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Covid-19 Crisis Could Ensure Modi's Economic Transformation

 


RBI seems to be of the opinion that the economic emergency of Covid-19 will be a transient phenomenon. No crisis action appears to have been taken by the RBI to address the effects of the global supply and demand shock from Covid-19 on India.

NEW DELHI: The emergency caused by the spread of the new coronavirus (Covid-19) in India must lead to the introduction of transformational reforms in the economy, as happened in 1992 due to the precariousness of the country at the time when PV Narasimha Rao succeeded the post of Prime Minister. Societal aftershocks of the Citizenship Amendment Act (CAA) and the visible collapse of animal spirits in the economy indicate the need for both policies and personnel changes to be undertaken by Prime Minister Narendra Modi for the country to return to the growth trajectory it was in before the takeover by 10 Janpath of 7 RCR after the repeat in 2009 of the victory in the 2004 national elections of the UPA. Such measures are urgently needed as the appearance of Covid-19 in an increasing number of countries around the world creates a classic supply and demand shock. This threatens to tip the international economy into a systemic recession. Ironically, the greatest impact of Covid-19 is felt in the developed world, as well as in sectors located in developing countries that are more globally competitive than the rest of the economy. This is a consequence of China's dominance in the two global demand chains through its purchases of natural resources, services, manufactured goods and consumables in countries around the world, mainly in North America, Europe and in the Indo-Pacific. The recent sharp reduction in imports from the People's Republic of China is driving down overall consumer demand in several drivers of global economic growth, including a sharp drop in oil prices and others raw materials. In the case of supply, whether it's Japan, India, the EU or the United States, a substantial segment of the supply chain The manufacturing supply is based in China, and much of this has been temporarily taken offline by President Xi's unprecedented emergency responses. Jinping from the third week of January 2020 until the coronavirus epidemic after its first appearance in the country months before. The global emergency of Covid-19 shows the danger in large economies of letting their supply chains depend as much on a single country as the bulk of global manufacturing depends on China. Despite this, the slowdown in growth caused by the supply and demand shock of Covid-19 means that most companies will find it difficult to quickly develop alternative manufacturing capabilities in locations other than the China. Aware of the danger that considerable manufacturing capacity could migrate from China and thus have an impact on employment prospects, President Xi Jinping ordered the manufacturing units to restart their operations, calculating that the risk of certain infections at within the workforce is less than the damage that would be caused to the Chinese economy through large-scale migration of manufacturing capabilities to Taiwan, Vietnam, the Philippines and, to some extent, India.

TOWARDS NEGATIVE INTEREST RATES

The Federal Reserve Board of the United States inadvertently indicated the depth of the crisis facing the world economy by its unforeseen decision to carry out an emergency lowering lowering the already low level of interest rates. Interest of 50 basis points for the first time since the 2008 financial crisis. This was taken by investors as a sign of panic, which is why US stock prices fell rather than rose immediately after the drop in interest rates. In recent years, on the brink of a global recession, central bankers have ensured that interest rates in the developed world are lowered to levels never seen in the previous millennium. The Federal Reserve Board realistically has about three other rate cuts in its quiver, after which it will have to impose negative interest rates, which will send the banking sector of the world's largest economy into a mess, a as soon as depositors find out that they have to pay interest (no matter how small) to a bank when they put their savings there, rather than having the money that earns them interest. The EU and Japan are also on the verge of crossing the border into a regime of negative interest rates, so deep have been the interest rate cuts from central banks which have find there. On the other hand, despite the situation of Covid-19, the Reserve Bank of India seems to be of the opinion that the economic emergency of Covid-19 will be a transitory phenomenon, because no crisis measure seems to have been taken by the RBI to respond to the effects. of the global Covid-19 supply and demand shock to India. Surprisingly, the RBI has yet to report that the panic drop currently seen in the value of the rupee to a historic low has even deserved its attention, let alone its action. This must be more than reassuring words spoken to stop the fall in the value of the rupee, which is now the worst performing currency in the Indo-Pacific with the Iranian rial hit. This lack of response to the high octane index contrasts with the central banks of other major economies. It may be added that a similar belief (that the economic effects of the Covid-19 pandemic on the Indian economy will be superficial and transient) also seems to have taken root within the Ministry of Finance. So far, there do not seem to be many political obstacles to the Covid-19 shock set up by this ministry, which is next door only to the Prime Minister's Office in its ability to determine the course of economics. Prime Minister Narendra Modi chose Nirmala Sitaraman as Minister of Finance, after studying his performance first as Minister of Trade and then as Minister of Defense.

MODIS MANY INITIATIVES

Those who have studied the policies adopted by Narendra Damodardas Modi think that since the beginning of his first mandate, on May 26, 2014, the Prime Minister has put as priorities (a) global economic development, (b) the empowerment of youth and (c) a safety net for the needy. Much has been done in all three areas, particularly where civil society has been put to work, such as with the Ujjwala program. However, as the relatively thin layer of administrative talent in its government has not yet been complemented by the side entry of domain specialists and performance-oriented private sector practitioners (rather than obsessed with procedures ), so far, the overall strike rate has not matched the expected level of a Modi government. A higher success rate would be achievable if human resources managers and headhunters of the system paid less attention to the insertion in key positions of individuals from the most influential durbars that dot the Lutyens area. Instead, they must prioritize talent over relationships and make their selections in the absence of the personal bias that is universal in the Lutyens area, which still dominates the number of entrants to high-level positions within the current establishment. Even investigative agencies are sometimes forced to provide misleading positive reports on questionable candidates that the Lutyens area favors, while the preparation of false records on troublesome names has been turned into science by those of agencies wishing to do appeal to influential officials, businessmen and politicians seeking to exclude those who are not part of the daily durbar of the Lutyens' potentates. Rather than spending time working productively, attending these durbars is not only the best way to progress, but, in many cases, the only way to progress in your career since dawn of the Nehuvian era opened in the 1950s. This period can be distinguished from the secret Nehuvian era, where the same interests as those promoted by this cohort were pursued, although this is of course not openly recognized. The foundation of policies designed to foster such interests is the continuation of the quasi-vice grip of states of governance over the country's economy and society. Except maybe a few hours in the quiet of the room each night, there is little in India that escapes the attention and intervention of either state. of Governance. It should be noted that the first amendment to the Constitution of the United States added to the rights of ordinary citizens, while the first amendment to the Constitution of India diluted the fundamental rights which formed the core of the constitutional matrix offered to the Republic of India by the Constituent Assembly. .

Bold measures taken in peace

The good news is that the very first weeks of Modi 2.0 saw several initiatives taken to reduce the stifling of the colonial system of governance over elements of society and the economy. Examples:

(1) PM Modi sought to accelerate the pace of integration of specialists in the field in the administration, despite this movement against the headwinds of the traditionalists designed to ensure that the new inductees are only placed in positions that have no real influence. The intention of the traditionalists in the Lutyens area is to reduce inductees in the field to the level of consultants, rather than empowering them and giving them operational responsibilities.

(2) Prime Minister took steps to scrapple Sonia-Sibal-Chidambaram laws and regulations that forced him to play for almost any official to arrest almost any citizen for a multitude of reasons. As a result, any position of responsibility (such as being a business owner) has become a form of Russian roulette, where the destruction of a life and a career can take place due to accidents that have occurred with problems with which the individual concerned has not had any real involvement. The Lutyens area is fighting hard against the necessary dilutions in draconian laws and regulations, claiming that such movements would promote transplantation and incompetence, although both are in abundance, precisely because of the regressive laws and regulations handed over to civil servants, many of whom are less than honest. .

5G telecommunications will play an important role in modernizing India by empowering citizens. More and more services have to be controlled by the person via the smartphone. It can therefore be interesting to look at the different 5G systems under development and to launch global calls for tenders including a calendar and a roadmap for putting online. This would ensure that the country's 5G network would not be the monopoly of a single player but would be shared with at least three and preferably five major players, given the size of the market in India. It is a symptom of the malaise that has plagued innovation in India that Vietnam has deployed an indigenous 5G system, unlike India. Over the decades, foreign competitors have become proficient in using systemic roadblocks in India to slow and stop domestic competition, which is why so many migrants migrate to other countries with their innovations, due to the ease with which they can derail in India in the hyper complex procedures and those responsible for their implementation. What is needed is sandbox-type regulation, where innovators and entrepreneurs are free to make decisions without having to get permission from official agencies, but who have to hold agencies informed of their activities. Agencies can intervene if necessary, but such interventions would then not be the rule but the exception. In addition, they would be posted online, so that the procedure is transparent.

PROHIBITION OF ILLOGICAL CURRENCY

An example of how the bureaucracy in India sought to retain control over the processes, even at the expense of the country's future, was the 2018 RBI decision to ban cryptocurrencies. , now set aside by the Supreme Court. The RBI has not accepted that the 21st century is no longer the age of the pigeon telegraph but that of the Internet. Cryptocurrency is just a sequence of random numbers and, as such, impossible to eliminate. What is needed is to create a sandbox-like reporting and regulatory structure for them, so that millions of Indians can join the growing world of cryptocurrency rather than being excluded by it. reason for a faulty policy. The RBI must take into account that the era where central banks could tightly control foreign exchange instruments is drawing to a close. The post-Gold Standard era that began in 1971 is coming to an end and, from now on, the power of traditional central banks will diminish, as will the Chief of the General Staff Army MM Naravane pointed out that combat tanks and fighter jets will soon belong to museums rather than being useful on the battlefield, where drones, missiles and cybertechs take over. PM Modi once called for minimum government, and I hope he will be able to overcome those from his own establishment who seek to overturn his policy.

STABILITY OF NECESSARY POLICIES IN TAXES

Since the RBI and the North Block have mismanaged the replacement of Mods 2016 by PM Modis 2016 with Rs 2000 notes and changed the design of Rs 500 notes, overall investor confidence in policy stability has been weaker than necessary for rapid growth. Since rates must be reasonable rather than absurd (as in the case of some of the GST rates), it is important that the policy is stable in direct and indirect taxes so that HNIs and businesses can better plan costs and benefits. . A similar stability of customs duties must be ensured, which is quite possible for the current PM given the stability of public support for Narendra Modi. Foreign funds should not be allowed to continue their grip on the North Block so that they can pursue policies which make Indian assets always cheaper for those with foreign exchange and regularly reduce the value of the rupee. Speculators are convinced that North Block and the RBI favor a lower rupee, so they continue to beat the currency. This happens despite the fact that a higher rupee is the better, as it allows REITs to increase profitability, in addition to allowing corporate debtors to pay less than if the rupee continues to ; to be devalued, as is currently the case. Imports into India are mostly inelastic (oil, radio-controlled products, coal and gas are examples) and therefore a higher rupee would benefit the economy. As for exporters, a lower rupee does not seem to have helped them at all, as countries where currencies appreciate are faring much better than India. In addition, lower interest rates are needed to lower the cost of capital. In the case of the GST, the system should be so simplified that a battery of chartered accountants is no longer required to file returns. There should not only be Saral direct taxes, but also Saral GST, with forms so simple that they can be filled out by the taxpayer without resorting to professional assistance, as has become inevitable these days. .

Catch the big fish

In India, while some flies (small or medium pests) seem to be caught, tigers (mega pests) seem to laugh up to the Bahamas. Financial law enforcement agencies must use sniper rifles to target a few large fish rather than continuing to use AK-47s to spray pursuit bullets all around. The continuing tax terrorism of the UPA era has caused significant collateral damage to the economy. Only VVIP pesters should receive special attention, rather than being allowed to roam freely around the world, spending the money they looted from the public. At the same time, individuals such as bankers whose mistake was to obey a call from the then finance minister should be made to turn to the approvers. They should be given a full pardon if they help get VVIPS to book. So far, only one VVIP (P. Chidambaram) has had to be incarcerated, this too on a much smaller subject than others with whom he is involved. The network of facilitators of Chidambarams must be identified and those who still occupy high positions must be removed. The same goes for other VVIPs who have abused public confidence. India must be made dangerous to the VVIP pest, and modern technology can help in this task. Today, the economy is faced with a situation which, in many ways, is no different from that of 1992. Just like China under Deng in 1982 and India under Narasimha Rao in 1992 launched a transformative economic change, a similar rejuvenation is to take place during Modi 2.0. The Covid-19 crisis offered the Indian government the opportunity to show that it is capable and willing to replace the models and methods of the 19th and 20th centuries with those of the 21st.

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