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Monday, June 17, 2019

CHINA US TRADE WAR

Trade War  between the US and China 

The current US‐China trade conflict concerns two major sets of issues. The first  is  the US‐China  trade imbalance—a  record $375 billion US  trade deficit in goods in  2017 which is perceived  to be because of  the lack of  reciprocity in  terms of  tariffs,  market access and investment.  China  has already  offered  some  concessions in  this  area such as opening up particular service sectors, lowering investment restrictions,  and  offering  to  buy  more  American  agricultural  and  energy  products;  and,  such  concessions can be made to align with China’s overall economic reform agenda.

The US has demanded that the Chinese government abandon the plan altogether or  face  punitive  tariffs.  The  US  government  believes  that  the  state‐led  financing  associated  with  MIC  2025  will  enable  Chinese  companies  to  unfairly  compete  and  dominate  over  strategic  industries,  especially  food,  fuel,  medicine,  and  semiconductors  (where  US  companies  are  presently  global  leaders).  China,  on  the  other  side,  views  it as  critical  to  its  plan  to  transform  the  country  into a  high‐tech  power. On this second set of issues, there is no compromise in sight so far
Made in China 2025 is a strategy that aims to upgrade China’s industrial sector  by shifting the country’s economy to higher value‐added manufacturing sectors such  as  robotics,  aerospace,  and  energy‐saving  vehicles.  The  stated  objective  of  this  programme, released in 2015, is for China to become a major competitor in advanced  manufacturing, a sector dominated by high‐income, developed countries such as the  US. Until now China has relied on manufacturing and exporting basic consumer goods  like clothing, shoes and consumer electronics to drive the country’s growth. In these  lower‐value,  low‐wage  sectors,  China  mainly  competes  with  other  developing  countries like Mexico, Brazil, South Africa, India, Vietnam and Taiwan. But to escape  the middle‐income trap, China will have to move towards high‐tech industries and that  is where the MIC strategy comes in. This programme involves government subsides,  heavy  investments in  research and  innovation, and  targets  for  local manufacturing  content.  It  also  builds  on  earlier  government  policies  that  encouraged  or  required  foreign companies seeking access to the Chinese market to enter into joint ventures  with, and transfer technology to, domestic firms. Trump argues that MIC 2025, with  the  support  of  state  funding,  puts  the  US  companies  at  an  unfair  disadvantage.  However,  these  policies  are  not  unique  to  China—these  are  standard  tools  for  developing countries wishing to catch up with the richer, industrialised West. Japan,  South  Korea,  Taiwan,  Hong  Kong,  and  Singapore  used  similar  policies  to  foster  economic growth and raise incomes. From the Chinese perspective, the proposition is  straightforward. If foreign multinationals are going to reap profits from producing and
selling goods in the large Chinese market, it should be able to take advantage of such  investment to aid its own development. Even advanced industrialised states, including  the US, relied on state intervention and protectionist policies during their own stages  of economic development.

Though China has now become a major economic power, it continues to be a  developing nation with a per capita income of just $8000 compared to $56000 of the  US.  Though  China  has  achieved  success  in  fostering  economic  development  and  reducing poverty, it  faces challenges in boosting incomes  to anywhere close  to  the  level of advanced economies. China’s continued economic development will bring it  increasingly into direct competition with the United States, which is why Trump has  explicitly stated  that  the proposed US  tariffs are designed  to impede  the MIC 2025  programme.  However,  this  strategy  is  unlikely  to  be  effective;  rather,  it  may  undermine US manufacturing instead of boosting it. Currently,  the US imports only  limited  high‐tech  products  from  China;  however,  over  half  of  its  imports  are  intermediates that are used to manufacture high‐tech goods in the US which are then  exported to China and other countries. The 25 per cent tariff on “high‐tech” imports  from  China  will  harm  the  competitiveness  of  US’s  high‐end  manufacturers  across  various sectors. Retaliatory tariffs imposed by China on American goods would expose  them  to  the  double‐whammy  of  increased  costs  alongside  reduced  access  to  the  Chinese market—the largest market for many of US’s exports.

Wednesday, June 12, 2019

All India Muslim League

 After the revolt of 1857 Muslims became the target of the British hatred and suffered most from its consequences. The decline of Muslim power created a sense of loss among the Muslims of India. Sir Syed Ahmad Khan, the first post Mutiny thinker tried hard to raise the economic conditions by promoting modern education for them. The Mohammedan Anglo- Oriental College, Aligarh and the Muslim Educational Conference were by far the most lasting achievements in the political organization of Muslims. After the death of Sir Syed Ahmad Khan in 1998 Nawab Mohsin- ul- Mulk and Nawab Viqar- ul– Mulk played an important role in the formation of All India Muslim League. Its original purpose was to safeguard the political rights and interests of Muslims in India. The formation of All India Muslim League was the result of the Divide and Rule policy of British Government. The partition of Bengal in 1905 gave impetus to the old efforts of Muslims at uniting them into an All India Organization. The result was the formation of the Mohammedan Political Union, the Simla Deputation and eventually the formation of All India Muslim League in 1906. It had long lasting effects on Muslim politics in India.

 harsh realities of life. They began to see that they must organize themselves so that they become a worthy object of government patronage.The first man to try to meet the situation was Nawab Abdul Lateef(1823- 1893) the first member of Bengal Legislative Assembly. In April 1863 he laid the foundation of an IslamiMajlis- i- Muzakira, better known as the Mohammedan Literary Society, atCalcutta. While the Mohammedan Association of Calcutta formed in January 1856 was the oldest Muslim organization. Abdul Lateef was concerned to preserve and to promote old Muslim tradition. The object of the society was “to impart useful information to the higher and educated classes of the Mohammedan community by means of lectures delivered in Urdu, Persian and Englishlanguages.”For more than thirty years Nawab Abdul Lateef, by his own account „almost alone” represented the Muslims of Bengal in all public movements and proceedings.” His efforts were supplemented by another Muslim, when Syed Ameer Ali (1849- 1928) established the National Mohammedan Association in May 12, 1878 at Calcutta with the same object.

On the Muslim side also arose a leader of great force and determination and western outlook. He was Sir Syed Ahmad Khan the first post Mutiny thinker to realize the pathetic condition of the Muslims. He wrote a treatise in Urdu “Asbab- e- Baghawat- e- Hind” on thecauses of the Indian Revolt in which he boldly indicated the Government of India for its lack of social intercourse between the British and the Indian public. According to him the basic cause of the Legislative Councils. For the welfare of the stability of the Government the people must have a voice in its Councils.However,soon after the publication he process of the reforms- e.g., the appointment of Indians to the Legislative Councils was stared. In a way, the book also led to the birth of Indian National Congress and eventually the All India Muslim League. His aim was not only to confined to the reconciliation of the Muslims to the Government but also reconcile them to the Hindus. He considered the two major communities as the two beautiful eyes of India. He believed that all people of a nation should co-operate national development.Sir Syed Ahmad Khan organized a British India Association in 1886, the first HinduMuslim organization, with the avowed object of effectively representing matters to the British Parliament. His work in political sphere and his speeches createdthe atmosphere which ultimately gave birth to the Indian National Congress. In 1883 the Mohammedan Political Association also came into existence under the patronage of Sir Syed Ahmad Khan and other Aligarh Leaders.With Sir Syed Ahmad began the period of selfawakening. In the field of education, to combine Western education with Islamic values, he founded the Mohammedan- Anglo- Oriental College at Aligarh in 1875. His efforts were crowned with success. It proved very beneficial for the promotion of Higher education and modern culture among the Muslims.With a view to raise their educational and social standard, he founded the All India Mohammedan Educational Conference in December 1886. When the Congress passed the resolution in its first session held in 1885 demanding the reconstruction of the Legislative Councils on representative basis, worried Sir Syed a great deal because in that case the Muslims would be in a “permanent minority” and would always be outvoted as the Irish members in West Minister. He therefore advised the Muslims to be away from the Congress and asked them to follow his educational programme. He founded the Indian United Patriotic Association in 1889. The object of the association was to “publish pamphlets and other papers for information of members of parliament, English people and journals of Great Britain” with the aim of explaining to them the Muslim point of view on Indian political affairs.In December 1893 the Mohammedan Anglo- Oriental Association was formed in a meeting held at Sir Syed‟s house at Aligarh, with a view to promote the political interests of Muslims, to lend support to the British Government and to strive to preserve peace in India. After his death in 1898 some other men of similar background came forward to carry his work.

Sunday, June 9, 2019

‎Ilbert Bill Controversy

This consciousness began to be clearly stated by the political associations formed after 1850, especially those that came into being in the 1870s and 1880s. Most of these were led by English-educated professionals such as lawyers. The more important ones were the Poona Sarvajanik Sabha, the Indian Association, the Madras Mahajan Sabha, the Bombay Presidency Association, and of course the Indian National Congress. Note the name, “Poona Sarvajanik Sabha”. The literal meaning of “sarvajanik” is “of or for all the people” (sarva = all + janik = of the people). Though many of these associations functioned in specific parts of the country, their goals were stated as the goals of all the people of India, not those of any one region, community or class. They worked with the idea that the people should be sovereign – a modern consciousness and a key feature of nationalism. In other words, they believed that the Indian people should be empowered to take decisions regarding their affairs. The dissatisfaction with British rule intensified in the 1870s and 1880s. The Arms Act was passed in 1878, disallowing Indians from possessing arms. In the same year the Vernacular Press Act was also enacted in an effort to silence those who were critical of the government. The Act allowed the government to confiscate the assets of newspapers including their printing presses if the newspapers published anything that was found “objectionable”. In 1883, there was a furore over the attempt by the government to introduce the Ilbert Bill. The bill provided for the trial of British or European persons by Indians, and sought equality between British and Indian judges in the country. But when white opposition forced the government to withdraw the bill, Indians were enraged. The event highlighted the racial attitudes of the British in India. Sovereign – The capacity to act independently without outside interference © NCERT not to be republished THE MAKING OF THE NATIONAL MOVEMENT: 1870S-1947 143 The need for an all-India organisation of educated Indians had been felt since 1880, but the Ilbert Bill controversy deepened this desire. The Indian National Congress was established when 72 delegates from all over the country met at Bombay in December 1885. The early leadership – Dadabhai Naoroji, Pherozeshah Mehta, Badruddin Tyabji, W.C. Bonnerji, Surendranath Banerji, Romesh Chandra Dutt, S. Subramania Iyer, among others – was largely from Bombay and Calcutta. Naoroji, a businessman and publicist settled in London, and for a time member of the British Parliament, guided the younger nationalists. A retired British official, A.O. Hume, also played a part in bringing Indians from the various regions together.

What is the Reserve Bank of India’s operating framework?

The monetary policy framework and the associated operating procedure of monetary policy in India have also evolved over time. On 3rd May 2011, the Reserve Bank in its Annual 6 BIS central bankers’ speeches Monetary Policy Statement announced a revised monetary policy operating procedure based on the recommendations of a Committee constituted for the purpose.5 Before I delve into the current operating procedure, let me give you a snapshot of the evolution of our monetary policy operations since the inception of the Reserve Bank of India in 1935. First, in the formative years during 1935–1950, the focus of monetary policy was to regulate the supply of and demand for credit in the economy through the Bank Rate, reserve requirements and OMO. Second, during the development phase during 1951–1970, the need to support plan financing through accommodation of government deficit financing by the RBI began to significantly influence the conduct of monetary policy. This led to introduction of several quantitative control measures to contain the consequent inflationary pressures while ensuring credit to preferred sectors. These measures included selective credit control, credit authorisation scheme (CAS) and “social control” measures to enhance the flow of credit to priority sectors. The Bank Rate was raised more frequently during this period. Third, during 1971–90, the focus of monetary policy was on credit planning. However, the dominance of fiscal policy over monetary policy accentuated and continued through the 1980s. To raise resources for the government from banks, the statutory liquidity ratio (SLR) was progressively increased from the statutory minimum of 25 per cent of banks’ net demand and time liabilities (NDTL) in 1970 to 38.5 per cent by 1990. And to neutralise the inflationary impact of deficit financing, the cash reserve ratio (CRR) was gradually raised from its statutory minimum of 3 per cent to 15 per cent of NDTL during the period. Fourth, the 1980s saw the adoption of monetary targeting framework based on the recommendations of Chakravarty Committee (1985). Under this framework, reserve money was used as operating target and broad money (M3) as an intermediate target. A number of money market instruments such as inter-bank participation certificates (IBPCs), certificates of deposit (CDs) and Commercial Paper (CP) were introduced based on the recommendations of Vaghul Committee (1987). Fifth, structural reforms and financial liberalisation in the 1990s led to a shift in the financing paradigm for the government and commercial sectors with increasingly market-determined interest rates and exchange rate. By the second half of the 1990s, in its liquidity management operations, the RBI was able to move away from direct instruments to indirect market-based instruments. The CRR and SLR were brought down to 9.5 per cent and 25 per cent of NDTL of banks by 1997. Sixth, the monetary policy operating procedure also underwent a change following the recommendation of Narasimham Committee II (1998). The RBI introduced the Interim Liquidity Adjustment Facility (ILAF) in April 1999, under which liquidity injection was done at the Bank Rate and liquidity absorption was through fixed reverse repo rate. The ILAF gradually transited into a full-fledged liquidity adjustment facility (LAF) with periodic modifications based on experience and development of financial markets and the payment system. The LAF was operated through overnight fixed rate repo and reverse repo from November 2004. The LAF helped to develop interest rate as an instrument of monetary transmission. In the process, two major weaknesses came to the fore. First was the lack of a single policy rate. The operating policy rate alternated between repo and reverse repo rates depending upon the prevailing liquidity condition. In a surplus liquidity condition, the operating policy rate was the reverse repo rate, while in a deficit liquidity situation it was the repo rate. Second was the lack of a firm corridor. The effective overnight interest rates dipped below the reverse repo  rate in surplus conditions and rose above the repo rate in deficit conditions. Moreover, overnight call rates became unbounded under occasional liquidity stress. Thus, more often the overnight interest rate remained outside the corridor

New operating procedure Against this background, the new operating procedure retained the essential features of the LAF framework with the following key modifications. First, the weighted average overnight call money rate was explicitly recognised as the operating target of monetary policy. Second, the repo rate was made the only one independently varying policy rate. Third, a new Marginal Standing Facility (MSF) was instituted under which scheduled commercial banks (SCBs) could borrow overnight at their discretion up to one per cent of their respective NDTL at 100 basis points above the repo rate. 

Why is monetary policy operating procedure important?

Monetary policy as an arm of public policy has set objectives and priorities. These objectives are derived from the respective mandates of central banks. It ranges from a single objective of price stability, considered to be the dominant objective of monetary policy, to multiple objectives that include growth and financial stability as well. Central banks strive to achieve these objectives indirectly through instruments under their direct control and on the basis of the empirical relationship these instruments have with the final objectives. This requires articulation of a consistent monetary policy framework that enables transmission of policy signals in such a way that monetary and financial conditions are influenced to the desired extent to attain the objectives. Monetary policy framework, however, is a continuously evolving process contingent upon the level of development of financial markets and institutions, and the degree of global integration. As long as the value of money was linked to gold or silver, monetary policy had a secondary role. With the breakdown of the Bretton Woods system of fixed exchange rate, monetary policy framework evolved from that of setting an intermediate target. Under this framework, central banks, through the instruments under their direct control, were trying to influence an intermediate target such as money supply which had a stable relationship with the final objectives of price and output. This framework was abandoned by advanced central banks towards the late 1980s because of the unstable relationship of money with the final objectives attributed to financial innovations. As an alternative, since the late 1980s, many central banks began to adopt inflation targeting framework in which inflation was directly targeted as the sole final objective. The recent global financial crisis has, however, 2 BIS central bankers’ speeches questioned the virtue of this framework, as sole focus on price stability failed to ensure financial stability (Subbarao, 2010).1 Among advanced central banks, while the Bank of England is an inflation targeting central bank, there are many others which follow an eclectic approach. For instance, the US Federal Reserve follows a framework termed as risk management approach wherein a view on interest rate is taken on consideration of balance between risks to inflation and growth. Similarly, the European Central Bank takes policy decisions based on a twin strategy comprising economic and monetary analysis. It is, however, important to note that irrespective of differences in frameworks, price stability, interpreted as low and stable inflation, remains the dominant objective of monetary policy for all these central banks. Once a monetary policy framework is in place, it needs to have a supporting operating procedure through which monetary policy is implemented. An operating procedure is defined as day-to-day management of monetary conditions consistent with the overall stance of monetary policy. Generally, it involves: (i) defining an operational target, generally an interest rate; (ii) setting a policy rate which could influence the operational target; (iii) setting the width of corridor for short-term market interest rates; (iv) conducting liquidity operations to keep the operational target interest rate stable within the corridor; and (v) signalling of policy intentions. In addition, most central banks require commercial banks to keep minimum cash reserves with them. Commercial banks also require cash to meet the currency demand of their clients. The inter-bank transactions are also ultimately settled in their accounts with the central bank. The demand for and supply of cash reserves provide the lever to central banks not only to modulate liquidity in the system but also to set interest rate in the money market. Through the calibration of monetary conditions by using instruments under its direct control, a central bank guides the operating target to the desired level. Under a monetary targeting framework, bank reserves used to be the operating target. Central banks used to influence money supply through varying required reserves. Though cash reserve requirements remain in the toolkit of central banks, they are not actively used by advanced economies as an operating target in normal times. Consequently, most of the central banks now signal their monetary policy stance by setting interest rates in the money market. The operating target, therefore, is one of the short-term market interest rate. The operating target, however, is only an intermediate objective of monetary policy. The ultimate objectives are price stability, growth and financial stability. The effect of interest rate on these ultimate objectives would depend upon how the signals are transmitted through the financial system and how businesses and households respond to these changes. These transmission channels could be commercial interest rates, asset prices, exchange rate and expectations. The main transmission channel, however, is the commercial interest rate channel whereby change in the policy interest rate impacts deposits and lending rates of financial institutions, and alters the spending and investment decisions of households and businesses. The relative importance and effectiveness of each of these four channels of transmission, however, are conditioned by development of financial markets and institutions, and the degree of global integration

THE GOVERNMENT OF INDIA ACT, 1935

Excluded areas and partially excluded areas.—
(1) In this Act the expressions "excluded areas" and "partially excluded area" mean, respectively such areas as His Majesty may by Order in Council declare to be excluded areas or partially excluded areas. The Secretary of State shall lay the draft of the Order which it is proposed to recommend His Majesty to make under this sub­section before Parliament within six months from the passing of this Act. (2) His Majesty may at any time by order in Council (a) direct that the whole or any specified part of an excluded area shall become, or become part of, a partially excluded area; (b) direct that the whole or any specified part of a partially excluded area shall cease to be a partially excluded area or a part of such an area; (c) alter, but only by way of rectification of boundaries, any excluded or partially excluded area; (d) on any alteration of the boundaries of a Province, or the creation of a new Province, declare any territory not previously in any Province to be, or to form part of, an excluded area or a partially excluded ­area, and any such Order may contain such incidental and consequential provisions as appear to His Majesty to be necessary and proper, but save as aforesaid the Order in Council made under sub­section (1) of this section shall not be varied by any subsequent Order. 92. Administration of excluded areas and partially excluded areas.—(1) The executive authority of a Province extends to exclude and partially excluded areas therein, but notwithstanding anything in this Act, no Act of the Federal Legislature or of the Provincial Legislature, shall apply to an excluded area or a partially excluded area, unless the governor by public notification so direct; and the Governor in giving such a direction with respect to any Act may directs that the Act shall in its application to the areas, or to any special part thereof, have effect subject to such exceptions or modifications as he thinks fit.                                                                                                                                                     ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ (2) The Governor may make regulations for the peace and good government of any area in a Province which is for the time being an excluded area, or a partially excluded area, and any regulations so made may repeal or amend any Act of the Federal Legislature or of the Provincial Legislature, or any existing Indian law, which is for the time being applicable to the area in question. Regulations made under this sub­section shall be submitted forthwith to the GovernorGeneral and until assented to by him in his discretion shall have no effect, and the provisions of this Part of this Act with respect to the power of His Majesty to disallow Acts shall apply in relation to any such regulations assented to by the Governor­General as they apply in relation to Acts of a Provincial legislature assented to by him.                                                                                                                      (3)The Governor shall, as respects any area in a Province which is for the time being an excluded are, exercise his functions in his discretion. 311. Interpretation, etc.—(1) In this Act and, unless the context otherwise requires, in any other Act the following expressions have the meanings hereby respectively assigned to them that is to say. "British India means all territories for the time being comprised within the Governors' Provinces and the Chief Commissioners' Provinces. "India" means British India together with all territories of any Indian Ruler under the suzerainty of His Majesty, all territories under the suzerainty of such an Indian Ruler, the tribal areas, and, any other territories which His Majesty in Council may, from time to time, after ascertaining the views of the Federal Government and the Federal Legislature, declare to be part of India. "Burma" includes (subject to the exercise by His Majesty of any powers vested in him with respect to the alteration of the boundaries thereof) all territories which were immediately before the commencement of Part III of this Act comprised in India being territories lying to the east of Bengal, the State of Manipur, Assam, and any tribal areas connected with Assam; "British Burma" means so much of Burma as belongs to His Majesty; "Tribal areas" means the areas along the frontiers of India or in Baluchistan which are not part of British India or of Burma or of any Indian State or of any foreign State: "Indian State" means any territory, not being part of British India, which His Majesty_yecognises as being such a State, whether described as a State, an Estate, a Jagir or otherwise; "Ruler" in relation to a State means the Prince, Chief or other person recognised by His Majesty as the Ruler of the State. 2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

CABINET MISSION