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Subject: International Relations

  • India-Bangladesh Relations

    The article highlights the need for Indian leaders to respect the sentiments of Bangladesh by avoiding adverse comments during elections and recognition of Bangladesh’s importance for India.

     Diplomacy with Bangladesh

    • Long-standing bilateral problems: As a neighbour nearly surrounded on all territorial sides by India, there are the inevitable bilateral problems of long duration.
    • Such problems include a perennially favourable balance of trade for India, drought and flood in the 54 transboundary rivers flowing from India to Bangladesh, and the smuggling of goods and vulnerable human beings across the approximately 4,100 kilometre land border.
    • Cultural ties with India: There are several sections who regard their Bengali roots and traditions as being of equal validity as their religious affiliation, and treasure the linguistic and cultural ties with adjacent India.
    • India’s expectations: For India’s attentions and support, India’s expectations are that a neighbour will keep India’s concerns in mind when devising and pursuing its policies.

    Steps taken to consolidate the bilateral ties

    • Bangladesh has successfully dealt with Muslim fundamentalist terrorists.
    • Bangladesh has also controlled the Northeast militant movements sheltering in Bangladesh.
    • This has facilitated the pacification of India’s Northeast.
    • Bangladesh facilitated a considerable degree of connectivity between India and its Northeast by land, river and the use of Bangladeshi ports.
    • Indian investments in Bangladesh have been encouraged.
    • There are at least 100,000 Indian nationals now living and working in that country.
    • For economic integration along with free movement of commerce and capital, the movement of persons on the lines of Nepal and Bhutan will have to be considered.

    Consider the question “To a certain degree both India and Bangladesh depend on each other for security and stability. In light of this, take an overview of the consolidation of the bilateral ties between the two countries and discuss the issues that need to be addressed between the two countries.”

    Conclusion

    Responsible individuals on both sides of the border, whether in government or the Opposition, must be actively discouraged from words and actions detrimental to the consolidation of the existing cordiality.

  • SCO Agreement on Mass Media Cooperation

    The Union Cabinet has accorded an ex post facto approval for signing and ratifying an agreement on cooperation in the field of mass media between all member states of the Shanghai Cooperation Organization (SCO).

    Highlights of the Agreement

    • The agreement, which was signed in June 2019, would provide an opportunity for the member states to share best practices and new innovations in the field of mass media.
    • It aims to promote equal and mutually beneficial cooperation among associations in the field of mass media.
    • The main areas of cooperation in the agreement are the creation of favorable conditions for the wide and mutual distribution of information through mass media in order to further deepen the knowledge about the lives of the peoples of their states.
    • It will assist in broadcasting television and radio programmer and those, distributed legally within the territory of the state of the other side.

    What is SCO?

    • After the collapse of the Soviet Union in 1991, the then security and economic architecture in the Eurasian region dissolved and new structures had to come up.
    • The original Shanghai Five were China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan.
    • The SCO was formed in 2001, with Uzbekistan included. It expanded in 2017 to include India and Pakistan.
    • Since its formation, the SCO has focused on regional non-traditional security, with counter-terrorism as a priority.
    • The fight against the “three evils” of terrorism, separatism and extremism has become its mantra. Today, areas of cooperation include themes such as economics and culture.

    Try this PYQ now:

    Q. In the context of the affairs of which of the following is the phrase “Special Safeguard Mechanisms” mentioned in the news frequently?

    (a) United Nations Environment Programme

    (b) World Trade Organization

    (c) ASEAN- India Free Trade Agreement

    (d) G-20 Summits

    India’s entry to the SCO

    • India and Pakistan both were observer countries.
    • While Central Asian countries and China were not in favor of expansion initially, the main supporter — of India’s entry in particular — was Russia.
    • A widely held view is that Russia’s growing unease about an increasingly powerful China prompted it to push for its expansion.
    • From 2009 onwards, Russia officially supported India’s ambition to join the SCO. China then asked for its all-weather friend Pakistan’s entry.

  • What is the EAGLE Act of US Visas?

    Legislation to remove the per-country cap on permanent residency visas, or green cards, for the US has been introduced in the House of Representatives.

    What is the EAGLE Act?

    • Eagle stands for Equal Access to Green cards for Legal Employment (EAGLE) Act, 2021.
    • The act seeks to phase out the seven percent per-country limit on employment-based immigrant visas and raises the per-country limit on family-sponsored visas from seven percent to 15 percent.
    • It provides for a nine-year period for the elimination of this limit.
    • The seven percent limit was introduced in the mid-20th century, which has led countries with relatively small populations to be allocated the same number of visas as a relatively large-population country.

    Benefits of the act

    • It will benefit the US economy by allowing American employers to focus on hiring immigrants based on their merit, not their birthplace.
    • The bill will be advantageous for Indian job-seekers who currently rely on temporary visas or await green cards to work in the US.

    How does it help Indians?

    • 75 percent of the backlog for employment‐based visas was made up of Indians.
    • Backlogged Indian workers face an impossible wait of nine decades if they all could remain in the line.
    • More than 200,000 petitions filed for Indians could expire as a result of the workers dying of old age before they receive green cards.
    • With the EAGLE Act, the per-country cap would be removed, which may expedite the petitions for those applying for employment-based green cards.

  • US investigation into India’s Digital Services Tax (DST)

    The US government has announced the further suspension of punitive tariffs for six months on India, Austria, Italy, Spain, Turkey, and the UK while it continues to resolve the DST investigation amid the ongoing multilateral negotiations at the OECD and the G20.

    Do you remember?

    GAFA tax—named after Google, Apple, Facebook, Amazon—is a proposed digital tax to be levied on large technology and internet companies.

    What are the Digital Services Taxes in India?

    • The NDA government had moved an amendment in the Finance Bill 2020-21 imposing a 2 percent digital service tax on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore.
    • The new levy has expanded the ambit of the equalization levy for non-resident e-commerce operators involved in the supply of services, including the online sale of goods and provision of services.
    • E-commerce operators are obligated to pay the tax at the end of each quarter.
    • Estimates by the USTR indicate that the value of the DST payable by US-based company groups to India will be up to approximately $55 million per year.

    Also read:

    What are Digital Services Taxes?

    What is the story?

    • The US is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes.
    • It is trying to reaching a consensus on international tax issues through the OECD and G20 processes.

    Investigation regarding DST

    • The US has conducted a year-long investigation into digital services taxes imposed by countries, stating that they are against tech companies like Apple, Amazon, Google, and Facebook.
    • It had determined that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK has discriminated against US digital companies and were inconsistent with principles of international taxation, and burdened US companies.

    What’s the case against India?

    • In the case of India, the USTR’s proposed course of action includes additional tariffs of up to 25 percent ad valorem on an aggregate level of trade.
    • Around 26 categories of goods are in the preliminary list of products that would be subject to the additional tariffs.
    • This includes shrimps, basmati rice, cigarette paper, cultured pearls, semi-precious stones, silver powder and silver articles of jewelry, gold mixed link necklaces, and neck chains, and certain furniture of bentwood.

    Why does India need DST?

    • The agenda to reform international tax law so that digital companies are taxed where economic activities are carried is still a work in progress.
    • Due to this, countries are worried that they might cede their right to tax incomes. Therefore, many countries have either proposed or implemented a digital services tax.
    • The proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order.
    • Countries such as India which provides large markets for digital corporations seek a greater right to tax incomes.
    • The taxation of the digitalized economy turned out to be a relatively contentious issue because there is a huge asymmetry in digital service providers and consumers.

  • COVID diplomacy 2.0, a different order of tasks

    The article highlights the contrast in India’s diplomacy during the first wave of the pandemic and the second wave. It also discusses the challenges ahead for India.

    India’s diplomatic structure in two Covid waves

    •  In the past month, the focus for the Ministry of External Affairs (MEA) and Missions abroad has shifted.
    • During the first wave of the pandemic, focus was on coordinating exports of COVID-19 medicines, flights to repatriate Indians abroad through the ‘Vande Bharat Mission’ after the lockdown, and then exporting vaccines worldwide- ‘Vaccine Maitri’.
    • After the second wave, Covid Diplomacy 2.0 has a different order of tasks, both in the immediate and the long term.
    • The immediate imperative was to deal with oxygen and medicine shortages that claimed the lives of thousands.
    • The Ministry of External Affairs has had to deal with internal health concerns while galvanising help from abroad for others.
    • Despite difficulties, the Ministry of External Affairs has completed the task of bringing in supplies in a timely manner, and with success.

    Dealing with vaccine shortage

    • Companies manufacturing AstraZeneca and Sputnik-V are stretched as far as future production is concerned.
    • The Chinese vaccines are out of consideration given bilateral tensions.
    • So, it is clear that India is looking to the U.S. to make up the shortfall.
    • This could be done in the following ways:
    • 1) Requesting the U.S. to share a substantial portion of its stockpile of AstraZeneca.
    • The U.S. government is holding up its AstraZeneca exports until its own United States Food and Drug Administration approves them.
    • 2) Asking the US to release more vaccine ingredients which are restricted for exports.
    • 3) To buy more stock outright from the three U.S. manufacturers, Pfizer, Moderna and Johnson & Johnson, and to encourage production in India of these vaccines.
    • Production of Johnson & Johnson single-dose vaccines in India, as had been announced during the Quad summit, will take some time.
    • The U.S. companies seem set on getting both an indemnity waiver from India as well as Emergency Use Authorisation prior to supplying them.
    • The Government may also need to make a change to its publicly announced policy that States in India will need to negotiate purchases directly, as the U.S. manufacturers want centralised orders, with payments up-front.

    2) Patent waiver

    • The promise of patent waivers, from India’s joint proposal at the World Trade Organization (WTO) will not reap early benefits.
    • Even though it has received support from world leaders such as the U.S., Russia and China.
    • Many countries including Japan, Australia, Brazil and EU are still holding out on the idea of freeing up intellectual property rights on vaccines for three years.
    • That could ultimately hold up proceedings at the WTO, as it works by consensus.

    3) Diplomatic fallout of vaccine collapse

    • The Government has defended its decision to export more than 66 million vaccines doses to 95 countries between January and April this year.
    • All exports were stopped as soon as cases in India began to soar.
    • Both India’s neighbours and partners in Africa as well as global agencies depending on India for vaccines have been left in the lurch by the Government’s failure to balance its vaccine budget.
    • For example, once India completed delivery of the first batch, of 550,000 Covishield doses, Bhutan completed the administration of the first dose to 93% of its population in a record 16 days.
    • Two months later, Bhutan does not have any vaccines to complete the second dose and has been left requesting other countries for vaccines.
    • It is no surprise that each of India’s neighbours has now sought help from China and the U.S. to complete their vaccination drives.

    4) Tracing virus pathways

    • India, as one of the worst pandemic-hit countries, must be at the forefront of demanding accountability on the origin of the virus.
    • The World Health Organisation (WHO) which studied “pathways of emergence” of SARS-CoV2 in Wuhan, listed four possibilities:
    • 1) Direct zoonotic transmission.
    • 2) An intermediate host.
    • 3) Cold chain or transmission through food.
    • 4) A laboratory incident.
    • China appears adamant on blocking these studies.
    • Even the U.S. appears to have dragged its feet on a conclusive finding, possibly because the U.S. National Institutes of Health had funded some of the Wuhan Institute’s research.

    Way forward on virus pathways

    • India must call for a more definitive answer and also raise its voice for a stronger convention to regulate any research that could lead, by accident or design, to something as the current pandemic.
    •  It is necessary to revamp the 1972 Biological Weapons Convention to institute an implementation body to assess treaty compliance, and build safer standards for the future.

    Consider the question “How different was the impact of two Covid-19 waves on India’s diplomacy? What are the challenges India faces in the near future in dealing with the fallout of the pandemic?”

    Conclusion

    With its seat at the UN Security Council as non-permanent member and its position on WHO’s Executive Board, India could seek to regain the footing it has lost over the past few months of COVID-19 mismanagement, by taking a lead role in ensuring the world is protected from the next such pandemic.

  • Israel and Palestine could take a leaf out of India’s book

    The article suggest the Indian model for peaceful coexistence as a possible solution to Israel-Palestine conflict.

    Brief history of the conflict

    • Britain renounced its Mandate over Palestine in 1948.
    • This paved the way for the United Nations to divide Palestine between the Jews and Arabs, giving them about 55% and 45% of the land, respectively.
    • The Jews, meanwhile, had declared the establishment of the state of Israel for which they had been working for long.
    • The Palestinians, who lacked the resources to conceive of a state, failed to form a state of their own in the land allotted to them.
    • Instead, a coalition of Arab countries invaded the nascent state of Israel to nip it in the bud.
    • Israel defeated the Arab armies.
    • Israel also destroyed about 600 Palestinian villages and expelled about 80% of Arabs from its territory.
    • In 1967, in the Six-Day War, Israel captured not just more Palestinian land but also Egypt’s Sinai Peninsula and Syria’s Golan Heights.
    • During the Yom Kippur War of 1973, the Arabs came to realise that Israel is here to stay.

    Need for realisation on both the sides

    • The Arab states failed to impress the realisation of permanency of Israel upon their Palestinian brethren, a sizeable number of whom remain committed to seeking a solution through counter-violence. 
    • Vicious cycle of violence is not going to end unless there is realism on both sides.
    • The Hamas should know that Israel will not give up on holding on to land it has held for years.
    • Israel should understand that total subjugation, expulsion or even decimation of Palestinians will not make it any safer.
    • A solution based on the common humanity of all stakeholders, one that is not riven by racial and religious schisms, needs to be explored.

    Viability of Indian model

    • The Indian model of democracy and secularism, which accommodates religious, ethnic, linguistic and other diversities, could be a viable model for the peaceful coexistence of formerly antagonistic groups.
    •  India evolved a unique model of accommodating the victors and the vanquished, without ever resorting to the latter’s decimation.
    • A modus vivendi has to evolve on the basis of hard realities, the first of which is that neither the Jews nor the Palestinians are going to vanish.
    • If the two-state solution is nowhere in the offing, a single state after the Indian model, i.e., a secular, democratic and pluralistic state, may be the only feasible option.
    • The Palestinian refugees have a right to return.
    • That the altered demographics would impinge on the religio-racial character of Israel is not an argument which behoves a modern democratic state.
    • It is true that a nation state belongs to the group which constituted itself into a nation.
    • A nation is an imagined community.
    • As imagination expands, the foundations of the nation become deeper.

    Consider the question “In the absence of two-state solution to the Israel-Palestine conflict, what lessons India could offer to the two parties for peaceful coexistence?”

    Conclusion

    Israel might not offer the right model of conflict resolution for India, but India presents a model of peaceful coexistence for Israel.

  • How Pakistan Plays the world

    The article explains evolution of Pakistan’s approach towards forming alliances and maintaining strategic autonomy against the backdrop of U.S. withdrawal from Afghanistan.

    New dynamic Pakistan has to face

    • As the US withdraws its troops from Afghanistan, Pakistan is eager to build a relationship with Washington that is not tied to US stakes in Afghanistan.
    • Pakistan does not want to be totally alienated from U.S. in the new geopolitical jousting between the US and China.
    • How Pakistan copes with the new dynamic between the US and China as well as manages the deepening crisis in Afghanistan would be of great interest to India.

    Striking the balance between autonomy and alliance

    • Autonomy is about the basic impulse for enhancing the degree of one’s freedom.
    • Alliances are about coping with real or perceived threats to one’s security.
    • Both are natural trends in international politics.
    • Joining an alliance does not mean ceding one’s sovereignty.
    • Within every alliance, there is a perennial tension between seeking more commitments from the partner in return for limiting one’s own.

    Explaining Pakistan’s approach to alliances

    • Pakistan’s insecurities in relation to India meant it was eager for alliances.
    •  And as the Anglo-Americans scouted for partners in the crusade against global communism, Pakistan signed a bilateral security treaty with the US and joined the South East Asia Treaty Organisation and Central Treaty Organisation in the mid-1950s.
    • Rather than target Pakistan’s alliance with a West that was intensely hostile to Beijing in the 1950s, Chinese premier Zhou Enlai saw room to exploit Pakistan’s insecurities on India.
    • While Pakistan’s ties with the US went up and down, its relationship with China has seen steady expansion.
    • Pakistan’s relations with the US flourished  after the Soviet Union sent its troops into Afghanistan at the end of 1979.
    • The US and Pakistan reconnected in 2001 as Washington sought physical access and intelligence support to sustain its intervention in Afghanistan following the attacks on September 11.
    • Now the US wants Pakistan to persuade the Taliban to accept a peaceful transition to a new political order in Afghanistan.

    Pakistan’s ability to adapt to shifting geopolitical trends

    • Pakistan worries that its leverage in U.S. will diminish once the US turns its back on Afghanistan and towards the Indo-Pacific.
    • Pakistan does not want to get in the Indo-Pacific crossfire between the US and China.
    • It would also like to dent India’s growing importance in America’s Indo-Pacific strategy.
    • India should not underestimate Pakistan’s agency in adapting to the shifting global currents.
    • Pakistan has been good at using its great power alliances to its own benefit.

    Three problems that complicates Pakistan’s strategic autonomy

    • 1) Relative economic decline: Pakistan’s expected aggregate GDP at around $300 billion in 2021 is 10 times smaller than India’s.
    • 2) Obsession with Kashmir: Pakistan’s enduring obsessions with separating Kashmir from India, and extending its political sway over Afghanistan; both look elusive despite massive political investments by the Pakistan army.
    • Unsurprisingly, there is a recognition that Pakistan needs reorientation — from geopolitics to geoeconomics and permanent war with neighbours to peace of some sorts.
    • 3) Using religion as political instrument: Turning Islam into a political instrument and empowering religious extremism seemed clever a few decades ago.
    • However, today those forces have acquired a life of their own and severely constrain the capacity of the Pakistani state to build internal coherence and widen international options.

    Conclusion

    It will be unwise to rule out Pakistan’s positive reinvention; no country has a bigger stake in it than India. For now, though, Pakistan offers a cautionary tale on the dangers of squandering a nation’s strategic advantages — including a critical geopolitical location that it had inherited and the powerful partnerships that came its way.

  • Economic Community of West African States (ECOWAS)

    West African leaders were due to meet in Ghana to discuss a response to Mali’s second coup in nine months.

    • Since 1960, when Mali gained independence from France, there have been five coups — and only one peaceful transition from one democratically elected president to another.
    • But on Monday, soldiers detained transitional President Bah Ndaw and Prime Minister Moctar Ouane, releasing them on Thursday while saying that they had resigned.

    Recent coup

    • Nine months ago, President Ibrahim Boubacar Keita was overthrown in the wake of mass anti-government protests.
    • Last week, the announcement of a new cabinet was made that excluded two key military leaders. Following this, the army has detained the President and the Prime Minister.

    About ECOWAS

    • The Economic Community Of West African States (ECOWAS) is a regional group of fifteen countries, founded in 1975 via the treaty of Lagos.
    • Mission: To promote economic integration in “all fields of economic activity, particularly industry, transport, telecommunications, energy, agriculture, natural resources, commerce, monetary and financial questions, social and cultural matters.
    • Vision: Creation of a borderless region where the population has access to its abundant resources and is able to exploit same through the creation of opportunities under a sustainable environment.
    • ECOWAS can be divided into two sub-regional blocs:
    1. West African Economic and Monetary Union – established in 1994
    2. West African Monetary Zone (WAMZ) – established in 2000
    • ECOWAS is meant to be a region governed in accordance with the principles of democracy, rule of law and good governance.
    • The member countries of ECOWAS comprises: Benin, Burkina Faso, Cape Verde, Cote d’ Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal and Togo.

  • India must engage with Nepal-without intervening

    The article suggests recalibration of India’s approach towards political turmoil in Nepal.

    Nepal in political crisis

    • For the second time in weeks, Prime Minister K P Oli has persuaded President Bidya Devi Bhandari to dissolve parliament and call for fresh elections.
    • That is, unless the Supreme Court decides to declare the dissolution of parliament as unconstitutional, as it had done in the recent past.
    • The current dissolution has been challenged in the court by five political parties.

    Medhesi demand fulfilled

    • Prime Minister Oli has also delivered on the longstanding Madhesi demand to reverse a constitutional provision which denied citizenship to children born of Nepali mothers who had foreign husbands.
    • The widespread unrest in the Terai adjoining India in 2015 was triggered by this attempt to deny equal rights to the Madhesi population.
    • This provision had directly targeted the Madhesi population, which has close kinship and marital ties across the border with India.
    • While this provision has now been removed through a presidential ordinance, it could well be reversed in future by Nepali political parties dominated by the higher caste.

    Steps India needs to take

    • Political uncertainty in a neighbouring country is never good news for India, particularly in Nepal with whom we share a long and open border.
    • The Indian government has maintained a studied silence on the current political developments in Nepal and this may be the right thing to do.
    • But this silence should not imply the lack of a proper assessment of the political situation in Nepal and what would serve the interests of India best.
    • Following are the steps India need to take:

    1) India should declare it does not support the revival of monarchy

    •  The abolition of the monarchy is a net gain for India and the government must firmly and unambiguously declare that it does not support the revival of the monarchy, which has already been rejected by its people.
    • India should declare its unconditional support to Nepal’s republican democracy.

    2) Remain engaged with Nepal

    • India should remain fully engaged with Nepal at all levels and across the political spectrum.
    • The safeguarding of India’s vital interests demands such sustained engagement.
    • A hands-off policy will only create space for other external influences, some of which, like China, may prove to be hostile.
    • However, engagement must dispense with the recurrent tendency to label Nepali political leaders as friends or enemies.
    • India should advocate policies rather than persons.

    3) Recognise the role of Madhesi population

    • In India’s engagement with Nepal, the Terai belt and its large Madhesi population plays a critical and indispensable role.
    • In an effort to win over the Kathmandu political and social elite, one should be careful not to neglect citizens living in the plains.
    • Our engagement with Nepal must find an important place for Nepali citizens who are our immediate neighbours and act as a kinship, cultural and religious bridge between our two countries.

    4) Appreciate people-to-people link

    • India needs to appreciate that the people-to-people links between our two countries have an unmatched density and no other country, including China, enjoys this asset.
    • The challenge to our Nepal policy lies in leveraging this precious asset to ensure a stable and mutually-productive state-to-state relationship.
    • India has every reason to approach its relations with Nepal with confidence and assurance.

    Consider the question “What are the factors that make India-Nepal relationship special? What are the recent challenges impacting this special relationship? ” 

    Conclusion

    The safeguarding of India’s vital interests demands India’s engagement with Nepal without intervening in its politics. A hands-off policy will only create space for other external influences.

  • Currency swap between Bangladesh and Sri Lanka

    Bangladesh’s central bank has approved a $200 million currency swap facility to Sri Lanka.

    Practice question for mains:

    Q. What are Currency Swaps? Discuss the efficacy of Currency Swap Agreements for liberalizing bilateral trade.

    What is a Currency Swap?

    • In this context, a currency swap is effectively a loan that Bangladesh will give to Sri Lanka in dollars, with an agreement that the debt will be repaid with interest in Sri Lankan rupees.
    • For Sri Lanka, this is cheaper than borrowing from the market, and a lifeline as is it struggles to maintain adequate forex reserves even as repayment of its external debts looms.
    • The period of the currency swap will be specified in the agreement.

    A helping hand for SL

    • Bangladesh Bank, the central bank, has in principle approved a $200 million currency swap agreement with Sri Lanka.
    • Dhaka decided to extend the facility after a request by Sri Lankan PM Mahinda Rajapaksa to Bangladesh’s PM Sheikh Hasina.
    • It will help Colombo tide over its foreign exchange crisis, according to media reports from Bangladesh, quoting the bank’s spokesman.
    • Sri Lanka, staring at an external debt repayment schedule of $4.05 million this year, is in urgent need of foreign exchange.

    An unusual move

    • Bangladesh has not been viewed so far as a provider of financial assistance to other countries.
    • It has been among the most impoverished countries of the world, and still receives billions of dollars in financial aid.
    • But over the last two decades, its economy has pulled itself up literally by the bootstraps, and in 2020, was the fastest growing in South Asia.
    • Bangladesh’s economy grew by 5.2 percent in 2020 and is expected to grow by 6.8 percent in 2021.
    • The country has managed to pull millions out of poverty. Its per capita income just overtook India’s.

    A break in monopoly

    • This may be the first time that Bangladesh is extending a helping hand to another country, so this is a landmark of sorts.
    • It is also the first time that Sri Lanka is borrowing from a SAARC country other than India.
    • The presumption was that only India, as the regional group’s largest economy, could do this.
    • The Bangladesh-Sri Lanka arrangement shows that is no longer valid.

    Why didn’t SL approach India?

    • Last year, it requested for a $1 billion credit swap, and separately, a moratorium on debts that the country has to repay to India.
    • But India-Sri Lanka relations have been tense over Colombo’s decision to cancel a valued container terminal project at Colombo Port.
    • India put off the decision, but Colombo no longer has the luxury of time.

    Is SL in a crisis?

    • With the tourism industry destroyed since the 2019 Easter attacks, Sri Lanka had lost one of its top foreign exchange pullers even before the pandemic.
    • The tea and garment industries have also been hit by the pandemic affecting exports.
    • Remittances increased in 2020, but are not sufficient to pull Sri Lanka out of its crisis.
    • The country is already deep in debt to China. According to media reports, Sri Lanka owes China up to $5 billion.

    What about the previous swap facility that India gave Sri Lanka?

    • Last July, the RBI did extend a $400 million credit swap facility to Sri Lanka, which the Central Bank of Sri Lanka settled in February. The arrangement was not extended.
    • RBI has a framework under which it can offer credit swap facilities to SAARC countries within an overall corpus of $2 billion.
    • According to RBI, the SAARC currency swap facility came into operation in November 2012 with the aim of providing to smaller countries in the region.