What to Read in Indian Express (Topic and Syllabus wise)

Editorial 1 : Expanding India’s Local Currency Settlement System (LCSS)

Context:

India has expanded the Local Currency Settlement System (LCSS) to reduce reliance on the US dollar and make bilateral trade more stable and cost-effective.

Introduction:

India’s recent move to expand the Local Currency Settlement System (LCSS) to countries such as the UAE, Indonesia, Mauritius and the Maldives marks a strategic shift in the way cross-border trade is conducted. By permitting invoicing, payment and settlement in local currencies—primarily the Indian Rupee and the partner country’s currency—India is attempting to reduce dependence on hard currencies like the US dollar and build a more resilient financial ecosystem.

Why LCSS Matters

• The traditional dependence on the US dollar exposes emerging economies to exchange-rate volatility, higher transaction costs and the spillover effects of global monetary tightening.
• The LCSS aims to insulate bilateral trade from such external shocks by creating a smoother, more predictable settlement channel. This also helps conserve foreign exchange reserves, which is extremely valuable during periods of global uncertainty.
• For India, the initiative is part of a broader strategy to internationalise the Rupee gradually. While full internationalisation requires deep financial markets and large global demand for the currency, expanding LCSS is a pragmatic, incremental step.
• It encourages partner countries to hold and use the Rupee for trade, increasing its circulation and utility.

Economic and Strategic Advantages

• LCSS offers significant transactional benefits. Local currency settlement reduces hedging costs, simplifies invoicing, and provides exporters and importers clarity on pricing.
• It enhances competitiveness by eliminating the dollar-conversion layer that often adds 2–5% to operational costs.
• Strategically, LCSS strengthens India’s economic diplomacy. Partner countries gain a predictable, cost-effective mechanism for trade, while India reduces its vulnerability to sanctions-linked disruptions in global payment infrastructures.
• It also opens space for long-term financial cooperation such as Rupee-denominated investments, credit lines, and broader fintech collaboration.

Challenges Ahead

• Despite the promise, several challenges remain. Partner countries must have sufficient liquidity in Rupee accounts to enable smooth settlement.
• Differences in regulatory frameworks, concerns over currency stability, and the limited convertibility of the Rupee could restrict widespread adoption.
• Building trust in the system will require consistent trade volumes and stable macroeconomic conditions.

Conclusion

The expansion of the LCSS is a carefully calibrated step toward enhancing India’s financial autonomy and strengthening regional economic partnerships. While it is not a substitute for deep structural reforms required for full currency internationalisation, it moves India toward a more resilient and diversified trade settlement framework. If supported by stable policies and deeper financial integration, LCSS could emerge as a cornerstone of India’s long-term economic strategy.

 

Editorial 2 : China’s dominance rests on fragile foundations

Context:

China’s rise as an economic superpower faces structural vulnerabilities that may weaken its long-term global dominance.

Introduction

China has emerged as the main challenger to US supremacy since 2008, its economic strength is built on weak foundations such as overdependence on exports, political rigidity, and demographic decline. This raises questions about whether the ongoing US–China rivalry represents a sustainable “new cold war.”

Key Issues

• Evolution of US–China Rivalry
  • Historically, the US dominated both economically and politically, but China’s rapid growth has challenged this position.
  • Unlike the ideological divide of the US–Soviet Cold War, both the US and China today operate globally integrated economies, making rivalry more complex and interdependent.
• China’s Rise After the 2008 Crisis
  • The 2008 global recession weakened Western economies and exposed internal contradictions in Europe.
  • China used this moment to expand global influence through manufacturing dominance and large-scale investments.
• Structural Fragilities in China’s Economic Model
  • Domestic Dependencies
    • The US became deeply dependent on Chinese goods, which earlier limited its capacity to impose tariffs.
    • China’s control over rare earth minerals gave it critical leverage during trade tensions.
  • Internal Economic Strains: Recent indicators show China’s economic foundations facing severe stress:
    • • Real estate sector collapse(e.g., Evergrande crisis).
      • Declining consumer demandand slowing GDP growth.
      • Manufacturing overcapacity, leading to excess exports.
      • Debt accumulationamong local governments and state-owned enterprises.
    • Political and Social Constraints
      • • China’s political model restricts market reforms that require transparency and institutional accountability.
        • Over-centralization of power under Xi Jinping creates policy risks and slows course correction.
      • Demographic Decline
        • • China faces rapidly ageing population and shrinking workforce.
          • UN projections show China losing nearly 100 million working-age individuals by 2035, affecting productivity and consumption.
        • Limits of China’s External Influence
          • China’s Belt and Road Initiative (BRI) has faced debt pushback from many developing countries.
          • Its dominance in Africa and Asia resembles earlier resource-driven relationships, limiting long-term economic partnership.
          • Overdependence on export-driven surplus (e.g., to the US and Europe) exposes China to global demand fluctuations.
        • Can China Replace the US as the Global Economic Centre?
          • China’s per capita income is still only one-sixth of the US.
          • Innovation capacity remains uneven despite advances in AI, EVs, and green tech.
          • Future consumption is uncertain due to demographic and income-related challenges.
          • Without strengthening domestic markets, China cannot sustainably overtake US-led economic structures.

Conclusion

It concludes that China’s rise, while impressive, is built on fragile socio-economic and political foundations. For the world, this means that a stable bipolar order may not emerge soon. Instead, international systems may continue to be shaped largely by the US, as China grapples with internal vulnerabilities that limit its long-term dominance.