The Hindu Editorial Discussion is crucial for UPSC CSE preparation, offering in-depth analysis of current affairs, government policies, and socio-economic issues. It enhances critical thinking, answer-writing skills, and interview preparation by providing diverse perspectives on national and international developments. Regular editorial reading helps aspirants develop a balanced viewpoint, improving their essay writing and General Studies papers.
1. Necessary infusion: On the RBI’s currency swap
The Reserve Bank of India (RBI) has taken a significant step to address long-term liquidity concerns by injecting an additional $10 billion into the financial system through a dollar/rupee swap auction. This move comes amid heightened financial volatility caused by the flight of foreign capital from Indian stock markets. Investors are shifting their funds to the U.S., driven by expectations of better returns following President Donald Trump’s corporate tax cuts and trade policies, strengthening the U.S. dollar.
This marks the second such liquidity infusion within a month, with the previous one being a $5 billion swap on January 31, which had a six-month tenor. However, the latest auction has a longer duration of three years. Together, these measures will inject approximately ₹1.3 trillion into the banking system, as banks exchange their dollar reserves with the RBI for rupees at a pre-determined buyback rate.
Purpose and Impact of Currency Swaps
Central banks deploy currency swaps during periods of global financial instability to stabilize the local currency, ease liquidity constraints, and control inflation. Economists estimate that an additional $5 billion swap may be needed to bridge the ₹1.7 trillion liquidity deficit in India’s banking system as of February 20, 2025.
This is not the first time the RBI has conducted a long-term currency swap. A similar measure was undertaken in 2019 during Trump’s first term to counter global financial volatility caused by trade tensions and tax cuts. However, the present situation is more complex. Unlike in 2019, when India’s forex reserves were rising, the current scenario is marked by a weakening rupee and substantial foreign capital outflows.
Challenges and Necessity of the Swap
Between October 2024 and February 21, 2025, the rupee has depreciated by approximately 3.3% against the dollar, breaching the ₹85 per dollar mark in December 2024. Additionally, foreign portfolio and institutional investors have withdrawn nearly $31 billion from Indian equity markets. To stabilize the rupee, the RBI has sold an estimated $111.2 billion—about 18% of its forex reserves—since December 2024. Given these pressures, the latest long-term currency swap appears to be a necessary response rather than a proactive strategy.
The Way Forward
For Indian banks, this liquidity infusion presents an opportunity to sustain credit flow, ensuring continued capital investment, employment generation, and consumer demand. If utilized effectively, this measure could support India’s real GDP growth beyond the current 6.4%, despite prevailing global economic uncertainties.
2. Foreign influence: On the USAID and India controversy
The ongoing controversy surrounding USAID’s presence in India highlights the increasingly polarized nature of public discourse, which risks undermining India’s global confidence and standing. The BJP and Congress have engaged in political battles over USAID-funded projects, using them as tools to discredit each other. However, much of this debate is driven by misinformation and misinterpretation, often echoing the Trump administration’s skepticism about international aid. While the U.S. has its own reasons for reassessing its aid priorities, India’s political parties must engage in a more informed discussion rather than adopting an overly reactive stance. USAID has long partnered with Indian institutions on various developmental projects, and without verifiable data on the scope and impact of these initiatives, public discourse remains speculative and prejudiced. In an interconnected world where nations compete for capital, technology, and human resources, branding political opponents as foreign agents may serve as a short-term propaganda tool but ultimately damages India’s long-term aspirations of global leadership.
Foreign Aid and India’s Role as a Donor
Foreign aid has historically been a means of exerting soft power, with stronger nations using financial assistance to influence domestic policies in recipient countries. However, recognizing this reality calls for a measured and strategic approach rather than a reactionary response that could be counterproductive. Notably, India has transformed into a donor nation, expanding its influence through financial assistance. According to an ORF analysis, since 2000, the Ministry of External Affairs has overseen aid exceeding $48 billion to more than 65 countries through grants, credit lines, and capacity-building programs. This shift in India’s role has also coincided with stricter regulations on foreign funding within the country. However, these regulations have been selectively enforced—organizations aligned with the ruling government often face fewer obstacles, while others, including non-political entities, encounter significant restrictions.
Need for a Policy-Driven Approach
The debate over USAID’s activities in India does raise valid concerns about foreign influence. However, any response must be guided by well-defined policy measures rather than reactionary rhetoric. If the government suspects that foreign funding is unduly shaping India’s political landscape, it must address the issue transparently, ensuring thorough investigations based on evidence rather than speculation. Managing national security in an era of increasing global interdependence and transnational challenges requires a mature, strategic outlook rather than a divisive and chaotic public discourse.
3. Talent shortage — global challenge, India’s opportunity
The global labor market is undergoing rapid changes, with a projected talent shortage of over 85.2 million skilled workers by 2030. A recent FICCI-KPMG study, Global Mobility of Indian Workforce, highlights that this shortage could result in $8.45 trillion in unrealized annual revenue, equivalent to the combined GDPs of Germany and Japan. For India, this presents both a challenge and an opportunity to supply a significant share of the global skilled workforce. Addressing this requires strategic planning, international collaboration, and proactive policies to enhance workforce mobility and economic productivity.
Key Geographies and Sectoral Demands
Three major regions—Gulf Cooperation Council (GCC), Europe (including the UK), and Australia—will be crucial for workforce mobility. However, their workforce needs vary:
(i) Healthcare: A common requirement across all three regions due to aging populations.
(ii) Manufacturing & Construction: High demand in the GCC and Australia.
(iii) Service Sector: Europe, as an advanced post-industrial society, will require more service workers.
(iv) Emerging Sectors: Across all regions, skills in automation, artificial intelligence (AI), big data, predictive analytics, Internet of Things (IoT), blockchain, resource efficiency, and sustainability are becoming essential.
Challenges to Workforce Mobility
Several barriers hinder the seamless movement of skilled workers across borders:
(i) Regulatory and Immigration Barriers: Complex visa processes and stringent work permit regulations limit skilled migration.
(ii) Recruitment Malpractices and Trafficking: Exploitative practices and human trafficking threaten migrant workers’ safety.
(iii) Policy Barriers and Skill Mismatches: Many Indian degrees, especially in medicine, are not recognized globally, leading to underemployment.
(iv) Language and Cultural Barriers: Integration challenges, including language proficiency and cultural adaptation, affect workforce productivity.
Government Initiatives and Strategic Measures
The Government of India has implemented various programs to address these challenges, including:
(i) Bilateral Agreements & FTAs: Agreements with GCC nations, such as the Joint India-UAE Vision, emphasize skill cooperation.
(ii) Skill Development Programs: Aligning workforce skills with global market demands.
(iii) Digital Platforms for Workforce Support: Online recruitment systems ensure legal protections for workers, particularly in GCC nations.
To further capitalize on global demand, India must prioritize:
(i) Sector-Specific Skill Training: Aligning workforce training with target geographies.
(ii) Regulation of Recruitment Practices: Strengthening oversight to prevent exploitation.
(iii) Recognition of Qualifications: Promoting international recognition of Indian degrees.
(iv) Public-Private Partnerships: Encouraging private sector involvement in training and employment facilitation.
(v) Circular Migration & Mobility: Implementing temporary work visas and rotational workforce models to prevent demographic imbalances.
India’s Advantage and Path Forward
Despite shifting immigration policies in regions like Europe, Indian skilled workers continue to find opportunities globally. A major advantage for India is the relatively favorable perception of Indian workers in most international markets. However, preventing illegal migration is crucial to maintaining this reputation and ensuring fair opportunities for skilled workers.
India’s efforts in this direction align with its broader economic ambitions. According to the Chairman of the Sixteenth Finance Commission, Arvind Panagariya, India’s GDP could reach between $6.5 trillion and $9 trillion by 2030. A key factor in achieving this will be India’s ability to tap into the estimated $8.45 trillion in unrealized global economic potential. By positioning itself as a leading supplier of skilled labor, India can drive its vision of Viksit Bharat and secure its place as a global economic powerhouse.
4. Indian industry needs innovation, not mindless toil
The Indian industry has long relied on cheap labor rather than technological advancements for growth. This dependence has created an exploitative work environment where workers endure excessively long hours for meager wages. Despite corporate leaders advocating for longer working hours, most Indian workers are already informal and overworked. According to the Periodic Labour Force Survey (2023-24), only 21.7% of workers in India hold regular jobs with a salary, while the rest struggle with casual or self-employment.
The Problem of Cheap Labor Dependence
In contrast to developed nations that have increased productivity through technological and managerial improvements, Indian industries continue to rely on labor-intensive production. The average workweek in India stands at 46.7 hours compared to 38 hours in the U.S. and 36.6 hours in Japan (ILO, 2024). Capitalists in India have encouraged a shift from the organized to the unorganized sector, where labor laws are lax. Over 70% of the manufacturing workforce operates in small, unregistered enterprises with fewer than 10 workers.
Small firms, which form the backbone of Indian manufacturing, are often exploited by larger firms that delay payments, forcing them into financial distress. Additionally, the employment of contract labor has surged, with 56% of new factory workers since 2011-12 being contract employees, leading to suppressed wages and declining job security.
Lack of Innovation: A Major Setback
The Indian industry’s over-reliance on cheap labor has hindered its global competitiveness. The garment industry exemplifies this stagnation, with India’s share in global garment exports remaining at 3.1% for the past two decades. Countries like China, Bangladesh, and Vietnam have outpaced India due to their investment in modernization and efficiency. A reluctance to innovate and improve production techniques has led to stagnation across various industries, including the IT sector.
The Consequences and the Way Forward
Low wages and long working hours have reduced domestic purchasing power, limiting market expansion. The pursuit of short-term profits through labor exploitation is unsustainable in the long run. Without technological advancements and managerial improvements, the industry will struggle to grow. Indian capitalists must recognize that innovation, rather than excessive toil, is the key to long-term economic prosperity.
5. The worrying surge of the AfD
The increasing support for the far-right Alternative for Germany (AfD) party is a growing concern in German politics. This rise is occurring amidst economic slowdown, migration challenges, and security threats linked to the war in Ukraine. With the AfD polling at nearly 20% ahead of the national elections, mainstream parties such as the Christian Democratic Union (CDU) and the Social Democratic Party (SPD) are facing increased pressure.
Migration Challenges and Political Shift
Germany’s migration policies have been at the center of political debates, especially following attacks by refugees in Aschaffenburg and Munich. While migration has long been a contentious issue, public sentiment has turned increasingly anti-migrant. The AfD has capitalized on this shift by advocating for stricter border control and opposing asylum rights. The CDU, under its chancellor candidate Friedrich Merz, has also taken a stricter stance, signaling a move toward nationalist policies.
Economic Concerns and the AfD’s Appeal
Germany’s economic stagnation has added to public discontent. In 2024, the economy contracted by 0.2%, while inflation peaked at 8.67% in 2022 before stabilizing at 2.41% in 2024. Rising energy costs, exacerbated by the Russia-Ukraine war, have further strained industries, particularly the automobile sector, which is struggling to compete with China. The AfD has positioned itself as a party offering economic relief by advocating for tax cuts and reducing financial commitments to the European Union.
The Impact of the Russia-Ukraine War
The ongoing Russia-Ukraine war is another major concern shaping Germany’s political landscape. The potential for a U.S.-Russia deal under President Donald Trump has raised fears of an emboldened Russia. Germany would likely have to increase its defense spending significantly, conflicting with its constitutional debt limits. While mainstream parties support continued aid to Ukraine, the AfD argues for normalizing relations with Russia and reducing Germany’s role in the conflict.
AfD’s Political Strategy and Future Risks
The AfD promotes nationalist policies, advocating for Germany’s withdrawal from the European Union, stricter migration controls, and an economic pivot away from global commitments. With endorsements from influential figures like Donald Trump, J.D. Vance, and Elon Musk, the AfD is gaining legitimacy on the global stage. However, its rise threatens Germany’s democratic values, European stability, and the nation’s historical commitment to confronting its past.
Summary
The surge of the AfD reflects broader political shifts towards the right, both in Germany and globally. While its popularity stems from public concerns over migration, economic instability, and security, its far-right ideology challenges Germany’s democratic and European commitments. The growing acceptance of the AfD in mainstream politics could significantly alter Germany’s role in Europe and its approach to governance.
6. A new age of imperialism
The post-World War II international order, built on principles of collective security, sovereign equality, and economic integration, is facing an unprecedented crisis. The second presidency of Donald Trump has accelerated the erosion of this system, signaling a shift toward a world where power politics reigns supreme.
The Evolution of the Global Order
The modern international system emerged after World War II, shaped by agreements between the U.S., U.K., Soviet Union, and China. The creation of the United Nations and institutions like the Bretton Woods system aimed to prevent conflicts and ensure stability. However, great power politics continued, with implicit recognition of spheres of influence, particularly in Europe.
Despite its flaws, the system promoted predictability in international relations, allowing smaller states to navigate global politics with some degree of security. Over time, self-determination replaced colonial rule, and economic integration became a key feature of globalization.
Challenges to the Existing Order
Donald Trump’s presidency has actively dismantled elements of this system. His withdrawal from key international agreements, including the Paris Climate Accord and World Health Organization, and his protectionist economic policies have undermined global cooperation. The imposition of tariffs and disregard for multilateral institutions reflect a shift toward nationalism and unilateralism.
One of the most significant geopolitical shifts has been Trump’s rapprochement with Russia. His efforts to negotiate a peace deal in Ukraine without Kyiv’s involvement and his alignment with Vladimir Putin’s stance on NATO have destabilized European security. By reducing American commitments, Trump has effectively allowed Russia to expand its influence, leading to concerns about a return to Cold War-style spheres of influence.
Implications for Global Power Dynamics
(i) Europe: With the U.S. stepping back, European nations must take greater responsibility for their security. NATO’s role is uncertain, and Russia’s ambitions could reshape the continent’s geopolitical landscape.
(ii) China: The U.S. retreat raises concerns about China’s growing assertiveness, particularly regarding Taiwan. The absence of American deterrence could embolden Beijing to push its territorial claims further.
(iii) India: As China strengthens its geopolitical position, India faces increased strategic challenges. The unresolved border disputes, including the McMahon Line, could become more contentious in this shifting order.
Final Thoughts
The rhetoric from Washington indicates a return to imperialist power politics, where strength dictates international relations. As the U.S. focuses on its immediate interests, global stability is at risk. India and other nations must reassess their foreign policies to navigate an increasingly uncertain world order.
Disclaimer:
This analysis is based on the editorial content published in The Hindu and is intended solely for informational and educational purposes. The views, opinions, and interpretations expressed herein are those of the author of original article. Readers are encouraged to refer to the original article for complete context and to exercise their own judgment while interpreting the analysis. The analysis does not constitute professional advice or endorsement of any political, economic, or social perspective.
Follow Fusion IAS