How India lost rapport with Nepal...

On 28th October, we got two major news stories from Nepal. First, Bidhya Bhandari was elected as the first woman President of the country; second, Nepal inked its first fuel agreement with China thus ending decades long monopoly by India.

While the news of a woman leader being elected as the President of a country was news that brought cheers to many of us in India as we saw it as a sign of decreasing gender inequality in the Subcontinent, but the other one about the fuel deal with China surely upset many on both sides of the border.

India and Nepal had a historic bonhomie because of the similar cultural and social structures. India was in fact one of the first nations which helped Nepal with relief measures when the earthquake struck it.The relief work of Indian army and other volunteer groups was lauded by one and all, until of course the Indian media started harassing the victims with insensitive and completely apathetic questioning. Even after the media fiasco the work of other India agencies
was widely acclaimed.

The problem between the two nations started shortly after the Nepalese constitution was adopted by the elected constituent assembly of a sovereign country. Some groups in the southern part of Nepal along the Indo-Nepal border started protesting against the constitution on the pretext that the Madhesi people and their interests have not been properly dealt with. The Indian government in an unprecedented move decided to formally pressurise Nepal to not accept the constitution. This was perhaps the first time that Indian government formally tried to interfere in the internal matters of Nepal which is a sovereign country.

This formal acknowledgement of the grievances of the Madhesi people gave a fillip to their movement and within days the protests became violent. The major roads that were used for transportation of fuel from India to various destinations in Nepal passed through the region marred by protest and violence. Many transporters refused to enter landlocked Nepal due to security concerns. The Nepal government tried to allay their fears by stating that it will guarantee the safety of the trucks entering from India. But even after such Guarantee of safety the trade did not resume.

All this led to acute fuel shortage in Nepal which was further worsened by the festive season and the chilling cold season which was just beginning. With scores of trucks lining  up on the border and refusing to enter Nepal the situation kept on deteriorating with fuel rationing across the Himalayan nation. The Nepalese people felt that India was using its fuel monopoly to force Nepal's hand.They are accusing India of perfidy.

China, at this point, tried to quell the fuel dearth by agreeing to donate 1.3 million litres of petrol to Nepal. Nepal which was irked by the hegemonic attitude of India thus decided to sign its first fuel agreement with China. China National Oil Corporation signed the MoU with Nepal government, ending a decades-long monopoly by India.

The relations between New Delhi and Kathmandu have reached an all time low following the recent events. The facade that is left of the good relations is also eroding quickly. It is the need of the hour for both the countries to iron out their differences as sour Indo-Nepal relations are in the interests of none. The business on the Indian side and the common people across the border are both on the losing side if this ebb in relations is not addressed with utter urgency and sincerity.

  

Monday Market Massacre -effect of the chinese slump

On Monday equity markets allover the world went on a downward spree. This avalanche in the markets was triggered by over 9% rout in the Chinese markets. Chinese markets plummeted owing to the fears of the economic slowdown despite the devaluation of Renminbi. The devaluation of Yuan, officially the Renminbi, led to speculation that the economy is slowing, and this slowdown has led to the devaluation of Yuan to contain this slowdown by increasing exports.But, it seems as though China is on a unmanageable slow down trajectory.And similar fears among the investors has led to an increase in the volatility of the markets.

Tremors of the global equities sell-off were felt in the currency markets, bullion markets, and energy markets.The Rupee hit 66.60 against the US dollar on Monday. The rupee, however, gained 54 paisa to close at 65.87 on Tuesday, as the Chinese central bank cut the interest rates by 0.25 percentage points and the reserve requirement ratio by 0.50 percentage points.Gold prices increased with the rise in fear over the volatility in the global markets while the oil prices continue to be decreasing amidst supply glut.

As far as India is concerned, both the Sensex and Nifty took a beating on Monday but have regained some of their losses in trading on Tuesday.Indian economy though vulnerable to the global changes, especially those in China, is comparatively more robust than other economies due to a variety of factors.First,inflation rate is under control and moderate; second,current account deficit(CAD) is low; third,fiscal deficit is manageable; fourth,growth is still good compared to other major economies; and with positive investor sentiments over increase in the infrastructure spending and most probably the passage of bills like GST.An expected untimely rate cut by RBI is also a major factor which is keeping the market sentiment in high spirits.

Experts have opined that the volatility in the markets will continue mainly due to decreasing manufacturing growth rate in China.The stocks continue to plummet wiping billions from Chinese equity market, amidst the efforts by the Chinese government to contain the losses ,showing that the government efforts have not had the desired effect. What remains to be seen is that will China be able to curtail this downward spiral?

Why Oil Prices Are Falling?

The oil prices are falling in the international market with the oil prices on August 10,closing at $49.45 per barrel of oil .But why?

This slump in the oil prices can be understood using rather jejune rules of supply and demand economics.The changes in the supply and demand for any quantity changes the price of the commodity will also change and oil is no exception.So in the present scenario where the supply is going up and the demand is plummeting the prices were meant to go down according to the supply-demand curve.

Now the question arises as to why is there a sudden supply glut and fall in demand of oil?

Enumerated below are the main reasons that have led to this recent over supply and reduced demand for crude-

1)Increased shale oil supply from the US.

2)Unwillingness on the part of OPEC(Organization of the Petroleum Exporting Countries),the oil producing cartel of the gulf countries, to cut own production.

3)Slowdown in the economy of China,which is one of the biggest consumer of oil.This has led to the  demand for oil plummeting in China.

4)Iran Nuclear Deal effect-After Iran signed the historical nuclear deal the trade sanctions on Iran have been lifted.Thus Iran can export more of it's oil to the world.This will lead to increased availability of oil.

5)Paradigm shift in the energy procurement methods adopted by many countries, all over the world, with increased focus on clean energy.

Because of the above stated factors the oil prices are going down and are not going to recover anytime soon.

Should the Parliamentarian's salary be deducted for disruptions??

The twenty one day long Monsoon session of the Indian Parliament has started, and as expected no legislative business has been done in it's preliminary days due to the pandemonium that ensued. The treasury benches are feeling the heat from a stiff Opposition over the latter's demand of removal of the External Affairs minister and two of the ruling party's Chief Ministers.
The Government is unrelenting and not willing to budge to the demands of the opposition. This clash of egos has led to the futile attempt by the Speaker and Chairman of the two houses to ensure the functioning of the parliament.
All this clamor and an unrelenting attitude on the part of both the opposition and the government has led to wastage of the precious time of Parliament.The disruptions in Parliament lead to not only the wastage of time but also of the taxpayer's money.
Each minute of Parliament in session costs approximately Rs. 29,000.If all 18 working days of this short session are disrupted, an estimated Rs. 35 crore of the taxpayer's money will be lost.This wastage of public money has led to the debate that should the parliamentarian's be fined for disruptions and their salary be deducted?
In order to fully understand the repercussions of such a move we need to understand the  role that the representatives of the people that is our MPs are entrusted by the constitution to do. The Members Of Parliament are chosen so that they can raise the issues of public importance in the parliament.The Opposition is also required to keep a check on the policies and overreach of the government.And the best way to bring accountability is through the Parliament.
Now coming on to the point of deductions in salary and fine for disruption of the working of the Parliament.
I think this approach to solving a deadlock is not feasible and goes against the right of the MPs to raise issues without any pressure. Such a rule, if implemented, would stifle the opposition and will provide full leeway to the Government without any check on it's power and posterity will not be too kind to us as a form of showing dissent will be snatched away from them.
Even Mr. Jaitley our Finance Minister, who was the leader of the opposition in the Upper House, had once said that "Disruptions are a completely valid way of protest". Most of the MPs feel the same way e.
Therefore, deduction of salaries and fining the MPs is not the solution to ensure that the Parliament functions.The more amicable solution to the problem of disruptions would be for the Government and the Opposition to sit together and iron out their differences on various contentious issues outside the parliament and use the time in the Parliamentary Sessions for the legislative discussions and meaningful debate.

The Chinese Slump.

The People's Republic of China, the world's second biggest economy is facing a major crisis today. With over 30% of the value being knocked off the Chinese market since the slump began in mid-June.

The crisis comes after the rallying of the Chinese markets as the:

1)county's central bank cut interest rates 3 times since November last year,

2)the rules regarding Margin trading were eased.

Margin trading has always been considered risky, but with the loosening of the reins, trading in stocks on borrowed money by mostly the retail investors of china increased.

 Unlike most other stock markets, where investors are mostly institutional investors, in China, 80% of investors are small retail investors.All the above factors led to volatility in the markets.with Greece in the backdrop,the volatility in China is of great concern owing to the huge size of the china's economy.

The concerns are justified as in the last three weeks about $3 trillion ,which is more than 10 times the GDP of Greece($237 billion in 2014) or 1.5 times the GDP of India($2 trillion) has been wiped out from the chinese markets.

With the shanghai composite losing about 34% in 3 weeks and the number of chinese firms who want to halt their trading in the Shanghai and the Shenzhen Exchange reaching to above 1200 out of the total 2800 enlisted firms, some are describing it as the busting of the chinese bubble.
 
Effect of the Chinese slump on the world economy:

1. Metal prices plunged with the crash in the Chinese markets and the strengthening of the US dollar.
2. Asian markets as well as the US markets have also shown a slowdown.
3. Commodities like gold, silver and platinum fell as a stronger US currency makes dollar dominate        commodities more expensive for holders of other currencies.
4. Crude oil prices along with coal, natural gas and iron ore price are trending lower.
5. Aviation sector shares benefited with the fall in crude oil prices as it accounts for 50% of their operating cost.

With the Eurozone members giving Athens until the end of this week to propose reform measures in order to secure the funding it needs to stay in the euro zone, and the market crash in China threatening a new blow to the country's already slowing economy, all we can do right now is observe and take notes.