Today Re 1 buys 1.72 yen, ten years ago Re 1 could buy 2.80 yen and, 32 years ago, say on February 26, 1985, Re 1 could buy 19.77 yen. On February 26, 1985, the exchange rate of dollar/yen was 261 and that of dollar/rupee was 13.20. Divide 261 with 13.20, you get 19.77. So, had India borrowed 150,000 crores yen on February 26, 1985, today, that is after 32 years, the principal amount of loan (without interest) would have swelled 11.49 times (divide 19.77 by 1.72). Depending on repayment schedule and lock-in period of loan, the multiplication factor could have reduced from 11.49 to 6 or 7 on a conservative estimate. This is simple arithmetic and no rocket science.
So, can we not predict what fraction of a yen, Re 1 would buy after 50 years? If the rupee’s purchasing power has dipped from 19.77 yen in 1985 to 1.72 yen today, then after 50 years can a rupee buy anything more than just a fraction of a yen? Unlikely, unless yen interest rate shoots up and rupee rate becomes close to zero, which is highly improbable. Therefore, this 50-year yen loan, with a 15 years lock-in period, is anything but free. It is in fact a rip off. By the time the loan is repaid in 50 years, India would have shelled out Rs 300,000 crores at least, or even more, depending on how quickly the loan is extinguished. This excludes interest of 0.1% on yen loan which would add to the cost. Yen is a dangerous currency and it would be imprudent to ignore its track record.
India can ill-afford to keep such a huge liability in yen unhedged. But even the cost of hedging rupee/yen exchange risk would be prohibitive. Initially India would be required to buy Yen 150,000 crore forward outright in the international market, and keep doing rupee/yen swaps – sell yen spot and buy yen back forward, matching with each due date of loan repayment installment. This process would continue till the entire loan is extinguished. This is called roll-over swap, which corporate in India execute to hedge currency exchange risk in external commercial borrowings. But, such swaps, on each occasion, would entail huge costs for the simple reason that forward delivery of yen against rupee would be at a premium so long as yen interest rate remains lower than rupee.
It is axiomatic that forward delivery of a currency yielding lower rate of interest would always be at a premium vis-à-vis the currency yielding higher rate of interest. The yen interest rate is now close to zero. The rupee repo rate (rate at which banks borrow from the Reserve Bank of India) is 6%. Thus, multiple swaps executed till the currency of the loan would be hugely expensive as forward premia would have to be paid by India on each swap. India would thus end up paying well over Rs 300,000 crores (multiplication factor 3.4 taken) on a most conservative estimate. Notably, rupee/yen quote will not be available directly in the international forex market; consequently, dollar being the intervention currency for India, swaps would have to be performed through dollar/yen quotes. Rupee would thus have be converted into yen only through dollar.
The above figures/calculations do not take into account 0.1% interest burden on yen loan. Today, interest rate in Japan is hovering around zero to fractionally negative, like in Sweden. On September 7, 2017, the Central Bank of Sweden held its benchmark interest rate at (minus) – 0.5%. Similarly, the Central Bank of Japan has slashed interest rate to just shade below zero. Tokyo Inter Bank Offer Rate (TIBOR) is around 0.06%. A ten year Japanese Government Bond yields barely 0.04%. Therefore, 0.1% interest rate that Japan would earn from India is a very lucrative investment opportunity for Japan, which is struggling to fight deflation for over 15 years. More the lock-in period/tenure of yen lending in India, merrier it is for Japan, and costlier it is for India.
Though the work of Adani on Vizhinjam Transit Harbour stopped due to the struggle of the local people may be resumed for the time being as the Catholic Church leaders interfered and signed an agreement, the basic questions raised still continues... Now, the agreement is on possibility for rehabilitation and compensation. But how can you rehabilitate and how can you compensate? The southern tip of Arabean sea is the only wedge bank (highest biodiversity region) for India among the only 20 wedge banks in the world. Can you rehabilitate and compensate the rare and threatened species of this region? Can you rehabilitate over 50,000 coastal people who will lose their jobs? Can you rehabilitate or compensate two hills from the Western Ghats which will be lost? Can you rehabilitate the beaches which will be lost? Can you rehabilitate the famous Kovalam beach which will become Kovalam rocks? Can you rehabilitate the loss of 25 coastal villages which will be affected by this developmental terrorism
On 6th Novemebr tens of thousands of people from Vypeen are marching to Ernakulam demanding the scrapping of the planned huge LPG storage tanks in the thickly populated area. Is the CPI(M) government going to crush all these movements using brute police force?
It can do so only if the economy is taken out of the vortex of global capital flows, through capital controls, and also, to the extent necessary, trade controls; that is, if the economy delinks itself from globalisation. Since the corporate-financial oligarchy which is itself integrated with international finance capital will not countenance this, only a State with an alternative class basis will be able to effect such a change, a State that is based on the support of the working people. And when the working people effect such a change, they will not rest content merely with reviving a capitalist economy, but will rather proceed to build an alternative economy altogether, an economy that will make a transition to socialism. Hence the cul-de-sac in which neo-liberal capitalism finds itself can be broken through; but such a break-through will lead to a transcendence of capitalism itself.
To be sure, as Lenin had said, there is no such thing as an absolutely hopeless situation for capitalism. Even if capitalism itself is unable to break out of the cul-de-sac, it will make every possible effort to prevent the working people from organising themselves to effect a change in the situation. It will unleash every skullduggery known to fascism towards this end. It will make every effort to push mankind towards barbarism in order to prevent its moving ahead towards socialism. The outcome ultimately of course depends upon praxis.
But the current scenario is one which opens up the possibility for the working people to seize the initiative to lift themselves out of the crisis and at the same time to defend and deepen their democratic rights, to carry forward in short the project of the October Revolution.” Will the CPI(M) leadership ask its leaders in Kerala heading the government there to give attention to these words; (or, is it only for the general readers)?
The police’s conduct in BHU was disgraceful. Such actions have now become widespread in the country. Due to politicized university administrations — be it at Jawaharlal Nehru University, Jadavpur University, Hyderabad Central University, and now at BHU — policemen get a free hand to act against students who are perceived to have overstepped the limits set by the authorities. The girl students narrate that this life in BHU campus is like life in Kashmir; isolated, alienated, and cut off from the mainstream. “There’s no space for us to demand our rights, or express our opinion. We are simply required to read text-books, and maybe, even act like robots,” the girls added.
In spite of protests in many campuses, the situation continues unchanged or become worse as a result of commercialization and communalization of the education system and campuses. As the latest orders by the Kerala High Court shows even the judiciary is impervious to making the campus atmosphere democratic. A major struggle is called for to end terrorization of the students, for campus democracy and gender equality, linked with the struggle against commercialization and communal-ization of the education system.
This brings home the fact that individuals/communities that are part of this complex spiral web may at best understand and grasp their own concerns but not the entirety, the ‘conflict of interest’ that so arises as a barrier to comprehensive understanding requires an ‘unbiased’ external force to help facilitate an action based learning process. Such an ‘unbiased’ agency does not exist. However the sum total of human experiences and current developments provides the material on which to make a start to understanding the difference in ‘systemic change’ from system change. This is an appeal to those who have learnt enough to understand that the current system has no answers and a sincere effort is first needed to first free ourselves from the system spectacles that it gives so that we can begin to fathom what is it, that is needed for real change.
In short these processes play itself out in the context of developing a live agenda for CCNR group as well. I am also attaching the concept note on Gender which further deepens the understanding. I quote from that document as well. Physical, verbal and psychological violence on women is the order of the day where they are involved directly in asserting their rights under FRA. Customary social practices and taboos, bind them. This restricts the process of women’s assertion in a process that seeks to restore the best of customary practices in the protection and management of sustainable forests. Hence gender equality in the process will ensure equity and sustainability of resources and of women’s rights and roles therein. Such an approach for engendering the forest rights regimes needs to refer to the injustices to women, in the discrimination and oppression they experience in denial of recognition of entitlements within family and community structures, both in the ownership and/or control over land and resources as well as in the voice and agency to make decisions for such resource conservation, use, protection and management. And that such protection of their rights must be based on an examination of the oppression within the rules and structures of governance from the family onwards.
This document was circulated widely among women’s groups in India and posted on facebook as well with the comment that in response to my note pointing out the role of my experiences in SPWD in developing this note I got a mail saying that I was blacklisted.