Analyze "The Hindu" Editorial

[ankursanghi]

Hi guys!!

For people like me (engineering students and having special disliking for economics), this article from Hindu might provoke interest:

http://www.hindu.com/2005/08/01/stor...0104471000.htm

At the same time, since I don't understand a lot of economic terms, I have posted my questions here.

Please enlighten fellow members and me about the terms and their significance.

[vamsi0077]

Recently there has been a lot of talk about the pact reached between Dr. Manmohan Singh and George W of Bush. Let us now look at the details pact and how it benefits INDIA and what are the consequences that have led Manmohan to sign this pact and what INDIA is going to lose because of this pact.

According to this agreement, US recognises INDIA as a nation with advanced nuclear power and provide full cooperation for the civilian nuclear programme. But in payback for this we must seperate the civilian and military nuclear programmes in a phased manner and the civilian programme must be voluntarily brought under the inspection of foriegn powers (International Atomic Power Agency).

This is a very big step in nuclear programme. till now india has been in isolation with respect to nuclear technology. Indians have been developing nuclear technology indigenuously. It has been very independent in its nuclear policy, which was formed by the steel lady of india Smt. Indira Gandhi. but the present step taken by Dr.Manmohan is in complete opposition to the policy framed by Indira Gandhi.

What led to this drastic change in policy?
Let us look at the consequences which pushed India into the pact.

The tarapur nuclear power plant set up with the help of U.S.A has a total capacity of 400MWe. But dut to lack of fuel ( Uranium) to the reactor it is running at a lower capacity of 320MWe. The Plants like kalpakkam which have been developed indigenuously are running out of fuel and they are running at a very low plant load factor. After building the first nuclear power plant we have targeted an installation capacity of 10,000MWe by 2000. even after 5 Years into the new millenium we hav achieved an installed capacity of 3,300MWe which is way below the expectations. also the new fields found in Nalgonda district in Andhra Pradesh are also not being explored due to some environmental problems.

Around 50% of the world’s electricity is produced using nuclear energy. in some countries this goes upto 70%. Nuclear Power is economically cheap and is immune from fluctuating oil and crude prices. But the situation is completely different in INDIA. only 3% of the power is generated using Nuclear energy, which is less than the share of wind energy.

So to achieve development in Nuclear energy we needed fuel and advanced technology. All these conditions led Dr. Manmohan to take a drastic change in the nuclear policy and sign the pact with U.S.A

Now coming to what INDIA has given up..

1. Independence in the nuclear policy.
2. The defence grade plutonium which was obtained after processing of Uranium to make defence grade weapons cannot be used because of inspection of foriegn powers.
3. Civilian and Military Nuclear operations are to be seperated.
4. There has been a rumour that Dr.Manmohan has sidelined the IRAN-PAKISTAN-INDIA oil pipieline, which was being opposed by U.S.A, in favour of this pact, although Dr. Manmohan has condemned this and said that ” INDIA IS NOT FOR SALE ”

Thats all abt the Nuclear Pact between INDIA and U.S.A

Further Articles that can be read on this topic are

http://www.hindu.com/2005/07/22/stor...2207191200.htm

http://www.hindu.com/2005/08/02/stor...0201251000.htm

Regards
Vamsi Krishna

[vamsi0077]

Recently you must have heard of Chinese People’s Bank Of China revaluing their Currency (Yuan).. you should have really wondered what this revaluation is.. and why are they doing it now!! let us clear the air on this topic.

Until this revaluation the rate of yuan was fixed (pegged) to the dollar at 1 dollar = 8.28 yuan.
Unlike Indian Rupee which is in float mode.. which is traded daily in the forex market.. whose rate changes every day.. chinese yuan is not so. they have fixed this rate in 1997. It is an artificially low rate.

You would wonder why a country would want to fix its currency at a lower rate and USA is pressurising China to revalue its currency Upward.

If the value of the currency is lower the exports from the country will become cheaper and the imports will be inhibited due to larger costs.

Let us look at this in a mathematical way.
export of a item = 100$.
Let us consider 1 dollar = 10 yuan.
then the value recovered in terms of yuan will be 1000 yuan.
Let us consider the yuan is revalued and is now at a stronger position ( revalued upwards )
1 dollar = 9 yuan.
Then the value recovered in terms of yuan will be 900 yuan.

And also if the currency is stronger the exports also will become costlier making the importing compnies look for alternatives.

Why is USA pressurising China to revalue its Currency?
around 60% of chinese exports go to USA. so they r having to shell out more money.
wheras around 4% of US exports go to china.

now that with all the pressures mounting on them to revalue their currency they hav revalued it by 2.1% and removed the system of pegging the value. now they hav introduced a system where the yuan can float in a range of 0.3%.

This is all abt the Chinese Revaluation of currency.

Regards
Vamsi Krishna

[lomi]

Originally Posted by vamsi0077

Recently you must have heard of Chinese People’s Bank Of China revaluing their Currency (Yuan).. you should have really wondered what this revaluation is.. and why are they doing it now!! let us clear the air on this topic.

Until this revaluation the rate of yuan was fixed (pegged) to the dollar at 1 dollar = 8.28 yuan.
Unlike Indian Rupee which is in float mode.. which is traded daily in the forex market.. whose rate changes every day.. chinese yuan is not so. they have fixed this rate in 1997. It is an artificially low rate.

You would wonder why a country would want to fix its currency at a lower rate and USA is pressurising China to revalue its currency Upward.

If the value of the currency is lower the exports from the country will become cheaper and the imports will be inhibited due to larger costs.

Let us look at this in a mathematical way.
export of a item = 100$.
Let us consider 1 dollar = 10 yuan.
then the value recovered in terms of yuan will be 1000 yuan.
Let us consider the yuan is revalued and is now at a stronger position ( revalued upwards )
1 dollar = 9 yuan.
Then the value recovered in terms of yuan will be 900 yuan.

And also if the currency is stronger the exports also will become costlier making the importing compnies look for alternatives.

Why is USA pressurising China to revalue its Currency?
around 60% of chinese exports go to USA. so they r having to shell out more money.
wheras around 4% of US exports go to china.

now that with all the pressures mounting on them to revalue their currency they hav revalued it by 2.1% and removed the system of pegging the value. now they hav introduced a system where the yuan can float in a range of 0.3%.

This is all abt the Chinese Revaluation of currency.

Regards
Vamsi Krishna

Nice explanation there and did anyone say chinese are smart, they are very smart.

[vamsi0077]

seems like no one reading the hindu editorial.... almost no response to the analysis.... ths thread has become inactive.. cmon friends put in ur thoughts on the issues that hog the limelight.

[DesiGuru]

This thing on the chinese thingies is more like fact reporting... Was this an editorial??

The macroeconomics is i am guessing very complicated. China is a heavy exporter to the US... India is not even in the same league...
What China has done now, India already has approx the same approach about the Rupee valuation. There are no set figures but the RBI does its review of what the value should be with no exact cap...

How the Chinese managed to keep the yuan constant for so many years? Why did they do it? China is booming big time So did they pull off a hyper successful macroeconomic strategy? An editorial should be going into these things...

K

[convolutedsignal]

No way on earth is that a Hindu editorial..Ive been reading the Hindu for well almost my entire life now and Im sure that thats not the way any self respecting Hindu editor writes..Am stuck in Delhi now and am disgusted with TOI..Frankly beats me how they call it a newspaper..The frontpage never has any news the editorial page sucks big time..And tho ppl might know about who is screwing who or who partied where or what the girls are weraing in DU there is absolutely no news of what happens anywhere else in India..DT of course is a seperate issue altogether..They have this very innocent SMS joke of the day n trust me lotsa parents would have a tough time trying to protect their children from the daily newspaper of all things!..N the worst thing of em all is the fact that its the world's largest selling newspaper in the World..I guess we are going the America way..What next Zoom is the most watched news channel?
P.s. Sorry for digressing from the topic but my newspaperwalah doesnt deliver the Hindu n I really was pissed off abt not knowing a single pice of info abt the G4 resolution for an entire frickin week

[convolutedsignal]

This is a Hindu editorial on the Chinese revaluation..Aah the joys of reading a well written piece n DG measures up to your parameters?






The long anticipated revaluation of the yuan might have been below market expectations but there is no doubt at all that the announcement by the People's Bank of China has major significance that extends beyond China and its principal trading partners. The yuan had been pegged at 8.28 to the dollar since 1995 and the new rate at 8.11 represents a 2.1 per cent revaluation. After abandoning the decade-old dollar peg and replacing it with a trade-weighted basket of currencies, the new exchange rate system is similar, although not identical, to the `managed float' system followed with great success in India. The yuan will be allowed to float in a narrow range of 0.3 per cent up or down from its previous closing. The new system gives greater flexibility to the Chinese monetary authorities. It will be watched closely by central banks and currency traders round the world, not only for its mechanics but also to decipher the yuan's movements over the short term. The expectation is that, having moved away from a fixed exchange rate mode, the Chinese central bank might loosen up further in the days to come. Much of the debate has tended to look at the issues from the perspective of the country's trading partners. Beyond the compulsions of trade, the domestic macroeconomic situation also played a major part in the decision.

The fixed exchange rate regime served China well for most of the last decade. It was one of the pillars of a highly successful export-led growth strategy that made the country the world's factory. The yuan emerged unscathed during the Asian crisis of 1998 by remaining pegged to the dollar. Speculative forces that spread uncontrollably wreaked havoc on many other Asian currencies and economies. While the Chinese experience had been favourable and emulated with success by Malaysia under Prime Minister Mahathir Mohammad, the time for re-examining the exchange rate system had come. Much has been said of the pressures emanating from the United States and other developed countries that are China's principal trading partners. An artificially low yuan-dollar rate privileged the country's exporters. Indeed protectionist sentiment has been gaining ground recently, with America reimposing quotas on Chinese textiles. It was not just the fear of an external backlash but also the realisation that an exchange rate correction would assist macro-economic consolidation that helped the shift to a flexible system. The dollar peg virtually compelled China to follow the easy monetary stance of the American Federal Reserve while the recipe for its red-hot economy was monetary tightening and higher interest rates. The country's current account surplus, which stood at 4.2 per cent of GDP in 2004, was becoming embarrassingly large. It remains to be seen what impact the recent revaluation of its currency will have on the external trade profile of the world's fastest growing economy.

[vamsi0077]

Originally Posted by DesiGuru

This thing on the chinese thingies is more like fact reporting... Was this an editorial??

An editorial should be going into these things...

K

Originally Posted by convolutedigital

No way on earth is that a Hindu editorial

Friends

This is an analysis of the HINDU editorial.. not the editorial itself.. that thing is just what i hav understood after reading the editorial

Pls don't misinterpret it.........

[convolutedsignal]

Sorry buddy kinda got mislead by the title and by the desi guy