Contents

  1. Vote for Status Quo in Taiwan
  2. U.S.A – Iran: In the name of Self-defence
  3. Counter Cyclical Fiscal Response to the ongoing Slowdown

VOTE FOR STATUS QUO

Why in news?

Pro democratic president of Taiwan, Ms Tsai’s win from Democratic progressive party [DPP] In presidential election in Taiwan could further strain ties with china

Taiwan Japan China Map Hong Kong Legacy IAS Academy Best IAS academy in Bangalore
Taiwan and nearby countries

Taiwan Japan Philippines China Hong Kong Legacy IAS Academy Best IAS Academy in Bangalore

Opposition to Beijing’s one­ country

Two ­systems policy has long defined the ruling DPP.

The Hong Kong protests have only served to bring into sharp relief the consolidation of democracy and sovereignty in Taiwan ahead of the weekend’s elections

Chinese influence

China has meanwhile leveraged its economic clout to influence much of Africa and Latin America to withhold recognition to Taiwan as a sovereign state


U.S.A. – IRAN : IN THE NAME OF SELF-DEFENCE

Why in news?

The U.S. strike in Iraq that killed Soleimani was in violation of UN norms proscribing such unilateral use of force

What does the law say?

  • Under international law, there is a general prohibition on the use of force, articulated in Article 2(4) of the UN Charter.
  • The Article proscribes any use of force by members against the “territorial integrity or political independence” of a state

Exceptions to the law

  • Use of force by a state in the lawful exercise of its right to self- defence
  • When such an act is carried out with the prior authorisation of the UN Security Council (UNSC)

COUNTER CYCLICAL FISCAL RESPONSE TO THE ONGOING SLOWDOWN

Background

The advance GDP estimate for FY20 points to the slowest economic growth in nearly 11 years at 5%
Both cyclical and structural forces at work to bring this scenario

Some reasons

Credit market issues that broke out in 2018 have negatively impacted the availability and cost of credit.

Consumption growth has moderated, and investment growth is subdued
Headline inflation has climbed due to the spike in food prices, but this is likely transient, and inflation should stay moderate as the economy is running well below potential

Response and Strategies

The response to a slowdown is counter-cyclical policies.

Monetary policy guidance

  • The monetary policy rate cut by 135 basis points in 2019 is yet to be passed to the consumers
  • The monetary policy works with a lag and given that the banking system is flush with liquidity, this should gradually transmit through the system
  • There is also a trust deficit in credit markets and regulators should consider the equivalent of an asset quality review (AQR) as was done for banks in 2015 to restore confidence.

Fiscal policy guidance

  • Tax revenues are running well below the target as growth is weak
  • Fiscal deficit is likely to miss the target and the attempts to bring it within control by reducing expenditure will only further dampen growth
  • The delay in settling dues at year-end to manage the fiscal deficit does more harm than good to the economy
    Fiscal policy should also adopt an accommodative approach to tame slowdown.
  • Economic growth is an essential element of India’s macroeconomic stability and growth is arguably the only way to address many of our problems
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