Candles Online

During my childhood days, Independence day always meant patriotic songs, pompous processions, humdrum speeches and delectable jalebis, all-in-all an eventful holiday to me. It was when I grew up a little that I started understanding the reason behind all these festivities. Independence day is a celebration of freedom, a reiteration of our rights and duties towards our great nation, I was told. As for rights and duties, they are clearly adumbrated in our constitution, it was the term ‘freedom’ which puzzled me quite a bit. What is freedom, I asked myself. Does this only mean that we can elect our own government who get to rule us, and not some foreign tyrants. Is it only symbolic or has an aspect to it which affects our day-to-day life? To which extent have we achieved freedom and how far do we have to further go?

Freedom is when we have the…

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All about Brexit

So it happened, the Brexit referendum took place and turns out the Britons have voiced their opinion in favor of resorting to isolation. Here is all you need to know about Brexit (Britain+exit, simple, yet not-so-simple):

  • The European Union(EU)

The EU is a partnership of 28 European countries which was formed by its six founder nations, Luxembourg, Italy, Germany, France, Belgium and the Netherlands with a unanimous objective of pooling resources and establishing a single market for free movement of goods and people under the name of European Economic Community(EEC). After the Maastricht Treaty in 1993, EEC was renamed as the European Union(EU). Nineteen members of the bloc went a step further and adopted a common currency Euro. All member countries contribute different shares to fund the EU mechanism.

  • The EU-UK situation

The United Kingdom joined the EU in the year 1973. It has long enjoyed special right within the structure. The UK has not adopted the practice of Euro and has retained its Pound Sterling even though the EU recognizes the common currency as one of its goals. Certain EU laws are not automatically enforced in the UK (opt-outs). Conversely, the country can apply EU measures in certain policy areas as per its own convenience (opt-ins). In recent negotiations with the EU, the British PM David Cameron secured the right to decline full social benefits payments to immigrants from other EU countries.

  • Then why Brexit?

The key argument behind Britain exiting the bloc is that EU regulations paralyze the British economy. Brexit supporters quote that the UK contributions are too high and rewards are too meager. Also, being a part of the 28-member bloc will mean exposure to mass immigration threats.  The UKIP (UK Independence Party) which had got 13% votes in last year’s general election strongly campaigned for leaving EU on an anti-immigrant platform.

The main cross-party group campaigning for UK to remain in UK was called ‘Britain Stronger in Europe’ headed by former Marks and Spencer chairman Lord Rose. On the opposite side, the Brexit campaign was spearheaded by ‘Vote Leave’, again a cross-party group.

  • Aftermath of Brexit

Brexit has caused a state of panic and a global economic turmoil till now with share markets hitting new lows across the continents. Global indices may experience volatility and it’s overall a bad news for the international trade and investments.

  • Effects of Brexit on the UK

The British would be required to withdraw from the single market within two years of leaving EU. With Brexit, there are two possibilities, one is that the UK will have to negotiate independent trade agreements with other countries which will go on over a period of time and will cause uncertainty in the market. Another possibility is that despite leaving EU, it remains in the European Economic Area (EEA) which is unlikely given that 80% of the EU rules apply on EEA and hence it would be thwarting the purpose of Brexit. The insiders believe that EU won’t make it easy for Britain to return to the single market to avoid strengthening anti-EU movements in other countries.

  • Effects on India

Brexit is believed to have no major long-term impact of India. India’s strong macroeconomic fundamentals, huge forex reserves, low current account and fiscal deficits and moderate inflation will attract investors in medium to long-run. Nonetheless, the near-term uncertainty and the shrinking of the British economy will adversely impact the exporters of products such as garment and agricultural products and the IT sector, for which UK accounts for 17% of the net exports.

How ironic it is that the country which played divide and rule for centuries ended up dividing itself! Now amidst the piling petitions to conduct a second referendum, the British policy-makers have to lead the country through new economic reforms and arrangements. It’s going to be a tough path ahead, indeed.


3 Years of RR: The Good, The Bad and The Ugly

Raghuram Rajan, one of the most widely acclaimed economists in the world and the present governor of the Reserve Bank of India,announced that he’s going to step down from the prestigious post after his 3-years tenure and won’t be seeking an extension. Here is my take on the various aspects of reforms which took place under his reign.

The Good

  • Controlling deficit

Dr Rajan successfully brought down the deficit from 4.8% in 2012-13 to 0.1% of the gross domestic product in 2015-16 by incentivizing banks to raise deposits from Indians living overseas and restricting import of gold to a certain extent.

  • Tackling inflation

A combination of better food management, a new inflation framework, calibrated monetary policies aided by a sharp fall in global commodity pricing lead to a lower consumer price inflation which almost halved to 5.8% last month from a precarious double digit rate of increase in late of 2013.

  • Stabilizing volatile rupee

Dr. Rajan’s steps to raise overseas deposits and increase the amount of money that Indian banks can raise through overseas bonds helped ease the pressure on the currency. In 2013, the rupee weakened 11.5% against the dollar. In subsequent years though, its decline slowed to between 1% and 5% — making it easier for importers to manage foreign currency risks.

  • Clearing bad debt

Before Dr Rajan took over in the office, bad loans were growing rife in the banking sector. With him at the helm at RBI, banks were forced to close the loan taps and take promoters of those companies who resorted to ever-greening of loans to court to for their recovery. This measure cleared around 13 lakh crores of bad debts, resulting into more transparency.

  • Rising foreign-exchange reserves

India’s foreign-exchange reserves were about $275 billion before Dr. Rajan took charge. Central bank data issued this month showed India’s foreign-exchange reserves have climbed to a record-high of over $363 billion. That provides significantly more firepower to protect the currency from overseas financial shocks.

The Bad

  • Vapid industries

Over the past three years, the central bank’s policies have failed to bring about any significant improvement in the performance of Indian industry. During Dr. Rajan’s tenure, the RBI made controlling inflation its main objective. But in its pursuit of this goal, the focus on growth appears to have weakened. Most recent government data show industrial production fell 0.8% in April, the fourth month of decline in six months.

  • Dismal banks

Numerous public sector banks reported record losses while several such as State Bank of India saw a massive decline in profits. A need for equity infusion has been felt on account of rising bad debt, but Dr Rajan’s monetary policies have been unfavourable towards this proposition.

The Ugly

  • Conflicts with fiscal authorities

Governor Rajan’s cautious view on using low rates for growth and stabilizing economy made him an obstacle to fiscal authorities’ agenda of using low rates for the ease of borrowing. Many of them felt that his ideas and policies are influenced by western methodologies and are unapt in Indian circumstances.

  • Controversial speeches

Dr Rajan’s statements have been perceived as anti-government at several occasions. Apart from the monetary policy of RBI, he was quite vocal in expressing his opinion about matters such as intolerance and the ambitious ‘Make in India’, which upset the politicians.

  • Allegations of Subramanian Swamy

Parliamentarian Subramanian Swamy alleged Dr Rajan of an “apparently deliberate attempt to wreck the Indian economy” and complained that his decisions have squeezed small and medium businesses and increased unemployment in the country. Also, in an unpublished letter to Dr Rajan, he accused him of not co-operating with Enforcement Directorate, Finance Ministry in tracking Karti Chidambaram in connection with Aircel-Maxis scam probe.

Dr Raghuram Rajan revived the Indian economy from befalling a catastrophe but now the emergency is over and the government wants to pursue robust growth by slackening the monetary restrictions. In such times Dr Rajan’s policies appear to be an impediment. Will his departure be detrimental for the economy or is it for the greater good? Only time will tell.