Current Affairs for IAS Exams - 11 September 2013

U.S. may tighten L-1 visa rules to curb fraud

• With the dust yet to settle over the recently-proposed U.S Immigration Bill, widely-touted as detrimental for Indian IT firms, a U.S Government body has trained its guns on the L-1 visa programme, saying that without some changes, the programme is at risk for fraud and abuse.

• Currently, the largest users of the L-1 visa programme are either companies based in India, or those with operations here.

• A recently-released report by the Department of Homeland Security’s Inspector General (IG) lists a series of recommendations to curb potential abuse, including more rigorous consideration of new office petitions to reduce fraud and abuse and consistently applying anti- “job-shop” provisions to L-1 petitions.

Periodic visits

• Perhaps, most importantly, it also points out that “periodic visits by visa offers…and familiarisation trips by senior adjudicators to the posts in India where most L-1 visas are adjudicated” may be required.
• The L-1 visa programme facilitates the temporary transfer of foreign nationals with primarily specialist skills to the United States—a programme that has become more popular as IT firms shift to doing specialised and domain work.
• Unlike the H-1B visa, there is no cap or prevailing wage requirement with the L-1 visa.
• The biggest users of the L-1 visa programme, according to data complied by the government body, are TCS and Cognizant—which received 26,000 and nearly 20,000 petitions from 2002 to 2011.
• The third largest user was IBM India operations, which received 5,722 L-1 petitions.

FOREIGN INVESTORS

• India’s policymakers have been at pains to assure foreign investors that there will be no return to capital controls.
• This followed a lowering of the annual limit on foreign remittances of Indian nationals from $200,000 to $75,000.
• The move is said to have triggered a rush of outflows on the part of foreign investors fearful that their own investments too might soon be subject to capital controls.
• These assurances might make sense in the present turbulent conditions where it is necessary not to further rattle foreign investors already upset by the steep depreciation in the rupee in recent months.
• On a longer view, however, capital controls may not be as unthinkable or reactionary as they are now thought to be. The pendulum in both academic and policymaking circles appears to be swinging further away from a whole-hearted embrace of financial globalisation.
• This swing is the result of the convulsions caused by the impending reversal of quantitative easing (QE) in the United States.

• The currencies of several emerging markets — India, Indonesia, South Africa, Brazil, to name a few — have been battered in recent months as foreign investors have withdrawn capital in anticipation of a reversal of QE. Under QE, which the U.S. Federal Reserve commenced in response to the financial crisis of 2007, the Fed starting buying up long-maturity bonds in order to keep long-term interest rates low. We are now into the third round of QE.

• In the current round, the Fed has been buying up $85 billion of bonds every month or over a trillion dollars in a year.
• These purchases expand the flood of dollars in the U.S. market. Since not all of it can be absorbed within the U.S., a big chunk spills into other countries, including emerging markets.
• The flood of dollars has helped finance low-cost investment in the emerging markets and led to appreciation in their currencies..
• The Fed will start withdrawing the stimulus when it becomes clear that economic growth is stronger.
• The unemployment rate target is 6.5 per cent but the trigger for a tapering, the Fed has indicated, could be an unemployment rate “in the vicinity of 7 per cent”.
• The August jobs data for the U.S. shows a fall in the unemployment rate to 7 per cent. So, some analysts believe the Fed will withdraw the stimulus right away.
• That would be bad news for emerging markets. Others believe that the Fed wants the interest rate to remain low until 2016.
• This would imply that any tapering of the stimulus would be very gradual. That would be excellent news for emerging markets..
• There are two issues that are relevant to India. First, how do we deal with the inevitable tapering in the immediate present? Secondly, how do emerging markets in general cope with the flows and ebbs in money supply emanating from the advanced world?
• In respect of the first, we have seen a flurry of activity. On assuming office, RBI Governor Raghuram Rajan announced a concessional window for hedging the foreign currency risk for banks bringing in NRI deposits in dollars.
• This move is estimated to bring in about $5 billion-$8 billion over the next six months. Earlier, the RBI had announced that it was opening a swap window to sell dollars to oil marketing companies.
• This is expected to ease the demand for dollars in the market and hence the downward pressure on the rupee.
• Further, at the G-20 summit, India and Japan agreed to enhance their bilateral currency swap agreement from $15 billion to $50 billion.
• This, in effect, enhances India’s forex reserves in the event of a major flight of funds.
• Again, at the G-20 summit, the BRICS countries announced the creation of a $100 billion fund to fight currency shocks.
• China will contribute $41 billion, with Russia, India and Brazil each adding $18 billion and South Africa providing $5 billion. These announcements have already led to an appreciation in the rupee in recent days.
• FII investments in debt in India stood at $28 billion on September 6; those in equity at $137 billion.

AUSTRALIA,S General election

• The landslide election victory of Australia’s conservative Coalition on September 7 is no surprise, but it leaves the deposed Labor Party in chaos.

• Voting is compulsory in Australia, and the fully-preferential electoral system used for the federal lower chamber, the 150-seat House of Representatives, has delivered no fewer than 88 seats to Coalition leader Tony Abbott’s grouping, with Labor winning 57; final results under the single transferable vote for the 76-place Senate, where half the seats were available, are still awaited.

• the country has seen 22 years of uninterrupted aggregate growth and under Labor has ridden the global crash very well — the party’s bitter infighting, which saw Prime Minister Kevin Rudd ousted by his deputy Julia Gillard in 2010 and then reinstated in a June 2013 counter-coup, was predictably punished by voters. Ms Gillard had more parliamentary Labor support than Mr. Rudd, who rated better among the public, but her U-turn introducing mining and carbon taxes (which may have been intended to preserve her Green-supported minority government) was a political disaster; another right-wing policy of hers included a blanket refusal to let refugees arriving by boat set foot on the Australian mainland.

• Mr. Abbott made the most of his opportunity, and with strident Murdoch press support led the polls throughout a campaign sullied by crude sexism, particularly towards Ms Gillard.

• The incoming Prime Minister aims to abolish the carbon tax, despite doubts about the putative benefits, and to impose austerity measures.

Sources: Various News Papers & PIB