Table of Contents
Why a currency war is a worry
❖ Why in news : Reserve Bank of India Governor Urjit Patel warned that trade wars among various countries may lead to a currency war.
❖ History before currency war :
• Financial crisis – US in September 2008
•, G20 Summit in November 2008.
• India, the 13th largest economy then.
• Developed countries — the US , European Union — embarked on expansionary fiscal and monetary policies (spending more and keeping interest rates low).
• While other countries like China, South Korea – Protectionism introducing non-tariff barriers and tariff barriers
• Potent weapon → devaluation of their currency – exports remained cheaper and competitive in the world market.
• China kept the renminbi value low
❖ Why talk about a currency war now?
• Donald Trump threatened to slap tariffs on Chinese goods in March 2018
• China’s response – Depreciate the Yuan (depreciated 8% in 3 months)
• Trump imposed tariffs on European steel and aluminum
❖ Does India need to worry about this currency war?
• In the last 10 years, the Indian economy has grown rapidly, from being the 13th largest in 2008 to the sixth largest in 2018 .
• The country is a net importer of energy and cruide oil ,so higher prices will put pressure on fiscal deficit and current account deficit.
• Capital flight if the macroeconomic situation worsens.
• This will have adversely impact currency, inflation and interest rates.
• Policy rates, increase two times in past few months
• Higher interest rates and stable inflation make a country more attractive for foreign investment
• An international currency war due to heightened tariff tensions can hurt the global economy, and in the process hurt India’s growth prospects too.
• Wild animals are vulnerable to vehicular traffic passing through forests, especially at night when, blinded by bright headlights.
• By blocking access to potential habitats, roads, railway lines and irrigation canals act as a major contributor to habitat loss.
❖ India’s policy :
• Sept 2013 : National Board for Wildlife (NBWL) – apex advisory body to the central government on all wildlife-related matters, said no to new roads through protected forests, but was open to the widening of existing roads with adequate mitigation measure. How do roads impact wildlife, and why should anyone bother?
• In February 2018, the NBWL made-mandatory for every road/rail project proposal to include a wildlife passage plan as per guidelines framed by Wildlife Institute of India, an autonomous wildlife research body under the Environment Ministry.
❖ The new plan in Karnataka:
• Elevating the road passing through national parks.
• Wildlife passageways below. • Fencing the entire highway passing through the reserve.
Trump’s foreign policy: An unlovely triangle
• President Donald Trump’s erratic approach to international relations has made it easy for India to respond to his latest demand that India reduce its imports of Iranian crude to zero by November this year.
• Decision to withdraw from the Iran nuclear deal – The Joint Comprehensive Plan of Action (JCPOA)
• P5+1 Countries
• Endorsed by the UN in July 2015
• USA/TRUMP wants to reimpose sanctions on Iran.
Why IRAN Strategically Important For INDIA ?
1. Iran is an important supplier of crude oil to India
2. Chabahar Port Development on the south coast of Iran is currently part financed and
led by an Indian consortium it will offer India overland access to the Central Asian
market without having to cross Pakistan and offer us strategic benefits.
America is a mightier economy and India’s “permanent interests” would be more severely
impacted if its companies were sanctioned under the US law CAATSA .
India would then have to walk a tightrope between
1. Securing uninterrupted supplies of oil (from Iran)
2. Protect its strategic interests encompassing defence, trade, services and technology vis
a vis America.
American Demand –
It Doesn’t have the support of international Community. There is no evidence that Iran has failed to comply with the conditions of the JCPOA.
So which side should India choose?
We could source comparable quality crude from Saudi Arabia, Iraq, Kuwait and Venezuela. Cost will increase but better than US sanctions and loss of US benefits. We may also Face Tighter commercial Norms
What Happen If IRAN Block the Straits of Hormuz ?
It may affect supplies of almost 22 million tonnes of oil To prevent such a step, India must remain engaged with Iran. The weakening of ties between Iran and India would give Chance To China .
China already said that it will not comply with the sanctions’ demand and it has not discouraged its companies from investing in Iran. China Also expressed interest in the Chabahar project and Iran may well be responsive if India tacked too closely to America.
India is on the horns of a dilemma.
Weakening relations with Iran is better than bad relations with USA The American demand does not have legal or international support, it is not even clear whether Trump will stay with his position Trump’s two-step approach to foreign policy –
1 Hurl an insult or threaten Armageddon.
2. Solve the resultant crisis by offering “unilateral concessions”.
Kim Jong-un
Trump is creating a reputation for the US as erratic, unpredictable, unreliable and fundamentally hostile to the global order”. In such an environment, India need do no more than stay true to its principles.
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