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Subject: Bilateral Relations

1. Major World Events
2. India’s Interests in neighbourhood
3. Effects of our Policies

  • The Yuan Challenge: How India-Russia trade gap may threaten rupee internationalization efforts    

    Why in the News? 

    New Delhi aims to boost trade with Moscow to $100 billion by 2030, but India faces a $57 billion trade deficit due to strong oil imports from Russia.

    Background

    • India’s trade with Russia has been skewed since the onset of the Ukraine war in 2022. Russia has become India’s top oil supplier, while Indian exports to Russia have struggled, resulting in a large trade deficit.
    • The trade deficit in the bilateral trade stood at $57 billion in FY24, with a total trade value of $66 billion. This deficit is primarily driven by India’s significant oil imports from Russia.

    Why is the widening trade gap with Russia benefiting the Yuan?

      • Increase in Balanced Trade with China: Unlike India, China has been able to maintain a more balanced trade relationship with Russia since the Ukraine war began in 2022.
        • China’s exports to Russia have surged, with shipments increasing by 47% year-on-year to $111 billion in 2023.
        • 95% of trade between China and Russia is conducted in domestic currencies, making the yuan the most popular currency in the Russian stock market.
      • Increase in volatility of Rubble and Rupee:  Unlike the yuan, both the Indian rupee and Russian ruble have experienced considerable volatility, complicating trade in domestic currency.
        • The yuan’s relative stability compared to the rupee and ruble has made it a more attractive currency for settling Russia-India trade
    • Reluctance of Private Banks: The Indian private banks have been reluctant to facilitate trade with Russia due to fears of Western sanctions.
      • Most Indian private banks have significant business interests in Western countries and fear their branches could face sanctions if they engage with Russia.
      • As Russia prefers the yuan for payments, India’s limited exports to Russia have hindered the use of the rupee in bilateral trade.

    What are the benefits of the Internationalisation of the Rupee?

    • Reduced Dependence on USD: Internationalizing the rupee would reduce India’s reliance on foreign currencies like the US dollar for international trade and financial transactions.
      • This would enhance India’s economic sovereignty and reduce exposure to currency fluctuations.
    • Enhanced Trade Efficiency: Using the rupee for international transactions can simplify trade processes and reduce transaction costs.
      • Internationalization of the rupee would eliminate the need for currency conversions, reducing transaction costs and simplifying cross-border trade.
    • Mitigating Risks: Protection from currency volatility not only reduces the cost of doing business but also enables better growth of business, improving the chances for Indian businesses to grow globally
    • Increased Global Influence: A widely accepted rupee would boost India’s economic and political influence on the global stage.

    How can India internationalize the rupee?

    • The Reserve Bank of India permitted settling trade using the rupee through its circular in July 2022.
      • Trade invoicing: For the rupee to be recognized as an international currency, it needs to be increasingly used for trade invoicing.
      • Trade invoicing refers to the process of issuing invoices for goods or services exchanged between international trading partners. It includes detailing the terms of sale, such as prices, quantities, payment terms, and currencies used for settlement.
    • Increase Rupee Turnover: The rupee needs to achieve a global forex turnover share of around 4% to be regarded as an international currency, up from the current 1.6%.
    • Government Support: Strengthening industrial cooperation and addressing banking sector concerns can promote the use of the rupee.

    Challenges involved:

    • Banking Sector Reluctance: Private banks are hesitant to facilitate trade with Russia due to fear of Western sanctions.
    • Rupee Settlement Mechanism: Indian exporters face difficulties using the rupee settlement mechanism due to the absence of a Standard Operating Procedure (SOP) for banks.
      • Note: A Standard Operating Procedure (SOP) for banks is a formal document outlining step-by-step instructions for routine processes and activities to ensure consistency and compliance.
    • Currency Volatility: Both the ruble and the rupee have experienced considerable volatility, complicating trade in domestic currencies.
    • International Sanctions: Private banks’ significant business interests in Western countries make them wary of facilitating trade with Russia.

    How are Russia and India planning to boost trade?

    • Both countries have decided to eliminate non-tariff and tariff barriers in trade.
      • Negotiations for a trade deal with the Russia-led Eurasian Economic Union (EEU) could ease the flow of Indian products into the EEU.
    • Cooperation in manufacturing sectors like transport engineering, metallurgy, and chemicals.
      • Implementation of joint projects in priority areas and expanding reciprocal trade flows of industrial products.
    • Discussions on a Migration and Mobility partnership agreement to facilitate trade and movement between the two countries.

    Way Forward 

    • Enhanced Banking Support and Infrastructure: Develop a robust Standard Operating Procedure (SOP) for banks to facilitate smoother implementation of the rupee settlement mechanism for trade with Russia.
    • Strategic Economic Diplomacy: Strengthen bilateral economic ties through high-level diplomatic engagements to mitigate banking sector reluctance and enhance trust between Indian and Russian financial institutions.

    Mains PYQ: 

    Q Craze for gold in Indian has led to surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of Gold Monetization scheme. (UPSC IAS/2015)

  • How PM Modi’s visit to Austria sends a message both to Moscow and the West

    Why in the news? 

    Prime Minister Narendra Modi selected Vienna as a neutral location to convey a message to both Moscow and the Western countries.

    What message it sent?

    • India’s Diplomatic Signal: Modi’s visit to Vienna after meeting Putin in Moscow underscored India’s commitment to global peace and non-violence.Statements emphasized India’s concern over civilian casualties in conflict zones and the futility of war as a solution.
    • Historical Context: Referencing Austria’s historical neutrality and diplomatic role during the Cold War, Modi’s visit reaffirmed India’s stance on maintaining strategic autonomy. Highlighted India’s support for negotiated settlements and dialogue in international disputes.

    Similarity in ideologies between both countries

    • Neutrality and Non-Alignment: Both India and Austria historically maintained neutrality in global conflicts. Shared values in promoting peace, diplomacy, and non-intervention in internal affairs of other nations.
    • Historical Ties: Nehru’s role in supporting Austria’s sovereignty post-World War II reflected shared principles of neutrality and independence. Both countries value multilateralism and respect for international law.

    Evolution of bilateral relations between India and Austria

    • Establishment of Diplomatic Relations: Diplomatic ties between India and Austria were established in 1949, celebrating 75 years of engagement in 2024.Historical visits by leaders from both countries have strengthened political and economic cooperation.
    • Modern Partnerships: Focus on future-oriented collaborations in infrastructure, renewable energy, technology, and trade. Continuation of bilateral engagements despite global geopolitical shifts, maintaining a balanced approach in international relations.

    Key dimension related to relation between Austria and India: 

    • Political Relations: India intervened in Austria’s favor during negotiations with the Soviet Union on the Austrian State Treaty in 1953.India supported Austria on the UN-South Tyrol conventions. Austria expressed support for India’s bid for a permanent seat on a reformed United Nations Security Council.
    • Economic Relations: As of 2019, there are over 200 collaborations, including 100 technical collaborations and 60 joint ventures between Indian and Austrian firms.Bilateral trade between Austria and India was EUR 2.93 billion in 2023. Austria has received a cumulative foreign direct investment of EUR 1.159 billion from India as of 2023.
    • Cultural Relations: The Indo-Austrian cultural relations date back to the 16th century. The Austrian tradition of Indology began in the 19th century.Rabindranath Tagore visited Vienna in 1921 and 1926, fostering cultural exchange.

    Way forward: 

    • Enhanced Political Dialogue: Increase high-level visits and diplomatic exchanges to deepen understanding and cooperation on global issues like climate change, terrorism, and global health.
    • Support for Multilateral Initiatives: Collaborate in multilateral forums such as the United Nations to promote shared values of peace, neutrality, and respect for international law. Work towards common positions on global challenges.

    Mains PYQ: 

    Q What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem. (UPSC IAS/2019)

  • [12th July 2024] The Hindu Op-ed: Reading the tea lea/ves ahead of China’s Third Plenum

    [12th July 2024] The Hindu Op-ed: Reading the tea lea/ves ahead of China’s Third Plenum

    PYQ Relevance: 

    Q The new tri-nation partnership AUKUS is aimed at countering China’s ambitions in the Indo-Pacific region. Is it going to supersede the existing partnerships in the region? Discuss the strength and impact of AUKUS in the present scenario. (UPSC IAS/2021)

    Q What is the significance of Indo-US defence deals over Indo-Russian defence deals? Discuss with reference to stability in the Indo-Pacific region. (UPSC IAS/2020)

    Mentors comment: Commentators in the West have long argued to move beyond the optimistic view of a post-Cold War world, suggesting that Moscow, Beijing, and their aligned states cannot be expected to uphold a rules-based international order. Attention is now focused on China’s upcoming Third Plenum of the 20th Party Congress, scheduled for July 15-18, for potential signs of policy shift. Despite pessimism about China embracing mutual security, there remains hopeful anticipation for surprises and directional changes following economic challenges and global interest in the plenum’s outcomes.

    Let’s learn!

    __ 

    Why in the news?

    There is optimism that the plenum could indicate a shift in China’s direction.

    About the Third Plenums: 

    Third Plenums historically set economic strategies for the next 5-10 years and are pivotal in China’s economic planning. 
    The 1978 Third Plenum under Deng Xiaoping marked a significant shift towards economic reforms that revitalized China’s economy.

    Economic reforms, issues

    • Advanced Timing of the Third Plenum: The early scheduling of the Third Plenum suggests China may be planning sweeping economic reforms to address current challenges and ensure future progress.
    • Current Economic Challenges: China faces several economic challenges, including an ageing population, a shrinking workforce, high debt levels, and ongoing economic issues despite previous measures. These factors contribute to domestic pessimism about China’s economic future.
    • Leadership Dynamics: There is uncertainty about whether the current leadership under Xi Jinping will embrace significant new economic reforms akin to those initiated by Deng Xiaoping. Any admission of past mistakes could impact Xi’s political standing and future leadership.
    • Reform Necessity: There is a perceived necessity for China to experiment with new economic ideas and reforms to address current economic challenges effectively. However, uncertainties remain about the extent and nature of reforms that will be introduced.

    The view about China’s ‘intentions’

    • Perceived Threats and Activities: The West and others view China’s tactics like ‘gray zone coercion’, disinformation campaigns, interference in elections, and military provocations in the South and East China Seas as ongoing threats. Taiwan remains a focal point of China’s military and propaganda efforts, adding to regional tensions.
    • Regional and Global Impact: China’s initiatives such as the Global Development Initiative (GDI), Global Security Initiative (GSI), and Global Civilization Initiative (GCI) reflect its strategic beliefs and influence. This perspective increases paranoia about China’s intentions, particularly in Asia, impacting regional stability.
    • India-China Relations: India-China relations have deteriorated, exacerbated by border tensions and China’s perceived inflexibility despite India’s attempts at flexibility. India is concerned about China’s military capabilities, including missile and nuclear advancements, and sees a need to prepare for potential conflict scenarios.

    Where India stands

    • Economic Strength and Leadership: India is transitioning from a ‘middle level’ power to a ‘major’ power, with robust economic parameters that are among the best globally. The country is perceived to have strong and focused leadership, which enhances its capability to take significant initiatives on the global stage. India’s economic position and leadership are considered advantageous for taking proactive steps towards promoting world peace.
    • Diplomatic History and Initiatives: India has a history of taking diplomatic initiatives, especially in its relations with China, which have had notable outcomes. Examples include past initiatives such as Sumdorong Chu and Wangdung, and Prime Minister Rajiv Gandhi’s pivotal visit to China in 1988, which contributed to decades of peace between the two nations. These historical precedents suggest that India has the capacity to play a proactive role in regional and global diplomacy.
    • Current Strategic Advantage: The current geopolitical environment between India and China is relatively less tense compared to historical periods of conflict. India is seen to hold a stronger position vis-à-vis China than at any time in modern history, presenting an opportune moment for India to initiate significant diplomatic efforts. There is potential for India to leverage its position and historical diplomatic successes to foster positive outcomes for both countries, Asia, and the broader world.

    Way forward: 

    • Diplomatic Engagement and Conflict Avoidance: India should prioritize diplomatic engagement with China to manage and mitigate tensions effectively. Focus on dialogue, negotiation, and confidence-building measures to prevent escalation of conflicts, particularly regarding border disputes and military posturing.
    • Regional Leadership and Global Initiatives: Utilize India’s emerging status as a major global power to lead initiatives that promote peace and stability in the region and beyond. Engage proactively in international forums to advocate for peaceful resolutions to regional conflicts and enhance India’s diplomatic influence on the global stage.

  • India hosts BIMSTEC Foreign Ministers amid raging Myanmar crisis

    Why in the News? 

    At the first BIMSTEC Foreign Ministers’ retreat, External Affairs Minister S. Jaishankar emphasized that BIMSTEC must address regional challenges internally, fostering collaboration among member nations.

    About BIMSTEC Countries  

    BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) is a regional organization comprising seven member countries lying in the littoral and adjacent areas of the Bay of Bengal. These countries are Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand.

    Significance of BIMSTEC:

    • Economic Cooperation: Facilitates trade and investment among member countries.
    • Connectivity Projects: Enhances regional connectivity through road, rail, and maritime links.
    • Technical and Technological Collaboration: Promotes capacity building and technology sharing.
    • Security Cooperation: Addresses transnational crimes, terrorism, and humanitarian assistance.
    • Cultural Exchange: Strengthens cultural ties and people-to-people contacts.

    India’s Stand on Myanmar Crisis

    India has adopted a cautious and balanced approach to the crisis in Myanmar, emphasizing the following points:

    • Connectivity Projects: India focuses on the importance of ongoing connectivity projects for the future of BIMSTEC, which are crucial for regional integration.
    • Humanitarian Assistance: Discussions on humanitarian assistance remain limited to displaced populations and some military personnel seeking refuge in Mizoram, reflecting India’s cautious humanitarian stance.
    • Border Stability: India emphasizes maintaining stability along its border with Myanmar, considering the volatile situation and the control of trade routes by Ethnic Armed Organizations (EAOs).
    • Security Cooperation: Countering transnational crimes, including cyber, narcotics, and illegal arms, remains a priority, reflecting India’s security concerns.

    India Pushes to Link South Asia with Southeast Asia via BIMSTEC

    • Enhanced Connectivity: Promoting infrastructure projects such as road and rail links, and port development to improve trade routes.
      • Encouraging cultural exchanges, tourism, and academic collaborations to strengthen regional bonds
    • Economic Integration: Facilitating trade agreements and economic cooperation to boost regional trade and investment.
    • Energy Cooperation: Exploring opportunities for energy trade and development, including renewable energy projects.
    • Security Collaboration: Addressing common security challenges, including terrorism, human trafficking, and maritime security.

    Way forward: 

    • Establish a Permanent Secretariat: Enhance coordination and efficiency by establishing a fully functional permanent secretariat for BIMSTEC with adequate resources and authority to implement and monitor projects.
    • Promoting Sustainable Development Goals (SDGs): Launch joint initiatives to combat climate change, focusing on disaster risk reduction, sustainable management of natural resources, and renewable energy projects, leveraging the diverse ecological systems within the member states.

    Mains PYQ: 

    Q Do you think that BIMSTEC is a parallel organisation like the SAARC? Waht are the similarities and dissimilarities between the two? How are Indian foreign policy objectives realized by forming this new organisation? (UPSC IAS/2022)

  • India, Russia to boost bilateral trade to $100 billion by 2030

    Why in the News? 

    During the 22nd Annual Summit on Tuesday, both countries agreed to elevate bilateral trade to $100 billion by 2030. This agreement includes the use of national currencies to bypass Western sanctions.

    Bilateral ties between India-Russia  

    • Long-standing strategic partnership: India and Russia have enjoyed a strong strategic partnership since the Cold War era.
      • This was further strengthened with the signing of the “Declaration on the India-Russia Strategic Partnership” in 2000, which elevated cooperation in various areas including politics, security, defense, trade, and culture.
      • In 2010, the partnership was elevated to a “Special and Privileged Strategic Partnership”.
    • Robust defense cooperation: Russia is India’s largest defense partner, accounting for approximately 68% of India’s military hardware imports in 2017.
      • The two countries have an Inter-Governmental Commission on Military-Technical Cooperation that meets annually.
      • Major defense projects include the MiG-21, Su-30, and the Kudankulam Nuclear Power Plant.
    • Economic and Trade Relations: Russia is India’s 7th largest trading partner, with bilateral trade reaching $45 billion, surpassing the target of $30 billion by 2025.
      • Key areas of economic cooperation include energy, nuclear energy, and the North-South Transport Corridor.
      • Russia is also an important partner in India’s energy security, with investments in the oil and gas sectors.
    • Geopolitical coordination: India and Russia closely collaborate on matters of shared national interest at international forums such as the UN, BRICS, G20, and SCO.
      • Russia supports India’s permanent seat on the UN Security Council and its membership in the NSG and APEC.
      • The two countries also coordinate on regional issues like Afghanistan and the Indo-Pacific.

    Key highlights of the 22nd Annual Summit   

    • Trade and Economic Cooperation: India and Russia have set an ambitious target to increase bilateral trade to $100 billion by 2030. They plan to use national currencies for trade to bypass Western sanctions, reflecting a strategic shift in their economic engagements.
    • Defense and Strategic Partnership: The countries discussed delays in defense supplies and committed to enhancing the co-production of defense equipment.
    • Response to Ukraine Conflict: Prime Minister Modi made a plea for ending civilian casualties and the conflict in Ukraine. Both countries called for a peaceful resolution to the Ukraine conflict in their joint statement, highlighting mediation efforts and adherence to international law.
    • Institutional Agreements and MoUs: Several MoUs were signed on topics including climate change, polar research, legal arbitration, and pharmaceutical certification, demonstrating broad-based cooperation.
    • Recognition and Future Engagements: Modi received Russia’s highest civilian honor, the Order of St. Andrew the Apostle. Putin invited Modi to the “Extended BRICS” summit in Kazan in October 2024, emphasizing ongoing and future high-level engagements.

    Russia Offers Compensation and Citizenship to Kin of Indians Killed in War Against Ukraine

    • Expedited Discharge of Indian Recruits: President Putin accepted Prime Minister Modi’s request to expedite the discharge of Indian nationals recruited by the Russian military. Approximately 40 Indians, currently at the war front, are to be discharged through diplomatic processes.
    • Compensation and Citizenship Offer: Russia has offered compensation and citizenship to the families of Indian nationals who have been killed in the conflict in Ukraine. This move aims to provide support and recognition to the families of the deceased.

    New Delhi and Moscow call for ‘zero tolerance’ towards terrorism

    • Joint Statement on Terrorism: India and Russia reiterated their strong stance against terrorism, emphasizing the need for “zero tolerance” towards all forms of terrorism.
    • Commitment to International Cooperation: Both countries underscored the importance of international cooperation to combat terrorism effectively. They highlighted the necessity for a coordinated global response to address the threat of terrorism.
    • Condemnation of Terrorist Acts: The leaders condemned terrorist acts worldwide and stressed that no cause or ideology could justify the killing of innocent people. They called for the strictest measures to combat and eliminate terrorism.

    Do you know – Why Western sanctions haven’t worked on Russia?

    While the U.S. and some European countries have imposed extensive sanctions, enforcement has been uneven across the coalition. Some nations lack robust mechanisms to prevent violations and struggle to track and penalise offenders effectively. Russia has found ways to sidestep restrictions on critical technologies and dual-use items by re-labelling shipments, diverting products through third countries, and exploiting loopholes in regulations.  They are:

    • Collaborative evasion tactics: Russia’s partnerships with countries like China, Iran, and North Korea enable it to circumvent sanctions and sustain its military capabilities. These strategic alliances facilitate the procurement and transfer of goods, including weapons used in Ukraine.
    • Mutual economic dependence: Europe’s reliance on Russian energy, particularly natural gas, complicates the imposition of severe sanctions without causing significant repercussions for European economies.
      • Russia’s dependence on energy export revenue also makes it reluctant to disrupt energy flows to Europe.
    • Resilience of the Russian economy: Despite the sanctions, Russia’s economy has shown remarkable adaptability. It has redirected trade to China, found alternative suppliers for critical goods, and maintained robust oil and gas sales.

     

    Conclusion: India should work on broadening the range of goods and services exchanged with Russia. Focusing on sectors like pharmaceuticals, information technology, and agricultural products can reduce dependency on any single industry and promote sustainable trade growth.

    Mains PYQ: 

    Q What is the significance of Indo-US defence deals over Indo-Russian defence deals? Discuss with reference to stability in the Indo-Pacific region. (UPSC IAS/2020)

  • [9th July 2024] The Hindu Op-ed: A brewing duel amid Manila’s dual engagement

    [9th July 2024] The Hindu Op-ed: A brewing duel amid Manila’s dual engagement

    PYQ Relevance:

    Mains: 

    Q) With respect to the South China sea, maritime territorial disputes and rising tension affaire the need for safeguarding maritime security to ensure freedom of navigation and ever flight throughout the region. In this context, discuss the bilateral issues between India and China. (UPSC IAS/2014)

    Q) Quadrilateral Security Dialogue (Quad) is transforming itself into a trade bloc from a military alliance, in present times Discuss.  (UPSC IAS/2020)

    Q) The new tri-nation partnership AUKUS is aimed at countering China’s ambitions in the Indo-Pacific region. Is it going to supersede the existing partnerships in the region? Discuss the strength and impact of AUKUS in the present scenario. (UPSC IAS/2021)

    Note4Students: 

    Prelims: QUAD countries; South China Sea;

    Mains:  Regional Security and Institutions; QUAD countries; South China Sea;

    Mentor comment: There is growing anti-China sentiment in India, with 84% of Indians believing they “cannot trust China” and 59% believing “India should go to war with China over the border conflict. There is also growing sentiment of anti-Chinese feeling in several Southeast Asian countries, driven by a mix of historical prejudices, economic resentment, and concerns over China’s growing regional influence.

    Under President Marcos Jr., the Philippines is taking a more assertive stance against China’s actions in the South China Sea, in contrast to the previous administration’s conciliatory approach. However, the Philippines remains economically reliant on China, creating a “dual engagement” that may become difficult to maintain as tensions rise.

    Today’s Article suggests that the Philippines under Marcos Jr. is poised for a more confrontational approach towards China, with significant implications for regional security and the country’s complex relationships with both the US and China.

    Let’s learn!

    __

    Why in the news? 

    Ferdinand Marcos Jr. (affectionately known as “Bongbong”) is leading the Philippines with a more assertive stance compared to his predecessor, Rodrigo Duterte.

    Background:

    • US-Philippines Relationship: The relationship has seen an upswing since Marcos Jr.’s election victory in 2022, marking the return of the Marcos family to Malacañang Palace.
    • Tensions in the South China Sea: Tensions have increased due to territorial disputes and competing claims.
      • Images of the Chinese maritime militia using water cannons against Philippine fishing boats raised tensions in the region.
      • Marcos Jr. sharply criticized China’s actions in the South China Sea at the Shangri-La Dialogue in Singapore.
      • China views Marcos Jr. as an American lackey, bent on inviting chaos and conflict in the region.

    American stakes in the Philippines

    • Historical Context:
      • The Philippines’ strategic location in the South China Sea makes it an indispensable actor in the U.S.’s Indo-Pacific strategy to counter China.
      • The U.S. has a Mutual Defense Treaty with the Philippines dating back to 1951, but is cautious about getting entangled in a naval battle with China, its peer competitor
      • The U.S. has around 400,000 American citizens, including many military veterans, residing there.

    Leveraging support from Quad partners: Mr. Marcos Jr. is leveraging support from Quad partners (India, Australia, Japan, U.S.) to transform the Philippines’ military forces.

    • India: India delivered BrahMos missile launchers and missiles to the Philippines in a $374.96 million deal.
      • India supports the 2016 Tribunal ruling against China’s actions in the Philippines’ exclusive economic zone, which China ignored.
    • Japan: Japan provided $4 million worth of coastal surveillance radars to the Philippine Navy and pledged to fund 7 more patrol ships.
      • Japan’s assistance aims to help the Philippine Coast Guard focus on military missions rather than enforcing the EEZ.
    • Australia: South Korea is also approached for coast guard vessel development, and Australia is the Philippines’ second largest bilateral grant aid donor.
      • Despite preparing to confront China, the Philippines remains reliant on China’s $9.1 billion in financial support to previous administrations.
    • USA: It is uncertain how long the Philippines can maintain this dual engagement with the U.S. and China, as Marcos Jr.’s friction with China is likely to affect Beijing’s financial flows.
    What role do Quad partners play in the Philippines’ strategy against China?

    • Enhanced Defense Cooperation: President Ferdinand Marcos Jr. has granted US troops expanded access to Philippine bases under the Enhanced Defense Cooperation Agreement (EDCA) and negotiated new defense deals with Japan.
    • Joint Military Exercises: The Philippines conducts joint military exercises with the US, Japan, and Australia, focusing on potential contingencies in the South China Sea and Taiwan. These exercises aim to improve military interoperability and enhance the Philippines’ ability to respond to Chinese coercion.
    • Maritime Security: Australia and the Philippines have agreed to conduct joint maritime patrols across the South China Sea, which will help monitor and counter Chinese maritime activities. This cooperation is seen as a significant deterrent to Chinese aggression. 

    Conclusion: The Philippines is part of a new quadrilateral grouping, dubbed the “Squad,” which includes the US, Japan, Australia, and the Philippines. This grouping aims to enhance military interoperability and address the challenges posed by China’s expansive military activities in the region.

    https://www.thehindu.com/opinion/op-ed/a-brewing-duel-amid-manilas-dual-engagement/article68381943.ece

  • UK elections: Historic result for Labour, but no vote share gains

    Why in the news? 

    Keir Starmer is poised to become the next Prime Minister of the UK, following Labour’s landmark victory securing a substantial majority.

    Labour Party Comes to Power after 14 Years of Conservative Rule: 

    • Electoral Outcome: Labour secures a decisive victory in the UK elections, winning 412 seats in the House of Commons, ending 14 years of Conservative governance.
    • Majority: Labour has achieved the largest majority in British politics since the early 20th century, with over 290 seats ahead of the Tories.
    • Voter Sentiment: The election reflects a strong anti-conservative sentiment rather than a resounding endorsement of Labour, with significant losses in Conservative strongholds.
    • Strategic Shifts: Labour’s success is attributed to strategic moves to appeal to rural and traditionally Conservative areas, contrasting with losses in urban and progressive strongholds.

    Left and Right Streams in the UK:  

    Left Stream (Labour Party):

    • Traditionally advocates for social justice, welfare state policies, and government intervention in the economy to reduce inequality.Strong support from urban areas, progressive voters, trade unions, and historically marginalised groups such as minorities and low-income earners.
    • Under Keir Starmer, Labour has moved towards the centre, focusing on appealing to more rural and traditionally Conservative constituencies.

    Right Stream (Conservative Party):

    • Favors free-market policies, limited government intervention, and emphasises individual responsibility and economic freedom. Strong support from affluent voters, business interests, rural communities, and traditionally conservative values such as patriotism and national sovereignty.
    • The Conservative Party has faced challenges with internal divisions over Brexit and criticism for austerity measures implemented during previous administrations.

    Impact on India: 

    • India-UK FTA: The Labour Party has maintained its commitment to completing the FTA, though the timelines will remain uncertain for some time. Key sticking points include India’s demand for greater access for its skilled professionals in the UK market and the UK’s push for lower import duties on goods like Scotch whisky and electric vehicles.
    • Defence and Security Cooperation: The India-UK defence and security partnership is likely to continue strengthening, building on recent momentum from the 2+2 mechanism and Defence Minister Rajnath Singh’s visit in early 2024. The UK is expected to maintain its support for a rules-based order and continue working with India to promote a “free and open Indo-Pacific”.
    • Visa Rules: India has been in talks with the UK for the past few years to relax visa rules for its citizens. With the Labour Party coming into power, there might be some uncertainty around the progress of these discussions.
    • Carbon Tax: While the FTA might reduce or eliminate tariffs, Indian exports could still face hefty carbon taxes, unlike UK exports to India. The Labour Party has always been in favour of imposing a carbon tax, which could impact Indian industries

    Conclusion: India should leverage diplomatic channels to strengthen economic cooperation with the UK under Keir Starmer’s leadership. This could include negotiating bilateral trade agreements, promoting investment opportunities, and collaborating on emerging sectors like technology and renewable energy.

    Mains question for practice: 

    Q Discuss the potential implications of Keir Starmer’s ascension to UK Prime Minister on India-UK relations. 10M

  • What a Labour election win could mean for India-UK Free Trade Agreement (FTA)?

    Why in the news?

    New Delhi and London have been engaged in negotiations for over two years to discuss a proposed free trade agreement (FTA) aimed at enhancing bilateral trade between the two nations.

    What does the agreement could result?           

    • Mutual Tariff Reductions: Both countries may agree to lower tariffs on a wide range of goods, including automobiles, textiles, alcoholic beverages, and medical instruments, facilitating increased trade flows.
    • Market Access: Improved market access could benefit industries in both countries, particularly India’s IT and services sectors, which are seeking expanded opportunities in the UK market.
    • Economic Growth: The FTA aims to stimulate economic growth by promoting trade and investment, potentially boosting employment and productivity in relevant sectors.
    • Political Relations: Strengthening economic ties could lead to closer political cooperation between India and the UK, influencing bilateral relations on international platforms.

    Impact on Global Geopolitics and Indian Scenario

    • Global Trade Alliances: Strengthening economic ties between India and the UK could enhance their geopolitical influence, potentially shaping global trade alliances and partnerships in the Asia-Pacific region and beyond.
    • Diversification of Trade Partnerships: For India, the FTA represents a strategic move to diversify its trade partnerships beyond traditional allies, thereby reducing dependency and enhancing economic resilience.
    • Improve Bilateral Relations: Improved economic cooperation could foster closer political relations between India and the UK, influencing diplomatic engagements and collaboration on global issues such as climate change and security.
    • Regional Economic Impact: The agreement may spur economic growth in India, particularly benefiting sectors like IT and services, while also contributing to the UK’s post-Brexit economic strategy and trade diversification efforts.
    • Influence the Environmental and Regulatory Standards: Negotiations over environmental standards, including India’s concerns over carbon taxes and the UK’s climate goals, highlight the FTA’s potential to influence global environmental policies and regulatory frameworks.

    India-UK Relation: 

    • Strong historical ties: India and the UK share deep historical and cultural connections dating back to the colonial era. The UK has a large Indian diaspora of over 1.5 million people.
    • Strategic partnership: In 2004, India and the UK upgraded their relationship to a Strategic Partnership. This was further strengthened by the ‘2030 Roadmap for India-UK Future Relations’ agreed in 2021, which outlined cooperation across 5 pillars- people-to-people ties, trade, defence and security, climate change, and health.
    • Growing trade and investment: The UK is one of India’s major trading partners. Bilateral trade reached £38.1bn in the year to Q3 2023, making India the UK’s 12th largest trading partner. India is the 3rd largest foreign investor in the UK. Both countries are negotiating an India-UK Free Trade Agreement to further boost economic ties.
    • Cooperation in new frontiers: India and the UK are collaborating in emerging areas like fintech, green finance, cyber security, and critical technologies. They plan to hold the first Strategic Tech Dialogue to deepen cooperation in areas like semiconductors, 5G, and AI.
    • Shared global outlook: India and the UK have convergent views on many global issues and support a rules-based international order. The UK supports India’s permanent membership of the UN Security Council. They also cooperate closely on maritime security in the Indo-Pacific

    Way forward: 

    • Addressing Key Negotiation Points: Focus on resolving critical issues such as tariff reductions, market access for IT and services sectors, and alignment on environmental standards to expedite FTA conclusion.
    • Enhancing Strategic Partnerships: Strengthen bilateral economic and political cooperation through sustained dialogue and proactive engagement, aiming to maximize mutual benefits and ensure the long-term sustainability of the FTA.

    Mains PYQ:

    Q The judicial systems in India and the UK seem to be converging as well as diverging in recent times. Highlight the key points of convergence and divergence between the two nations in terms of their judicial practices. (UPSC IAS/2020)

  • An overview of the French elections

    Why in the news? 

    On June 30, during the first phase of the French elections called after President Emmanuel Macron unexpectedly dissolved parliament, the far-right National Rally (RN) and its allies emerged as frontrunners with a 33% vote share.

    Why did French President Emmanuel Macron decide to dissolve parliament and call for snap elections?

    • Strategic Decision: Macron dissolved parliament three years early to seek a clear majority for governance. His centrist bloc suffered a major defeat in the European Parliament elections against the RN. The decision aimed to consolidate votes against the rising far-right influence.
    • Low Approval Ratings: Macron’s approval ratings plummeted to 36%. The snap election was seen as a gamble to prevent the RN from gaining more power.

    How did the far-right National Rally become so popular?

    • Rebranding and Policy Changes: Under Marine Le Pen, the RN rebranded from the National Front (FN). The party softened its stance on extreme policies, like leaving the EU.
    • Response to Societal Issues: Capitalized on fears of cultural clashes, cost-of-living crises, and dissatisfaction with Macron’s policies. Opposed immigration and advocated for ‘national priority’ policies favoring French citizens in social services.
    • Political Strategy: Increased its presence in provincial towns and among blue-collar workers. Rose from 7 seats to 89 in the French parliament in 2022, aiming for 240-300 seats now.

    How are the two rounds of elections conducted in France?

    • First Phase: Equivalent to a qualifying round where candidates need at least 12.5% of locally registered votes.Candidates who get more than half the votes win outright.
    • Second Phase: Candidates meeting the qualifying criteria move to the second round. Common practice of ‘horse-trading’ where parties form alliances to avoid splitting votes.
    • Overall Structure:577 seats in the French parliament. A party needs 289 seats for an absolute majority.

    Why have left-wing parties also formed a bloc?

    • Republican Front Strategy: Centrist and left-wing parties team up to prevent right-wing parties from gaining power.Formation of the New Popular Front is a reference to the 1936 alliance against far-right rioters.
    • Electoral Tactics: Over 200 candidates from centre and left alliances have dropped out to consolidate votes against the RN. Aimed at countering the RN’s rise and preventing fragmentation of the anti-RN vote.
    • Challenges and Unity: Presence of controversial leftist figures like Jean-Luc Mélenchon has made the unity fragile.Despite internal differences, the bloc aims to present a united front against the far-right surge.

    Conclusion: The rise of the far-right National Rally in France may lead to stricter immigration policies, affecting Indian students, workers, and diaspora. Economic relations could face uncertainties, impacting trade and bilateral cooperation. So,India’s diplomatic strategies may need adjustments to navigate the changing political landscape in France.

    Mains PYQ: 

    Q Critically examine the procedures through which the Presidents of India and France are elected. (UPSC IAS/2022)

  • France: India’s steady partner in green growth

    Why in the news?

    On July 14, 2023, in Paris, President Emmanuel Macron and Prime Minister Narendra Modi elevated the ‘Partnership for the Planet’ to one of the three central pillars of the Indo-French Horizon 2047 Roadmap.

    Indo-French Horizon 2047 Roadmap are:

    • Strategic Partnership: Enhancing defense, security, and geopolitical ties.
    • Economic Partnership: Promoting trade, investments, and sustainable development.
    • Partnership for the Planet: Focusing on environmental sustainability and green technologies.

    India- France Bilateral Ties   

    • Strategic Partnership: India and France established a strategic partnership in 1998, which covers cooperation in defense, civil nuclear energy, space, and security. This partnership is considered a cornerstone of their bilateral ties.
    • High-Level Exchanges: There have been frequent high-level exchanges between the leaders of both countries, including state visits and participation in each other’s national events like the Republic Day parade. This demonstrates the close political ties.
    • Defense Cooperation: Defense is a major pillar of the India-France partnership. The two countries conduct joint military exercises, collaborate on defense equipment manufacturing, and have an “intelligence and information exchange” mechanism.
    • Space Cooperation: India and France have robust space cooperation, including co-development and launch of satellites, research on new launch technologies, and connecting startups. They recently launched a Strategic Space Dialogue to guide their space partnership.
    • Convergence on Indo-Pacific: Both countries share concerns over China’s assertiveness in the Indo-Pacific region. They have agreed to intensify cooperation in the strategically important Southwest Indian Ocean and work with other like-minded countries to address regional security challenges.

    How France is India’s steadfast partner to achieve its sustainability goals?

    • Financial Support: France, through the French Development Agency (AFD) and Proparco, has committed substantial financial resources to India. This includes over €4 billion since 2008 for nearly 100 projects, with a significant focus on climate change mitigation and adaptation.
    • Strategic Focus Areas: Cooperation spans key sectors like energy transition, sustainable urban development, biodiversity conservation, resilience of territories, and reduction of inequalities. These efforts contribute directly to India’s sustainable development agenda.
    • Project Implementation: AFD’s involvement in projects such as metro systems in Pune and Nagpur, forest conservation in Rajasthan, and urban water management across 20 cities demonstrates tangible contributions to India’s environmental and social sustainability.
    • Partnership in Innovation: Collaborative initiatives underpinning innovation, including the Indo-French Year of Innovation in 2026, aimed at fostering solutions that integrate social inclusion with environmental sustainability.
    • Indo-Pacific Engagement: Strengthening bilateral ties with an Indo-Pacific dimension, focusing on initiatives like the Indo-Pacific Parks Partnership and joint funds for scaling up green technologies, showcasing France’s commitment to regional sustainability efforts.

    Private sector-led projects

    • Investment in Agriculture: Proparco’s €11.2 million investment in Sahyadri, supports farmer-led initiatives to reduce farm losses, pesticide and fertilizer use, and enhance yields and produce quality.
    • Healthcare Investments: Proparco’s €33 million equity investment in Quadria, aimed at improving access to affordable quality healthcare in underserved regions of India and Southeast Asia.
    • Innovation and Sustainability: Emphasis on innovative solutions blending social inclusion with sustainability, such as through the Indo-French Year of Innovation in 2026 and joint efforts to scale up green technologies in the Indo-Pacific region.

    Way forward: 

    • Strengthen bilateral agreements to facilitate smoother cooperation and ensure compliance with international sustainability standards.
    • Foster deeper public-private partnerships to leverage expertise, funding, and innovation for sustainable development projects.
    • Promote continuous high-level dialogues and joint initiatives to address global challenges, enhance regional security, and drive economic growth and environmental sustainability.

    Mains PYQ:

    Q What were the events that led to the Suez Crisis in 1956? How did it deal a final blow to Britain’s self-image as a world power? (UPSC IAS/2014)