The data for the country’s current account balance for the fourth quarter of FY 2021-22 shows a decrease in the deficit to 1.5% of gross domestic product (GDP) from 2.6% of GDP in Q3 FY 2021-22.
What is Current Account Deficit (CAD)?
A current account is a key component of balance of payments, which is the account of transactions or exchanges made between entities in a country and the rest of the world.
This includes a nation’s net trade in products and services, its net earnings on cross border investments including interest and dividends, and its net transfer payments such as remittances and foreign aid.
A CAD arises when the value of goods and services imported exceeds the value of exports, while the trade balance refers to the net balance of export and import of goods or merchandise trade.
Components of Current Account
Current Account Deficit (CAD) =
Trade Deficit + Net Income + Net Transfers
(1) Trade Deficit
Trade Deficit = Imports – Exports
A Country is said to have a trade deficit when it imports more goods and services than it exports.
Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports.
A trade deficit represents an outflow of domestic currency to foreign markets.
(2) Net Income
Net Income = Income Earned by MNCs from their investments in India.
When foreign investment income exceeds the savings of the country’s residents, then the country has net income deficit.
This foreign investment can help a country’s economy grow. But if foreign investors worry they won’t get a return in a reasonable amount of time, they will cut off funding.
Net income is measured by the following things:
Payments made to foreigners in the form of dividends of domestic stocks.
Interest payments on bonds.
Wages paid to foreigners working in the country.
(3) Net Transfers
In Net Transfers, foreign residents send back money to their home countries. It also includes government grants to foreigners.
It Includes Remittances, Gifts, Donation etc
How does Current Account Transaction takes place?
While understanding the Current Account Deficit in detail, it is important to understand what the current account transactions are.
Current account transactions are transactions that require foreign currency.
Following transactions with from which component these transactions belong to :
Component 2 : Interest on loans to other countries and Net income from investments in other countries
Component 3 : Remittances for living expenses of parents, spouse and children residing abroad, and Expenses in connection with Foreign travel, Education and Medical care of parents, spouse and children
What has been the recent trend?
In Q4 FY 2021-22, CAD improved to 1.5% of GDP or $13.4 billion from 2.6% of GDP in Q3 FY 2021-22 ($22.2 billion).
The difference between the value of goods imported and exported fell to $54.48 million in Q4FY 2021-22 from $59.75 million in Q3 FY2021-22.
However, based on robust performance by computer and business services, net service receipts rose both sequentially and on a year-on-year basis.
Remittances by Indians abroad also rose.
What are the reasons for the current account deficit?
Intensifying geopolitical tensions and supply chain disruptions leading to crude oil and commodity prices soaring globally have been exerting upward pressure on the import bill.
A rise in prices of coal, natural gas, fertilizers, and edible oils have added to the pressure on trade deficit.
However, with global demand picking up, merchandise exports have also been rising.
How will a large CAD affect the economy?
A large CAD will result in demand for foreign currency rising, thus leading to depreciation of the home currency.
Nations balance CAD by attracting capital inflows and running a surplus in capital accounts through increased foreign direct investments (FDI).
However, worsening CAD will put pressure on inflow under the capital account.
Nevertheless, if an increase in the import bill is because of imports for technological upgradation it would help in long-term development.
Should a widening CAD worry policymakers?
Data shows the trade deficit widened to $24.29 billion in May 2022 from $6.53 billion a year ago.
Merchandise exports in May 2022 rose by 20.55% over May 2021, while merchandise imports rose by 62.83%.
However, if increasing imports is accompanied by an expansion in industrial production, it is a sign of economic development.
Immediately after the covid-19 lockdown, after a long time, the country experienced a current account surplus.
On April 28, Computer Emergency Response Team (CERT-In) passed a rule mandating VPN (virtual private network) providers to record and keep their customers’ logs for 180 days.
What is VPN?
VPN describes the opportunity to establish a protected network connection when using public networks.
It encrypts internet traffic and disguise a user’s online identity.
This makes it more difficult for third parties to track your activities online and steal data.
The encryption takes place in real time.
How does a VPN work?
A VPN hides your IP address by letting the network redirect it through a specially configured remote server run by a VPN host.
This means that if you surf online with a VPN, the VPN server becomes the source of your data.
This means your Internet Service Provider (ISP) and other third parties cannot see which websites you visit or what data you send and receive online.
A VPN works like a filter that turns all your data into “gibberish”. Even if someone were to get their hands on your data, it would be useless.
Why do people use VPN?
Secure encryption: A VPN connection disguises your data traffic online and protects it from external access. Unencrypted data can be viewed by anyone who has network access and wants to see it. With a VPN, hackers and cyber criminals can’t decipher this data.
Disguising whereabouts: VPN servers essentially act as your proxies on the internet. Because the demographic location data comes from a server in another country, your actual location cannot be determined.
Data privacy is held: Most VPN services do not store logs of your activities. Some providers, on the other hand, record your behaviour, but do not pass this information on to third parties. This means that any potential record of your user behaviour remains permanently hidden.
Access to regional content: Regional web content is not always accessible from everywhere. Services and websites often contain content that can only be accessed from certain parts of the world.
Secure data transfer: If you work remotely, you may need to access important files on your company’s network. For security reasons, this kind of information requires a secure connection. To gain access to the network, a VPN connection is often required.
What does the new CERT-IN directive say?
VPN providers will need to store validated customer names, their physical addresses, email ids, phone numbers, and the reason they are using the service, along with the dates they use it and their “ownership pattern”.
In addition, Cert is also asking VPN providers to keep a record of the IP and email addresses that the customer uses to register the service, along with the timestamp of registration.
Most importantly, however, VPN providers will have to store all IP addresses issued to a customer and a list of IP addresses that its customers generally use.
What does this mean for VPN providers?
VPN services are in violation of Cert’s rules by simply operating in India.
That said, it is worth noting that ‘no logs’ does not mean zero logs.
VPN services still need to maintain some logs to run their service efficiently.
Does this mean VPNs will become useless?
The Indian government has not banned VPNs yet, so they can still be used to access content that is blocked in an area, which is the most common usage of these services.
However, journalists, activists, and others who use such services to hide their internet footprint will have to think twice about them.
Why such move?
Crime control: For law enforcement agencies, a move like this will make it easier to track criminals who use VPNs to hide their internet footprint.
Curbing dark-net activities: Users these days are shifting towards the dark and deep web, which are much tougher to police than VPN services.
Back2Basics: Indian Computer Emergency Response Team (CERT-IN)
CERT-IN is an office within the Ministry of Electronics and Information Technology.
It is the nodal agency to deal with cyber security threats like hacking and phishing. It strengthens the security-related defense of the Indian Internet domain.
It was formed in 2004 by the Government of India under the Information Technology Act, 2000 Section (70B) under the Ministry of Communications and Information Technology.
The Centre has extended the time for levy of GST compensation cess by almost four years till March 31, 2026.
What is the news?
The Goods and Services Tax (Period of Levy and Collection of Cess) Rules were notified in 2022 by the Finance Ministry.
The levy of cess was to end on June 30 but the GST Council, chaired by Union Finance Minister decided to extend it till 2026.
What is GST?
GST, being a consumption-based tax, would result in loss of revenue for manufacturing-heavy states.
GST launched in India on 1 July 2017 is a comprehensive indirect tax for the entire country.
It is charged at the time of supply and depends on the destination of consumption.
For instance, if a good is manufactured in state A but consumed in state B, then the revenue generated through GST collection is credited to the state of consumption (state B) and not to the state of production (state A).
Compensation Cess under GST regime
Due to the consumption-based nature of GST, manufacturing states like Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu feared a revenue loss.
Thus, GST Compensation Cess or GST Cess was introduced by the government to compensate for the possible revenue losses suffered by such manufacturing states.
However, under existing rules, this compensation cess will be levied only for the first 5 years of the GST regime – from July 1st, 2017 to July 1st, 2022.
Compensation cess is levied on five products considered to be ‘sin’ or luxury as mentioned in the GST (Compensation to States) Act, 2017 and includes items such as- Pan Masala, Tobacco, and Automobiles etc.
Alternatives to prevent losses
The input tax credit can help a producer by partially reducing GST liability by only paying the difference between the tax already paid on the raw materials of a particular good and that on the final product.
In other words, the taxes paid on purchase (input tax) can be subtracted from the taxes paid on the final product (output tax) to reduce the final GST liability.
Distributing GST compensation
The compensation cess payable to states is calculated based on the methodology specified in the GST (Compensation to States) Act, 2017.
The compensation fund so collected is released to the states every 2 months.
Any unused money from the compensation fund at the end of the transition period shall be distributed between the states and the centre as per any applicable formula.
Significance of GST compensation
States no longer possess taxation rights after most taxes, barring those on petroleum, alcohol, and stamp duty were subsumed under GST.
GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of states’ total revenues.
Finances of over a dozen states are under severe strain, resulting in delays in salary payments and sharp cuts in capital expenditure outlay amid the pandemic-induced lockdowns and the need to spend on healthcare.
Try this question from CSP 2018:
Q.Consider the following items:
Cereal grains hulled
Chicken eggs cooked
Fish processed and canned
Newspapers containing advertising material
Which of the above items is/are exempt under GST (Goods and Services Tax)?
The bacteria causing typhoid fever is becoming increasingly resistant to some of the most important antibiotics for human health.
What is the news?
The largest genome analysis of Salmonella Typhi (S. Typhi) also shows that resistant strains — almost all originating in South Asia — have spread to other countries nearly 200 times since 1990.
The researchers noted that typhoid fever is a global public health concern, causing 11 million infections and more than 1,00,000 deaths per year.
Antibiotics can be used to successfully treat typhoid fever infections, but their effectiveness is threatened by the emergence of resistant S. Typhi strains.
What is Salmonella Typhi?
Salmonella Typhi (S. Typhi) are bacteria that infect the intestinal tract and the blood.
It is usually spread through contaminated food or water.
Once S. Typhi bacteria are eaten or drunk, they multiply and spread into the bloodstream.
The disease is referred to as typhoid fever. S. Paratyphi bacteria cause a similar, but milder illness, which comes under the same title.
Paratyphoid has a shorter duration, generally, than typhoid.
Typhi and S. Paratyphi are common in many developing countries where sewage and water treatment systems are poor.
How does it spread?
Salmonella Typhi lives only in humans.
Persons with typhoid fever carry the bacteria in their bloodstream and intestinal tract.
Symptoms include prolonged high fever, fatigue, headache, nausea, abdominal pain, and constipation or diarrhoea.
Some patients may have a rash. Severe cases may lead to serious complications or even death.
Typhoid fever can be confirmed through blood testing.
Scientists have recorded four species of corals for the first time from Indian waters. These new species of azooxanthellate corals were found from the waters off the Andaman and Nicobar Islands.
What are Azooxanthellate Corals?
The azooxanthellate corals are a group of corals that do not contain zooxanthellae and derive nourishment not from the sun but from capturing different forms of planktons.
They are deep-sea representatives with the majority of species being reported from depths between 200 metres and 1,000 metres.
They are also reported from shallow waters unlike zooxanthellate corals that are restricted to shallow waters.
Which are the news species found?
Truncatoflabellum crassum, T. incrustatum, T. aculeatum, and T. irregulare under the family Flabellidae were previously found in Japan, the Philippines and Australian waters.
Only T. crassum was reported with the range of Indo-West Pacific distribution.
Significance of the discovery
Most studies of hard corals in India have been concentrated on reef-building corals while much is not known about non-reef-building corals.
These new species enhance our knowledge about non-reef-building solitary corals.
Back2Basics: Coral Reefs
Corals are marine invertebrates or animals not possessing a spine.
Each coral is called a polyp and thousands of such polyps live together to form a colony, which grows when polyps multiply to make copies of themselves.
Australia’s Great Barrier Reef is the world’s largest reef system stretching across 2,300 km.
It hosts 400 different types of coral, gives shelter to 1,500 species of fish and 4,000 types of mollusc.
Corals are of two types — hard coral and soft coral:
Hard corals, also called hermatypic or ‘reef building’ corals extract calcium carbonate (also found in limestone) from the seawater to build hard, white coral exoskeletons.
Soft coral polyps, however, borrow their appearance from plants, attach themselves to such skeletons and older skeletons built by their ancestors. Soft corals also add their own skeletons to the hard structure over the years and these growing multiplying structures gradually form coral reefs. They are the largest living structures on the planet.
How do they feed themselves?
Corals share a symbiotic relationship with single-celled algae called zooxanthellae.
The algae provides the coral with food and nutrients, which they make through photosynthesis, using the sun’s light.
In turn, the corals give the algae a home and key nutrients.
The zooxanthellae also give corals their bright colour.
Farmers in Kerala continue to protest across several high ranges of the state against the Supreme Court’s recent order to establish 1-km Eco-Sensitive Zones around all protected areas, wildlife sanctuaries, and national parks.
What are the Eco-sensitive Zones (ESZs)?
Eco-Sensitive Zones (ESZs) or Ecologically Fragile Areas (EFAs) are areas notified by the MoEFCC around Protected Areas, National Parks and Wildlife Sanctuaries.
The purpose of declaring ESZs is to create some kind of “shock absorbers” to the protected areas by regulating and managing the activities around such areas.
They also act as a transition zone from areas of high protection to areas involving lesser protection.
How are they demarcated?
The Environment (Protection) Act, 1986 does NOT mention the word “Eco-Sensitive Zones”.
However, Section 3(2)(v) of the Act, says that Central Government can restrict areas in which any industries, operations or processes or class of industries, operations or processes shall be carried out or shall not, subject to certain safeguards.
Besides Rule 5(1) of the Environment (Protection) Rules, 1986 states that central government can prohibit or restrict the location of industries and carrying on certain operations or processes on the basis of certain considerations.
The same criteria have been used by the government to declare No Development Zones (NDZs).
Defining its boundaries
An ESZ could go up to 10 kilometres around a protected area as provided in the Wildlife Conservation Strategy, 2002.
Moreover, in the case where sensitive corridors, connectivity and ecologically important patches, crucial for landscape linkage, are beyond 10 km width, these should be included in the ESZs.
Further, even in the context of a particular Protected Area, the distribution of an area of ESZ and the extent of regulation may not be uniform all around and it could be of variable width and extent.
Activities Permitted and Prohibited
Permitted: Ongoing agricultural or horticultural practices, rainwater harvesting, organic farming, use of renewable energy sources, and adoption of green technology for all activities.
Prohibited: Commercial mining, saw mills, industries causing pollution (air, water, soil, noise etc), the establishment of major hydroelectric projects (HEP), commercial use of wood, Tourism activities like hot-air balloons over the National Park, discharge of effluents or any solid waste or production of hazardous substances.
Under regulation: Felling of trees, the establishment of hotels and resorts, commercial use of natural water, erection of electrical cables, drastic change of agriculture system, e.g. adoption of heavy technology, pesticides etc, widening of roads.
What is the recent SC judgment that has caused an uproar in Kerala?
On June 3, a three-judge bench of the Supreme Court heard a PIL that sought to protect forest lands in the Nilgiris in Tamil Nadu, but was later expanded to cover the entire country.
In its judgment, the court while referring to the 2011 guidelines as “reasonable”, directed all states to have a mandatory 1-km ESZ from the demarcated boundaries of every protected area.
It also stated that no new permanent structure or mining will be permitted within the ESZ.
If the existing ESZ goes beyond 1-km buffer zone or if any statutory instrument prescribes a higher limit, then such extended boundary shall prevail, the court, as per the Live Law report, said.
Why are people protesting against it?
There is a high density of human population near the notified protected areas.
Farmer’s groups and political parties have been demanding that all human settlements be exempt from the ESZ ruling.
The total extent of the wildlife sanctuaries in Kerala is eight lakh acres.
If one-km of ESZ is demarcated from their boundaries, around 4 lakh acres of human settlements, including farmlands, would come within that purview.
Try this PYQ
With reference to ‘Eco-Sensitive Zones’, which of the following statements is/are correct?
Eco-Sensitive Zones are the areas that are declared under the Wildlife (Protection) Act, 1972
The purpose of the declaration of Eco-Sensitive Zones is to prohibit all kinds of human activities, in those zones except agriculture.
Select the correct answer using the code given below:
With the US Supreme Court’s overturning of abortion as a constitutionally guaranteed right, America has taken another step towards democratic backsliding.
Background of the Roe v Wade case
Bodily autonomy: Roe, the 1973 outcome of an unmarried woman’s crusade for bodily autonomy, had declared overbroad, and consequently unconstitutional, a provision of the Texas Penal Code which permitted only those abortions that were “procured or attempted by medical advice to save the life of the mother”.
Right to abortion: While locating the right of privacy within the guarantee of personal liberty enshrined in the fourteenth amendment of the American constitution, Roe embodies a supervening constitutional right to abortion emanating from this right of privacy.
The right to abort was held to be a constitutionally protected right within the right of privacy.
Recognition of states’ rights: The decision simultaneously recognised the state’s interest in protecting the life of the foetus as also the life of the mother.
Roe is not only relevant as a progressive trailblazer for reproductive rights in the United States but is also fundamental to constitutional jurisprudence globally for the interpretative tools it employed.
Overturning of Roe Vs Wade case
The US Supreme Court on June 24 overturned a half-century-old right to abortion, granted by a 1973 Supreme Court decision in the Roe vs Wade case.
No nationwide right to abortion: With a 5-4 majority, the court has said that American women have no nationwide right to abortion.
Rather, state legislatures should decide whether women can have that right in their respective states.
Concerns about the life of the unbors: In the court’s opinion, the right to privacy stemming from the 14th Amendment is not relevant, for abortion concerns not only the pregnant woman but also the life of the unborn.
Not mentioned in the 1787 constitution: Moreover, the court said, abortion is neither “enumerated” as a right in the original 1787 constitution nor is it consistent with American history and tradition.
Taking away the right once granted: In a democracy, can a right once granted be taken away?
As the world’s oldest surviving democracy, the United States has figured prominently in this debate.
With the overturning of Roe vs Wade, this debate has now become wider.
Was the right to abortion constitutionally justified?
Protection of liberty and privacy: The 1973 court decision allowing the right to abortion was based on the 14th Constitutional Amendment (1868).
Even though abortion was not mentioned in the 1787 US Constitution, abortion’s defence was derived from the 1868 Amendment
This Amendment, the court said, allowed protection of liberty and privacy, something the state could not impinge upon.
Not absolute right: The 1973 court also argued that this right was not absolute, limited as it would be by considerations of “protecting potential life”.
Issues with the overturning of Roe Vs. Wade case
1] No constitution can anticipate the evolution of rights: Abortion was not mentioned in the 1787 constitution, nor explicitly in the 1868 amendment.
That is because women were not autonomous political agents at that time.
Until they were given the right to vote in 1920, they were not a constitutional category in the US, as was true virtually everywhere in the world.
Women are autonomous agents today. Norms change; rights evolve.
2] Ignores rape and incest: As the court’s dissent note puts it, this majority decision ignore rape and incest.
If abortion as a right is dissolved, women can be forced to give such unwanted births.
The majority decision of the court is silent on this important matter.
3] Against the right to participate equally in economic and social life: Having a child is not simply a deeply moral obligation to the unborn.
It is also a decision that affects “the ability of women to participate equally in (the nation’s) economic and social life”.
These words are from a later decision, known as Casey (1992), when the US Supreme Court added the concept of “undue burdens” to support the idea of abortion.
4] Right over body ignored: Men don’t have to deal physically with pregnancy, whereas the foetus grows inside a woman’s body for nine months.
If men have the right over their bodies, which can’t be taken away by the government,then women should also have autonomy over their bodies as well.
Maternity must be a voluntary choice.
There is no going back to the notion of rights as they were viewed in the 18th century — unequal, unneutral, unbalanced.
Conclusion
Typically, as they evolve and deepen, democracies allow the arc of rights to broaden further, not retreat. After this judgment in the US, the stakes have become much higher and the democratic challenges bigger.
This article seeks to re-articulate a question pertaining to the composition of the Council of States.
Historical background and CAD over the issue of second chamber
Lokanath Misra led the charge against a federal second chamber in the Constituent Assembly stating that there was not need for the second chamber and also that it will not serve any useful purpose.
Shibban Lal Saksena, was equally emphatic: He said that as per their experience, the Upper House acts as a clog in the wheel of progress.
They were not the only ones who had concerns. Other members expressed them too in different contexts during the Constituent Assembly debate on draft Article 67.
Issues with the role of Rajya Sabha
Unable to protect the interest of the States: Article 1(1) of the Indian Constitution states “India, that is Bharat, shall be a Union of States.”
Therefore, the primary responsibility of a Council of States would be to protect the interests of the states vis a vis the Union.
There is hardly any empirical evidence that substantiates that the Rajya Sabha has measured upto the task ever since it came into existence on April 3r 1952.
No focus on states: From 1952 to 2003, at least there was a veneer of a state focus when it was mandatory that any citizen desirous of contesting a Rajya Sabha election had to be an elector from that particular state.
By amending Section 3(1) of the Representation of People’s Act 1952 and doing away with the domicile requirement, the Government removed this fig leaf also in 2003.
A five-judge bench did not uphold tha challenge to this judgement.
This amendment and the subsequent judgment buried the earlier practice of individuals entering the Rajya Sabha from anywhere based upon rather dodgy but still some form of domicile credentials.
All states do not have bicameral legislature: Twenty-four states have unicameral legislatures, that is, only one legislative body, and only six states are bicameral.
If the bulk of the states can make do with one House why not the Centre?
Rajya Sabha as continuous house argument: It is also argued that the Rajya Sabha is a continuous House as opposed to the Lok Sabha that gets mandatorily dissolved every five years if not sooner.
That can be fixed with a simple amendment to Article 83 (2) that should state that “Lok Sabha would remain in existence till the time its successor body/house is not constituted.
Article 83 (1) would stand deleted and consequential amendments can be carried out to other parts of the Constitution.
Conclusion
It would be instructive to keep in mind that the Basic Structure doctrine enunciated by the Supreme Court in Re: Kesvananda Bharti holds parliamentary democracy to be basic structure, not bicameralism.
At the invitation of Chinese President Xi Jinping, PM Modi is attending the 14th BRICS Summit hosted by China in virtual format.
Discussions during the summit are expected to cover intra-BRICS cooperation in areas such as counter-terrorism, trade, health, traditional medicine, environment, IT and innovation, agriculture, technical and vocational training, and MSMEs.
Why in news?
China is keen for the grouping to explore expansion and include new developing country members.
Under the “BRICS Plus” format, the forthcoming summit is also expected to be attended by leaders of invited emerging countries.
What is BRICS?
BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
The BRICS Leaders’ Summit is convened annually. It does not exist in form of organization, but it is an annual summit between the supreme leaders of five nations.
Its inception
On November 30, 2001, Jim O’Neill, a British economist who was then chairman of Goldman Sachs Asset Management, coined the term ‘BRIC’ to describe the four emerging economies of Brazil, Russia, India, and China.
He made a case for BRIC on the basis of econometric analyses projecting that the four economies would individually and collectively occupy far greater economic space and become among the world’s largest economies in the next 50 years or so.
How it has formed?
The grouping was formalized during the first meeting of BRIC Foreign Ministers on the margins of the UNGA in New York in September 2006.
The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
Who are the members?
South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.
The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
The importance of BRICS is self-evident: It represents 42% of the world’s population, 30% of the land area, 24% of global GDP and 16% of international trade.
The five BRICS countries are also members of G-20.
Salient features of BRICS
(1) New front against western dominance
The BRICS is group of countries having total population of approximately 3.6 billion which makes 40% of world population.
Also, the cumulative economy of the group members aggregate to around 17 trillion in nominal term which is 22% of world economy in current context.
(2) Future power centres of the world
India and China are today the fastest growing economies and they are considered as future super power of world.
The group also has Russia the former USSR as a member which was one of the two super power until 1991 when it was disintegrated for various political and economic reason but still retain the hegemony of western, US led military dominance.
(3) New global order
In subsequent summits since its inception the group has taken various initiatives which have changed the world economic order.
The group pledged a corpus of $75 billion to IMF on precondition of voting rights reform in June, 2012 which is not only the end of US hegemony in institution but also a start of more democratic world order.
(4) New Development Bank
During its fifth summit at Durban, South Africa in 2013, the member countries agreed to create a new global financial institution which finally came into existence as New Development Bank in 2015.
The bank is today considered as rival of World Bank and the bank’s primary focus is to lend for various development projects in member and other developing countries.
(5) Contingent Reserve Agreement
To save members from immediate economic shocks the group has also agreed to Contingent Reserve Agreement.
The agreement provide protection to member countries against global liquidity pressure as all the members are developing economies.
They are prone to increased economical volatility in current globalized scenario and is considered as rival of International Monetary Fund.
(6) A bridge between North and South
The grouping has gone through a reasonably productive journey. It strove to serve as a bridge between the Global North and Global South.
(7) Sustainable and inclusive growth and development
Structural imbalances caused by the global financial crisis of 2008 and new threats to the global economy posed by trade war and unilateral economic sanctions are yet to be resolved.
The growing contribution of the BRICS to the world economy and the rising importance of the economic relations between the BRICS and other Emerging Market and Developing Countries (EMDCs) create an opportunity for new initiatives.
Importance of BRICS for India
(1) Geo-Politics
Global geopolitics today represents the case of a tug of war and India finds itself in the middle of it.
This has made difficult for India to carve a middle path for balancing its strategic interests between the U.S and the Russia-China axis.
Therefore, BRICS platform provides an opportunity for India to balance Russia-China axis.
(2) Global Economic Order
BRICS countries shared a common objective of reforming the international financial and monetary system, with a strong desire to build a more just, and balanced international order.
To this end, BRICS community plays an important role in the G20, in shaping global economic policies and promoting financial stability.
(3) Voice of Developing Nations
As the western countries are raising challenges on issues ranging from World Trade Organization to climate change, the developing countries are crippling under the onslaught of these policies.
In recent period, BRICS has emerged as the voice of developing countries, or the global south and playing a significant role in protecting the rights of developing countries.
(4) Multilateral reforms
India is actively pursuing its membership for United Nation Security Council (UNSC) and Nuclear Supplier Group (NSG).
China forms the major roadblock in pursuing such goals.
Therefore, BRICS provides an opportunity to actively engage with China and resolve the mutual disputes. It also helps in garnering support of other partner countries.
What are the challenges with the BRICS?
(1) Heterogeneity
It is claimed by critics that heterogeneity (variable/diverse nature of countries) of the BRICS nations with its diverse interests possess a threat to the viability of the grouping.
(2) China Centric nature of the group
All the countries in BRICS grouping trade with China more than each other, therefore it is blamed that as a platform to promote China’s interest.
Balancing trade deficit with China is huge challenge for other partner nations.
(4) Regional model
Amidst, global slowdown, trade war and protectionism, the critical challenge for the BRICS consists in the development of a new global model of governance which should not be unipolar but inclusive and constructive.
The goal should be to avoid a negative scenario of unfolding globalization and to start a complicated merging of the global growing economies without distorting or breaking the single financial and economic continuum of the world.
(5) In-effective
The five-power combine has succeeded, albeit up to a point.
However, China’s economic rise has created a serious imbalance within BRICS.
Also the group has not done enough to assist the Global South to win their optimal support for their agenda.
(6) Hostile members
The future of the group seems little gloomy as the two biggest economy India and China of the group are having various contentious issues between them.
The two countries are often seen as rival on various global forums which degenerate the confidence between each other.
(7) Sanctions on Russia
In recent times the global slowdown, sanction on Russia since it annexed Crimea and political instability in Brazil has also added burden on BRICS economy.
Russian participation has been seen through lens of its recent invasion of Ukraine aslo.
Priorities/Immediate goals of BRICS
(1) Reform of multilateral institutions
The first is to pursue reform of multilateral institutions ranging from the United Nations, World Bank and the International Monetary Fund to the World Trade Organization and now even the World Health Organization.
This is not a new goal. BRICS has had very little success so far, although strengthening multilateralism serves as a strong bond as well as a beacon.
(2) Resolve to combat terrorism
Terrorism is an international phenomenon affecting Europe, Africa, Asia and other parts of the world.
Tragic developments concerning Afghanistan have helped to focus attention sharply on this overarching theme, stressing the need to bridge the gap between rhetoric and action.
China, for example, feels little hesitation in supporting clear-cut denunciations of terrorist groups, even as its backing of Pakistan, which is heavily enmeshed with a host of international terrorist groups, remains steadfast.
(3) Promoting technological and digital solutions for the Sustainable Development Goals
Digital tools have helped a world adversely hit by the pandemic, and India has been at the forefront of using new technological tools to improve governance.
(4) Expanding people-to-people cooperation
However, enhancing people-to-people cooperation will have to wait for international travel to revive.
Interactions through digital means are a poor substitute.
Way Forward
The BRICS needs to expand its agenda for increasing its relevance in the global order.
A close examination of India’s record in BRICS reveals that New Delhi has used its membership to make a substantial contribution to the global financial architecture.
India is not a free-rider in a system of global governance dominated by the West, and continues to provide a vision of global governance.
For BRICS to remain relevant over the next decade, each of its members must make a realistic assessment of the initiative’s opportunities and inherent limitations.
BRICS should promote comprehensive development of all states — both big and small — and enhanced mutually beneficial cooperation among them on the basis of shared interests.
Democratization of international issues i.e agreements on global agendas should be reached with the widest and equal participation of all stakeholders and be based on universally recognized legal norms.
The principle of respect for cultural and civilization diversity of the world should be a top priority.
BRICS nations should strive for peaceful and politico-diplomatic settlement of crisis and conflict in various regions of the world.
This week the Wall Street Journal and the New York Times both reported on India emerging as a major buyer of Russian oil.
Background of rising fuel prices due to Ukraine crisis
A significant fallout of Russia’s invasion of Ukraine has been the rising cost of petroleum.
In response to the invasion, Western countries, including the United States and Europe, have imposed an array of sanctions against Russia.
Reduced purchases from Russia: Europe and the United States have seen the price of oil steadily rise after they reduced their purchases from Russia.
For now, Russia has been able to mitigate the impact of sanctions by selling crude, oil and coal at reasonable prices in greater volumes to newer bulk buyers like India, to combat Europe trying to wean itself off Russian crude.
Why India increased purchase of Russian oil
India has chosen a different route.
Cope with rising fuel prices: We are the third-largest importer and consumer of oil in the world and have increased our purchase of Russian oil to cope with rising oil prices elsewhere.
We are also refining crude oil or turning it into products like jet fuel and diesel and selling it to Europe and other nations.
Curb inflation: Importing Russian crude also helps us curb inflation that has been made worse by rising fuel prices.
Halting the fall of the rupee: Procuring discounted Russian oil is an effort by the government to bring down prices and halt the decline in the value of the Indian rupee.
India’s behaviour is governed by our best interest, which is the most important element of any astute foreign and economic policy.
Issues with purchasing oil from Russia
The European Union has announced a ban against insuring ships carrying Russian oil, to commence this December.
Insurance ban: Countries like India, China and Turkey that are increasing their oil purchases from Russia have six months to find a work-around to the insurance ban by using non-European insurance companies.
European companies own most of the ships carrying Russian oil to India.
These insurance sanctions will impact the companies that own these ships as well.
Dependence for batteries: Apart from geopolitical changes in the world indicating the rise of China, there is a major change: Electric vehicles and electric batteries substituting for non-renewable resources like petroleum and diesel.
India cannot afford to be dependent on an unhindered supply of electric batteries from China, given geopolitical considerations and border disputes between the two nations.
Way forward
To weather the new electric era that will no doubt be dotted with territorial wars and national security concerns, India would do well to preempt shortages in the arena – by putting in place factories which will build the electric batteries that will power our futures.
What the invasion of Ukraine has taught us is that we need to be more self-reliant and have in-house energy sources.
Conclusion
India needs to factor in the implications of comprehensive western sanctions as it increases its purchase of discounted Russian oil.
