9 JAN 2016

THE HINDU: China’s contagious economic turmoil

China’s transition to a ‘new normal’ rate of growth was always expected to be bumpy. But, as it shifts gears, the Asian giant is spilling pain on to the rest of the world, and volatility is about the only certainty in the global economy at the moment. The yuan’s depreciation on Thursday to its lowest level since 2011, again put stock markets and currencies worldwide under pressure. Investors fear other countries could now be forced to consider competitive currency devaluations. The depreciation was less unexpected than the devaluations in August and is in line with Beijing’s move to make the yuan — all set to become a reserve currency of the International Monetary Fund — more market-linked. There’s a fresh worry: China’s foreign exchange reserves shrank by $108 billion in December, the biggest monthly drop on record, and declined by $513 billion last year. To put this figure in perspective, India’s foreign exchange reserves added up to $350.4 billion on January 1. The accelerating outflows from China, investors fear, could also be a sign of the country’s deepening troubles. China is rebalancing its economy, shifting it away from a model of debt-fuelled infrastructure and low-cost exports towards lower but more sustainable growth, driven instead by domestic consumption and services. Reformers in Beijing want to slow the Chinese economy, which expanded at a frenetic 10 per cent annually before 2008, and by about 7 per cent more recently. As the world’s second largest economy goes through a recalibration, the question increasingly being asked is: are the authorities in Beijing in control of the transition?
The scale and span of China’s trade gives it an over-sized influence over the global economy. Its waning appetite for commodities and imports is hurting economies dependent on such exports. For India, though, the drop in international commodity prices, especially of oil, is providing a silver lining as it is a net importer. The pain for India will come from the big and growing trade deficit it has with China. The deficit, which was $48 billion at the end of March, had reached $36 billion in the first eight months of this year and could worsen with the yuan’s depreciation. The Indian government must recognise that the depreciating yuan is a threat above all to Prime Minister Narendra Modi’s ‘Make In India’ plan. Indian manufacturers already suffer significant cost disadvantages. Their competitiveness will now diminish further against imports from China. Under the burden of China’s slowdown, global trade itself has shrunk. Recovery continues to elude the world more than seven years after the financial meltdown in 2008 and the subsequent monetary easing worldwide. India must recognise that the global economic scenario is far from healthy and take steps to spur domestic growth.

(of a disease) spread from one person or organism to another by direct or indirect contact.

A state of great disturbance, confusion, or uncertainty.

(of a surface) uneven, with many patches raised above the rest.

Fast and energetic in a rather wild and uncontrolled way.

(recalibrate) To calibrate for a second or subsequent time

(of the moon) have a progressively smaller part of its visible surface illuminated, so that it appears to decrease in size.

Evade or escape from (a danger, enemy, or pursuer), typically in a skillful or cunning way.

A disastrous event, especially a rapid fall in share prices.

THE HINDU: The U.S.’s firearms menace

U.S. President Barack Obama parted with the steely tradition of his two-term presidency this week, when he shed tears at the White House over what appears to have become a top-of the-agenda item of his final year in office, gun control reform. Although he broke down at the mention of six-year-olds massacred at Sandy Hook Elementary School in Newtown, Connecticut, it was anger that seared through his speech announcing executive actions to take on the stubbornly lax regulation of guns in the U.S. These actions aim to expand background checks for gun ownership, boost funding for federal agencies enforcing gun laws, improve treatment of mental health conditions nationwide, and herald an era of “smart gun” technology to prevent accidental firearm deaths. Few would blame Mr. Obama for feeling frustration over the quagmire that has greeted every attempt of his to start a conversation on what many worldwide would consider a reasonable restriction on the constitutionally enshrined right to bear arms. He has pitched for tighter, more meaningful gun laws no fewer than 15 times from the Oval Office, and his most ambitious attempt to bring the discussion to the floor of the Senate three years ago was speedily disposed of by hostile lawmakers. This week’s executive action had echoes of that 2013 omnibus gun control bill, yet in the face of uncertain funding prospects in a Republican-controlled Congress, likely resistance from conservative states and near-certainty of legal challenges, it may lack the teeth to seriously impact gun proliferation.
There are two forces behind America’s abysmal progress in halting the regular occurrence of gun rampages in public spaces. The first is what Mr. Obama described as the “lies” of the pro-gun lobby, whose lifeblood is the influential National Rifle Association, funded largely by gun manufacturers. After every mass killing with guns, NRA spokespersons proclaim in the American media that the only answer to gun deaths is more guns. Their efforts are bolstered by Republican presidential hopefuls such as Donald Trump. The second, more intractable, impediment facing any would-be reformer is the U.S.’s cultural proclivity for gun ownership. Even though a Quinnipiac poll last month found 89 per cent overall support for expanded background checks, a CNN poll the same month found that only 48 per cent of Americans favoured stricter gun control laws. Like any other cultural revolution, unwinding this national obsession with guns will be a slow process. Ultimately the realisation must dawn that, contrary to the Second Amendment’s promise that the right to bear arms will protect the public from the tyranny of government, in the 21st century it is the tyranny of firearms that truly threatens the American way of life.
A rifle, pistol, or other portable gun.

A person or thing that is likely to cause harm; a threat or danger.

(of two things) move away from each other.

Resembling steel in color, brightness, or strength.

Deliberately and violently kill (a large number of people).

Burn or scorch the surface of (something) with a sudden, intense heat.

In a stubborn unregenerate manner; "she remained stubbornly in the same position"

Not sufficiently strict, severe, or careful.

An official messenger bringing news.

A soft boggy area of land that gives way underfoot.

Place (a revered or precious object) in an appropriate receptacle.

Get rid of by throwing away or giving or selling to someone else.

A volume containing several novels or other items previously published separately.

Rapid increase in numbers.

Extremely bad; appalling.

Slow and hesitant, especially through lack of confidence; faltering.

(especially of a large group of people) rush around in a violent and uncontrollable manner

Support or strengthen; prop up.

Hard to control or deal with.

A hindrance or obstruction in doing something.

A tendency to choose or do something regularly; an inclination or predisposition toward a particular thing.

The Quinnipiac—rarely spelled Quinnipiack—is the English name for the Eansketambawg a Native American nation of the Algonquian family who inhabited the Wampanoki region, including present-day Connecticut.

Cruel and oppressive government or rule.

INDIAN EXPRESS: Say it like it is

LESS than six weeks after Prime Ministers Narendra Modi and Nawaz Sharif agreed to restart the India-Pakistan peace process in a quiet meeting in Paris, their audacious effort is at risk of being reduced to ashes by the fires lit in Pathankot. New Delhi announced, on Thursday, that it expects prompt action from Pakistan against the alleged perpetrators of the attack. Though India has not explicitly said so, it has signalled that talks between the two countries’ foreign secretaries may even be called off in the event the perpetrators are not arrested.
Events are playing true to the dismal script of India-Pakistan engagement. Progress towards peacemaking has, with depressing regularity, been blown apart by terrorist violence and the political costs this imposes on Indian political leaders. India’s intelligence services, and even independent commentators, had warned of just this prospect. Delhi ought, thus, to have anticipated the prospect of an attack, and anticipated the fallout by preparing the public. Even now, however, it is important that Delhi steer clear of the trap of calling off talks — the outcome the terrorists and their state sponsors seek.
This one fact is key: Engagement serves India’s strategic interest, allowing outreach to some of the many sharply divided constituencies that make up Pakistan’s polity. Though engagement does nothing to temper the hostility of Pakistan’s army to normalisation, it allows for incremental movements on trade and people-to-people contact.
These, it stands to reason, serve to strengthen civilian constituencies seeking peace. It is no one’s case that these constituencies can compel Pakistan’s army to sever its links with its anti-India jihadist clients. Pakistan will not act against groups like the Jaish-e-Muhammad or Lashkar-e-Taiba, for the simple reason that its all-powerful army sees them as useful instruments, both to pressure India on Kashmir and as a bulwark against anti-Pakistan jihadists.
Having said that, Pakistan-backed violence far more intense than today inflicted no strategic harm on India. Indeed, Pakistan is now worse off, relative to India, than it was when the army launched its proxy war campaign in the mid-1980s.
Prime Minister Modi now needs to reach out to India’s people, and explain just why it is in the country’s interests to continue the dialogue he began. Engagement, he must argue, serves India’s long-term interests, even if its short-term results are uncertain, and gains limited. He needs to explain, too, that engagement does not close the doors for retaliation, should it become necessary. However, war — urged on the government each night by prime-time anchors — is not to be taken casually. Like peacemaking, the outcomes of conflict are unpredictable, but its costs, human and economic, are gargantuan. India’s interests are served best by cold-blooded restraint, not the primal reflex to avenge a hurt.

Showing a willingness to take surprisingly bold risks

A tree with silver-gray bark and compound leaves. The ash is widely distributed throughout north temperate regions where it can form forests.

(perpetrate) perform an act, usually with a negative connotation; "perpetrate a crime"; "pull a bank robbery"

In an explicit manner; "in his foreword Professor Clark puts it explicitly"

Depressing; dreary.

Regard as probable; expect or predict.

Radioactive particles that are carried into the atmosphere after a nuclear explosion or accident and gradually fall back as dust or in precipitation.

Force or oblige (someone) to do something.

A defensive wall.

Cause (something unpleasant or painful) to be suffered by someone or something.

(peacemaker) conciliator: someone who tries to bring peace


Inflict harm in return for (an injury or wrong done to oneself or another).

BUSINESS STANDARD: Akash Prakash: COP21, stranded carbon and India


The Paris Agreement at COP21 reached in mid- December to tackle climate change has elicited mixed reactions. Some feel it is a truly historic agreement, fundamentally accelerating the move towards de-carbonisation of our energy mix, while others believe that nothing much has really changed.

Some of the key elements of the agreement are:

First of all, to keep the increase in global temperatures to well below 2°Celsius, with a hope to restrict global warming to 1.5°C.

Secondly, most countries announced voluntary pledges to curb emissions (158 submissions covering 185 countries and 90 per cent of global emissions were announced). These submissions are a first step, with most countries having to announce further reductions in 2020 and continuing to increase the cuts every five years.

Thirdly, the developed countries will supposedly provide the poor nations with $100 billion a year till 2025, and then step up this funding.

The problem with the above is that the actions taken do not deliver the desired outcome of limiting global warming to within 2°C, forget 1.5°C. Not even close.

Prior to Paris, assuming no change in policy, we were on track to achieve a global warming trajectory of about 3.6°C. With all the pledges made in Paris, we would see an improvement, but emissions would still keep rising till 2030, and the path towards global warming would improve to 2.7°C. An improvement, but nowhere near enough. To limit warming to 2°C, carbon dioxide emissions will have to be cut by 25 per cent more than the pledges already made. To limit global warming to 1.5°C, we will need additional cuts in emissions of 40 per cent by 2030, according to Bernstein Research.

Just to give a sense of the enormity of the task, the additional emissions cuts needed to restrict warming to 1.5°C imply a total phase-out of coal from the energy mix and replacing oil from all transport uses - and all this by 2030. Clearly highly unlikely.

The takeaway from this is that while a target of 1.5°C is impractical, we are going to see much higher cuts in emissions than what has been pledged - it is inevitable.

This brings us to the question of stranded carbon: the concept that some of the proven reserves of fossil fuels will never be burnt and will remain stranded.

Thinking of the challenge in terms of a total carbon budget, to stay within the 2°C target, we only have about 1,100 giga tonnes (gt) of carbon dioxide (CO2) that can still be emitted. Assuming emissions peak today (not likely), we would only have another 22 years or until 2037, before carbon emissions would have to go to zero.

Looked at another way, current proven reserves of fossil fuels are about 812 billion tonnes of oil equivalent (oil, gas and coal). Just burning all these proven reserves (not counting contingent reserves or those yet to be discovered) would generate about 2,512 gt of CO2 equivalent emissions. The world cannot afford to have more than 1,100 gt of incremental emissions if we are to stay within the 2°C framework. Thus, no more than 40 per cent of the existing proven reserves of fossil fuels can ever be burnt. Probably even less, as some of the carbon budget will be taken by non- fossil fuel applications like agriculture.

Within the fossil fuel carbon budget, coal will lose out, given its carbon intensity and sheer abundance. Bernstein estimates that only about 25-30 per cent of the proven global coal reserves will ever get used. More than 50 per cent of oil reserves will get burned and upwards of 60 per cent of gas reserves, given its relative carbon efficiency. The major oil companies, given their short reserve life and speed of extraction will not suffer stranded assets - unlike sovereign nations, many of whom like Iran and Iraq, have been too slow to work their reserves. Whatever oil and gas is stranded will be at the cost of the sovereign nations in Organization of Petroleum Exporting Countries (OPEC).

What are the implications for India?

First of all, we need to ramp up coal production as soon as possible, otherwise the bulk of our coal will never get burnt. There is probably a limited window of another 20-25 years for coal, beyond that it will be impossible to use.

Secondly, there is a possibility that we could see a race to produce as much oil as possible by OPEC members, if countries like Iran and Iraq get convinced that much of their oil will never be burnt if they keep producing at current rates of extraction. This carbon race will be highly damaging to petroleum pricing. We may already be seeing some form of this dynamic playing out, as OPEC production has continued to surprise to the upside throughout this crash in oil prices. The Saudis may be playing a game beyond just crushing US shale: They may simply be maximising the value of their reserves by pumping flat out.

Thirdly, natural gas will gain prominence as the only way to lower emissions in the short term and provide a low carbon bridge to renewables, electric vehicles (EVs) and energy storage systems till they gain economic viability. We need to ensure long-term linkages for gas; it will be far more important than oil in the future. Locking in long-term contracts today when prices are low may be prudent.

An inexorable shift away from coal and other high carbon fuels (oil sands) is underway. This will benefit lower carbon fuels like natural gas, and zero-carbon technologies like renewables, energy storage systems, batteries and electric vehicles. As much as 60 per cent of current emissions come from power generation and transport; both will be disrupted as EVs and solar combined with energy storage gain prominence.

We need to attain a technology position in these new fields. China already dominates solar, and South Korea leads in battery technology powering EVs and energy storage systems. India has to use our likely leapfrogging and mass adoption of these new technologies to build a viable eco-system in these areas. We should encourage local players in both areas.

The equipment required for a task or sport.

Evoke or draw out (a response, answer, or fact) from someone in reaction to one's own actions or questions.

A stone or concrete edging to a street or path.

The path followed by a projectile flying or an object moving under the action of given forces.

The great or extreme scale, seriousness, or extent of something perceived as bad or morally wrong.

A key fact, point, or idea to be remembered, typically one emerging from a discussion or meeting.

Certain to happen; unavoidable.

Nothing other than; unmitigated (used for emphasis).

A very large quantity of something.

The action of taking out something, especially using effort or force.

(of a boat, sailor, or sea creature) left aground on a shore.

Impossible to stop or prevent.

Interrupt (an event, activity, or process) by causing a disturbance or problem.

With legs parted, vault oneself over the backs of others who are bending dowN

Capable of working successfully; feasible.

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