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Type: Op-ed

  • Making sense of Pakistan’s new national security policy

    Context

    The national security policy statement issued last week by the government of Pakistan acknowledges the need for change.

    Why does it matter for India?

    • India’s stakes in a stable Pakistan are higher than anyone else in the world.
    • Therefore, Delhi must pay close attention to the internal debates within Islamabad on the imperatives of major change in Pakistan’s national direction.
    • But as critics in Pakistan insist, the policy offers no clues on how to go about it.
    • The classified version probably has a clear strategy on how to accelerate economic growth, build national cohesion, and revitalise its foreign and security policies.

    Overview of India’s transformation after 1990s

    • The crises that Pakistan confronts today are quite similar to those Delhi faced at the turn of the 1990s.
    • Economic challenge: India’s post-Independence old economic model was on the verge of collapse.
    • Political instability: The era of massive domestic political mandates was over and weak coalitions government were in place.
    • Challenges in International relations: The Soviet Union, India’s best friend in the Cold War, fell off the map and the Russian successor was more interested in integrating with the West.
    • India found that its political ties with all other major powers — the US, Europe, China and Japan — were underdeveloped at the end of the Cold War.
    • Pakistan, meanwhile, was running proxy wars in India even as it mobilised international pressures against Delhi on Kashmir.
    • Within a decade, though, India was on a different trajectory.
    • . Its reformed economy was on a high growth path.
    • India was hailed as an emerging power that would eventually become the third-largest economy in the world and a military power to reckon with.
    • Delhi also cut a deal with Washington to become a part of the global nuclear order on reasonable terms.
    • This involved a series of structural economic reforms, the recasting of foreign policy, and developing a new culture of power-sharing within coalitions and between the Centre and the states.

    The economic transformation of Bangladesh

    • The economic transformation of Bangladesh has been equally impressive.
    • Since Sheikh Hasina returned to power in 2009, Bangladesh focused on economic development, stopped support to terrorism, and improved ties with the larger of its two neighbours — India. 
    • As a result, Bangladesh’s economy in 2021 (GDP at $350 billion) is well ahead of Pakistan ($280 billion).

    How Pakistan missed the opportunity

    • Pakistan chose a different path.
    • Having ousted the Soviet superpower from Afghanistan in the late 1980s, Pakistan was ready to apply the model of cross-border terrorism to shake Kashmir loose from India and turn Afghanistan into a protectorate.
    • Supporting jihadi groups was seen as a low-cost strategy to achieve Pakistan’s long-standing strategic objectives in the neighbourhood.
    • These grand geopolitical obsessions left little bandwidth for the much-needed economic modernisation of Pakistan.
    • Islamabad, which relentlessly pursued parity with Delhi, now finds that the Indian economy at $3.1 trillion is more than 10 times larger than that of Pakistan.

    Factors that explain change in Pakistan’s policy

    • Diminishing role in geopolitics: In the past, Pakistan had much success in pursuing a foreign policy that not only balanced India with the support of the West, but also carved out a large role for itself in the Middle East and more broadly the Muslim world.
    • Today, barring the United Kingdom, Pakistan’s equities in the West have steadily diminished.
    • Weakened ties in the Middle East: Meanwhile, it has weakened its traditionally strong ties in the Middle East with Saudi Arabia and the United Arab Emirates.
    • Weakened ties with the US: Although its all-weather ties with China have gone from strength to strength, the unfolding conflict between Washington and Beijing has put Pakistan in an uncomfortable strategic situation.
    • Pakistan’s support for violent religious extremism has also begun to backfire.
    • A permissive environment for terrorism has now attracted severe financial penalties from the international system.

    India’s changed approach towards Pakistan

    • Delhi, which was prepared to make concessions on Kashmir in the 1990s and 2000s, has taken Kashmir off the table and is ready to use military force in response to major terror attacks.
    • Delhi’s attitude towards Islamabad now oscillates between insouciance and aggression.
    • Unlike in the past, the West is no longer pressuring India to accommodate Pakistan on Kashmir.
    • The US is eager for India’s support in balancing China in the Indo-Pacific.

    Conclusion

    All these shifts together have compelled Pakistan to rethink its policies.  There is no guarantee that the change will be definitive and for the good. But if it is, Delhi should be prepared to respond positively.

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  • Domestic and geopolitical risks India faces in 2022

    Context

    Risks in 2022 could be both domestic and geopolitical, with many precepts that the world has been accustomed to being at risk. Democracy itself could face serious headwinds this year.

     Challenges to democracy

    • The world has recently seen the rise of authoritarian rulers in many countries.
    • What is worrisome is that democratic tenets which have been under attack in recent years appear set to face more onslaughts this year.
    • The United States, which was widely viewed as a major bulwark for democracy, appears to have developed certain pathological infirmities.

    Geopolitical challenges and risks

    [1] Disruption by China

    • The role of China is possibly the most disrupting one, given the challenge it poses to the existing international order.
    • Militarily, China is openly challenging U.S. supremacy in many areas, including ‘state-of-the-art weaponry’ such as hyper-sonic technology.
    • China is now threatening Taiwan, which could well become one of the flashpoints of conflict in 2022.
    • The dip in China’s economic profile in the past year and more could also lead to new tensions in the Asia-Pacific region in 2022.

    [2] Russia-Ukraine conflict

    • The other major risk of a war in 2022, stems from the ongoing conflict between Russia and Ukraine — the latter being backed by the U.S. and North Atlantic Treaty Organization (NATO) forces.
    • During the past three decades, NATO has expanded its reach almost a 1,000 miles to the east in violation of an earlier tacit understanding.
    • Russia appears determined that Ukraine should be the ‘last frontier’ and, if need be, ensure this through military force.
    • The situation has grave possibilities and could result in a series of cyclical outcomes with considerable damage potential.

    [3] Instability in the vast region

    • Unrest in Kazakhstan: The current unrest in Kazakhstan, which till recently was one of the more stable Central Asian nations, is perhaps symptomatic of what is in store.
    • Recent events in Kazakhstan demonstrates a sharper cleavage between the U.S.-led West and its principal opponents, Russia and China.
    • This is not a good sign for the world already wracked by a series of coups or internecine strife as in Ethiopia, Libya and certain regions of West Asia and North Africa.

    [4] Return of Taliban and security implications for India

    • Shift in balance of power: Of particular significance to India is that the Taliban’s return to power in Afghanistan has led to a material shift in the balance of power in India’s periphery.
    • Developments in Afghanistan have fuelled the ambitions of quite a few ‘anti-state militant groups’ across the region.
    • Even in Pakistan, the Tehrik-e-Taliban Pakistan (TTP) has become energised and is enlarging its sphere of action to other parts of Asia, notably Kazakhstan.
    • This will have an unsettling effect across large parts of Asia.
    • New evidence suggests that on India’s eastern flank, viz. Indonesia, a resurgence of radical Islamist activities is taking place.
    • The Jemaah Islamiyah has reportedly become more active in Indonesia.

    [5] India’s border issue with China

    • The most serious issue that India confronts today is how to deal with a China that has become more confrontational.
    • India’s membership of the Quad still rankles as far as China’s psyche is concerned, and during 2022, may well result in China embarking on new adventurist actions at many more points on the Sino-Indian border compelling India to react.
    • Additionally, India will need to determine how best to respond to China’s provocations.
    • Strengthen military posture: India would need to strengthen its military posture, both as a means to deter China and also to convince India’s neighbours that it can stand up to China.

    Challenges ahead for India

    • Challenge in Central Asia: Diplomatically, in 2022, India may find itself vulnerable in dealing with the turmoils which have occurred in two areas of strategic interest to it, viz. Central Asia and West Asia.
    • Challenge in West Asia: In West Asia, the challenge for India is how to manage its membership of the Second Quad (India, Israel, the United Arab Emirates and the U.S.) with the conflicting interests of different players in the region.
    • Limits to balancing: There is a limit to the kind of balancing act that India can perform, whether it be with regard to buying S-400 missile systems from Russia, risking potential sanctions from Washington under Countering America’s Adversaries Through Sanctions Act (CAATSA) or manoeuvering between the Arab States, Israel, Iran and the U.S. in West Asia.

    Conclusion

    Facing a host of unprecedented challenges, India’s leaders and diplomats must not only take stock of the dangers that exist but also be ready on how to manage the risks that are well evident.

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  • India-Japan friendship can help global peace, prosperity

    Context

    The year 2022 marks the 70th anniversary of the establishment of diplomatic relations between Japan and India.

    Historical background of India-Japan relationship

    • We have a long history of people-to-people exchanges that can be traced back to the sixth century.
    • Buddhism was brought to Japan and, in 752.
    • During Meiji Restoration in the late 19th Century — Japan needed natural resources to modernise its industry.
    • Many Japanese travelled to India to purchase cotton, iron ore, etc.
    • Formal relations between Japan and India began in 1952.
    • After the Second World War, instead of signing the multilateral San Francisco Peace Treaty, India opted for concluding a bilateral peace treaty with Japan, considering that honour and equality should be ensured for Japan to rejoin the international community.
    • But even before the establishment of diplomatic relations, the goodwill between the people of the two countries was deeply rooted through business, academic and cultural exchanges.
    • After 70 years of multi-layered exchanges, the relationship between our two countries grew into a “Special Strategic and Global Partnership”. 

    Future possibilities

    [1] As democratic countries, contribute to global peace and prosperity

    • As democratic countries in Asia, India and Japan can cooperate to contribute to global peace and prosperity.
    • We share political, economic and strategic interests based on the firm foundations of common values and traditions.
    • We are continuing our efforts to build a rules-based free and open international order.

    [2] Cooperation in security

    • There are a plethora of fields that we can cooperate in security issues including cyber security, outer space and economic security.

    [3] Augmenting economic relations

    •  For long, Japan has been the largest ODA (Official Development Assistance) donor to India.
    • One of the most recent and ongoing examples of our collaboration is the Mumbai-Ahmedabad High-Speed Rail project.
    • Japan is also one of the largest investors in India.
    • Both countries have also promoted economic cooperation in other countries to enhance social infrastructure and connectivity.
    • Our economic partnership can further strengthen the economy of the Indo-Pacific, as well as the world economy.

    [4] Cultural exchange

    • Cultural exchanges including literature, movies, music, sports and academics are essential for our relations, enabling a better understanding.

    Consider the question “The year 2022 marks the 70th anniversary of the establishment of diplomatic relations between Japan and India. The future offers enormous possibilities for the partnership. In context of this, examine the future possibilities the two countries can explore.” 

    Conclusion

    India-Japan ties will continue to flourish. Our long history substantiates that.

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    Meiji Restoration in Japan

    • In Japanese history, the political revolution in 1868 that brought about the final demise of the Tokugawa shogunate (military government)—thus ending the Edo (Tokugawa) period (1603–1867)—and, at least nominally, returned control of the country to direct imperial rule under Mutsuhito (the emperor Meiji).
    • In a wider context, however, the Meiji Restoration of 1868 came to be identified with the subsequent era of major political, economic, and social change—the Meiji period (1868–1912)—that brought about the modernization and Westernization of the country.

  • Opportunity for agri-reforms in Punjab

    Context

    It is no secret that Punjab, once the frontrunner of Indian agriculture, is struggling to retain its dynamism.

    Need to diversify

    • While Punjab ranked at the top of major Indian states in terms of per capita income during 1967-68 to 2002-03, it has slipped below the 13th position.
    • Punjab’s agricultural growth rate, at 5.7 per cent, was more than double the country’s average of 2.3 per cent during 1971-72 to 1985-86.
    • This has reversed between 2005 and 2019 with Punjab at 1.9 per cent and India at 3.7 per cent.
    • Agriculture least diversified state: With almost 85 per cent of the gross cropped area under wheat and rice, agriculture is least diversified in the state. 
    • Mandi transactions cost about 8.5 per cent of the MSP, the highest in the country, making Punjab wheat and rice less competitive.

    What explains low diversification in agriculture?

    • Policies: Guaranteed MSP for wheat and paddy, backed by assured procurement, free power and highly subsidised fertilisers, has disincentivised diversification.
    • Political economy: The political economy around wheat and rice is so intense that any effort to address its distortionary impact is met with fierce opposition by vested interest groups.

    How to recalibrate Punjab agriculture towards higher, sustainable growth?

    • Augment livestock and milk processing: While fruits and vegetables account for 7.4 per cent of the value of the output of agriculture and allied sectors, livestock accounts for 31.5 per cent and fisheries less than 1 per cent.
    • The state has the highest per capita availability of milk but it can process less than 20 per cent of it.
    •  Promoting mega parks for value addition in fruits and vegetables, milk, and other livestock products through medium and small enterprises will strengthen its competitiveness.
    • Strengthen market for seed potato: It is also a significant player in seed potato and with the right package of practices, traceability systems, and infrastructure, the market for Punjab seed potato can be strengthened.
    • Scaling up alternative marketing channel: Alternative marketing channels for fruits and vegetables such as direct marketing, contract farming, and exports have been in place but these models need to be scaled up with the right ecosystem.
    • Shift to demand-driven agriculture: Punjab needs to switch from supply-driven agriculture to demand-driven agriculture.
    • The demand for fisheries, poultry, dairy, and fruits and vegetables is increasing way faster than the demand for wheat and rice.
    • Rationalise mandi charges:  Rationalising mandi charges to not more than 3 per cent will attract private sector investments in building efficient value chains.
    • Rationalise subsidies: Time-bound incentives in the form of freight subsidies for exporters of high-value agri-produce, tax exemptions for the processing of perishable commodities for value chain players would be more rational than the overloaded subsidies of urea and free power.
    • Use technology and start-up revolution: Punjab should leverage the start-up revolution that is unfolding in India, and use technology to ensure optimal utilisation of resources, expand markets, and augment farmers’ income.
    • Geo-tagging of farms can address concerns related to long-term leasing of land that is critical for large-scale investments and enable vibrant agricultural land markets.
    • Innovations in supply chain management, be it automated grain silos or state-of-art herd management will not only optimise the use of resources but also bring in traceability of farms and animals, early monitoring and prevention of disease outbreaks, and contain value chain losses.

    How to manage financial resources?

    • Rationalise urea subsidy: It should rationalise its fertiliser subsidy regime by moving towards cash transfers on a per hectare basis and free up fertiliser prices.
    • Include urea in nutrient-based subsidy scheme: If that’s not possible, then urea should be included in the nutrient-based subsidy scheme.
    • Bring soluble fertiliser under subsidy: Bring soluble fertilisers under subsidy, which will enhance fertiliser use efficiency through fertigation.
    • This will also help reap environmental gains.
    • Rationalise food subsidy: Food subsidy can also be rationalised through direct cash transfers replacing PDS, as Punjab is a grain surplus state.

    Conclusion

    Both environmental and financial sustainability concerns related to business-as-usual farming in Punjab call for a rebooting strategy.

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  • Taxing cryptocurrency transactions

    Context

    Notwithstanding the eventual introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill in Parliament, cryptocurrencies continue to proliferate.

    Provisions in Income Tax Act 1961 to tax cryptocurrencies

    • Cryptocurrencies not mentioned in Income Tax Act, 1961: Although the Income Tax Act, 1961 (“IT Act”) does not specifically mention cryptocurrencies, it does cast a wide enough net to bring crypto transactions under its ambit.
    • Capital asset: Trading in cryptocurrency may be classified as transfer of a ‘capital asset’, taxable under the head ‘capital gains.
    • Business income: If such cryptocurrencies are held as stock-in trade and the taxpayer is trading in them frequently, the same will attract tax under the head ‘business income’.
    • Even if one argues that crypto transactions do not fall under the above heads, Section 56 of the IT Act shall come into play, making them taxable under the head ‘Other sources of income’.

    Challenges in taxing cryptocurrencies

    • The above provisions in themselves are not sufficient in order to put in place a simple yet effective taxation regime for cryptocurrencies.

    [1] Varied interpretations:

    • First, the absence of explicit tax provisions has led to uncertainty and varied interpretations being adopted in relation to mode of computation, applicable tax head and tax rates, loss and carry forward, etc.
    • For instance, the head of income under which trading of self generated cryptocurrency (currencies which are created by mining, acquired by air drop, etc.) is to be taxed is unclear.
    • Since there is no consistency in the rates provided by the crypto-exchanges, it is difficult to arrive at a fair market value.
    • Similarly, when a person receives cryptocurrency as payment for rendering goods or services, how should one arrive at the value of the said currency and how should such a transaction be taxed?

    [2] Identifying tax jurisdiction

    • It is often tricky to identify the tax jurisdiction for crypto transactions as taxpayers may have engaged in multiple transfers across various countries and the cryptocurrencies may have been stored in online wallets, on servers outside India.

    [3] The anonymity of taxpayer

    • The identities of taxpayers who transact with cryptocurrencies remain anonymous.
    • Exploiting this, tax evaders have been using crypto transactions to park their black money abroad and fund criminal activities, terrorism, etc.

    [4] Lack of third party information on crypto transaction

    • The lack of third party information on crypto transactions makes it difficult to scrutinise and identify instances of tax evasion.
    • One of the most efficient enforcement tools in the hands of Income Tax Department is CASS or ‘computer aided scrutiny selection’ of assessments, where returns of taxpayers are selected inter alia based on information gathered from third party intermediaries such as banks.
    • However, crypto-market intermediaries like the exchanges, wallet providers, network operators, miners, administrators are unregulated and collecting information from them is very difficult.

    [5]  Physical goods/services may change hand in return for cryptocurrencies

    • Even if the crypto-market intermediaries are regulated and follow Know Your Customer (KYC) norms, there remains a scenario, where physical cash or other goods/services may change hands in return for cryptocurrencies.
    • Such transactions are hard to trace and only voluntary disclosures from the parties involved or a search/survey operation may reveal the tax evaders.

    Steps need to be taken

    • Statutory provision: The income-tax laws pertaining to the crypto transactions need to be made clear by incorporating detailed statutory provisions.
    • Awareness generation: This should be followed by extensive awareness generation among the taxpayers regarding the same.
    • Separate mandatory disclosure: The practice of having separate mandatory disclosure requirements in tax returns (as is the case in the United States) should be placed on the taxpayers as well as all the intermediaries involved, so that crypto transactions do not go unreported.
    • Strengthen international legal framework: Additionally, the existing international legal framework for exchange of information should be strengthened to enable collecting and sharing of information on crypto-transactions.
    • This will go a long way in linking the digital profiles of cryptocurrency holders with their real identities.
    • Training tax officers: the Government must impart training to its officers in blockchain technology.
    • The United Nations Office on Drugs and Crime’s ‘Cybercrime and Anti-Money Laundering’ Section (UNODC CMLS) has developed a unique cryptocurrency training module, which can aid in equipping tax officers with requisite understanding of the underlying technologies.

    Consider the question “What are the provision in Income Tax Act 1961 to tax the cryptocurrencies? What are the challenges in taxing cryptocurrencies? “

    Conclusion

    It is certain that cryptocurrencies are here to stay. A streamlined tax regime will be essential in the formulation of a clear, constructive and adaptive regulatory environment for cryptocurrencies.

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  • How women cadets benefit the army

    Context

    Last year, the Supreme Court threw open the hallowed portals of the National Defence Academy for women. Something to truly celebrate on January 15, Army Day, this year.

    Background

    • The first batch of women officers was inducted into the Indian Army in non-medical roles via the Short Service Commission in 1992.
    • Since 2008, women were inducted as permanent commissioned officers in the legal and education corps  and as permanent commissioned officers in eight more non-combative corps in 2020.

    The low number of women in Army

    • As recent as 2020, women officers in the Indian army (excluding the medical corps) numbered just about three per cent.
    • Compare this to 16 per cent in the US, 15 per cent in France and 10 per cent in both Russia and the UK.

    Significance of allowing women to NDA

    • When in February 2020, the Supreme Court decreed that women officers should get command positions on par with male officers, it also effectively dismissed the military’s earlier objection that it would lead to “operational, practical and cultural problems”.
    • The SC went on to say that denying women commands based on the above argument was discriminatory and reinforced stereotypes.
    • Last year, the Supreme Court threw open the National Defence Academy for women to compete for the seats and subsequent permanent commission in the Indian army in any corps they desire, including the combat ones.
    • Addressing the shortage of officers: This may effectively address the long-standing shortage of officers in the Indian army in general. In response to a question in Rajya Sabha a month ago, the Minister of State for Defence said the Army has a shortage of 7,476 officers.
    • This torch may also help confront the chauvinism, often misspelt as chivalry, that indisputably exists in the Army.

    Conclusion

    The move promises to change the composition of this arm of the defence force not just quantitatively, but also qualitatively — both dire requirements of the force at present.

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    Back2Basics: Permanent Commission (PC) Vs. Short Service Commission (SSC)

    • SSC means an officer’s career will be of a limited period in the Indian Armed Forces whereas a PC means they shall continue to serve in the Indian Armed Forces, till they retire.
    • The officers inducted through the SSC usually serve for a period of 14 years.
    • At the end of 10 years, the officers have three options.
    • A PC entitles an officer to serve in the Navy till he/she retires unlike SSC, which is currently for 10 years and can be extended by four more years, or a total of 14 years.
    • They can either select for a PC or opt-out or have the option of a 4-years extension.
    • They can resign at any time during this period of 4 years extension.

  • MSP is necessary to make farming viable

    Context

    There has been debate on the issue of MSP with some arguing against it while some favouring it.

    The issues with MSP

    • The broad strands of argument against MSP are:
    • MSP hinders the price discovery: Providing MSP does not allow the market to discover the prices; if market cleared prices are less than MSP, then the only buyer would be the government; this would render the government bankrupt.
    • FPO as a mechanism to deal with markets: If markets have any distortions, the way to negotiate it is through Farmer Producer Organisations (FPOs) — as demonstrated by Amul.
    • Provide income support through DBT: A better way to address the possible income gap is to give an income support-based direct benefit transfer (DBT).

    Why MSP is necessary?

    1] Barriers in agri-markets

    • Through tariffs and other measures, we have built a national barrier on markets, where gates are opened on the basis of strategic intent.
    • If we were to open our borders for free movement of grains from elsewhere, we may even argue for unlocking agricultural land for more lucrative purposes without worrying about food self-sufficiency, buffer stocking and domestic food safety.
    • We may have to accept a national food safety for at least the essential foodgrains and pulses.

    2] Role of MSP as price signalling and why it needs to be given as legal guarantee

    • Disproportionate risk: If we were to look at farming, we realise that this exposes itself to disproportionate risks. 
    •  First, there is no stop-loss mechanism after sowing the seed, except for destroying the crop for the season.
    • This enterprise not only has the usual business risks but also has the enhanced risk of the force majeure elements that destroy the enterprise — a sudden hail storm, drought, unseasonal showers, a pest attack, a locust attack — there are too many things that the farmer cannot control.
    • Therefore, an MSP provides a powerful signal to the farmer to exercise the choice of sowing a particular crop because the farmer can back-calculate the expected margin.
    •  If MSP is a signal that helps the farmer to choose a crop, then it must remain a choice at the harvest time as well.
    • The significance of MSP is only when the markets do not clear the price.
    • In such a situation, the farmer gets a return less than the MSP and by this argument we are escorting the farm fraternity towards bankruptcy.
    • A legal guarantee is, therefore, needed.
    • The argument that the state will have to procure all the floating stock in the market and may become bankrupt is fallacious.
    • The intervention of the state in the markets usually covers information asymmetry, arbitrage and cools the markets when they get overheated.

    3] Why not opt for income support instead of MSP?

    •  Income support does not address the issue of viability of the farming operations.
    • There is no doubt that we need to make farming viable.
    •  It is important to address the prices of each crop as a strategic signalling mechanism: For crops that would be encouraged and those that would be discouraged.

    4] Issues with drawing parallels with AMUL

    •  While the Amul model recognised the inherent power of markets, it took about five decades to make the system competitive — the investments were made in breed improvement, free veterinary services, better cattle feed, capital subsidy for processing plants, and return-free capital as investments.
    • The nature of subsidies was smart and innovative.
    • Dairying was the last bit to be liberalised, and it enjoyed protection even when we opened up in 1991.

    Way forward

    • Modernise the markets: We need to modernise the markets and storage and processing facilities.
    • There is no point in conflating modernisation with liberalisation.
    • Investment: If we need to take Indian agriculture on the path of Amul, we need to start making those investments now.

    Consider the question “What are the objectives of providing MSP? How legal basis to MSP could help in making agriculture viable in India?”

    Conclusion

    Let us use the MSP framework smartly on diversified crops, on a decentralised basis while we develop the markets. A legal guarantee will only assure the farmers that they will not be bankrupted.

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  • The Indo-Pacific opportunity

    Context

    The geopolitics of the Indo-Pacific, which is changing fast. As it moves into 2022, the region will carry the imprint of the past five years, and will have to chart a course through inter-state tensions and crises, using both diplomacy and military preparedness.

    What will shape the geopolitics and geoeconomics of the Indo-Pacific?

    • Key players in the region: The region is central to world economy and peace, and nine countries are key players: the US, China, Japan, India, Germany, the UK, Russia, Australia and France.
    • The geopolitics and geo-economics of the Indo-Pacific will be largely shaped by the interplay of relations among these nations.
    • US-China relations: Of paramount importance is the US-China equation.
    • Expect this relationship to be marked by continually adversarial, competitive and cooperative traits.
    • Beijing’s south/east China policy, aggressive postures towards Taiwan, human rights violations in Xinjiang, the subjugation of Hong Kong’s citizenry and assertive economic outreach in the Indo-Pacific — these will weigh heavily on US-China relations.

    A significant role of groupings and individual nations

    • In this standoff, the role of new groupings and individual nations is significant.
    • Role of Quad: Foremost are the Quad, a strategic partnership between the US, India, Japan and Australia and the militaristic AUKUS (Australia, UK, US). 
    • India-Australia ties: Meanwhile, India and Australia are on track to deepen ties, not only bilaterally but also with the other two Quad powers.
    • The next Quad summit, probably hosted by Japan, will cement the grouping.
    • EU’s role: The EU’s Indo-Pacific strategy, announced last September, aims at increasing its economic and security profile in, and linkages with, the region.
    • UK’s role: Only by being more strategic and less mercantilist, more candid and assertive with China, and more cooperative with partners such as India, can the EU — and its former member the UK — hope to become vital players in the Indo-Pacific.
    • ASEAN, located in the middle of the Indo-Pacific waters, faces the heat of China’s aggression and the sharpening great power rivalry.
    •  It must enhance its realism and shed its tendency of wishing away problems.

    Suggestions for India

    • 1]Strengthen the Quad – especially by ensuring that the grouping fulfils its commitment to deliver at least one billion vaccine doses to Indo-Pacific nations by December 2022.
    • India must protect its established relationship with Russia, and show some resilience in dialogue with Beijing.
    • 2] Enhance relations with ASEAN nations: It must enhance cooperation with key Southeast Asian partners —Indonesia, Vietnam, Philippines and Thailand — while humouring ASEAN as a grouping.
    • 3] Give attention to African and Indian Ocean island states: The eastern and southern planks of Africa and the Indian Ocean island states need continued high policy attention and financial resources.
    • A clear economic and trade agenda to follow the flag in this vital region, is certain to yield long-term dividends.

    Consider the question “Indo-Pacific will present India strategic and economic opportunities that India must not miss. However, the region will have to chart a course through inter-state tensions and crises. Comment.”

    Conclusion

    India has done well by fulfilling its humanitarian duties during the pandemic. Learning how to convert them smartly into economic and strategic opportunities in its periphery is the focused task for the nation in 2022.

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  • China does not have it all its way in the South China Sea

    Context

    South-East Asian countries are increasingly wary of their giant neighbour.

    Background of dispute

    • Disputes in the South China Sea go back decades.
    • But it was only ten years ago that China, which makes maritime claims for nearly the whole sea, greatly upped the ante.
    • Countries involved: They involve Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam, all with contesting claims.
    • China provoked a stand-off that left it in control of an uninhabited atoll, Scarborough Shoal, which under un maritime law clearly belongs to the Philippines.
    • Then China launched a massive terraforming exercise, turning reefs and rocks into artificial islands hosting airstrips and bases.

    China’s strong-arm tactics

    • China’s long-term aim is to project Chinese power deep into the South China Sea and beyond, and to hold the Americans away during any conflict.
    • The immediate aim, though, is to dominate politically and economically as much as militarily.
    • China has challenged oil-and-gas activity by both Indonesia and Malaysia, and sent drilling rigs to both countries’ eezs and continental shelves.
    • It has bullied foreign energy companies into dropping joint development with Vietnam and others.

    Implications

    • China has paid a diplomatic price.
    • Impact on relations with ASEAN: Had Mr Xi engaged in none of the terraforming and bullying, China would be better admired among members of the ten-country Association of South-East Asian Nations (ASEAN).
    • Naval presence of the US: The United States and its Western allies have upped their naval presence in the sea, welcomed by most ASEAN members.

    Negotiation on Code of conduct on South China Sea

    • For years China dragged its feet on agreeing with ASEAN a code of conduct on the South China Sea, a principle agreed on 20 years ago in order to promote co-operation and reduce tensions.
    • These days, China likes to play willing.
    • China is demanding, in effect, the right of veto over ASEAN members’ naval exercises with foreign powers.
    • It also wants to keep out foreigners from joint oil-and-gas development.
    • Such demands are unacceptable to members.

    Conclusion

    Despite China’s efforts to establish its wild claims of sovereignty, China has been facing sustained resistance from the ASEAN countries.

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  • A new form of socialism powered by cooperative economic enterprises is required

    Context

    Inequalities of wealth have increased around the world and India is becoming one of the world’s most unequal countries.

    Role of globalisation and privatisation in increasing economic distress

    • Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.
    • Role of Globalisation: Opening national borders to free trade became an ideology in economics in the last 30 years.
    • Taxes of incomes and wealth at the top were also reduced.
    • The ideological justification was that the animal spirits of ‘wealth creators’ must not be dampened.
    • With higher taxes until the 1970s, the U.S. and many countries in Europe had built up their public health and education infrastructure and strengthened social security systems.
    • The rich are now being taxed much less than they were.
    • The pie has grown larger but the richest few have been eating, and hoarding, most of it themselves.
    • Role of privatisation: ‘Privatisation’ of everything became another ideological imperative in economics by the turn of the century.
    • Selling off public enterprises raises resources for funds-starved governments.
    • Another justification is efficiency in delivery of services, setting aside ethical questions of equity.
    • When ‘public’ is converted to ‘private’, rich people can buy what they need.
    • The gaps between the haves and the have-nots become larger.

    How liberal economic policies are creating illiberal societies

    • Liberal economists, promoting free markets, free trade, and privatisation, are worried by nationalism and authoritarian governments.
    • They rail against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens.
    • Liberals must re-examine their ideas of economics, to understand their own culpability in creating authoritarian and identitarian politics.

    The failure of capitalism and communism

    • While communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s solution to the “property” question — that there should be no private property — was a failure.
    • It deprived people of personal liberties.
    • Capitalism’s solution to the property problem — replacing all publicly owned enterprises with privately owned ones (and reducing taxes on wealth and high incomes) has not worked either.
    • It has denied many of their basic human needs of health, education and social security, and equal opportunities for their children.
    • The private property solution has also harmed the natural environment.

    Way forward

    • Climate change and political rumblings around the world are both warnings that capitalism needs reform.
    • Economic policies must be based on new ideas.
    • Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it seems to be trapped.
    • Principles of human rights must not be overpowered by property rights.
    • A new form of “Gandhian” democratic socialism, powered by cooperative economic enterprises, is required in the 21st century, to create wealth at the bottom, not only at the top, and save humanity and the planet.

    Conclusion

    A new form of ‘Gandhian’ democratic socialism powered by cooperative economic enterprises is required.

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