CURRENT AFFAIRS

(18th to 24th Jan 2016)

GNXX CANA X03A EN16

THIS WEEK WE DELIBERATE ON ISSUES

1. CURRENCY DEVALUATION BY CHINA
2. WHAT DO YOU KNOW ABOUT BS VI NORMS?
DEVALUATION OF YUAN BY CHINA
DIFFERENT EXCHANGE RATE MECHANISMS
Fixed Exchange
Rate System

Government
decides and no
role for market
forces

Quasi-Floating
Exchange Rate System

Market forces will

determine, but the
Governments / Central
Banks will intervene as
and when required

Floating Exchange
Rate System

Market forces will

determine and
no Govt.
intervention

FLOATING EXCHANGE RATE SYSTEM

THIS IS BECAUSE OF
MARKET FORCES

APPRECIATION

Rs. 40 per dollar

January
2016

NOTE

Rs. 68 per dollar

As RBI intervenes as and when required

(rarely), Indias exchange rate system is
called Managed Float

DEPRECIATION
Rs. 100 per dollar
FIXED EXCHANGE RATES

HERE, GOVERNMENT FIXES

THE EXCHANGE RATE

REVALUATION

Rs. 40 = 1 Dollar

January
2016

Rs. 68 = 1 Dollar

DEVALUATION
Rs. 100 = 1 Dollar

REVALUATION

APPRECIATION

DELIBERATELY
BY GOVT.

BY MARKET
FORCES

REVALUATION

DEPRECIATION

WHAT CHINA IS DOING SINCE AUGUST 2015?

1
August 11, 2015
China devalued the currency by 1.9% followed by
1.6% the next day.

2
Since August 11, 2015
Reference rate of Yuan is being set daily after
taking into account
Previous days close
Movement of other major currencies
Demand and supply conditions in the forex
market
Then, the currency is allowed to move 2% on
either side of the reference rate.
If required, Central Bank will step in.

3
4th Jan, 2016
Devalued the currency once again by 0.5%
Meanwhile, in November, IMF took a decision to include Yuan in SDR basket.
REASONS FOR DEVALUATION
1
Weak macro economic indices, as China
is slowing down more than anticipated

2
To give impetus to exports, which will take
care of GDP growth to some extent

3
Excess capacity already created in China
in manufacturing sector and utilisation of
assets is very important

4
Due to excess capital outflows, Yuan was
trading at much lesser level in offshore markets.
To align the value of currency in onshore and
offshore markets, devaluation was done

HOW DOES IT AFFECT?

WORLD IN GENERAL

INDIA IN PARTICULAR

Already commodity prices across the

globe have fallen during the past 2 years.
Further fall may take place, which may
lead to further deflation.
May lead to Competitive Devaluation
by some countries, which may be termed
as Currency War
It may affect certain industries in some
countries, which are already reeling
under slow growth rates.

Cheaper imports from China

It may benefit India as India runs high trade
deficit with China ($ 48 bn)
Certain domestic industries may suffer

Overall, devaluation of currency by any country is not good for world economy

WHAT DO YOU UNDERSTAND BY BS VI NORMS?

1
BS means Bharat Stage These
are emission control standards

2
BS norms were introduced in
2000, to keep a check on air
pollution

3
These are based on European
standards (Euro norms)

4
They set specific limits for the
release of air pollutants from IC
engines, including vehicles

5
Higher the stage, the more
stringent the norms, i.e. Stage VI
is more stringent than stage IV

6
At present, BS IV standard is
implemented in several North
Indian cities. Overall, 24% petrol &
16% diesel confirms to BS IV
norms

7
Entire country will switch over
to BS IV norms by April 2017

8
Now, Directly country will
switch over to BS VI from BS
IV, skipping BS V

9
Fuel supplied by oil refineries should
comply to BS VI norms by April 1,
2020

10
Vehicles have to be equipped
with engines compliant with the
new standards, from 1st April,
2020

11
Hence, both oil refining
companies and auto
manufacturers have to make
modifications

12
China already upgraded to equivalent
of Euro V norms

OIL REFINERS
The public sector oil refiners require investment of Rs. 30,000 cr to Rs. 35,000 cr for upgradation.
Oil refiners expressed confidence that they will meet the deadline.

Indian Oil
Bharat Petroleum
HP

VEHICLE MANUFACTURERS
They have to upgrade the engines compliant with BS VI norms
They may entail additional expenditure.
The cost of vehicle may also go up from April 1, 2020.
Petrol cars may go up by Rs. 10,000 to Rs. 20,000.
Diesel cars may go up by Rs. 80,000 to Rs. 1,20,000.
Trucks cost may go up by Rs. 1,50,000 to Rs. 2,00,000.

TATA
Ashok Leyland
Mahindra
Maruti

LIKELY BS VI NORMS
PETROL EMISSIONS
NORMS
BS III
BS IV
BS VI

CO
2.30
1.00
1.00

HC
0.20
0.10
0.10

NOX
0.15
0.08
0.06

HC+NOX
-

PM
0.005

These figures are gms / km

DIESEL EMISSIONS
NORMS
BS III
BS IV
BS VI

CO
0.64
0.50
0.50

HC
-

NOX
0.50
0.25
0.06

HC+NOX
0.56
0.30
0.17

PM
0.05
0.025
0.005

These figures are gms / km

LET US HOPE FOR IMPROVEMENT IN AIR QUALITY FROM 1st APRIL, 2020 !