Interestingly, a marginal comment was quickly inflated into magnificent disproportions in the West. In reality, the group seeks to foster greater prosperity through diversified development.

From top-down to bottom-up network effects

Ever since then, some international observers from the Wall Street Journal to the Financial Times have derided the idea of BRICS currencies, which is reframed as “de-dollarization.” A BRICS currency, they warn, could shake the predominance of the US dollar, which they see as a nightmare of sorts.

In May – oddly, amid the US banking crisis – economist Paul Krugman attributed the “de-dollarization” brouhaha to crypto-cultists and Putin’s sympathizers, as if the trend was nothing but a misguided anti-patriotic melee.  And just days ago, even the ex-Goldman Sachs economist Jim O’Neill, who coined the BRIC acronym two decades ago, dismissed as “ridiculous” the notion that emerging nations might develop their own currency. 

In reality, the migration from the US dollar has already started. But it seeks to avoid disruption and does not rely on the kind of top-down network effects, which the US dollar and its precursor the UK pound once used, typically through geopolitics and military might. 

Instead, the BRICS promote bottom-up network effects. As the group’s summits suggest, the first step is the transition to settlements in local currencies, to avoid redundant currency intermediaries and foreign-exchange traps. The next step is the establishment of digital currency. 

The launch of a potential common currency is still another possible mechanism, but more likely in the long-run.

Bottom-up diversification, sovereign choices

Last spring, Brazil’s president Luiz Inàcio Lula da Silva said he asks himself “every night, why all countries have to base their trade on the dollar.” It is a valid point. Global currency arrangements shouldn’t reflect just the interests of Americans who account for only 4.1 percent of the world population.

Thanks to its organizational flexibility, the BRICS makes possible unilateral, bilateral and multilateral measures. These range from gradual reforms to more unilateral individual measures, which are driven mainly by the original BRICS founder economies (Brazil, Russia, India, China, and South Africa). These measures are also promoted by the new aspiring members and coalition partners who share the BRICS vision and are considering its membership. 

Reportedly, some 22 countries have formally applied to join the group, while an equal number of states have been informally asking about becoming BRICS members. Countries looking to join the bloc include Saudi Arabia, Iran, the United Arab Emirates, Argentina, Indonesia, Egypt and Ethiopia. After the 1955 Bandung Conference, the non-aligned countries were organized into a political movement. Today, the BRICS group is building an economic bloc. 

Figure 1    Non-Aligned Movement and the BRICS Group

Member states of the Non-Aligned Movement. Light Blue states have observer status.	Member states in Dark Blue; applicants shown in Cyan, countries interested in membership in light cyan

It is the rising number of large and populous emerging economies that make possible the kind of bottom-up network effects, which will be critical to launch the new infrastructure for the proposed complementary settlement mechanisms. These bottom-up effects are based on choices by sovereign states. By contrast, the dollar-predominance is imposed on the rest of the world, which excludes sovereign choices.

Like asset managers who seek to maintain appropriate diversification in their portfolios, the BRICS’ strategic objective is to recalibrate reserve currencies. 

In the multipolar world economy, global growth prospects are driven by the  emerging economies; not by the West any longer. 

Figure 2    Emerging economies drive global growth, not the West 

Exorbitant risks of dollar monopoly   

Paradoxically, misguided US policies have accelerated the erosion of the dollar-based regime following the West’s financial crisis in 2008, excessive debt-taking, trade protectionism and technology friction, pandemic-induced depression, and the new Cold Wars. 

When the dollar is weaponized by US foreign policy in the name of international community but without the broad support of international consensus, it puts trade invoicing and settlement, foreign corporates, financials and central bank reserves at risk. Hence, too, the recent warning by Fitch Ratings that it may be forced to downgrade dozens of US banks, even the likes of JP Morgan Chase. 

After the spring failures of Silicon Valley Bank, Signature Bank, First Republic and the takeover of Credit Suisse by UBS, 200 more banks may be vulnerable to the type of risk that caused SVB to collapse. Across the US, 2,315 banks – almost half of the total – sit on assets worth less than their liabilities. 

Today, US public debt hovers around $32.6 trillion; that’s two trillion more than a year ago. Since 2008, US debt as percentage of GDP has doubled and soared to over 120 percent. According to the non-partisan Congressional Budget Office, persistently large federal deficits will push federal debt over 181 percent of GDP by 2053. 

Figure 3    US Federal debt held by the public

Source: CBO, June 2023

Avoiding lethal geopolitics 

To defer the reckoning, the Biden administration needs to print money, ceaselessly. Such trajectories are damaging to major foreign holders of federal debt, many of which are large emerging economies, particularly China.

If, in a likely crisis, these economies must drastically reduce their purchases of US securities, sell a significant share of their dollar holdings, or do both, Washington needs to offset the gap. Otherwise, it will face significantly higher interest rates. Neither Western Europe nor Japan can alleviate the pain because they are struggling with secular stagnation, as is the US.

To avoid such lethal global scenarios, the BRICS seeks a diversified world economy and reserve currencies. That trajectory is more peaceful, stable and secure. 

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/

A version of the commentary was published by China Daily on August 23, 2023

In 1937 the English economist Joan Robinson proposed that “when capitalism is rightly understood, the rate of interest will be set at zero and the major evils of capitalism will disappear”. John Maynard Keynes, who had taught Robinson, suggested something similar a year earlier in slightly more qualified and technical terms, arguing that this would be “the most sensible way of gradually getting rid of many of the objectionable features of capitalism”.

Robinson and Keynes were writing during the great depression, when spending and investment were moribund and interest rates seemed like a stranglehold on the economy. Unlike the sort of temporary measure we saw from 2009-21 when rates were close to zero, they believed interest rates should be set at zero permanently as a way to purge capitalism of its most objectionable and destabilising features.

This was a time when the Soviet Union was challenging the western model of prosperity. Indeed, Robinson’s argument was in response to a Marxist, proposing it would lead to “even better results than the revolutionist theory”.

With interest rates rising steeply in the past couple of years and capitalism deeply unpopular among younger generations, it is worth returning to this idea. So what was the logic and how would it work?

The rationale

Inflation is sustained by consumers, businesses and governments spending in excess of the supply of goods and services. Central banks raise interest rates to reduce demand by discouraging borrowing and spending. This aims to restore equilibrium between supply and demand, and reduces inflationary pressure.

A major problem – setting aside the question of how well it works – is that this distributes the cost of curbing inflation very unevenly. A recent report by the Royal Bank of Canada said higher interest rates disproportionately hurt poorer and younger people, such as renters and first-time homebuyers. Anyone borrowing out of financial distress is likely to be in trouble with rising rates.

There are additional objections to positive interest rates. One relates to depleting resources.

Suppose I own a forest that regenerates at 2% per year and is worth £1 million in timber overall. I could log the forest sustainably, cutting down trees only in line with the speed of regeneration, which would earn me £20,000 a year.

But with interest rates at 5.25%, I would do better to cut down everything, invest my £1 million into bonds, and earn upwards of £52,500 in annual interest (I say upwards because the rate of interest on bonds is usually a little way above the central bank base rate).

If the interest rate were zero, it would reduce my incentive to log the entire forest today. It’s true I could still cut it all down and earn a passive income in other ways, such as holding shares that pay good dividends. But that would involve slightly more risk, since dividends are not guaranteed, and the underlying shares might lose value.

In general, to quote a recent op-ed, central banks raising interest rates make it harder to fight the climate crisis. A permanent zero rate might also discourage wealthy people from parking their money in bonds to earn a passive guaranteed income rather than taking entrepreneurial risks.

The fiscal alternative

If the interest rate were permanently zero, the government’s fiscal levers of taxation and spending would be the alternative means of controlling inflation. The economist John Kenneth Galbraith made the point that using progressive taxes rather than interest rates to control spending would put the greatest costs of maintaining stable prices on those best placed to weather them.

Targeted consumption taxes, for instance on luxury goods or products with an needlessly high carbon footprint, could be used to ensure that the most socially undesirable forms of spending are the first to be reduced during inflation. Likewise, socially desirable forms of spending such as essential infrastructure would be the first to increase during recessions.

Such a system would require several other changes. There would always be a danger that the government would manipulate tax and spending to try and win an election rather than focusing on inflation. This was the main reason independent central banks were given control over interest rates in the first place.

We could prevent that by restricting the inflation-controlling levers to just a few types of tax and spending. We could then give an independent body oversight of these levers to make sure they were not exploited for electoral purposes.

At the same time, there is a risk that permanent zero rates might encourage commercial banks to lend more irresponsibly. There wasn’t a lot of evidence of this in the UK when rates were close to zero in the 2010s. But we did see other economically hazardous activities such as companies borrowing cheaply to buy back their shares to drive up their prices. New regulatory frameworks could be introduced to prevent these kinds of activities.

Giving up control of the interest rate needn’t remove all central-bank control over lending. The “open secret of central banks” is that they also control lending through a list of types of loans that they are willing to take as collateral in exchange for providing banks with reserves (in practice these transactions are often indefinitely renewable, so they’re more like purchases).

Banks are strongly motivated to lend to customers according to this framework, since it gives them access to liquidity at low cost. Central banks claim to maintain “neutrality” on the types of loans on these lists, though others would disagree. The Bank of England includes mortgages but not construction loans, for instance, encouraging banks to lend more for buying houses than building them. Instead, central banks could openly use these frameworks to guide banks into making low-risk loans for socially and environmentally responsible ventures.

The future of central banks

Also worth mentioning is the current push by the Bank of England towards central bank digital currencies (CBDCs), in which buyers and sellers would transfer money directly without having to use the banking system. This could enable central banks to encourage or discourage certain spending in more targeted ways, for example by restricting what can be spent by people in certain areas or income brackets. If inflation was controlled using only fiscal levers, CBDCs could be used to reinforce this policy.

The idea of permanent zero rates is far outside the mainstream of economic thinking. But perhaps Robinson was right to suggest it as a viable compromise between capitalism and more radical alternatives: rewarding entrepreneurship without compounding inequality or incentivising the unsustainable use of resources. At a time like this, it’s an old idea well worth considering.

Alexander Douglas, Lecturer in Philosophy, University of St Andrews

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The listed share price was INR 265 on the BSE and INR 262 on NSE as compared to its derived market value of INR 261.85 apiece.

The market capitalisation of the NBFC was estimated at Rs 1.66 lakh crore at the time of listing.

On July 21, the exchanges had conducted a special pre-open session for the demerged entity in which the discovered price for the stock worked out to be Rs 261.85 and the implied market cap was Rs 1.65 lakh crore.

The stock will be in the trade-to-trade segment for the next 10 sessions.

JFSL has been temporarily added to Nifty50 along with 18 other indices of NSE, including Nifty 100, Nifty 200, Nifty 500, Nifty Energy, and Nifty Oil & Gas without replacing any stocks. The stock has also been added to 18 of the S&P BSE indices also, including the S&P BSE Sensex. 

However, after three days of listing, JFSL stock will be dropped from all the indices at the last traded price. JFSL shares will be removed from all indices on Wednesday evening, i.e. after trading ends on August 23.

JFSL shares will be eligible to be added into the indices in the next cycle.

Reliance shares fell as much as 1.55% to INR 2,517.00 apiece on the BSE, after the listing on Monday.

Reliance had announced in October 2022 that it would demerge and list its financial services business – Reliance Strategic Investments, which was to be renamed Jio Financial Services Ltd (JFSL).

Last month, Reliance also announced its tie up with Blackrock, the world’s largest asset manager, to float a mutual fund company, targeting an initial investment of $300 million.

Jio Financial Services is currently listed under a dummy ticker after its price discovery at INR 261.85 but there is no trading happening in the scrip.

Trading Members of the Exchange are hereby informed that effective from Monday, August 21, 2023, the equity shares of Jio Financial Services Ltd (Formerly known as Reliance Strategic Investments Limited) shall be listed and admitted to dealings on the Exchange in the list of T Group of Securities,’ the BSE said in a notice.

The scrip will be in trade-for-trade segment for 10 trading days, it added.

The shares of Jio Financial Services were credited to demat account of shareholders last week. As part of the demerger, Reliance shareholders would got one share of Jio Financial Services for holding one share of Reliance Industries.

Following the update, shares of Reliance Industries rose over 1 percent to INR 2566.85 on BSE.

Jio Financial Services through its operating subsidiaries and joint ventures will offer broad range of financial services solutions addressing the needs of both consumers and merchants.

The company will primarily operates in the NBFC market and credit market segment and has strategic plans to expand its operations into insurance, digital payment, and asset management verticals.

Reliance Industries’ Chairman and Managing Director Mukesh Ambani in his message to shareholders in the company’s 2022-2023 annual report, said, Jio Financial Services is positioned uniquely to capture the growth opportunities in the financial services sector and play a crucial role in transforming the landscape of digital finance in India.

‘Jio Financial Services Limited along with its subsidiaries will leverage the technological capabilities of Reliance and digitally deliver financial services, democratising access to financial services offerings for Indian citizens,’ Mr Ambani said in his message to shareholders.

‘Jio Financial Services aims to provide simple, affordable and innovative digital first solutions,’ Mr Ambani had said.

This article has been updated.

Insurance Basics

So, what exactly is an insurance policy? Think of it as a safety net. It’s a mutual agreement where you say, “I’ll pay you regularly in case something bad happens,” and the insurance company replies, “If that bad thing happens, we’ll help cover the costs.” 

Sounds simple, right? But there’s much more to it than that.

The Core of Insurance Policies: Coverage

When talking about coverage, it refers to the specific things your insurance policy protects you against. For instance, health insurance might cover a hospital stay, while car insurance could cover repairs after a minor fender-bender.

Now, coverages come in two main flavours, so to speak:

1) Basic Coverages 

This is the essential stuff. Often, these are either required by law or are the foundational protections you’d expect. Using our car insurance example, basic coverage might protect against costs if you injure someone else.

2) Additional or Optional Coverages

These are the extras. The cherry on top. They’re for those who want that extra peace of mind or have unique needs. Sticking with the car theme, maybe you want protection against someone keying your shiny new car in a parking lot.

Every policy has its limits. This is where limitations and exclusions come into play. These are the things that your policy won’t cover. For instance, if you’ve had a medical condition for years and then decide to get health insurance, the policy might exclude treatments related to that condition. Or, if a massive tree suddenly decides to make your car its home during a storm, your car insurance might say that’s an “Act of God” and not pay out.

How do you decide what coverage is right for you? It’s a balancing act. Think about what risks you or your property face. If you live in a flood-prone area, flood insurance might be a good idea. Or if you’ve just started a family, maybe you want more extensive health coverage. 

Next, weigh up how much you’re willing to spend against how much protection you want. And remember, the best way to know you’re getting the right coverage is by chatting with an expert or doing some proper homework.

The Cost of Security: Premiums

Now, it’s time to talk about money. Premiums are those payments you make to your insurance company such as quoteleader.ie. Think of them as your ticket to the safety net. But why do some people pay more and others less?

A bunch of things can change the amount of your premium:

Risk Factors: How risky are you? If you’re a young driver, have a history of being a bit accident-prone, or maybe you’ve got some health issues, then you might find yourself paying more. It’s all about how likely the insurance company thinks it is they’ll have to pay out for you.

Amount of Coverage: More coverage usually means you’ll be shelling out a bit more in premiums.

Deductible Amount: This is an interesting one. Your deductible is the amount you agree to pay before your insurance kicks in. If you choose a higher deductible, your premium often goes down. However, this means if something happens, you’ll be reaching deeper into your pocket before getting any help.

Deciding on the right premium is all about balance. How much are you willing to pay regularly versus how much you’d like to potentially pay in an unforeseen event? Shopping around and comparing prices can help. It might sound like a bore, but a bit of research can save you lots of money in the long run.

Factors Affecting Premium Amounts

1) Location 

Live in a bustling city? Your car insurance might be higher because of increased chances of accidents or theft. Similarly, a home in a flood-prone area might push up your home insurance premiums.

2) Use and Purpose 

How you use something affects how much you pay. A car that’s for business travels might cost more to insure than one for weekend drives. If you rent out your home on a site like Airbnb, your home insurance could see a bump.

3) Loyalty and No Claims 

Been with your insurer a while without making a claim? They might just reward you with lower premiums. No claims bonuses are a nice pat on the back for being claim-free.

How to Make the Most of Your Premiums

No one likes to pay more than they have to, especially not for something you hope you’ll never use. So, how can you make sure you’re getting the most bang for your buck?

Shop Around: Don’t just settle for the first quote you get. Different insurers have different criteria, so prices can vary. Use comparison websites, but remember, not all insurers are on them. Sometimes, going direct can offer better deals.

Bundle Up: Got a car and a home? Sometimes insuring them with the same insurance company can net you a tidy discount. It’s like buying a meal deal instead of just a sandwich.

Increase Your Excess: Remember deductibles? That amount you pay before insurance steps in? If you can afford to set this a bit higher, it might cut down your premium. But, tread carefully. It’s no good having a high deductible if it’s unaffordable when you need it.

Rethink Add-Ons: That extra windscreen cover or legal expense cover might sound appealing, but it adds up. Decide what’s essential and what’s a ‘nice to have’. Trim the fat where you can.

Your Policy, Your Needs

Insurance isn’t a “set and forget” deal. Your life changes – new job, new home, new car – and your insurance should flex with it. Maybe last year you needed that extra coverage for business travels, but this year you’re working from home. Or perhaps you’ve added to your family, and it’s time to think about life insurance.

According to Pembroke Insurance, Regularly reviewing your insurance ensures you’re not overpaying or under-protected. So, pencil in a date. Make it an annual ritual. Grab a cup, sit down, and make sure your safety net is still right where you need it.

When in doubt, a quick chat with an insurance expert can clear the fog. They’re there to help you navigate the maze, ensuring you’re covered from every angle.

A facility operated by Foxconn Technology Group, major supplier for the tech giant in Sriperumbudur, Tamil Nadu is gearing up to dispatch the latest iPhone units shortly after their initial rollout from Chinese factories, according to a Bloomberg report.

This move is aimed at rapidly ramping up the quantity of new iPhones manufactured in India, according to individuals acquainted with the situation, amid increasing trade uncertainty due to political tensions between Washington and Beijing. 

Prime Minister Narendra Modi’s administration in India has endeavored to strengthen its relationship with the United States while positioning the country as a prominent manufacturing center as part of the ‘Make In India’ initiative.

Reportedly, according to sources in the know, further alignment in the shipment schedules from India and China is the overall objective toi reduce dependency on one manufacturing hub, although suppliers remain uncertain about achieving this goal.

Accessibility of components, predominantly sourced through imports, especially as the world faces semiconductor shortage woes and the seamless scaling up of production lines at the Foxconn facility situated near Chennai will all be factors in how the iPhone manufacturing in India will ramp up.

Anticipated to be unveiled around September 12, the upcoming iPhone represents a significant advancement for the device after a span of three years. Notable enhancements encompass a substantial upgrade to the camera system across all variants, while the Pro models are set to incorporate an enhanced 3-nanometer A16 processor. 

Apple has been hit with diminishing sales due to lackluster consumer interest in major markets such as the US, China, and Europe. The company is hoping its presence on ground in India, the world’s second-largest smartphone market, especially with the opening of official Apple stores, will give sales a boost fot the next quarter.

Additional Apple suppliers operating in India, including Pegatron Corp. and a Wistron Corp. facility that is in the process of being acquired by the Tata Group, are also expected to commence iPhone 15 assembly, as per Bloomberg.

Hotels are more than a place to stay while on vacation. They are also critical for disaster relief and recovery.

When major hurricanes, wildfires or other disasters strike, relief organizations like Federal Emergency Management Agency and the Red Cross are usually seen at the heart of the disaster response. Less publicized are the essential roles hotels play in aiding and supporting the efforts of first responders and residents.

As wildfires rage on the island of Maui, Hawaii, hotels hooked up to diesel generators are doing their best to support the needs of not only their guests and employees but other residents of the community as well.

To better understand their role in relief efforts, my colleagues Jennifer L. Schneider, Muhammet Kesgin and Sarah Dobie and I interviewed over 40 hotel general managers in Florida in 2017 and collected online survey data on 156 more to study what they did during and after Hurricane Irma struck that year.

We were impressed by the range of roles hotels said they take on in a disaster, whether a massive storm in Florida or a wildfire in Maui.

Preparing for the storm

Hotels located in the vicinity of a disaster are in a unique position to help, because unlike other first responders, they are already physically there with large and fortified buildings.

Our interviews in Florida showed that hotels take steps every year to mitigate the impact of hurricane season. This annual preparedness involves continued education, planning and sharing of best practices through local hotel associations, such as the Florida Restaurant and Lodging Association and Lodging Association of the Florida Keys and Key West.

“There is no way FEMA could set up temporary housing as fast as hotels in providing immediate places for people to stay in impacted areas,” one general manager told us.

Hotels mitigate the potential of being closed by signing advance contracts for diesel fuel to run generators in case electricity is lost. They also line up contractors ahead of time to repair any damage that might occur.

One manager even reported taking out US$5,000 in cash to make sure she was able to buy groceries for local residents in need, since the lack of electricity was forcing stores to accept cash only.

Offering shelter and aiding recovery

During Hurricane Irma, residents and visitors were forced to evacuate certain parts of the state and sought shelter from the storm wherever they could, including at hotels, some of which are resilient to Category 5 hurricanes.

How much a hotel can help with disaster response can depend on how severely its own infrastructure is damaged. But even when there is damage and no electricity, hoteliers reported that lodging was the key resource they were able to provide victims of Irma, whether they were local residents who fled homes or insurance adjusters and response teams trying to get things back up and running.

Managers told us they offered discounted room rates for people trying to get out of the way of the oncoming storm and waived their usual pet policies to help those fleeing the hurricane with animals.

Some managers said their hotels transformed from four-star resorts to simple shelters where first responders or power repair workers could find a safe and free place to sleep. One manager reported setting up dozens of cots in a ballroom for a National Guard command post.

Hotel employees who felt unsafe in their homes were allowed to ride out the storm with their families for free. And in some cases, they provided housing for months after the storm.

Beyond lodging, in some cases hotels sent out engineers to inspect employee homes to determine whether they were habitable while they waited for official inspections.

Beyond the humanitarian value of providing assistance, separate research I helped conduct also found that hotels that provide relief may produce goodwill through the shared vulnerability that employees and customers experience. When customers receive assistance during periods of vulnerability and recognize that employees are facing similar challenges, they become advocates for public support of the business, its workers and the broader industry and destination impacted by the disaster.

Whether in Florida or Maui, hotels serve as critical hubs for disaster relief and recovery. As such, policymakers should be aware of their dual role as both private sector businesses and community resources.

This is an updated version of an article originally published on Sept. 12, 2019.

Rick Lagiewski, Principal Lecturer – Management, Rochester Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Union Minister informed in Lok Sabha that the tomatoes will be sold at a price of INR 70 by the National Cooperative Consumers’ Federation of India Limited (NCCF) in the Delhi-NCR region.

The Finance Minister explained that tomatoes are being procured from Maharashtra, Andhra Pradesh, and Karnataka to be distributed through cooperative societies like NCCF.

The FM also noted that this system is already being used in states like Bihar, West Bengal, Uttar Pradesh and Rajasthan since July 14.

‘I want to highlight the fact that on these essential commodities, we are taking enough steps but more will also be taken because we are conscious that people need essentials at an affordable price’ the FM observed.

The government has initiated the imports of tomatoes from Nepal by removing the import restrictions and the first lot of tomatoes are likely to reach Varanasi, Lucknow and Kanpur by Friday.

FM Sitharaman highlighted the ‘economic transformation’ brought in by the current government, while mentioning global economic challenges that are posing significant hurdles for nations like high inflation rates.

Talking about global inflationary pressures, FM Sitharaman also highlighted the problems faced by some developed countries and was quoted as saying ‘the United Kingdom’s struggle, where the Bank of England has raised interest rates 14 consecutive times, and the European Central Bank’s struggle with high inflation, having raised interest rates nine times to a 23-year high.’

The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) decided to keep the key repo rate unchanged at 6.5%, despite rising inflation.

RBI Governor Shaktikanta Das had kept the rates unchanged in the June policy after a unanimous vote as well, thus maintaining the repo rate for the third consecutive time.

The repo rates were left unchanged by the six-member MPC h in the April meeting too, before which there was a cumulative hike of 250 basis points from May 2022 in a bid to contain inflation. 

‘After detailed deliberations on all relevant aspects, the MPC decided unanimously to keep the policy repo rate unchanged at 6.50 per cent,’ Governor Das said.

The RBI’s decision is in line with the inflationary trends that have been visible so far as well as those expected going forward.

While global growth is expected to be muted this financial year it is encouraging that overall economic activity in the Indian context has been encouraging. 

The RBIs commitment to firmly focus on aligning inflation to the target of 4% signals a moderated interest rate scenario going forward.

The RBI Monetary Policy Committee (MPC) has left the Cash Reserve Ratio unchanged at 4.5%.

It has however put in place an additional Cash Reserve Ratio (CRR) of 10% on banks starting August 12, 2023.

Indian banks have been asked to maintain a 10% incremental cash reserve ratio (ICRR) with effect from August 12, due to an increase in their Net Demand and Time Liabilities (NDTL) between May 19 and July 28, 2023, stated Governor Shaktikanta Das.

The decision to increase incremental CRR is only intended to absorb the surplus liquidity generated by various factors (including a greater-than-anticipated quantum of INR 2,000 notes in the banking system) and is a temporary measure for managing the liquidity overhang and is not likely to impact liquidity in the system, Governor Das added.

The recently declared inflation print for June was at 4.49 per cent, up from 4.25 per cent in May.

‘The month of July has witnessed accentuation of food inflation, primarily on account of vegetables. The spike in tomato prices and further increase in prices of cereals and pulses have contributed to this. Consequently, a substantial increase in headline inflation would occur in the near-term,’ said Governor Das.

Any entity or company planning to bring laptops and computers for sale in India will now have to seek permission or license from the government for their inbound shipments. The notification in this regard was issued by the Directorate General of Foreign Trade (DGFT).

What is HSN Code 8471?

The Harmonised System of Nomenclature (HSN) code is a classification system used to identify products for taxation purposes. Data processing machines such as laptops are classified under HSN code 8471.

Why have these restrictions been imposed?

The move has been announced with an aim to promote domestic manufacturing of these products under the recently renewed production-linked incentive (PLI) scheme for IT hardware.

The last date to apply for the so-called production-linked incentives in this product category is August 30. According to a PTI report, it also curtails inbound shipments of these goods from countries like China and Korea.

However, it quoted a government official as saying that there are a variety of reasons for imposing these restrictions but the primary reason is ‘to ensure that the security of our citizens is fully safeguarded.’

Exemptions?

Under the transition provisions of the foreign trade policy (FTP), if the bill of lading and letter of credit has been issued or opened before August 3, the import consignments can be imported.

An importer can apply for a license from August 4. The trader should have to be a regular importer to get a license.

Exemptions have also been given import of one laptop, tablet, all-in-one personal computer or ultra-small form factor computer, including those purchased from e-commerce portals through post or courier.

However, these imports shall be subject to payment of duty as applicable.

According to PTI, there is an exemption from seeking import licensing for up to 20 items per consignment for R&D, testing, benchmarking and evaluation, repair and return, and product development purposes.

Impact

The announcement is expected to impact companies that import bulk of their products.

Tech giants like Apple, Samsung, Lenovo etc. will have to either start manufacturing their laptops in India or stop imports.

Most of the laptops and personal computers sold in India are manufactured or assembled in China. With the new rule, the government plans to shift all this to India.

If that happens, the prices of these gadgets can go down.

The companies, meanwhile, can apply for and obtain special permits to bring laptops into India.

Could this be a good move?

India started hiking tariffs well before protectionism in the West took over in the wake of the pandemic.

The Rajaraman Committee report set the stage for the import of computers and their parts, the subsequent computerisation of the Indian Railways passenger reservation system, and the progressive entry of computers into India’s financial sector, eventually catalysing India’s IT revolution.

The Centre’s sudden move marks the reversal of the broadly consistent policy followed by successive governments since the Rajaraman Committee.

There needs to be an emphasis on finding a balanced approach between protectionism and trade liberalization for sustainable economic growth.

The sudden shift in trade policy, including the use of licensing as a trade tool could prove disruptive, even regressive trade policy.

There is a need for thoughtful policy decisions that consider the potential impact on industries, consumers, and international trade commitments.

Both the Trump and Biden administrations have ignored Lew’s warning. One consequence has been the Global South’s rising interest in the BRICS, which will have its next, highly-anticipated summit in South Africa in late August.

A key topic in Johannesburg will be the BRICS quest to develop alternative payment systems to US dollar.  

Risks of dollar monopoly   

In May – oddly, amid the US banking crisis – economist Paul Krugman attributed the “de-dollarization” brouhaha to crypto-cultists and Putin’s sympathizers, as if the trend was nothing but a misguided anti-patriotic melee.  

However, as Krugman noted, much of world trade remains invoiced and settled in U.S. dollars; many banks based outside the United States nonetheless offer dollar-denominated deposits; many non-U.S. corporations borrow in dollars; central banks hold a large share of their reserves in dollar assets; and so on. The assumption was that, a bit like diamond, US dollar is forever. In reality, no dominant reserve currency has had an indefinite life-span.

What Krugman failed to understand is that it is precisely the current coercive monopoly of the US dollar – the world’s disproportionate dependency on US dollar in trade invoicing and settlement, and the dollar reliance by non-US corporate and financial giants, and dollar’s high share in central banks’ reserves – that increasingly worries not just the Global South, but an increasing number of major economies in the West. 

When the dollar is weaponized by the US foreign policy in the name of international community but without the broad support of international consensus, it puts trade invoicing and settlement, foreign corporates, financials and central bank reserves at risk.

True, recently US Secretary of Treasury Janet Yellen said there’s still no alternative to the dollar-based monetary system. Then again, not so long ago, she also warned about a catastrophic scenario if Washington failed to agree on a (still another) new debt limit. Similarly, the British, too, touted the blessings of their sterling pound until 1914. But that primacy ended with the overstretch of the UK economy after 1945. 

The early 21^st century has its unique characteristics, but it won’t be that different.

Advantages of diversification

How is the BRICS contributing to diversification? Thanks to its organizational flexibility, the bloc makes possible unilateral, bilateral and multilateral measures. Analytically, these range from gradual reforms to more unilateral individual measures. These, in turn, are driven by the original BRICS founder economies (Brazil, Russia, India and China), the new aspiring members and the coalition partners who share its vision and are considering membership as well. 

Some 22 countries have formally applied to join the group, while an equal number of states “have been informally asking about becoming BRICS members,” according to Anil Sooklal, South Africa’s ambassador-at-large responsible for ties with Asia and the BRICS. Reportedly, countries looking to join the bloc include Argentina, Iran, Saudi Arabia, and the United Arab Emirates.

Indeed, the rising number of populous and large emerging economies make possible the kind of “network effects” and “positive spillovers” that will be critical to launch the new critical infrastructure for the proposed alternative global financial system. 

However, what the BRICS offer is not simple de-dollarization. The goal is not to eliminate the dollar, which is typically the depiction by the critics and political adversaries of the BRICS, particularly in the West. At the eve of the Ukraine conflict, Atlantic Council characterized Russia and China as “partners in de-dollarization.” That, in turn, was portrayed as “an alternative to the US-dominated SWIFT” [the currently dominant payment system]. Touted widely in the West, the cooperation of Russia and China is understood as a de jure alliance, and de-dollarization as a ploy for dollar substitution. 

The realities are a bit less scandalous and more nuanced. The BRICS have little to do with rogue states seeking covertly to subvert international order. Rather, like asset managers who seek to maintain appropriate diversification in their portfolios, the BRICS’ strategic objective is diversify and recalibrate rather than simple de-dollarization.

From Keynes’s Bancor to the BRICS’ currency diversification

The skeptics say that the dollar has been buried many times before. Why should it die this time? But who says it would have to die. The more, the merrier. Most BRICS economies still rely significantly on the US dollar, whereas those that have been sanctioned by the US and/or its allies have significantly reduced their dollar reserves, often opting for gold instead. 

What the major BRIC economies seek for is a more diversified global currency regime. The present path is untenable. If it is not remedied gradually and over time, it will change through a major world crisis, disruptively. The BRICS goal is not to replace the dollar. Rather, it is to diversify the monetary system so that it would better reflect today’s world economy. 

In historical view, it’s far from a new idea. John Maynard Keynes made a similar argument for the proposed supra-national currency bancor (the name was inspired by the French banque, “bank gold”) in Bretton Woods in 1944. But the idea was torpedoed by the U.S. negotiators, who wanted to replace the UK pound with the dollar as the world’s major reserve currency. However, Keynes cautioned that the dollar primacy would result in great uncertainty and volatility following the reconstruction and recovery of Western Europe and other major economies.

That’s what ensued in 1971, when President Nixon ended unilaterally the convertibility of the dollar to gold. Though introduced as a temporary measure, it made U.S. dollar a permanently floating fiat money. As gold no longer offered a yardstick for value, the perception of value replaced value itself. The consequent price shock reverberated across the world. With the twin oil crises, it was followed by the quadrupling of oil prices, then runaway inflation and stagflation, and eventually record-high US interest rates and massive rearmament drives. 

Rise of complementary institutions

In geopolitics, the U.S. has continued to lean on major Western economies and Japan, but in international economy it refused to renounce the exorbitant privilege. As a net consequence, the dollar monopoly contributed to asset bubbles in the 1980s, early ‘90s, early 2000s and finally in 2008. Amid the Great Recession, China’s central bank governor Zhou Xiaochuan revived the idea and urged major Western economies to “reform the international monetary system.” 

Great pledges were made in Brussels, Washington and Tokyo, but nothing much happened. Hence, the efforts at complementary development institutions and critical infrastructure, including the BRICS New Development Bank (NBD), the Asian Infrastructure Investment Bank (AIIB), the Bridge and Road Initiative (BRICS), and the quest for new currency arrangements.  

The BRICS do not want to subvert the world order. Rather, they seek to foster one vis-à-vis diversification. Nonetheless, global currency arrangements must not just the interests of Americans who account for 4.1 percent of the world population. It must also reflect the aspirations of the multipolar world economy in which global growth prospects are driven by the large emerging economies.

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/

The original commentary was released by China-US Focus on Aug. 4, 2023. See also Dr Steinbock’s interview by Berliner Zeitung “Wollen die Brics den Dollar ersetzen? Das sagt ein Wirtschaftsexperte dazu” on July 27, 2023. Berliner Zeitung is one of the leading German dailies.