Category: Economy

More than half a million people of Indian origin live in Singapore. However, this is not the only reason that India and Singapore have come closer than together on multiple levels and spheres.

India and Singapore relations go a long way and have widened and deepened consistently with time. When Singapore obtained its independence in 1965, China-backed communist threats loomed large, while Malaysian and Indonesian domination was also expected. Singapore found a close strategic relationship with India significant for its regional security, which also served as a counterbalance to Chinese influence in international politics. The fact that India had already fought a war against the Chinese in 1962 helped both sides to shake hands enthusiastically. In turn, Singapore has proved to be an important strategic trading post for India giving it trade access to the Far East.

There was a time when India and Singapore held rival positions on the Vietnam War and the Cold War, as they belonged to two different camps on international foreign policy. Singapore chose to ally with North Atlantic Treaty Organization (NATO), while India being a founding member of the Non- Aligned Movement (NAM), not only supported Vietnam’s independence from France, but also opposed American involvement in the Vietnam War. It also supported unification of Vietnam, and during the Vietnam War, supported the North without militarily opposing the South.

However, India and Singapore grew their relationship strategically and judiciously in the 1990s, when Singapore responded favourably to India’s “Look East” Policy with a long-term vision of expanding its economic, cultural and strategic ties in Southeast Asia to strengthen its standing as a regional power.

India’s Look East policy of 1992, when it embarked upon the path of economic liberalization and export promotion, was immediately responded to by Singapore with a parallel “Look West” Policy. In addition, Singapore has always extended a hand of political support towards India in multiple ways, including getting India into ASEAN as a dialogue partner, getting it the membership of the ASEAN Regional Forum (ARF), and also in initiating ASEAN-India Summit meetings. Then, Singapore (and also Japan) also supported India’s entry in the East Asia Summit (EAS). This fact becomes more significant in the light that India got an entry even when China and Malaysia opposed it. Singapore’s continued efforts also resulted in India’s first-ever Free Trade Agreement (FTA) with any ASEAN country. As a result, India could initiate a politico- strategic relationship with Singapore at two levels simultaneously: bilateral and ASEAN-centric.

ASEAN is composed of 10 countries: Singapore, Malaysia, Indonesia, Thailand, Vietnam, Philippines, Myanmar, Cambodia, Brunei and Laos. The ASEAN countries account for 9.5 percent of India’s total commodity exports, and within ASEAN, Singapore alone absorbs 4.5 percent of India’s exports. From India’s perspectives, Singapore is India’s 10th largest source of imports. At present, it accounts for 3.27 percent of India’s total commodity imports.

Opening New Avenues

Navies of both countries started conducting joint naval exercises and training in 1993, by the names SIMBEX and MILAN near Andaman and Nicobar Islands, and gradually expanded their cooperation in fighting terrorism. SIMBEX is an annual naval combat exercise, and several warships from India and Singapore take regular and active part in this interoperable combat exercise.

As the relationship matured, India and Singapore signed a Defence Cooperation Agreement in 2003, on expanding military cooperation, conducting joint military training, developing military technology and achieving maritime security. As decided under the Agreement, Singapore army and air force may conduct training on Indian soil.

In 2016, India and Singapore signed another agreement for creating a strategic relationship across the board, which includes defence and military, security and intelligence cooperation, political exchanges, enhancing trade and investment, improving financial linkages, improving air connectivity and cooperation in multilateral forums.

A year later in 2017, both signed a Naval Cooperation Agreement for boosting maritime security, joint exercises and mutual logistics support. This Agreement also allows ships of either navy to refuel, restock and rearm at each other’s military bases. The camaraderie between India and Singapore may be judged by the statement of Singapore’s Defence Minister Dr. Ng Eng Hen, who stated after signing the agreement that, “not only would we be more comfortable, we would encourage the Indian Navy to visit Changi Naval base more often”. In addition, the Republic of Singapore Air Force (RSAF) and the Indian Air Force (IAF) regularly conduct joint military training exercises.

Military cooperation of several decades has now transformed into resolving common security challenges for both countries, such as terrorism, maritime piracy, safety of Sea Lanes of Communications (SLoCs), etc. Set up in 2006, they conduct high-level discussions on defence and security through India-Singapore Defence Policy Dialogue. In addition, they cooperate with each other in their fight against terrorism through a Mutual Legal Assistance Treaty in criminal matters.

Evolving a Meaningful Relationship

India and Singapore established diplomatic relations fifteen days after Singapore’s independence in 1965. They kept their relationship alive, and grew it consistently as top leaders from both countries took active interest and action. In the next six years, the erstwhile Prime Minister of Singapore Lee Kuan Yew visited India three times, in 1966, in 1970 and in 1971. In between, the former Indian Prime Minister Indira Gandhi and Deputy Prime Minister Morarji Desai also visited Singapore in 1968. As a sign of close positive relationship, Singapore supported India for a permanent seat at the United Nations Security Council, in cultivating a greater role and influence in the Association of Southeast Asian Nations (ASEAN), in India’s war against Pakistan in 1965, and in the Kashmir conflict.

As the military cooperation enhanced from both sides in the 1990s and 2000s, in the last two decades, both have created economic, political and cultural hubs for each other within their countries. Over time, Singapore has emerged as a strategic partner for India in the Southeast Asia.

In the words of the then Indian Defence Minister, Pranab Mukherjee, in 2006, “Singapore has become the hub of India’s political, economic and security strategy in the whole of East Asia.”

As Singapore completed 50 years of India–Singapore bilateral relations in 2015, Prime Minister Narendra Modi visited Singapore. The Father of Singapore, Lee Kuan Yew, also breathed his last in 2015 and India declared national mourning in his memory.

Great Source of Investment

Singapore is a significant economic partner of India, as after Mauritius, it is the second-largest source of foreign direct investment into India as of 2017–18, and is the largest among the ASEAN member nations.

In 2005, India and Singapore signed the Comprehensive Economic Cooperation Agreement (CECA) as they decided to take their strategic partnership to the next level, and garnering support from the Federation of Indian Chambers of Commerce and Industry (FICCI), the Confederation of Indian Industry (CII) and the Singapore Business Federation to promote trade, economic development and partnerships, it organized the India-Singapore Parliamentary Forum and the Singapore-India Partnership Foundation. Singapore is the first country with which India signed such an agreement.

CECA came into force after much deliberations from both countries, as first the former Indian Prime Minister, Atal Bihari Vajpayee, visited Singapore in 2002, and then during his visit the India–Singapore Joint Study Group was set up, which recommended for the Agreement. Then, for two years, 13 rounds of negotiations took place, and modalities and formalities of the Agreement were discussed and decided. The first review of CECA was done in 2007.

CECA has brought major transformations and excellent results, as it has completely removed tariff barriers, double taxation, duplicate processes & regulations, and has also offered unhindered access and collaboration between the financial institutions of Singapore and India. CECA has also facilitated alliances in Singapore. In 2018, this figure has gone up by 14 per cent compared to that of 2017.

Buoyed by the success of agreements and policies under CECA, Narendra Modi visited Singapore in June 2018 for the second review of the India- Singapore Comprehensive Economic Cooperation Agreement with the Singapore Prime Minister Lee Hsien Loong. The third review has come quite close to the heels of the second review, as in September 2018, India and Singapore formally launched the third review of CECA focusing on trade facilitation, e-commerce and customs. As explained by Mr Iswaran, the third review became important after just four months of the second review because, “CECA has opened up market access for Singapore companies in a variety of sectors including finance, organic chemicals, plastics, as well as electrical machinery and equipment. Our companies also benefit from CECA’s investment protection and dispute resolution provisions, and to Mauritius. They also have mutually improved market access for each other, and have implemented fair and impartial domestic regulations. They promote and protect bilateral trade, and both have unrestricted access to their banks in each other’s country. Temasek Holdings and the Government of Singapore Investment Cooperation (GIC) also have special enhanced investment limits on financial services such as between the stock exchanges of the two countries.

Temasek Holdings is the sovereign wealth fund of Singapore government, and its India portfolio stands at around USD 10 billion. It plans to increase its portfolio further in India, with its India investments in the first three months of 2018 being around USD 1.5 billion. Other components of India– Singapore CECA include economic cooperation in areas like education, science, technology, air services and intellectual property, and relaxed visa regimes for Indian professionals in several areas such as information technology, medicine, engineering, financial, and advertising professionals. The second review of India– Singapore CECA was done by the Singapore Prime Minister Lee Hsien Loong and India Prime Minister Narendra Modi, and through the review the provisions of the agreement were enhanced by means of greater trade facilitation, that is both Singapore and Indian businesses were allowed increased access to each other’s markets.

Tariff concessions were also expanded under the review, for 30 additional products and rules of origin were improved to provide more flexibility for Singapore exports into India to qualify for preferential tariffs under the agreement. S Iswaran was Singapore’s Minister- in-charge of Trade Relations at that time, and he noted, “The upgraded agreement will enable more Singapore companies to qualify for lower tariffs. This improves local exporters’ access to the Indian market. I encourage our companies to make full use of the upgraded agreement and explore more opportunities for collaboration in India.”

In 2017, the total bilateral trade between Singapore and India had and partnerships related to education, science & technology, intellectual property, aviation and relaxed visa regulations for Indian professionals in information technology, medicine, engineering and financial fields to emigrate and work in Singapore.

Under the same agreement, Singapore has invested in projects to upgrade India’s ports, airports and developing information technology parks and a Special Economic Zone (SEZ). With the enhancement of bilateral relations, Indian tourists entering Singapore broke their previous record, as in 2017, 1.27 million travelers went to Singapore. This also made India the third- highest contributor of visitor arrivals can do business in India with greater confidence.” Further, the fact that India’s economy not only continuously expanded at the fastest pace in nine quarters, but domestic consumption and manufacturing also grew strongly has given confidence to businesses on both sides.

India–Singapore CECA benefits both countries in the following ways: there are Mutual Recognition Agreements (MRAs) which help in eliminating duplicate testing and certification of products, then a Joint Council oversees the MRAs. They have a Double Taxation Avoidance Agreement that offers zero capital gains tax for Singaporean companies similar to concessions given by India reached a figure of S$25.2 billion, as India had emerged as Singapore’s largest trading partner in South Asia, while Singapore became India’s second-largest trading partner within ASEAN. Foreign Direct Investment from India to Singapore increased by S$19.3 billion and the Direct Investment Abroad from Singapore to India increased by S$35.6 billion in 2017 from 2005 when the CECA was first signed.

Top imports from India in 2017 include petroleum oils as well as jewellery and precious metals. Top exports to India in 2017 include machineries, petroleum oils, styrene and gold.

Positive Outlook

The warmth in strategic relationship of India and Singapore has grown because of the direct involvement of top leadership from both sides. Prime Minister Narendra Modi feels that, “The future is a world of unlimited opportunities and the two lions (India and Singapore) shall step into it together. The defence relations between the two countries are among the strongest and the two sides are building a ‘partnership of our age.’ When India opened up to the world and turned to the East, Singapore became a partner and a bridge between India and ASEAN. Political relations between India and Singapore are among the warmest and closest. There are no contests or claims, or doubts.”

He further shared, “It is a natural partnership from a shared vision. Our defence relations are among the strongest, for both. My Armed Forces speak with great respect and admiration for Singapore’s Armed Forces. India’s longest continuous naval exercise is with Singapore. It is a partnership at the front-line of India’s global engagement. Singapore is both a leading investment source and destination for India. Singapore was the first country with which we signed a Comprehensive Economic Cooperation Agreement. On the foundations of an extraordinary heritage, the wealth of our human links and the strength of our shared values, India and Singapore are building a partnership of our age. It is a relationship that truly meets the test of strategic partnership.”

With growing engagement, Singapore has started being a key partner in India’s development priorities, such as smart cities, urban solutions, financial sector, skills development, ports, logistics, aviation and industrial parks. India and Singapore have been contributing to each other’s prosperity, and building new partnerships with the passage of time, they have been together building a digital world, using each others’ initiatives for innovations and enterprises.

India and Singapore have several common chords connecting their hearts, and cultural & entrepreneurial arms. Together they have been working to create and enhance the power of mobile and digital technology, with the target of bettering governance and making inclusion possible.

Singapore is small in size, but with global dreams it has proved that nations’ greatness and achievements are not dependent on geographical size. It has not just positively used the strength of its multi-cultural society, but has actually celebrated its diversity, creating a unique Singaporean identity.

Ancient & Modern Connections

India and Singapore could quickly create highly mutually beneficial relationship because of their centuries-old historical and cultural connect which is deep-rooted. India’s centuries-old trade with the South East Asia was possible as trade routes passed through Singapore. Both countries had powerful commercial, cultural and people-to-people links.

Actually, India and Singapore have been connected for trade since the Chola regime in Ancient India. In the modern India, British governing from Calcutta established a trading station in Singapore on the route of the Straits of Malacca and gradually developed it into a colony. Because of this colonial connection we find that India and Singapore have high has also partnered with India’s Larsen and Toubro for similar IT parks in other cities. Tourism has also emerged as a strong sector where the two countries have partnered with magnificent results.

As Indian companies see Singapore as a safe and reliable home, and a conducive and trusted springboard to start internationalizing their businesses, they prefer to open new verticals or expand the existing ones in Singapore. Their work ranges from IT services and education to logistics and manufacturing. As India is the fastest growing major economy in the world currently, and has been on a fast-growing spree for some time now, obviously needing to develop its infrastructure, Singapore companies’ work in India is mainly concerned with Urban Solutions, Power, Transport and Logistics to Food Processing and Education. As regional consumption is growing and infrastructure developments are taking place, both India and Singapore are in a good position to take advantage of each other’s economic fundamentals as well as the region’s growth opportunities.

Cultural Support

Furthering their ancient cultural linkages, India and Singapore have taken several initiatives towards greater people-to-people contact, expansion of tourism and mutual appreciation of each other’s cultures. Indian Presidents, including Dr A P J Abdul Kalam and K R Narayanan, had also played their parts in promoting scientific and cultural collaborations between both countries. During his visit to Singapore in 2005, Dr A P J Abdul Kalam proposed and facilitated collaborations between the Aeronautical Development Agency of Singapore and the Hindustan Aeronautics Limited of India for joint ventures in designing, developing, producing and marketing ASEAN Passenger Jets. Consequently, both countries have initiated engagements and joint programmes regarding aircraft maintenance, repair and overhaul in sync with the growing demands of international aviation industry. Next, both countries have joined hands for technological similarity of institutions and practices, both are quite conversant with the English language, and of course a large number of Indians are part of the Singaporean community.

The relationship has only improved with each passing year. India recognized Singapore as a new and independent country within 15 days of its independence in 1965. Growing on its economic reforms during 1990s and 2000s, India made Singapore one of its strategic partners and on the wings of its Look East Policy created a host of mutual opportunities.

Matching Economic needs

India and Singapore are natural partners in economic and trading activities as India has been making efforts to integrate its economy with the global economy, while Singapore has a small domestic market and it has been looking outward. India’s integration with global economy means more exports, liberal policies for businesses, and more foreign direct investment. As Singapore initially found it difficult to enter the developed market due to cut-throat competition, it found Indian policies and market quite friendly. Soon, the mutual ground of advancement turned into unlimited opportunities for private businesses of both the countries, which were duly supported by mutually beneficial economic and political policies by both governments.

The focus of Singapore’s investment strategy in India has been on promoting private investment from Singapore in India, asking countries like Japan to invest in India and exploring the possibilities of collaborative investment in third countries. It has also focused on infrastructure sector, and has been mainly involved in the development of ports and their upgradation, roads and constructions. The Port of Singapore Authority (PSA) together with the South India Cooperation (Agencies) Limited (SICAL) had upgraded the Tuticorin port in Tamil Nadu, and then the PSA together with the Government of Gujarat had develop a container terminal at the Pipavav port in Gujarat, which became India’s first private sector-run port. The Singapore-based consortium of International Seaports Private Ltd. (ISPL) had upgraded the Kakinada project in Andhra Pradesh.

Singapore’s another area of focus has been development of software technology parks in India, such as the Madras Corridor and International Tech Park Limited (ITPL) near Bangalore. Lee Kuan Yew had taken an active interest in the Madras Corridor project, while his successor, Goh Chok Tong, helped the Bangalore ITPL project become a success. A consortium of Singapore companies led by Ascendas International, the Tata Group and the Karnataka State Government with respective holdings of 40, 40 and 20 per cent, brought success to the project.

Singapore’s Ascendas International cooperation in the field of information and communication technology, biotechnology, biochemistry, pharmaceuticals, efficient use of energy resources and space research. They have also signed an MoU for setting up a Task Force in Information and Communications Technology and Services.

In addition, during his visit to Singapore in 2000, K R Narayanan facilitated Cooperation in the Arts, Heritage, Archives and the Library for two years through an Executive Programme. Both countries also signed an MoU on the loan of artifacts to the Asian Civilization Museum of Singapore during his visit, and on the basis of the presence of a large Indian diaspora in Singapore and India’s Buddhist tourist places, they have been trying to revive their centuries-old cultural linkages. Both countries have decided to jointly develop the Buddhist religious tourism circuit in India and revive a multidisciplinary university in Nalanda in Bihar, because of its importance as the first-ever university in the history of human civilization and one of the great centres of Buddhist learning in the ancient times.

Greater Significance

India and Singapore have helped each other strengthen their larger strategic relationship in the entire Indo-Pacific region. They have created opportunities for exchanges, visits, and exercises, and also for the Singapore military to train in India. Other countries within and without the region have also recognized their strategic and security cooperation in the larger context of Indo-Pacific region. All relevant countries watched closely when both countries held defence ministers’ dialogue in November 2018 and inked a new naval pact.

In 2018, Prime Minister Narendra Modi hosted all ten ASEAN member states in New Delhi for India’s Republic Day in favour of India’ Act East Policy. The usual annual, overall the 25th time, Singapore–India Maritime Bilateral Exercise (SIMBEX) also took place from November 10 to 21. They also held Exercise Agni Warrior, which is the bilateral artillery exercise of the Singapore Army and the Indian Army. This is expected to continue on in 2019.

Simultaneously endeavouring to deepen their economic ties, both countries have been paving a path of mutual peace and prosperity for each other. This included their steps towards equal access, as a right under international law, to the use of common spaces on the sea and in the air. These are significant steps which would mean in the short- and long-term freedom of navigation, unimpeded commerce and peaceful settlement of disputes in accordance with international law.

Using ASEAN as a powerful platform, India and Singapore have not only created strong bilateral relations with each other, but have also taken steps towards creating a powerful front of regional security and a rules based order for peaceful settlement of disputes.

A joint statement laid out a broad vision for the relationship’s development, spanning defence to cultural and people to people exchanges. It also reaffirmed a shared commitment to maritime security and freedom of navigation, as well as safety of sea lanes in accordance with international law, such as the UN Convention on the Law of the Sea.

The strategic partnership will see regular high-level meetings at the level of Defence Ministers, the continuation of joint military exercises across all three service arms and collaboration in defence technology and co-production of weapons.

With Mr Modi pushing infrastructure and smart cities as a key plank of his development strategy, urban solutions a key Singapore strength – has gained salience in the relationship. The two sides agreed to enhance cooperation in sustainable smart city development with Mr Modi urging Singapore to explore the possibility of developing urban centres under the Smart Cities Initiative.

Another agreement on civil aviation will open opportunities for collaboration in development of Indian airports. Singapore is India’s largest trading and investment partners in ASEAN. The increasingly close relations between India and Singapore in recent years have been underpinned by a dramatic growth in bilateral trade.

The traditionally close and friendly India-United Arab Emirates relations have evolved into a significant partnership in the economic and commercial spheres, as recently, the relations between the two countries have witnessed unprecedented improvement, with leaders from both sides visiting each other’s country and signing crucial agreements in various sectors in a bid to improve relations and trade. The strategic decisions taken would go a long way to help each other grow enormously.

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According to annual Economic Freedom of the World report published by the Fraser Institute, Hong Kong has topped the list of the world’s most free economies this year. Next top four regions that have marked their positions in the rankings are Singapore, New Zealand, Switzerland, and Canada. America retained 16th position.

Down by 0.5 points from last year, this year Hong Kong scored 89.6 out of 100 points in the overall economic freedom. Singapore scored 89.4 in the rankings. Around 186 countries received rankings that were based on 10 quantitative and qualitative factors such as levels of personal choice, an ability to enter markets, the security of privately owned property and rule of law on a scale of 0 to 100.

It is noted that Hong Kong has “maintained its economic vitality” regardless of the swirling concerns related to China. It showed small improvements in areas such as business freedom, labor freedom and fiscal freedom.

One of the spokesmen of the Hong Kong government affirmed that the government is very happy with the ranking. In one of the interviews, he said, “The government will continue to uphold our fine tradition of the rule of law, a clean society with a level playing field, an efficient public sector, and a simple tax regime with low tax rates.” He also remarked that in a world of keen competition, they cannot afford to be complacent.

According to the list, the least free economies were countries such as Central African Republic, Argentina, the Republic of the Congo, Libya, and Venezuela whose scores were around three.

Narendra Modi can be banked upon one thing for sure – changing India for the better! He is one Indian leader who has been working to change things domestically and internationally for India without any fear. He has been consistently bold and revolutionary in cleansing and purifying the system. He has definitely taken some drastic measures trying to improve things; and without doubt, India needs these drastic steps to further improve its current political and economic scenario. The latest step of demonetisation was daring, which definitely shook things up, but all for a positive cause.

The night of November 8, 2016 is still fresh in most people’s memory, when Narendra Modi announced that all 500 and 1000 rupee notes would cease to be legal tender past midnight. Though most Indian political parties reacted that the manner of announcement without prior notice or planning was wrong, everyone agreed that the motive of demonetisation was right, and there was praise all along.

Mostly, people have saluted the PM for this historic move, which will surely make the future of India cleaner and more transparent. People understand that every change is difficult in the short run. They must also be confident that long-term gains are in the offing. Demonetization is always challenging in the short run, and can definitely turn advantageous in the medium and long run, if followed by the right policy measures.

As a matter of fact, demonetisation of Nov 8 was definitely inconvenient. The ensuing cash crunch was natural, as suddenly 86% of the currency in circulation ceased to be legal tender. However, it is important to understand demonetization better by analyzing its advantages and disadvantages.

Arun Jaitley, the Finance Minister of India has asserted that, “Demonetisation should be seen according to the effect on the economy. No doubt we will continue to be the fastest growing major economy. When you are in a cusp of history and you look at the long-term impact of these steps which are going to be taken, I think India is going to become a society in the long term with a certainly better GDP, cleaner ethics, a cleaner economy.”

DEMONETISATION AND INDIA

The current demonetisation move is a master stroke as simultaneously the following were targeted: a) Eliminating fake notes, b) Restricting generation of black money, c) Restricting terror funding and other subversive activities, d) Encouraging people to disclose all income and pay tax, e) Becoming more cashless and digitized, and f) Hitting the parallel economy.

Demonetisation is not new to India. It has been resorted to twice previously to combat tax evasion and the consequent black money – in 1946, which was before independence, and in 1978 by the Janata Party.

Irrespective of its impact, the current demonetisation is a golden opportunity to start afresh. The Indian economy has obtained a never-before chance to “restart”, where it can reset or control extensively elements of the economy such as liquidity, inflation, and even fiscal and external deficit. As the rate of outflow will definitely be lower than the rate of inflow, the deposits can be specifically utilized towards infrastructure, education, roads, defence, energy, health, housing and facilities for the underprivileged. It’s a great opportunity for various economic reforms.

Finally, demonetisation should not be construed as an end; it is a means to a greater end. Thus, it must be complemented by other policy measures to achieve its objectives.

CRITICISM OF DEMONETISATION

It must be accepted that it was definitely poorly planned and had a paralysing effect on economic activities in the short term. India is a cash-based economy where close to 83 percent of transactions materialise in the form of cash. As a result of demonetization, a cash deficit to the tune of Rs 8.5 trillion or 5.7 percent of the GDP is expected to materialise in the third quarter of FY17, which will reduce but continue into the fourth quarter of FY17.

Let’s look at some salient criticisms:

Wedding dampener: In India, cash is the only mode of payment for most petty products and services for marriages. However, social evils such as dowry and unnecessary expenses were hit.

Shrinkage of informal sector: The informal sector accounts for more than 40 percent of India’s GDP and provides employment to close to 80 percent of the labour force. Now, from the third quarter of FY17 to fourth quarter of FY19, the share of the informal economy in India could shrink from 40 percent to 20 percent, which would result in a short-term adverse effect as employment would reduce. However, it’s a great opportunity to set things right in the formal sector.

Rural woes: People in villages and semi-urban areas were the worst hit as they are almost entirely dependent on cash. However, it is a great opportunity to penetrate into these areas and teach the people the goodness of digitization, the organized sector and the banking system. Overall, the rural population has taken well the idea of India as a future digital economy.

Low economic growth: This is one of the biggest threats. Former Prime Minister Manmohan Singh, also an economist, has already suggested contraction in GDP by 2 percent. The Reserve Bank of India in its policy statement has also cut down growth forecast to 7.1 percent from 7.6 percent earlier for the current fiscal year.

Increase in unemployment: According to CPM’s Sitaram Yechury, since 8 November, four lakh jobs have vanished, and more will follow in construction and allied sectors, jewellery, textiles, leather and real estate.

Cost of printing new currency: This is an additional cost to the exchequer and entirely unnecessary. However, it should motivate India to go digital.

SHORT- AND MEDIUM-TERM BENEFITS

Every criticism of demonetisation is valid; however, it’s not devoid of positives. Demonetisation was a calculated move though the timing may not have been perfect. About five months back, the Income Declaration Scheme for all citizens was launched. Before that, Jan Dhan Yojana had already been implemented. Other policy measures to complement demonetisation include Revised Double Taxation Avoidance Agreement (DTAA) with Mauritius and Cyprus, The Benami Transactions (Prohibition) Amendment Act, 2016, and Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016.

Let’s consider some short- and medium-term benefits:

Counterfeit and unaccounted notes: Deep-rooted fake notes and unaccounted cash of the past many decades were tracked. Either they came back into the system, or became detritus. However, banks struggling because of NPA (non-performing assets or bad loans) have money to lend for agriculture, infrastructure, and social sector, as also for trade and industry.

Black money: 40 years had passed since the last demonetization, and a large amount of black money had been generated. Black money can’t be wiped out totally from the economy; however, gradual and slow processes will never be able to hit the black money generation in a way this latest demonetization move did. Further, the psychological strike on black money has deeply demotivated the generators and hoarders of black money.

Boost in deposit base as well as financial savings: The total deposits in banks after demonetisation crossed Rs 12.44 lakh crore on December 10, 2016 according to data released by Reserve Bank of India. This has helped people switch from holding unproductive physical assets to financial assets.

Reduction in lending rates and improved monetary transactions: With the rise in deposit base with the banks through CASA (current accounts, savings accounts), the blended cost of funds has come down, and so has the cost of borrowing. Consequently, several banks have lowered the interest rates.

Marginal Cost of Funds-based Lending Rate: MCLR has reduced the lending rates and will boost the economic activity in the medium-term.

Strong bonds: Higher bank deposit base would lead to higher SLR (statutory liquidity ratio) demand. Anticipation of monetary easing will further support bonds.

Real estate: Prices are down and would become more realistic in the future.

Terrorism: An important source of funding of terrorists is black money and counterfeit money. Demonetisation and slow release of new notes also helped in this cause, as no cash was available for funding terrorist activities.

Gambling and Money laundering: Will be discouraged as they thrive on cash.

Discouraged drug peddling: Demonetisation made it hard for drug peddlers to demand and supply products.

Increased Tax Collection: As per Data from the Urban Development Ministry for November 2016 showed an increase of 268% in tax collection by 47 local bodies, as compared with November 2015. Also, till December 19 2017, direct tax mop-up rose 14.4%, indirect tax grew 26.2%, central excise was up 43.3%.

Others: Black money is also used to inflate prices of major assets such as real estate properties and gold. This will take a back seat for some time.

LONG-TERM BENEFITS

Long-term benefits are undeniable. Meaningful changes are already visible in terms of higher digitisation, greater tax compliance and lower realty prices.

Actually, demonetisation has provided the government and the Reserve Bank of India an iron ladder which, if utilized properly, may take the Indian economy higher than just being the world’s fastest growing economy. It’s time to become the most robust, most digitized and the most advanced economy in the world.

Banking liquidity: Increased considerably, now the money can be largely supplied back into the system through ATMs in a calculated and controlled way. The total liquidity in the economy can be controlled.

Banking the unbanked population: Banking habits of the entire population will improve. Opening bank accounts has almost become mandatory for every citizen. Those who can’t open bank accounts on their own, are being provided these by the government as Jan Dhan accounts.

Disclosures and income tax paid: Of course, not all black money returned due to monetisation. However, whatever was disclosed and income tax paid on that, was a positive. This should help cushion the government’s FY17 fiscal deficit target.

Formalisation Effect: Going digital would greatly enhance Indian economy’s chance to transform into an organized economy. This is likely to enhance the government’s ability to tax commercial transactions resulting in a structural improvement in tax to GDP ratio in the economy.

Improved international image: India’s position on transparency and corruption at the global stage will improve adding to its investor appeal.

New income tax payers: The number of new income tax payers as well as the magnitude of reported and taxable income will rise.

Financial inclusion: The new notes with higher security features will make the economy more transparent. Digital transactions will rise dramatically. India has the potential for digital financial inclusion.

DIGITIZATION DRIVE

One of the biggest advantages of demonetisation is India’s expedited movement towards digitization. After the successful drive of Aadhaar Card, maximum digitization is possible. Besides banks, online wallet companies including Paytm, MobiKwik and FreeCharge will support.

Positives of digitization: a) Log of every purchase, b) Increased tax revenue, c) No deposits or withdrawal of currency, d) Money will be constantly in circulation or in the bank, e) Chance to lower taxes, f) Billing would increase, g) Cost of printing currency would reduce, h) Bribes will reduce, i) Tax avoidance will decrease, j) Misuse of laws would reduce, k) Social evils would reduce, and l) Day-to-day life would become easier.

Caution in digitization: To increase trust and reduce frauds in digital payments, cybersecurity systems must be strengthened considerably. Inter-operability of the payments system must be ensured and the newly created Unified Payment Interface (UPI) system must be popularized. However, cash is not bad. Public policy must balance both cash and digital payments. Transition to digitalisation must be gradual, inclusive and not controlled, and digitally deprived must be supported.

SUGGESTIONS AND RECOMMENDATIONS

If India focuses on the right policies and measures, it will improve the economic condition at an unprecedented scale. The potential benefit to India and to the world is incalculable. India needs to seize opportunities by making smart investments in the right things boldly.

The following must be done immediately: fast, demand-driven remonetisation, a push to digital payments using incentives, bringing land and real estate (the long-suspected, main parking slot for black money) under the goods and services tax (GST) net, lowering tax rates and stamp duties, and improving the tax system.

In addition, the RBI should guarantee the public the amount of currency that the latter wants. The early elimination of withdrawal limits will build confidence; there should be no penalties on cash withdrawals. Tax reforms must be implemented and tax administration must be improved. For inclusive growth, the poor must be distributed subsidies through the Jan Dhan Aadhar Mobile mode (JAM).

Through other measures, people must be prevented from parking their savings in physical assets such as gold and real estate. The government must keep a tight leash on the corruption front. Low bank penetration in the rural areas and low financial literacy must be improved. Government must immediately generate a lot of employment opportunities by lending massively to the infrastructure sector.

India’s cash-to-GDP ratio is as high as 12%, roughly three times of even developing countries like Brazil and South Africa, as cash accounts for 98% transaction volumes and 68% of value. This needs to be reduced. There must be bold cut in tax rates.
CONCLUSION
Though India’s economic growth is likely to dip to 6.5 per cent this fiscal, it must rebound to 6.75-7.5 per cent in the next financial year, a number that largely agrees with IMF forecast of 6.6 percent. According to Chief Economic Advisor, Arvind Subramanian, “Even under this forecast, India would remain the fastest growing major economy in the world.”

Further, as per Economic Survey 2007, “Over the medium run, the implementation of GST, follow-up to demonetisation, and enacting other structural reforms should take the economy towards its potential real GDP growth of 8 per cent to 10 per cent.”

Significant financial data has been collected through the demonetisation drive. Similar to the population census data – where over a period of time relevant calculations are made, and appropriate policy measures or decisions are taken – this financial data would go a long way in improving financial conditions in the economy, making financial reforms and taking action against errant depositors.

And then, of course, as Mahatma Gandhi said, “A right cause never fails”.

DOMESTIC SUPPORT

Kailash Satyarthi (Nobel laureate): “It will check human trafficking and child slavery in the country.”

Adi Godrej (Chairman of Godrej Group): “Demonetisation is a good move for long term growth.”

Pankaj Jain (Group CEO, Logix Group): “Recent demonetization would not only bring more transparency and enhanced financial discipline in Indian economy but would also open the doors for a host of opportunities to new-age start-ups and entrepreneurs.”
INTERNATIONAL SUPPORT
World Bank President, Jim Yong Kim said, “I am a big fan of Modi!”

Washington Post: “… initiative is ambitious and … a crackdown against black money.”

The Independent: “Modi does a Lee Kuan Yew to stamp out corruption in India.”

Bill Gates: “It will help India move from shadow to a more transparent economy.”

State Bank of India (SBI) Managing Director B. Sriram will serve as the CEO of IDBI Bank for tenure of 3 months following a special order by the GOI.

The appointment was passed on through an official order and is the first lateral shift of senior management in decades. The vacancy for the top position opened after its CEO Mahesh Kumar Jain was named Deputy Governor of the RBI by the Appointments Committee of the Cabinet, which decides appointments to several top posts under the Government of India and is composed of the Prime Minister of India, who serves as the Chairman of the committee.

Jain has been a part of the IDBI Bank since March 2017 and was previously CEO at Chennai based Indian Bank. Jain has been appointed the 4th deputy governor’s post which lay vacant since SS Mundra retired in July 2017.

The 11th meeting of the G20 Group which accounts for the 85 percent of the world’s economy, 80 percent of global trade, and two-thirds of the world’s population was concluded in Hangzhou, China on 4–5 September, 2016. The Summit was aimed to bring profound measures for giving a new direction to the world economy and had the theme, “Building an Innovative, Invigorated, Interconnected and Inclusive World Economy”.

The leaders discussed to bolster the steps which they have taken to address corruption, tax evasion and avoidance, and other challenges that undermine the integrity of the global financial system. They committed to make use of all policy tools – including fiscal policy – to achieve the common aim of strong, sustainable, balanced, and inclusive growth.

In the declaring statement the G20 communiqué presented a central vision which the member states will follow to “strengthen the G20 growth agenda to catalyze new drivers of growth, open up new horizons for development, lead the way in transforming our economies in a more innovative and sustainable manner and better reflect shared interests of both present and coming generations.”

Apart from economic reforms, discussion on terrorism, migrant crisis, and climate change also took place. The communiqué lauded the World Bank for its efforts in collaboration with other international organizations and its shareholders in creating a global crisis platform for providing support to refugees and host communities in both low and middle income countries.

America and China announced that they will formally ratify the Paris climate change agreement to curb climate-warming emission. The move was highly appreciated as both the nations collectively account for more than 37 percent of global emissions. US Secretary appreciated the move saying, “It moves the needle in a way that no two other nations can accomplish.”

Along with the heads of 20 member states, the Summit was attended by presidents of Chad, Egypt, Kazakhstan, Laos, and Senegal, and the prime ministers of Singapore, Spain, and Thailand as well.

India and the United States have recently signed a significant logistics defence agreement that will empower militaries of both the countries to utilize each others’ assets and bases to repair and replenish the supplies for making joint operations more efficient. Indian Defense Minister Manohar Parrikar and the United States’ Defense Secretary Ashton Carter have signed the “Logistics Exchange Memorandum of Agreement” (LEMOA) and have assured that it will facilitate opportunities for “practical engagement and exchange”.

The transparency was maintained about the fact that the reciprocal logistic support would be used exclusively during authorized port visits, joint exercises, joint training, and humanitarian assistance and disaster relief efforts. And, the logistics support for any other co-operative effort shall only be offered in a case-by-case basis through prior mutual consent of the parties, consistent with their respective laws, regulations, and policies.

This pact facilitates the provision of logistical support, supplies and services between the United States’ and Indian militaries on a reimbursable basis and offers a framework for governing them. This pact may include food, water, billeting, transportation, petroleum, oils, lubricants, clothing, medical services, spare parts and components, repair and maintenance services, training services, and other logistical items and services.

According to a joint statement after signing the pact both the countries agreed for this deal, because of the significance it will provide to facilitate innovative and advanced opportunities in defence technology and trade cooperation. Also, the United States has agreed to elevate defence trade and technology sharing with India to a level commensurate with its closest allies and partners. On the basis of this statement the defense ties among the two countries are based on their “shared values and interests,” and their “abiding commitment to global peace and security.”

Besides, during the meeting, Indian Defence Minister Manohar Parrikar and US Defence Secretary Ashton Carter had a discussion regarding the “wealth of progress” in bilateral cooperation and deepening strategic partnership between the United States and India.

Expanding the aerial reach of the continent, East African countries are all making headway in the airlines industry. While Uganda is all set to reintroduce its national airline, carriers in Tanzania and Rwanda are also amplifying their presence. Kenya is also expected to raise its capital in Kenya Airways, where the government has 29 per cent shares. The Airlines is also reestablishing itself for a better outcome.

Yoweri Museveni, Uganda’s President said in a cabinet meeting that he wishes to revive the airline that went bankrupt earlier in the year 2001. He said that at the present time, Uganda has a stronger economic situation and is looking forward to start its own Airline for “Ugandan travelers are suffering because of, apparently, not having a national airline.”

In Tanzania, to acquire more aircrafts in the state-controlled airline Air Tanzania, the government has also allocated various funds in its last month’s budget as well.

In this rapid race of strengthening the fleet of the country, Rwanda too is going to start its first two Airbus A330 long race jets in the upcoming months. The country also has eight aircrafts that serve the people. In addition, the country also wants to become a regional trade hub and to achieve that it is planning to begin air travel to Asian and European countries from next year.

Keeping in mind the need to strengthen their economic position on the globe, these East African countries are on their move to develop airports and airlines for a better and faster transportation system.

Majid Al Futtaim, the leading retail and Hospitality Company of The Middle East and North Africa, announced an investment increase of Dh30 billion over the next ten years in the UAE. Apart from strengthening the economic state of the Emirate, this investment will also boost up the retail sector of the country which is growing rapidly in the present time.

In this mega investment, this flourishing conglomerate plans to develop 10 new state-of the-art shopping malls under its City Centre brand, six hotels, a mixed-use community, 28 cinemas and 40 Carrefour outlets as well as expand six existing malls. Further, the company also plans to renovate and expand existing properties by enhancing their grandeur and beauty. The group said that it will undertake six expansions to its existing malls, including major extensions to City Centre Ajman and City Centre Me’aisem, which will turn them into regional malls. The company will also launch its first super-regional mall in Sharjah that will make it one of the best shopping destinations for the shoppers of the Emirate.

The company’s chief executive, Alain Bejjani proudly stated that “For more than two decades, driven by our vision to create great moments for everyone, everyday, we have continually transformed the face of shopping, entertainment and leisure both here in the UAE and across the Mena region. In doing so, we have contributed to Dubai and the UAE becoming among the top global tourist and retail destinations, enhanced the lifestyle of their residents”.

These investments, particularly in the retail sector, are transforming the fashion and retail industry of the country. Today, cities of the UAE have turned into a favorable destination that offer best shopping experiences to the customers.