Editorial 1: Ties that bind
Context
- Prime Minister Narendra Modi is concluding his three-nation tour in Australia as India seeks to assert its role in the Indo-Pacific.
Highlights of the visit
- Prime Minister was accorded a Ceremonial Welcome and Guard of Honour on arrival at Admiralty House.
- PM Albanese said that PM Modi’s visit to Australia has “strengthened the close and strong relationship that Australia enjoys with India.”
- While his visit was originally planned for a multilateral event, the meeting of the Quad, it transformed into a purely bilateral visit after the U.S. President pulled out over domestic political constraints;
- Japanese Prime Minister Fumio Kishida followed suit, and a shortened Quad Summit was held in Hiroshima.
- Activities of other groups and conflicts also tracing back to people of Indian origin were discussed as PM Modi repeated his concerns over vandalism and attacks defacing community centres and temples.
- “Three D’s” PM Modi said bind the two countries today — Democracy, Diaspora and Dosti [Friendship].
- Both leaders exulted in the mammoth crowd at Sydney’s SuperDome, PM Modi said that the “real reason, the real power” behind the bilateral relations came from people of Indian-origin in Australia.
- The announcements from the Modi-Albanese meet included opening an Australian consulate in Bengaluru and an Indian consulate in Brisbane, an agreement on Migration and Mobility, and the finalisation of terms of reference for an India-Australia Green Hydrogen Task Force. Defence and security ties, cooperation on renewable energy, and critical minerals were also part of the substantive agenda.
- On international issues, despite their differing stances on Russia’s invasion of Ukraine and western sanctions, they found continuing and common cause on maintaining a free and open Indo-Pacific, and dealing with an aggressive China.
India- Australia Relations so far
- Australia and India for the first time established diplomatic relations in the pre-Independence period, when the Consulate General of India was first opened as a Trade Office in Sydney in 1941.
- Shared values of pluralistic, Westminster-style democracies, Commonwealth traditions, expanding economic engagement, and increasing high-level interaction have underpinned the India-Australia bilateral relationship.
- India is one of the top sources of skilled immigrants to Australia.
- Both Australia and India support a rules-based international order and they are seeking to forge regional institutions in the Indo-Pacific which are inclusive, promote further economic integration.
- Both are members of the Quad, Commonwealth, Indian Ocean Rim Association (IORA), ASEAN Regional Forum, Asia Pacific Partnership on Climate and Clean Development, and have participated in the East Asia Summits.
- The Mechanism for Mutual Recognition of Educational Qualifications (MREQ) was signed in March 2023. This will facilitate mobility of students between India and Australia.
- In February 2022, countries signed a Letter of Intent on New and Renewable Energy for cooperation to reduce the cost of renewable energy technologies, including ultra low-cost solar and clean hydrogen.
Way forward
- The India-Australia relations have strengthened in recent years due to shared values, interests, geography, and objectives. Both countries envision a free, open, inclusive, and rules-based Indo-Pacific region, unilateral or coercive actions are not preferred and are to be avoided in resolving any disagreements or conflicts.
Editorial 2: The fundamental value of the rupee
Introduction
- The Indian rupee is the official currency of the Republic of India. The first rupee in India was introduced by Sher Shah Suri and the Bank of Hindustan issued the first paper note. The Reserve Bank of India issues and regulates currency-related provisions. The symbol of Indian Rupee characterizes India’s worldwide identity for currency transactions and economic clout.
Currency
- The first thing that comes to mind when speaking of the value of a currency is the exchange rate it commands in international transactions. For instance, we may ask how many cents is the rupee worth.
- Another is its purchasing power within an economy, i.e., whether it can buy the same basket of goods over time.
- Inflation erodes the value of a currency over time. But there is a more fundamental sense in which the value of a currency is to be understood, and it has nothing to do with prices.
- It has to do with the confidence that citizens have in its continued acceptance as a medium of exchange and store of value. This confidence is based on the trust that they repose in their monetary authority, which is the central bank.
The RBI’s withdrawal of 2000 Rupee Note
- On May 19, the Reserve Bank of India (RBI) announced that the ₹2,000 note is being withdrawn from circulation but that it will remain legal tender.
- The RBI said that the withdrawal of the 2000 rupees notes is part of its currency management operations as per its Clean Note Policy.
- The RBI governor stated that the impact of withdrawal of 2000 rupees notes will be "very very marginal" on the economy because it accounts for only 10.8% of currency in circulation.
Poor judgment
- For over 50 years, the RBI had mostly lived up to this expectation. In particular, the public saw it as having transitioned from being a handmaiden to Britain’s colonial interest in India to being a relatively independent central bank of an independent country with high economic ambitions.
- The demonetisation of 2016 dented this reputation. And now, within just a few years, the RBI has come up with another action of dubious worth. By undoing its own action of introducing the ₹2,000 note, it draws attention to poor judgment on its part.
- In 2016, the government amended the RBI Act of 1933 to redefine monetary policy as the control of inflation. The RBI has not had great success in its new avatar.
- It has missed the targeted inflation rate of 4% for 14 quarters in a row. Its relentless messaging however gives the impression that it is singularly devoted to the task of controlling inflation.
- But by casting a shadow on the public’s perception of what is legal tender in India it destabilises their confidence in the rupee.
Reserve bank of India (RBI)
- RBI is an institution of national importance and the pillar of the surging Indian economy. It is a member of the International Monetary Fund (IMF).
- The concept of Reserve Bank of India was based on the strategies formulated by Dr. Ambedkar in his book named “The Problem of the Rupee – Its Origin and its Solution”.
- This central banking institution was established based on the suggestions of the “Royal Commission on Indian Currency & Finance” in 1926. This commission was also known as Hilton Young Commission.
- In 1949, the Reserve Bank of India was nationalized and became a member bank of the Asian Clearing Union.
- RBI regulates the credit and currency system in India.
- The chief objectives of the RBI are to sustain the confidence of the public in the system, protect the interests of the depositors, and offer cost-effective banking services like cooperative banking and commercial banking to the people.
Conclusion
- A central bank sits at the pinnacle of a country’s financial system. The public expects of it the highest standard of probity. But apart from probity, the central bank must also convey competence, transparency and fairness.