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Doklam Is Narendra Modi’s Biggest Geo-Strategic triumph

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Doklam Is Narendra Modi's Biggest Geo-Strategic triumph

The issue regarding who withdrew its ground troops first from Doklam region  – India or China is settled at present as it is now clear that both sides agreed to withdraw simultaneously.

India withdrew first, however only after it was persuaded that China has entirely aborted its road construction plan in the disputed region.

The peaceful resolution of the conflict has been PM Narendra Modi’s biggest geostrategic triumph. It further demonstrated the achievement of a quiet guidance, where cold along with calculative moves strike chest-thumping style and where consequences verbalise for themselves.

The past seventy days of the Doklam stand-off as well as private discussions crafts for a classic case study of multi-party discussions.

In such multi faceted negotiations, a feature called BATNA, i.e.  Best Alternative To a Negotiated Agreement plays a vital role. A well-planned BATNA is the most significant influence a negotiating party has.

For the foremost time, India went to the negotiating bench with a visibly uttered and verifiable “finest alternative”, that it would not be timid away from a limited border battle if negotiations botched. The certainty of this alternative puzzled China, which seemed to anticipate that India would tenderly concede from its place.

As Prime Minister Modi and his lineup must be lauded for the declaration of the crisis, we have to be careful concerning the chinks in our Northeast plan being exposed. The Doklam dispute doesn’t appear like a single case of a Chinese attack.

India, thus, needs to carry on intensifying its BATNA to perk up its diplomatic negotiating control. For that, dipping the tremendous strategic and financial pressure on the 22 km wide Siliguri passage, which connects mainland India with its north eastern states, is a must.

What to consider?

While it is undecided if any side can announce victory,  even those contented to assert India has won a victory should also add warning notes concerning what China might do after that, and what New Delhi must embark on to guarantee that situations like this persist in working to Indian advantage. What is even more significant is not to be directed away to consider that only calm diplomacy succeeds.

This time China did not employ its force multipliers like cyber warfare however probably tested several models in the live surroundings. The next time this will be a critical area.

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RBI keeps repo rate unchanged at 6%

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Reserve Bank of India has kept key policy repo rate unchanged at 6 percent, in a third consecutive pause for the monetary policy.

No surprises for the hawkish tone. The inflation estimates have been revised at 5.1 percent in Q4 due to factors including pick up in food prices and international crude oil prices.

“CPI inflation for 2018-19 is estimated in the range of 5.1-5.6 percent in H1, including diminishing statistical HRA impact of central government employees, and 4.5-4.6 percent in H2, with risks tilted to the upside,” RBI’s monetary policy statement said.

RBI said, “In terms of actual outcomes, headline inflation averaged 4.6 per cent in Q3, driven primarily by an unusual pick-up in food prices in November. Though prices eased in December, the winter seasonal food price moderation was less than usual. Domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices, it said.

The 2-day deliberations on February 6 and 7 by the Monetary Policy Committee (MPC) headed by Governor Urjit Patel noted that the inflation outlook is clouded by several uncertainties on the upside. First, the staggered impact of HRA increases by various state governments, pick-up in global growth and the Union Budget proposal to revise MSP (minimum support price).

The government promised to ensure MSP of key crops at 1.5 times the cost of production. This could mean at least a 50-70-basis-points increase in the headline inflation number.

Growth outlook

GVA (gross value added) growth for 2017-18 is projected at 6.6 percent. Beyond the current year, the growth outlook will be influenced by several factors including GST, early revival signs of investment climate reflecting credit offtake and recapitalisation of banks even as resolution of stressed assets is underway.

GVA growth for 2018-19 is projected at 7.2 percent overall – in the range of 7.3-7.4 percent in H1 and 7.1-7.2 percent in H2 – with risks evenly balanced.

Repo rate – the rate at which banks borrow short term funds from RBI – continues to stand at 6.00 percent while the reverse repo is at 5.75 percent.

The liquidity in the system continues to be in surplus mode, but it is moving steadily towards neutrality, the statement added.

The December bi-monthly resolution projected inflation in the range of 4.3-4.7 percent in the second half of 2017-18, including the impact of increase in HRA (house rent allowances).

“Since the MPC’s last meeting in December 2017, global economic activity has gained further pace with growth impulses becoming more synchronised across regions… Financial markets have become volatile in recent days due to uncertainty over the pace of normalisation of the US Fed monetary policy…,” said the sixth bi-monthly Monetary Policy Statement for 2017-18.

Rise in crude oil prices, coupled with a rise in prices of vegetables, has already led the consumer price index (CPI) or retail inflation shoot up from just under 2 percent in June 2017 to a 17-month high of 5.21 percent in December 2017.

As inflation remains a worry, in the last few months, RBI has been gradually nudging up its inflation forecast. While keeping the medium-term target for CPI inflation of 4 percent within a band of +/- 2 percent, the Central Bank had raised the near-term forecast of inflation to 4.3-4.7 percent for the second half of FY18.

Amid rising interest rate scenario, experts had pointed out risks of higher inflation with fiscal slippages and higher food prices apart from the government’s plans to increase the Minimum Support Price (MSP).

The government has said the fiscal deficit in 2017-18 will be 3.5 percent, higher than the budgeted 3.2 percent at the start of this fiscal, which is seen as a negative by the bond and equity markets, and already reflected in higher yields and falling stock prices in the wake of the Budget.

Of the six members, four voted in favour of a pause while one called for a rate hike of 25 bps.

Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Viral V. Acharya and Dr. Urjit R. Patel voted in favour of the monetary policy decision. Dr. Michael Debabrata Patra voted for an increase in the policy rate of 25 basis points.

The minutes of the meetings will be published 14 days from now on February 21.

The last repo rate cut by RBI was done in August 2017 when the central bank had reduced the repo rate by 25 basis points (bps) from 6.25 percent to 6 percent.

The next meeting of the MPC is scheduled on April 4 and 5, 2018.

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India News

GST e-way bill mandatory from today

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GST e-way bill

The GST e-way bill for moving goods across states has been rolled out from today, the day when the finance minister has also presented the Union Budget for the year 2018. It is considered to be a very crucial policy to help prevent tax evasion under GST (goods and services tax).

As per the new rule, the GST e-way bill, which is an electronic document for tracking the movement of goods, will be mandatory for all types of goods moving across states, and will be in effect from February 1.

GSTN (Goods and Services Tax Network) has already completed a 14-day trial which started on January 17. In the trial period, 28.4 lakhs e-way bills have already been generated. GSTN estimates that a number of around 7,00,000 – 8,00,000 GST e-way bills will be issued on a daily basis across the country.

“We rolled out the e-way bill system for all states from 17 January. Given the experience so far of the last two weeks, we are optimistic that the rollout will be smooth” said Prakash Kumar, Chief Executive Officer, GSTN.

However, the e-way bill is expected to trigger another economic disruption to a nation which has just come over the economic effects of the GST and demonetisation.

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India News

Main Highlights of Union Budget 2018-19

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Finance Minister Arun Jaitley presented the Union Budget of 2018 on February 1st, 2018. The finance minister also stated that India is one of the fastest-growing economies in the world.

The main highlights of the budget were increasing MSP, decrease in corporate tax rate, allocation of Rs. 1200 crore to health care sector and others. “This year’s Budget will particularly focus on agriculture”, said Mr Jaitley. Keeping in mind the plight of the farmers of a nation which is highly dependent on its agriculture, many positive changes were done in the budget which was long overdue.

There was some positive news for the common folks as well, one of them being the increase in EPF contribution by the government. But then, not substantiating the rumours regarding income tax, no changes were made in the income tax slabs.

Here are some key points of the Union Budget 2018 :-

  • There are no changes in income tax rate
  • For transport, medical reimbursement for salaried tax payers, standard deduction of Rs 40,000 will be allowed
  • Education cess has been increased from 3% to 4% which will lead to an additional revenue generation of Rs 11,000 crore
  • The new employees of all sectors will have 12% of their income as EPF contribution by the Government for the next 3 years. Contribution to EPF of women employees reduced from 12% to 8% for the first 3 years.
  • Finance Minister also said that there is a target to provide all Indians with their own homes by 2022
    The MSP for Kharif Crops has been set at 1.5 times the produce price
  • Eklavya Schools will be opened in every block with more than 50% Schedule Tribe population by 2022
    Aayushman Bharat programme to be initiated, which will have 1.5 lakh centres set up to provide health facilities near homes. Rs 1,200 crore will be allocated for this programme.
  • Flagship National Healthcare protection scheme, world’s largest government-funded healthcare programme, will have approximately 50 crore beneficiaries who will receive up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation.
  • Mobile phones and televisions to become costly after an increase in customs duty for some products
  • Co-operative societies to be allowed 100% tax deduction
  • Airport capacity proposed to be increased to handle 1 billion trips every year
  • Corporate tax on companies with a turnover of up to Rs 250 cr is to be decreased from 30% to 25%, which results in a revenue loss of Rs 7,000 cr for the government.
  • PAN has been made compulsory for any entity entering into a financial transaction exceeding 2.5 lakh

There are a lot of promises initiating a lot of hopes in the eyes of the common rural and urban population. But promises alone cannot cover the fiscal deficit and uplift the living condition of the people, implementation of such promises is necessary. Not much can be said about the upcoming changes in the wake of the Union Budget, we’ll just have to wait and watch.

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