CED&L's

GLOBAL BULLETINCENTRE FOR ECONOMY DEVELOPMENT & LAW 26.7.2014 Issue 1

INSIDEWe welcome BRICS Bank:

WB group page 2

Knowledge spillovers for

better convergence of

economies page 2

Pro GASA vote - India

condemned page 3

Crossborder Banking Risks

reduce page 4

$15-18 Billion supportto India: WBIndia Government have

identified infrastructure

development and job-oriented

skill development as the deep

drivers of growth. The World

Bank Group is ready to

support these initiatives.

Page 2

Modi's stance on TFA

India's tough stance hassurprised those who expectednewly elected pro-businessPrime Minister Narendra Modito radically slash subsidies.India demands a halt to tradefacilitation agreement.

Page 3

Disgraceful Pro GasavoteRight-leaning commentators

tweet that India's vote against

Israel in UNHRC as

"disgraceful." The vote against

Israel is a monumental blunder

- Ashok Malik

Page 4

Courtesy: http://artintifada.files.wordpress.com/

Combating Hunger our priority,not just trade: India to WTONEW DELHI/ GENEVA (news

courtesy Reuters): In a move that wil l

have ‘major ramifications’ in global

economy, India on Friday wanted the

adoption of the TF (trade facil itation)

Protocol to be postponed and said a

‘permanent WTO deal on food stock-

pil ing’ must be given priority. The TF

Protocol moots a worldwide reform

of custom rules, which some

estimates say could add $1 tri l l ion to

the global economy and create 21

mil l ion jobs.

Diplomats from the 1 60 World Trade

Organization member countries

meeting in Geneva had been meant

to rubber stamp a deal on "trade

facil itation" that was agreed at talks

in Bali last December in the WTO's

most important ever global trade

agreement. But India, in an 11 th-hour

intervention, demanded a halt to the

trade facil itation timetable unti l the

end of the year and said a

Permanent WTO deal on foods tock-

pil ing must be in place at the same

time, well ahead of the proposed

201 7 target date. “My delegation is

of the view that the adoption of the

TF (trade facil itation) Protocol be

postponed ti l l a permanent solution

on public stockholding for food

security is found," Indian

Ambassador Anjal i Prasad told the

WTO meeting. India’s stand has

prompted the U.S. to issue a

warning that its demands could ki l l

global trade reform efforts. "I t is no

use to sugar coat the consequences

of such action or to pretend that

there would be business as usual in

the aftermath," U.S. Ambassador

Michael Punke said.cont page 3

WEEKLY NEWSLETTER ON CONTEMPORARY INTERNATIONAL AFFAIRS

Newsletter HeaderPage 2

INTERNATIONAL PRODUCTION NETWORKPROMOTES KNOWLEDGE SPILLOVERSThe evidence from the WTOworking paper, Knowledgespillovers throughinternational supply chains,manuscripted 23rd July 2014,suggests that productionnetworks are an importantdriver of technology transfers.In fact, the productivity effectof foreign R&D spendingincreases with the intensity ofproduction network linksbetween the sender and therecipient country. Importantly,the results suggest thatknowledge spillovers occur

only when a country is fullyintegrated in a Global ValueChain (GVC) network. Mereimports of inputs or exports-platform type of GVCparticipation does not seem tofacilitate knowledge spillovers.Finally, knowledge spilloverswithin production networksappear to be less spatiallylocalized than the average.

The findings helps to explainthe emergence of economiessuch as China, Singapore andthe Republic of Korea as major

technological innovators since1985. Economic literature hasso far stressed that whileglobal spillovers fosterconvergence at the level ofcities, and regions, localspillovers can lead toconvergence-clusters andcreating disparity in incomelevels. "Our finding suggeststhat convergence acrossnational-level economies islikely to occur along theproduction chain lines" - Theauthors Piermartini and Stelaclaim.

The World Bank Group willbring increased financial andknowledge resources to helpIndia return to the path ofsustained high growth neededto bring prosperity to millions,especially the poor living in thelower income states. WorldBank Group President Jim YongKim made this renewedcommitment during his firstmeeting with Prime MinisterNarendra Modi last week.

Recognizing that India stillneeds to lift around 270 millionpeople out of poverty,International DevelopmentAssociation (IDA) donors haveagreed to provide $3.4 billionover the next three years astransitional support. TheInternational Bank forReconstruction & Development(IBRD) has also recentlyincreased the single borrowerlimit for India to $20 billionfrom $17.5billion. This, alongwith the Government of India’sagreement to purchase SpecialPrivate Placement Bonds(SPPBs) of up to $4.3 billion,will create additional

opportunities for continuedassistance to India as it strivesto revive growth. In addition,the WBG’s private sector arm,the International FinanceCorporation (IFC) hasmobilized its $1 billion offshorerupee bond program, aimed atstrengthening India’s capitalmarkets and attracting foreigninvestments.

Dr. Kim said that in terms ofcosts as a fact of the matter,the cost of borrowing from theWorld Bank Group right nowfor IBRD is very low. TheIndian government is going toreceive 3.4 billion dollars ofIDA, and the interest rate iszero, so you actually can’treduce the cost much fromthere. And for IBRD it’s alsovery low, it’s less than onepercent. He said PrimeMinister Modi, though, wasvery clear that the money isimportant he really stressed onthe kinds of insights, the kindof data, the kind of analysisthat could help him achieve hisextremely high aspirations forthe people of India. Kim

assured that every single oneof WB loans comes withliterary free knowledge andaccess to solutions and insightsfrom all over the world.

We welcome BRICSbank, the New

Development Bank.World Bank expresses itsheartful welcome to BRICSmove forming the NewDevelopment Bank. WB groupreiterated that its onlycompetition is against povertyand lack of shared prosperity.To the question that whetherthis means a call for voicereforms in World Bank Voting,Dr Kim answered that in 2010,the voice was adjusted andthere is significantly morevoice for developing countries.So, we’re at about 47.5% of thevoices coming from developingcountries. He added - "there’sno question that every yearmiddle-income countries likeIndia especially, the BRICScountries, are growing inprominence. Now in 2015 wewill re-open the voice debate.We are a cooperative - 188

Financial support worth $15-18 billionover 3 years: World Bank group

Global Bul letin

Issue 1 Page 3

In a major shift from its earlierstance, India voted in favour ofthe United Nations HumanRights Council resolution tolaunch a probe into Israel'soffensive on Gaza. But themove has made right leaningpundits unhappy, particularlysince it contradicts thecarefully neutral stance Indiahas maintained during thecourse of the Gaza offensive.Sadanand Dhume, Wall StreetJournal columnist tweeted thatIndia's vote against Israel was"disgraceful."

The Modi sarkar's initialposition was lauded by right-leaning commentators whoargued that India's trueinterests lie with Israel, andnot in siding with a terrorist

organisation like Hamas.

Indrani Bagchi in her piece forEconomic Times had argued:"For all MPs who confuseHamas with the PalestinianAuthority, Sushma Sawarajshould point out that Hamas isanother name for the MuslimBrotherhood. If we haveproblems with the ideology ofthe latter, our outpouring ofsympathies for Palestiniansmay overshadow India'slegitimate revulsion forHamas."

In his column for NDTV, AshokMallik argues that Hamascould have started orestablished a peace processwhen they got voted into officein the Palestinian authority - an

opportunity they havesquandered since. "It is truethat support for the Palestiniancause has declined in Indiasince say the 1970s. Actuallythis is a worldwidephenomenon, made worse bythe fact that the Palestinianleadership - or competingPalestinian leaderships - havenot been able to take charge ofany government or authoritythey have been given."

"TFA must go along with negotiations onPublic stockholding" (continued from front page)

A failure to overcome India'sobjections by early next weekcould overshadow a plannedvisit to New Delhi by U.S.Secretary of State John Kerry,which begins on July 30.Unless India succeeds inchanging the timeframe, thedeadline for agreeing the tradefacilitation is July 31, at whichpoint it will lapse.

D.S. Rawat, secretary generalof the Indian industrialchamber ASSOCHAM, said hesupported the government'smove."We should not be undulyperturbed for being blamed forfailure of talks," Rawat said."We need a level-playing fieldon the issue of agriculturalsubsidies. India will have toprovide food subsidies to itsmillions of poor people livingbelow poverty line until theyreach a level." India's tough

stance has surprised those whoexpected newly elected pro-business Prime MinisterNarendra Modi to radicallyslash subsidies. Modi has

vowed to spur economicgrowth through sweepingchanges to policies that manypeople felt had stagnatedunder the outgoingadministration, and his everystep is being closely monitoredat home and abroad.

While Punke said "Manymembers, including developingcountry members, have notedthat, if the Bali package fails,there can be no post-Bali. It’swith regret that we agree withthem," India's formercommerce minister AnandSharma, who negotiated theBali deal, explained "It wasexpected that TFA would movealong with the issue of publicstockholding ... but it seems ithas not happened. That isunacceptable," Sharma said.However, WTO diplomats saidSharma had agreed in Bali to afour-year timeline for a deal onstockpiling and a much shorterone for trade facilitation. Tradeexperts opined that the 'nopost-bali' argument reminds ofthe same diplomatic patternobserved during the 1995-98negotiations on TRIPS andTRIMS.

India's pro-Gaza vote in UNHRC attractsire of critic (news courtesy firstpost.com)

Image Courtesy: Reuters

image courtesy: tap. info.tn

Crossborder Banking Risksreduces: IMF working paperThe IMF Working paperlooking at the vulnerabilitiesstemming from banking sectorlinkages between countriesand their macroeconomiceffects finds that credit risks(from a banking system’sclaims on other countries) andfunding risks (from a bankingsystem’s liabilities to another)have declined over the pastfive years. For both asset andliability side vulnerabilities, onaverage for the global bankingsystem, the potential forcapital depletion arising fromcredit risks and funding riskshave come down since theglobal financial crisis. Thereduction is mainly due tolower exposures, but is alsopartly due to higher capitalbuffers around the world.

The authors Kyunghun Kimand Srobona Mitra opineswhile the trend is similar forindividual countries, thereason for the decline invulnerabilities differs betweencountries and between creditand funding for particularcountries. We also find that,compared to 2008, the numberof countries as corepropagators of credit andfunding shocks have dropped.The United Kingdom and theUnited States would still bethe major propagators ofcredit shocks in 2012.

The paper also finds thatfunding vulnerabilities havereal effects. During normal

times, funding vulnerabilitiesare associated with significantpositive GDP growthsurprises. During crisis times,funding vulnerabilities areassociated with significantnegative GDP growthsurprises. Funding risks havesignificant positive effects ongrowth surprises duringnormal times, and significantnegative effects on growthsurprises during crisis times.More than the risks fromcrossborder credit, risks fromcrossborder borrowing havesignificant impacts on realgrowth surprise. Therefore,they need much more analysisand understanding than justlooking at overall externalfunding volumes. In particular,taking on higher funding risks(by borrowing more fromcrossborder sources) generallyexacerbates the negativeoutput surprise during crisis.

"Future research would try toexplain why funding risksappear to matter more thancredit risks" - the authorsforsee.

CED&LCentre for EconomyDevelopment and LawGovernment Law College,ThrissurAyynathole

phone: +91 9633876835email: cedl.kerala@gmail.comweb: www.cedl.ac.in

(CED&L) is an inter-disciplinary centreestablished underGovernment LawCollege, Thrissur,Kerala. The proposedcentre envisages to be aplatform for academicdiscussion and as acreative think-tank forstudying, analysing andinterpreting varioussocio-economic and legalissues. This forumintends to generateperceptual framework toexplore and understandsocial issues and events,thereby enabling thepeople and institutionsto create best possiblemodels in policy makingand legal practices.Students, academicians,jurists, journalists,politicians and anyonewho wishes to offerhis/her creative andintellectual input areinvited to be part of theforum.

Printed and Published by: Centre for Economy Development and Law, Government Law College Thrissur. For Free Distribution.

Patron: Prof Mercy Thekkekara. Editor in Chief: Abhilash Gopinath. Editors: Srinath Namboodiri , Nithin Ramakrishnan. Issue (Content) Editor:

Nithin Ramakrishnan.

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