The Hindu Newspaper Analysis – 11 January 2021

Challenges for the RBI

  • The country’s economy suffers from crisis and to top that the easy money regime has been playing for quite some time. In order to get the country out of this, RBI which is the central bank of the nation has an important role to play.
  • The already crashing economy and the COVID 19 pandemic provided formidable challenges to the RBI for which it took many steps:
    • It slashed the policy rates in the country
    • It helped in filling the liquidity in the market
    • It assisted distressed individuals like salaried people, frontline workers among others.
  • Now the RBI has to get the country’s economy out of the easy money regime to create a balanced economic ecosystem, but RBI faces several challenges in this regard, they are as follows:
    • It has to rightly balance between inflation and support the recovery through an expansionary monetary policy. This could be a tough situation as it could lead to more inflation. The inflation rate in India has recently breached the targets and RBI has to be more careful in this regard.
    • The savers in the economy have to be considered as they will be in confusion when they will have low-interest rates and high inflation.
    • RBI has to withdraw the excess liquidity in the economy that will balance out things.
    • RBI while doing this has to consider the market tantrums and take them in the right spirit to settle the scenario.
    • All this has to be communicated by the RBI in the right so as to avoid confusion and save the scenario.
    • RBI must also note that the Rupee must not appreciate out of the limit set.
  • All in all, the RBI is currently in a difficult situation which the author calls as the classic trinity which is characterized by three issues:
    • The doors for the capital inflow have to be kept open
    • The inflation should be kept under check
    • The rupee must not be allowed to appreciate more than the limit

Electric Mobility

  • India is now in the Bharat Stage 6 and we are progressing towards phasing out diesel vehicles then we will move towards completely electric vehicles.
  • Electric vehicles are important as they have the following advantages:
    • They reduce our dependence on crude oil
    • They will help reduce carbon emissions and move towards a cleaner environment
    • They will strengthen our relations with nations in terms of reduced crude oil dependence
    • They will finetune our infrastructure which will be more environmentally friendly.
  • When we talk about strengthening our relations, we have to understand that we are too dependent on central Asian, West Asian, and Latin American nations for crude oil and we are the 3rd largest importer in terms of value.
  • The Govt has taken several steps and policies have been introduced to strengthen this scenario:
    • The FAME scheme or the Faster Adoption and Manufacturing of Hybrid and Electric vehicles provide for the same.
    • Allocation of 1.3$ billion subsidies for manufacturing electric buses, 3 wheelers and 4 wheelers for commercial purposes by 2022.
    • 13.5$ million subsidies have been separately provided for the charging stations that an important part of the electric ecosystem.
    • 4.6$ billion has been provided for battery makers.
  • Through this, the Govt aims to have 30% of the cars traveling on the road to be electric ones.
  • In 2019 Suzuki automobiles along with Denso and Toshiba have planned to develop a battery manufacturing plant in Gujarat.
  • We are dependent on the Latin American Nations for the minerals used in manufacturing batteries like Lithium and Cobalt. The lithium triangle of South America consisting of Argentina, Brazil, and Chile satisfies most of our needs in this regard.
  • In 2019, KABIL (Khanij Bidesh India Ltd.) was started by
    • NALCO (National Aluminum company)
    • HCL (Hindustan Copper Ltd)
    • MECL (Mineral Exploration Corporation Ltd)
  • This initiative will help us scout natural mineral resources in the country like Lithium and Cobalt that would cater to commercial and domestic uses. This is imperative to reduce our dependency on the Latin American nations as it has tripled in the last few years and is likely to grow.
  • Lithium is also important for us as it is used in the drug to treat bipolar disorder.
  • We are seeming to remove from crude oil dependence regime to lithium and cobalt import regime and we need to curb the over-dependence scenario.
  • India with this will take the front-seat in the electric mobility scenario, it will be able to understand the needs, will forge more joint ventures, supply the domestic demand, drive international markets.
  • It will also help us to achieve cleaner cities, build new markets, provide more jobs, and even skill more people. It will help us rightly move towards the AtmaNirbhar Bharat. 

The Hindu Newspaper Analysis – 12 January 2021

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