Editorial 1. Contesting the hegemony of the dollar
Context:
The fact that the multipolar international system is fast unfolding is reinforced by clear trends in polycentric global geoeconomics. There is significant trade within the Global South:
Is this multipolarity irreversible? Can the dollar hegemony be challenged?
Economic diversification:
Countries outside the West say they are operating in a multipolar system and are developing mechanisms for alternate currency exchanges to reduce risks and their dependence on the dollar. Trade wars against China since 2018 have set China on this path. The Russia-Ukraine war has hastened this development since Russia trades oil and commodities in ruble and national currencies, in a model similar to the rupee-rouble trade of earlier years.
The steady but unequal growth of the ‘emerging economies’ is the base for economic diversification. For example, the combined GDP of China, India, Russia, South Africa, Indonesia, Brazil, Iran and Turkey exceeds that of the G7.
Inter-Asian consumption is driving high levels of trade between Asian countries. India’s trade with Asian countries is higher than with the West. China’s trade with Asian countries more than doubled in the last few years, beating its trade with the West.
The UAE, Iran, Turkey, Indonesia, Sri Lanka, Myanmar, Thailand, Malaysia and Indonesia are trading in local currencies with regional partners. Bilateral currency swaps among ASEAN countries, China, Japan, South Korea are $380 billion and rising. Similarly, the South African rand is used by several African countries. The Latin American countries are moving towards greater inter-regional trade.
Internationalising the rupee:
With high exchange rates of the dollar, emerging economies have initiated trade in national currencies bypassing the dollar. Asian central banks have over $400 billion of local currency swap lines and trade amongst themselves.
Since 2019, India has been paying Russia for fuel, oil, minerals and specific defence imports in rupees on an informal basis. It has worked out local currency trade with the UAE, Japan, Turkey, Korea and South Asian countries.
In July 2022, the Reserve Bank of India (RBI) unveiled a rupee settlement system for international trade by allowing special vostro accounts in designated Indian banks, a step towards internationalising Rupee. RBI has allowed the opening of nine special vostro accounts in two Indian Banks (UCO Bank and IndusInd Bank) for the settlement of payments in rupee for trade between India and Russia. Russia’s two largest banks — Sberbank and VTB Bank — are the first foreign lenders to have received approval from the RBI towards settling international trade transactions in rupee.
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A Nostro account is an account held by a bank in another bank. It allows the customers to deposit money in the bank's account in another bank. It is often used if a bank has no branches in a foreign country. A Vostro account is just another name for a Nostro account. It is an account held by a bank that allows the customers to deposit money on behalf of another bank. Nostro and Vostro accounts are held in a foreign denomination. Vostro accounts enable domestic banks to provide international banking services to their clients who have global banking needs. Vostro account services include executing wire transfers, performing foreign exchange transactions, enabling deposits and withdrawals, and expediting international trade. |
New alternative arrangements:
The BRICS’s New Development Bank (NDB) encourages trade and investment in national currencies by disbursing up to 50% of its loans in national currencies since 2015.
Other regional groupings such as the Shanghai Cooperation Organization (SCO) and Eurasian Economic Union (EEU) and partner-countries of the Regional Comprehensive Economic Partnership (RCEP) are setting up processes to conduct trade, investments and settlements in national currencies.
The process of creating a common payment infrastructure and connecting national systems for the transmission of financial information is being put in place. A serious challenge to the petrodollar comes from moves to trade oil and gas outside the dollar zone. This move can cut into the monopoly of the dollar that the U.S. has since the 1970s.
But while many oil producers, refiners and buyers such as Russia, India, China, Venezuela and Iran have initiated trading hydrocarbons in national currencies, this process is yet to achieve full force. India’s vostro accounts enable rupee payments for Russian crude and, as former RBI governor D. Subbarao said, India can save up to $4 billion a month in forex outgo.
Way forward:
Conclusion:
Multipolarity is here for the near/foreseeable future. India will have to work in this economic framework. However, we must also hedge our bets with alternative, emerging arrangements.
Editorial 2. The new and dark interpretations of ‘We the People’
Context:
The raging controversy over the very meaning of ‘We the People’, after the speech made by the Vice-President of India and Chairman, Rajya Sabha, Jagdeep Dhankhar at the 83rd all India conference of presiding officers’ in Jaipur, Rajasthan, in January 2023, needs a closer look. With its particular reference to the judiciary, Mr. Dhankhar’s speech was of the view that ‘We the People’ essentially gives primacy to elected members of Parliament and the State legislatures.
Separation of powers :
The Speaker of Lok Sabha supported Mr. Dhankar’s view that the separation of powers (as enshrined in the Constitution) gives this primacy. Expatiating on this theme, Mr. Dhankhar implied that the separation of powers does not equate the three pillars of democracy: Parliament, judiciary and the executive.
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Separation of powers is a doctrine in which the three organs of the State— the executive, the legislature and the judiciary— have separate functions and powers, and one organ does not interfere in the functioning of the others. This ensures a system of checks and balances wherein the various organs impose checks on one another by certain provisions, so that no one organ becomes all-too powerful. |
We the people:
Let us first sort out the meaning of ‘We the People’. The Constitution does not define ‘people’. Its concern is about citizens and not any group or a particular institution. There are people in the judiciary, in the executive and in most other constitutional institutions. There are also those in the military, the police, public enterprise and the vast private enterprise. They are all people no less. To identify representatives in the legislature to be the sole representatives of the people is a travesty. Apart from being enshrined in the Constitution, the theory of a separation of powers is basic to any democratic society.
Democracy in the U.S. and the U.K.
In the United States, the President has the power to appoint judges, although this should be endorsed by Congress. But the President is directly elected by the people and has prerogatives in several issues which do not apply to a parliamentary democracy. The Prime Minister-in-cabinet does not have the powers of the U.S. President. And hence the possibility of a judicial review to check the suitability or otherwise of the candidates nominated.
In the case of the United Kingdom, it is run by time-honoured conventions and laws passed by the House of Commons. It does not have a written Constitution which gives judicial review. But strong conventions are in place in spite of the primacy of Parliament. Conventions in the United Kingdom have an inviolable tradition. Laws can be changed, violated and repealed. Even in Parliament, the Speaker of the House of Commons is elected, but becomes a non-party man, choosing when to retire from office.
In India too, the first two Speakers, G.V. Mavalankar and M. Ananthasayanam Ayyangar and later Neelam Sanjiva Reddy resigned from the ruling party to give the entire Parliament a sense of impartiality in ensuring a proper place for minority parties.
In the United Kingdom, the House of Commons retains the Speaker if he continues to hold office. But this does not happen in India, in spite of the first two Speakers of the Lok Sabha having tried to set a convention. This lack of convention has drastically affected the running of Parliament. The reluctance to honour conventions made our laws and Constitution strive for greater specificity, often leading to quibbling in language and meaning.
Onslaught on institutions
Democracies cannot be run only by the laws passed in representative Assemblies. They need conventions. Unless conventions are solidified into constituent laws and bound by strong threads, institutions may even be destroyed, endangering the very purpose of a Constitution protecting the citizen. Indeed, there is a price to be paid converting conventions into law and B.R. Ambedkar knew it.
Today’s onslaught on the judiciary is aimed at a powerful constitutional authority which is, by and large, refusing to deviate from its constitutional responsibilities. The fate of the Election Commission of India, independent investigating agencies and the civil service and police are a classic example of a dereliction of constitutional and other legal responsibilities.
The basic structure of the Indian Constitution, as recognised by the Supreme Court of India, is to be protected by it, in spite of any over-reach by the legislature.
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The basic structure doctrine, termed as Judicial Innovation evolved by the SC is a Judicial principle that states that the core underlying features termed basic are not subjected to the amending power of the legislature under article 368. Though the court did not explicitly define what are those principles few of them can be derived from various SC judgements over the years like supremacy of the constitution, Rule of law, judicial review, federalism, secularism, Fundamental rights, Article 32, balance between FR and DPSP etc. and are not static but dynamic and continuously evolving. Doctrine of Basic Structure was propounded by the Indian Judiciary on 24th April 1973 in Keshavananda Bharati case. |
The dangers ahead:
There is a virtual war in the country now between elected governments in States and the Governors appointed by the Centre, which has brought into focus the question whether we need the institution of Governors in the first place. The Constitution does not intend Governors to be subordinates to the central government or even as detractors of the legitimacy of States.
The dangerous portent now is that the Centre consciously feels that it is superior to the States and their Governors are its proxies. This goes against the very dignity of the people of a State as inferior to a higher power outside their State, the constitutional validity of which rightly needs the judiciary as the final judge.
In other words, the separation of powers acceptable to the Centre is not applied to the States, where an appointed Governor can defy not only the legislature but also the elected government.
Apparently, members of the ruling party members are pushing for greater centralisation not only within constitutional institutions at the Centre but also in States which are ruled by parties other than the national ruling party. When there is a ruling party determined to dominate States both explicitly and in stealth, there will be strife and conflict endangering the very process of governance.
Conclusion:
“Instead of chipping away at a Constitution framed by the best minds of the Independence movement generation, it will be more honest to go for a Constituent Assembly and seek a more totalitarian state — far from the ideals of democracy enshrined in the Constitution. If the people of India accept such devastating change, so be it,” says Sudarsanam Padam.