+91 484 2401588 / 2401688

Judges Avenue Road, Cochin, Kerala, India.

triangle
About Us

OCTOBER

30

2018

    INTERNATIONAL RELATION

    India-Japan Fact Sheets

    News: India-Japan Development Cooperation in the Indo-Pacific, including Africa.
    Source: The Hindu

    Cooperation in Sri Lanka, such as the development of LNG-related infrastructure;

    Cooperation in Myanmar, synergizing development efforts in the Rakhine State by collaborating in housing, education and electrification projects;

    Cooperation in Bangladesh, for enhancing connectivity by way of four-laning of road and reconstruction of bridges on the Ramgarh to Baraiyarhat stretch, and providing rolling stock and constructing the Jamuna Railway Bridge over the Januma River;

    Cooperation in Africa, such as organising an SME development seminar in Kenya and seeking a possibility of a collaborative project in the area of health service such as developing a cancer hospital in Kenya.

    The two countries also acknowledged the importance of expanding cooperation in human resource development, capacity building, healthcare, livelihood, water, sanitation and in the digital space, and of working together to extend access to education, health and other amenities, and assist the people of the Indo-Pacific, including Africa, to realize their developmental potentials.

    Both India and Japan believe that their development cooperation in the Indo-Pacific can contribute to unlocking the potential for an equitable, positive and forward-looking change in the region, and contribute to socio-economic development of Africa.

    India’s North East Region is one of the main areas of India’s Act East Policy. The region also shares historical and traditional bonds with ASEAN countries, and has the potential to be India’s springboard to the ASEAN region. Enhancing connectivity within North East Region and with its neighboring countries is essential to tap its potential and presents crystallized examples of the shared vision between Japan and India as expressed in the Vision Statement.

    ECONOMICS

    Currency Swapping

    News: India, Japan sign $75 billioncurrency swap agreement.
    Source: The Hindu

    A currency swap involves exchanging principal and fixed interest payments on a loan in one currency for principal and fixed interest payments on a similar loan in another currency.

    To understand the concept properly, an example is essential.

    Imagine that I am an Indian businessman and I need US $1million for five years. My plan was to borrow from a US bank. But there is a usual problem- that if the rupee’s value falls steeply, my debt burden from this loan will go up in rupee terms. One million Dollars today is equal to Rs 7 crores (at $1 =Rs 70). If rupee value falls to Rs 100/1$, I have to pay Rs 10 crore at maturity.

    Soon I came to know that there is a US businessman called Robert who needRs 7 crore. This give me an opportunity. If he and me agrees, I will give him my Rs 7 crore and he will give me $1 million. Both amounts are equal.

    Here, I should give him an interest rate prevailing at the US markets in dollars (say 6%). Similarly, Mr Robert has to give me the Indian interest rate (say 8%) in rupees. This we will do for five years.

    At the end of the fifth year, Robert will give me back Rs 7 crores and I will give him back the $1 million. Here, we simply re-exchanged the original principal amounts.

    This arrangement is called currency swap. There occurred an exchange or swap of principals in terms of two currencies.

    A currency swap between two parties is the exchange of a notional principal with one another in order to gain exposure to a desired currency.

    Regarding interest rates, it will be paid at regular intervals specified in the swap agreement. The two parties will exchange interest payments on their respective principal amounts.