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Subject: Bilateral Relations

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

  • India, Australia Relations

    The Union Cabinet has approved the signing of an Audio Visual Co-production Treaty between India and Australia, which is aimed at facilitating joint production of films between the two countries.

    India – Australia Relations

    • Both the countries share the ethos and values of pluralism, liberal democracy, steadfast commitment to rule of law, Commonwealth traditions, international peace, development and security.
    • The establishment of diplomatic relations between them dates back to the Pre-independence era. It started with the opening of the Consulate General of India as a Trade Office in Sydney in 1941.
    • Since then the ties have blossomed and currently, they enjoy a multi-faceted cooperation spanning areas of political interactions, economic collaboration, scientific research, strategic convergence, friendly people-to-people ties especially diaspora links and sporting ties of hockey and cricket.

    Areas of cooperation

    1.Political Dimension

    • Both the countries are members of G-20, ASEAN Regional Forum (ARF), IORA (Indian Ocean Rim Association), Asia Pacific Partnership on Climate and Clean Development, East Asia Summit and the Commonwealth. Australia has been extremely supportive of India’s quest for membership of the APEC (Asia Pacific Economic Cooperation).
    • Australia whole-heartedly welcomed India s joining of the MTCR (Missile Technology Control Regime).

    2. Economic Dimension

    • In recent years, the India-Australia economic engagement has magnified significantly. Australia has been very appreciative of economic reforms undertaken by India and its improving ease of doing business rankings because of the reforms was undertaken by the current government. India has welcomed Australia to participate in its Make in India, Smart Cities, AMRUT (Atal Mission for Rejuvenation and Urban Transformation), Clean Ganga Project etc. initiatives.
    • India and Australia are partners in the trilateral Supply Chain Resilience Initiative (SCRI) arrangement along with Japan which seeks to enhance the resilience of supply chains in the Indo-Pacific Region.
    • Recently, India signed a historic trade agreement with Australia, the India-Australia Economic Cooperation and Trade Agreement (Ind- Aus ECTA).
    • It is the first Free Trade Agreement (FTA) that India has signed with a major developed country in over a decade.
      India reaches out to Australia, set to start trade talks again | Business Standard News
      Credit: Business Standard
    • The current government has invited Australia s private sector participation in Indian economy. It says red tape in India has been replaced by red carpet and has welcomed private investors.

    3.Trade and Economic

    • The establishment of India-Australia Joint Ministerial Commission (JMC) in 1989 encouraged dialogue at a government and business level on multiple issues of trade and investment.
    • India-Australia CEO Forum is a significant mechanism through which business leaders from both nations engage in mutually fruitful dialogue to enhance bilateral trade and investment relationship. The Forum consists of heads of Indian and Australian business from multiple sectors like energy and resources, agri-business, financial sector, telecommunications, IT, education and pharmaceuticals. The last meeting of the Forum was held in New Delhi on 29th August 2017.
    • The city of Canberra, Australia hosted the seventh India-Australia Economic Policy Dialogue during 16-18 July 2017.
    • India’s main exports to  Australia  are  Refined  Petroleum,  medicaments, while our major imports are Coal, copper ores & concentrates, Gold, and  education related  services.
    • India s major imports from Australia are coal, non-monetary gold, copper, wool, fertilizers, wheat, vegetables and education-related services.
    • India and Australia have been each other’s important trading partners.
      • Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner.
      • India-Australia bilateral trade for both merchandise and services is valued at USD 27.5 billion in 2021.
      • India’s merchandise exports to Australia grew 135% between 2019 and 2021. India’s exports consist primarily of a broad-based basket largely of finished products and were USD 6.9 billion in 2021.
      • India’s merchandise imports from Australia were USD 15.1 billion in 2021, consisting largely of raw materials, minerals and intermediate goods.

    4.Civil Nuclear Cooperation Agreement

    • A Civil Nuclear Cooperation Agreement between the two countries was signed in September 2014 during the visit of the Australian Prime Minister to India. The agreement came into force from 13 November 2015.
    • The Australian Parliament passed the “Civil Nuclear Transfer to India Bill 2016” on 01 December, 2016 which ensures that Uranium mining companies in Australia may fulfil contracts to supply Australian uranium to India for civil use with confidence that exports would not be hindered by domestic legal action challenging the consistency of the safeguards applied by the IAEA in India and Australia’s international non-proliferation obligations.
    • It also ensures that any future bilateral trade in other nuclear-related material or items for civil use will also be protected.

    5.Defence Cooperation

    • The Mutual Logistics Support Agreement has been signed during the summit that should enhance defence cooperation and ease the conduct of large-scale joint military exercises.
    • There is a technical Agreement on  White  Shipping Information  Exchange.
    • Recently Australia and India conducted AUSINDEX,their largest bilateral naval exercise, and there are further developments on the anvil, including Australia’s permanent inclusion in the Malabar exercise with Japan. 
    • In 2018, Indian Air Force participated for the first time in the Exercise Pitch Blackin Australia. The third edition of AUSTRAHIND(Special Forces of Army Exercise) was held in September 2018.
    • A broader maritime cooperation agreement with a focus on Maritime Domain Awareness (MDA) is also in the works and Australia has agreed to post a Liaison Officer at the Indian Navy’s Information Fusion Centre – Indian Ocean Region (IFC-IOR) at Gurugram. 

    6.Education 

    • Under the New-Colombo Plan of Australian government, 900 Australian undergraduates have studied and completed internships in India during the period 2015-16

    7.Diaspora

    • The Indian community in Australia has the population of nearly half a million (2.1 % of the population), and another over 1,50,000 persons of Indian descent immigrated from other countries (Fiji, Malaysia, Kenya and South Africa).
    • India is one of the top sources of skilled immigrants to Australia.

    8.Energy Cooperation

    • A Joint Working Group on Energy and Minerals was established in 1999 to expand bilateral relationship in the energy and resources sector. The 8th JWG meeting held in New Delhi in June 2013.
    • As energy is one of the central pillars of economic cooperation, both sides agreed during the visit of our Prime Minister to Australia in November 2014 to cooperate on transfer of clean coal technology and welcomed Australia’s desire to upgrade the Indian School of Mines, Dhanbad.

    9. International cooperation

    India and 62 other countries have backed a draft resolution led by Australia and the EU to ‘identify the zoonotic source’ of Covid-19 and its ‘route of introduction’ to humans.

    • Australia supports India’s candidature in an expanded UN Security Council.
    • Both  India  and  Australia  are members of the Commonwealth, IORA, ASEAN Regional Forum, Asia Pacific Partnership on Climate  and  Clean  Development,  and  have  participated  in  the  East  Asia  Summits.  
      • Australia   is   an   important   player   in   APEC   and   supports   India’s membership of the organisation. In 2008, Australia became an Observer in SAARC.
    • Both countries have also been cooperating as members of the Five Interested Parties (FIP) in the WTO context.

    An India Economic Strategy to 2035

    • In 2018, Australia’s Prime Minister has announced implementation of “An India Economic Strategy to 2035”, a vision document that will shape India-Australia bilateral ties.
    • It is based on three-pillar strategy- Economic ties, Geostrategic Engagement and Rethinking Culture-thrust on soft power diplomacy.
    • The focus of this report is on building a sustainable long-term India economic strategy.
    • The report identifies 10 sectors and 10 states in an evolving Indian market where Australia has competitive advantages, and where it should focus its efforts. These are divided into a flagship sector (education), three lead sectors (agribusiness, resources, and tourism) and six promising sectors (energy, health, financial services, infrastructure, sport, science and innovation).

    Significance of the Relations

    • Australia is one of the few countries that has managed to combat COVID-19 so far through “controlled adaptation” by which the coronavirus has been suppressed to very low levels. Two of the leaders of this great Australia-wide effort are Indian-born scientists.
    • From farming practices through food processing, supply and distribution to consumers, the Australian agribusiness sector has the research and development (R&D) capacity, experience and technical knowledge to help India’s food industry improve supply chain productivity and sustainability and meet the challenges of shifting consumption patterns.
    • Australia is the 13th largest economy in the world, following closely behind Russia which stands at $1.6 trillion.
      • Australia is rich in natural resources that India’s growing economy needs.
      • It also has huge reservoirs of strength in higher education, scientific and technological research.
      • The dominance of Indo-Pacific countries in India’s trade profile: Fostering deeper integration between India and Australia will provide the necessary impetus to the immense growth potential of the trade blocs in this region.
    • The two countries also have increasingly common military platforms as India’s defence purchases from the U.S. continue to grow.
      • Australia has deep economic, political and security connections with the ASEAN and a strategic partnership with one of the leading non-aligned nations, Indonesia. Both nations can leverage their equation with ASEAN to contain China.
      • The Indo-Pacific region has the potential to facilitate connectivity and trade between India and Australia.
      • Being geographically more proximate than the US or Japan, India and Australia can emerge as leading forces for the Quad.

    Associated Issues

    • Trade deficit: India’s trade deficit with Australia has been increasing since 2001-02 due to India-Australia Free Trade Agreement. It is also a contentious issue in the ongoing RCEP negotiations which India left.
    • India’s desire for visa reforms in Australia, which would permit more Indian workers to seek employment in Australia, remains unmet. India wants greater free movement and relaxed visa norms for its IT professionals, on which Australia is reluctant. Australia and India are yet to nurture a common bilateral ground to figure out the basis of their cooperation.
    • The formation of the Japan–America–India (JAI) partnership at the G20 summit in Buenos Aires in 2018 is cause for Australian concern. India’s unwillingness to invite Australia to participate in the Malabar naval exercise, despite Australian lobbying, has sparked speculation over the fate of the Quadrilateral Consultative Dialogue (the ‘Quad) involving India, Australia, Japan and the United States.
    • Building consensus on non-nuclear proliferation and disarmament has been a major hurdle given India’s status as a nuclear power. Trade and maritime security on the other hand seem the most viable points of collaboration. Although a defence agreement was signed in 2014, the defence relationship has yet to develop fully.
    • Although security has received a lot of significance in the relationship, in practice Australia-India defence cooperation remains relatively undeveloped. There are a considerable number of defence and security dialogues between the two countries, but none has been translated into more substantive cooperation.
    • Increasing Racist attacks on Indians in Australia has been a major issue. The relationship was further strained over the attacks on Indian students studying in Melbourne, and the resulting media coverage caused serious damage to Australia’s standing in India.

    Need of the Hour

    • Upgradation of 2+2 talks. In addition, it may be prudent too for New Delhi and Canberra to elevate the ‘two plus two’ format for talks from the Secretary level to the level of Foreign and Defence Ministers.
    • Utilising current innovations in digital trade; such digitisation of economic activities has changed the landscape of trade, enhancing associations between economies and, in particular, South-South flows.
    • Removal of trade barriers would lead to an increase in the exports of these commodities, although the increasing number of disputes at the WTO with regard to the Australian sector can act as a serious impediment.
    • India and Australia have a strong track record of collaborating in research and innovation. The $84 million Australia-India Strategic Research Fund (AISRF) is Australia’s largest. The Australian Government’s $1.1 billion National Innovation and Science Agenda presents new opportunities to engage with India. The agenda resonates well with India’s ‘Start-up India’ and ‘Make in India’ campaign.
    • It is evident in policy areas such as maritime security, climate change, energy security, law enforcement, governance and the politics of security institutions.
    • Engaging Indonesia, Japan, France and Britain for securing Indo-Pacific
    • An ‘engage and balance’ China strategy is the best alternative to the dead end of containment. The role of the US is of particular importance as it has recently been a driver of efforts towards bringing similarly aligned states in counterbalancing China.

    Conclusion

    • Their ties are extremely important for the Indo-Pacific region which is in flux. They stand out for their solemn commitment towards democratic values, international peace, rule of law, development and multiculturalism.a

  • India Switzerland Relations

    Context

    Two countries will commemorate next year the 75th anniversary of the signing in New Delhi of the 1948 Treaty of Friendship.

    Cooperation between two countries in various area

    • Switzerland and Indian partners are collaborating on digital transformation, sustainability, health, life sciences, medtech, infrastructure, cleantech, fintech, blockchain, AI and robotics.
    • Innovation and investment continue to be the primary drivers of our bilateral relations.
    • With over 330 Swiss companies, Switzerland is the 12th largest investor in India.
    • About 100 Swiss companies manufacture locally and support the Make in India initiative.
    • Trade talks between Switzerland (European Free Trade Association EFTA) and India are high on the priority list.
    • Digitalisation is emerging as a relatively new area of engagement with enormous potential for Switzerland and India.
    • Switzerland plays a leading role in researching new technologies and is home to many innovative and world-leading technology companies.
    • As one of the most innovative countries of the world, Switzerland seeks to engage with India, the leader of the Industry 4.0 revolution, in areas ranging from digital governance to digital self-determination.

    Switzerland in UNSC as non-permanent member

    • Switzerland was elected to the United Nations Security Council as a non-permanent member for the first time this year in June.
    • Convergence in priorities at Security Council: There are convergences in Swiss and Indian priorities at the UN Security Council.
    • Switzerland, like India, is committed to a robust and effective multilateral system.
    • In the Security Council, Switzerland will do everything possible to ensure sustainable peace.
    • Many years ago, from 1971 to 1976, Switzerland represented India’s interests in Pakistan and vice versa.
    • In the Security Council, Switzerland will focus on the protection of civilians and on international humanitarian law.
    • Impact of climate change on security: Switzerland will also address climate change and its impact on security.
    • Reforms of Security Council: Switzerland desires effective UN institutions.
    • India has been advocating for a reform of the Security Council.
    • Switzerland’s fourth priority in 2023 and 2024 will be to contribute to improving the United Nations Security Council’s effectiveness towards greater transparency and accountability.

    Conclusion

    Two countries can together contribute to global good. This engagement is a result of not only our shared priorities, but also our shared democratic values and foreign policy independence.

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  • Taiwan Crisis

    As US House Speaker Nancy Pelosi arrived upsetting China, India was keenly watching the developments, although it has not yet commented on it.

    What is the ‘One China’ policy?

    • It is the diplomatic acknowledgment of China’s position that there is only one Chinese government.
    • Taiwan’s government was set up by the Kuomintang, whose party logo is reflected in Taiwan’s flag
    • Initially, many governments including the US recognised Taiwan as they shied away from Communist China.
    • But the diplomatic winds shifted as China and the United States saw a mutual need to develop relations beginning in the 1970s, with the US and other countries cutting ties with Taipei in favour of Beijing.

    Why is China obsessed with Taiwan?

    • Taiwan is the largest producer of electronic chips, which are supplied to almost all the industries, from phones to laptops, watches to game consoles, industrial equipment to automotive, and aircraft and fighter jets.
    • TSMC (Taiwan Semiconductor Manufacturing Company) is the largest foundry in the world and holds around 65 percent of the global production of chips.
    • Any potential conflict with China would completely disrupt the entire supply chain of TSMC and labor availability, and could cause major shortage of electronic chips.
    • Additionally, China controls five percent of the global production of chips, which could also be affected.
    • This could further impact the already existing supply-demand gap for electronic components.

    India- Taiwan Relations

    Background

    • India does not have formal diplomatic ties with Taiwan yet, as it follows the One-China policy.
    • However, during then Chinese premier Wen Jiabao’s visit to India in December 2010, India did not mention support for the One-China policy in the joint communique.
    • In 2014, when PM Modi came to power, he invited Taiwan’s Ambassador Chung-Kwang Tien, along with Lobsang Sangay, president of the Central Tibetan Administration to his swearing-in.

    Diplomatic ties

    • While following the One-China policy, India has an office in Taipei for diplomatic functions — India-Taipei Association (ITA) is headed by a senior diplomat.
    • Taiwan has the Taipei Economic and Cultural Center (TECC) in New Delhi. Both were established in 1995.
    • Their ties focus on commerce, culture and education.
    • Now in their third decade, these have been deliberately kept low-profile, owing to China’s sensitivities.
    • For example, parliamentary delegation visits and legislature-level dialogues have stopped since 2017, around the time the India-China border standoff happened in Doklam.

    The new push

    • Any significant development in India-Taiwan relations runs the risk of meeting with a likely stern reaction from Beijing.
    • This explains India’s steady, albeit slow, outreach to Taiwan.
    • Given that India-China relations are not likely to witness a return to normalcy in the near future, India should consider adopting a bold, comprehensive and long-term approach to engage Taiwan.

     

     

  • China-Pakistan Economic Corridor (CPEC)

    India has severely criticized the reported move by both China and Pakistan for third-party participation in some projects on the China-Pakistan Economic Corridor (CPEC) that passes through Pakistan-occupied Kashmir (PoK).

    China-Pakistan Economic Corridor (CPEC)

    • The CPEC, one of the most ambitious components of Beijing’s Belt and Road Initiative (BRI), was announced to great fanfare in 2015.
    • CPEC is a collection of infrastructure projects that are under construction throughout Pakistan beginning in 2013.
    • Originally valued at $47 billion, the value of CPEC projects is worth $62 billion as of 2020.
    • It is intended to rapidly upgrade Pakistan’s required infrastructure and strengthen its economy by the construction of modern transportation networks, numerous energy projects, and SEZs.
    • On 13 November 2016, CPEC became partly operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.

    Why CPEC?

    • CPEC has consistently been held up as a “gamechanger” for Pakistan’s economy.
    • But the road to completion has proved long and winding. Reports indicate that the pace of CPEC projects has been slowing down in Pakistan in recent years.
    • At the same time, China is the only country that is heavily investing in Pakistan.

    Why in news?

    • The lack of progress has led to numerous reports about CPEC being at a near standstill in the country.
    • Gwadar, despite being the epicenter of multibillion-dollar projects, lacks basic necessities like reliable access to water and electricity, let alone other facilities.
    • The baloch freedom movement is another impediment to the stalled project.
    • There have been sporadic attacks in Gwadar and elsewhere in the province and the country to discourage Chinese investments in the province.
    • China is also seeking to deploy its Army in the CPEC projects, to which Pakistan has contested.

    India’s reservation

    • The GoI, which shares tense relations with Pakistan, objects to the CPEC project as upgrade works to the Karakoram Highway are taking place in Gilgit-Baltistan.
    • This is the territory illicitly occupied by Pakistan in 1947-48.
    • During the visit of Indian PM Modi to China in 2015, the Indian FM, Sushma Swaraj reportedly told the Chinese.
    • India did not object to the Chinese construction of the Karakoram Highway which was built between 1959 and 1979.

     

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  • Defence and technology cooperation is key to US-India partnership

    Context

    The possibility of India’s continuing rise over this century seems to be on a stronger wicket today than it did a decade ago, marred as the early 2010s were by political instability and economic turmoil.

    Historical background of dominance of world economy by the East

    • Prior to the era of colonial exploitation followed by self-inflicted stagnation due to communist economic policies adopted across the region, the ancient civilisations of India and China dominated the world economy
    • There existed a deep history of scientific innovation and technological prowess, which spread by osmosis and intercourse from the East to the West.
    • The West, led principally by Great Britain, then stole a march over Asia with the advent of the Industrial Revolution.
    • Emergence of the US: A pyrrhic victory for Britain in the Second World War marked the formal transfer of the Western bloc’s leadership to the US.

    Geopolitics in 2020s

    • Emergence of China: China is now home to a manufacturing-led and technology-driven economy, competing head-on with the US in areas like biotech, robotics, artificial intelligence, and advanced materials.
    • India, which faced an economic setback when the liberalisation process largely came to a halt between 2004-2014, is back on its feet, with consistent commitment and concerted policy action focused on building domestic capabilities in critical technologies as well as in key manufacturing industries and pursuing important structural economic reforms.
    • Common threat of China: From seeing non-democratic China as a benign partner, the US now sees it as a threat, the present preoccupations in Europe notwithstanding.
    • India, which for a time welcomed Chinese involvement in its economy, has also recalibrated after the 2020 Galwan face-off.
    • Unlike India and the US, which are both well-established republics with deep democratic cultures, China is “a party with a state attached to it”.
    • Concerns for India:  Being inextricably linked by geography, Beijing’s ambition to dominate its periphery and proximate region is of particular concern to India.

    What this mean for India-US relations?

    • Natural allies: Given this background, India and the US are natural allies to confront the challenges posed by an expansionist and aggressive China in the Indo-Pacific and beyond.
    • New areas of cooperation: There are clear signals of unprecedented cooperation between the two countries in areas like national security, defence production and most prominently, new-age information technology and internet industries where American financial firms and blue-chip corporates are contributing growth capital as well as know-how.
    • Closer cooperation in scientific research and critical emerging technologies is imperative.
    • Reducing India’s dependence for defence equipment: In particular, as some American lawmakers highlighted when providing India with exemption under CAATSA that the American defence industry should contribute to reducing India’s dependence on Russian armaments and equipment.
    • Technology cooperation: Connected to the expansion of defence-industrial ties is the broadening of technology collaboration in areas like artificial intelligence, drones, advanced materials, space technology, semiconductors, and biotech in India, beyond the consumer tech and software sectors.

    Conclusion

    Demographic and economic trends firmly position India as a global force that will have the weight to stride alongside America and China, who would constitute the other two geopolitical — and ideological — poles over the 21st century.

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  • ‘Advantage New Delhi’ in Sri Lanka’s India lifeline

    Context

    Ranil Wickremesinghe’s election as the President of Sri Lanka in a crucial Parliament vote on July 20, 2022, gives India an opportunity to take the lead in the foreign aid game in its neighbourhood.

    Background of the crisis in Sri Lanka

    • Sri Lanka has been facing economic turbulence since its pre-emptive default on its foreign debt obligations in mid-April this year.
    • Following the debt default and a shortage of dollars, the Sri Lankan economy is experiencing stagflation.
    •  Inflation has spiralled to over 50%, translating into higher food and fuel prices.
    •  Sri Lanka’s worst economic crisis since its independence in 1948 is due to a tepid recovery from the COVID-19 pandemic, the Russia-Ukraine conflict shock and economic mismanagement under the administration of the Rajapaksas.
    • Sri Lanka is also facing challenges in getting foreign aid, as 60% of the world’s poorest countries are also experiencing debt distress.

    Opportunities for India

    •  In the first six months of 2022, Indian aid worth $3.8 billion has flowed to Sri Lanka through loans, swaps and grants.
    • This is India’s largest bilateral aid programme in recent times.
    •  Stabilising Sri Lanka’s economy could prove to be a major win for Indian’s ‘neighbourhood-first’ policy.
    • Moreover, once the Sri Lankan economy stabilises, India can deepen its trade and investment linkages with Sri Lanka, transcending the current humanitarian aid relationship.
    • On the other hand, an unstable Sri Lankan economy could pose security risks to India and lead to a flood of refugees across the Palk Strait.
    • This is an opportunity for India to strengthen bilateral and regional partnerships.
    • Countering Chinese influence: In recent years, China has emerged as a major partner for Sri Lanka, especially for infrastructure projects, many of which are under scrutiny now.
    • This provides an opportunity for India to upscale its aid and cement its first mover advantage over China by leading an aid consortium for Sri Lanka, working closely with other friendly countries such as the United States, Japan and the European Union as well as the International Monetary Fund (IMF).

    Why China is reluctant to help?

    • China worries that unilaterally restructuring Sri Lanka’s debt or giving it moratoria would set a new precedent in its lending practices, leading to a queue of similarly distressed countries seeking debt relief from Beijing.
    • Furthermore, China, which is a G2 economy, and wanting to challenge the U.S., does not want its reputation to be tarnished by bailing out a floundering economy.

    Steps Sri Lanka needs to take

    • Concluding the talks with Sri Lanka: The government must show that it is serious about stabilising the economy by concluding talks on an IMF programme which will increase taxes and utility prices to raise revenue and increase interest rates to control inflation.
    • Economic reforms: It has to implement structural reforms to make the economy more open to trade and investment and allow market forces to determine resource allocation.
    • National consensus on IMF program: It has to build national consensus on implementing the IMF programme and reforms by explaining that this is the only solution to the crisis.
    • Anti-corruption policies: It has to restore the rule of law and enforce strong anti-corruption policies (including asset declarations for all parliamentarians and a strong anti-corruption office supported by the United Nations).
    • Reset foreign policy: It has to reset foreign policy towards a more neutral direction.

    Conclusion

    With political will and the right set of policies, Sri Lanka stands a sporting chance of achieving some economic normalcy within the next three years. India stands to gain by supporting Sri Lanka in its hour of need. A friend in need is a friend indeed.

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  • India-Vietnam ties, from strong to stronger

    Context

    India and Vietnam are celebrating the 50th anniversary of their diplomatic relations.

    India-Vietnam relations background

    • Commonalities: India’s relations with Vietnam — some of which is based on a set of historical commonalities — predate any conflict between India and China as well as that between China and Vietnam.
    • Political and security engagement: As India pursues its ‘Act East Policy’, Vietnam has become a valuable partner in India’s political and security engagements in the Indo-Pacific region.

    Growing convergence between India and Vietnam

    • Convergence of strategic and economic interests: Bolstering friendship between the two countries is a natural outcome of a growing convergence of their strategic and economic interests, and also their common vision for peace, prosperity and their people.
    • Shared strategic concerns: The two countries are working to address shared strategic concerns (such as energy security and open and secure sea lines of communication), and make policy choices without undue external interference.
    • Given India’s broadening economic and strategic interests in the region and Vietnam’s desire for strategic autonomy, both countries will benefit from a stronger bilateral relationship.
    • Shared apprehension about China: India and Vietnam face territorial disputes with and shared apprehensions about their common neighbour, China.
    • Vietnam is of great strategic importance because its position enables it to control ‘the South China Sea — a true Mediterranean of the Pacific’.
    • The maritime domain, therefore, has become an essential element of India and Vietnam cooperation.
    • More importantly, India sees an open and stable maritime commons being essential to international trade and prosperity; therefore, it has an interest in protecting the sea lanes.
    • There are some other potential areas for New Delhi and Hanoi to further deepen collaboration, such as meaningful academic and cultural collaborations, shipbuilding, maritime connectivity, maritime education and research, coastal engineering, the blue economy, marine habitat conservation, and advance collaboration between maritime security agencies.

    Four factors responsible for growing maritime engagement with Vietnam

    • 1] Countering China: India’s aspiration to counter an assertive China by strengthening Vietnam’s military power.
    • 2] Security sea lines: With India’s increasing trade with East and Southeast Asia, India has begun to recognise the importance of its sea lines of communication beyond its geographical proximity; the South China Sea occupies a significant geostrategic and geo-economic position, resulting in India’s renewed interests in the South China Sea.
    • 3] Development in maritime domain: India desires to intensify its presence to track potential developments in the maritime domain that could affect its national interests.
    • 4] Naval partnership: The Indian Navy underlines the importance of a forward maritime presence and naval partnership that would be critical to deter potential adversaries.
    • India’s maritime strategic interests in the region are well established, including the fact that almost 55% of India’s trade with the Indo-Pacific region passes through the South China Sea.

    Strategic and defence cooperation

    • Ever since the formal declaration of a strategic partnership in 2007 and Comprehensive Strategic Partnership in 2016, the scope and scale of the India-Vietnam strategic and defence cooperation, particularly in the maritime domain, is deepening with a clear vision, institutional mechanisms.
    • The signing of ‘Joint Vision for Defence Cooperation’ and a memorandum of understanding on mutual logistics support in June 2022 has further strengthened mutual defence cooperation.
    • Enhancing Vietnam’s defence capabilities: While a U.S.$100 million Defence Line of Credit has been implemented, India has also announced early finalisation of another U.S.$500 million Defence Line of Credit to enhance Vietnam’s defence capability.
    • New Delhi has also agreed to expand military training and assist the Vietnam Navy’s strike capabilities.

    Cooperation in Indo-Pacific region

    •  India is willing to take a principled stand on territorial disputes in the hope that it contributes to the stabilisation of the Indo-Pacific.
    • Such positions align closely with Vietnam’s stance on the management of the South China Sea disputes.
    • The two countries are also engaging in wide-ranging practical cooperation in the maritime domain through a maritime security dialogue, naval exercises, ship visits, Coast Guard cooperation, and training and capacity building.
    • Working in various frameworks: Both countries have found mutual convergences on cooperation in the Indo-Pacific region and are synergising their efforts to work in bilateral as well as other sub-regional and multilateral frameworks, such as the Indian Ocean Rim Association (IORA), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Mekong-Ganga Cooperation, ADMM-Plus or the ASEAN Defence Ministers Meeting-Plus.
    • Both countries are also looking at collaboration around the seven pillars of the Indo-Pacific Oceans Initiative (IPOI).

    Conclusion

    The road map agreed upon by the leaders will be helpful in addressing common challenges and decisively navigating towards making an India-Vietnam partnership that helps in stability in the Indo-Pacific.

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  • Lessons on navigating the evolving geopolitics in the Middle East

    Context

    The US President’s visit to Saudi Arabia and Israel highlights not only some new trends that are reshaping the region but also eternal truths about international politics that are lost in the din of public discourse about the Middle East.

    What is the significance of the visit

    1] The US is not abandoning the Middle East

    • Contrary to the popular perception in the US, the region, and India, the US is not about to abandon the Middle East.
    • Many in the US political class believed that given America’s oil independence from the Middle East no longer needed the region.
    • American withdrawal from Afghanistan last year intensified these concerns and the region looked for alternative means to secure itself.
    • But as in the Indo-Pacific and Europe, the Biden Administration has concluded that it can’t cede its regional primacy in the Middle East and is ready to reclaim its leadership.
    • But as in the Indo-Pacific and Europe, the Biden Administration has concluded that it can’t cede its regional primacy in the Middle East and is ready to reclaim its leadership.

    2] No direct involvement

    • While the US will stay put in the Middle East, it is certainly changing the manner in which it acts.
    • In the past, the US saw itself as the sole provider of regional security and was ready to send its troops frequently into the region.
    • While the US does not want to be drawn directly into the region’s wars, it is determined to help its partners develop capabilities to secure themselves.
    • Arab-Israel reconciliation: Efforts are also being taken to produce greater reconciliation among Arabs and Israel and create stronger networks within and beyond the region to strengthen deterrence against adversaries.
    • The current effort to craft a Middle East Air Defence coalition is an example of this,
    • The I2U2 signals that the US no longer views the Middle East in isolation from its neighbourhood.

    3] Setting aside the differences on democracy vs autocracy debate

    • Biden had to modify his sweeping rhetoric about the “conflict between democracies and autocracies” as the principal contradiction in the world.
    • To sustain the US position in the region, Biden had no option but to sit with leaders of monarchies and autocracies that are America’s long-standing partners.

    4] Nation above identities

    • Biden’s focus on national interest found an echo in the Middle East, which is learning to put nation above other identities such as ethnicity and religion.
    • In the past, the region seemed immune to nationalism as it focused on transcendental notions of “pan Arabism” and “pan Islamism”.
    • Although the idea of Arab solidarity on the Palestine issue endures, many Arab leaders are not willing to let that come in the way of normalisation of relations with Israel.
    • A critical section of the Arabs, long seen as irreconcilably opposed to Israel, are now joining hands with the Jewish state to counter threats to their national security from Iran.
    • Many Gulf kingdoms, including Saudi Arabia and the UAE, are now consciously promoting a national identity among their peoples.
    •  Despite shared religion, Turkey’s leader Recep Erdogan has in recent years sought to undermine many of the Arab regimes.
    • Qatar has often found itself closer to non-Arab Turkey and in opposition to its Gulf Arab neighbours.

    Conclusion

    Delhi, whose Middle East policy today is imbued with greater realism, can hopefully discard the inherited ideological inertia, avoid the temptation of seeing the Middle East through a religious lens, and strive hard to realise the full possibilities awaiting India in the region.

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  • Pakistan and IMF talks: What lies ahead?

    The latest IMF press release maintains it would consider an extension of the current Extended Fund Facility (EFF) to end June 2023 and augment the fund amount to $7 billion for Pakistan.

    Pakistan seeks IMF bailout

    • Surprisingly, it took five months to reach the staff-level agreement.
    • The total disbursement under the current EFF to Pakistan has now been $4.2 billion.
    • The talks were originally aimed at releasing a tranche of $900 million.

    What is Extended Fund Facility (EFF)?

    • The EFF was established by the IMF to provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.
    • An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.

    What was the Pakistani EFF?

    • The 39-month EFF between the two was signed in July 2019 to provide funds amounting to Self-Drawing Rights (SDR) — $4,268 million.
    • The EFF was signed by Pakistan to address the medium-term balance of payment problem, and work on structural impediments and increase per capita income.

    Why did the talks take longer to conclude?

    • The IMF placed demands (all of which seem impossible for Pakistan) includes :
    1. Fiscal consolidation to reduce debt and build resilience
    2. Market-determined exchange rate to restore competitiveness
    3. Eliminate ‘quasi-fiscal’ losses in the energy sector and
    4. Strengthened institutions with transparency
    • Ousted Pakistani PM eased fuel prices. This was considered a major deviation under the EFF benchmarks.
    • Then govt gave tax amnesties to the industrial sector, impacted the tax regime and a structural benchmark for fiscal consolidation.
    • The IMF insisted on its demands before approving any release of the tranche.

    How important is the IMF support to Pakistan?

    • Pakistan’s economic situation is dire.
    • According to the Economic Survey of Pakistan 2022, the fiscal deficit in FY 22 was $18.6 billion, and the net public debt at $252 billion, which is 66.3% of the GDP.
    • The power sector’s circular debt is $14 billion.

    Why have the Pakistan-IMF relations remained complicated?

    • Structural reforms require long-term commitment, which have been sacrificed due to Pakistan’s short-sighted political goals.
    • Hence the urge to go to the IMF for fiscal stability has been repeated over time.

    Risks posed by a failed Pakistan

    • There is also a narrative that Pakistan has the fifth largest population with nuclear weapons that cannot be allowed to fail.
    • A section within Pakistan also places the geo-strategic location of the country would provide an edge for cooperation, rather than coercion.
    • Hence, this section believes, the IMF would continue to support.
    • Given the IMF’s increased assertion, Pakistan’s political calculations and the elections ahead, the relationship between the two is likely to remain complicated.

    What lies ahead for Pakistan and the IMF?

    • Despite the latest agreement, the road ahead for the IMF and Pakistan is not an easy one.
    • Political calculations and the elections ahead will play a role in Pakistan’s economic decision-making.
    • However, one thing is eminent Pakistan will certainly collapse someday badly like Sri Lanka.

    Try this PYQ from CSP 2022

    “Rapid Financing Instrument” and “Rapid Credit Facility” are related to the provisions of lending by which one of the following?

    (a) Asian Development Bank

    (b) International Monetary fund

    (c) United National Environment Programme Finance initiative

    (d) Word bank

     

    [wpdiscuz-feedback id=”md50hycvo5″ question=”Please leave a feedback on this” opened=”1″]Post your answer here.[/wpdiscuz-feedback]

    Back2Basics: Special Drawing Rights (SDRs)

    • SDRs, created by the IMF in 1969, are an international reserve asset and are meant to supplement countries’ reserves.
    • Adding SDRs to the country’s international reserves makes it more financially resilient.
    • Providing liquidity support to developing and low-income countries allows them to tide over the balance of payments (BOP) situations like the one India has been experiencing due to the pandemic and the one it faced earlier in 1991.
    • SDRs being one of the components of foreign exchange reserves (FER) of a country, an increase in its holdings is reflected in the BOP.

     

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  • In news: India-Bhutan Relations

    After over two years of the COVID-19-induced lockdown, Bhutan will open its doors to tourists on September 23 with a new expensive policy for Indians and other foreign tourists.

    India-Bhutan Relations: A backgrounder

    • India and Bhutan have had long-standing diplomatic, economic and cultural relations
    • Bhutan and India relations are governed by a friendship treaty that was renegotiated only in 2007, subjecting the Himalayan nation’s security needs to supervision.
    • Treaty of Friendship in 2007, which brought into the India-Bhutan relationship “an element of equality.”
    • The Treaty provides for perpetual peace and friendship, free trade and commerce, and equal justice to each other’s citizens.

    What is the Treaty of Friendship?

    • On August 8, 1949, Bhutan and India signed the Treaty of Friendship, calling for peace between the two nations and non-interference in each other’s internal affairs.
    • India re-negotiated the 1949 treaty with Bhutan and signed a new treaty of friendship in 2007.
    • The new treaty replaced the provision requiring Bhutan to take India’s guidance on foreign policy with broader sovereignty and not require Bhutan to obtain India’s permission over arms imports.
    • Under the 2007 India-Bhutan Friendship Treaty, the two sides have agreed to “cooperate closely with each other on issues relating to their national interests.”
    • Neither Government shall allow the use of its territory for activities harmful to the national security and interest of the other

    Various facets of ties

    (1) Commercial Relations

    • India is Bhutan’s largest trading partner.
    • India and Bhutan have signed an Agreement on Trade, Commerce and Transit on in 2016, which provides for a free trade regime between the two countries.
    • Tourism is another point of convergence.

    (2) Energy Cooperation

    • A scheme titled “Comprehensive Scheme for Establishment of Hydro-meteorological and Flood Forecasting Network on rivers Common to India and Bhutan” is in operation.
    • The network consists of 32 Hydro-meteorological/ meteorological stations located in Bhutan and being maintained by the Royal Government of Bhutan with funding from India.
    • The data received from these stations are utilized in India for formulating flood forecasts.

    Significance of Bhutan to India

    • Buffer to China: Bhutan is a buffer state between India and China. Bhutan shares a 470 km long border with China.
    • Vital connectivity through chicken’s neck: The Chumbi Valley is situated at the tri-junction of Bhutan, India and China and is 500 km away from the “Chicken’s neck” in North Bengal.
    • Security in North-East: Bhutan has in the past cooperated with India and helped to flush out militant groups in NE.
    • Chinese inroad in Bhutan: China is interested in establishing formal ties with Thimphu, where it does not yet have a diplomatic mission.

    China factor in ties: China predates on small neighbours

    • Bhutan is strategically important for both India and China. Chinese territorial claims in western Bhutan are close to the Siliguri Corridor.
    • Beijing is reportedly insisting on Bhutan establishing trade and diplomatic relations as a quid pro quo for a border settlement.
    • Bhutan is currently India’s only neighbour who has stayed away from joining China’s Belt and Road Initiative (BRI), but that may change if India can’t make itself an attractive ally and neighbour.

    Why does India need Bhutan?

    • Bhutan has always been India’s most trusted ally in South Asia and has often put India’s security at the forefront.
    • Come to think of it, in December 2003, Bhutan’s fourth king personally led the army to throw out Indian militants living in Bhutan’s jungles.
    • Bhutan was also the only South Asian country besides India not to attend China’s Belt and Road Initiative forum in May 2017.
    • In other words, land-locked Bhutan has held its end of the bargain.

    Various cooperation developments

    • Maitri Initiative: Bhutan is the first country to receive the Covishield vaccines under India’s Vaccine Maitri Initiative.
    • Financial connectivity: It has touched new heights through the launch of the RuPay card and the BHIM app.
    • Start-Up ecosystem: Both nations successfully linked up the Start-Up systems of our two countries via structured workshops; through the National Knowledge Network & the Druk-REN connection.
    • E-Library project: It has opened up new vistas of education and knowledge sharing between two countries.

    Irritants in ties

    • India has not invested in significantly in Bhutan and other smaller neighbours that modicum of trust which is critical in building genuine goodwill.
    • This means not only increasing people-to-people contact but also being sensitive to Bhutan’s desire for a wider engagement beyond India’s borders. This means respecting Bhutan as an equal, sovereign nation-state.

    Conclusion

    • The Indo-Bhutan friendship is built on shared values and aspirations, trust and mutual respect.
    • Bhutan’s foreign policy framework holds the relationship with India as being integral to its national interest.
    • The Indian approach to Bhutan has necessarily to be tailored while being sensitive to the growing Bhutanese aspirations of being considered equal.

     

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