According to the Forbes World’s Billionaires list published on June 17, Amazon founder and CEO Jeff Bezos has become the richest man in the world with a net wealth of $ 141.9 billion, followed by Bill Gates, the principal founder of Microsoft Corporation, who is the second-richest man in the world with $ 92.9 billion. Bezos’ wealth has grown more than $ 5 billion since June 1 to beat Bill Gates in wealth ranking. Warren Buffet, one of the most successful investors in the world, trailed in the third place with a total of wealth of $ 82.2 billion. Notably, Bezos officially became the richest person in the world earlier this year, and his business behemoth of online retailing, Amazon, grew into the second most valuable company in the world after Apple. Fortune’s last list release showed that Amazon ranked eighth on the 2018 list of America’s largest companies, with revenues of USD 177.87 billion.

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Shangri-La is believed to be a mystical, harmonious valley, an earthly paradise and a permanently happy land. If there is a Shangri-La, it is not likely to be in India, and that will be a big disappointment for all Indians who take pride in the history, culture, civilisational attributes and traditions of the country. Prime Minister Narendra Modi’s outreach to the world has attracted widespread attention. Recently, he made an impressive speech at the Shangri-La dialogue in Singapore. It was a well-crafted speech and there are several passages that deserve to be quoted and read.

Diversity at Home

Early in his speech, he said: “Singapore also shows that when nations stand on the side of principles, not behind one power or the other, they earn the respect of the world and a voice in international affairs. And, when they embrace diversity at home, they seek an inclusive world outside.” Diversity at home is embedded in the idea of India. It includes diversity of religion, language, personal law, culture, food, dress etc. Yet, there are powerful groups that oppose or ridicule diversity and insist on uniformity. They claim that all those who inhabit Hindustan are Hindus. They attempt to re-write history and re-claim what they believe is theirs, and seek to impose a uniform personal law, uniform food habits, uniform dress codes and one language. The world’s leaders hear the Prime Minister and applaud his appeal to embrace diversity; and then they read about happenings in Dadri, Uttar Pradesh (Mohammed Akhlaq); Alwar, Rajasthan (Pehlu Khan); Una, Gujarat (Dalit boys); and Bhima Koregaon, Maharashtra (Dalit gathering). They shake their heads in disbelief and are confused. And a few days ago, two Muslims were lynched on suspicion of being cattle-lifters (Dullu, district Godda, Jharkhand) and three Dalit boys were beaten and paraded naked for swimming in a well (Vakadi, district Jalgaon, Maharashtra). Whither the diversity that we advocate to the world? Speaking on economic relations, the Prime Minister said: “Coming back to our region. India’s growing engagement is accompanied by deeper economic and defence cooperation. We have more trade agreements in this part of the world than in any other.”

Flunked Export-Import Test

To what intent and purposes did we enter into numerous agreements with the countries of the region? Why has India’s trade with the SAARC countries and the ASEAN countries stagnated? Total trade, in 2013-14 and 2017-18, with SAARC countries was approximately USD 20 billion and USD 26 billion respectively. As a proportion of India’s total trade with all countries, the numbers were 2.6 per cent and 3.4 per cent. In the case of ASEAN countries, the numbers for the two years were approximately USD 74 billion (9.7 per cent) and USD 81 billion (10.5 per cent). There is nothing in the record of the last four years to boast that there has been significant improvement. Talking about India’s economic growth, the Prime Minister said: “We will sustain growth of 7.5 to 8 per cent per year. As our economy grows, our global and regional integration will increase. A nation of over 800 million youth knows that their future will be secured not just by the scale of India’s economy, but also by the depth of global engagement.”

That is absolutely correct, but the government seems to have little understanding of the link between exports, manufacturing and jobs. The true measure of India’s ‘global engagement’ is trade, and the government has flunked that test. In four years, export growth has been negative (from USD 315 billion to USD 303 billion). Imports have grown marginally from USD 450 billion to USD 465 billion. No country has lifted its manufacturing sector without robust export growth. And no country has created non-farm jobs without boosting the manufacturing sector. It is the failure of manufacturing and exports that has led many to suspect the GDP growth numbers that are thrown about. In any event, even the GDP growth rate has slumped from 8.2 per cent in 2015-16 to 6.7 per cent in 2017-18.

Path of Wisdom

And then the Prime Minister uttered carefully chosen words in the context of the global economy, but those words could have described the Indian situation as well:

“And, the future looks less certain. For all our progress, we live on the edge of uncertainty, of unsettled questions and unresolved disputes; contests and claims; and clashing visions and competing models.”
The closing passages of the Prime Minister’s speech and the peroration were worthy of the occasion:

“We are inheritors of Vedanta philosophy that believes in essential oneness of all, and celebrates unity in diversity. Truth is one, the learned speak of it in many ways. That is the foundation of our civilisational ethos — of pluralism, co-existence, openness and dialogue.

“But, there is also a path of wisdom. It summons us to a higher purpose: to rise above a narrow view of our interests and recognise that each of us can serve our interests better when we work together as equals in the larger good of all….”
How true and how appropriate those words will be if they are addressed to the Vishwa Hindu Parishad, the Bajrang Dal, the Ram Sena, the Hanuman Sena, the anti-Romeo squads, the Akhil Bharatiya Vidyarthi Parishad and the several ministers, parliamentarians and legislators who reject the ‘path of wisdom’.

I urge the Prime Minister to deliver a Shangri-La type speech in India and on the reality of India.

Background Info on IISS Asia Security Summit/ The Shangri-La Dialogue (SLD)

The IISS Asia Security Summit: The Shangri-La Dialogue (SLD) is a “Track One” inter-governmental security forum held annually by an independent think tank, the International Institute for Strategic Studies (IISS) which is attended by defense ministers, permanent heads of ministries and military chiefs of 28 Asia-Pacific states. The forum gets its name from the Shangri-La Hotel in Singapore where it has been held since 2002.

The summit serves to cultivate a sense of community among the most important policymakers in the defense and security community in the region. Government delegations have made the best out of the meeting by holding bilateral meetings with other delegations on the sidelines of the conference. While primarily an inter-governmental meeting, the summit is also attended by legislators, academic experts, distinguished journalists and business delegates. The participants in the dialogue include   Australia, Brunei, Burma (Myanmar), Cambodia, Canada, Chile, France, Germany, India, Indonesia, Japan, Laos, Malaysia, Mongolia, New  Zealand, Pakistan, China, Philippines, Russia, South Korea, Sri Lanka, Singapore, Sweden, Thailand, East Timor, United Kingdom, United States and Vietnam.

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Challeges of Mahathir Mohamad as new Prime Minster of Malaysia

2018 election for PM in Malaysia

In a historic election upset in a country that has been governed by just one coalition for decades, a Malaysian opposition bloc led by the 92-year-old former Prime Minister Mahathir Mohamad swept to a majority in national parliamentary elections. The opposition had won 122 seats in Parliament, 10 more than needed to form a new government.  Prime Minister Najib Razak, who is accused of stealing hundreds of millions of dollars in government funds, gave an emotional national address on May 10, saying that he would “accept the verdict of the people.” In the Malaysian general election, 2018, Barisan Nasional were defeated for the first time in the nation’s history, winning 79 seats out of 222 in the Dewan Rakyat. Najib accepted the results of the election and promised to help facilitate a smooth transition of power.

 Following a decisive victory for Pakatan Harapan in the 2018 election, Mahathir was sworn-in as Prime Minister on 10 May 2018. At 92, he is the world’s oldest sitting head of government. He is the first Malaysian Prime Minister not to represent the Barisan Nasional (or preceding Alliance). He is also the first Malaysian Prime Minister to serve from two different parties and on non-consecutive terms. After leaving office, Mahathir became a strident critic of his hand-picked successor Abdullah Ahmad Badawi in 2006 and later, Najib Razak in 2015. His son Mukhriz Mahathir was the Chief Minister of Kedah until early 2016. On 29 February 2016, Mahathir quit UMNO in light of UMNO’s support for the actions of Prime Minister Najib Razak, in spite of the 1Malaysia Development Berhad scandal. On 9 September 2016, the Malaysian United Indigenous Party was officially registered as a political party, with Mahathir as chairman. On 8 January 2018, Mahathir was announced as the Pakatan Harapan coalition candidate for Prime Minister for the 2018 general election, in a plan to pardon Anwar Ibrahim and hand a role to him if the campaign was successful.

With victory, Mr. Mahathir, who led the country for 22 years before retiring at 78, would return to power as the world’s oldest elected government leader. Mr. Mahathir had left Mr. Najib’s party over the financial scandal and joined the opposition to help oust him.   Among the important jobs that Mahathir is expected to do is to stitch together a governing coalition that includes followers of Anwar Ibrahim, his onetime nemesis, who was released from prison after serving five years on charges that were widely seen as politically motivated. Mr. Najib waged a desperate election-eve attempt to gain support, promising that if his coalition wins he would exempt everyone 26 or younger from paying taxes and declare two public holidays next week, but he lost.

Challenges before the new government

Malaysia is grappling with many economic challenges. Its Debt-GDP ratio is described as unsustainable while its fiscal deficit is also high. Malaysian economy is also a victim of crony capitalism since the old regime and the country is in need of economic reforms to keep on the path of sustained and interrupted growth.  Over the years, former PM Mr. Najib has been accused of having ties to a murder, taking kickbacks from the purchase of military hardware and helping concoct a criminal prosecution against a rival. The image of the government in the past was entrenched in corruption.
Najib Razak, former Prime Minister who lost in the 2018 election, faced allegations of  siphoning off billions of dollars from sovereign wealth fund 1MDB.

Moody’s Investors Service has maintained (June 13) its estimate of Malaysia’s direct government debt at 50.8% of GDP in 2017. It said its assessment of contingent liability risks posed by non-financial sector public institutions has also not changed following some statements by the new Federal Government led by Pakatan Harapan which won the 14th General Election.  It pointed out that the new administration’s treatment of large infrastructure projects that may be placed under review but have benefited from  government-guaranteed loans in the past, and outstanding debt from state  fund, 1Malaysia Development Bhd (1MDB, unrated), will play an important role in determining risks that contingent liabilities pose to the credit profile.

Background

Najib’s tenure as Prime Minister has been marked by economic liberalisation measures, such as cuts to government subsidies, loosening of restrictions on foreign investment, and reductions in preferential measures for ethnic Malays in business. After the 2013 election his government was marked by the pursuit of a number of its critics on sedition charges, the imprisonment of opposition leader Anwar Ibrahim following a conviction for sodomy, the implementation of a Goods and Services Tax (GST), and an ongoing scandalinvolving state investment firm 1Malaysia Development Berhad (1MDB) which led to rallies calling for Najib’s resignation, spearheaded by the grassroots movement Bersih. These protests culminated in the Malaysian Citizens’ Declaration by Mahathir Mohamad, Pakatan Harapan and NGO’s to oust Najib. Najib’s response to the corruption accusations has been to tighten his grip on power by replacing the deputy prime minister, suspending two newspapers and pushing through parliament a controversial National Security Council Bill that provides the prime minister with unprecedented powers. Najib’s various subsidy cuts have contributed to soaring living costs, while fluctuating oil prices as well as fallout from the 1MDB scandal have led to a steady depreciation of the Malaysian ringgit.

1MDB Scandal

The 1Malaysia Development Berhad Scandal involves came to light in 2015 in Malaysia as a political scandal occurring involving former Malaysia’s Prime Minister Najib Tun Razak, who allegedly channeled over RM 2.67 billion (nearly $700 million) from 1Malaysia Development Berhad (1MDB), a government-run strategic development company, to his personal bank accounts. The event triggered widespread criticisms among Malaysians, with many calling for Najib Razak’s resignation – including Tun Dr. Mahathir Mohamad who has served as the fourth and now the seventh Prime Minister. Political leader Anwar Ibrahim has openly questioned the credentials of 1MDB. He told Parliament that according to the records held by the companies commission, the company “has no business address and no appointed auditor.” According to its publicly filed accounts, 1MDB has nearly RM 42 billion ($11.73 billion) in debt. Some of this debt resulted from a $3 billion state-guaranteed 2013 bond issue led by Goldman Sachs, who is believed to have made as much as $300 million in fees from that deal alone, although it disputes this figure. Conference of Rulers in Malaysia has called for the investigations by the government to be completed as soon as possible, saying that the issue is causing a crisis of confidence in Malaysia.

After the 14th general election, the newly elected Prime Minister Dr. Mahathir Mohamad said there was enough evidence to reopen a probe on the 1MDB scandal. Having filed complaints alleging that more than $ 4.5 billion was diverted from 1MDB and laundered through a web of shell companies and bank accounts located in the United States and elsewhere, the U.S. Department of Justice said it would continue to pursue investigations into 1MDB and looked forward to working with Malaysian law enforcement authorities. On 18 May 2018, Malaysian police seized a huge haul of designer handbags, many of them stuffed with cash and jewelry, in searches of homes and offices linked to Najib Razak. Later he signed a pipeline deal with China which was also suspected as a deal to garner money to pay off the debt taken from 1MDB sovereign fund in an unauthorized manner. The pipeline deal was one of a series of big-ticket, Beijing-backed projects signed during Najib’s leadership, fuelling suspicions China was helping the scandal-mired leader pay off debts racked up by the stricken fund.

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The Federal Reserve raised interest rates on June 13 indicating a shift from the policies used to battle the 2007-2009 financial crisis and recession. In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Federal Reserve dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signaled it would tolerate above-target inflation at least through 2020. However, it is not the first time that the US has raised its interest rate in recent times. The Fed has raised rates seven times since late 2015 on the back of the US economy’s continuing expansion and solid job growth, rendering the language of its previous policy statements outdated. One of the reasons of recent hike is that inflation in the US is expected to be higher than projected earlier by the Federal Reserve. According to fresh projections from policymakers, it would run above the central bank’s 2 percent target, hitting 2.1 percent this year and remaining there through 2020.Also the Federal Reserve indicated that the need for near zero interest rate to buoy a crisis hit economy has lessened in view of strengthening labor market and rising economic activities. It also pointed out that household spending in the US has picked up while business fixed investment has continued to grow strongly. Fed Chairman Jerome Powell was latter to do a press conference to announce this policy changes.

The rate increase was in line with investors’ expectations and showed policymakers’ confidence in the economy’s growth prospects, continued low unemployment and steady inflation. The Fed now sees gross domestic product growing 2.8 percent this year, slightly higher than previously forecast, and dipping to 2.4 percent next year, unchanged from policymakers’ March projections. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.

The Fed’s short-term policy rate, a benchmark for a host of other borrowing costs, is now roughly equal to the rate of inflation, a breakthrough of sorts in the central bank’s battle in recent years to return monetary policy to a normal footing. Though rates are now roughly positive on an inflation-adjusted basis, the Fed still described its monetary policy as “accommodative,” with gradual rate increases likely warranted as a sturdy economy enters a 10th straight year of growth. Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

 United States of America is the e biggest economy by size (about $18 trillion GDP) and the biggest trading partner and investor for many other economies. It is the best investment destination for many investors. Keeping in view these factors any change in the in the US fiscal and monetary policies has marked effect on the flow of global trade and investment.  The US is returning to normalcy with short-term rates moving up from the near-zero level in the post-2008 period to 1-1.25 per cent and further to 1.75 percent. The interest rate hike in the world’s largest economy has implications for emerging economies like India. The dollar inflows from foreign institutional investors (FIIs) have been robust in the past in India and other emerging economies due to troubles and uncertainties in the US. The focus on a normal monetary policy is now playing out well for the financial markets. There are expectations that a part of the money will flow back to the US as there will be investment safety and also good returns. The rupee value against the US dollar can also come under pressure if dollar funds’ outflow from the Indian markets take place. The rupee, which has strengthened a bit lately, came under pressure post the US Fed rate hike. The gradual hike in Fed rates will also make the international debt more expensive. If there would be narrowing of  the interest rate differential between the US rates and the Indian interest rates it may impact the speculative or short-term money that comes to the domestic financial markets.

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The US- North Korea Summit took place on March 12 at Capella Singapore hotel in Sentosa Island after months of diplomatic twists and turns indicating some thaw in icy relationship, leaving the question wide open how long the agreement lasts and whether it is implemented on real ground. The two leaders held one-on-one meeting for around 45-minutes with just translators present. In the summit North Korean leader Kim Jong-un agreed to work toward “complete denuclearisation of the Korean Peninsula” in return for security guarantees from the U.S. At the end of Summit a joint statement was issued by the two leaders which said that Mr. Trump and Mr. Kim conducted a comprehensive, in-depth, and sincere exchange of opinions on the issues related to the establishment of new relations between the two countries and the building of a lasting and robust peace regime on the Korean Peninsula. The document was signed after the two leaders had a one-on-one meeting, with translators only, followed by an expanded meeting including their top aides and a working lunch. US President Donald Trump described the summit as “honest, direct and productive.”
The summit meet indicated readiness to discover points of convergence of interest, yet the give and take by the two countries seems to be just a beginning. Although Mr. Trump said that the U.S. would end joint military exercises with South Korea, but the sanctions on North Korea for its nuclear tests will remain for now. The first concession the US agreed is a friendly diplomatic gesture and fulfills one of the major demands of North Korea, the economic sanctions would still be in place to create pressure on the country to initiate denuclearization process. The President also committed to provide security guarantees to the DPRK (Democratic People’s Republic of Korea), and Chairman Kim Jong-un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula. It said the two sides committed to recovering POW/MIA (prisoners of war and missing in action) remains including the immediate repatriation of those already identified.
Later, they held delegation-level talks. Mr. Kim was asked at least three times if he would give up his nuclear weapons. In response, he just smiled. “There will be challenges ahead but we will work with Trump. We overcame all kinds of skepticism and speculation about this summit and I believe that this is good for the peace.” Mr. Trump, however, said the U.S. sanctions would remain in place until Washington had seen progress. When asked about North Korea’s future economic model, Mr. Trump said it is for the country and its people to decide. He pointed out the real estate potential of its “great beaches” which can be seen on missile test footage.

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President Donald Trump is trying to make America great at the cost of other countries and it is reflected in his unilateral policy decision regarding imposition of import tariff without any iota of concern for the comparative advantage of other countries, the same thing on which America was once reaping huge trade advantages. He slapped 25 percent of import tariff on steel and 10 percent on Aluminium imported to America. Although China retaliated, Japan complained and South Korea bargained some relief, the European Union has now planned to start imposing duties from July on a list of U.S. products in response to President Donald Trump’s decision to slap tariffs on steel and aluminum imports from Europe.

EU retaliates against US tariffs

According to the plan, the EU is likely to introduce “rebalancing” tariffs on about 2.8 billion euros’ ($3.4 billion) worth of U.S. steel, agricultural and other products, including bourbon, peanut butter, cranberries and orange juice. European Commission Vice-President Maros Sefcovic said on June 06 that formalities in finalizing the list should be completed this month and that “the new duties start applying from July.”It is noteworthy that the European Union exported about 5.5 million tons of steel to the U.S. last year. European steel producers are concerned about a loss of market access but also that steel from elsewhere will flood in.

Key Senate Republicans, meanwhile, are pushing longshot legislation that would require Congress to sign off on President Trump’s import tariffs, a rare attempt to stand up to the administration on a bedrock issue that once defined the GOP. Trump took office promising to rip up trade deals and crack down on unfair trading practices. But that campaign slogan is at odds with Republicans’ longstanding preference for free markets and open trade. The standoff is raising an uncomfortable question: If Republicans can’t confront Trump on trade; can they challenge him on anything? “For Republicans, this is who we are,” said Sen. Jeff Flake, R-Ariz. “If we believe our own rhetoric — on trade, tariffs and congressional prerogative — I hope it does come to a vote.” The idea being pursued by Corker, Sen. Pat Toomey, R-Pa., and others who have been meeting privately — and with Democrats — would be narrowly crafted legislation requiring congressional approval of the tariffs Trump has imposed in the name of national security. They’re targeting Trump’s reliance on the so-called 232 authority, named from Section 232 of the Trade Expansion Act of 1962, which allowed the administration to impose tariffs of 25 percent on imported steel and 10 percent on imported aluminum from Mexico, Canada and the European Union, some of the U.S.’s top allies. The senators are also hoping to halt Trump’s threat to slap tariffs on auto imports, including those from Japan.

South Korea wins an exception

It may be recalled that South Korea won a permanent exemption from Washington’s new tariffs of 25 per cent on steel and 10 per cent on aluminium, which came into effect on March 23, to become the first US ally to receive an indefinite reprieve from the hefty tariffs. But Washington was able to limit South Korea’s steel exports by imposing a quota of 2.68m tonnes, or 70 per cent of the annual average Korean steel exports to the US over the past three years. South Korea is the third-largest steel exporter to the US and the biggest importer of Chinese steel. The relaxation to South Korea sparked criticism in the US that it was being used as a conduit for China’s excess steel capacity. The US is South Korea’s second-largest trading partner after China, with bilateral trade reaching $119.3bn last year

Effect of US import Tariffs on Japan

On the other hand Japan’s steel industry is worried about the United States policy of imposing new tariffs on steel and aluminium. Analyst consider new US tariffs as a tactic to win better deals in wider trade pacts such as CPTPP. Trump temporarily excluded six countries, including Canada and Mexico, and European Union states from higher U.S. import duties on steel and aluminum. The exclusion included most U.S. allies, but not Japan. Japan failed to win an exemption, even though many of close U.S. allies secured carve outs (some of which have since expired, causing further friction). Last month, Tokyo filed a notification with the World Trade Organization (WTO) that it reserves the right to impose counter-measures. The notification estimated that Japan faced a $415 million annual hit from the 25 percent tariff on steel and a $25 million impact from the 10 percent tariff on aluminum. With the Trump administration launching a similar national security-related investigation into automotive imports in the past couple of weeks, Japan is seriously alarmed. The U.S. is the biggest market for Japanese carmakers, underpinned by a trend of production moving to the United States. Japan’s economy would take a hit equivalent to 0.1 percent of GDP (or about $5 billion) if Washington slapped tariffs of 25 percent on imports of cars and car parts, according to modeling by Germany’s ifo Institute. This comes as policymakers digest the news that Japan’s economy contracted in the first quarter of this year – marking the end of a two-year run of uninterrupted quarterly growth. Japan has now started publicly criticizing US move of imposing import tariff.

Effects of US protectionism on India

As far as India is concerned India’s exports of steel items to the US are estimated at about $ 500 million per year. The country’s share in prime steel imports in the US is 1.28 per cent, while in aluminium it is 1.12 per cent. Therefore, the direct impact of heavy tariffs on imported steel and aluminium will not be very big on India. It Yet would impact India’s engineering exports, maybe not directly but indirectly. If the policy of protectionism is pursued by the US regime, India would also suffer in the medium and ling run. India is ninth in the list of US’ trading partners that have a trade surplus. Trade surplus means that we export more to the US than we import from the country. India’s exports account for a hefty 15% of US’ aggregate trade with the world. Gems and diamonds are India’s biggest goods exports to the US, followed by pharmaceuticals, textiles, fish and petroleum products. As of now, these exports are not on the radar of the US, but there is a risk of retaliatory tariffs on these goods. Trump’s clamp-down on steel and aluminium imports will not impact India much as just about 4% of the steel exports flow into the US; while aluminium exports constitute 2% of total US aluminium imports. While the direct impact of higher metal tariffs on Indian firms will be limited, there is a possibility that muted metals demand, owing to cooling off in global trade, will put metal prices under pressure, hurting the operating profits of Indian metals and mining firms, such as Tata Steel, SAIL and Hindalco, among others.

Conclusion

What Donald Trump is missing is that the world today is a very different world from what it was in early decades following the World Wars. The geo-economic and geo-political matrices are changing fast and they are still in flux. There are rising aspirations in all the developing and emerging economies and China is out to increase its global outreach through trade and investment. Russia and Germany would also try to defend their economic and geo-political interests. If “America first” is the slogan and “protectionism” is the strategy of president Trump to achieve his goals, by the same logic no country in the world would remain behind in responding in the same coin with their own set of retaliatory policies. Even if America does not accept that it is “waning power”, the countries suffering from new policies of the US would not tolerate the policies that impede their rise and progress. Global integration and free trade was eulogized as golden policy by the US as long as benefitted it, now the same US is adopting protectionism while pleading others to remain open. Heads I win and tails you lose was the logic of imperialist era. Times have changed much and if US would slap losses to others, it’s not long the other’s also retaliate in the same coin. And this will eventually give birth to trade wars and in trade wars there are no winners; it is a self destructive path. The finer reading is that creating pressure on trade partners for balanced trade is one thing and punishing them like a global police is other. Gone are the days of unilateralism and hegemony, the ground reality demands adjustment and cooperation. This is true for all the stakeholders, be it China, Russia or the US.

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Pedro Sánchez was sworn in as Spain’s new Prime Minister on June 01, 2018. This remarkable personal comeback has settled a week of political upheaval that culminated in the first removal of an incumbent leader by Parliament in modern Spanish history. The New York Times writes aptly, “Little more than a year ago, Mr. Sánchez, 46, seemed lost in the political wilderness, deposed as the leader of the Socialist party after two record electoral defeats. And the man he has now replaced, Mariano Rajoy, 63, was seen as the great survivor of Spanish politics, one of Europe’s longest-serving heads of government. But Mr. Sánchez was unexpectedly re-elected as Socialist leader seven months after his ousting. Then, when Mr. Rajoy’s conservative Popular Party was tarnished by corruption — a court last week found the party guilty of operating a slush fund — he pounced, assembling parliamentary backing for a vote of no confidence in Mr. Rajoy, which passed on June 01.”

Background

His tenure may be short. The Socialist party holds just under a quarter of the seats in Parliament. Like the vote against Mr. Rajoy, his government will rely on support from the far-left Podemos party and nationalists from Catalonia and the Basque region. An economist by training and politician by occupation, he is also Secretary-General of the Spanish Socialist Workers’ Party (PSOE), holding office for the second time after winning a leadership election June 2017. He is without a seat in the Congress of Deputies. He served as town councillor in the City Council of Madrid from 2004 to 2009. In 2009, he was first elected Deputy in the Congress. In 2014, he became Secretary-General of the PSOE, and he was the party’s candidate for prime minister in the 2015 and 2016 general elections. During his first term as Secretary-General, he was heavily opposed to the re-election of Rajoy as Prime Minister. Rajoy needed the abstention of the PSOE in the Congress of Deputies in order to secure a parliamentary majority. Tensions grew within the party to allow Rajoy to form a government; due to its opposition by Sánchez, he stepped down as Secretary-General on 1 October 2016. He simultaneously resigned as Deputy, and a caretaker committee took over the PSOE leadership. He would eventually win the party primaries, defeating Susana Díaz and Patxi López, and was reinstated Secretary-General in June 2017. Under his tenure, the PSOE backed the Government of Spain in its handling of the Catalan independence referendum and the subsquent constitutional crisis.

On 31 May 2018 the PSOE filed a no-confidence motion, which passed with the support of the PSOE, Unidos Podemos, and Basque, Valencian and Catalan regionalist and nationalist parties. On 1 June 2018, a Royal Decree named Pedro Sánchez Prime Minister of Spain. On the following day, he was officially sworn into the office before King Felipe VI.

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The Monetary Policy is reviewed by Monetary Policy Committee (MPC) of the Reserve Bank of India. This time RBI governor Urjit Patel headed the six member NPC. This was the first three-day bi-monthly policy meeting (June 06) of MPC headed by Urjit Patel. The next meeting of the MPC is scheduled on July 31 and August 1, 2018.The decision of the MPC is consistent with the ‘neutral’ stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.

Growth and Inflation according RBI
On the domestic front, the Central Statistics Office (CSO) released on May 31 the quarterly estimates of national income accounts for Q4:2017-18 and provisional estimates for 2017-18. Gross domestic product (GDP) growth for 2017-18 has been estimated at 6.7 per cent, up by 0.1 percentage point from the second advance estimates released on February 28. This increase in growth has been underpinned by a significant upward revision in private final consumption expenditure (PFCE) due especially to improved rural demand on the back of a bumper harvest and the government’s thrust on rural housing and infrastructure. Quarterly data suggest that the economy grew at 7.7 per cent in Q4:2017-18 – the fastest pace in the last seven quarters. Gross fixed capital formation (GFCF) growth accelerated for three consecutive quarters up to Q4.
Retail inflation, measured by the year-on-year change in the CPI, rose sharply to 4.6 per cent in April, driven mainly by a significant increase in inflation excluding food and fuel. Excluding the estimated impact of an increase in house rent allowances (HRAs) for central government employees, headline inflation was at 4.2 per cent in April, up from 3.9 per cent in March. Food inflation moderated for the fourth successive month, pulled down by vegetables due to lower than the usual seasonal increase in their prices, and pulses and sugar which continued to experience deflation. However, within the food group, inflation increased in respect of cereals, fruits, prepared meals, meat and fish.

Highlights of the Bi monthly Monetary Policy
Repo rate under the liquidity adjustment facility (LAF) has been raised by 25 basis points to 6.25% in a first rate hike in four-and-half-years.
Reverse repo rate under the LAF stands adjusted to 6% and the marginal standing facility (MSF) rate and the Bank Rate has been adjusted to 6.5%.
The MPC has decided to retain the projection of GDP growth for the financial year 2018-2019 at 7.4% with risk evenly balanced around this number.
All six members of the MPC including RBI Governor Urjit Patel and Dr Chetan Ghate, Dr Pami Dua, Dr Ravindra H. Dholakia, Dr Viral V. Acharya Dr Michael Debabrata Patra voted for 0.25% rate hike.
RBI has projected retail inflation at 4.8-4.9% for the period of April-September and 4.7% in H2 FY19.
RBI Governor has said that the forecast of normal monsoon for 2018-19 augurs well for the agriculture sector.
Emerging market currencies have by and large got depreciated against the US dollar. The geopolitical risks, financial market volatility and trade protectionism will further impact domestic growth.
According to RBI, the adherence to budgetary targets by the central government and the respective state government will ease upside risks to the inflation outlook.
The major upside risk to the inflation path is due to continuous rise price of crude oil as Brent crude rose to $76 a barrel from a level of $67 per barrel during April meeting of MPC.
RBI pointed that the volatility in the crude oil prices has added to uncertainty to the inflation outlook.
Investment activity is recovering well in the context of IBC (Insolvency and Bankruptcy Code) and will further get a boost from swift resolution under IBC.
The Reserve Bank of India’s next Monetary Policy Committee meeting is scheduled on 31 July and 1 August 2018.

About Monetary Policy Committee
The Monetary Policy Committee of India is a committee of the Reserve Bank of India that is responsible for fixing the benchmark interest rate in India. The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India. They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”. The Governor of Reserve Bank of India is the chairperson ex officio of the committee. Decisions are taken by majority with the Governor having the casting vote in case of a tie. The current mandate of the committee is to maintain 4% annual inflation until March 31, 2021 with an upper tolerance of 6% and a lower tolerance of 2%.
The committee was created in 2016 to bring transparency and accountability in fixing India’s Monetary Policy. Minutes are published after every meeting with each member explaining his opinions. The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
Goal of Monetary Policy and inflation targeting
The monetary policy aims at growth with price stability apart from promoting saving, investment and capital formation. But in recent years the primary goal of the monetary policy is “inflation targeting” or “price stability” for which MPC is accountable. Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. The central bank uses interest rates, its main short-term monetary instrument.
An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively. The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation. The first three countries to implement fully-fledged inflation targeting were New Zealand, Canada and the United Kingdom in the early 1990s, although Germany had adopted many elements of inflation targeting earlier.
Understanding Repo Rate and Reverse Repo Rate
The repo rate is the rate at which the central bank lends short-term money to the banks against securities. It is more applicable when there is a liquidity crunch in the market. In contrast, the reverse repo rate is the rate at which banks can park surplus funds with the reserve bank. This is mostly done when there is surplus liquidity in the market.
Repo rate — Repo rate also known as the benchmark interest rate is the rate at which the RBI lends money to the banks on collateral of securities for a short term. When the repo rate increases, borrowing from RBI becomes more expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate.

Reverse Repo rate — Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks. The Reserve bank uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse repo rate means that the banks will get a higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe instead of lending it others (people, companies etc) which is always risky.
Repo Rate signifies the rate at which liquidity is injected in the banking system by RBI by, whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from the banks. In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.
The central bank takes the contrary position in the event of a fall in inflationary pressures. Repo and reverse repo rates form a part of the liquidity adjustment facility.
Liquidity Adjustment Facility
Reserve Bank of India’s liquidity adjustment facility of LAF helps banks to adjust their daily liquidity mismatches. LAF has two components — repo (repurchase agreement) and reverse repo. When banks need liquidity to meet its daily requirement, they borrow from RBI through repo. The rate at which they borrow fund is called the repo rate. When banks are flush with fund, they park with RBI through the reverse repo mechanism at reverse repo rate.
Marginal Standing Facility
Marginal standing facility is a window for banks to borrow from Reserve Bank of India in emergency situation when inter-bank liquidity dries up completely. Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. Marginal Standing Facility (MSF) as a new policy was announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window. MSF, being a penal rate, is always fixed above the repo rate. In MSF scheme banks can borrow overnight upto 1 per cent of their net demand and time liabilities (NDTL) i.e. 1 per cent of the aggregate deposits and other liabilities of the banks. However, with effect from 17th April 2012 RBI raised the borrowing limit under the MSF from 1 per cent to 2 per cent of their NDTL outstanding at the end of the second preceding fortnight. The rate of interest for the amount accessed through this facility got fixed at 100 basis points (i.e. 1 per cent) above the repo rate for all scheduled commercial banks. But all MSF limit and interest rate have been subject to change from time to time. The minimum amount which can be accessed through MSF is Rs.1 crore and in multiples of Rs.1 crore. ( Rs 1 crore = Rs 10 million). The application for the facility can be submitted electronically also by the eligible scheduled commercial banks. The banks used the facility for the first time in June 2011 and borrowed Rs.1 billion via the MSF.

The MSF would be the last resort for banks once they exhaust all borrowing options including the liquidity adjustment facility by pledging government securities, where the rates are lower in comparison with the MSF. The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio. The scheme has been introduced by RBI with the main aim of reducing volatility in the overnight lending rates in the inter-bank market and to enable smooth monetary transmission in the financial system.MSF represents the upper band of the interest corridor with repo rate at the middle and reverse repo as the lower band.
Bank Rate
Bank rate is the rate charged by the central bank for lending funds to commercial banks. In other words it is the rate of interest which a central bank charges on its loans and advances to a commercial bank. Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa. Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.
There is a difference between bank rate and repo rate. Bank rate deals with loans whereas repo or repurchase rate deals with the securities. The bank rate is charged to commercial banks against the loan issued to them by central banks, whereas, the repo rate is charged for repurchasing the securities.
Interest rate corridor
Interest rate corridor has repo rate in the centre and MSF above it and reverse repo below it. This became important to define the interest rate corridor after giving up administered interest rate regime in India. To balance the liquidity, RBI uses the sole independent “policy rate” which is the repo rate (in the LAF window) and the MSF rate automatically gets adjusted to a fixed per cent above the repo rate (MSF was originally intended to be 1% above the repo rate) and reverse rate is adjusted 1% below the repo rate. MSF is at present aligned with the Bank rate. Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as “the standard rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act. On introduction of Liquidity Adjustment Facility (LAF), discounting/rediscounting of bills of exchange by the Reserve Bank has been discontinued. As a result, the Bank Rate became dormant as an instrument of monetary management. It is now aligned to MSF rate and is used only for calculating penalty on default in the maintenance of cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).
Base Rate
Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done byThe Monetary Policy is reviewed by Monetary Policy Committee (MPC) of the Reserve Bank of India. This time RBI governor Urjit Patel headed the six member NPC. This was the first three-day bi-monthly policy meeting (June 06) of MPC headed by Urjit Patel. The next meeting of the MPC is scheduled on July 31 and August 1, 2018.The decision of the MPC is consistent with the ‘neutral’ stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth.

Growth and Inflation according RBI

On the domestic front, the Central Statistics Office (CSO) released on May 31 the quarterly estimates of national income accounts for Q4:2017-18 and provisional estimates for 2017-18. Gross domestic product (GDP) growth for 2017-18 has been estimated at 6.7 per cent, up by 0.1 percentage point from the second advance estimates released on February 28. This increase in growth has been underpinned by a significant upward revision in private final consumption expenditure (PFCE) due especially to improved rural demand on the back of a bumper harvest and the government’s thrust on rural housing and infrastructure. Quarterly data suggest that the economy grew at 7.7 per cent in Q4:2017-18 – the fastest pace in the last seven quarters. Gross fixed capital formation (GFCF) growth accelerated for three consecutive quarters up to Q4.

Retail inflation, measured by the year-on-year change in the CPI, rose sharply to 4.6 per cent in April, driven mainly by a significant increase in inflation excluding food and fuel. Excluding the estimated impact of an increase in house rent allowances (HRAs) for central government employees, headline inflation was at 4.2 per cent in April, up from 3.9 per cent in March. Food inflation moderated for the fourth successive month, pulled down by vegetables due to lower than the usual seasonal increase in their prices, and pulses and sugar which continued to experience deflation. However, within the food group, inflation increased in respect of cereals, fruits, prepared meals, meat and fish.

Highlights of the Bi monthly Monetary Policy

  • Repo rate under the liquidity adjustment facility (LAF) has been raised by 25 basis points to 6.25% in a first rate hike in four-and-half-years.

  • Reverse repo rate under the LAF stands adjusted to 6% and the marginal standing facility (MSF) rate and the Bank Rate has been adjusted to 6.5%.

  • The MPC has decided to retain the projection of GDP growth for the financial year 2018-2019 at 7.4% with risk evenly balanced around this number.

  • All six members of the MPC including RBI Governor Urjit Patel and Dr Chetan Ghate, Dr Pami Dua, Dr Ravindra H. Dholakia, Dr Viral V. Acharya Dr Michael Debabrata Patra voted for 0.25% rate hike.

  • RBI has projected retail inflation at 4.8-4.9% for the period of April-September and 4.7% in H2 FY19.

  • RBI Governor has said that the forecast of normal monsoon for 2018-19 augurs well for the agriculture sector.

  • Emerging market currencies have by and large got depreciated against the US dollar. The geopolitical risks, financial market volatility and trade protectionism will further impact domestic growth.

  • According to RBI, the adherence to budgetary targets by the central government and the respective state government will ease upside risks to the inflation outlook.

  • The major upside risk to the inflation path is due to continuous rise price of crude oil as Brent crude rose to $76 a barrel from a level of $67 per barrel during April meeting of MPC.

  • RBI pointed that the volatility in the crude oil prices has added to uncertainty to the inflation outlook.

  • Investment activity is recovering well in the context of IBC (Insolvency and Bankruptcy Code) and will further get a boost from swift resolution under IBC.

  • The Reserve Bank of India’s next Monetary Policy Committee meeting is scheduled on 31 July and 1 August 2018.

About Monetary Policy Committee

The Monetary Policy Committee of India is a committee of the Reserve Bank of India that is responsible for fixing the benchmark interest rate in India. The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.

The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India. They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”. The Governor of Reserve Bank of India is the chairperson ex officio of the committee. Decisions are taken by majority with the Governor having the casting vote in case of a tie. The current mandate of the committee is to maintain 4% annual inflation until March 31, 2021 with an upper tolerance of 6% and a lower tolerance of 2%.

The committee was created in 2016 to bring transparency and accountability in fixing India’s Monetary Policy. Minutes are published after every meeting with each member explaining his opinions. The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.

Goal of Monetary Policy and inflation targeting

The monetary policy aims at growth with price stability apart from promoting saving, investment and capital formation. But in recent years the primary goal of the monetary policy is “inflation targeting” or “price stability” for which MPC is accountable. Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. The central bank uses interest rates, its main short-term monetary instrument.

An inflation-targeting central bank will raise or lower interest rates based on above-target or below-target inflation, respectively. The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation. The first three countries to implement fully-fledged inflation targeting were New Zealand, Canada and the United Kingdom in the early 1990s, although Germany had adopted many elements of inflation targeting earlier.

Understanding Repo Rate and Reverse Repo Rate

The repo rate is the rate at which the central bank lends short-term money to the banks against securities. It is more applicable when there is a liquidity crunch in the market. In contrast, the reverse repo rate is the rate at which banks can park surplus funds with the reserve bank. This is mostly done when there is surplus liquidity in the market.

Repo rate — Repo rate also known as the benchmark interest rate is the rate at which the RBI lends money to the banks on collateral of securities for a short term. When the repo rate increases, borrowing from RBI becomes more expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate.

Reverse Repo rate — Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks. The Reserve bank uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse repo rate means that the banks will get a higher rate of interest from RBI. As a result, banks prefer to lend their money to RBI which is always safe instead of lending it others (people, companies etc) which is always risky.

Repo Rate signifies the rate at which liquidity is injected in the banking system by RBI by, whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from the banks. In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.
The central bank takes the contrary position in the event of a fall in inflationary pressures. Repo and reverse repo rates form a part of the liquidity adjustment facility.

Liquidity Adjustment Facility

Reserve Bank of India’s liquidity adjustment facility of LAF helps banks to adjust their daily liquidity mismatches. LAF has two components — repo (repurchase agreement) and reverse repo. When banks need liquidity to meet its daily requirement, they borrow from RBI through repo. The rate at which they borrow fund is called the repo rate. When banks are flush with fund, they park with RBI through the reverse repo mechanism at reverse repo rate.

Marginal Standing Facility

Marginal standing facility is a window for banks to borrow from Reserve Bank of India in emergency situation when inter-bank liquidity dries up completely. Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. Marginal Standing Facility (MSF) as a new policy was announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the LAF window. MSF, being a penal rate, is always fixed above the repo rate. In MSF scheme banks can borrow overnight upto 1 per cent of their net demand and time liabilities (NDTL) i.e. 1 per cent of the aggregate deposits and other liabilities of the banks. However, with effect from 17th April 2012 RBI raised the borrowing limit under the MSF from 1 per cent to 2 per cent of their NDTL outstanding at the end of the second preceding fortnight. The rate of interest for the amount accessed through this facility got fixed at 100 basis points (i.e. 1 per cent) above the repo rate for all scheduled commercial banks. But all MSF limit and interest rate have been subject to change from time to time. The minimum amount which can be accessed through MSF is Rs.1 crore and in multiples of Rs.1 crore. ( Rs 1 crore = Rs 10 million). The application for the facility can be submitted electronically also by the eligible scheduled commercial banks. The banks used the facility for the first time in June 2011 and borrowed Rs.1 billion via the MSF.

The MSF would be the last resort for banks once they exhaust all borrowing options including the liquidity adjustment facility by pledging government securities, where the rates are lower in comparison with the MSF. The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio. The scheme has been introduced by RBI with the main aim of reducing volatility in the overnight lending rates in the inter-bank market and to enable smooth monetary transmission in the financial system.MSF represents the upper band of the interest corridor with repo rate at the middle and reverse repo as the lower band.

Bank Rate

Bank rate is the rate charged by the central bank for lending funds to commercial banks. In other words it is the rate of interest which a central bank charges on its loans and advances to a commercial bank. Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa. Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.

There is a difference between bank rate and repo rate. Bank rate deals with loans whereas repo or repurchase rate deals with the securities. The bank rate is charged to commercial banks against the loan issued to them by central banks, whereas, the repo rate is charged for repurchasing the securities.

Interest rate corridor

Interest rate corridor has repo rate in the centre and MSF above it and reverse repo below it. This became important to define the interest rate corridor after giving up administered interest rate regime in India. To balance the liquidity, RBI uses the sole independent “policy rate” which is the repo rate (in the LAF window) and the MSF rate automatically gets adjusted to a fixed per cent above the repo rate (MSF was originally intended to be 1% above the repo rate) and reverse rate is adjusted 1% below the repo rate. MSF is at present aligned with the Bank rate. Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as “the standard rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act. On introduction of Liquidity Adjustment Facility (LAF), discounting/rediscounting of bills of exchange by the Reserve Bank has been discontinued. As a result, the Bank Rate became dormant as an instrument of monetary management. It is now aligned to MSF rate and is used only for calculating penalty on default in the maintenance of cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).

Base Rate

Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium.

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Abdel Fatah al-Sisi was re-elected (March 29, 2018) for a second term. The election campaign was shrouded in controversy from the beginning five of his potential challengers were prevented from getting on the ballot. On 19 January, incumbent President Abdel Fattah el-Sisi had formally announced he would run for a second and final term. Presidential elections were held in Egypt between 26 and 28 March 2018. Egyptians abroad voted from 16 to 18 March 2018. However, many human rights groups dismissed the poll as “farcical”. They said the authorities had “trampled over even the minimum requirements for free and fair elections”, stifling basic freedoms and eliminating key challengers. Egyptian president Preliminary results showed that Sisi won about 92% of the vote, with turnout at around 41.5%. Twenty-five million of the 60 million registered voters turned out during the three days of polling. Reportedly Sisi won 21.4 million votes.

Sisi’s sole challenger was Mousa Mostafa Mousa, who previously declared that he “was not here to challenge the president” and who entered the race at the last minute after five other potential challengers were blocked from getting on the ballot. Mousa conceded his loss and accepted popularity of Sisi. Other, more heavyweight would-be challengers were all sidelined, detained or pulled out. Opposition groups had called for a boycott of this week’s vote, which they labelled a facade. There were no presidential debates and Sisi himself did not appear at any official campaign events, although he spoke at a number of ceremonies.

Boycotters who cannot show good reason for not going to the polls could a face a fine of up to 500 Egyptian pounds (£20), the electoral commission has warned. The election commission of Egypt official Mahmud al-Sherif claimed that there had been no violations of Egypt’s election law. Sisi denied any role in sidelining the opposition.

The president of Egypt is elected using the two-round system. If no run-off is needed, the first round elects the president. If a run-off is needed, the final result is announced after run-off in the second round. But Sisi has own in the first round itself. Although the March election campaign was marked by arrests, intimidation, and fear, Sisi just secured another four years in office. Analysts pointed out that Sisi beat the only other candidate, Mousa Mostafa Mousa, who was publicly known to be a strong supporter of the president.

After the results were announced, US President Donald Trump called Sisi to congratulate him on winning Egypt’s presidential election. According to a White House statement, “The two leaders affirmed the strategic partnership between the United States and Egypt, and noted that they look forward to advancing this partnership and addressing common challenges.” In the past, the US president had repeatedly expressed admiration for Sisi, whom he has called a “fantastic guy” Who had done a fantastic job in a very difficult situation.”

The US president’s embrace of Sisi reflects his belief that Egypt is vital to the security of Israel and other US allies throughout the Middle East. Sisi has fostered a strong, if quiet, working relationship with the Israeli government — since 2015, he’s even secretly allowed Israeli drones to operate in Egyptian territory — and warned Iran to “stop meddling” in the region. Above all, the US and Israel are gambling on Sisi to control the Arab world’s most populous nation after years of political uncertainty.

Background

As army chief, Sisi ousted Egypt’s first freely elected president, Islamist Mohamed Morsi, after mass street protests in 2013, then went on to win his first term in 2014 with 96.9% of the vote.Turnout of 47% in that year’s election was higher than this year’s 40% despite appeals from Sherif Ismail, the prime minister, for voters to fulfil their patriotic duty. Morsi’s removal had ushered in a deadly crackdown that killed and jailed hundreds of Islamists. The initial attack on Morsi’s supporters expanded to include liberal and leftist secular activists.

During his past four years in power, Sisi has cracked down on civil liberties and brought the country’s political system squarely under his grip.

He’s not the first military leader to run Egypt. Most of the country’s former presidents, including Gamal Abdel Nasser, Anwar Sadat, and Hosni Mubarak, came from the military. The heads of Egypt’s armed forces, which has around 1.2 million active personnel, also control a large percentage of the country’s economy, though the military budget is secret and their industries are not taxed or audited. Sisi has downplayed the military’s economic control, but experts estimate that it could be anywhere from 5 to 40 percent.

Sisi first appeared on the Egyptian political stage as the youngest member of the Supreme Council of the Armed Forces, a military junta that temporarily ruled Egypt after public protests forced former President Hosni Mubarak to step down in 2011. When Muslim Brotherhood candidate Mohamed Morsi was elected president in 2012, he chose Sisi to be his minister of defense. Morsi granted himself sweeping powers while trying to push through a new constitution and implemented Islamist policies, infuriating much of the Egyptian public.

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Pedro Sánchez was sworn in as Spain’s new Prime Minister on June 01, 2018. This remarkable personal comeback has settled a week of political upheaval that culminated in the first removal of an incumbent leader by Parliament in modern Spanish history. The New York Times writes aptly, “Little more than a year ago, Mr. Sánchez, 46, seemed lost in the political wilderness, deposed as the leader of the Socialist party after two record electoral defeats. And the man he has now replaced, Mariano Rajoy, 63, was seen as the great survivor of Spanish politics, one of Europe’s longest-serving heads of government. But Mr. Sánchez was unexpectedly re-elected as Socialist leader seven months after his ousting. Then, when Mr. Rajoy’s conservative Popular Party was tarnished by corruption — a court last week found the party guilty of operating a slush fund — he pounced, assembling parliamentary backing for a vote of no confidence in Mr. Rajoy, which passed on June 01.”

Background

His tenure may be short. The Socialist party holds just under a quarter of the seats in Parliament. Like the vote against Mr. Rajoy, his government will rely on support from the far-left Podemos party and nationalists from Catalonia and the Basque region. An economist by training and politician by occupation, he is also Secretary-General of the Spanish Socialist Workers’ Party (PSOE), holding office for the second time after winning a leadership election June 2017. He is without a seat in the Congress of Deputies. He served as town councillor in the City Council of Madrid from 2004 to 2009. In 2009, he was first elected Deputy in the Congress. In 2014, he became Secretary-General of the PSOE, and he was the party’s candidate for prime minister in the 2015 and 2016 general elections. During his first term as Secretary-General, he was heavily opposed to the re-election of Rajoy as Prime Minister. Rajoy needed the abstention of the PSOE in the Congress of Deputies in order to secure a parliamentary majority. Tensions grew within the party to allow Rajoy to form a government; due to its opposition by Sánchez, he stepped down as Secretary-General on 1 October 2016. He simultaneously resigned as Deputy, and a caretaker committee took over the PSOE leadership. He would eventually win the party primaries, defeating Susana Díaz and Patxi López, and was reinstated Secretary-General in June 2017. Under his tenure, the PSOE backed the Government of Spain in its handling of the Catalan independence referendum and the subsquent constitutional crisis.

On 31 May 2018 the PSOE filed a no-confidence motion, which passed with the support of the PSOE, Unidos Podemos, and Basque, Valencian and Catalan regionalist and nationalist parties. On 1 June 2018, a Royal Decree named Pedro Sánchez Prime Minister of Spain. On the following day, he was officially sworn into the office before King Felipe VI.

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