JNPT was awarded by ISO14001 and OHSAS 18001 certification:
Jawaharlal Nehru Port Trust (JNPT) was awarded ISO 14001 and OHSAS 18001 certification respectively by the Indian Register for Quality Systems (IRQS), confirming its adherence to globally recognised management systems in environmental responsibility and occupational health and safety.
With the addition of these certifications, JNPT has achieved the distinction of becoming the first major port to achieve the three certifications from the international organisation for standardisation (ISO) and an occupational health and safety management system certification in keeping with its status of a world-class port
Highlights
Commissioned on 26th May 1989.
Located at 18 degrees56′ 43″ (latitude) & 72 degrees 56’24′ E (longtitude)
Land Area : 2584 Hectares
Handles containers, liquid bulk & cement ships.
Has three dedicated container terminals namely JNPCT, NSICT & GTIPL
ISO 9001:2000 certified and ISPS compliant
Ranked 24th among top 100 container ports in the world.
Handles about 60% of total containers handled by all Major Ports in India
Connected with 24 CFSs and 34 ICDs destinations
Handled 57.29 million tonnes of cargo in 2008-09 including 3.96 TEU’s containers
Poised to handle 10 million TEUs of containers by the year 2015-16
Capital punishment:Delay has made it a nebulous category:
Also referred to as “Death Penalty”, Capital punishment is the lawful infliction of death as a punishment and since ancient times it has been used for a wide variety of offences. The word “capital” comes from the Latin word “capitalis”, which means “regarding the head”. Capital punishment is a practice in which prisoners are executed in accordance with judicial practice when they are convicted of committing what is known as a “capital crime.” Capital crimes are crimes deemed so heinous that they should be punishable by death. Worldwide, this practice is extremely controversial, with a variety of concerns ranging from human rights to economic efficiency being raised in discussions about capital punishment. At one point and time capital crimes where punished by severing the head. Capital punishment has been used in societies throughout history as a way to punish crime and suppress political dissent. In most places that practice capital punishment today, the death penalty is reserved as punishment for premeditated murder, espionage, treason, or as part of military justice. In some countries sexual crimes, such as rape, adultery and sodomy, carry the death penalty, as do religious crimes such as apostasy (the formal renunciation of the State religion). In many retentionist countries (those countries that use the death penalty), drug trafficking is also a capital offense. In China human trafficking and serious cases of corruption are also punished by the death penalty.
Madras High Court decision on Rajiv Gandhi killers evokes debate on death penalty in India: After the political controversy over the hanging of Rajiv Gandhi’s assassins comes a legal one. The Madras High Court has suspended the execution, scheduled for September 9, by eight weeks. It should be noted that Santhan, Murugan and Perarivalan - all convicted for being part of the group that conspired to kill the former Prime Minister in 1991 - were sentenced to death by the Supreme Court in 1999. Their mercy petitions, filed 11 years ago asking for their sentence to be commuted to life in prison, were rejected earlier by President Pratibha Patil. On the face of it, there seems to be good justification for staying the executions —scheduled for 9 September —by eight weeks. The three were convicted and their death penalties confirmed 11 years ago, and this fact alone establishes a strong case for clemency. In a previous judgment, the Supreme Court has said that clemency pleas should be disposed of within three months of a death penalty being confirmed. Failing this, it would amount to mental cruelty to the condemned person and his or her relatives. All the three convicts have waited almost 11 years for their death and this seems enough reason for granting them clemency. Interestingly, with the aim to save the three convicts, the Tamil Nadu Assembly has also adopted a unanimous resolution asking President to reconsider their mercy petition. This decision of the TN Assembly is definitely going to set bad examples for other states, which can also pass resolutions in the future for cancellation of mercy petitions of their beloved criminals. Against the backdrop of High Court ruling, the things are definitely going to get harder to resolve. The politicians will only be encouraged to play more politics with condemned men and their relatives – prolonging everybody’s agony. The questions that the HC ruling has raised are: (a) First, the main issue right now is whether the death penalty is a good thing or not. (b) Secondly, the delay in the execution for 11 years points to the failure of the executive to do its job. The successive governments have been sitting on mercy petitions for years on end for lack of political courage. (c) Thirdly, is it cruel to keep a prisoner on death row for so long? We need to understand that the convicts and their families have suffered mentally. Their families certainly must have suffered from not knowing whether their convicted relatives would be reprieved or not. (d) The ban-the-death-penalty supporters seem to wake up only when someone is actually on the threshold of a hanging. This is opportunism of a different kind. One need not doubt their sincerity, but trotting out the same old arguments against death penalty just when justice is at the point of being done is simply not on.
Delay in disposal of mercy petition erodes right to personal liberty: The delay in disposal of mercy petitions by the government is not new in India. For example the mercy petition in Rajiv Gandhi murder case was delayed by almost 11 years when on August, 11, 2011 the President of India ruled out the mercy petition and ordered the execution of the convicts. The indecision and delay by the government in deciding mercy petitions has created a huge backlog and the result is that the fate of convicts is hanging in between; they are dying every day in wait of their death to come. The delay in deciding a mercy petition not only causes trauma to the convict but he can also exploit the situation at a later stage to escape the capital punishment. It can affirmatively be said that the delay in deciding the mercy petition is unconstitutional and illegal and is a clear violation of Article 21 of our constitution (Protection of Life and Personal Liberty). It’s thus imperative that the government should avoid undue delays in deciding the mercy petition to avoid the adverse implication for the victims, the convict and the society at large.
Capital punishment and statutory framework in India: In India, the provisions relating to capital punishment are embodied in Indian Penal Code and Criminal Procedure Code. Indian Penal Code is the substantive law, which suggests the offences, which are punishable with death sentence. Criminal Procedure Code is the procedural law, which explains the procedure to be followed in death penalty cases.
Let us now look at some of the provisions of the Indian Penal Code that provide for the imposition of Capital Punishment:
(a) Section 121 provides that whoever wages war against the Government of India or attempts towage such war, or abets the waging of such war, shall be punished with death, or imprisonment for life and shall also be liable to fine.
(b) Section 124 - A provides death penalty for sedition.
(c) Section 302 of Indian Penal Code is the most important section in the jurisprudence of Capital Punishment. It prescribes death sentence for the offence of murder.
(d) Section 396 states that “If any one of five or more persons, who are conjointly committing dacoity, commits murder in so committing dacoity, every one of those persons shall be punished with death, or imprisonment for life.
Pardoning powers under Constitution and judicial review regarding capital punishment: The administration of justice through courts of law is part of the constitutional scheme to secure law and order and the protection of life, liberty, or property. Under that scheme it is for the judge to pronounce judgment and sentence, and it is for the executive to enforce the sentence. Normally this is the procedure. But, sometimes the sentence pronounced by the judge is not carried out as it is. It may be altered into the following forms.
(a) A pardon releases both the punishment prescribed for the offence and the guilt of the offender, and when the pardon is full, it releases the punishment and blots out of existence the guilt, so that in the eye of law, the offender is as innocent as if he had never committed the offence. If granted before conviction, it removes the penalties and disabilities and restores him to all his social rights. However, pardon is an act of grace and therefore it cannot be demanded as a matter of right.
(b) Commutation means exchange of one thing for another. Here it means substitution of one form of punishment for another, of lighter character.
(c)Remission means reduction of the amount of punishment without changing its character.
(d) Respite means awarding a lesser punishment on some special grounds; for example the pregnancy of a woman offender.
(e) Reprieve means temporary suspension of death sentence; for example pending proceeding for pardon or commutation.
Article 72 of the Indian Constitution: Under this article the constitution grants power to the President to grant pardon etc., and suspend, remit or commute sentence in certain cases:
(a) In all cases where the punishment or sentence is by a Court Martial
(b) In all cases where the punishment or sentence is for an offence against any law relating to a matter to which the executive power of the Union extends.
(c) In all cases where the sentence is a sentence of death.
Hang them now, hang them not: The recent stay on the execution of Rajiv Gandhi’s killers by the Madras High Court has again brought the issue of capital punishment into national focus. After dealing with the statutory provisions of the capital punishment, let us now concentrate on the larger question i.e. whether capital punishment should be abolished or continued. In the past, capital punishment has been practiced in almost every society. Currently, only 58 nations actively practice it, with 95 countries abolishing it. Many countries have abandoned capital punishment, including almost all European and many Pacific Area states (including Australia, New Zealand and Timor Leste), and Canada. In Latin America, most states have completely abolished the use of capital punishment, while some countries, such as Brazil, allow for capital punishment only in exceptional situations, such as treason committed during wartime. The United States (the federal government and 36 of its states), Guatemala, most of the Caribbean and the majority of democracies in Asia (e.g. Japan and India) and Africa (e.g. Botswana and Zambia) retain it. South Africa, which is probably the most developed African nation, and which has been a democracy since 1994, does not have the death penalty. The debate on capital punishment revolves around number of questions, which are important to layout as a way of summarizing the moral trade-offs off the debate. They include, is capital punishment intended primarily as a punishment? Is it a just and proportional punishment for certain crimes, like murder? Do murderers and some other criminals commit crimes so horrific that they forfeit the right to life? Should innocent life be valued over a murderer’s life, and does capital punishment demonstrate this? Is life imprisonment without parole a sufficient punishment? Is the idea of proportional justice a slippery slope to abusive forms of punishment? Does capital punishment jeopardize our sense of the “dignity of life”? Or, is it important to demonstrate compassion even to murderers by sparing them their lives? Is the purpose of our prison system retribution or rehabilitation?
Let us now analyse the reasons why capital punishment should be and why it needs to be abolished: Reasons for capital punishment:
(a) The principle of capital punishment is that certain murderers deserve nothing less than death as a just, proportionate and effective punishment. There are problems with the death penalty, but these are with its implementation rather than its principle. Murderers forgo their rights as humans at the moment when they take away the rights of another human. By wielding such a powerful punishment as the response to murder, society is affirming the value that is placed upon the right to life of the innocent person. Many more innocent people have been killed by released, paroled or escaped murderers than innocent people executed. (b)Prison: There are three purposes for prison. First, prison separates criminals for the safety of the general population. Second, prison is a form of punishment. Third and finally, the punishment of prison is expected to rehabilitate prisoners; so that when prisoners are released from prison, these ex-convicts are less likely to repeat their crimes and risk another prison sentence. The logic for capital punishment is that prisons are for rehabilitating convicts who will eventually leave prison, and therefore prison is not for people who would never be released from prisons alive.
(c) Capital punishment is 100 per cent effective as a deterrent to the criminal being executed; that killer cannot commit any more crimes. As a deterrent to others, it depends on how effectively the death penalty is applied. (d) A person who has committed a crime like killing or raping another person should be given death penalty, which is as severe punishment as the act. It is said that when a criminal is given a capital punishment, it dissuades others in the society from committing such serious crimes. They would refrain from such crimes due to fear of losing their lives. This would definitely help in reducing crime rate in society. (e) Cost of Prison: Typically, the cost of imprisoning someone for life is much more expensive than executing that same person. However with the expensive costs of appeals in courts of law, it is arguable if capital punishment is truly cost effective when compared with the cost of life imprisonment. (f) It is also important for the safety of fellow prison inmates and guards, as people who commit horrifying crimes like murder are believed to have a violent personality and may, in future, attack someone during imprisonment. These reasons emphasize the importance of capital punishment for the betterment of human society. However, there is another section of people who believe that it is an immoral and unethical act of violence. (g) Some anti-death penalty campaigners describe examples of people on death row, or people have already been killed have then been proved innocent. Today, the accuracy of modern forensics and DNA testing makes it very unlikely for an innocent person to be put on death row. Furthering this point, it is argued that the number of innocent people that may be killed is equalised by the number of actual criminals that are set free. (h) Criminals who receive the death penalty are typically violent individuals. Therefore for the safety of the prison’s guards, other prisoners, and the general public (in case a death row inmate escapes prison), then logic dictates that safety is a reason for capital punishment.
(i) It is commonly believed that the punishment of a crime should equal the crime, if possible. This is also known as “an eye for eye” justice. Therefore using this logic, the appropriate punishment for murder is death.
Reasons against capital punishment:
(a) Execution is, in simplest terms, state-sanctioned killing, and it devalues the respect we place on human life; how can we say that killing is wrong if we sanction killing criminals? More importantly, the whole principle is outweighed by the proven risk of executing innocent people. The avoidable killing of an innocent person can never be justified, in any circumstances.
(b) Not humane: Killing any living being is not at all humane. Even if the crime is committed by any animal it is against the law of humanity to kill back that particular animal. What is humane is subjective to a person’s upbringing, education, beliefs, and religion. Therefore different people interpret what is humane differently. That is the reason some societies have banned capital punishment while some other still maintain it.
(c) Implementation of the death penalty can cause social or racial bias and in fact be used as a weapon against a certain section of society. Hence this can result in increase in rate of crime in the nation.
(d) By executing criminals the possibility of rehabilitation is ruled out i.e. we can never expect the criminals to repent their crime that they will serve their sentence of punishment and emerge as a reformed and useful member of society.
(e) Capital punishment is not always just and appropriate. Usually, it has been seen that poor people have to succumb to death penalty as they cannot afford good lawyers to defend their stance. There are very rare cases of rich people being pronounced capital punishment. Also, an individual from minority communities are more likely to be given death penalty.
(f) Every human being is entitled to receive a second chance in life. Putting a convict behind bars is always a logical option than killing him, as there is a chance that he may improve. People who have served life sentences are reported to have bettered their earlier ways of living and have made worthwhile contribution to the society.
(g) It is reported that there is no relation between capital punishment and crime rate i.e. giving death penalty does not decrease crime rate in the society. Crimes are prevalent in countries where capital punishment exists and also where it has been abolished.
(h) Due to capital punishment the family members of the executed needlessly suffer too, yet the crime itself has victims and family members too.
(i) Violates Human Rights: Some groups of people deem death a violation of the person’s right to live. Other groups of people disagree that the death penalty is a cruel and unusual punishment. There is no clear definition of what human rights are, so there will always be disagreements with whether it violates human rights.
(j) Playing God: Some people believe that all deaths should be natural. Other people believe murder is a part of nature.
The debate on this vital issue is seems to an endless one. The debate over the death penalty has in the recent past acquired renewed vigour and passion among the academician as well as politicians. Without a doubt, executions are considered the ultimate punishment for a crime, because there is no repeal from death. The logical alternative for capital punishment is life in prison without parole, yet a lot of nations still perform the death penalty. This is because the debate whether capital punishment is ethical and justifiable is still widely disputed. Thus we can conclude that there will always be debate over whether capital punishment is an effective form of penalty for criminals for as long as it exists because the question whether capital punishment is a moral or an immoral act in a cultured society, does not have a definite answer. Whether to give capital punishment to a criminal or not, may depend on his previous criminal records and the seriousness of the crime he has committed. But, do we really have the right to take the life of our fellow human beings?
“The expansion of the European financial crisis and its deepening into a political crisis has followed a clear causal chain produced by a series of missed opportunities.”
Eurozone refers to the Economic and Monetary Union of member states of the European Union. Members of the Eurozone have adopted the Euro as their common currency and sole lender. The monetary policy of the Eurozone is laid out by the European Central Bank (ECB). Fiscal Policy, however, is the domain of individual member countries. The eurozone currently consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The roots of the ongoing economic crisis in Europe began in early 2009, as a knock-on effect from the 2008 global financial crisis, which had already claimed Iceland as a victim. Iceland was not an institutional issue for the EU, but in 2009 Eastern members of the EU not using the euro began to have balance-of-payments problems. They suffered effective devaluations of their national currencies and sought help from Brussels to resolve their mounting budget deficits. In response, the EU doubled the funds in an existing facility to address balance-of-payments problems. Among the European countries that are affected mainly by the ongoing Eurozone crisis are Portugal, Ireland, Greece and Spain (PIGS countries). Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed has emerged less affected this time as the government was unable to bail the banks out. In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.
The debt crisis affecting Europe has come to a fore. Called the Sovereign debt crisis, the issue started around the beginning of 2009. By 2010 eurozone members Greece, Ireland and Portugal and some other EU countries outside the area were affected. In simplified terms Eurozone countries in question are faced with the risk of running out of money to pay back the loans that they have taken out in past. As a result the countries are being refused loans for the future. The crisis began from Greece, which amassed a huge pile of debt from years of statistical fraud in its public-accounts sector. In lay terms, debt crisis was triggered by over-borrowing. Countries borrowed beyond their means and then struggled to pay off these debts. This led to a dramatic rise in borrowing costs for these countries, worsening the problems further. What started off two years ago in Greece has now spread to Portugal, Ireland, Spain and Italy. Other European countries are also feeling vulnerable. Those lending money to these countries are charging higher interest rates since they are now seen as risky – and hence prone to default. So we have country after another country in eurozone being dubbed as not good risk, and are therefore charged more for loans via bond issues. This is very much the same as someone who has failed to pay back a past mortgage and would be refused, or charged more for a loan by a bank, in the future. European zone countries face a similar dilemma. The Euro as a common currency of countries with disparate political and fiscal policies has meant the crisis has spread across the Eurozone. If each of these countries would have had a separate currency and monetary policy, the crisis would have been localized instead of having spread across the Eurozone. With slowing GDP growth, large welfare budgets and popular opposition to measures towards curbing entitlements, the situation in Europe is extremely difficult. At present, Germany is the only large Eurozone country with a sound economy, and it cannot be expected to bail out all of Eurozone on its own.
On wrong track: When the EuroZone formed in the late 1990’s, Germany and France were the economic powers and every other country was clearly in an economically subservient position. When the poor countries of Europe wanted to build roads, fund schools, and do various other large-scale projects, they funded these activities by issuing debt in the form of government bonds. Countries that are economic powers are able to borrow this money for pretty cheap. However, countries that are not in excellent financial shape have to pay more to finance their debt by offering investors a higher yield. Economically-weak PIGS countries were paying quite a bit to be able to borrow money. By joining the EuroZone, they were magically allowed to borrow money at very close to German bond yields. So the grand idea when the EuroZone started was that these weak countries like Greece would be able to borrow money at cheap rates in order to economically develop their countries in a responsible manner. This would help them close the gap with stronger countries like Germany and France, and then all of Europe would grow more powerful. It is clearly evident now that this grand idea has failed drastically and the whole Eurozone is facing the worst economic crisis of this century. Well, of course Greece, Portugal, Spain, Italy, and Ireland borrowed money. It’s what they did with the money, and how much they borrowed that became a problem. Instead of using the money to develop strong economic infrastructure in their respective countries, they went on reckless spending sprees. These countries have spent so much money and developed such irresponsible fiscal agendas that they are now having trouble paying back all those loans. To make it worse, investors are now demanding more yields in order to hold the debt of these countries.
Euro was introduced in 1999 and the unified interest rates allowed its members to borrow heavily and recklessly. Bonds issued by southern European nations were taken to be as safe as German ones. The money created a huge boom into the real estate in PIGS countries. The US housing bubble busted in 2008 and this affected real estate business all over Europe. The big EU countries and IMF came to rescue but did not able to stop the spread to other EU countries. If Greece were to default on its 370-billion-euro debts then the European banks that lent to Greece at the height of the borrowing binge would certainly be hit especially the French banks. The budgetary deficit of Greece in the eight months to the end of August has widened to 22 per cent to 18.9 billion euros, more than the target of 18.1 billion euros for the period. Greece has pledged to reduce its general government deficit to about 7.5 per cent of gross domestic product this year from 10.5 per cent in 2010.
Sovereign states and large debts: First, investors start worrying that the debt may not be sustainable, concerns rise over the ability of the state to pay back capital and interests by generating budget surpluses in the future (that is, fiscal revenues in excess of expenditures). In this case, investors require higher interest rates to subscribe new public debt as a compensation for the risk of insolvency. This in turn increases the risk of insolvency as it worsens public sector balance sheets. At some point, there may no longer be an interest rate able to compensate investors for the risk of insolvency; then they just stop subscribing the public debt. This is a situation of fiscal crisis and has only two possible outcomes:
(a) Government default followed by a renegotiation of the debt.
(b) Monetization of the debt, which is effectively bought by the central bank. This represents an injection of money in the economy and thus generates inflation and exchange-rate depreciation.
Euro depreciating: In the last few days we have witnessed the sudden depreciation of the Euro. A possible answer is that as the financial crisis spreads to other large Eurozone countries, the risk of monetization of the public debt becomes more concrete. Even if Greece has been bailed out by other countries in the Eurozone, this would not be feasible for the much larger public debts of other debt ridden European nations. In the scenario of a widespread crisis, the possibility that the ECB will monetize the debt of weak Eurozone countries exists, and fear of the implied inflation can explain the depreciation of the euro. However, a massive monetization is an unlikely scenario, as it would eventually undermine price stability in the Eurozone and imply a substantial transfer of resources from strong to weak Eurozone countries.
Measures to curb crisis:
(a) The 27 member states of the European Union have created the EFSF (European Financial Stabilization Mechanism), a legal instrument to preserve financial stability in Europe by providing financial assistance to Eurozone states in difficulty. The facility is jointly and severally guaranteed by the Eurozone countries’ governments.
(b) The steps taken by ECB to reduce volatility in the financial market and improving liquidity include: (i) it began open market operations buying government and private debt securities. (ii) It announced two 3-months and one 6-month full allotment of Long Term Refinancing Operations (LTRO’s). (iii) It reactivated the dollar swap lines with Federal Reserve support.
(c) The Euro Plus Pact: The Euro Plus Pact was adopted in March 2011 under which the countries of the EU make concrete commitments to a list of political reforms intended to improve the fiscal strength and competitiveness of each country. The Euro-Plus Pact has four broad strategic goals along with more specific strategies for addressing these goals. The four goals are: (i) Fostering competitiveness. (ii) Fostering employment. (iii) Contributing to the sustainability of public finances. (iv) Reinforcing financial stability.
(d) Eurozone leaders agreed to extend the maturity of current bailout loans to Greece to 7.5 years, doubling the repayment deadline. They also agreed to lower the interest on their bilateral loans to Greece by 100 bps.
(e) Euro zone leaders have agreed that the EFSF will be able to buy troubled countries’ bonds on the primary market — that is, when they are auctioned by the sovereign. The purchases will be possible only for countries which have agreed on an emergency aid programme with the euro zone, such as Greece or Ireland. Greece's parliament has passed a law to expand the powers of the European Financial Stability Facility (EFSF), which renders the euro zone's bailout fund more flexible. The EFSF increases the rescue fund's effective lending capacity to 440 billion euros ($603 billion) and allows it to lend euro zone governments money to recapitalise their banks. The fund is also empowered to provide precautionary loans to countries under attack in the markets and to buy sovereign bonds. Further, German Chancellor Angela Merkel has suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the troika's audit.
(f) Greek Prime Minister George Papandreou's Socialist Pasok party has won the parliamentary backing by 155 to 142 for a property tax to meet deficit-reduction targets required to avoid default. But the implementation of the measures is the biggest challenge for the government as the trade unions and parts of the civil service will protest against this decision. The property levy, to be collected via electricity bills, will provide an annual yield of 1.1 per cent of GDP. It will generate as much as 1.8 billion euros.
The Government has announced an additional 20 per cent wage cut, on top of 15 per cent for the civil service and 25 per cent in the wider public sector. Pensions are being reduced 4 per cent on average, in addition to previous cuts of 10 per cent. A lowering of the tax-free threshold to 5,000 euros will mean higher taxes for all Greeks.
Possible solutions to the crisis:
(a) Creation of Common European bond: If a common Euro bond is created it will allow the weaker countries to share Germany’s credit rating and hence they will be able to borrow at lower rates. However, for this, Germany would have to guarantee other countries’ debt which is highly unlikely.
(b) ECB buys bonds of weak countries: One of the solutions to cope up with the meltdown is that ECB buys bonds of the heavily indebted Eurozone members. The ECB has earlier bought Greek, Irish and Portuguese bonds and is now buying Italian and Spanish bonds. But this is not a bottomless pit and purchases would have to stop at some point.
(c) IMF should come to rescue Eurozone: International Monetary Fund should organize a global rescue package worth trillions of euros. Europe’s debtor nations could borrow at low rates with long maturities. Once a debt pressure is relieved, Europe could follow more pro-growth economic policies.
(d) Developed nations can write off the debts: A solution to the ongoing eruozone crisis can be achieved if the developed nations negotiate and write down on their debts or defaults on them. Superficially, this seems a solution. But it would create other problems. Defaults would inflict huge losses on banks, insurance companies and will lead to collapse of many European banks and finally the global economy will fall into Great Recession II.
Thus we can analyze the fact that there are no easy solutions to the crisis confronting Eurozone. However, the urgency for solid steps to confront the issue is also increasing day by day.
European crisis and the American economy: Both, the USA and the Eurozone are witnessing the economic crisis almost at the same time. The 2008 global financial crisis was triggered due to failure of the American economic system and in 2011 the world is witnessing the failure of European economic policies. The fear about the failed Eurozone economy has raised concerns about rising government deficits and debts across the globe. This has worsened the situation and has created alarms in world financial markets and expectations of recession in developed countries including the United States. Let us analyze briefly the impact of European crisis on American economy:
(a) Impacts on US Banks: The U.S.’ gross direct exposure to European banks through loans and bonds amounts to $678 billion. This does not include less direct exposure through financial derivatives, loan guarantees and other financial connections such as credit default swaps. While a collapse of a European bank as major as Societe Generale or BNP Paribas will not have much impact on the U.S. economy, a financial contagion in Europe will, however, have a palpable impact on the U.S. and the global financial system through the loss of confidence in banks.
(b) Euro devaluation: The European sovereign debt crisis will trigger a devaluation of the euro against the U.S. dollar, which would impact U.S. exports. Europe is the largest export market for the United States. Depreciation in the euro will make American exports to Europe more expensive, which would significantly weaken the only remaining engine of growth for U.S. economic recovery after the U.S. government ended its stimulus package.
(c) Threat to Euro viability: The weakening of the euro versus other global currencies and spread of contagion from small European countries, such as Greece and Portugal, to the larger countries, such as Germany and France, may threaten the viability of the euro, potentially paralyzing global credit markets in a way similar to what happened after the collapse of Lehman Brothers in the United States.
(d) Loss of wealth: The European crisis has affected U.S. capital markets other than the banking sector. It has unraveled stocks and increased fears of a new crash in the stock market. The crisis has also jolted hopes of a strong recovery in the United States. There could be a global loss of wealth, one way or the other, and the loss could be huge. Thus we can say that if the US economy is again hit by recession, this time it will definitely come from Europe and whenever it happens it may be called Great Recession II.
Implications of Eurozone crisis for Indian Economy: Any deceleration in software exports due to the Euro zone debt crisis and the poor economic conditions in the US will affect India's GDP growth. In 2009-10, the US alone accounted for 61 per cent of India's total software exports. European countries (including the UK) followed with as much as 26.5 per cent. If these two regions are the first to be hit by the recession, it is unlikely that software export revenue would remain unscathed. Moreover, over the period 2004-05 to 2009-10, services accounted for 66 per cent of the increment in India's GDP. Revenues from software services amounted to 9.4 per cent of this (excluding public administration and defence). According to balance of payment data, gross revenue from exports of software services amounted to as much as 24 per cent of the gross revenue from merchandise exports. But by and large, India is not going to be affected directly due to PIGS crisis as in 2010, Portugal and Greece had a share of about 1.3 per cent each in India's exports to the EU and Ireland had about 0.7 per cent. Italy and Spain had 11.5 per cent and 6.8 per cent respectively.
Let us now examine some potential scenarios:(a) Impact on foreign trade:First of all, the EU (excluding UK) accounts for roughly 30 per cent of the country’s merchandise foreign trade (export and import). A slowdown in Europe would naturally have a negative impact on our foreign trade and lead to loss of revenue as well as jobs in export-oriented industries. The impact of a slowdown would be much more severe in the service sector (particularly BPO and software) where trade is in India’s favour.(b) Impact on domestic economy: If the European meltdown spreads and leads to a global slowdown, this will definitely worsen India’s trade with other countries and thus hit our domestic economy directly as well as indirectly. The income of exporters will reduce drastically, unemployment will rise, etc. thus our domestic demands will fall drastically and our growth rate will have to comprise. (c) Bearish stock market: More importantly the impact of the crisis would be felt in the financial market. The first signs of this may already be visible, with the Indian markets declining by nearly 4 per cent in last week September, 2011. (d) Fall in commodity prices: In addition to decline in security markets, one can expect to see a rise in gold prices and fall in commodity prices (due to lower demand), and depreciation in currency (due to flight of capital). (e) Currency depreciation: If the Eurozone crisis hangs on for a longer time it will result in deprecation of Indian Rupees due to fligh to capital from the market. (f) Foreign remittances will suffer: Slowdown could impact the flow of remittances and NRI deposits in India. In the wake of a crisis, remittances from abroad could slow down and a significant number of expatriates might even lose jobs and move back to India, thus straining the local economy.
The impact of Eurozone meltdown will be felt seriously by emerging economies like India. In addition to the possibilities outlined above, the Indian economy could be affected in numerous other ways, as it is practically impossible to identify all the interlink-ages between India and the global economy in this day and age of increasing integration. But there is another side of the story which can also become possible. The slowdown in Europe and the USA could benefit the emerging economies due to fall in commodity prices and flow of capital from those countries to countries such as India. In order to reap fruits from the crisis the developing nations need to fasten their economic growth and change the overall climate of crisis of governance.
