8 July 2023 : Indian Express
Indian Express
8-July–2023
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1. THE RUPEE CHALLENGE
Syllabus – GS III
Context – The internationalisation of the currency will have advantages for the Indian economy, but a cautious approach is called for.
Internationalisation of Rupee
- An inter-departmental group constituted by the Reserve Bank of India to frame a road map for the internationalisation of the Indian rupee has submitted its report.
- The report comes against the backdrop of the Russia-Ukraine war, the subsequent imposition of sanctions and the weaponisation of the financial system, which has led to apprehensions over excessive reliance on the dollar, leading to calls for diversification.
Advantages
- For an economy like India, the advantages from greater usage of its currency in international transactions are manifold.
- For one, it brings down the “exchange rate risk” for Indian exporters and importers while curtailing the demand for the US dollar.
- It also reduces the need to maintain a forex war chest to “manage external vulnerabilities” and, among others, makes the economy less at risk to “sudden stops and reversals of capital flows”.
- The report has detailed several measures to boost the rupee’s usage in international transactions.
- The short-term measures range from putting in place a uniform approach for dealing with trade arrangements “for invoicing, settlement and payment in the rupee and local currencies”, incentivising exporters to use the Indian currency for trade settlement, and integrating payment systems to provide seamless cross-border transactions.
- Among the more medium-term measures are synchronising tax regimes of India and other financial centres and allowing banking services in the rupee outside the country, while in the long run, the objective could be to include the rupee in the IMF’s SDR (special drawing rights)basket.
Disadvantages
- However, the path to internationalisation is likely to be challenging.
- As per reports, even though the central bank had allowed banks to settle international trade in rupees with 18 countries, there has been little traction for this facility so far.
- Russia, for instance, reportedly prefers the yuan or the dirham as a medium of transaction, even though there has been a sharp rise in oil imports from the country.
- A few months ago, Russian Deputy Prime Minister Denis Valentinovich Manturov had said that “because of a lack of imports from India, it’s not enough to use the rupee”.
- The quest for internationalisation will involve providing greater frictionless freedom to transact in the rupee.
- Moreover, the depth and breadth of financial and foreign exchange markets, and the extent of frictions therein, will also play a critical role in determining the pace of internationalisation of the currency.
- As the Indian economy grows and its trade linkages with other countries strengthen, more space will be created for using the rupee in international transactions. But, a cautious approach is called for.
2. RIVER ABANDONED
Syllabus – GS III
Context – Delhi government report shows very little progress in cleaning the Yamuna.
In January, the National Green Tribunal (NGT) constituted a panel headed by Delhi’s lieutenant governor to find ways to rejuvenate the Yamuna in the capital. Six months later, a status report submitted by the Delhi government shows that there’s scarcely any reduction in the river’s pollution levels.
Problems
- It lists a litany of problems that have been known for a long: The city’s sewage treatment plants do not operate to their full capacity, and untreated or partially treated sewage flows into the river.
- A large number of localities inhabited by the poor are not covered by the network of pipes that take sewage to treatment plants.
- As a result, the water of the river in most of its stretch in the capital is not fit for bathing quality.
- The six-month deadline set by the NGT to resolve these problems was perhaps unrealistic.
- But in the past two decades, goalposts on Yamuna cleaning have been shifted several times.
- The Delhi government must get its act together. The status report points to an “extension of the sewerage network to a few more unauthorised colonies and JJ clusters”.
- However, the fact that 245 million gallons of sewage is left untreated daily shows that this extension has not significantly affected Yamuna’s pollution levels. By all accounts, about 250 MGD was dumped in the river before the NGT’s intervention.
- An interceptor drain project initiated over 15 years ago has missed several deadlines.
- The idea behind the project was that, instead of laying a massive network of new lines, interceptor sewers would trap these wages from Delhi’s three large drains that carry most of the city’s filth and dump it into the Yamuna.
- However, since the project was conceived, the number of colonies outside the city’s sewerage network has increased.
- It seems that the interceptor drain project did not plan for Delhi’s growing population’s impact on the capital’s waste disposal system.
- The trouble also is that the different authorities in the city — the DDA, the municipal corporation, and the pollution control agencies— rarely work in sync.
- And the Yamuna cleaning work is among the several casualties of the constant confrontation between the Delhi government and the city’s LG.
Way Ahead
- The Delhi stretch is only 2 per cent of the river’s length. But more than70per cent of Yamuna’s pollution burden originates in the capital.
- Restoring the river in Delhi is, therefore, critical for its health.
- The NGT has asked the Delhi government to submit another report by September.
- The solutions have been known for a long now. It’s high time they are implemented.
For Enquiry
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