The Indian Express
Editorial : Delhi to Riyadh
PM Modi visit to Saudi Arabia; this visit assumed significance as next step in INDO- SAUDI ARABIA ties to up the ante after RIYADH DECLARATION of 2010 which focused on mutual help in cases of terrorist activities, human trafficking as well as to develop as knowledge based economies (IT and ITes)
Important Points :
- PM Modi visit to Saudi Arabia has yielded a strong Joint Security Cooperation Statement; Gulf country was unwilling to come out in open even after extraditing terrorists Abu Jundal (2008 Mumbai Attacks) and Fasih Mohammad (Chinnaswamy stadium and Jama Masjid blasts) in 2012.
- Saudi Arabia, along with US, also announced sanctions against Lashkar e Taiba.
- Saudi Arabia is willing to cooperate against terrorism as Iran’s rise, threat of Arab Spring, dwindling oil prices as well as American withdrawal has left it tentative.
- India has opportunity of re-entering Gulf as security and strategic partner
- New Delhi has primarily focused on oil and remittances from Gulf in the past; pro Pakistan tilt of Saudi Arabia was seen with suspicion
- This visit symbolizes renewed Indian posturing and pro active Indian course in the region
Editorial : RJD’s Saheb
Four time MP Mohammad Shahubuddin, who is serving life term for double murder, is appointed to Rashtriya Janta Dal (Founded by Lalu Yadav) national executive committee raising clamors of incentivizing criminals and laying bare the connection between politics and criminals.
Important Points :
- Nitish Kumar, CM of Bihar, was supposed to pull out Bihar from apparent JUNGLE RAJ (lawlessness) of yesteryears when Bihar suffered flee of capital and people
- Recent development is a throwback to past giving impression that little has changed in politics in Bihar
- Shahabudin is barred from contesting election but still exerts enormous political clout. Still, from Siwan (North west Bihar) his stooges are elected.
- Mandal commission empowered backward classes in Bihar who instead of mobilizing support through hard labour of politics followed the short cut approach of relying on musclemen
- Lalu Yadav’s govt ignored fundamental principles of governance and ruled based on patronage resembling old feudal order
- Good governance and social justice are ignored by the incumbent govt of Bihar ruled by Nitish Kumar
Editorial : Cutting it fine
RBI on Tuesday announced 25 basis point cut (from 6.75% to 6.5%) in repo rate (rate at which RBI lends to other commercial banks)
Important Points :
- In monetary policy review of FEB, RBI laid down two conditions for rate cut; downward trend in inflation and structural reforms undertaken by govt
- Recent rate cut shows RBI is satisfied on both accounts; in 2015 125 basis point cut was made but only 60 of those were transmitted by banks to the market
- Retail inflation has fallen in FEB largely due to low prices of pulses and vegetables
- However 7th pay commission and One Rank One Pension scheme will exert upward pressure on prices
- Govt role in reforms and budget has been commended by RBI as it focuses on inciting rural demand, enhancing economy’s social and physical infrastructure and ease of doing business
- Two key changes are likely to deliver further cuts; cut in small savings in March and shift to Marginal cost of Funds based Lending Rate from April 1
- Cut in rates of small saving will give reason to banks to cut their deposit rates (on savings) and also lending rates; Banks make money on difference between lending rate and deposit rate. If deposit rate is less banks can reduce lending rate without incurring loss
- MARGINAL COST OF FUNDS BASED LENDING (to understand this: Click Here)
Editorial : Making India a ‘leading power’
Since the end of the Cold War, Delhi has deliberately taken a low profile in the international arena.
- India’s foreign policy after the demise of Soviet Union and end of Cold War.
- Shambolic state of Indian economy after 1990 economic crisis
- Limited focus on narrowly defined self-interest
- Continuing defensiveness on economic globalization.
- Delhi was following advice that Deng Xiaoping gave China as it entered the era of reform and opening up at the end of 1970s to “keep a cool head, maintain a low profile and avoid taking the lead”.
Why should Delhi be more proactive?
- India is today the seventh largest economy in nominal terms and the third in purchasing power parity . 40% of India’s GDP is linked to global trade.
- Expectation that India will take larger responsibilities to facilitate global economic revival and strengthen regional economic integration being world’s fastest growing economy
- Growing Demand That India Make More Contributions To The Maintenance Of Regional Order In Asia.
- The traditional balance of power in the Eurasian landmass is being shaken by the assertiveness of Russia, the rise of China, the emerging American temptation for retrenchment, the chaos in Europe and the turmoil in the Middle East.
Lessons learnt from China
Almost four decades after Deng’s reforms, China no longer maintains a low profile & is taking the lead in building new regional institutions and pressing for a reform of the global power structure. The idea of India as a leading power is probably the beginning of a similar phase in India’s international evolution.
Advantages to India
Unlike China’s assertiveness, the rise of a democratic India, with internal checks and balances, is viewed as a benign development
What has India been upto?
- PM Modi’s central contribution to the conduct of the nation’s external relations has been the imagination of India as a “leading power” in the international system.
- More proactive approach on global issues.
- India moving away from being a reactive power to one that shapes regional and international outcomes.
Practical Outcome :
India’s efforts in the climate change summit at Paris last December and promote regional cooperation in the subcontinent.
Way Forward :
- India must revert to ambitious foreign policy principles
- Modernizing its internal political and economic structures
- International leadership is vital for India to accelerate its internal economic development and improve its national security environment
- Responding to the interconnected policy imperatives at home and abroad.
Delhi no longer has the luxury of thumbing its nose at the world. It must necessarily shape the world around it.
Editorial : Dovish tone
RBI decreased Repo Rate. But only marginally. Because CPI inflation is still a concern.
Why more rate cut can be expected?
- CPI and WPI are lower than the Interest Rate, therefore, the real rate of Interest faced by borrowers is positive
- There is demand and investment crunch. Industries need cheaper money
- The last three monthly Index of Industrial Production (IIP) have seen a year-on-year decline.
Why RBI may not cut rates any further?
- To establish the central bank’s credibility as an inflation fighter, and CPI is high
- Continued Global uncertainties
- Future domestic inflation dependent on:
- The forthcoming monsoon
- Central pay commission award
- One-rank, one pension agreement
- Higher prices because of increases in the service tax rate.
What is causing tighter liquidity conditions in India?
- Large accumulation of cash by the government
- Persistently high demand for cash by public
- Low mobilization of bank deposits by the banks.
RBI’s concern about the rate cut :
About the transmission of current and future rate cuts to consumers by the banks.
What other methods of monetary management can be used?
(Important only for Economics Optional Students)
- To lower the average ex-ante liquidity deficit from one per cent of net demand and time liabilities (NDTL) to “a position closer to neutrality”
- A narrowing of the policy rate corridor by 50 basis points
- A reduction of the daily maintenance requirement of the cash reserve ratio by five percentage points.
Editorial : Prompt response
Recent reports of Tax evasion. Govt acting quickly to investigate it by forming a team.
- Setting up of offshore entities in tax havens like Panama
- Helping rich to create offshore companies in an easy and tax-free environment
- Presence of secrecy that is not easy to pierce.
Govt’s response to the report
Setting up a multi-agency investigation team to probe illegalities
Are all off shore investments illegal?
- Not all such investments are illegal
- But that such large numbers of rich and powerful people across the globe, have used this facility is a cause for concern.
Steps to curb black money and tax evasion :
- Budget 2016-17 : Allowed Indian residents to declare their past undisclosed income on payment of close to 50 per cent tax within a compliance window of four months.
- Put in place a transparent and rule-based tax administration system.
- A simple taxation regime
- A non-adversarial approach to tax-payers
- Simplify and rationalise tax administration
- Enforce Global standards on disclosure of foreign accounts
Editorial : RBI cuts repo rate by 25 basis points
Important Points :
- RBI cut the Repo Rate by 25 basis points indicating an accomodative stance. It is a clear move to spur growth
- The decision comes amidst concerns of a ‘too’ slow global recovery and slowdown in China
- The RBI assumes that monsoon for this season would be normal, boosting rural demand. Thus RBI has retained a 7.6 percent forecast for growth
- Dr Rajan believes that improved monetary transmission holds key to unlocking credit
- Dr Rajan also aims at cleaning balance sheet of banks to augment money supply.
Editorial : Justice delayed, justice denied
Important Points :
- There may be times at which instances of even a delayed conviction can send out a message, that dilutes the denying of justice to certain extent. The example cited by the editor goes back to the year 1991.
- In July 1991 Sikhs were encountered by police officials in fake encounters accusing them of being terrorists at Pilibhit, U.P.
- A CBI court found out the truth of the fake encounter of 10 Sikhs and ordered 47 police personnel to life imprisonment.
- Though the superior officers were not probed and let off, but still the ruling will help end the culture of impunity seemingly enjoyed by security forces and reduce such abuse of power.