Last month we witnessed one of the most dreadful naxal attack since the 60 years of independence.76 CRPF jawans lost their lives fighting against the naxals.The media has been calling P.Chidambaram the best home minister India ever had,but I can say this with great amount of certainty that "India's best home minister" was completely shaken after this incident.He offered his resignation which was not accepted.Opposition had a valid point that,the Home minister by offering his resignation,is sending wrong signals to our enemy.
Naxals claim to be fighting for the rights of the poor in the rural areas of India,but the question is-Do the rural people really consider the naxals their messiah???
In the last decade the naxal recruits have increased tremendously.These recruits are mainly from the rural areas.Some of them fight for the ideology and most of them fight for the money.However it is certain that naxals do receive public support.Jharkhand CM Shibu Soren won elections in few constituencies with the help of naxals.Nitish Kumar has always been against the use of force on naxals.Recently Railway Minister Mamta Banerjee went on record to say that there were no naxals in Lalghar.There were rumors circulating in the media that Mamta Banerjee had sought help from the naxals to carry out her protests in Singur against the Tata's.The reason why naxals have been receiving support from these politicians is because of their popularity amongst the locals. Hence we cant outrightly reject the possibility of naxal's receiving support from the poor in rural areas.Naxals have been targeting the corporates and they have been vocal against the illegal mining activities carried out in the backward areas.Their presence has been observed in areas where illegal mining activities are widely carried out.In the past they have been attacking few industrial units in Bihar and Orrisa,they also had kidnapped a group of Posco executives who visited India after signing a MOU with the Orissa Government.Naxal ideologues are of the view that the presence of these corporates would hamper the lives of the tribal people.The naxals claim that they are against the signing of these MOU's which would eventually lead to the depletion of mineral resources and forest cover making life difficult for the tribals in these areas.In all debates it has been clearly evident that the so-called human right activists bring all these arguments forward to defend the maoists.
The naxal sympathizers must understand that these are just tactics used by the naxals to prevent any kind of development in these backward areas.MP's and MLA's refrain from visiting their constituencies because of their fear of the naxals,this prevents any possibility of carrying out developmental activities in these backward areas.People in these areas are generally isolated from the outside world,and eventually they are forced to support the naxals due to the lack of availability of external help.
So therefore it has to be understood that eliminating naxals is the only way through which developmental activities can be carried out in these areas.The CRPF jawans and the local police should be provided with proper training,logistics and weapons to fight the naxals.It is necessary for the CRPF and the police force to work together,this clearly did no happen in dantewada.It should be a collective responsibility of the state and center to eliminate these anti-nationals.Air force should be used for logistical support since these areas are highly inaccessible.Post-Dantewada its evident that negotiations with the naxals should be of no use,naxals may probably use the cease-fire time to strengthen their army.The government should look into the channels through which these naxals receive their funding,it has been widely speculated that they receive their funding from China.This angle must be seriously probed into,because China can use these maoists to fight a proxy war against India,and of course lets not forget that the maoists in Nepal have openly said that they would support the Indian naxals.The Indian government should take the right steps to prevent the naxals from seeking help from the other side of the border.In a recent article in the DNA it was mentioned that there have been instances in the past where Christian Missionaries operating in the remote areas have provided support to the naxals.This probably justifies the naxal aggression against the RSS social workers.
It has been encouraging to watch the opposition parties promising unconditional support for government on this issue,but sadly there seems to be difference of opinion amongst the members of the UPA.The recent article by Digvijay Singh in the Economic Times clearly highlights this difference in opinion,Mamta has always been against the use of force against the naxals.The face of the Gandhi's are always brought forward when it comes to fiscal spending,but unfortunately when it comes to issues such as naxailsm and terrorism the Gandhi family chooses to remain silent.Sad that media never questions the "YUVRAJ"of Indian politics on these issues,but I am quite sure that if he is asked questions on this issue,he would go ahead and blame the system-conveniently forgetting the fact that the system has been designed by his great grand father,grand mother and his father.The reason I have brought Rahul Gandhi into picture is because it is very well known that Digvijay singh has been Rahul Gandhi's mentor.Digvijay through his article in ET has asked the government to negotiate with the maoists,whereas P.Chidambaram has initiated the operation Green Hunt.The whole country would like to know which side the Gandhi family is in,and as always the Gandhi family chooses to remain silent on issues which would fail to garner any political mileage-"Power without Responsibility"
To conclude I would only say that it is time the government gets its act together on this issue.The government must speaking in an united voice.I am saddened by the recent difference of opinion between ManiShankarAiyyer and Digvijay Singh v/s P.Chidambaram.
Tuesday, April 27, 2010
Monday, April 5, 2010
The Dragon Tactics
Pegging is the process of stabilizing a particular currency.Yuan is a fixed currency and it is pegged against the US dollar.The six month high for Yuan is 6.83 and the six month low for the currency is 6.82.The people's bank of China has successfully managed to keep the yuan between these levels.So how is pegging helping China?
China undervalues its currency,this makes the Chinese exports to the US cheaper.This has been one of the main reasons the Chinese manufacturing industry has flourished.In India we often come across reports of the textile industries being badly hit due to Rupee appreciation,This is because the Rupee is not a fixed currency(however Nepalese rupee is pegged against the Indian Rupee),R.B.I enters the currency markets generally to reduce the volatility,to reduce the losses for the importers and the exporters.The RBI perceives that long run equilibrium is different from the actual values.However in the past we have seen RBI allowing the Rupee to appreciate and depreciate up to10% over a period of 12 months(we have seen the rupee fall from 39 to 44 in 2009),and I am of the view that these actions are quite justified in case of a developing nation,comparing the fluctuations in the Yuan and Rupee it can be said that RBI has not been as aggressive as the People's bank of China.We have to appreciate RBI for letting the market forces determine the movement in the Rupee.
Having said that we have to understand the fact that a fixed Yuan actually benefits the exporters in China,and therefore may have a negative impact on the exporters in India.For instance when it comes to pricing we can say that the Chinese textile industry has an upper hand over the Indian textile industry because of the fixed Yuan and the floating Rupee.Unfortunately Indian government has always been in the back foot when it comes to raising its voice against China.
For a brief period the Yuan was allowed to appreciate,and during this period the Yuan appreciated by 20%.Most analysts today are of the view that Yuan is undervalued by 10%-50%.So if the central bank stops pegging we can say that the Chinese manufacturers will be forced to raise their prices in proportion with the appreciation in Yuan.
Recently many senators in the US congress have been protesting against this policy of China.A group of senators in the US are planing to bring in a legislation which would impose taxes on Chinese imports.Increase in Chinese imports has made life difficult for the local US manufacturers,this legislation should certainly help the US manufacturers compete with their Chinese counterparts.However any aggressive step taken against China will have a negative consequence on the US considering the fact that China is currently sitting on 2.4 trillion of foreign reserve,most of which is US T-bills.This is one of the main reasons why the recent statements by the treasury secretary T.Geithner does not sound threatening towards China.It is going to be interesting to see if US is going to accuse China for being a currency manipulator considering the fact that China is currently having T-bills worth trillions.Let us also not forget that the US consumers are the major beneficiaries of these low priced Chinese products.So any action against China can potentially affect the US bond market and the US consumers.
Coming back to China-to prevent the Yuan from appreciating the Chinese central bank sells Yuan.The Chinese central bank may increase the supply of Yuan to prevent it from appreciating,this may in turn lead to a rise in inflation in China.Looking at the broader picture we can actually say that the Chinese central bank is helping the Chinese manufacturers sell their products in the US markets,but what is unfortunate is that these benefits does not get transferred from the employers to the employees.Workforce in China continues to be exploited to meet the rising demand,and we come across cases of workforce exploitation in China on a regular basis.
Considering all this it should be interesting to see how the US and China deal with this issue.
China undervalues its currency,this makes the Chinese exports to the US cheaper.This has been one of the main reasons the Chinese manufacturing industry has flourished.In India we often come across reports of the textile industries being badly hit due to Rupee appreciation,This is because the Rupee is not a fixed currency(however Nepalese rupee is pegged against the Indian Rupee),R.B.I enters the currency markets generally to reduce the volatility,to reduce the losses for the importers and the exporters.The RBI perceives that long run equilibrium is different from the actual values.However in the past we have seen RBI allowing the Rupee to appreciate and depreciate up to10% over a period of 12 months(we have seen the rupee fall from 39 to 44 in 2009),and I am of the view that these actions are quite justified in case of a developing nation,comparing the fluctuations in the Yuan and Rupee it can be said that RBI has not been as aggressive as the People's bank of China.We have to appreciate RBI for letting the market forces determine the movement in the Rupee.
Having said that we have to understand the fact that a fixed Yuan actually benefits the exporters in China,and therefore may have a negative impact on the exporters in India.For instance when it comes to pricing we can say that the Chinese textile industry has an upper hand over the Indian textile industry because of the fixed Yuan and the floating Rupee.Unfortunately Indian government has always been in the back foot when it comes to raising its voice against China.
For a brief period the Yuan was allowed to appreciate,and during this period the Yuan appreciated by 20%.Most analysts today are of the view that Yuan is undervalued by 10%-50%.So if the central bank stops pegging we can say that the Chinese manufacturers will be forced to raise their prices in proportion with the appreciation in Yuan.
Recently many senators in the US congress have been protesting against this policy of China.A group of senators in the US are planing to bring in a legislation which would impose taxes on Chinese imports.Increase in Chinese imports has made life difficult for the local US manufacturers,this legislation should certainly help the US manufacturers compete with their Chinese counterparts.However any aggressive step taken against China will have a negative consequence on the US considering the fact that China is currently sitting on 2.4 trillion of foreign reserve,most of which is US T-bills.This is one of the main reasons why the recent statements by the treasury secretary T.Geithner does not sound threatening towards China.It is going to be interesting to see if US is going to accuse China for being a currency manipulator considering the fact that China is currently having T-bills worth trillions.Let us also not forget that the US consumers are the major beneficiaries of these low priced Chinese products.So any action against China can potentially affect the US bond market and the US consumers.
Coming back to China-to prevent the Yuan from appreciating the Chinese central bank sells Yuan.The Chinese central bank may increase the supply of Yuan to prevent it from appreciating,this may in turn lead to a rise in inflation in China.Looking at the broader picture we can actually say that the Chinese central bank is helping the Chinese manufacturers sell their products in the US markets,but what is unfortunate is that these benefits does not get transferred from the employers to the employees.Workforce in China continues to be exploited to meet the rising demand,and we come across cases of workforce exploitation in China on a regular basis.
Considering all this it should be interesting to see how the US and China deal with this issue.
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