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Type: op-ed snap

  • Electoral Reforms In India

    Here is why the electoral bonds scheme must go

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Electoral bonds

    Mains level: Paper 2- Issues with electoral bond scheme

    The article highlights the constitutional objections to the electoral bond scheme.

    Context

    • The Supreme Court, after a brief hearing on March 24, reserved orders on the question of whether or not to stay the electoral bond scheme, ahead of the upcoming State elections.

    Issues

    1) Against democracy

    • When citizens cast their votes they have the right to do so on the basis of full and complete information.
    • And there is no piece of information more important than the knowledge of who funds political parties.
    • The Indian Supreme Court has long held — and rightly so — that the “right to know”, especially in the context of elections, is an integral part of the right to freedom of expression under the Indian Constitution.
    • By keeping this knowledge from citizens and voters, the electoral bonds scheme violates fundamental tenets of our democracy.

    2) Aids role of money in influencing politics

    • It is equally important that if a democracy is to thrive, the role of money in influencing politics ought to be limited.
    • In many advanced countries, for example, elections are funded publicly.
    • The purpose of this is to guarantee a somewhat level playing field, so that elections are a battle of ideas and not money.
    • The electoral bonds scheme, however, removes all pre-existing limits on political donations, and effectively allows well-resourced corporations to buy politicians by paying immense sums of money.

    3) Creates asymmetry in donation

    • Electoral bonds allow receiving limitless donation and that too asymmetrically.
    •  Since the donations are routed through the State Bank of India, it is possible for the government to find out who is donating to which party, but not for the political opposition to know.
    • This, in turn, means that every donor is aware that the central government can trace their donations back to them.
    • Statistics bear this out: a vast majority of the immensely vast sums donated through multiple electoral cycles over the last three years, have gone to the ruling party.

    Issues with the government’s defence

    • The government has attempted to justify the electoral bonds scheme by arguing that its purpose is to prevent the flow of black money into elections.
    •  It is entirely unclear what preventing black money has to do with donor anonymity, making donations limitless, and leaving citizens in the dark.
    • Indeed, as the electoral bonds scheme allows even foreign donations to political parties.
    • With this the prospects of institutional corruption including by foreign sources increases with the electoral bonds scheme, instead of decreasing.

    Constitutional objections

    • The objections to the electoral bonds scheme, highlighted above, are not objections rooted in political morality, or in public policy, they are constitutional objections.
    • The right to know has long been enshrined as a part of the right to freedom of expression.
    • Uncapping political donations and introducing a structural bias into the form of the donations violate both the guarantee of equality before law, as well as being manifestly arbitrary.

    Judiciary must act

    • Governments derive their legitimacy from elections.
    • However, for just that reason the process that leads up to the formation of the government should be policed with particular vigilance.
    • In other words, the electoral legitimacy of the government is questionable if the electoral process has become questionable.
    • The courts is the only independent body that can adequately umpire and enforce the ground rules of democracy.

    Consider the question “How electoral bond scheme can play role in preventing black money in elections? What are the issues with the electoral bond scheme? 

    Conclusion

    The government should take into account the distorting effect of the electoral bonds scheme and take measures to remove the provisions in the scheme that leaves the scope for its misuse.

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  • How fiscal stimulus in the U.S. will impact emerging economies

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Uneven economic recovery at the global level and policy challenges it poses

    The article highlights how the faster recovery of the U.S. economy aided by the faster vaccination and stimulus packages may pose a policy challenge to the emerging economies.

    About the fiscal stimulus in the U.S.

    • With the recent passage of Biden’s $1.9 trillion coronavirus relief package, the cumulative fiscal stimulus amounts to 25 per cent of GDP. 
    • This reliance on fiscal stimulus is in sharp contrast to the policy response in the aftermath of the 2008 global financial crisis (GFC) when monetary policy was the main tool.
    • The over reliance on fiscal measures is because of the “liquidity trap” — interest rates are already treading close to zero.

    So, what does this mean for the US and emerging economies?

    • From the US perspective, this is good news.
    • The U.S. economy is expected to converge to the pre-pandemic GDP projection after the third quarter of 2021, exceeding it by 1 per cent in the fourth quarter.
    • The impact on emerging economies is less certain.
    • A booming US economy generally bodes well for global growth as higher demand “spills over” to the rest of the world.
    • However, the sectoral contribution to US growth presents a different picture this time.
    • Private consumption of goods (tradable) is already back to pre-pandemic levels, while consumption of services remains significantly below pre-pandemic levels.
    • As the vaccination drive gathers pace in the US and the economy slowly opens up, it should be fair to assume that the non-tradable sector would be driving growth.
    • But given the expected nature of the underlying growth, the positive impact on emerging economies will perhaps be softer.
    • With smaller fiscal stimulus in emerging economies and the slower vaccine roll, the US recovery largely being led by the non-tradable sector will result in a divergence in growth between the US and emerging countries.

    Policy challenge for emerging economies which is different from GFC

    • Post-GFC, a combination of zero interest rates and quantitative easing in advanced economies led to a significant surge in capital inflows to emerging countries in search of higher yield leading to an appreciation of their currencies.
    • Now, the situation is exactly the opposite.
    • The differential rate of recoveries has already led to capital outflow from emerging economies.
    • The rise in yield in the U.S. may further fuel capital outflows in coming days leading to tighter monetary conditions in emerging markets.

    What should be India’s policy response

    • As far as India is concerned, the macro-economic fundamentals are much stronger than during the taper-tantrum days.
    • The foreign exchange reserves remain at historically high levels, the current account situation is comfortable and the inflation rate remains within the target band of the RBI.
    • In the event of capital outflows, the RBI should let the currency depreciate as the first line of defence to preserve India’s external competitiveness and intervene only to smoothen out extreme volatility.
    • It should avoid the temptation to increase interest rates at the risk of hurting the pace of economic recovery.

    Consider the question “Uneven economic recovery on the global level poses a policy challenge to India. In this context, discuss the possible impact of uneven recovery and suggest the policy measures to deal with it.”

    Conclusion

    Uneven recovery at the global level demands an unconventional policy approach. The policy approach of India should be based on this premise.

    Back2Basics: Taper Tantrum

    • The phrase, taper tantrum, describes the 2013 surge in U.S. Treasury yields, resulting from the Federal Reserve’s (Fed) announcement of future tapering of its policy of quantitative easing.
    • The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
    • The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.

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  • Disinvestment in India

    Why privatising public assets is poor economics

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- How fiscal deficit financed government spending leads to wealth inequality

    The article highlights the issues with government expenditure driven by the selling of public sector assets.

    How public asset selling could affects private investment decisions

    • Public sector assets are not bought by reducing consumption or investment.
    • Current investment expenditure depends on decisions taken in the past and is more or less pre-determined.
    • Investment decisions that are taken today for fructification tomorrow that may be scaled down by such a purchase.
    • However, if investment decisions taken today are scaled-down, then it results in crowding out and such a strategy should be avoided anyway.
    • This implies that selling public sector assets therefore does not release any resources from private use for government spending.

    How selling public asset has same macroeconomic effect as fiscal deficit

    • In case of fiscal deficit, the government puts its bonds in private hands; in sale of a public asset, the government puts its equity held in public sector assets in private hands.
    • The macroeconomic consequences of a fiscal deficit on the economy are no different from those of selling public assets.
    • However, finance capital, and institutions like the IMF treat the sale of public assets on a different footing from a fiscal deficit, for ideological — not economic — reasons, because they ideologically favour a dismantling of the public sector.

    How fiscal deficit leads to wealth inequality

    • In a situation of demand-constraints, where unutilised capacity and unemployed workers exist aplenty, if an appropriate monetary policy is pursued, it can have no adverse effects whatsoever, except one: It increases wealth inequality.
    • The government expenditure financed by the fiscal deficit creates additional aggregate demand that increases output and incomes until the additional savings generated out of such incomes exactly match the fiscal deficit.
    • These additional savings accrue to the savers without their having to reduce their consumption, compared to the initial situation (that is, prior to government expenditure increase).
    • Since savings represent additions to wealth, this amounts to putting extra wealth into the hands of the rich.
    • Selling public assets puts into private hands public assets, and that too at prices well below the capitalised value of earnings.
    • This increases wealth inequality for two reasons:
    • First, it does so exactly as a fiscal deficit does.
    • Second, the public asset it puts in private hands is under-priced.

    Why tax financed government spending should be preferred

    • If the same government expenditure is financed by taxation, no matter who was taxed, then there would be no addition to private wealth and hence no increase in wealth inequality.
    • Which is why tax-financed government expenditure should always be preferred to fiscal-deficit-financed government expenditure.

    What alternative government have

    • The obvious one is wealth taxation.
    • Taxing away the private wealth created by a fiscal deficit leaves private wealth inequality unchanged at its initial level; it does not exacerbate it.
    • If the government is unwilling to impose higher wealth or profit taxes, it can raise GST rates on several luxury goods.

    Consider the question “How fiscal deficit financed government spending differs in its impact on weath inequality from the tax-financed government spending?”

    Conclusion

    Thus, selling public assets to finance government spending is both undesirable and unnecessary.

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  • Trans Pacific Partnership: Latest updates and developments

    Recalibrating India-Taiwan ties

    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-Taiwan ties

    25 years of friendship

    • India and Taiwan are celebrating 25 years of their partnership.
    • Mutual efforts between Delhi and Taipei have enabled a range of bilateral agreements covering agriculture, investment, customs cooperation, civil aviation, industrial cooperation and other areas.
    • This growing relationship indicates that the time has come to recalibrate India-Taiwan relations.

    Recalibrating relationship

    1) Creating political framework

    • Both partners have increasingly deepened mutual respect underpinned by openness, with democracy and diversity as the key principles for collective growth.
    • To make this relationship more meaningful, both sides can create a group of empowered persons or a task force to chart out a road map in a given time frame.

    2) Cooperation in healthcare

    • Taiwan’s handling of the pandemic and its support to many other countries underlines the need to deepen healthcare cooperation.
    • India and Taiwan already collaborate in the area of traditional medicine.
    • The time is ripe to expand cooperation in the field of healthcare.

    3) Bio-friendly technologies

    • Stubble burning and an associated decline in air quality has become a challenge for Indian government.
    • Taiwan could be a valuable partner in dealing with this challenge through its bio-friendly technologies.
    • Such technologies convert agricultural waste into value-added and environmentally beneficial renewable energy or biochemicals.
    • This will be a win-win situation as it will help in dealing with air pollution and also enhance farmers’ income.
    • Further, New Delhi and Taipei can also undertake joint research and development initiatives in the field of organic farming.

    4) Cultural exchange

    • India and Taiwan need to deepen people-to-people connect.
    • Cultural exchange is the cornerstone of any civilisational exchange.
    • However, Taiwanese tourists in India are a very small number.
    • The Buddhist pilgrimage tour needs better connectivity and visibility, in addition to showcasing incredible India’s diversity. .
    • With the Taiwan Tourism Bureau partnering with Mumbai Metro, Taiwan is trying to raise awareness about the country and increase the inflow of Indian tourists.

    5) Deepening economic ties

    • India’s huge market provides Taiwan with investment opportunities.
    • The signing of a bilateral trade agreement in 2018 was an important milestone.
    • Taiwan’s reputation as the world leader in semiconductor and electronics complements India’s leadership in ITES (Information Technology-Enabled Services).
    • This convergence of interests will help create new opportunities.
    • Despite the huge potential, Taiwan investments have been paltry in India.
    • Taiwanese firms find the regulatory and labour regime daunting.

    Consider the question “Though mutual efforts between Delhi and Taipei have enabled a range of bilateral agreements, the time has come to recalibrate India-Taiwan relations” In light of this, discuss the ways in which the two countries can deepen bilateral relations and increase cooperation.

    Conclusion

    The two countries have much to cooperate and build the relationship on. What is needed is the political will to recalibrate the relationship.

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  • Women empowerment issues – Jobs,Reservation and education

    Why the MTP Bill is not progressive enough

    op-ed snap | | Mains Paper 2: Parliament & State Legislatures

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Provision of MTP Act

    Mains level: Paper 2- Issues with the MTP bill

    The article highlights key changes the Medical Termination of Pregnancy (Amendment) Bill, 2021 seeks to make in the 1971 Act and also deals with the issues with some of these changes.

    Key changes

    • The 1971 Act had moral biases against sexual relationships outside marriage, adopts an ableist approach and carries a strong eugenic emphasis.
    • In addition to preventing danger to the life or risk to physical or mental health of the woman, “eugenic grounds” were recognised as a specific category for legally permissible abortions.
    • To deal with these issues the Medical Termination of Pregnancy (Amendment) Bill, 2021 was passed by the parliament.
    • The bill is being hailed for two reasons:
    • First, the bill replaces “any married woman or her husband” with “any woman or her partner” while contemplating termination of pregnancies resulting from contraception failures, thus ostensibly destigmatising pregnancies outside marriage.
    • Second, the time limit within which pregnancies are legally terminable is increased.

    Issues with the Bill

    1) Scope for executive overreach

    • The bill raises the upper gestational limits for the two categories of permissible abortions envisioned in Section 3(2) of the 1971 Act.
    • Limit for the first category in which pregnancies are terminable subject to the opinion of one medical practitioner is raised from 12 weeks to 20 weeks.
    • The limit for the second category in which pregnancies are terminable subject to the opinion of two medical practitioners is raised to include those exceeding 20 but not exceeding 24 weeks, instead of the present category of cases exceeding 12 but not exceeding 20 weeks.
    • However, the second category is left ambiguous and open to potential executive overreach insofar as it may be further narrowed down by rules made by the executive.

    2) Rejection of the bodily autonomy of women

    • Pregnancies are allowed to be terminated only where:
    • 1) Continuance of the pregnancy would “prejudice the life of the pregnant woman.
    • 2) Or cause grave injury to her mental or physical health”
    • 3) Or “if the child were born it would suffer from any serious physical or mental abnormality.”
    • As such, the bill seeks to cater to women “who need to terminate pregnancy” as against “women who want to terminate pregnancy.”
    •  By not accounting for the right to abortion at will the Bill effectively cripples women’s bodily autonomy.

    3) Ableist approach

    • A woman’s right to terminate the pregnancy of a child likely to suffer from physical or mental anomalies or one diagnosed with foetal abnormalities, on socio-economic grounds or otherwise, merits recognition.
    • However, in treating “physical or mental disability” or “foetal abnormalities” as separate categories amounting to heightened circumstances for termination of pregnancies, the bill reveals its ableist approach.
    • This evidences a presumption that certain people are by default societally unproductive, undesirable and somehow more justifiably eliminable than others.
    • This ableism becomes stark when the said 24-week limit, which is purportedly dictated by scientific and legislative wisdom, is completely lifted where the termination of a pregnancy involves “substantial foetal abnormalities”.

    4) Dichotomy in allowing termination beyond 24 weeks

    • When read together with Section 3(2B) of the bill, a strange dichotomy emerges:
    • 1) It is either the case that medical advancement is such that a safe abortion is possible at any point in the term of pregnancy, and hence, the bill allows it in case of “substantial foetal abnormalities” .
    • Or that, a 24-week ceiling is scientifically essential and abortions beyond the said limit would pose risks to the health of the pregnant woman or the foetus.
    • If it is the former, then allowing termination only in cases of “substantial foetal abnormalities” is a fictitious and moralistic classification.
    • If it is the latter, then the secondary status of women’s safety and the dominant eugenic tenor of the bill once again becomes evident.

    Need to sensitise healthcare provider

    • Access to abortion facilities is limited not just by legislative barriers but also the fear of judgment from medical practitioners.
    • It is imperative that healthcare providers be sensitised towards being scientific, objective and compassionate in their approach to abortions notwithstanding the woman’s marital status.

    Consider the question “What are the changes the Medical Termination of Pregnancy (Amendment) Bill, 2021 seeks to make in the 1971 Act. Discuss the issues with the changed provision in the Act.

    Conclusion

    In KS Puttaswamy v Union of India, the Supreme Court recognised women’s constitutional right to “abstain from procreating” was read into the right to privacy, dignity and bodily autonomy. The MTPA Bill falls short of meeting this constitutional standard and its own stated objectives.

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  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    Applying the policy of self-reliance to health, infrastructure and green technologies

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- How Atmanirbhar Bharat policies can help in post-covid recovery

    The article highlights how Atmanirbhar Bharat policies can play important role in India’s post-pandemic recovery.

    Decline of trade-led catch-up growth

    • The Asian Development Bank identifies India as an outlier, with the country’s GDP growth likely to range between eight and 10 per cent — as against 7.7 per cent for China and seven per cent for the Asian region.
    • The convergence between the rich and poor countries in the 1990s and 2000s was founded on high relative growth rates driven by globalisation and export-led growth.
    • The World Bank and many international think tanks are now projecting a process of de-globalisation, reduction in exports, and reduced service exports from the tourism, travel and hospitality sector in response to COVID.
    • So, the phenomenon of trade-led catch-up growth is declining.

    How Atmanirbhar Bharat is different from past strategies

    • India’s import substituting growth strategy of the 1960s did not succeed because the high protective customs barriers led to the growth of non-competitive industries.
    • The current Atmanirbhar Bharat project is different because tariffs are low and public investment is focused on non-tradable infrastructure rather than commodity production.

    1) Atmanirbhar in heath: Atmirbhar Swasth Bharat

    • Atmanirbhar Swasth Bharat is a domestic non-trade dependent initiative which will invest over Rs 64,000 crore in setting up 17,800 rural and 11,000 urban health and wellness centres and 602 critical care hospitals in the country’s districts.
    • Today India has 29 health workers per 10,000 population, while we need 60 such professionals per 10,000 people, as per WHO norms.
    • Creating such a cadre will mean nearly four million new jobs, which can be self-paying.

    2) Infrastructure

    • China and emerging markets like Russia and Brazil have a fairly advanced transport and energy infrastructure.
    • India has a huge potential to renew its railways and highways and shift to solar energy from its current dependence on coal.
    • In fact, the country’s long-neglected fourth largest rail network in the world is undergoing rapid transformation.
    • While rail track coverage expanded by 5,000 km during 2010 to 2014-15, nearly 7,000 km of tracks were added between 2015 and 2020.
    • The Railways now aim to lay 9.5 km of track daily and have raised adequate capital for the same by leveraging domestic insurance funds.
    • Railways are also aiming for 100 per cent electrification and zero carbon footprint by 2024.
    • Electrified track has doubled from 20,000 km in 2012/13 to nearly 40,000 km in 2020.
    • The Centre’s decision to invest heavily in urban mass transit systems since 2014 has led to the rapid expansion of such services.
    • The resolution of financial problems of blocked PPP projects and smooth land acquisition process has increased the pace of construction of national highways.
    • Pace of construction of the national highway increased from 3,330 km per year during 2009-20014 to nearly 9,450 km in 2020-21.

    3) Renewable energy

    • Today over 55 per cent of India’s energy comes from coal but the share of renewable has been steadly increasing.
    • Starting with only 10 MW of solar power in 2010, India has installed nearly 35 GW of solar power by 2020.
    • This has been propelled by economic reforms which drove solar power prices down from Rs 17 per unit in 2010 to Rs 2.44 per unit in 2020.
    • The target of reaching 100 GW by 2022 can drive growth further.
    • Currently nearly 25 per cent of India’s electricity is used for pumping underground water for irrigation.
    • Providing irrigation energy from decentralised solar grids — solar power can be generated at the points on consumption.
    • This will reduce huge transmission losses and the associated carbon footprint of non-renewable energy sources.

    4) Privatising public sector outfits

    • The Centre’s shift towards privatising public sector outfits including banks, insurance companies and other PSUs can fund the growth of rail, road and energy infrastructure.
    • This will also foster efficiency in India’s credit system.
    • China achieved supernormal growth in infrastructure without access to international financing in the initial decades.
    • Recent studies have revealed that China’s financial decentralisation and commercial exploitation of state-owned lands was critical for the success.
    • In India, too, regional development authorities like the Mumbai Metropolitan Regional Development Authority and Maharashtra Industries Development Corporation have financed the metro, trans-harbour links and industrial infrastructure through a similar commercial land allocation model.
    • This model can be extended throughout the country to finance infrastructure expansion.

    Consider the question “How Atmanirbhar Bharat policies differ from the past import-substituting growth strategy? Examine the role Atmanirbhar Bharat can play in the post-pandemic recovery?” 

    Conclusion

    In such a way, Atmanirbharta with its various facets will pave the road of post-pandemic recovery.

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  • NPA Crisis

    Bad bank is good move

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Bad bank

    Mains level: Paper 3- Advantages of bad bank

    The article explains the important role bad bank can play in cleaning up the balance sheets of the banks.

    How India banks dealt successfully with pandemic

    • Indian banks were written off in the early days of the pandemic due to expectations of an exponential jump in non-performing assets.
    • Only after the banks consistently talked about the lower number of restructuring requests, and the higher provision coverage ratios that the markets began to get convinced.
    • What finally turned the corner were the budget announcements related to the financial sector
    • There are several reasons for this good performance by the banks.
    • First, banks in India and globally were much better capitalised prior to the pandemic.
    • Second, Indian banks had built up a sizeable buffer to provide for bad assets negating any surprise on balance sheets during and even after the pandemic.
    • Third, independent research shows that as the size of the middle class grows to about two-thirds of Asian households.
    • Banks in Asia, including in India, have begun to adjust for this steady growth in the size of pie by experimenting with new business models, rationalising costs and providing faster and superior customer digital experience, as was clear during pandemic.
    • Fourth, Indian banks and the RBI brought about financial discipline much before the pandemic.

    Creation of Bad Bank

    • The budget this year has the provision for reation of a bad bank.
    • The proposed structure envisages setting up of a National Asset Reconstruction Company (NARC) to acquire stressed assets in an aggregated manner from lenders, which will be resolved by the National Asset Management Company (NAMC). 
    • A skilled and professional set-up dedicated for Stressed Asset Resolution will be ably supported by attracting institutional funding in stressed assets through strategic investors, AIFs, special situation funds, stressed asset funds, etc for participation in the resolution process.
    • The net effect of this approach would be to build an open architecture and a vibrant market for stressed assets.

    How it will work

    • Banks may first transfer those assets to the proposed bad bank with a 100 per cent provision on its book and then based on the experience they will decide on transferring assets with less than 100 per cent provisioning at a later date.
    • It is also being speculated that of the total amounts recovered, a specified percentage will be in the form of security receipts.
    • These receipts will reside in the bank balance sheets, but will carry a zero-risk weight, with full government guarantees for a specified period of time.

    How it will benefit the banks

    • The benefits of this process includes the recovered value, and significant lending leverage because of three factors:
    • One, capital being freed up from less than fully provisioned bad assets.
    • Two, capital freed up from security receipts because of a sovereign guarantee.
    • Three, cash receipts that come back to the banks and can be leveraged for lending, also freeing up provisions from the balance sheet.
    • There are several international success stories of a bad bank accomplishing its mission and there is no reason to believe why India cannot accomplish its objective.
    • The current Indian approach will drive consolidation of stressed assets under the AMC for better and faster decision making.
    • This will free up management bandwidth of banks enabling them to focus on credit growth, leading to an enhancement in their valuations.
    • Governance of the AMC and its independence is central to its successful functioning, there are multiple suggestions to make.
    • These include keeping majority ownership in the private sector, putting together a strong and independent board, a professional team, and linking AMC compensation to returns delivered to investors.

    Consider the question “What is a bad bank? How its creation could help the banking sector?”

    Conclusion

    The creation of a bad bank will help the banking sector contribute more in the growth of the country

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  • Foreign Policy Watch: India-Pakistan

    Applying lessons from India-Bangladesh ties to relations with Pakistan

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Lessons to improve India-Pakistan relations

    There is a sharp contrast between India’s relations with its neighbours two neighbours: Pakistan and Bangladesh. The article suggest drawing on the lessons from Indo-Bangladesh relations to mend Indo-Pak relations.

    Indo-Bangladesh relations

    • Prime Minister of India will travel to Dhaka this week to commemorate Bangladesh’s Declaration of Independence from Pakistan 50 years ago.
    • From being one of the world’s poorest countries in 1972, Bangladesh is now racing to be in the world’s top 25 economies by the end of this decade.
    • It is also a time for deeper reflection — on the inability of the region to come to a closure on the two Partitions of the subcontinent, the first in 1947 and the second in 1971.
    • Delhi and Dhaka have started finding ways to overcome the tragedy of the Partition to chart a new course of bilateral and regional cooperation.
    • Prime Minister Sheikh Hasina has provided strong leadership in advancing ties with India over the last decade and more.
    • Recently the Indian government mobilised enough political support to get a boundary settlement agreement with Bangladesh approved by the Parliament.
    • India also backed an international tribunal’s award resolving the maritime territorial dispute with Bangladesh.
    • The steady improvement in bilateral relations over the last decade has reflected in growing trade volumes, expanding trans-border connectivity, mutual cooperation on terrorism, and widening regional cooperation.

    Applying lessons from Indo-Bangladesh relations to Indo-Pak relations

    • Positive changes in India’s relations with Pakistan have been elusive.
    • Hopes have been rekindled by the agreement late last month between the two military establishments to a ceasefire on the border and to address each other’s concerns.
    • Following are the lessons we can learn and apply productively to Indo-Pak relations

    1) Importance of political stability

    • First lesson is the importance of political stability and policy continuity that have helped Delhi and Dhaka deepen bilateral ties over the last decade.
    • In contrast, the political cycles in Delhi and Islamabad have rarely been in sync.
    • Pakistan’s mainstream civilian leaders have all supported engagement with India.
    • In fact, it is the military that is yet to make up its collective mind.

    2) Concerns for mutual security

    • Cooperation in countering terrorism built deep mutual trust between Dhaka and Delhi.
    • That trust helped deal with many complex issues facing the relationship.
    • In the case of Pakistan, its army has sought to use cross-border terrorism as a political lever to compel India to negotiate on Kashmir.
    • If sponsoring terror seemed a smart strategy in the past, it has now become the source of international political and economic pressure on Pakistan.

    3) Depoliticise national economic interests

    • Delhi and Dhaka have steadily moved forward on issues relating to trade, transit and connectivity by dealing with them on their own specific merits.
    • Pakistan, on the other hand, has made sensible bilateral commercial cooperation and regional economic integration hostages to the Kashmir question.
    • It is not clear if Pakistan is ready to separate the two and expand trade ties while talking to India on Kashmir.

    Consider the question “The steady improvement in bilateral relations with Bangladesh over the last decade can offer valuable lessons to be applied to India-Pakistan relations. In light of this, examine the factors that India and Pakistan need to focus on to achieve improvement in bilateral relations.”

    Conclusion

    Both India and Pakistan need to recognise the importance of pursuing the national well being through regional cooperation. That is exactly what Bangladesh has done in the last decade.

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  • Iran’s Nuclear Program & Western Sanctions

    Iran deal could be rescued by the IAEA

    op-ed snap | International Relations | Mains Paper 2: Important International Institutions

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: JCPOA

    Mains level: Paper 2- Role IAEA can play in rescuing JCPOA

    The article explains how IAEA could play an important role in finding a solution to the stalemate between the U.S. and Iran on JCPOA.

    Issue of Iran’s return to JCPOA

    • There is uncertainty between the U.S. and Iran on the Joint Comprehensive Plan of Action (JCPOA) as to whether Iranian compliance comes first or the lifting of sanctions by the U.S.
    • In this context, the International Atomic Energy Agency (IAEA) is back on the stage to rescue the JCPOA.
    • The U.S. tried to pressurise Iran by proposing a resolution in the IAEA Board of Governors meeting criticising Iranian non-compliance with the JCPOA and its alleged IAEA safeguards violations.
    • This comes amidst rumours that Iran might withdraw from the Non-Proliferation Treaty (NPT).

    Iran may follow Indian model on creating a deterrent

    • Foreign Policy recently noted that Iranian society increasingly see the weapon not just as an ultimate deterrent but as a panacea for Iran’s chronic security problems and challenges to its sovereignty by foreign powers.
    • If the stalemate continues on JCPOA, because of the U.S. pressure, public opinion may shift towards the Indian model of creating a deterrent and then seeking a special dispensation to avoid severe sanctions.
    • But the risks involved in such a policy will be grave, including the possibility of military action by Israel.

    Relation between IAEA and NPT

    • The IAEA is neither the Secretariat of the NPT nor is it empowered to request States to adhere to it.
    • . It does, however, have formal responsibility in the context of implementing Article III of the Treaty.
    • At the broadest level, the IAEA provides two service functions under the NPT.
    • 1) It facilitates and provides a channel for endeavours aimed at further development of the applications of nuclear energy for peaceful purposes.
    • 2) It administer international nuclear safeguards, in accordance with Article III of the Treaty, to verify fulfilment of the non-proliferation commitment assumed by non-nuclear-weapon States party to the Treaty.
    • The NPT assigns to the IAEA the responsibility for verifying, at the global level, through its safeguards system, that non-nuclear weapon States fulfil their obligations not to use their peaceful nuclear activities to develop any nuclear explosive devices of any kind.

    How IAEA could play role in JCPOA

    • Accordingly, the Iranian file could go back to the IAEA to start fresh negotiations to restrain Iran to remain within the permissible level of enrichment of uranium.
    • This may mean going back to the pre-six nation initiative, when the IAEA could not certify that Iran was not engaged in weapon activities.
    • With the experience of the JCPOA, any new arrangement has to ensure the following:
    • 1) Iran must have sanctions relief.
    • 2) The stockpile of enriched uranium should not exceed the limits established.
    • 3) There should be guarantees that Iran will not violate the safeguards agreement.
    • The test is whether these can be accomplished within the framework of the IAEA.

    Way forward

    • Since the IAEA is a technical body, its deliberations may be kept at the technical level.
    • At the same time, since it is open for the IAEA to report to the Security Council for necessary action, the IAEA will have the necessary clout to insist on the implementation of the NPT and its additional protocol.
    • A new avenue may open for Iran to continue its peaceful nuclear activities as permitted in the NPT.

    Consider the question “Examine the role played by IAEA under NPT. How this role can help IAEA in breaking the ice between Iran and the U.S. on JCPOA?” 

    Conclusion

    Thus, IAEA can play an important role in ending the statement JCPOA finds itself in and ensure compliance from Iran on JCPOA and lifting sanctions by the U.S.

    Back2Basics: Article III of NPT

    • This article provides for the application of safeguards to ensure that nuclear material in non-nuclear weapon states (NNWS) isn’t diverted to nuclear weapons or other nuclear explosive devices.
    •  NNWS must place all nuclear materials in all peaceful nuclear activities under IAEA safeguards.
    • Each nuclear weapon state (NWS) will not provide nuclear materials or equipment to a NNWS without an IAEA safeguards agreement.
    • The safeguards should comply with Article IV of the NPT, and should not hamper peaceful uses of nuclear technology or economic/technical development in general.
    • Safeguards agreements can be concluded on an individual or group basis.
    • After the entry into force of the NPT, state parties had 180 days to commence negotiation of a safeguards agreement. Currently, state parties must begin negotiations by the date they deposit their instruments of ratification or accession.

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  • FDI in Indian economy

    Factors driving FDI in India

    op-ed snap | Economics | Mains Paper 3: Government Budgeting

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Factors driving FDI in India

    The article explains the four factors that explain the FDI inflows in India.

    India’s economic decade

    • Almost every major global company is either contemplating or operating on the assumption that India is a key part of their growth story.
    • Google, Facebook, Walmart, Samsung, Foxconn, and Silver Lake have been just a handful of the firms that made huge investments in Inda.
    • As a result, India saw the fastest growth in Foreign Direct Investment (FDI) inflows among all the major economies last year.
    • Meanwhile, India’s latest FDI totals still lags behind the highest tallies in other markets such as China and Brazil.

    Issues faced by investors and factors driving investment

    • Frequent shifts in the policy landscape and persistent market access barriers are standard complaints levied against India by the business community.
    • The government’s push to build a “self-reliant” India has also rattled skittish investors and smaller companies that lack the resources to navigate on-the-ground hurdles.
    • Still, investors recognise that doing business in India — or any emerging market  — comes with inherent risks but that adaptation in approach is critical to success.
    • Four core dynamics drive this calculus and explain why multinational companies are making India an essential part of their growth story.

    4 Factors driving FDI in India

    1) India’s population

    • What India offers through its nearly 1.4 billion people and their growing purchasing power is uniquely valuable for multinationals with global ambitions.
    • No other country outside of China has a market that houses nearly one in six people on the planet and a rising middle class of 600 million.

    2) Shifting geopolitics

    •  Rising U.S.-China competition is forcing multinationals to rethink their footprints and production hubs.
    • Savvy countries such as Vietnam have capitalised on this opportunity to great effect, but India is finally getting serious about attracting large-scale production and exports.

    3) Digital connectivity

    • Cheap mobile data have powered a revolution across India’s digital economy and connected an estimated 700 million Indians to the Internet.
    • More than 500 million Indians still remain offline, this is a key reason why leading global tech companies are investing in India and weathering acute policy pressure.
    • Domestic Indian companies have also demonstrated their ability to innovate and deliver high quality services at scale.
    • The partnerships and FDI flows linking multinationals and Indian tech firms will continue to unlock shared market opportunities for years to come.

    4) National resilience

    • Despite facing the scourge of the novel coronavirus head on, India has managed the pandemic better than many of its western peers and restored economic activity even before implementing a mass vaccination programme.
    • These are remarkable developments, and yet they speak to India’s underlying resilience even in the face of historic challenges.

    Shared value creation

    • Unlocking opportunities in the Indian market cannot take the form of a one-way wealth transfer.
    • Companies need to demonstrate their commitment to India.
    • Successful companies do this by placing shared value creation at the heart of their business strategy.
    • They tie corporate success to India’s growth and development.
    • They forge enduring partnerships and lasting relationships, elevate and invest in Indian talent, align products with Indian tastes, and ultimately tackle the hardest problems facing India today.

    Consider the question “Despite the issues faced by the investors, India witnessed the fastest growth in the FDI inflows among all the major economies amid pandemic. In light of this, examine the factors driving the FDI in India.”

    Conclusion

    For leading companies with global ambitions and a willingness to make big bets, the rewards of investing in the Indian market are substantial and well worth pursuing.

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