The face-off between the two regulators SEBI (Securities and Exchange Board of India) and IRDA (Insurance Regulatory and Development Authority) regarding sale of Unit Linked Insurance Plans (ULIPs) may start off a slump in share prices as the stock market opens today after the weekend. The issue is serious as considerable volume of funds collected through ULIPs is flowing into Indian stock market.

Unlike conventional insurance schemes that invest more in government securities and bonds, ULIPs invest a major chunk of the premium collected in equities. LIC is the biggest investor in equities, investing almost Rs. 50,000crore last year. It is also the largest investor in IPOs (Initial Public Offerings), which is sourced mostly using term plans and hence will not be affected by the ULIP ban.

ULIPs have earned an enviable position in the stock market that is comparable to FIIs. Their clout on the bourses gives them enough power to sway the market either way. This was demonstrated by the way they propped up the market with their funds during Jan-Mar’09 period when FIIs started dumping stocks. This helped the market avert an imminent disaster.

The present crisis regarding the right of private insurance firms to service ULIPs has managed to create confusion among investors. Sanjay Nirupam, Congress MP from Mumbai North has called for immediate intervention by the Finance Minister Pranab Mukherjee in the issue. According to him, a solution has to be found before it snowballs into a major concern and bring down stock prices, as the market opens for trading today morning.

Mr. Nirupam argues, “Investors are unsure about what this means and whether they should rush to redeem their investments on Monday morning. The panic is even more likely because the SEBI action seems to have kept the LIC’s schemes, which are similar in nature, outside the purview of its action.”

When India opened its doors to welcome multinationals with economic liberalization in 1991, did our policymakers foresee the present crisis? Even as Indian economy displayed an amazing acrobatic act to recover relatively unscathed from the economic turmoil that gripped the globe, it is facing unrelenting drainage by the same MNCs, we invited to our shores.

The multinational companies use local raw materials to manufacture finished goods, which is sold to the gullible public with the help of attractive ads and tempting offers. Even as Indians consume these products, one point forgotten is the huge drain on foreign exchange that this act is evoking. By listening to the crooning of desi superstars, are we ending up damaging our own economy?

The foreign exchange drain is estimated to be in the range of 50,000 crore rupees. This depletion in the Forex reserve ultimately aids in bringing down the value of rupee and helps in boosting the dollar value. This is bound to affect the country’s economy. As the rupee loses value day-by-day, the country is getting poorer and its economic structure is getting weaker.

Even as economy is recovering, unprecedented inflation has taken the sheen out of the commendable achievement. The amazing economic growth is mostly aided by the domestic consumption. The Indian consumer can do a great deal in this scenario. A campaign is gaining momentum to shun MNC products and to embrace local goods.

However, will this help stop the slide of the rupee? The answer is, to some extent it will.

The United Nations Intergovernmental Panel on Climate Change (IPCC) chaired by eminent climate scientist Rajendra Pachauri accepted on Wednesday that the panel’s calculation went wrong while drafting the report on global warming. The report published in 2007 had won Nobel Prize for its ‘accurate’ forecast.

The IPCC report had warned the wayward nations that if global warming goes unchecked, the Himalayan glaciers would ‘disappear altogether by 2035 if not sooner’.

In a statement issued yesterday, panel members expressed regret on its hasty conclusion, which was based on ‘poorly substantiated estimates of rate of recession and date for the disappearance of Himalayan glaciers’.

An offshoot of this episode is whether the panel members benefited from tabling this erroneous report, triggering wide-scale panic. From India’s perspective, the report placed Indian negotiators at a disadvantage during the recently concluded climate summit in Copenhagen.

Union Minister of State, Jairam Ramesh, had earlier questioned the veracity of the report’s claims. To this latest revelation, he said, “My objection was to the IPCC’s prediction that they will disappear by 2035.”

“There is no doubt that the sea-level is rising and the climate is changing. What we cannot prove scientifically is ‘why’. Science may eventually have the answer, but we cannot afford to wait till science gives us all the answers. We need to get into climate mitigation now,” he said.

Ramesh added that India will be the worst affected by climate change and rising sea level, as we have 35 crore people living in coastal areas. According to him, India will continue its proposed voluntary emission cuts without any change.

Inflation in India is calculated as a wholesale price index of 435 goods over 1993-94, as base year. This is by far, a unique measurement of inflation by any nation in the world and suffers from some serious shortcomings. The index is often criticized for its low weightage to food items (22.02%), which form a large proportion of consumer spending in India.

After hitting a 16-year high of 12.9% in August last year, the index is hovering around 1.5% currently, which apparently is an indicator of relief from inflation. However, in the week ending November 14, the food inflation index touched 15.58%, explaining the backbreaking price rise for the average Indian consumer. The rise in the prices of pulses (35.6%), wheat (12.53%), rice (11.89%), milk (11.36%), and fruits (10.97%), over last year, indicate an imminent problem. The cost of vegetables has climbed, as much as 62.42% since the beginning of this fiscal.

RBI has revised its annual inflation estimates from 5% to 6-6.5% for the year ending March 2010. Indian agriculture is largely dependent on monsoon, even today. Therefore, a weak monsoon in the current fiscal is likely to put further inflationary pressure on the food prices, as India plans to make up for the supply deficiency through the import of rice. In addition, the extremely high proportion of food reserves in the Government’s possession (more than 5% of which is wasted every year) is also being blamed for the current food shortage and consequent price rise.