DAILY CURRENT AFFAIRS (SEPTEMBER 16, 2022)

THE GEOGRAPHY: CLIMATOLOGY

1. ‘TRIPLE DIP’ LA NINA AND ITS IMPACT ON INDIA’S MONSOON

THE CONTEXT: Recently, the Australian Bureau of Meteorology confirmed the occurrence of La Niña phenomenon for the third consecutive year in the Pacific Ocean.
THE EXPLANATION:
• The World Meteorological Organisation (WMO) on August 31 had stated that the oceanic and atmospheric phenomenon would last until at least the end of the year, and for the first time this century, span three consecutive northern hemisphere winters to become a ‘triple dip’ La Nina.
• The WMO predicted that the current La Nina, which began in September 2020, would continue for six months, with a 70 per cent chance of lasting till September-November 2022, and 55 per cent chance of lasting till December-February 2022/2023.

What are El Nino and La Nina?
• El Nino and La Nina, which mean ‘the boy’ and ‘the girl’ in Spanish, are mutually opposite phenomena, during which an abnormal warming or cooling of sea surface temperatures is observed in the Pacific Ocean along the equator, off the coast of South America. Together they constitute what is known as the El Niño-Southern Oscillation system, or ENSO for short.
• ENSO conditions can alter both temperatures and rainfall globally, due to their strong interference on global atmospheric circulations.
• It is a recurring phenomenon and the change in temperature is accompanied by changes in the patterns of upper and lower level winds, sea level pressure, and tropical rainfall across the Pacific Basin.
• Normally, El Nino and La Nina occur every four to five years. El Nino is more frequent than La Nina.

How does La Nina impact India’s monsoon?
• El Niño years in India have witnessed extreme heat and below normal rainfall levels during monsoon, even though El Niño might not be the only factor or even have direct links to them. In 2014, a El Niño year, India received 12 per cent deficient rainfall from June to September.
• On the other hand, La Nina years are known to favour the Indian summer monsoon. This year, India has received 740.3 mm of rainfall, quantitatively 7 per cent higher than the seasonal average till August 30. Among the 36 states and union territories, 30 have received rainfall that is categorised as either ‘normal,’ ‘excess’ or ‘large excess.’
• Uttar Pradesh, Manipur (-44 per cent each), and Bihar (-39 per cent), however, remain the worst affected states this season.

La Nina conditions and cyclone formation
• Intense hurricanes and cyclones have frequently occurred in the Atlantic Ocean and the Bay of Bengal during La Nina years.
• Over the North Indian Ocean as well, the chances of an increased number of cyclones are due to multiple contributing factors, including high relative moisture and relatively low wind shear over the Bay of Bengal.

THE HEALTH ISSUES

2. NEW RESEARCH: COVID-19 INCREASES ALZHEIMER’S RISK IN OLDER ADULTS

THE CONTEXT: The researchers, recently published their findings in the Journal of Alzheimer’s Disease found that people aged 65 and above who developed Covid-19 were at a 50-80% higher risk of developing Alzheimer’s, expanding upon the little we currently know about the long-term consequences of the pandemic.
THE EXPLANATION:
• Older adults who were once infected with Covid-19 are at a much higher risk of developing Alzheimer’s disease within a year, with women above the age of 85 occupying the highest risk group, a new study of more than 6 million patients has found.
• However, the researchers have maintained that it is unclear “whether Covid-19 might trigger new onset of Alzheimer’s disease or accelerate its emergence.”
• The research team analysed the anonymous electronic health records of 6.2 million people who were 65 and older in the US, and who had visited healthcare organisations between February 2020 and May 2021. Those studied had not been previously diagnosed with Alzheimer’s.
They were then divided into two groups: one composed of people who had contracted Covid-19 during the period of study, and another group which had no documented cases of the infectious disease. There were more than 400,000 people enrolled in the Covid-19 study group, while the non-infected group contained 5.8 million people.
• The findings indicated that over the one-year period following the infection, older adults in the Covid-19 cohort faced a risk of 0.68%, nearly double that of the non-Covid-19 cohort, which faced a risk of 0.35%.

ABOUT ALZHEIMER DISEASE:
What is Alzheimer’s disease?
• It is the most common type of dementia.
Discovery:
• The disease was discovered after Dr Alois Alzheimer examined a memory-loss patient’s brain after her death in 1906 and found abnormal clumps (beta-amyloid plaque) and bundles of fibres (neurofibrillary tangles).
• It is a progressive disease beginning with mild memory loss and possibly leading to loss of the ability to carry on a conversation and respond to the environment.
• It involves parts of the brain that control thought, memory, and language.
• It can seriously affect a person’s ability to carry out daily activities.

What is the India scenario?
• In India, only 1 in 10 people with dementia receive any diagnosis, treatment or care for the disease, according to the World Alzheimer’s Report, 2021.

THE INTERNATIONAL RELATIONS

3. THE EASTERN ECONOMIC FORUM AND INDIA’S BALANCING ACT

THE CONTEXT: Recently, Russia hosted the seventh Eastern Economic Forum (EEF) Vladivostok from September 5 to 8 2022. The four-day forum is a platform for entrepreneurs to expand their businesses into Russia’s Far East (RFE).
THE EXPLANATION:

What is the Eastern Economic Forum?
The EEF was established in 2015 to encourage foreign investments in the RFE. The EEF displays the economic potential, suitable business conditions and investment opportunities in the region. Agreements signed at the EEF increased from 217 in 2017 to 380 agreements in 2021, worth 3.6 trillion roubles. As of 2022, almost 2,729 investment projects are being planned in the region. The agreements focus on infrastructure, transportation projects, mineral excavations, construction, industry and agriculture.

Who are the major actors in the Forum? What are their interests?
• This year, the Forum aimed at connecting the Far East with the Asia Pacific region. China is the biggest investor in the region as it sees potential in promoting the Chinese Belt and Road Initiative and the Polar Sea Route in the RFE.
• China’s investments in the region account for 90% of the total investments. Russia has been welcoming Chinese investments since 2015; more now than ever due to the economic pressures caused by the war in Ukraine.
• The Trans-Siberian Railway has further helped Russia and China in advancing trade ties. The countries share a 4000-kilometer-long border, which enables them to tap into each other’s resources with some infrastructural assistance. China is also looking to develop its Heilongjiang province which connects with the RFE.
• Besides China, South Korea has also been gradually increasing its investments in the region. South Korea has invested in shipbuilding projects, manufacturing of electrical equipment, gas-liquefying plants, agricultural production and fisheries. In 2017, the Export-Import Bank of Korea and the Far East Development Fund announced their intention to inject $2 billion in the RFE in a span of three years.
• Japan is another key trading partner in the Far East. In 2017, Japanese investments through 21 projects amounted to $16 billion. Under Shinzo Abe’s leadership, Japan identified eight areas of economic cooperation and pushed private businesses to invest in the development of the RFE. Japan seeks to depend on Russian oil and gas resources after the 2011 meltdown in Fukushima which led the government to pull out of nuclear energy.
• Japan also sees a market for its agro-technologies which have the potential to flourish in the RFE, given similar climatic conditions. However, the momentum of trade that existed with Shinzo Abe was lost with the leadership of Yoshihide Suga and Fumio Kishida. The trade ties between Japan and Russia are hindered by the Kuril Islands dispute as they are claimed by both countries.
• India seeks to expand its influence in the RFE. During the forum, Prime Minister expressed the country’s readiness in expanding trade, connectivity and investments in Russia. India is keen to deepen its cooperation in energy, pharmaceuticals, maritime connectivity, healthcare, tourism, the diamond industry and the Arctic.
• In 2019, India also offered a $1 billion line of credit to develop infrastructure in the region. Through the EEF, India aims to establish a strong inter-state interaction with Russia. Business representatives of Gujarat and the Republic of Sakha have launched agreements in the diamond and pharmaceuticals industry.

Will India be able to achieve a balance between the EEF and the Indo-Pacific Economic Framework for Prosperity (IPEF)?
• The U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) and the EEF are incomparable based on its geographic coverage and the partnership with the host-countries. India has vested interests in both the forums and has worked towards balancing its involvement. India has not shied away from investing in the Russia-initiated EEF despite the current international conditions.
• At the same time, India has given its confirmation and acceptance to three of the four pillars in the IPEF. The country understands the benefits of being involved in the development in the RFE but it also perceives the IPEF as a vital platform to strengthen its presence in the Indo-Pacific region. The IPEF also presents an ideal opportunity for India to act in the region, without being part of the China-led Regional Comprehensive Economic Partnership or other regional grouping like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
• The IPEF will also play a key role in building resilient supply chains. India’s participation in the forum will help in disengaging from supply chains that are dependent on China and will also make it a part of the global supply chain network. Additionally, the IPEF partners will act as new sources of raw material and other essential products, further reducing India’s reliance on China for raw materials. Although, the Indian Prime Minister has refrained from full participation in the trade pillar of the IPEF, it does not signify an end to India’s role in the forum.

4. THE AZERBAIJAN-ARMENIA BORDER CLASHES, AND THE RISING FEAR OF ANOTHER WAR

THE CONTEXT: Recently, Dozens of Armenian and Azerbaijani soldiers have reportedly been killed in renewed border clashes between Armenia and Azerbaijan, in the worst round of hostilities since 2020.
THE EXPLANATION:
After several hours of fighting, the Armenian government appealed to world leaders for help, saying that Azerbaijani forces were trying to advance into its territory. The conflict is decades old with its repercussions potentially engulfing all of the Caucasus.

About the Conflict
• Protestors are demanding the resignation of Prime Minister (PM) Nikol Pashinyan and are taking the means of strike like, chanting anti-government slogans, blocking metro from moving etc.
• Location: Nagorno-Karabakh is a mountainous and heavily forested region that under international law is recognised as part of Azerbaijan.

Latest developments:
• Armenia has been witnessing domestic unrest since April this year related to Pashniyan’s handling of the Nagorno-Karabakh conflict.
• There have been plans to oust their government or at least increase street pressure to prevent the PM from providing further concessions to Azerbaijan and Turkey when it comes to the security and right of self-determination of Armenians of Nagorno-Karabakh (called Artsakh) and the recognition of Armenian Genocide.

Criticism against Armenian PM:
• In Armenia, Pashinyan’s handling of the Nagorno-Karabakh conflict received criticism after he agreed to hand over Armenian control of several territories to Azerbaijan.
• Pashinyan increased the salaries of the country’s security forces, in an attempt to win their loyalty.
• The ongoing protests in Armenia have been marked by police brutality and the detaining of protestors, activists as well as Parliament members.
• Pashinyan’s stance on Nagorno-Karabakh: There has been a clear shift in Pashinyan’s views on Nagorno-Karabakh post May 2018, when he was elected leader of Armenia. Much of Pashinyan’s rhetoric was aimed at winning nationalist support.

Challenges of Nagorno-Karabakh conflict
• In this disputed region, there are hundreds of civilian settlements, residents of which would be directly impacted and potentially displaced if any large-scale war were to break out between the two countries.
• Any military escalation would draw regional powers like Turkey and Russia more deeply into the conflict.
• The energy-rich Azerbaijan has built several gas and oil pipelines across the Caucasus (the region between the Black Sea and the Caspian Sea) to Turkey and Europe.
• This includes the Baku-Tbilisi-Ceyhan oil pipeline (with a capacity of transporting 1.2 billion barrels a day), the Western Route Export oil pipeline, the Trans-Anatolian gas pipeline and the South Caucasus gas pipeline.
• Some of these pipelines pass close to the conflict zone (within 16 km of the border) and in an open war between the two countries, the pipelines could be targeted, which would impact energy supplies.
• For both nations, these would create immediate challenges and war would not be in the interest of both countries.

5. NORTH KOREA’S NEW ‘IRREVERSIBLE’ LAW ON NUCLEAR ARMS USE

THE CONTEXT: North Korea has recently passed a law enshrining the right to ‘automatically’ use preemptive nuclear strikes to protect itself. According to North Korea’s state media, leader Kim Jong Un has said this new law makes the country’s nuclear status ‘irreversible’ and bars any talks of denuclearization.
THE EXPLANATION:
• North Korea’s parliament passed the legislation replacing a 2013 law that had first outlined the country’s nuclear status.
• The KCNA quoted Kim as addressing the assembly: “The utmost significance of legislating nuclear weapons policy is to draw an irretrievable line so that there can be no bargaining over our nuclear weapons.”

Why has North Korea taken this step?
• This move comes as Pyongyang is seemingly preparing to resume nuclear testing for the first time since 2017, according to the Reuters report, after summits with former US President and other diplomatic meetings failed to persuade North Korea to abandon nuclear weapons development.

What is the new law?
• North Korea’s new law is important because, very simply, it authorises preemptive nuclear strikes. That means this law could be implemented if Pyongyang thinks there is an impending nuclear attack or if Pyongyang believes that its state’s existence faced threats or the command organisation of its nuclear forces were threatened.
• According to a Reuters report, the last point may be a “reference to South Korea’s ‘Kill Chain’ strategy, which calls for preemptively striking North Korea’s nuclear infrastructure and command system if an imminent attack is suspected.
• The report states that under the provisions of this new law, Kim has “all decisive powers” over nuclear weapons, but in case that command-and-control system were to be threatened, then nuclear weapons may be launched “automatically”.
• The law also bans the sharing of nuclear arms or technology with other countries, and is aimed at reducing the danger of a nuclear war by preventing miscalculations among nuclear weapons states and misuse of nuclear weapons.

How have others responded?
• Over the past few months, North Korea’s rhetoric has been increasingly critical of the US and its allies. In the past year, Pyongyang has carried out more than 30 long-range missile tests, involving ballistic missiles, cruise missiles and hypersonic missiles.
• According to data reported Russia’s Foreign Ministry as saying it was “closely monitoring” military activity on the Korean peninsula. While not addressing the new law, China’s Foreign Ministry said the country’s position on the Korean peninsula “had not changed”, which is denuclearization of North Korea.

THE GOVERNMENT SCHEMES IN NEWS

6. TAMIL NADU’S NEW BREAKFAST SCHEME IN SCHOOLS

THE CONTEXT: Tamil Nadu Chief Minister at the Madurai Corporation Primary School at Madurai, launched the Chief Minister’s Breakfast Scheme for students of Class I to V in government schools.
THE EXPLANATION:
The scheme covers around 1.14 lakh students in 1,545 schools which include 417 municipal corporation schools, 163 municipality schools and 728 taluk and village panchayat-level schools. A sum of ₹33.56 crore has been set apart for the scheme. The inauguration of the scheme marks an important milestone in the State’s history of providing free meals to school students.

How has the idea evolved?
• In November 1920, the Madras (now Chennai) Corporation Council approved a proposal for providing tiffin to the students of a Corporation School at Thousand Lights at a cost not exceeding one anna per student per day. P. Theagaraya Chetty, the then President of the Corporation (the modern-day equivalent of Mayor) and one of the stalwarts of the Justice Party, said the boys studying at the school were poor, which affected the strength of the institution ‘greatly’. The scheme, which was extended to four more schools and facilitated higher enrollment of students, suffered a setback in 1925 when the British government disallowed the expenditure on the supply of mid-day meals to students from the Elementary Education Fund. It was revived two years later, benefitting around 1,000 poor students in 25 schools.
• The concept saw a State-wide application in 1956 when the then Chief Minister K. Kamaraj decided to provide free noon meal to poor children in all primary schools across the State. The Budget for 1956-57 contained a provision for supplying mid-day meals to schoolchildren for 200 days a year, initially covering 65,000 students in 1,300 feeding centres.
• In July 1982, it was left to the then Chief Minister M. G. Ramachandran to extend the programme to children in the 2-5 age group in Anganwadis and those in 5-9 age group in primary schools in rural areas. Subsequently, the scheme — now called Puratchi Thalaivar M.G.R. Nutritious Meal Programme — was extended to urban areas as well. Since September 1984, students of standards VI to X have been covered under the scheme.
• Over the years, there have been improvements to the programme. M. Karunanidhi, as Chief Minister during the short-lived Dravida Munnetra Kazhagam Ministry (1989-91), introduced the provision of boiled eggs once every fortnight, starting June 1989. His successor, Jayalalithaa, in March 2013, extended the scheme by including variety meals along with masala eggs as per the children’s choice.

What are the number of beneficiaries of the programme?
• As of now, there are nearly 46.7 lakh beneficiaries spread over 43,190 nutritious meal centres. This includes around 3,500 students of National Child Labour Project (NCLP) special schools. The State budget for 2022-23 has provided around ₹2,077 crore for the nutritious meal programme.
• Besides, as a consequence of the collaborative implementation of the Integrated Child Development Scheme (ICDS) and the nutritious meal programme, around 15.8 lakh children in the age group of 2+ to 5+ years receive nutritious meals.

What was the impact of the mid-day meal scheme on school education ?
• After the improved version of the mid-day meal scheme in 1982, the Gross Enrollment Ratio (GER) at primary level (standards I to V) went up by 10% during July-September, 1982 as compared to the corresponding period in 1981.
• The rise in boys’ enrollment was 12% and in the case of girls, 7%, according to a publication brought out by the Tamil Nadu government on the occasion of the launch of the Chief Minister’s Breakfast Scheme.
• Likewise, attendance during July-September 1982 rose by 33% over the previous year’s figure.
• Kamaraj – An Era (2008), a biography authored by senior Congress functionary A. Gopanna, states that after the inauguration of the mid-day meal scheme in 1956, the number of primary schools went up from 15,800 in 1957 to 29,000 in 1962.

Where should the programme focus more?
• Anaemia is a major health problem in Tamil Nadu, especially among women and children, says the 2019-21 National Family Health Survey (NFHS)-5’s report. From 50% during the period of the 2015-16 NFHS-4, the prevalence of anaemia in children now went up to 57%. This and many other health issues can be addressed through the combined efforts of the departments of School Education, Public Health and Social Welfare and Women Empowerment.
• Based on expert advice, those in charge of the implementation of the ICDS and the nutritious meal programme can enhance the component of nutrition to those children having specific problems. The latest Breakfast Scheme is a step in this direction.
• Besides, a continuous and rigorous review of the progress of the scheme and nutritious meal programme should be carried out in a sustained manner.




Essay Question Paper: UPSC CSE Mains 2022

Section A

  • 1. Forests are the best case studies for economic excellence
  • 2. Poets are the unacknowledged legislators of the world
  • 3. History is a series of victories won by the scientific man over the romantic man
  • 4. A ship in harbour is safe, but that is not what ship is for

Section B

  • 5. The time to repair the roof is when the sun is shining
  • 6. You cannot step twice in the same river
  • 7. A smile is the chosen vehicle for all ambiguities
  • 8. Just because you have a choice, it does not mean that any of them has to be right

Essay Paper

DOWNLOAD PDF




Day-289 | Daily MCQs | UPSC Prelims | ART AND CULTURE

[WpProQuiz 334]




TOPIC : INTERNATIONALIZATION OF RUPEE- PROS AND CONS

THE CONTEXT: The Reserve Bank of India has recently introduced a mechanism to facilitate international trade in rupees. Now the import and export payments may be settled through a special Vostro account, while banks, with prior approval from the RBI, can act as authorised dealers for such transactions. This article intends to analyze the implications of rupee internationalization from the UPSC perspective.

INTERNATIONALIZATION OF RUPEE: UNDERSTANDING BASICS

DEFINING CURRENCY INTERNATIONALIZATION

  • Currency internationalization is the widespread use of a currency outside the borders of its original country of issue.
  • The level of currency internationalization for a currency is determined by the demand that users in other countries have for that currency.
  • This demand can be driven by the use of the currency to settle international trade, to be held as a reserve currency or a safe-haven currency, or in general use as a medium of indirect exchange in other countries’ domestic economies via currency substitution.

ORIGIN OF THE DEBATE

OUTBREAK OF GLOBAL FINANCIAL CRISIS (GFC) OF 2008

  • The global financial crisis (GFC) of 2008, for a variety of complex reasons, prompted emerging markets (EMs) to reconsider the role of their currencies as global alternatives to the “big four” currencies (US dollar, Yen, Euro, Pound).
  • The outbreak of the GFC and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system.
  • This was an indirect assertion that the US was taking advantage of the reserve currency status of the US dollar and dollar liquidity shortages were a real problem for EMs during the GFC.

EMERGENCE OF THE RENMINBI

  • China in response, embarked on an ambitious project of “Renminbi internationalization” with the coupled goals of international monetary reform and diversification of global currency risk through internationalizing its currency.

IMPLICATIONS ON INDIAN RUPEE

  • China’s policy pivot prompted policymakers in India to consider the possibility of internationalizing the Indian Rupee (INR). The Reserve Bank of India (RBI) commissioned two studies in 2010 and 2011 (Ranjan and Prakash, 2010; Gopinath, 2011) to examine the issues surrounding the internationalization of the INR.
  • Both studies recommended a cautious approach towards currency internationalization given the size of the Indian GDP, lower presence in global trade and partial capital account convertibility.
  • They also added that while the Rupee is a natural contender for transitioning into a global currency, policymakers should start by increasing the role of the INR in its local region, where the Renminbi has taken the lead over the Rupee.
  • In spite of an early interest in pursuing a policy of currency internationalization, both the Indian government and the RBI do not consider it to be a priority in the short to medium term.

LATEST DEVELOPMENT

  • The recent push of RBI for rupee internationalization is a great step in the right direction, considering the limitation for using the US dollar as a medium of international transactions, especially with counties under sanctions.
  • This would also help reduce exchange rate risk on traders and pressure on the Indian rupees.

PROCESS OF INTERNATIONALIZATION OF A CURRENCY

There are certain necessary preconditions which are as follows:

  • The government must remove all restrictions on the freedom of any entity, domestic or foreign, to buy or sell its country’s currency, whether in the spot or forward market.
  • Domestic firms are able to invoice some, if not all, of their exports in their country’s currency, and foreign firms are likewise able to invoice their exports in that country’s currency, whether to the country itself or to third countries.
  • Foreign firms, financial institutions, official institutions and individuals are able to hold the country’s currency and financial instruments denominated in it in amounts that they deem useful and prudent.
  • Foreign firms and financial institutions, including official institutions, are able to issue marketable instruments in the country’s currency.
  • The issuing country’s own financial institutions and non-financial firms are able to issue on foreign markets instruments denominated in their country’s own currency.
  • International financial institutions, such as the World Bank and regional development banks, are able to issue debt instruments in a country’s market and use its currency in their financial operations.
  • The currency may be included in the “currency baskets” of other countries, which they use in governing their own exchange rate policies.

ANALYZING RUPEE INTERNATIONALIZATION

CHALLENGES FOR INDIA: CRITICAL ANALYSIS

ATTAINING SUFFICIENT SCALE

  • The issuing country must have sufficient scale, both in terms of nominal gross domestic product and volume of international transactions. For instance, while China is a $10.36 trillion economy, India is roughly at $2 trillion.
  • For India to attain sufficient scale, the economy needs to grow at a sustainable average rate of 7-8% for the next five years or so. India’s current share of global trade is also relatively small, and the bulk of it is invoiced in US dollars.
  • Improvements in scale are linked to macroeconomic fundamentals, which cannot be changed through an internationalization-driven agenda.

STABILITY OF THE RUPEE

  • The value of the currency must be stable over time. A currency is considered stable when the general level of prices does not vary too much. Stability has multiple aspects: macroeconomic, financial and political.
  • On macroeconomic stability, earlier this year, India undertook an important reform in the form of the Monetary Policy Framework Agreement that formally lays down inflation targeting as the objective of monetary policy in India. But recent high inflations showed limited outreach of MPC.
  • The banking system continues to be overburdened with burgeoning non-performing assets.
  • In terms of political stability, the fact that India is a democracy, like issuers of most international currencies in the 19th and 20th centuries, goes in its favour.

ENSURING LIQUIDITY OF THE RUPEE

  • A currency is liquid if significant quantities of assets can be bought and sold in the currency without noticeably affecting its price.
  • This requires depth in financial markets, a large stock of domestic currency-denominated bonds and adequate options to hedge currency risk exposures.
  • India lacks a deep, liquid and well-functioning corporate bond market. Hedging opportunities for foreign investors are limited.
  • India has one of the least open capital accounts among emerging economies. Relaxing capital controls to attract foreign investor participation is crucial for enhancing rupee liquidity.

THE WAY FORWARD

  • The Reserve Bank of India (RBI) has made a strong case for the internationalization of the rupee and sought to differentiate it from capital account convertibility. According to RBI, countries that can borrow in their own currency are less susceptible to the international crisis.
  • As the currency risks are born by the lenders and not by the borrowers back in India, this is always a safer option for the Indian economy; hence, it must be promoted.
  • Democracy and associated checks and balances on the executive instil confidence in foreign investors about the policy credibility of the government, thereby imparting stability to the national currency. Thus, India can explore the option of controlled internationalization of the rupee.

THE CONCLUSION: Any possibility of conversation on rupee internationalization must be backed by a sustained and stable position of the Indian Rupee. Scale, stability and liquidity can be achieved through strong economic fundamentals and a process-driven regulatory environment. These, by themselves, are important policy goals to achieve for India. It is possible that once these are achieved, the rupee will come to be accepted as an international currency.

QUESTIONS TO PONDER

1. “Only if scale, stability and liquidity of Indian Rupee are achieved, will it be accepted as an international currency.” Examine critically in the light of the recent push by RBI for the internationalization of the rupee.

2. What do you understand by ‘internationalization of currency? Discuss the positives and negatives of the internationalization of the currency.