “Government policies and interventions for development in various sectors and issues arising out of their design and implementation.”


Proposing 49% FDI in print: too little, too late


  • Government has raised the foreign investment cap on India’s print media from the present 26% to 49%, bringing it on a par with norms for television news segment. The limit for TV news was raised to 49% in November 2015.

Here the author has viewed that if the government does eventually open up the sector further for foreign investors, don’t expect a surfeit of investment inflows immediately.

Reasons given by author:

  • While it is true that India’s print media sector continues to grow even as other markets are reporting a negative trend, this growth is expected to decline over the years. Print industry is expected to grow only for another seven-eight years.
  • In terms of growth rates, the India story in print may still hold promise but the growth rates are slowing. Under the circumstances, there are much better options available for investors in the new media space. Digital and radio are still growing in healthy double-digits.
  • In the absence of permission for majority ownership in the government policy regarding FDI, the interest from strategic investors may be muted.
  • Over the years, even at the 26% FDI limit, some newspapers managed to attract investors, however, most of these investors have now exited these newspaper companies.
  • Private Equity (PE) firms can add value to the newspaper businesses in case they have operational or other issues. Earlier, at a cap of 26%, they could exert no influence on the publisher. At 49%, they will have at least some level of influence. And unlike a strategic investor, they may not be really interested in a controlling stake.
  • Both PE firms and strategic investors may also find it worth their while to invest in regional print media, which is growing at a faster rate than English print media.

Key facts:

  • The government has already liberalized the rest of the media sector and permitted 100% FDI through the automatic route in television broadcast carriage services like direct-to-home firms, cable TV networks and headend-in-the-sky platforms. The changes were notified in June.
[Ref: LiveMint]


GS (M) Paper-3 Topic: “Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.”


The importance of policy predictability


Policy decisions are being dominated by sources such as financial markets. The Reserve Bank of India (RBI) in its latest Financial Stability Report also raised this issue and noted that there is a need to rethink whether the central banks should always act in a predictable way and never surprise the markets. It is, therefore, important to assess the costs and benefits of too much assurance to markets.

Role of communication in conducting monetary policy:

Communication has now become an important tool in conducting monetary policy in most countries.

  • Clear communication has helped in managing market expectations, especially in the aftermath of the global financial crisis, and was instrumental in restoring order in financial markets.
  • Greater focus on transparency, communication and guidance by central banks has resulted in greater policy predictability.

Importance of predictability in monetary policy:

  • At the global level, predictability in monetary policy path and better communication by central banks have helped economic agents make informed financial decisions.
  • It is difficult to argue that bringing in some unpredictability or surprising the market will help central banks achieve policy objectives, including that of maintaining financial stability.

For example,

  • In the summer of 2013, Ben Bernanke, then chairman of the US Federal Reserve, surprised the market by indicating that the US central bank could start reducing the quantum of asset purchases, or quantitative easing. Consequently, financial markets all over the world went into a tailspin. India was severely affected by this taper talk and the rupee was in a freefall, though domestic macroeconomic conditions were also to be blamed for a near-crisis situation.

Raghuram Rajan, after taking over as governor of RBI in September 2013, emphasized the need for transparency and predictability in policy.


  • Central banks have done most of the heavy lifting in the aftermath of the financial crisis and have stretched the limits of what monetary policy can do. Policy surprises at this stage will neither help the economy nor enhance the credibility of central banks.
  • What is perhaps needed is re-examination of the policy path that central banks have taken, preferably in a coordinated fashion, so that excesses in financial market and elsewhere can be avoided.
  • Central banks would do well to reserve policy surprises for extreme circumstances. It should be used to quell instability and not to induce volatility.
[Ref: LiveMint]


International Relations

GS (M) Paper-2 Topic: “Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora”


Visa as the master card


  • The free movement of high-skilled workers is a key concern in the India-U.S. bilateral relationship unlike any other issue, and it can be fixed with pragmatic reforms. It is time to end the discriminatory visa regime targeting Indian companies.

Why U.S. need the H-1B programme?

STEM gap:

  • H-1Bs visas are for high-skilled workers. The problem is that the demand for these workers far surpasses the annual allotment of 85,000 H-1B visas, 20,000 of which are slotted for master’s graduates. In fact, the U.S. needs 120,000 new computer engineers annually but American universities only produce one-third of that number. Hence, the H-1B programme allows the U.S. to fill the Science, Technology, Engineering, Mathematics (STEM) gap.

H-1B fetches jobs for native U.S. workers:

  • Moreover, bringing in tech workers from abroad creates jobs in the U.S. According to a study, hiring 100 H-1B workers resulted in an additional 183 jobs for native U.S. workers. Estimates show that by rejecting 178,000 H-1B visa applications in computer-related fields in 2007-08, the U.S. missed out on creating as many as 231,224 tech jobs for U.S.-born workers in the two years that followed.

Revenue source:

  • According to a National Association of Software and Services Companies (NASSCOM) study, Indian IT companies contributed $22.5 billion in taxes to the U.S. Treasury between 2011 and 2013.


  • Plus, they supported over 411,000 jobs in the U.S., including 300,000 jobs for U.S. citizens and permanent residents during that time. More important, those jobs make U.S. companies more efficient so that they can compete globally.

Why there’s a political issue over H-1Bs? Myths and their clarifications:

  • There is a myth that high-skilled workers on H-1Bs earn less than their native-born counterparts and as a result displace them.
  • In fact, high-skilled IT workers on temporary visas earn competitive salaries and cost their employers as much or more than their American counterparts. According to a May 2013 Brookings Institution publication, “H-1B [visa] workers are paid more than U.S. native-born workers with a bachelor’s degree generally.”
  • The IT services industry has been tainted by isolated media accounts of U.S.-born workers training in their foreign replacements. But the reality is that U.S. companies must remain technologically competitive. And that’s precisely what they hire U.S. and Indian IT companies to do.

Omnibus Appropriations Act- discriminatory act regarding H-1Bs:

  • Largely targeting Indian companies, in December, the U.S. Congress by passing Omnibus Appropriations Act doubled H-1B visa fees, punishing Indian companies to the tune of $400 million over a decade and prompting India to file a case at the World Trade Organisation over a discriminatory fee increase.
  • The Omnibus Appropriations Act’s so-called 50:50 fees are clearly discriminatory. The law provides that increased fees would apply to companies with (a) more than 50 U.S.-based employees and (b) more than 50 per cent of its U.S.-based workforce on H-1B or L-1 visas.


  • The Omnibus Appropriations Act’s so-called 50:50 fees are clearly discriminatory and should be eliminated.
  • If the U.S. Congress does not strike down this discriminatory trade barrier that disrupts the market, then it should level the playing field by reducing the amount assessed per petition, spreading the cost to every organisation that uses the H-1B and L-1 visa programmes instead of targeting Indian firms through the 50:50 trigger.
  • Indian Industry should push the U.S. Congress to rally around more visas for small businesses. Critics claim that smaller companies and start-ups don’t have the resources that larger IT firms have to procure their share of H-1Bs.


The U.S. could make these changes solely to improve its strategic relationship with India. But that’s not why the U.S. Congress should act. It should act because innovation rests on a global, mobile workforce.

[Ref: Hindu]


Defence & Security Issues

GS (M) Paper-3 Topic: “Security challenges and their management in border areas; linkages of organized crime with terrorism”


Living in denial on Kashmir

The article deals with the latest uprising in Kashmir, government’s efforts a decade ago to end the issue and its failure and at last author’s views.

‘Kashmir formula’:

  • During UPA government rule, efforts were made to ending the Kashmir insurgency. It was the heyday of Manmohan Singh’s proactive diplomacy with Pakistan on the Kashmir question even as his interlocutors were quietly negotiating with the dissident leadership in Kashmir on a ‘Kashmir formula’.
  • As per anecdotal evidence, a majority of the dissident leadership in the Valley, barring Syed Ali Shah Geelani, was on board the formula. Not only were the Pakistanis supporting the process but had even tried to reach out to the dissidents in the Valley to convince them of the proposed solution.
  • However, in mid-2007, Dr. Singh lost his political nerve to take the initiative to its logical conclusion, and also his counterpart, Pervez Musharraf, lost his domestic support because of the lawyers’ agitation, and as a result, the deal that would have settled both the conflict in Kashmir and over Kashmir disappeared into oblivion.

Results of failure of ‘Kashmir formula’:

The combined result of this mishandling has been a sharp and worrying.

  • Spike in the number of home-grown educated, armed, religiously inclined and ideologically motivated militants.
  • There is today a disquieting rise in the legitimacy for armed militancy among civil society and the educated classes of the Valley.
  • Anti-Indianism has become fashionable once again. A society that was exhausted by violence and gun culture has suddenly started justifying it.
  • Finally, a decade of mishandling Kashmir has fundamentally damaged the liberal political space that could have politically and ideologically countered the return of militancy. Even the moderate Hurriyat faction finds it difficult today to converse with the youngsters thronging Kashmir’s dark alleys and war-torn mofussil towns, shouting for azadi, throwing stones, and ready to die.


  • Here are some suggestions of the author to bring normalcy back to Kashmir: repeal or at least amend AFSPA, release political prisoners, institute a broad-based inquiry into extrajudicial killings in Kashmir, and open a result-oriented dialogue with the Valley’s dissidents to discuss the larger political questions as promised by the ruling coalition.

Author’s views:

According to the author,

  • We should respect their human and political rights and not snatch away what the country’s Constitution guarantees in Article 370.
  • In fact, the court has, on various occasions, made its views sufficiently clear on both AFSPA and Article 370. And as the court noted, every human life is important and therefore extrajudicial killings cannot be allowed.
  • There is therefore a need to look for sustainable political solutions if the government is serious about pacifying the conflict in Kashmir. There was more positivity in the Valley about talks a decade ago than is the case now.
  • Branding dissent as terrorism would only frustrate our efforts to deal with real terrorism.
[Ref: Hindu]


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