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  • Can India invoke state sovereignty in Cairn Energy case?

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: BIT

    Mains level: Paper 2- State sovereignty

    Context

    Last year, an arbitration tribunal indicted India for breaching its obligations by imposing taxes retrospectively on Cairn. As a result, Cairn Energy has been attempting to seize Indian assets in several jurisdictions to recover $1.7 billion due from India.

    How asset seizure order affects India?

    • This episode projects India as an unfriendly country for investors at a time when it wishes to project itself as a prime destination for foreign investment.
    • This episode puts India in the league of countries like Pakistan, Congo, Venezuela, Russia and Argentina, who have been part of attachment proceedings overseas due to their failure to comply with international arbitral awards.
    • Fighting cases will consume an enormous amount of time, money, and resources, in addition to attracting bad press internationally.

    Understanding the doctrine of state immunity

    • State immunity is a well-recognised doctrine in international law.
    • It safeguards a state and its property against the jurisdiction of another country’s domestic courts.
    • Despite the universal acceptance of this doctrine, there is no international legal instrument in force administering its implementation.
    • Attempts are underway to create binding international law on the application of the rules of state immunity such as the United Nations Convention on Jurisdictional Immunities of States and Their Property (UNSCI).
    • However, this convention is yet to be ratified by 30 countries — the minimum number required to bring it in force, as per Article 30(1) of UNSCI.
    • India has signed the convention, but not ratified it.
    • The doctrine of state immunity has progressed from absolute immunity to restrictive immunity in which immunity is only for the sovereign functions of the state.

    Can India invoke state immunity?

    • Most prominent jurisdictions follow the concept of restrictive immunity.
    • State immunity can be invoked to resist the seizure of sovereign assets, but not commercial properties. 
    • In the context of the execution of the investment treaty arbitration awards, properties serving commercial functions are available for seizure.
    • In the case of India, the most popular commercial property that foreign investors would target for attachment are the global assets of India’s public sector undertakings such as Air India.

    Way forward

    • If India wishes to continue the case, it needs to carefully study the laws on state immunity in different jurisdictions where attachment proceedings are likely to come up.
    • A better option would be to admit that amending the tax law retrospectively was a mistake and comply with the international ruling.

    Conclusion

    At the time when India seeks to project itself as an attractive investment destination, such cases could be a setback. India needs to avoid such disputes in the future.

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  • Police Reforms – SC directives, NPC, other committees reports

    Interference an investigating officer can do without

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Judicial interference in investigation

    Context

    Instances of judiciary directing the investigating officer point to the need for restraint from the judiciary.

    Challenging the discretion of investigating officer

    • There have been growing instances of subordinate judicial officers, and even High Courts sometimes, directing the investigating officer to effect the arrest of a particular individual.
    • To deal with the issue, the Supreme Court of India recently made the observation that courts have no authority to direct an investigating officer to in turn direct the arrest of any particular individual connected with a crime
    • This points to the need for a slightly kindlier view of police conduct and more latitude to them in the standard operating procedures which they follow, especially when they investigate a complicated crime.
    • The Code of Criminal Procedure (CrPC) vests sufficient discretion in the investigating officer to take such decisions as arrests and searches.

    Issues with court’s directions

    • Court observations that smack of a lack of faith in police ability and integrity will make grass-root level policemen even more arbitrary than now and force them into carrying out questionable actions that will cast aspersions on an officer’s ability to think for himself.
    • Court interference in the day-to-day investigation is not only undesirable but is also not sanctioned by law.
    • Only the Supreme Court, has been vested with enormous authority and discretion by the Constitution, the lesser courts shall not give directions in the matter of arrests and searches.

    Safeguard against police misconduct

    • We need to educate the Executive and the common man that it is now well-established law that the police have to register an FIR.
    • It is mandatory that every police station in the land should register a complaint under the relevant sections of a statute the moment a cognisable offence is made out in the complaint
    • There is another safeguard against police misconduct.
    • The CrPC makes it obligatory for the investigating officer to write a diary that details the action taken every day following registration.
    • When in doubt, the competent court, which already has a copy of the first information report, can demand to see the case diary.
    • Courts should remember that the police are a well-established hierarchy that is obligated to ensure objectivity during a criminal investigation.
    • Every investigation is supervised by at least two immediate senior officers.

    Conclusion

    Judicial interference in an investigation is counterproductive to the idea of justice. Therefore, there is a need for allowing more freedom to the investigating officers in the standard operating procedure that they follow.

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  • Addressing claims of backwardness by various politically powerful castes

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary,Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Social backwardness

    Mains level: Paper 2- Claim of backwardness and challenges

    Context

    Two rulings of the Supreme Court have frayed nerves in Maharashtra on the broader question of “reservation”. The other pertains to OBC reservation in local bodies. Both issues have relevance beyond Maharashtra.

    Challenges in addressing the demand for reservation

    • Lack of quantitative data: The issue of actual numbers or population share of OBCs has been talked about for over a decade.
    • Besides, there is a need to understand the socio-economic situation of different backward communities.
    • In the last instance, we have to decide which groups are backward and what needs to be done for them.
    • The political class have consistently avoided the juridical reality.

    Consensus between judiciary and political class

    • That consensus after implementation of Mandal commission recommendation had three dimensions:
    • 1) Accepting that caste is the main cause of tradition-born backwardness among a large section of the population.
    • 2) Resorting to “reservation” as the easiest policy response.
    • 3) Recognising and accommodating the political aspirations of the backward sections by expanding the social base of the political elite.
    • But this resulted in the current deadlock on the question of social justice.
    • Today, not only the Marathas, but Jats and Patidars, too, claim that vast numbers among them have been left behind in the contemporary economy.
    • These demands have deflected attention from two matters.
    • 1) That the enabling provision of the Constitution aims at social backwardness (caused by societal location).
    • 2) That the causes of economic distress originating in development policies are distinct from backwardness primarily originating in caste location.
    • Granting reservations on an economic basis seems to have complicated matters.

    Five reservation-related issues gaining renewed urgency

    • Intra-OBC differentiations: This issue was already raised by a member of the Mandal Commission itself.
    • Most states have failed to come up with an effective arrangement to addressing the issue.
    • The Centre is currently waiting for a report on this question.
    • Intra-caste stratification: Intra-caste stratification is increasing — something that was rather limited at the time of Mandal.
    • What sociologist D L Sheth called as classification is now becoming the central issue, with many complications.
    • Advantages and logic: The third question is about the specific advantages and logic of reservation in the three different arenas of employment, education and political representation.
    • Limits of reservation: There is need to discuss the limits of reservation and the need to think of additional measures to augment the policy of social justice.
    • Setting boundaries: With such widespread poverty and suffering, how do we distinguish between backwardness primarily caused by a group’s social location in traditional social order and backwardness resulting from distortions of the political economy?
    • Unless we grapple with this question, reservation is bound to remain a contentious issue.

    Way forward

    • The above questions are best left ideally to a third backward classes commission whose time has come.
    • Removing the 50 per cent cap legislatively needs to be considered.

    Conclusion

    We need to devise a mechanism to verify the claims of backwardness to address the increasing demands for reservation from the politically strong section of society.

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  • Issues with coercive Population Policy

    op-ed snap | Governance | Mains Paper 2: Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Right to reproductive freedom

    Mains level: Paper 2- Coercive policy measures to control population

    Context

    Recently, the government of Uttar Pradesh released a “Population Policy” in which it stated its intention to bring the gross fertility rate in the State down from the existing 2.7 to 2.1 by 2026.

    Provisions in the Bill

    • This draft law, titled the Uttar Pradesh Population (Control, Stabilisation and Welfare) Bill, 2021, seeks to provide a series of incentives to families that adhere to a two-child norm.
    • The Bill also intends on disentitling families that breach the norm from benefits and subsidies.
    • It promises public servants who undergo sterilisation and adopt a two-child norm several benefits.
    •  The draft Bill also contains a list of punishments.
    • A person who breaches the two-child norm will be debarred from securing the benefit of any government-sponsored welfare scheme and will be disqualified from applying to any State government job.
    • Existing government employees who infringe the rule will be denied the benefit of promotion.
    • Transgressing individuals will be prohibited from contesting elections to local authorities and bodies.

    Issues with coercive population control policies

    1) Counter-productive measure

    • Through an affidavit filed in court, the central government argued that “international experience shows that any coercion to have a certain number of children is counter-productive and leads to demographic distortions”. 

    2) Against international obligations

    • India is committed to its obligations under international law, including the principles contained in the International Conference on Population and Development Programme of Action, 1994.
    • Foremost in those principles was a pledge from nations that they would look beyond demographic targets and focus instead on guaranteeing a right to reproductive freedom.

    3) Against right to reproductive freedom and privacy

    •  In Suchita Srivastava & Anr vs Chandigarh Administration (2009),  the Court found that a woman’s freedom to make reproductive decisions is an integral facet of the right to personal liberty guaranteed by Article 21.
    • This ruling was endorsed by the Supreme Court’s nine-judge Bench verdict in K.S. Puttaswamy vs Union of India (2017).
    • A reading of the plurality of opinions there shows us that the Constitution sees a person’s autonomy over her body as an extension of the right to privacy.
    • A simple reading of U.P.’s draft law will show us that, if enacted, it will grossly impinge on the right to reproductive freedom.
    • However, In Javed & Ors vs State of Haryana & Ors (2003), the Court upheld a law that disqualified persons with more than two children from contesting in local body elections.
    • But the present UP Bill is far more disproportionate, therefore, the judgment in Javed can no longer be seen as good law.
    • The UP government will likely argue that there is no violation of privacy here because any decision on sterilisation would be voluntary.
    • But, as we ought to by now know, making welfare conditional is a hallmark of coercion.
    • Therefore, the proposed law will fall foul of a proportionality analysis.

    4) Negative consequences

    • An already skewed sex ratio may be compounded by families aborting a daughter in the hope of having a son with a view to conforming to the two-child norm.
    • The law could also lead to a proliferation in sterilisation camps, a practice that the Supreme Court has previously deprecated.
    • In Devika Biswas vs Union of India (2016), the Court pointed to how these camps invariably have a disparate impact on minorities and other vulnerable groups.

    Way forward

    • Experiences from other States in India show us that there are more efficacious and alternative measures available to control the growth of population, including processes aimed at improving public health and access to education.

    Conclusion

    For one thing, the reasoning of the Bill goes against the Puttaswamy case.  But as rousing as the nine-judge Bench verdict is, its legacy depends on how its findings are applied.

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  • e-Commerce: The New Boom

    The proposed e-commerce rules shield vested interests

    op-ed snap | | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Inventory model vs marketplace model

    Mains level: Paper 3- Issues with regulation of e-commerce

    Context

    The proposed Consumer Protection (E-Commerce) Rules, 2020, have been drafted ostensibly in the name of the consumer.  The rules are driven more by the desire to shield the traditional brick-and-mortar stores, and handicap e-commerce firms, especially the foreign ones.

    Issues with the provisions of draft Consumer Protection (E-Commerce) Rules, 2020

    1) Fall-back liability clause is unfair for those operating through marketplace model

    • Under this provision, e-commerce entities will be liable in case suppliers on the platform fail to deliver the goods to consumers, causing them a loss.
    • E-commerce firms in India operate through either the inventory model or the marketplace model.
    • As FDI is permitted only in the marketplace model.
    • Under the marketplace model, e-commerce platforms don’t hold inventory, but simply connect buyers and sellers.
    • Foreign players typically operate through this model. 
    • Considering that these platforms exercise little or no control over the inventory under this model, how can they be held liable for the sellers’ actions.

    2) Identifying goods based on country of origin and providing fair opportunity to domestic sellers

    • The draft rules also require e-commerce platforms to identify goods based on their country of origin.
    • And when goods are being viewed for purchase by consumers, the rules also mandate platforms to provide suggestions to ensure “fair opportunity” for domestic sellers.
    • This raises the question as to why the Make in India campaign is being pushed through the Consumer Protection Act.
    • Surely, if domestic manufacturers are competitive, consumers will automatically gravitate towards them.
    • Interests of consumers, not domestic manufacturers, should be at the core of the consumer protection framework.

    3) Overlapping/competing jurisdictions

    • Data protection: The draft rules have sought to safeguard consumer data by restraining e-commerce firms from sharing consumer data without consent.
    • But the data protection should be governed by the provisions under the Personal Data Protection Bill and not the Consumer Protection Act.
    • Considering the graded approach that is likely to be adopted under the Data Protection Bill, an e-commerce user’s data could be classified as per its vulnerability and be left under the jurisdiction of the data protection authority.
    • Dominant position: The rules also state that e-commerce entities are prohibited from abusing their dominant positions in the market. 
    • The “abuse of dominant position” has been given the same meaning as that prescribed under Section 4 of the Competition Act, 2002.
    • This will open the scope for new consumer protection authority to enter into issues of abuse of dominant position — the domain of the Competition Commission of India.

    Consider the question “Over-regulation tends to curb competition and create monopolies instead of ensuring its holistic growth dovetailed with fair competition. In light of this, examine the issues with the draft Consumer Protection (E-Commerce) Rules, 2020?”

    Conclusion

    The lines of demarcation that have been drawn up in the retail landscape — single brand vs multi-brand, online vs offline, domestic vs foreign — serve only to protect powerful vested interests, not benefit the consumer as is often proclaimed.

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  • The upcoming challenges to Indian federalism

    op-ed snap | Polity | Mains Paper 2: Federalism

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Federal structure

    Mains level: Paper 2- Challenges to India's federalism

    Context

    In 2026, there will be the challenge of addressing the conflict between the democratic principles and the federal principles, when there will be a reallocation of Lok Sabha seats. India needs to reimagine the current federal compact to address the challenges to federalism.

    Population freeze for Lok Sabha seats

    • Since 1976, seats in the Lok Sabha have reflected the 1971 census and have not taken into account changes in the population.
    • The primary reason for this has been unequal population growth among States.
    • India’s most highly developed and prosperous States have been successful at family planning, while the poorer States continue to expand.
    • The freeze was thus a chance to ensure that India’s most successful States are not punished politically for their success.
    • Therefore, the Indian Constitution may face an unprecedented crisis in 2026 when there will be a dramatic change in the composition of the Lok Sabha.

    Challenge of balancing the principle of democracy and federalism

    • As Article 1 of the Indian Constitution says, India is a Union of States.
    • However, the history of the linguistic reorganisation of States in 1956, and subsequent movements for Statehood afterwards demonstrates that States are distinct associative communities, within the federal structure of the Indian Union.
    • In a democratic set-up, all citizens are equal and are thus entitled to equal representation in governance.
    • But this would imply that bigger States are likely to dominate the national conversation over smaller States.
    • This leads us to an inherent contradiction between the principles of democracy and federalism when federal units are unequal in size, population and economics. 
    • The small States fear that they would get a smaller share of the pie economically, a much reduced say in national issues, and be irrelevant in the political governance of the country.

    How the US Constitution addresses the concerns of small states

    • When the Americans adopted their Constitution, they protected smaller States in four ways.
    • First, national powers over the States were limited.
    • Second, each State regardless of size had two seats in the Senate, giving smaller States an outsized role in national governance.
    • Third, Presidents are elected by electoral votes, which means they must win States rather than the total national population.
    • Fourth, the slave-owning states were allowed to count the slaves for purposes of representation, with each slave being counted as three-fifths of a person.
    • This essential structure remains the bedrock of the American Constitution today.

    How Indian Constitution deals with the issue?

    • India’s quasi-federal structure has always been sui generis.
    • Our founders knew that India’s diversity made federalism inevitable, but, fearing separatist tendencies among States that had never been a single political unit, they also created a strong centre.
    • However, the 1956 reorganisation of States on linguistic lines was a popular recognition of federal principles and yet did not result in separatist tendencies.
    • Since then, new States within the Union have been created in response to the demands of people for greater autonomy.

    Way forward on addressing the challenges to federalism

    • There is an urgent need to reimagine our national compact.
    • Following are the components of such a new balance that need to be fine-tuned to Indian realities.
    • Give more powers to States: The powers of States vis-à-vis the Centre contained in the Lists and in the provisions dealing with altering boundaries of States must be increased to assuage the fear of smaller States that they will be dominated by bigger ones.
    • More localised decision-making is bound to increase national prosperity.
    • Indeed, this was the entire goal of the creation of Panchayat governance through the 73rd and 74th Amendments to the Constitution.
    • Expand the role of Rajya Sabha: The role and composition of the Rajya Sabha, our House of States, must be expanded.
    • This would allow smaller States a kind of brake over national majoritarian politics that adversely impact them.
    • Consent of all states on financial redistribution: Constitutional change and the change in financial redistribution between the States must require the consent of all or nearly all States.
    • Constitutional provisions dealing with language and religion must also be inviolate.
    • Break the bigger States: Serious thought must be given to breaking up the biggest States into smaller units that will not by themselves dominate the national conversation.

    Conclusion

    The unity of India is, of course, the fundamental premise underlying this discussion; but this unity does not depend on an overbearing Centre for its survival.

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  • Capital Markets: Challenges and Developments

    SEBI needs to adopt dual approval system for independent directors

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Independent director

    Mains level: Paper 3- Dual approval system for independent directors

    Context

    While the regulators have taken giant strides to enhance board independence in India, one significant conundrum persists about appoint and removal process of the independent directors.

    How appointment and removal process affects the independence of independent directors?

    • Independent directors are appointed just like other directors through shareholder voting by a simple majority.
    • This confers a significant power in the hands of significant shareholders to handpick the independents.
    • In case of family-owned companies, it is not uncommon to appoint “friendly” independent directors.
    • As for public sector undertakings, there is a demonstrable affiliation between independent directors and the ruling political parties.

    Dual Approval System: Way forward

    • The above trends suggest that unless independent directors owe their allegiance to the shareholder body as a whole, independence is likely to remain largely in form and not function.
    • In its consultation paper, SEBI proposed a “dual approval” system.
    • Under this system, the appointment of an independent director required the satisfaction of two conditions:
    • First, the approval by a majority of all shareholders.
    • Second, the approval of a “majority of the minority”, namely the approval of shareholders other than the promoters.
    • SEBI recommended the same “dual approval” system for the removal of independent directors as well.
    • SEBI drew inspiration from Israel and the premium-listed segment of the United Kingdom, which confers greater power to minority shareholders in installing or dethroning independent directors.
    • SEBI has not yet made any mention of implementing the dual approval system.

    Issues with Dual Approval System

    • The first issue is that it militates against the majority rule principle that is intrinsic in a corporate democracy.
    • While understandable, that is hardly an immutable rule as corporate law does make exceptions in cases involving oppression of minority shareholders.
    • The second concern is that placing too much power in the hands of minority shareholders would be counterproductive, as it could result in a tyranny of the minority.
    • However, the dual approval system instead represents the best of both worlds. It does not negate the promoter’s involvement in the process of appointing or removing independent directors.
    •  Only consensus candidates would end up becoming independent directors.
    • The third issue is one of shareholder apathy: Will minority shareholders be motivated to exercise an informed and meaningful choice?
    • Minority shareholders tend to be passive when they are unable to influence the outcome of shareholding voting.
    • However, where they do have a significant say, like in the “majority of the minority” process, they are likely to be more active in exercising their franchise.

    Consider the question “How far has the provision of appointing independent directors to safeguard the interest of minority shareholders succeeded in its objectives? Suggest the changes to improve the challenges faced by the independent directors.”

    Conclusion

    In all, the appointment and removal system continues to undermine the independence and efficacy of corporate boards. The SEBI needs to implement the dual approval system at the earliest.

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  • RBI Notifications

    High forex reserves are no guarantee of monetary policy independence

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CAD

    Mains level: Paper 3- Forex reserves and its significance

    Context

    The ascending stock of forex reserves has led to the view this will enable the sole devotion of monetary policy to domestic objectives.

    Assessing the significance of forex reserves

    Let’s look into the experinec of China and India in this regard.

    1) Learning from China’s experience

    • In 2016, China had a strong external position—current account surplus and more than $3tn forex reserves.
    • However, investors’ expectations on renminbi (RMB) value began to shift due to rising concerns about its growth outlook, domestic rate cuts and eventual depreciation, and imminent tightening of US monetary policy, resulting in net capital outflows of $725 billio (bn) over the year.
    • This put sustained pressure upon the RMB.
    • Eventually, China resorted to capital control measures, which slowed the outflow and supported the RMB in the first half of 2017.

    2) India’s own historical record

    • India’s own historical record shows that, high or low, forex reserves didn’t prevent investors from reappraising positions.
    • India experienced this in case of oil prices (2018) or taper fears (2013).
    • The CAD was moderate, at 1.1% and 1.4% of GDP in two quarters to December 2017.
    • But as oil prices climbed, current account projections were rapidly revised to 2.5-3% of GDP in less than a quarter seeing the jump in the import bill, lagging exports and continuous outflow of portfolio capital.
    •  Reserves totalled $424 bn then (end-March 2018); foreign currency assets were $399 billion.
    • Against a mere $9 bn capital outflow, the peak-to-trough decline in reserves was $19 bn in April-June 2018, with 5% depreciation of the rupee.
    • The sharper, $21 bn fall in mid-April to July 20, 2018 equalled the reserves decline in April-August 2013 taper episode when the rupee depreciated three times more or 15%!
    • Forex reserves were much lower in 2013 ($255 bn range) and it had taken only a quarter for the current account gap to widen from 4.0% of GDP in April-June 2012 to 5.4% and a record 6.7% in subsequent two quarters to December 2012!

    Key takeaways

    • History shows that no level of reserves is a foolproof guarantee for macroeconomic stability or interest rate immunity.
    • The important lesson these episodes hold is that repressive attempts do not always convince markets or prevent shifts in expectations and often compel large, abrupt adjustment.
    • Investors reassess positions, including global factors, whatever the reserves’ stock.
    • The crucial role of reserves is psychological, i.e. market confidence and liquidity insurance that is immediate and unconditional that allows central banks to buy time, whether for a gradual adjustment, soft landing, or as the case may be.

    Distortion in bond market and RBI’s role in it

    • RBI has been systematically suppressing bond yields, particularly the 10-year benchmark, the reference rate for banks.
    • So effective was the repression that the bond market became irrelevant as yields altogether stopped responding to inflation or fiscal developments.
    • The 207-basis-point jump in retail inflation in a month in May, which exceeded expectations, caused not even a flicker in the yield premium for example.
    • This did not prevent responses elsewhere though – the overnight indexed swap (OIS), which signals future interest rate movements, increased 20-30 basis points at different tenures with fresh inflation risks.
    • Clearly, the market reading was inconsistent with RBI’s, whose rigid adherence to a particular level (6% in the case of the old, 10-year bond) was disregarded outright.
    • The monetary policy cue was not being accepted, failing to soothe ruffled feathers about inflation.

    Risk involved in RBI’s policy

    • If the global financial cycle were to suddenly turn, risk-aversion set in, or oil prices shoot up to risky levels, investors will undoubtedly look at actual differentials, not the one set in stone by RBI.
    • There will be exchange rate pressures, which RBI can no doubt manage with liberal reserves.
    • But the duration and degree of adjustment is not in RBI’s control, identically to the bond market one, where it has infinite capacity to keep local yields where it wants.
    • There’s a limit to how much foreign currency it can sell—the $609bn reserve holding is finite.
    • Currency depreciation can, therefore, worsen a bad situation as higher inflation pressurises domestic interest rates to rise.
    • RBI’s issuance of the new 10-year benchmark bond at 6.10%, which came as a surprise against its previous inflexibility, indicates RBI has internalised the above risks.
    • The disparate movements were undermining RBI,  whose commitment to continue the accommodative monetary policy as long as necessary to revive and sustain growth has been reassuring.

    Conlcusion

    When the economy is open, financially integrated and subject to cross-country dynamics, it is more prudent to let market forces play out a bit than persist with a stance that could turn unsustainable despite the high reserves.

    Back2Basics: What is Current Account Deficit (CAD) ?

    • The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
    • The current account includes net income, such as interest and dividends, and transfers, such as foreign aid, although these components make up only a small percentage of the total current account.
    • The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments (BOP).

     

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  • Foreign Policy Watch: India-Afghanistan

    Regional powers and the Afghanistan question

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: SCO members

    Mains level: Paper 2- Afghanistan after the US withdrawal

    Context

    A regional conclave of foreign ministers taking place in Dushanbe this week under the banner of the Shanghai Cooperation Organisation (SCO) should give us a sense of the unfolding regional dynamic on Afghanistan.

    SCO addressing challenges in Afghanistan

    • Geography, membership and capabilities make the SCO an important forum to address the post-American challenges in Afghanistan.
    • The SCO was launched 20 years ago by China and Russia to promote inner Asia stability. 
    • The current members of the SCO are China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Pakistan, and India.
    • The SCO has four observer states — Iran, Afghanistan, Mongolia and Belarus.
    • The idea of a regional solution to Afghanistan has always had much political appeal.
    • But divergent regional strategic perspectives limit the prospects for a sustainable consensus on Afghanistan.

    Implications of the US exit for the region

    • The quiet satisfaction in Moscow, Beijing, Tehran and Rawalpindi at the US’s exit from Afghanistan, however, is tinged by worries about the long-term implications of Washington’s retreat
    • Regional players have to cope with the consequences of the US withdrawal and the resurgence of the Taliban.
    • Neither Moscow nor Beijing would want to see Afghanistan becoming the hub of international terror again under the Taliban.
    • For China, potential Taliban support to the Xinjiang separatist groups is a major concern.
    • Iran can’t ignore the Sunni extremism of the Taliban and its oppressive record in dealing with the Shia, and Persian-speaking minorities.
    • Pakistan worries about the danger of the conflict spilling over to the east of the Durand Line, and hostile groups gaining sanctuaries in Afghanistan.

    Three factors that drive India’s Afghan policy

    • The US exit means a new constraint on Delhi’s ability to operate inside Afghanistan.
    • There is also the danger that Afghanistan under the Taliban could also begin to nurture anti-India terror groups.
    • If India remains active but patient, many opportunities could open up in the new Afghan phase.
    • Three structural conditions will continue to shape India’s Afghan policy.
    • One is India’s lack of direct physical access to Afghanistan.
    • This underlines the importance of India having effective regional partners.
    • Second, it remains to be seen if Pakistan’s partnership with China and the extension of the China Pakistan Economic Corridor into Afghanistan can address Pakistan’s inability to construct a stable and legitimate order in Afghanistan.
    • Third, the contradiction between the interests of Afghanistan and Pakistan is an enduring one.
    • While many in Pakistan would like to turn Afghanistan into a protectorate, Afghans deeply value their independence.
    • All Afghan sovereigns, including the Taliban, will inevitably look for partners to balance Pakistan.

    Way forward for India

    • India must actively contribute to the SCO deliberations on Afghanistan, but must temper its hopes for a collective regional solution.
    • At the same time, Delhi should focus on intensifying its engagement with various Afghan groups, including the Taliban, and finding effective regional partners to secure its interests in a changing Afghanistan.

    Conclusion

    India should pursue the regional solution to Afghanistan challenge after the US exit while increasing the engagement with the various players in Afghanistan including the Taliban.

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  • Foreign Policy Watch: India-Japan

    Strategic cooperation between India, Italy and Japan can ensure a free Indo-Pacific

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- India-Japan-Italy partnership

    Context

    Recently, Mr. Draghi, Italy’s Prime Minister described Chinese competitive practices as “unfair” and invited the EU to be franker and more courageous in confronting Beijing on various issues. Against this backdrop, a trilateral partnership between India-Japan-Italy could play important role in the Indo-Pacific region.

    India’s growing centrality in Indo-Pacific strategic architecture

    • Countries that share similar values and face similar challenges are coming together to create purpose-oriented partnerships.
    • In the context of the Indo-Pacific, the challenges posed by China’s assertive initiatives clash with a region lacking multilateral organisations capable of solving problems effectively.
    • But as a new pushback against China takes shape and as Indian foreign policy becomes strategically clearer, there is new momentum to initiatives such as the Quad.

    India-Italy-Japan trilateral partnership

    • Recently, Italy has also begun to signal its intention to enter the Indo-Pacific geography.
    • It has done so by seeking to join India and Japan in a trilateral partnership.
    • Italy has become more vocal on the risks emanating from China’s strategic competitive initiatives.
    • On the Indian side, there is great interest in forging new partnerships with like-minded countries interested in preserving peace and stability in the Indo-Pacific.
    • The responsibility of keeping the Indo-Pacific free and open, and working for the welfare of its inhabitants falls on like-minded countries within and beyond the region.

    Potential of trilateral partnership

    • Their compatible economic systems can contribute to the reorganisation of the global supply chains that is now being reviewed by many players as a natural result of the Chinese mismanagement of the COVID-19 pandemic.
    •  At the security level, the well-defined India-Japan Indo-Pacific partnership can easily be complemented by Italy.
    • At the multilateral level, the three countries share the same values and the same rules-based world view.

    The way forward for trilateral cooperation

    • The Italian government must formulate a clear Indo-Pacific strategy that must indicate its objectives.
    • But Rome must go beyond that in defining and implementing, at the margins of the EU’s common initiatives, its own policy with respect to the Indo-Pacific.
    • The India, Italy and Japan trilateral initiative can be a forum to foster and consolidate a strategic relationship between these three countries, and specifically expand India-Italy bilateral relations.
    • A trilateral cooperation can be the right forum for India and Italy to learn more from each other’s practices and interests and consolidate a strategic dialogue that should include the economic, the security and the political dimensions.
    •  To consolidate the trilateral cooperation in this field, the three countries need to define a common economic and strategic agenda.

    Conclusion

    A clear political will is needed from all sides, and Italy, in particular, should recognise its interests in playing a larger role towards the maintenance of a free and open Indo-Pacific. Robust India-Italy strategic ties can be the first step towards the realisation of this goal.

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