Category: Economy

As per the Lowy Institute Asia Power Index 2021, India has been ranked as the fourth most powerful country in Asia. And the report adds that India could have ranked even better if Covid19 didn’t happen.

The country performs best in the future resources measure, where it finishes only behind the United States and China. However, the lost growth potential for Asia’s third-largest economy is largely due to the impact of the coronavirus pandemic that has led to a diminished economic forecast for 2030, the report says.

India’s overall score declined by two points compared to 2020. It is one of eighteen countries in the region to trend downward in its overall score this year.

Further, India has slipped into 8th position for economic relationships measure. The report says that India lags in economic diplomacy.

The top 10 countries for overall power in the Asia-Pacific region are the US, China, Japan, India, Russia, Australia, South Korea, Singapore, Indonesia and Thailand, Lowy Institute said.

The annual Asia Power Index was launched by the Lowy Institute back in the year 2018. It measures resources and influence to assess the relative power of states in Asia. 26 countries and territories are ranked in terms of what they have and how they use it.

Due to the dangers of the quickly spreading Omicron variant of Covid19, the International Monetary Fund (IMF) is likely to lower its global economic growth estimates, the global lender’s chief said at the Reuters Next conference on Friday.

After being first reported in South Africa in the last week of November, Omicron has spread rapidly to at least 40 countries, including India.

IMF Managing Director Kristalina Georgieva told the conference that a rapidly spreading variant can dent confidence, and in that sense, the monetary fund is likely to see some downgrades of its October projections for global growth.

Most of Europe and the US is still grappling with a wave of infections caused by the Delta variant. The new strain will only destabilise the economies. While the Delta variant still accounts for 99.9% of the 90,000 to 100,000 new cases of Covid cases daily in the US, Omicron has also reached about one-third of US states.

As of now, there is no strong word on the severity of the virus, but it has been understood that it is highly transmissible. Some countries have imposed Covid restrictions again, which include no entry of foreigners into their land without a negative pre-departure RT-PCR report, or a week-long isolation post arrival.

As per the latest development, India and the United States have reached a settlement on 2 per cent equalisation levy or the ‘Google Tax’, which is imposed by India on e-commerce operators. The agreement is similar to the Unilateral Measures Compromise reached among the UK, Austria, France, Italy and Spain with the US last month.

As per the settlement, India shall continue to impose the google tax till the implementation of Pillar One or till 31st March 2024. The US, on the other hand, will discontinue the trade tariff actions it had announced in reply to the levy.

The Finance Ministry has released a statement in which it has said that India and the United States will remain in close contact to ensure there is a common understanding of the respective commitments and any further differences of views will be resolved through constructive dialogue.

With this agreement, India and the United States joined 134 members in the framework of the Organization for Economic Co-operation and Development (OECD) to reach an agreement on parity tax.

The solution proposed under the OECD BEPS (Base Erosion and Profit Shifting) framework has two pillars. Pillar 1 deals with reallocating an additional share of the profit to the market areas where the users are. Pillar 2 concerns a global minimum tax of 15 per cent. It is estimated that $150 billion in additional tax revenue should be mobilized under the second pillar.

The final terms of the agreement will be finalised by 1st February 2022.

Singapore’s economy, which has grown about 7% in 2021, will grow at a much slower pace next year as several sectors continue to recover from the crunch caused by Covid19. The Ministry of Trade and Industry (MTI) has forecast the economy to grow by 3% to 5% in 2022.

Gabriel Lim, permanent secretary for trade and industry said in a statement that the recovery of the various sectors is expected to remain uneven in 2022. Lim feels that sectors like manufacturing and wholesale trade will run well, while aviation and tourism sectors will continue to face challenges.

Singapore has fully vaccinated 85% of its 5.45 million population, while also easing some Covid19 restrictions, including quarantine-free travel. But the recovery is still expected to remain slow all through next year. In 2020, the economy sunk by 5.4% due to the pandemic, but much of what was lost was recovered this year.

The World Economic Forum has ranked Singapore’s economy as the most open in the world. The economy is primarily driven by exports in electronics manufacturing and tourism. The financial service industry is another major contribution to Singapore’s GDP, with the country being home to over 200 banks.

The United Nations on Monday warned of a big collapse of Afghanistan’s banking system. The country’s economy has been badly hit after withdrawal of foreign development support, which has led to a crunch in liquid cash, lower deposits in the bank and people being unable to repay loans.

The U.N. Development Programme (UNDP) has written a three-page report on Afghanistan’s banking and financial system, which notes that the economic cost of a banking system collapse “would be colossal,” and it would cause a negative social impact.

The report explains that if the banking system fails, rebuilding it could take decades. The non-performing loans had doubled to 57% in September from the end of 2020, and at this rate, the banks might meet their end in the next six months.

After the Taliban came to power on August 15, the war-torn country saw a withdrawal of foreign development aid, which has resulted in a downfall of the banking system. Billions of dollars have been frozen abroad, and the United States is now in talks with the United Nations and the UNDP on how to avert the collapse of the banking system and offer liquidity. However, Abdallah al Dardari, head of UNDP in Afghanistan, has made it clear that America’s support to the banking sector does not mean the country supports the Taliban.

On Tuesday, the virtual summit between United States President Joe Biden and China’s President Xi Jinping saw the nations exchanging a sharp remark on Taiwan ahead of the hotly awaited summit between leaders. Both presidents expressed their concerns over the other’s position on Taiwan over the telephonic conversation.

The Chinese Foreign Minister Wang Yi slashed the US for their ‘wrong words and deeds’ and said that “any connivance of and support for the Taiwan independence forces would only boomerang in the end”.

The Chinese government has also reacted angrily to a congressional delegation visit to Taiwan, while the PLA (People’s Liberation Army) conducted more drills. This was after the recent aerial incursions into Taiwan’s Air Defence Identification Zone.

Meanwhile, the US Secretary of State Antony Blinken has indicated his concern over the PRC’s (People’s Republic of China) continued pressure on Taiwan over diplomatic, military, and economic. The Secretary of State further urged Beijing to captivate meaningful dialogue to sort cross-Strait issues peacefully. He also expressed that it should be in a manner that is consistent with the wishes and in the best interest of Taiwan’s people.

The rising tension is also over Beijing’s self-ruling democracy claiming Taiwan over trade, human rights, and other issues.

On Wednesday, the United of America and China pledged to work together to speed up the climate action for this decade. The new pact in which the nations are working in the face of global warming is already wreaking disasters around the globe.

In Glasgow, this announcement came as the crunch COP26 headed towards its pivotal final days. All the negotiators are working hard to find ways to limit global warming and bring it as low as 1.5-2 degrees Celsius from the previous industrial level.

Earlier this week, China’s President Xi Jinping was criticized by President Joe Biden for not attending the summit in Glasgow. The President said that China “walked away”. However, on Wednesday, the US and Chinese envoys stressed their countries’ collaboration. The nations confirmed that they had agreed upon working on climate and put other differences aside for a while.

Xie Zhenhua, Beijing’s longtime climate envoy said, “ Both sides recognize that there is a gap between the current effort and the Paris Agreement goals so we will shorten climate action”.

The agreement includes a document that outlines its focus on lowering methane emissions. It is expressed as the most effective way to limit the warming and the single fastest method.

Boris Johnson, the British prime minister, outlined his plans for a green revolution on Tuesday in order to force Western economies to end their dependency on fossil fuels. Later this month, Britain is set to host the COP26 United Nations climate talks in Glasgow, Scotland. The meet aims to strengthen global action on global warming.

The UK Prime Minister Boris Johnson said, “with the major climate summit COP26 just around the corner, our strategy sets the example for other countries to build back greener, too, as we lead the charge towards global net-zero”. Earlier, Mr. Johnson was a little skeptical regarding climate change, had now presented his 368-page net-zero strategy. The document will put Britain at the vanguard of green economies. He further added that nations like Russia and China are following their lead with their own net-zero targets after prices tumble and green tech became the global norm.

Britain took part in the year 2019, to become the first Group of seven members to set a net-zero emission target for 2050. It aims to make drastic changes in the way Britons travel, heat their homes, and consume electricity.

On Tuesday, the International Monetary Fund ripped this year’s economic growth forecast for Asia. The IMF warned Asia about risks by a fresh wave of COVID-19 infections, supply chain disruption, and inflation.

According to the reports, this year China’s economy will see a growth of 8% and 5.6% in 2022. However, the recovery will remain “unbalanced” as fiscal tightening and repeated outbreaks of the coronavirus weigh on consumption. In its report, the IMF stated that any “untimely policy normalization or misconstrued communication from the United States Federal Reserve could lead to higher borrowing costs and significant capital outflows from Asian emerging economies.

A cut of 6.5% in this year’s economic growth for Asia was forecasted by the regional outlook report. It is 1.1% down from April’s projection due to a spike in Delta variant cases hit consumption and factory output. For 2022, IMF raised the growth forecast to 5.7% from 5.3% of April’s estimate in response to vaccination drives.

A growth of 9.5% is expected to be seen for India while economies like Australia, South Korea, New Zealand, and Taiwan benefit from the high-tech and commodity boom.

On Monday, the National Bureau of Statistics said in a statement that gross domestic product grew 4.9% in the third quarter from a year ago. It has missed the expectations of 5.2% expansion, according to analysts polled by a news agency. Despite a less-than-expected rise in industrial activity in September, China’s third-quarter GDP grew by only 4.9%.

In September, industrial production rose by 3.1% below the 4.5% expected. On Monday, in a press conference in Mandarin, the spokesperson for the National Bureau of Statistics Fu Linghui said, “Since entering the third quarter, domestic and overseas risks and challenges have increased”. He added that the power shortage had a “certain impact” on the basic manufacturing but the economic impact “is controllable”.

In the latter half of September, a rise in the price of coal and a shortage of electricity prompted local authorities to unexpectedly cut off the power. Since then the central government has emphasized that they will boost the coal supply and ensure the availability of electricity. The data which was released showed the businesses were not much interested to put money into future projects.

Bruce Pang of China Renaissance said, “China’s once leading growth recovery is losing momentum going into the fourth quarter”.