IMF and WTO 12 Oct 2015 by Tojo Jose

India demands governance reforms at the World Bank

India demands governance reforms at the World Bank

India has demanded governance reform of the World Bank (WB) by raising the shareholding by the developing countries at the Plenary Meeting of the WB-IMF Development Committee. The World Bank is facing fund shortages to implement its ambitious development programmes including climate financing and realizing the Sustainable Development Goals. Development Committee is the ministerial-level forum or decision making body of the World Bank Group and the IMF together, for intergovernmental consensus-building on development issues. India has a multi country representation as the Finance Minister represented a constituency consisting of -- Sri Lanka, Bangladesh and Bhutan besides India

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IMF and WTO 11 Oct 2015 by Tojo Jose

End of corporate tax avoidance: Governments coming to the final stage of ratifying the BEPS project

End of corporate tax avoidance: Governments coming to the final stage of ratifying the BEPS project

The much anticipated biggest rules in international taxation- the OECD designed and G20 promoted BEPS (Base Erosion and Profit Shifting) Project is coming into the final stages. World’s leading finance ministers at the leadership of the G20 agreed on Friday to create international and domestic laws for taxing profits; giving warning to MNCs that they should end tax avoidance practices. BEPS project is a set of international tax rules proposed to counter the widespread tax avoidance practices by big MNCs. The companies use tax loop holes, concessions and Double Taxation Avoidance Treaties (DTATs) to escape from taxation. This has frustrated governments and more than that, cit

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China & East Asia 05 Oct 2015 by Tojo Jose

US and its Pacific friends agrees on the biggest trade bloc in twenty years

US and its Pacific friends agrees on the biggest trade bloc in twenty years

The mega trade bloc that the world was continuously talking on during the last few years – the Trans Pacific Partnership (TPP) is going to be materialized. The New York Times has reported that the Obama administration and the partnering countries have reached consensus on TPP. If implemented, the TPP will be the largest trade bloc in recent history, comprising 40 per cent of the world GDP in twelve countries, but remarkably excluding China. The TPP is a WTO plus trade alliance that aims to liberalise trade to advanced level between the US and eleven other members of the group. Besides economics, the TPP bears considerable value as it is considered as an alliance betwee

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Emerging Markets 27 Aug 2015 by Tojo Jose

Emerging markets have to fight currency risks and currency wars

Emerging markets have to fight currency risks and currency wars

When the world’s biggest exporter -China has devalued its currency to stimulate export and growth, there is little option for other EMEs. They also have to produce devalued currencies to remain competitive in the international market. At the same time, the EMEs have to evade any potential currency crisis. Declining exports and evading foreign investors may make currencies double weaker. Already, fall in commodity prices are causing currencies of many EMEs, especially that of Brazil and Turkey weaker. Thus, policy makers in EMEs have to carefully balance measures to make currencies competitive at the same time by avoiding currency crisis. For India, it is difficult for

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China & East Asia 26 Aug 2015 by Tojo Jose

China’ stock market defies Central Bank support

China’ stock market defies Central Bank support

Chinese equity market continued to fall today despite the rate cut stimulus package extended by the People’s Bank of China yesterday. Leading index, the Shanghai Composite Index (SCI) fell by 1.3 %, which is a smaller dip compared to near double digit fall registered on the previous day. For the first time in this year, the SCI fell below 3000 mark and closed at 2927. Yesterday, the PBOC (People’s Bank of China) has cut its policy rate by 25 bps and the reserve ratio by 50 basis points. The continuing decline in stock prices indicates that the market is in an auto correction mode in the context of falling GDP growth. Stock prices that doubled in the last one year are

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China & East Asia 25 Aug 2015 by Tojo Jose

China’s central bank makes interest rate cut to end panic in the market

China’s central bank makes interest rate cut to end panic in the market

The People’s Bank of China has made a decisive cut in interest rate to arrest the free fall in the equity market. Central bank’s move came after the Shanghai Composite Index recorded third day steep fall with stock prices coming down by 7.5% today. For the last three days, the SCI has lost 20.5%. Always there is inverse relationship between stock prices and market rate of interest. Cutting the interest rate will make equities more attractive. This is what the PCB aims in its indirect way to support the market. It is expected that interest rate cut will make bank loans cheaper and will provided adequate liquidity in the stock market. The rate cut may encourage inv

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China & East Asia 24 Aug 2015 by Tojo Jose

China’s rattling economy brings down global financial markets

China’s rattling economy brings down global financial markets

The biggest crisis after 2008 has reached. From Japan to US, financial markets and commodity prices have crashed down by the latest turn of faults in Chinese economy.  Leading the scoop in stock markets, the Chinese Shanghai Composite Index has fallen by 8.5%; its biggest fall since 2007. Stock markets in Europe, US and Asia- all have recorded value collapse in response to the negative news from China. Over the last one month, the Chinese economy was showing symptoms of crack. Stock market value has come down by nearly five percent on many trading days. Worst is that every official attempt to arrest the market fall had failed. Financial markets are reading that China ca

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China & East Asia 14 Aug 2015 by Tojo Jose

‘Two birds in one shot’ is all about China’s currency devaluation

‘Two birds in one shot’ is all about China’s currency devaluation

In a reward maximizing move, China has made its official exchange rate equal to that of the market exchange rate. The result of aligning the two exchange rates was that the Yuan has undergone devaluation of around three and a half percent over three days. Of course there are two interpretations for the Yuan devaluation- one by China and the other by the rest of the world. The financial world has assessed Beijing’s move as a devaluation effort to make export gains. Many analysts have described the step as currency war. Devaluating domestic currency increases exports at the same time decreasing imports. Obviously, the Chinese economy is undergoing a tough and unprecedent

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China & East Asia 06 Aug 2015 by Tojo Jose

Renminbi’s global currency status: IMF extends the review of SDR currency basket to the next year

Renminbi’s global currency status: IMF extends the review of SDR currency basket to the next year

China has to wait for one more year to include the Renminbi under the IMF’s SDR basket.  A decision on this has been taken by the IMF on Tuesday, indicating that the Fund will introduce any change only by September 2016. The SDR (Special Drawing Rights) is the reserve asset of the IMF and its value depends upon a basket comprised of the four important global currencies- the US Dollar, the Euro, British Pound Sterling and the Japanese Yen. China has been insisting on every global front that the IMF should reform the currency basket by including its currency – the Renminbi. Inclusion of Renminbi is an indicator of the rising status of the Chinese economy and a big

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Emerging Markets 14 Jul 2015 by Abdul Kareem C

Iran’s reentry into the world economy is a big event

Iran’s reentry into the world economy is a big event

End of sanctions and slow reentry of Iran into the world economy is a big event for Iran as well as for the world economy.  Iran is the 17th largest populated country in the world with nearly 77 million people and is bigger than UK and France. Population size shows that Iran is bigger than South Africa, the latest entrant into the BRICS group.   It is expected that besides Iran, the major beneficiaries of the removal of sanctions are India and China. For these big neighbors of Iran, it provides opportunity to get cheaper oil compared to other sources. For Iran, sanctions have produced unstable growth, high inflation, international banking restrictions and hard curr

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