The pessimist will argue that demonetisation and GST have caused waves of layoffs in the informal sector, but there are arguments by the optimistic, that complex structure of tax has created jobs in formal sector.
RBI’s supervisory capacity needs strengthening — including better training, more specialization and longer tenures for officials, among other measures that the bank itself has recommended.
In a country where unemployment is at a historic high, the national anxiety isn’t about jobs — it’s about reach. Aspirations have shifted from employment to engagement, from careers to content.
The article lacks clarity as to what it means by “internationalising”.
(1) It starts by saying 80% world trade takes place in US$ and eyes the benefits the US derives because $ is a “Reserved” currency.
(2) The $ is not the Reserve currency because 80% of the world trade is in $, but 80% of world trade is in $ because it’s a reserve currency. Why did $ become the reserve currency? Historical reasons (post WW-II, US war economy machine turned into very serious consumerist economy machine; £ waned as British empire collapsed & Europe including Russia was severely battered; that made US engine of growth to world economy) & the fact that US continues to be the largest economy.
(3) Not just trade dominance, $ benefits even from Capital A/c. What do the countries running trade surpluses with US do with the $ they earn? Park them again with Federal Reserve.
(4) So what Does “internationalising” mean? Make ₹ Capital account convertible? No! That would be suicidal for a country that runs huge Current Account deficits?
(5) Therefore, does “internationalising” mean denominating India’s trade with other countries in ₹? Fine, but just because China is doing it, can India do it? Does India have the HEFT of massive Trade Surplus? China runs trade surplus with almost all countries. If & when it offers to export it’s goods in Renminbi, the counter-parties are thrilled because they don’t need to dip into their dollar reserves. India doesn’t have that cushion. Who would want to sell to India in ₹ unless they buy as much or substantially from India (because only then they can avoid perils of ₹ depreciation)? So it can work only with neighbouring countries with whom we run trade surpluses and would remain restricted only to that (it wont be a start to “internationalising” ₹ as article postulates unless we start running trade & current account surplus overall)
(5) Iran is an exception because her hand is forced due to US sanctions. And even this “Exception” is working because of US “benevolence” and is at the mercy of it’s continuation. That brings us to another point. Iran cannot trade even in Euro -another freely convertible currency acceptable the world over- or Swiss Francs (reputably currency of choice for illicit money/wealth parking) Canadian$ or Australian$. Why? Because US threatens these alternatives too with sanctions if respective countries/zones were to allow so.
(7) Even the mechanism of International Payment settlement, S.W.I.F.T or SWIFT, which is based in Switzerland, and supposed to be Independent of the whims & fancies of any country, is vulnerable to the capricious US administration.
Thanks for your response. Great perspective which makes much more sense.
It is not clear why there is reluctance to regionalize INR at least in SAARC and Gulf region. Further, is this a decision to be taken by RBI alone or it requires Government of India to approve this step. It always made sense to trade in INR given that it was used till 50s in our neighborhood, particularly in UAE, Kuwait and Oman. Imagine, by now we could have had a free trade agreement with INR as a major currency of trade with GCC and even MENA region.
The author is right in saying that we have not recognized the soft power of INR trading and also allowed China to march over us on this aspect.
It is also to be noted that all the wisest and bright governors of RBI in recent past and also their bright deputies have not given much thought on this issue, but could give unsolicited advise to the country on inclusiveness, liberal thoughts, cow slaughter etc.
The article lacks clarity as to what it means by “internationalising”.
(1) It starts by saying 80% world trade takes place in US$ and eyes the benefits the US derives because $ is a “Reserved” currency.
(2) The $ is not the Reserve currency because 80% of the world trade is in $, but 80% of world trade is in $ because it’s a reserve currency. Why did $ become the reserve currency? Historical reasons (post WW-II, US war economy machine turned into very serious consumerist economy machine; £ waned as British empire collapsed & Europe including Russia was severely battered; that made US engine of growth to world economy) & the fact that US continues to be the largest economy.
(3) Not just trade dominance, $ benefits even from Capital A/c. What do the countries running trade surpluses with US do with the $ they earn? Park them again with Federal Reserve.
(4) So what Does “internationalising” mean? Make ₹ Capital account convertible? No! That would be suicidal for a country that runs huge Current Account deficits?
(5) Therefore, does “internationalising” mean denominating India’s trade with other countries in ₹? Fine, but just because China is doing it, can India do it? Does India have the HEFT of massive Trade Surplus? China runs trade surplus with almost all countries. If & when it offers to export it’s goods in Renminbi, the counter-parties are thrilled because they don’t need to dip into their dollar reserves. India doesn’t have that cushion. Who would want to sell to India in ₹ unless they buy as much or substantially from India (because only then they can avoid perils of ₹ depreciation)? So it can work only with neighbouring countries with whom we run trade surpluses and would remain restricted only to that (it wont be a start to “internationalising” ₹ as article postulates unless we start running trade & current account surplus overall)
(5) Iran is an exception because her hand is forced due to US sanctions. And even this “Exception” is working because of US “benevolence” and is at the mercy of it’s continuation. That brings us to another point. Iran cannot trade even in Euro -another freely convertible currency acceptable the world over- or Swiss Francs (reputably currency of choice for illicit money/wealth parking) Canadian$ or Australian$. Why? Because US threatens these alternatives too with sanctions if respective countries/zones were to allow so.
(7) Even the mechanism of International Payment settlement, S.W.I.F.T or SWIFT, which is based in Switzerland, and supposed to be Independent of the whims & fancies of any country, is vulnerable to the capricious US administration.
Thanks for your response. Great perspective which makes much more sense.
It is not clear why there is reluctance to regionalize INR at least in SAARC and Gulf region. Further, is this a decision to be taken by RBI alone or it requires Government of India to approve this step. It always made sense to trade in INR given that it was used till 50s in our neighborhood, particularly in UAE, Kuwait and Oman. Imagine, by now we could have had a free trade agreement with INR as a major currency of trade with GCC and even MENA region.
The author is right in saying that we have not recognized the soft power of INR trading and also allowed China to march over us on this aspect.
It is also to be noted that all the wisest and bright governors of RBI in recent past and also their bright deputies have not given much thought on this issue, but could give unsolicited advise to the country on inclusiveness, liberal thoughts, cow slaughter etc.
On a lighter note, that is only possible if the colour scheme is improved …