INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016
INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India and its neighborhood- relations India’s neighbourhood policy, in recent years – Hindu Editorial: Why go it alone? India’s neighbourhood policy, in recent years, has managed to make more friends in the region in a surprisingly short span of time. Few projects including Salma Dam in Afghanistan and Chabahar port in Iran show India’s renewed interests in the region. The new government’s priorities and strategic objectives are essentially five-fold: Prioritizing an integrated neighbourhood; “Neighbourhood First.” Leveraging international partnerships to promote India’s domestic development. Ensuring a stable and multipolar balance of power in the Indo-Pacific; “Act East.” Dissuading Pakistan from supporting terrorism. Advancing Indian representation and leadership on matters of global governance. However, there is considerable scepticism within the strategic community regarding India’s material and political wherewithal to stay the course vis-à-vis these long-term projects, especially in the context of India’s not-so-impressive record when it comes to delivering on strategically important projects in the region and beyond. Main problems in this regard: India lacks the financial resources to invest in crucial projects in a sustained manner due to budget constraints and compulsions of domestic priorities. There is also a problem of severe attention deficit resulting from an inability to commit diplomatic and political capital to pursue key strategic objectives. Many of India’s strategic initiatives in the region, Chabahar for instance, often get portrayed in competitive terms, thereby getting into the cross hairs of adversarial/insecure neighbours. The problem is compounded by the fact that India has traditionally displayed a self-imposed “unilateral bias” in addressing key challenges in the neighbourhood and near abroad. How can these problems be addressed? By adopting a grand strategic approach in addressing key strategic challenges. There should be a clear rationale guiding India’s strategic engagements. By moving from a unilateral approach to tackling problems to a multilateral approach. By creating a regional/global consensus on key challenges. What needs to be done now? India should partner with Japan or European countries in Chabahar port development. This would save us some money, enable us to complete the project on time, and ensure more security and acceptability to the project.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 If India’s Afghan policy is to be meaningful and sustainable, it needs to do two things: get like-minded countries on board India’s reconstruction efforts in Afghanistan, and support and engage in the Afghan reconciliation and peace-building process. Indian reactions to China’s One Belt, One Road (OBOR) project need not be either dismissive or worried, nor should we dismiss it as a “Chinese national project” and look the other way. Our objective should be to see how we can utilise the many economic, infrastructural and other opportunities opened up by OBOR. Conclusion: It is important for India’s strategic planners to recognise that when it comes to dealing with key regional challenges and opportunities, unilateralism is not the way. We need to create alliances and coalitions to confront challenges and better utilise opportunities, and in today’s “loose multipolar” world, our alliance behaviour should be guided by clear strategic objectives rather than traditional friendships alone.
India should overcome its lethargy in overcoming its development infrastructure projects in neighbourhood – in comparative perspective with Chinese as well India’s Aid Programs in South Asia The title of ‘foreign aid donor’ is no longer exclusive to rich developed economies. Despite receiving aid for years, India has extended development, humanitarian and technical assistance to countries in different parts of the world. South Asia is one of the major recipients of aid from India. It is important to explore India’s interests in providing aid to her neighbours. India emerged as a benevolent donor for her immediate neighbours with total foreign assistance, including technical and economic cooperation, and loans to foreign governments, increasing dramatically over the past years. During 2009-10, India provided US$ 383.01 million in aid and loans to South Asian countries (except Pakistan), which has expanded to US$ 1,149 million in 2015-16. Out of India’s total foreign aid budget in 2015-16, about 74.6 percent was pledged for Bhutan, followed by 9.1 percent for Afghanistan, 6.6 percent for Sri Lanka, 4 percent for Nepal and 2.8 percent each for Bangladesh and Maldives. The pattern of aid allocation in South Asia has however remained constant during 2009/10 — 2015/16, with Bhutan continuing its reign over the aid budget. The relative shares of these economies in the aid outlay indicate their reliance on India on the one hand, and India’s strategic and economic interests in them on the other. India’s Motives for Extending Aid to South Asia Bhutan is a landlocked country and has more than half of its trade with India. In 2015-16, the bilateral trade between India and Bhutan stood at US$ 750.22 million, which represents nearly 55 percent growth over the previous year. Bhutan holds greater significance for India as it is an important source of India’s imports of electricity, base minerals, cement, chemicals and wood products. Particularly, hydropower
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 electricity is central to cooperation between India and Bhutan. A major part of India’s aid to Bhutan during 2016-17 — approximately 78 percent is budgeted for construction of hydropower projects namely 1200 megawatts (MW) Punatsangchhu-I, 1020 MW Punatsangchhu-II, 720 MW Mangdechhu and 600 MW Kholongchhu, among others. Developing large hydropower projects in Bhutan is in India’s economic interests as it gets easy access to cheap electricity, especially during times of power shortages. With escalating demand and competition over energy resources in the world, India is undertaking numerous projects in its neighbourhood for securing reliable and cheap sources of energy supplies. Driven by similar interests, India has endeavoured to strengthen relations with Afghanistan, which provides an easy route to Central Asia — the hub of energy, minerals and gas resources and access to markets in the Middle East and Europe. India’s foreign aid activities are mainly focused on reconstruction and development of Afghanistan, which would provide security and economic benefits to India in the longer term. Various infrastructure projects, including construction of the Afghan Parliament, Salma dam — hydropower and irrigation project, Zaranj-Delaram highway project (linking Delaram road in Afghanistan to Iranian border Zaranj) have been initiated by the Indian government in Afghanistan with an intention of greater access to country’s energy markets. India’s foreign policy for Afghanistan has significantly changed over time in response to Kabul’s growing centrality in many energy projects such as Turkmenistan-Afghanistan-Pakistan-India gas pipeline project, and the Central Asia and South Asia 1000 electricity transmission and trade project. India is also funding various infrastructure development projects in Sri Lanka, Bangladesh, Nepal and the Maldives. These are typically ‘aid for trade’ projects as they aim at developing these countries’ trade capacity and infrastructure (roads, sea ports and airports), which significantly alters the time and costs of trading with them. Due to limited transport arrangements connecting countries in South Asia, trade costs (or transport costs) are typically high for traders in this region. India intends to reduce the cost of trading by directing aid towards improving regional transport connectivity, especially between northeastern states in India and landlocked countries like Bangladesh, Bhutan and Nepal. Enhancing connectivity among countries in South Asia fosters regional growth and prosperity. Besides economic interests, India also has strategic and security interests in South Asia that it pursues through its foreign aid programs. Bhutan, Bangladesh and Nepal share borders with both India and China. Should China gain access to these countries, it would open an easy route for it to eastern and north-eastern states in India. This raises a security concern for India. In response to this threat and to ensure regional connectivity, India is engaging with South Asian countries on a sub-regional level. It has inked motor vehicle agreements with Bangladesh, Bhutan and Nepal, which would provide an easy and seamless movement of cargo, people and vehicles among them. Chinese Aid in South Asia China is relentlessly competing with India for power and influence in South Asia. It has been trying to strengthen its relations with South Asian countries due to their immense potential in energy and trade markets.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 These economies are also a significant part of China’s string of pearls strategy and would help to encircle the Indian Ocean, thus establishing China’s control over important sea trade routes. China has also shown interest in stabilising Afghanistan in order to establish safe trade and transport networks in the region. Yet, this appears to be challenging given China’s interests in bolstering the military capabilities of Pakistan, which is alleged to be inflicting terror in South Asia. China has invested funds of nearly US$ 46 billion in the China-Pakistan Economic Corridor project that would link western China to Gwadar port in Pakistan through a network of roads and railways. This would open markets for China in western Asia, extending to Central Asia and Europe. In order to check China’s growing footprints in South Asia, India has expedited its own plans to establish links with Chabahar port in Iran via Afghanistan. Multi-billion dollar, Chinese-financed infrastructure projects are planned in almost all of India’s neighbours, from Pakistan, Bangladesh, Sri Lanka, the Maldives and Nepal to Myanmar. President Xi Jinping on his visits to South Asia has brought grand infrastructure plans for his hosts — during his visits to Sri Lanka and the Maldives in September 2014, to Pakistan in April 2015 and more recently to Bangladesh. Xi’s visit to Pakistan resulted in the multi-billion dollar investment in the ChinaPakistan Economic Corridor that connects China’s Xinjiang province to Gwadar port in Pakistan. Former Nepalese Prime Minister KP Oli’s visit to Beijing earlier this year brought forth bountiful promises of infrastructure assistance. China’s involvement in Myanmar is of a longer standing, among several major infrastructure projects is a gas pipeline that transports natural gas from Maday port on the Bay of Bengal to China’s Yunnan province and a proposed rail line along the same route. India has had reservations about the Belt and Road Initiative, especially the China-Pakistan Economic Corridor that passes through Pakistan-occupied Kashmir. But all its neighbours, with the sole exception of Bhutan, have welcomed the Chinese initiative with enthusiasm. India is however engaged in the Bangladesh-China-India-Myanmar (BCIM) economic corridor, which aims to connect Kolkata with Kunming, in China’s Yunnan province, passing through Myanmar and Bangladesh. The BCIM corridor is a long-delayed proposal which Beijing has now referred to as part of its BRI plans. Bangladesh and China signed agreements worth $24.45 billion for 34 projects and programmes during Xi’s visit to Dhaka in 2016 mid. They are expected to cover financing for infrastructure, energy, and communication projects. As the two sides elevated their ties to strategic partnership, Bangladesh expressed its support to China’s Road and Belt Initiative and the BCIM economic corridor. They also agreed to negotiate a free trade agreement. China is Bangladesh’s largest trading partner and supplier of defence equipment. Sri Lanka was the first South Asian country to receive large investments in big infrastructure projects during the Mahinda Rajapakse regime. But when the Maithripala Sirisena government came to power in a surprise election victory in January 2015, it began a review of the controversial $1.4 billion Colombo port city expansion project. The Sirisena alliance had charged Rajapakse of turning Sri Lanka into a Chinese dependency and had vowed to review all major Chinese investments.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 China offered to align its maritime silk road project with Sri Lanka’s development plans to enable the island nation to become a shipping hub in the Indian Ocean. The Maldives, like Sri Lanka and Pakistan earlier, has faced international pressure over its policies. All three countries have found firm support from Beijing, which has helped them withstand the pressure. Large scale Chinese projects in the Maldives coincided with India's troubles in Male. The contract for modernising and operating the Male International Airport, granted to a consortium led by the Indian infrastructure company, GMR Group was cancelled by the new government. International arbitrators ruled in GMR’s favour, but the contract for the expansion of the international airport was awarded to a Chinese company. A Chinese construction firm is building the $280 million China-Maldives Friendship Bridge that would connect the Hulhule island where the international airport is located to a suburb of Male. Other projects included large housing projects and other infrastructure assistance. China is the largest foreign investor in Nepal with two large hydropower projects underway in the country. While India cannot match the Chinese largesse, greater generosity in its dealings with its smaller neighbours can win it more friends and create goodwill through the region. Foreign Aid Models — India versus the West Western countries generally provide conditional aid, which might not promote economic and social development of the recipient but is tied to the recipient’s assent to neoliberal preconditions (ranging from trade-investment liberalisation to governance and human rights) as set out in the ‘Washington Consensus’. The low level of development in recipient countries however makes it difficult for them to comply with the radical democratic reforms stipulated by the consensus. This is exemplified by the persistently low levels of development and income in Africa despite receiving plenty of foreign aid from United States, which apparently is also its largest trade partner. The western countries did not invest adequately in developing the African economy, which is endowed with a large natural and human resource base. Alongside conditional transfers, a significant proportion of aid from the west is targeted at social sectors like education, health, sanitation and water supply, government and civil society, among others. Nearly 42 percent of the total aid commitments by various donor countries in 2013 were focused in Africa’s social sector in comparison to only 19 percent for the economic and production sectors. Indian aid perfectly fills this space as it provides untied aid in the form of concessional grants and loans to her neighbours, targeted at infrastructure development. India provides aid to her neighbours in sectors that hold mutual economic-strategic interest, such as transport, energy and democracy. In this manner, India acknowledges the development needs of her neighbours, especially smaller landlocked countries like Bhutan and Nepal. Indian aid programs also do not interfere with recipient’s domestic policies and respect their sovereignty.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Moreover western foreign aid as an instrument for promoting imperialism because it sustains the unequal relationship between donor and recipient. Foreign assistance from India however does not promote a culture of pauperization (or absolute dependence) in the recipient country as advocated by traditional foreign aid theorists. In addition, Indian aid projects provide autonomy to the recipients as these are based on a demanddriven approach wherein aid-receiving countries identify priority sectors for investment and development cooperation. India does not follow ‘one size fits all’ approach while providing aid to South Asian economies. It formulates an aid package specific to interests of the recipient country. For instance — in Afghanistan to stabilising the war-prone country by building the democratic capacity of the Afghan government and its institutions; In Bhutan, Bangladesh and Nepal for developing infrastructure for trade and transport connectivity.
Significance of Bangladesh for India for connecting with NE States Strengthening regional and sub-regional cooperation is important in the wake of globalisation’s second wave. Improving connectivity is key to a region’s security and development. For India, the current infrastructure in the region reflects the domination of exports to the US and Europe in most economies in Asia. To adjust to the West’s shrinking consumption following the ongoing global financial crisis and European debt crisis, Asia now needs to promote intra-regional connectivity in infrastructure in order to deepen and expand regional economic cooperation. This would require concentrated efforts to develop both “hard”[ transport, energy, and telecommunications networks etc.,] and “soft” infrastructure [institutions necessary to make hard infrastructure work properly]. At the same time, connecting low-income countries like Bangladesh and Myanmar, to large countries like India and China, can narrow existing development gaps. In addition, India needs to connect to China and Southeast Asian economies through Myanmar (which is opening up rapidly) and Bangladesh by creating cross-border transport-cum economic, energy and telecommunications corridors. Experts opine that infrastructure connectivity of Bangladesh with northeastern states is essential in trade integration and enhancement in the region through lowering trade and logistics costs. Involvement of Northeast India, Bangladesh, and Myanmar are crucial for enhancing connectivity between south and southeast Asian countries as well as India’s national connectivity. On November 2016 a cargo vehicle made the first successful trial run from Kolkata to Agartala through Bangladesh, reviving a route shut since Independence, and cutting the travel distance by a thousand kilometres.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016
The trial run came four-and-a-half months after South Asian transport ministers signed the landmark Bangladesh, Bhutan, India, Nepal (BBIN) Motor Vehicles Agreement (MVA) for the Regulation of Passenger, Personnel and Cargo Vehicular Traffic among their countries. The BBIN MVA, signed in Thimphu on June 15, is intended to promote safe, economical, efficient and environmentally sound road transport in the subregion, help the four countries create an institutional mechanism for regional integration, and promote mutually beneficial economic development. The BBIN MVA is the second subregional initiative that will benefit the Northeast economically, the first being the Kolkata-Dhaka-Agartala bus service that was started in June. Nearly seven decades after Partition, trains are set to run from Kolkata to Agartala through Bangladesh. India is building a Rs 1,000 crore, 15 km railway line connecting Agartala with Akhaura in Bangladesh. The line — 5 km of which will be in India, the rest in Bangladesh — is expected to be completed by 2017, and cut the distance between Agartala and Kolkata to 499 km from the existing 1,590 km route via Badarpur, Lumding, Guwahati and New Jalpaiguri. The Agartala-Akhaura rail link will also be part of the ambitious multination Trans-Asian Railway (TAR) project, of which both India and Bangladesh are members. The 350-km Manipur leg of the TAR, from Jiribam to Moreh on the Myanmar border via Imphal, is progressing despite numerous hurdles. Cargo vessels have been plying through Bangladesh under an Inland Water Transit and Trade Protocol signed by New Delhi and Dhaka, and heavy machinery and equipment for the Numaligarh refinery in Assam and the Lower Subansiri hydroelectric project in Arunachal Pradesh have been transported by this route. Lack of connectivity is the biggest hurdle to the development of the Northeast. The renewal of the Inland Water Transit & Trade Protocol and the MoU on the Chittagong port will go a long way in removing the region’s connectivity bottleneck. Connectivity by road, rail, river, sea, transmission lines, petroleum pipelines and digital links will lead to tremendous economic activities and provide a real boost to cross-border trade between Bangladesh and Northeast India. It will usher in a never-before win-win situation for all, particularly the landlocked Northeastern region, which will help India connect further to Southeast Asia and even southwestern China.
Indus Water Treaty – Debates on the revision of the treaty.
10 things to know about Indus Water Treaty For 56 years, both India and Pakistan are peacefully sharing the water of Indus and its tributaries, thanks to the Indus Water Treaty. 1
The Indus Waters Treaty was signed on September 19, 1960 by the then Prime Minister Jawaharlal Nehru and Pakistan's President Ayub Khan.
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It was brokered by the World Bank.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016
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The treaty administers how river Indus and its tributaries that flow in both the countries will be utilised.
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According to the treaty, Beas, Ravi and Sutlej are to be governed by India, while, Indus, Chenab and Jhelum are to be taken care by Pakistan.
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However, since Indus flows from India, the country is allowed to use 20 per cent of its water for irrigation, power generation and transport purposes.
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A Permanent Indus Commission was set up as a bilateral commission to implement and manage the Treaty. The Commission solves disputes arising over water sharing.
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The Treaty also provides arbitration mechanism to solve disputes amicably.
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Though Indus originates from Tibet, China has been kept out of the Treaty. If China decides to stop or change the flow of the river, it will affect both India and Pakistan.
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Climate change is causing melting of ice in Tibetan plateau, which scientists believe will affect the river in future.
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It may be noted that both India and Pakistan are still at loggerheads over various issues since Partition, but there has been no fight over water after the Treaty was ratified.
India is reportedly considering to review its position on the Indus Waters Treaty. The 56-year-old Indus Waters Treaty between both the countries has become a rallying point for many. It has been suggested by some politicians that India should either revisit or abrogate the treaty as it would be the easiest way to punish the neighbouring country that refuses to control terrorism emanating from its land. Many in India claim that the treaty is too one-sided, hence it requires introspection. However, the suggestion is fraught with dangers, according to experts. About the Treaty: Signed in 1960 by then Prime Minister Jawaharlal Nehru and then Pakistan President Ayub Khan, the treaty allocates 80% of water from the six-river Indus water system to Pakistan. Beas, Ravi, Sutlej, Indus, Chenab and Jhelum from the Indus water system that flows from India to Pakistan. The Indus river basin spans parts of 4 countries (Afghanistan, Pakistan, India and China) in an area that is more than 30% arid. Under the treaty, control over six north Indian rivers were divided between the two countries. India got control over the rivers Beas, Ravi and Sutlej whereas Pakistan got control over Indus, Chenab and Jhelum. This is a unique treaty involving a third party. It was brokered by the World Bank.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 A Permanent Indus Commission was set up as a bilateral commission to implement and manage the Treaty. The Commission solves disputes arising over water sharing. The Treaty also provides arbitration mechanism to solve disputes amicably. How will changes in this treaty affect India? India may face environmental damage if it decides to scrap the treaty. The river flows through earthquake prone region. It would take years of work to build huge dams or reservoirs or canals to change the flow of water. This may also lead to floods in the valley. The decision of not giving water to Pakistan may further enrage the terror elements in the country, making them intensifying their attacks on India. Even the construction works for diverting the flow of water would be on the target of terrorists all the time. To check terrorist activity, India will have to deploy huge security forces. This would further drain the Indian economy. India’s decision to abrogate the treaty may be detrimental to the country’s interests in the long run. Experts say that people in Pakistan already do not like the fact that India controls its rivers, even as it has complied with the provision of the treaty sincerely. India at present enjoys a moral high ground because it respects all its treaties with the neighbouring countries. The decision to abrogate the treaty would make other smaller neighbours uneasy. Not only the neighbours would be distrustful of India, even the country would not be in a position to say anything if China also takes a similar move against it. The country may also earn the ire of China. Indus originates in China and if the country decides to divert the Indus, India would lose over 35% of its river water. Not respecting the treaty, may invite global condemnation to India as the treaty is an international agreement. At present India is on a moral high ground vis-a-vis Pakistan after the Uri attack. This would be lost if India doesn’t follow the deal. Such decision by India would automatically bring World bank in the picture and in support of Pakistan. How will this affect Pakistan? About 65% area of Pakistan, including the entire Punjab province, is a part of the Indus basin. Interestingly, Pakistan boasts of the world’s largest canal irrigation system because of its development of the basin, which covers over 90% of irrigated area. The water from Indus is important for the country for irrigation, drinking and other purposes. India’s decision to abrogate the treaty would affect Pakistan severely. Pakistan may face draught-like conditions. What’s the way out then? Pakistan can be pressured even without stopping the waters or violating any other provisions of the Indus Treaty. India has never used its rights on the western rivers. Under the Treaty, India can make use of the waters of the western rivers for irrigation, storage, and even for producing electricity, in the manner specified. If we just do what we are entitled to under the Treaty, it would be enough to send jitters through Pakistan. It would be a strong signal without doing anything drastic.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India also needs to engage with Afghanistan on the development of the Kabul river that flows into Pakistan through the Indus basin. This again can make Pakistan extremely nervous. It is in our strategic interest in any case to enhance our engagement on developmental issues with Afghanistan. Conclusion: So far the treaty has survived wars and phases of frosty ties between India and Pakistan. India’s any move affecting the treaty would be closely watched by the international community. India cannot abrogate the treaty on a short notice. It takes years to divert the flow of a river. The government of India will have to prepare a long-term strategy if it intends to threaten Pakistan by diverting or stopping the water.
India-Sri Lanka Economic cooperation India is Sri Lanka's closest neighbour. The relationship between the two countries is more than 2,500 years old. India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership, with bilateral trade growing rapidly in the last decade and a number of leading Indian private sector companies investing in Sri Lanka and establishing a presence in this country. Sri Lanka is India's largest trade partner in SAARC. India in turn is Sri Lanka's largest trade partner globally. Much of the impetus for the current level of our economic interaction stemmed from the signing and entry into force of the Free Trade Agreement (FTA) in 1998 and 2000 respectively. During January-August 2015, the bilateral trade amounted to US$ 3.23 billion. Sri Lanka’s imports from India amounted US$ 2,776.65 million and exports to India amounted US$ 454.42 million. During the year 2014, Sri Lanka continued to be one of the largest trading partners of India in South Asia. According to Sri Lankan Customs trade data the bilateral trade amounted to US$ 4.6 billion in 2014. Sri Lanka’s imports from India and exports to India registered an increase of 24.83% and 14.86% respectively as compared to corresponding period of 2013. India had a share of 20.62% and 5.64% respectively in the global imports and exports of Sri Lanka during 2014. It may be noted that in 2014 Sri Lanka’s exports to India has reached a new peak of US$ 624.67 million which is the highest since the introduction of ISLFTA in 2000. While Sri Lankan exports to India have increased substantially during past 12 years since 2000 when ISFTA came into force, they have lagged behind the high growth in India’s exports to Sri Lanka, resulting in a widening of the balance of trade. This is largely because of the lack of export capacity from Sri Lanka to service Indian requirement and also due to increase in imports from India because of competiveness of our exports. Interestingly, over 80% of our exports to Sri Lanka are outside the list of products covered by the FTA, thereby indicating their overall competitiveness in the Sri Lankan market.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 During January-June 2015, Indian Investment amounted to US$ 33.05 million out of total investments of US$ 515.09 million in the country. The main investments from India are in the areas of petroleum retail, hospitals, telecom, real estate, telecommunication, hospitality & tourism, banking and financial services, IT and food processing (tea & fruit juices). After the end of armed conflict in 2009, substantial opportunities for reconstruction, infrastructure development and revival of local economy emerged. India announced a package of Rs. 500 crores as grant for rehabilitation/reconstruction activities, apart from assistance for construction of 50,000 houses for IDPs in Northern and Eastern Sri Lanka. Several large infrastructure projects supported by Lines of Credit (LOC) amounting to over US$ 1 billion are being funded by India for restoration of arterial railway lines connecting the north and south of Sri Lanka, wreck removal, dredging and port revival at Kankesanthurai (KKS) and the development of a civilian airport at Palaly. There has been resistance from some section of the Sri Lankan businessmen for concluding Comprehensive Economic Partnership Agreement (CEPA) with India. There has been no progress for finalization of the document since January 2011. In tourism India continued to be the largest source of tourists coming to Sri Lanka. India and Sri Lanka have decided to conclude an enhanced bilateral economic partnership by the end of 2016 to allow the free flow of services, investments and technology, in addition to the existing Free Trade Agreement (FTA) between the two nations. Closer economic ties can especially boost India’s five southern States and categorically denied there was any military engagement involved in the island nation’s negotiations with China for its “One Road, One Belt” initiative. Arguing that Sri Lanka and the five southern States, including Karnataka, Andhra Pradesh and Tamil Nadu, together have a population of 272 million people and a combined gross domestic product of over $500 billion, he said there is room to grow much faster if the two countries work together. Sri Lanka has suggested the creation of a larger special zone of economic cooperation around the Bay of Bengal to India, which takes on board Singapore, Indonesia and Malaysia in addition to BIMSTEC countries. Sri Lanka is negotiating a Free Trade Agreement (FTA) with Singapore, while India already has comprehensive economic partnership pact with the latter, so there is scope for a trilateral arrangement to boost the three economies. Note: Sri Lanka is negotiating an FTA with China under its “One Belt, One road” initiative.
India-Bhutan Economic Cooperation Mutually beneficial economic linkages exists between India and Bhutan. India continues to be the largest trade and development partner of Bhutan.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Planned development efforts in Bhutan began in the early 1960s. The First Five Year Plan (FYP) of Bhutan was launched in 1961. Since then, India has been extending financial assistance to Bhutan’s FYPs. The 10th FYP ended in June 2013. India's overall assistance to the 10th FYP was a little over Rs. 5000 crores, excluding grants for hydropower projects. (a) Hydropower Cooperation - Cooperation in the hydropower sector between our two countries is a true example of mutually beneficial relationship. Hydropower is one of the main pillars of bilateral cooperation. Three hydro-electric projects (HEPs) totaling 1416 MW, (336 MW Chukha HEP, the 60 MW Kurichu HEP, and the 1020 MW Tala HEP), are already exporting electricity to India. In 2008 the two governments agreed to further develop a minimum of 10,000 MW hydropower generation capacities by 2020 and identified ten more projects. Of these, three projects totaling 2940 MW (1200 MW Punatsangchu-I, 1020 MW Punatsangchu-II and 720 MW Mangdechu HEPs) are under construction and are scheduled to be commissioned in the last quarter of 2017-2018. Out of the remaining 7 HEPs, 4 totaling 2120 MW (600 MW Kholongchhu, 180 MW Bunakha, 570 MW Wangchu and 770 MW Chamkarchu) will be constructed under Joint Venture model. Prime Minister Sh. Narendra Modi, during his visit to Bhutan in June 2014, laid the foundation stone of Kholongchhu HEP. President of India laid the foundation stone for the Jigme Wangchuk Power Training Institute during his state visit to Bhutan in November, 2014. Power is an important sector of Bhutanese economy. It contributes 14% to the GDP. It is the most important export item contributing about 35% of Bhutan's total exports. (b) Eleventh Five Year Plan (2013-18): The 11th Five Year Plan has a total budget outlay of Nu.21300 crores, with self-reliance and inclusive green socio-economic development as the key objectives. Government of India committed to support Bhutan’s 11th Five Year Plan to the tune of Rupees 4500 crores (Rs. 2800 crores as Project Ties Assistance (PTA), Rs. 850 crores for Small Development Projects (SDP) and Rs. 850 crores as Programme Grant / Development Subsidy). There was also a commitment for an additional Rupees 500 crores for the Economic Stimulus Plan. (c) Bilateral Trade: India is Bhutan's largest trading partner. A free trade regime exists between India and Bhutan. The India-Bhutan Trade and Commerce Agreement was first signed in 1972 which was last renewed in 2006 for a period of 10 years. The Agreement provides for duty free transit of Bhutanese merchandise for trade with third countries. Total bilateral trade grew by about around 9% in 2013.
China Factor in Indo-Bhutan relation While China and Bhutan have disagreed on the disputed tracts of Doklam plateau in eastern Bhutan and the Jakarlung and Pasamlung valleys in northwestern Bhutan, the countries are moving closer to a resolution on their disputed 470 km border (boundary talks have been held annually since 1984). India is paying close attention to China’s strategic intentions in the region. China–Bhutan tensions date back to the Chinese occupation of Tibet in 1951, which was followed by the publication of Chinese maps that claimed considerable territory in central and northwestern Bhutan. This resulted in closer ties between India and Bhutan along with an embargo on cross-border trade with China.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 In 1996, China made a proposal to exchange a large claim over the Pasamlung and Jakarlung valleys in Central Bhutan for a relatively smaller geographical portion of Bhutan’s northwestern territory in Chumbi Valley. Chumbi Valley borders Tibet and lies in close proximity to the Siliguri Corridor, one of India’s most strategic and sensitive territories. Reports of repeated, aggressive Chinese incursions into India’s Ladakh region at regular intervals, and China’s sustained interest in the Chumbi Valley, have created a great sense of urgency for India to remain involved in Bhutan’s border negotiations. Over the years, China has firmly gained ground in Bhutan and raised the very real possibility of developing political ties with its small, but critically vital, neighbour. In 2012, China and Bhutan indicated for the first time the possibility of establishing full diplomatic ties following a meeting between the then Bhutanese prime minister Jigme Thinley and then Chinese premier Wen Jiabao on the sidelines of the Rio+20 Conference in Brazil — without India’s knowledge. This development was taken very seriously by the Indian government.
China Factor in Indo-Nepal relation India’s resentment against growing China’s geostrategic foothold in Nepal is on rise as it has constantly spreading its sphere of influence in the Himalayan Kingdom by extending greater economic linkages and substantial military assistance. China is working for the promotion of trade and tourism, joint border management, development of hydropower projects, building infrastructure for greater connectivity. Such serious business to engage with Nepal poses a grave concern for India. China has been slowly making the Himalayan nation its strong ally making greater economic depth. It is highly investing in strategic sectors and working to take over India’s position by its investment, trade and aid policy. As evident, from the growing Chinese investments in Nepal, its faster growth rate will leave India behind in near future. As a result, there will occur reduction of India’s investments which will reduce India’s income from Nepal. China is also making every effort to emerge as the largest trading partner of Nepal. During the last three years, Chinese trade with Nepal has increased by 61 percent and has offered zero tariff treatment in 2010 to 60 per cent products of Nepal. So, such measures will undermine the India’s position as the largest trading partner of Nepal. Accordingly, increased trade relations will increase Chinese exports to Nepal whereby cheaper Chinese goods will provide a stiff competition to Indian goods. Further, China’s removing of trade deficits with Nepal will reduce India’s imports and exports with Nepal. China also used aid policy a reward for echoing the 'One China policy" and banning any kind of antiChina activities on its soil. It will provide security for increasing the Chinese investments in strategic section and will bring Nepal close to China. These real economic intentions of China getting involved in Nepal’s economic arena will become a worry for India because it has blasted Chinese expansion in the region, with bigger and long-term interests.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 China-Nepal military engagement which existed since 1990s took a foremost turn after the Maoist triumph in which Nepal became largely dependent on Chinese military supplies which was earlier enjoyed by India. The greater Chinese military engagement with Nepal government becomes security threat to India establishment. It will undermine the India’s military relations with Nepal. To counter this and to overspill China the India government has to spend heavily in developing strong military relations with Nepal. It will heavily impinge upon the India defence budget. Moreover, Chinese indirect moves of politicizing the Maoists increased its leverage over the Nepal’s military which heavily undermine the Indian security establishment. India will be reduced in its ability to maintain its military influence and will not get intelligence reports about the border security. Moreover, India’s military aids to Nepal for receiving intelligence reports about the border security will also do not get the desired results and will go astray. Recently, the integration of Maoist combatants in Nepal’s army largely supported by China will also be inimical to Indian interests. The unsettled Indo-Nepal border remains a thorn in India-Nepal relations as most of the border areas run through underdeveloped and populous areas where a high crime rate, poor governance, inadequate infrastructure, and an ill-equipped police force make conditions conducive for various forces inimical to Indian interests to operate. Therefore, with the growing Chinese influence the subversive elements across the Indo-Nepal border and even in the north-eastern states of India will increase. Besides, this the Indian concerns over the Chinese move in Nepal has got to do with the fact that region has been an important theatre for Indian counter-terrorism operations. Having greater strategic linkages with Pakistan the Chinese consolidation in Nepal will provide greater protective cover to Pakistani terror outfits targeting India through Indo-Nepal border. Moreover, the Nepalese border has also served as the passage to a haven for smugglers, who have been able to smuggle drugs and arms to India without hindrance. The decline of Indian influence due to the entry of Maoists in Nepal’s political mainstream is further decreased by extensive network of Chinese railways in recent years. The Chinese railway and roads passing through most difficult terrain aimed at Chinese consolidation and greater and easy access of China to Nepal. China has been rapidly investing on its road and railway networks in Nepal. This Chinese approach in Nepal by laying the rail networks would increase its maneuverability in Nepal. China’s longer term interests to link Nepal with Tibet's large network of road, rail and air infrastructure would neutralize India advantage in having better strategic access to Nepal. More importantly their extensions along the Indo-Nepal border will undermine Indian security. With greater expectancy, Chinese trains loaded with goods will reduce the Himalayan country's longstanding dependence on Indian imports and will enable it to import petroleum products from Beijing. Furthermore, Chinese rail system will bring into Nepal more tourists from China. In August 2015, China signed a series of bilateral treaties with Nepal, after India voiced objections to Nepal’s new constitution and temporarily blocked the transport of Indian goods and fuel to Nepal.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Suggestions to Build a Better Relationship While taking overall judicious foreign policy India will able to maintain its position in Nepal. India should also develop good relations with all the political entities of Nepal. It should also develop the relations with Maoists whether they remain in power or not to avoid criticism of its policy and ensure the security of its investments. The treaties and agreements particularly the Treaty of Peace and Friendship should be revised in light of the fact that it comes as an impediment at whatever point India and Nepal came closer to accomplish statures of bilateral collaboration. India should also work for the development of frontier region by modernizing border infrastructure and regulated trans-border connectivity. It should develop railway and road connectivity with Nepal. India likewise needs to put well in Nepal’s hydropower development in light of the fact that India has remained a potential speculator in hydro-power segment and is a potential market also. It has also to ensure full accomplishment of these projects to attain its leverage. The less implementation of these projects has remained a common feature of India’s policy which had led to growing perception in Nepal that “India promises, China delivers”. India’s record of project implementation in Nepal is awful. The major reason for this is that India is putting less emphasis on gigantic infrastructure, but India has to work well for the strategic constructions with planned execution. At the cultural level numerous conceivable options are accessible at the Indian cost to make a sort of broadened social zone for the development of its relationship with Nepal. India can increase its influence by enhancing funding for cultural activities in embassies, starting India study centres etc. India should also give more emphasis to public diplomacy. More funding should be given for public diplomacy and holding of more cultural festivals showcasing large identities of each other’s cultural aspects. The doors of Indian universities should be adequately made open to Nepalese students through scholarships and student exchange programmes to understand each other’s culture, interests and values which would project favorable image about India. Tourism exchanges should be enhanced whereby Nepalese tourists should be highly welcomed to India so that more people see the beauty and varied culture of India. However, Nepal should also come forward to avoid the greater strategic leverage towards China.
How India Can Direct its 'Act East' Policy Toward Myanmar Among ASEAN countries, Myanmar enjoys a unique position for India. It is the only member-state of ASEAN that has both land and maritime borders with India. Myanmar and India are important to each other. India’s importance for Myanmar may be explained in terms of ethnicity and religion. To the Burman majority, the Buddhist connection has been the most compelling and lasting bond between the two countries. Besides, a collective memory of interactions and exchanges – philosophical, spiritual, cultural, and commercial – between the two lands persists.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 As for India, Myanmar is a nation of considerable importance as a partner capable to cooperate for the security and development of our Northeast, as a strategic ‘buffer state’ in the context of the ‘China factor’, as a key constituency for our AEP, and as an attractive market as well as an economic partner. Myanmar has been in transition from military rule to democracy since 2010. The past five years witnessed a significant transformation in its internal and external situation. Parliamentary elections on November 2015 opened a new phase. The quotient of democracy is set to increase further, but power sharing will guide the nation’s affairs in the future. Myanmar seems to be like a car that may be driven by two drivers – the NLD leader Aung San Suu Kyi and Commander-in-Chief Min Aung Hlaing. If the two leaders forge cooperation, the country will move forward. If they fail to do so, trouble could loom ahead. Given this intricate situation, some in India advocate a ‘wait and watch’ policy. But we have vital stakes in Myanmar. Activism – calibrated and purposeful – rather than passiveness should guide our policy. We need to work closely and pro-actively with both centres of power. India, for its own interests, would welcome a stable, strong, inclusive and democratic Myanmar. It can help Myanmar to end its ethnic conflict, on quid pro quo basis. Myanmar is opening up fastly its economy. India should take advantage of it by investing more. Joint ventures between India and Thailand can be done inside Myanmar. Adopting a long-term and enlightened perspective, it is now time for India to increase its attention and assistance to a friendly and important neighbour. Success in Myanmar will contribute to the success of our AEP.
Is Pakistan developing 'strategic assets' in Bangladesh? Pakistan has a dual approach to terrorism. While it takes certain terror groups as threat to Pakistani state and wants to uproot them, at the same time it also wants to use another set of terror groups as strategic asset against India. To cause further trouble to India, Pakistan is now trying to open another front using terror groups liked by Pakistani state from the side of Bangladesh, using Bangladeshi extremists as insurgency in northeast India is almost dead. Pakistan has been uncomfortable with the Sheikh Hasina government after she took over power in January 2009. This discomfort was for two reasons. First it disrupted the cozy relationship with Bangladesh that it had built during the Bangladesh Nationalist Party (BNP) – Jamaat regime as Sheikh Hasina decided to go after the terrorist groups of all variety. She acted against Islamists groups of Bangladesh as well as against groups like Let and JeM who were Pakistani but were trying to develop base in Bangladesh or at least link with the Bangladeshi terror groups. She also acted against northeast insurgents. In fact, her actions resulted in giving death blow to groups like United Liberation Front of Asom (ULFA).
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Secondly, she was also disliked by Pakistan because she showed her desire to go for war crime trials and wanted to prosecute Jamaat-e-Islami leaders. The Jamaat-e-Islami had supported Pakistan during the Liberation War and still remains the most important constituency for Pakistan in Bangladesh. According to Hasanul Huq Inu, information minister of Bangladesh, in another wave recently 8000 Bangladeshis trained in camps in Afghanistan and Pakistan have returned to Bangladesh. The displeasure of Pakistan with a secular and progressive regime in Bangladesh is quite obvious. In these circumstances it would not be surprising that Pakistan would try to create political instability in Bangladesh. And the best way to do it is through the Islamist extremist groups who now claim to be aligned to al-Qaeda and ISIS. Pakistan can also subsequently use these terror groups to launch terror attacks against India without being blamed. The terror groups like Al Qaeda in the Indian Subcontinent (AQIS) have shown intention to attack India and Myanmar from Bangladesh.
India-Maldives defence cooperation and strategic significance of Maldives to India and India-Maldives relations at a Glance
Indian Army's 'Operation Cactus' foiled a coup in Maldives that was attempted by a pro-Eelam group in 1988. India maintains a naval presence in Maldives, at the request of the Maldives, since 2009 . President Yameen, in an interview had said, "If they [Indian Army] had not come to our rescue, we would have lost independence during the past 50 years." Indian Coast Guard's Dornier was the first to land at the Ibrahim Nasir Airport with relief and supplies after the tsunami of December 26, 2004. Maldives has pledged its support to India as a permanent member of an expanded UN Security Council. On December 5, 2014, India dispatched “water aid” to the Maldivian capital of Male, after a fire destroyed the generator of its biggest water treatment plant. Maldives Growing "closeness" with China - India is uneasy with Maldives's relationship with China. There were media reports that China was looking to establish a base in Maldives after leasing out one of the islands under the liberalised leasing scheme brought in by the Yameen Government, which was denied by both Male and Beijing. The country's former President Mohamed Nasheed has more than once even commented on Maldives' 'pro-China' tilt. China is assisting Maldives in some infrastructure and developmental projects, including a bridge between the island in which the airport is located, Hulhumale, and the Capital island, Male, which is about 10 minutes by a passenger ferry. Maldives is also part of China's Silk Road project, a move that has not gone down well in New Delhi. The President's Office, has however, repeatedly clarified that China policy does not interfere with or diminish the country’s “special relationship” with India. India had assisted Maldives' election process by sending its observers, and had also withdrawn observers at one point because the electoral process was neither free nor fair.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 GMR Issue- Relations between India and Maldives came under a strain after Male had terminated the agreement it entered into with GMR in 2010 for the modernisation of the Ibrahim Nasir International Airport. The airport was taken over by the Maldives Airports Company Limited after a high-voltage legal tussle in which GMR. Maldives government maintains the reason for cancellation of the project was because "the contract was illegally awarded" by the then President Nasheed. The country's antigraft watchdog has ruled out any corruption in the leasing of the international airport to GMR. The airport expansion project was subsequently given to the Chinese company, which will plough in US $ 800 million. GMR, meanwhile, has won an arbitration against the Maldives. The quantum of damages to be paid by the Maldives is yet to announced by the arbitration tribunal in Singapore. Strategically significant and geopolitically sensitive, Maldives, a chain of 1192 islands 199 of which are inhabited and home to 3,15,000 people, has recently been brutalized by violence and coup, shattering the very nascent and fragile edifice of parliamentary democracy, which had just begun to take roots since 2008 after 30 years (1978-2008) rule of Abdul Gayoom. Located 300 miles of the southern coast of India and 450 miles southwest of Sri Lanka, this idyllic country, a tourist paradise in the Indian Ocean is yet another victim of Islamic fundamentalism. Internal sleaze by some opposition members including Gayoom, Islamic fundamentalist groups with support of external players, particularly Pakistan and China, has engendered the present unrest and instability in Maldives. The turmoil as expected has allured inimical powers to India to make a fresh bid to gain foothold in this part of the Indian Ocean Region (IOR) located strategically astride key maritime routes. India and Maldives have signed an “Action Plan for Defence Cooperation” on April 2016. At the two-day official visit to New Delhi, Maldives’ President Yameen declared India “the most important friend of Maldives” and pledged to pursue “an India first foreign policy.” Military-security collaboration between India and the Maldives is not new. However, enhanced strategic ties between New Delhi and Male take on great importance under conditions where India is aggressively seeking to limit China’s economic and political influence in the region and integrating itself ever more completely into the US “pivot to Asia”—that is Washington’s drive to strategically encircle and prepare for war with China. Yameen and his government have come under sharp criticism from the opposition Maldives Democratic Party (MDP) and the US and European imperialist powers for accepting large-scale Chinese investment and offers of military-security collaboration. India, albeit less publicly, has also communicated its keen displeasure to Male over its “pro-China” tilt. At a joint press conference, India described the main elements of the Action Plan as development of Maldives’ port facilities, continuous training and capacity-building of Maldives’ police and security forces, enhanced exchange of information between the countries’ security agencies, and Indian assistance in supplying Maldives with military equipment and maritime surveillance capabilities. Lying to India’s south-west, the Maldives straddle some of the world’s most important shipping lanes— including those that provide China, Japan, South Korea, and India with Mideast oil. Eight hundred miles directly south of Male lies Diego Garcia, the US’s principal Indian Ocean base.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Though last year, Indian PM Modi cancelled a scheduled visit to Maldives, in February this year, India dispatched its largest and most potent warship, aircraft carrier INS Vikramaditya, accompanied by destroyer INS Mysore and Tanker INS Deepak, to the Maldives. The security of the Maldives is intimately linked with the security of India. Maldives requested India’s assistance in strengthening government and the democratic process in the Maldives. For his part, Modi emphasized India’s readiness to forcibly assert its interests. “India understands its responsibility as a net security provider in the Indian Ocean Region,” said Modi. “And India is fully ready to protect its military interest in this part of the globe.” Modi added that Yameen had agreed that “Maldives will be sensitive to our strategic and security interests.” In addition to the Action Plan, Modi and Yameen signed five other agreements, covering taxation, tourism, joint research and surveys, and satellite tracking. India also announced that “India is ready to partner (with) Maldives in its ambitious Ihavan (or Ihavandhippolhu Integrated Development Project)” project. Ihavanddhipppolhu atoll is Maldives’ northern-most island. In the hopes of taking advantage of its proximity to what a Maldive government website describes as the “channels through which the main East-West shipping route, connecting SouthEast Asia and China to the Mid-East and Europe” run, the atoll is being developed as a major Indian Ocean transport hub, with an airport, port, docks and warehousing facilities. To entice investors, the mega-project is being developed under Special Economic Zone (SEZ) provisions that give them tax breaks and exemptions from financial, environmental and labor laws. India’s offer to partner in the Ihaven project is a clear challenge to China, which has been developing close ties with Maldives, including negotiating its formal inclusion in Beijing’s Maritime Silk Road. In September 2014 Chinese President Xi visited the Maldives and a year later the two countries agreed to launch free trade negotiations. The Chinese government, banks and engineering firms are also financing and building a series of major infrastructure and development projects, including a US$ 200 million bridge connecting Male and Hulhumale, the modernization of the Ibrahim Nasir International Airport, and a road between the interlinked islands of Gun and Funadhoo in Laamu atoll. Beijing is also developing closer military ties with Male. Maldives’ Minister of Defense and National Security, Mohamed Nizam, visited Beijing in November 2014 and met with his Chinese counterpart. Recently, China started providing training to Maldive maritime security personnel. Officials said that the defence action plan is an important component of the India-Maldives bilateral relationship and the shared strategic and security interests of the two countries in the Indian Ocean region. The Action Plan envisages an institutional mechanism at the level of the Defence Secretaries to further bilateral defence cooperation. Maldives is looking forward to get continued support from India for protection of Maldives from any “punitive action” from the Commonwealth Ministerial Action Group over domestic political situation. Recently India played a major role in helping the Maldives avoid action from the Commonwealth’s human rights and democracy oversight body. Maldives-India have completed 51 years of diplomatic relations this year.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 A dimension to strategic significance of Maldives with respect to India emerged about LeT plans to setup Indian Ocean base in the country. Reportedly, there were plans to use deserted islands to build bases and weapon storage facilities from where they could be moved to Kerala and then to the rest of India. The geo-strategic location of Maldives with regard to Indian Ocean is an imperative that has driven super powers in the past like the Great Britain, the US and the erstwhile USSR to gain foothold in the country. The same imperatives are now driving India, China, Pakistan and Islamic terror groups. Besides, there are other economic and geographical vulnerabilities – the most serious being the problem of global warming, which as per many experts threatens to submerge the country as such. Given the axis of sea route emanating from the infamous Golden Triangle and burgeoning tourism – Maldives is vulnerable to illegal drugs and its trafficking. India’s relations with Maldives are different in character and content when compared to other South Asian neighbours. Both India and Maldives have defied the difficulties of glaring power disparity in developing a mutually trustworthy relationship between a regional power and a micro-state. Some of the key catalysts that determine India-Maldives relationships are :1. Absence of any territorial disputes or irritants. In 1976, both countries most amicably demarcated their maritime boundary based on the median line principle. 2. Relations are free of any colonial baggage, unlike India-Sri Lanka relations. 3. Indo-centrism hither-to-fore was not a factor in the relations between the two countries. It is lately being created by China, Pakistan and Islamic fundamentalists. 4. No problems of common ethnicity or Indian community. Some shades of common ethnicity are only found in India’s Minicoy Island, which is inhabited by Maliki sect to which Maldivians belong to.
Hindu Editorial: Leave Pakistan’s MFN status in relation to INDO-PAK tension and possible counter measures In the midst of rising tensions in the wake of the Uri attack, some in India are calling for the withdrawal by India of the most favoured nation (MFN) trade status for Pakistan. What is Most Favoured Nation status? It is a treatment accorded to a trade partner to ensure non-discriminatory trade between two countries vis-a-vis other trade partners. The importance of MFN is shown in the fact that it is the first clause in the General Agreement on Tariffs and Trade (GATT). Under WTO rules, a member country cannot discriminate between its trade partners. If a special status is granted to a trade partner, it must be extended to all members of the WTO. Exceptions for MFN: The right to engage in Free Trade Agreements. This means members can participate in regional trade agreements or free trade agreements where there is discrimination between member countries and non member countries.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Another exemption is that members can give developing countries special and differential treatment like greater market access. This special concession are in different forms like reduced tariff rates from developing country imports, concessions that allows developing countries to give subsidies to their production sectors etc. All these exceptions are subjected to strict conditions.
Have Pakistan and India accorded MFN status to each other? The MFN status was accorded to Pakistan in 1996 as per India’s commitments as a WTO member. But Pakistan has not reciprocated, reportedly citing “non-tariff barriers” erected by India as well as huge trade imbalance. According to the WTO’s report on the Trade Policy Review of Pakistan (in 2015), “Pakistan is in the process of offering India Non-Discriminatory Market Access” (similar to MFN). Why Pakistan is not extending MFN status to India? India and Pakistan have great trade potentials. But trade among the two is not much because of political mistrust. Pakistan has been slow to take a positive decision on conferring the status to India. An important factor that makes it difficult for Pakistan to confer MFN status to India is the political impact of the tone of MFN status. It may feel that India is the most favored nation for Pakistan in literary sense though MFN means non-discrimination. To overcome that, Pakistan has devised a new term called Non Discriminatory Market Access (NDMA) which is equivalent to MFN. Such alteration of the MFN is happening elsewhere as well. For example in the US, the MFN is named as Permanent Normal Trade Relations (PNTR) clause. Pakistan has recently promised that it will confer India the NDMA status soon. Does MFN mean preferential treatment? In literal explanation, MFN doesn’t mean preferential treatment. Instead it means non-discriminatory trade that ensures that the country receiving MFN status will not be in a disadvantageous situation
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 compared to the granter’s other trade partners. When a country receives MFN status, it is expected to raise trade barriers and decrease tariffs. It is also expected to open up the market to trade in more commodities and free flow of goods. MFN essentially guarantees the most favourable trade conditions between two countries. These terms include the lowest possible trade tariffs, the least possible trade barriers and very crucial to trade relations– highest import quotas. The disclaimer only requires equal treatment to all Most Favoured Nations. What are the pros of MFN? MFN status is extremely gainful to developing countries. The clear upsides are access to a wider market for trade goods, reduced cost of export items owing to highly reduced tariffs and trade barriers. These essentially lead to more competitive trade. MFN also cuts down bureaucratic hurdles and various kinds of tariffs are set at par for all imports. It then increases demands for the goods and giving a boost to the economy and export sector. It also heals the negative impact caused to the economy due to trade protectionism. This irks the domestic industry. A country that grants MFN on imports will have its imports provided by the most efficient supplier. This may not be the case if tariffs differ by country. Granting MFN has domestic benefits: having one set of tariffs for all countries simplifies the rules and makes them more transparent. It also lessens the frustrating problem of having to establish rules of origin to determine which country’s part of the product (that may contain parts from all over the world) must be attributed to for customs purpose. As MFN clause promotes non-discrimination among countries, they also tend to promote the objective of free trade in general. What are the disadvantages of MFN? The main disadvantage is that the country has to give the same treatment to all other trade partners who are members of the WTO. This translates into a price war and vulnerability of the domestic industry as a result. The country is not able to protect domestic industry from the cheaper imports and in this price war, some domestic players have to face heavy losses or growth restrictions. What is the volume of trade between India and Pakistan? Bilateral trade between India and Pakistan stands at $2.61 billion. The major commodities and goods in which both countries trade include cement, sugar, organic chemicals, cotton, man-made filaments, vegetables and certain fruits and tubers, mineral fuels, mineral oils, salts, earths, stone, lime, dry fruits, steel and plastering material. What are India’s options? India could consider making use of a ‘security exception’ clause — Article 21(b)(iii) — in the GATT to deny the MFN status to Pakistan or bring in certain trade restrictions. Why this move would have little or no impact?
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 First, there is simple economic logic. Free trade remains the best policy even if your trading partner wishes to be more closed. As economist Joan Robinson is supposed to have said, if your trading partner dumps rocks into their harbour to block entering cargo, you do not make yourself better off by dumping rocks in your own harbour. Second, trade with Pakistan accounts for less than 1% of India’s total trade, and the figures for Pakistan are not very much higher. Thus, even strategically, trade policy with respect to Pakistan today can neither be offered as a carrot nor wielded as a stick. Nor does it amount to much for India. Third, offering MFN status to a trading partner is an obligation, not a choice, for WTO members. The fact that Pakistan is not living up to its WTO obligations is not a good reason for India not to do so. Indeed, India would be perfectly within its rights to raise Pakistan’s non-compliance at the WTO. Finally, free trade fosters not just prosperity but also peace and friendship. What will be the political fallout of such an action by India? Though it will have only a “symbolic” impact in trade terms, politically it could result in India losing goodwill in the South Asian region, where it enjoys a trade surplus and is a party to a free trade pact called SAFTA, which also includes Pakistan. The move may also not go down well at the WTO-level. Impact on Pakistan: The immediate impact could be very little, looking at the volume of trade between the two sides. However, India may opt to drag Pakistan to the WTO’s Dispute Settlement Body. This will allow New Delhi to remove trade benefits afforded to Islamabad under MFN status. Another step which India may consider is withdrawing concessions provided to Pakistan under provisions of the South Asian Free Trade Area (SAFTA) agreement. New Delhi can further ask members of the SAFTA to follow suit. And in the light of recent events, members of SAFTA are unlikely to stand against India’s move. Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka are the members of SAFTA which aims to increase the level of trade and economic cooperation among the SAARC nations by reducing the tariff and barriers. India has already made it clear that it will go all out to isolate Pakistan. And the latest decisions are part of India’s peaceful retaliation against Pakistan. Why Pakistan should consider granting MFN status to India? Granting MFN status to India may be beneficial for both countries. It may expand the size of the market because of trade creation and trade diversion. This possibly can help expand production on a large scale and also infuses competition into markets. India is a huge economy relative to Pakistan; opening up of trade between the two countries will expand the markets for both countries, stimulate investment both domestic and foreign, and thereby increase the growth rate of the economies of the respective countries. This in turn can create employment opportunities, increase income levels and lead to improvement in the standards of living in both the countries.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Such “investment creation” can be partly offset by what might be called “investment diversion” when investments are diverted from the most rational location in the world to Pakistan and India. The MFN status can also benefit consumers, producers and workers in Pakistan because of more trade with India. Conclusion:
India can legitimately claim the moral high ground in fulfilling our WTO obligations while Pakistan does not. Revoking Pakistan’s MFN status would shred this advantage. It may offer revanchist satisfactions, but it would not reflect mature statesmanship.
Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests 8th BRICS summit has ended with the adoption of the Goa Declaration. Comprehensive study about BRICS BRICS nations i.e., these five major emerging economies are looking for their right place, in the global economic and political stage, which befits their potential and capabilities. Their rising prominence will surely help in resolving global issues in a better way. The five BRICS countries look like a powerful grouping. Together they represent more than a quarter of the earth’s landmass, over 42% of the global population, almost 25% of the world’s GDP, and nearly half of the global foreign exchange and gold reserves. In 2001, in a research paper on global economics titled ‘Building Better Global Economic BRICs’ which was published by Goldman Sachs, British economist Jim O’ Neill coined and used the acronym ‘BRICs’ for the first time for four rapidly developing economies-Brazil, Russia, India and China. In 2006, Brazil, Russia, India and China began a regular informal diplomatic coordination initiative, with annual meetings of Foreign Ministers at the margins of the UN General Assembly (UNGA). This successful interaction led to the First BRIC Summit in Yekaterinburg (Russia) in 2009. It became BRICS in 2011 with the inclusion of South Africa. As the first important non-Western global initiative of the post-Cold War world, BRICS reflects ongoing global power shifts, including the slow retreat of Atlantic dominance. If BRICS can get its act together, it will be able to spur on fundamental changes in the global financial and governance systems. Over the years BRICS has strengthened its two main pillars: (1) coordination in multilateral forums, with a focus on economic and political governance and (2) cooperation between members. BRICS pushes for reforming the structures and forums of global governance, especially in the economic and financial fields – International Monetary Fund, World Bank, G-20 etc. There is special emphasis on the reforms of political institutions, such as the United Nations as well. Intra-BRICS cooperation has also been solidifying with a clear and broad agenda which has been developed over the years – in the areas such as finance, agriculture, economy and trade, combating
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 transnational crime, science and technology, health, education, corporate and academic dialogue and security, among others. BRICS as well as other emerging market economies and developing countries do continue to face major financing constraints at times in addressing infrastructure gaps and sustainable development needs. To address these issues, BRICS has now under its belt, the New Development Bank (NDB) which will mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. And to compliment the working of the NDB, the grouping also has the BRICS Contingent Reserve Arrangement (CRA), with an initial size of $100 billion, to help countries forestall short-term liquidity pressures. Recently the Bank approved its first package of loans worth about $811 million. The four projects in Brazil, China, South Africa and India are all in the renewable and green energy development sphere. In the 2016 Summit’s Goa Declaration, the members countries not only felicitated themselves for “the operationalisation of the New Development Bank (NDB) and of the Contingent Reserve Arrangement (CRA)”, but agreed to set up a Credit Agency. Basic DNA of BRICS is “geo-economic alliance” - that perceives power concentration in the hands of Bretton Woods institutions as unfair and seeks to promote alternative models of development. This is why, like in every summit since 2009, BRICS have targeted the governance of the IMF in Goa. Not only have they asked for a new quota formula that would ensure that the increased voice of the dynamic emerging and developing economies reflects their relative contributions to the world economy, but they have also called for the European countries to cede two chairs on the Executive Board of the IMF. For years, the targeting of West-dominated institutions has provided BRICS with a common cause. Issues on BRICS In reality, BRICS is struggling to define a common identity and build institutionalised cooperation among its members. Their Goa summit underscored inherent challenges, including building effective unity. Had BRICS pursued a more forward-looking approach, it could have simply called itself the R-5 after the names of its members’ currencies — the real, rand, ruble, renminbi and rupee — and presented itself, in contrast to the obsolescent G-7, as the face of the future. The plain fact is that the challenges BRICS faces today are fundamental. These disparate countries have starkly varying political systems, economies, and national goals, and are located in different corners of the globe. There is little in common among the BRICS states. For example, what is common between the world’s largest democracy, India, and the largest autocracy, China? How can BRICS create rules-based cooperation among its members if international norms of behaviour are flouted, as by China’s territorial creep in the South China Sea and its shielding of Pakistani terrorism?
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 To compound BRICS’ challenges, the Brazilian, Russian and South African economies have nosedived, even as China’s faltering growth and downside deflationary risks have unsettled global markets. Only India has defied BRICS’ slump, priding itself as the world’s fastest-growing major economy. Almost six years after it expanded from a four- to a five-member grouping, BRICS has yet to evolve into a coherent grouping with defined goals and an institutional structure. Of course, it has created the Shanghai-based New Development Bank and set up, as a shield against global liquidity pressures, the $100-billion, China-dominated Contingent Reserve Arrangement. The real winner from both these initiatives is China, with BRICS left carrying the can. The Goa summit was a reminder that BRICS has yet to devise a common action-plan to go forward. BRICS cannot remain just a ‘talk shop’. To be sure, the annual BRICS summit provides a useful platform for bilateral discussions on the sidelines. Some member states, by piggybacking on the BRICS summit, hold their own bilateral summits before or after the event, as was illustrated by the India-Russia summit. Still, BRICS faces nagging questions about whether its members, with their different priorities and interests, can unite on key international issues. If BRICS is to build collective clout, its members must frame common objectives and approaches to tackling the pressing international issues. Take the scourge of terrorism: At China’s insistence, the Goa Declaration omitted any reference to ‘cross-border terrorism’ or ‘state sponsorship’ of terror or even to any Pakistan-based group despite mentioning ISIS and al-Nusra. The G-7 began as a discussion platform like BRICS but, by defining its members’ common interests, it advanced within years to joint coordination on key international issues. BRICS, lacking the shared political and economic values that bind the G-7 members, cannot stay relevant if it does little more than bring together its leaders and various stakeholders for discussions. Indeed, the most important bilateral relationship for each BRICS country is not with another BRICS member but with the United States. Worse still, a domineering China is using BRICS to advance its own agenda, including expanding the renminbi’s international role. Lending and trading in the renminbi helps China to boost its exports and clout. China’s hidden export subsidies, meanwhile, have been systematically undermining manufacturing in the other BRICS states, especially India and Brazil. For Brazil, India, Russia and South Africa, BRICS offers largely symbolic benefits. Even on international institutional reforms, China is hardly on the same page as the other members. It is a revisionist power with respect to the global financial architecture. It seeks to dominate the first tangible challenge to the Bretton Woods institutions, as symbolised by the BRICS’ New Development Bank and the China-created Asian Infrastructure Investment Bank. China, however, is the status quo power in regard to the UN system and wishes to remain Asia’s sole country with a permanent seat in the Security Council, which means keeping India out. Its strategy, by extension, also seeks to shut India out of other political institutions, including the Nuclear Suppliers Group.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Moreover, India after the acceleration of its rapprochement with the US in several domains, including economic and defence matters, this rapprochement has been resented by two key BRICS players, Russia and China, which have recently made moves bound to be perceived as provocations by India. Russia, which has already agreed to sell attack helicopters to Pakistan, sent troops to this country in September last for first-ever military joint manoeuvres. The Indian ambassador to Moscow had to convey to Russia New Delhi’s views that “military cooperation with Pakistan which is a country that sponsors terrorism as a matter of state policy is a wrong approach.”. Relations with China were even more tense since, over the last six months, China blocked India’s attempt at joining the Nuclear Suppliers Group (NSG), made military incursions in Arunachal Pradesh and vetoed in the UN an India-supported resolution designating Masood Azhar as a terrorist. (Azhar is the chief of Jaish-e-Mohammed, one of the Pakistani groups already on a UN blacklist, which has been held responsible for the Uri attack and the killing of 19 Indian armymen). Russia and China were not on the same wave length with India so far as the security issue of Pakistan sponsoring terrorism was concerned. This hiatus may be due to Russian and Chinese perceptions that saving the Syrian regime is their priority and that both countries will need Pakistan to fight the Islamist groups there if they regroup in Afghanistan after being defeated in the Middle East. A day after India called Pakistan a “mothership of terrorism”, the Chinese Foreign Ministry declared that their country opposed “linking terrorism with any specific country or religion”. It also said: “China and Pakistan are all-weather friends”. The Goa summit enabled India to re-engage Russia (or vice versa). On the one hand, New Delhi and Moscow signed a $4-5 billion deal on the S-400 defence missile system. On the other, “India recognised Russian side’s effort towards achieving a political and negotiated settlement of the situation in Syria”. This joint statement was issued by Vladimir Putin and Modi at a time when the Obama administration was highly critical of the Russian strikes on Aleppo. The contradictions between India’s policies vis-à-vis Pakistan and the US and its membership of the BRICS, a grouping dominated by Russia and China, have led observers to think about alternative routes, like the revival of IBSA. Against this backdrop, if BRICS remains just a ‘talk shop’, it will not only fail to fulfil its true potential but will also wither away under the weight of its contradictions. The Goa summit did little to belie the contention of cynics that BRICS is just an acronym without substance.
Recent protocol between India and Mauritius to tax the Capital gains on FDI from Mauritius – Its need and possible impacts Recently India and Mauritius signed a Protocol to amend their 33 year old tax treaty caused seismic changes in the tax world. The tax treaty between India and Mauritius was signed in 1982 in keeping with India’s strategic interests in the Indian Ocean and India’s close cultural links with Mauritius. The treaty provides for a capital gains tax exemption to a Mauritius resident on transfer of Indian securities.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 As India opened the doors of its economy to foreign investment in 1991, Mauritius became a favourite jurisdiction for channelling investments into India. Soon enough, the Indian tax officers did not appreciate the prospect of perceived letter box companies in Mauritius claiming the tax exemptions and sent tax bills to them, alleging misuse of treaty. The Government of the day, concerned about the impact of these actions on stock markets, foreign inflows and the rupee, issued a circular in the year 2000 to halt the tax officers’ actions. The result was that Mauritius emerged as the top destination for foreign investment into India (Mauritius ranks first in terms of FDI investment into India, with 33% of the total FDI coming from Mauritius; on portfolio investment, Mauritius ranks no. 2 after the US). While the golden tap kept flowing, apprehensions on round tripping of money by Indians via Mauritius continued even as successive Governments made efforts to renegotiate the treaty. Timing of the change - Why now? The present Government came to power promising action on black money stashed abroad. Globally too there was widespread resentment against companies failing to pay their fair share of taxes. More notably, the OECD and G20 countries’ globally co-ordinated action plan on Base Erosion and Profit Shifting (BEPS) gave a shot in the arm to the Indian Government in the renegotiation process and virtually shut hopes of a possible continuation of the capital gains exemption with a limitation of benefits (LOB) clause in place, which was the hope and expectation of the investor community. The Government’s press release issued after the signing of the Protocol states that “the protocol will tackle the long pending issues of treaty abuse and round tripping of funds attributed to the IndiaMauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius.” The stride taken by the Government perhaps also reflects their belief in the economy and the ability to attract foreign investment without tax incentives. What does the Protocol say? The protocol gives India the right to tax capital gains on transfer of Indian shares acquired on or after 1 April 2017. Existing investments will be grandfathered. Further, the Protocol provides for a two year transition period upto 31 March 2019 during which the tax rates will be 50% of the prevailing domestic tax rates, subject to a LOB clause. After 31 March 2019, tax will be charged at full domestic tax rates. Capital gains on derivatives and fixed income securities will continue to be exempt. What is impact on foreign investors? A significant collateral damage of the Protocol is its impact on the India-Singapore treaty; capital gains tax exemption under the India-Singapore tax treaty is co-terminus with the capital gains tax exemption under the Mauritius treaty. Capital gains arising to a Singapore tax resident from transfer of Indian shares will therefore become taxable in India with from 1 April 2017. Long-only funds will not be impacted as the domestic tax law currently provides for 0% tax on listed shares held for more than a year.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Hedge funds and other short-term investors will pay a 15% short-term capital gains tax on transfer of shares (7.5% in the two year transition period); listed F&O will attract a much higher tax rate of 30% Private equity funds will pay long-term capital gains tax of 10%. For P-Note investors, this will mean an increase in cost of taking exposure to Indian shares For P-Note issuers, this will translate into operational challenges of computing taxes and recovery from clients. Mauritius will continue to remain relevant for fixed income business with tax on interest being the lowest at 7.5% under the new treaty and capital gains continuing to be exempt (subject to overcoming the GAAR challenge - GAAR comes into force from April 2017.) India still has tax treaties with other jurisdictions (notably a few European jurisdictions) which provide for capital gains exemption on transfer of shares and one will need to see what India’s approach will be towards these treaties and whether the foreign investors will now consider these jurisdictions for Indian investments. Shares acquired on or before 31 March 2017 have been grandfathered which would mean a continuance of the Mauritius structures for few more years; we may also see a possible acceleration of transactions by 31 March. Concluding remarks The signing of the Protocol is certainly a decisive move by the Government of India which puts at rest more than a decade long controversy around the Mauritius treaty. It is also in line with the Government’s agenda of tax rationalisation and simplification and moderation of tax rates while phasing out tax exemptions. The Government also deserves to be applauded for giving sufficient notice of close to a year before the change takes effect as well as providing protection to existing investments. Significantly, this development also blunts the impact of the much condemned GAAR, which would have conflicted with the capital gains exemptions under the Mauritius and Singapore treaties. One will need to be cautious of the impact of this development on foreign flows, at least in the near term. Most comparable jurisdictions do not tax capital gains on portfolio investments and India is unique to that extent. Policy makers will therefore need to assess the competitiveness of India’s taxation system vis-à-vis other economies.
India’s possible membership into NSG, its impacts and the coordinated efforts of China and Pakistan to block India’s entry into NSG Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Refer Class Notes
Indian entry into MTCR and its benefits and Hague Code of Conduct against Ballistic Missile Proliferation (HCoC) – India’s joining and its implications Refer Class Notes
India’s possible membership into SCO – Cost and Benefits At the recent Summit in Tashkent, Uzbekistan in June 2016, Pakistan and India signed the SCO’s ''Memorandum of Obligations''. Over the coming year India will sign around 30 documents, and join as a full Member at the next Summit in Astana, Kazakhstan in June 2017. Since its establishment, the SCO has concluded several wide-ranging agreements on security, trade and investment, connectivity, energy, SCO Bank, culture, etc. Their implementation has, however, remained uninspiring. This is partly because SCO lacks coherence. Having been created at China’s behest with Russian support, the SCO is still struggling to evolve as a well-knit entity. Nevertheless, its significance cannot be underestimated because it straddles large territorial, geopolitical, strategic and economic space and strength. Challenges and Opportunities India’s membership in the SCO will add significant heft and muscle to the Organization particularly in the backdrop of the anaemic international economy. India is the fastest expanding major global economy today, with annual GDP growth of 7.5 per cent. It represents the third largest economy (USD 8 trillion) in PPP terms and the seventh largest (USD 2.3 trillion) in nominal dollar terms. It inspires confidence on other indicators like FDI, inward remittances, savings rate, pace of economic reforms, etc. Its large market, favourable demographics and technological prowess augur well for the other economies of the grouping. Its growing energy demand promises an assured market to resource rich (oil, gas, uranium, coal) Central Asia and Russia. SCO will need to assume responsibility for providing security in Afghanistan in the aftermath of the withdrawal of US and NATO ISAF forces. India will be able to play its due role in stabilizing the situation in Afghanistan which is assuming disturbing proportions due to the Taliban's increasing attacks. Terrorism and radicalism are the most formidable challenges confronting the region and international community today. India has been a victim of terrorist attacks for the last 30 years. Battling with terrorism has provided invaluable perspicacity to the Indian security establishment in intelligence gathering, training, foiling terrorist operations, etc. The threat of terrorism to the SCO region is particularly grave on account of continuing violence in Afghanistan, which can embolden regional groups like the Islamic Movement of Uzbekistan, Hizb-utTahrir, etc. to destabilize governments in Central Asia. The scourge of radicalism also looms large over the region with the expanding influence of the Islamic State (IS) and the reported desertion of several
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 members of the Taliban, Al Qaeda, etc. to join the IS ranks. Several hundred young men and women have fled their homes in Central Asia to bolster IS forces that are spreading to Central Asia, Pakistan and Afghanistan. India can share its experience of handling the twin scourges of terrorism and radicalism with SCO members to mutual benefit. India can also enhance its engagement with the Regional Anti-Terrorist Structure (RATS) based in Tashkent, Uzbekistan. India’s ties with the bloc will help protect the region from threats of radicalisation and violence asserting that it would adopt “zero tolerance” to terrorism. India would significantly benefit from the grouping’s strengths in energy and natural resources and in turn India’s strong economy and vast market could drive economic growth in the SCO region. India’s membership of the SCO will help drive the region’s economic growth. Connectivity Central Asia is part of India’s extended neighbourhood. But India and Central Asian countries have failed to realize the immense potential in promoting security, political, economic, trade, investment, energy ties because of the lack of common land borders. Another reason is the lack of frequent visits at the highest level to Central Asian States. SCO membership will provide a welcome opportunity for Indian Prime Ministers to meet the Presidents of Central Asian States regularly and frequently. India’s potential participation in the Eurasian Economic Union (EEU) will add further value to the partnership. To obviate the lack of direct land connectivity with Central Asia, and Pakistan’s refusal to provide access through its territory, India is actively collaborating to develop the Iranian seaport of Chabahar with possible financial and technical support from Japan. India has also prioritized the construction of the International North-South Transport Corridor. Central Asia represents the ‘’near-abroad’’ for Russia. Both India and Russia can collaborate for reciprocal benefit in several areas including agriculture, SMEs, pharmaceuticals, IT, etc. India has demonstrated its determination to strengthen its multi-faceted relations with Central Asia through Modi’s historic visit to the five Central Asian Republics in July 2015. Several Agreements were signed. The Turkmenistan, Afghanistan, Pakistan, India (TAPI) gas pipeline whose construction commenced in December 2015, is a bright example of a mutually beneficial project. Conclusion Some commentators have expressed concern that the induction of India and Pakistan could shift the focus of SCO from Central Asia to South Asia and could disrupt the SCO's smooth and consensual functioning through an emphasis on India-Pakistan bilateral disputes. This appears highly unlikely. India's only objective is to engage with SCO members to promote peace, security, connectivity, energy trade, people-to-people contacts and economic development in the region. Some Chinese analysts opine that the membership of India and Pakistan will provide a role for the SCO to mediate in their disputes. The argument advanced is that the SCO’s predecessor, the Shanghai Five,
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 was established to demarcate boundaries between its member states. It successfully achieved this. This appears to be wishful thinking. India has made it abundantly clear that there is no role for third-party mediation in India-Pakistan conflict. A resolution is possible only when Pakistan stops using terrorism as an instrument of state policy. India’s membership of the SCO is a win-win proposition for the Organization, for Central Asia, for Russia, for China as well as for India. Members will reap huge benefits if they conduct themselves with responsibility.
In what way the port of Chabahar has become the crucial gateway to step up relations with Iran and the necessity of the port for India’s strategic and economic purposes Refer Class Notes
India and several other nations bordering the Indian Ocean have decided to evolve a regional mechanism for cooperation on Special Economic Zones (SEZ) In May 2016 India and several other nations bordering the Indian Ocean have decided to evolve a regional mechanism for cooperation on Special Economic Zones (SEZ) – or duty-free enclaves with tax holidays — to boost exports. The first-of-its-kind meeting between SEZ authorities from these Indian Ocean Rim (IOR) nations was held on May 19-20 at Chabahar, Iran, which houses a Free Trade Zone (FTZ) – a synonym for SEZs. The meeting comes at a time of global economic and trade slowdown and attempts are being made by countries to boost growth through trade. Thanks to their strategic locations and access to major waterways, these zones have formed a virtual network of trade connections spanning continents including Asia, Australia and Africa. Participants at the Chabahar meet also considered a proposal to form a “joint FTZ” among the IOR Association (IORA) member countries since most of these FTZs are situated or are being built in coastal regions. The meeting also assumes importance given that India had already signed a pact with Iran to develop the Chabahar port, and agreed to provide $500 million for the purpose. A World Bank (Trade & Competitiveness Global Practice) report in February 2015 said, “More and more countries have begun to implement this instrument (SEZs) for their industrialization process, especially as a way of attracting foreign direct investments mostly in the manufacturing sector, creating jobs, generating exports and foreign exchanges.” It noted that some countries have been successful while others, particularly those in sub-Saharan Africa, were still struggling. The meeting discussed ways to share information on SEZ best practices and common objectives including trade facilitation. What is Indian Ocean Rim Association?
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 On 29-31 March 1995, the Mauritius Government convened a meeting to discuss the enhancement of economic co-operation among the countries of the Indian Ocean Rim. Representatives of governments, academia and businesses from Australia, India, Kenya, Mauritius, Oman, Singapore and South Africa known as the Core Group States or the M-7—attended the meeting. IORA was formally launched at the first Ministerial Meeting in Mauritius on 6-7 March 1997. This meeting adopted the IORA Charter, and determined the administrative and procedural framework within which the organisation would develop. Members of Indian Ocean RIM Association Australia, Bangladesh, Comoros, India, Indonesia, Seychells, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Singapore, South Africa, Sri Lanka, Tanzania, Thailand, UAE, Yemen & Somalia. China, France, Japan, USA, Egypt, Germay & UK are Dialouge Partners. Objectives of the Association To promote the sustained growth and balanced development of the region and of the Member States, and to create common ground for regional economic co-operation. To focus on those areas of economic co-operation which provide maximum opportunities to develop shared interests and reap mutual benefits. To explore all possibilities and avenues for trade liberalisation, to remove impediments to, and lower barriers towards, freer and enhanced flow of goods, services, investment, and technology within the region. To encourage close interaction of trade and industry, academic institutions, scholars and the peoples of the Member States without any discrimination among Member States and without prejudice to obligations under other regional economic and trade co-operation arrangements. To strengthen co-operation and dialogue among Member States in international fora on global economic issues, and where desirable to develop shared strategies and take common positions in the international fora on issues of mutual interest; and To promote co-operation in development of human resources, particularly through closer linkages among training institutions, universities and other specialised institutions of the Member States.
APEC – India’s membership securing issues – Possible benefits and cost Refer Class Notes
India’s proposal for a Trade Facilitation Agreement (TFA) in Services at WTO – Features and Implications for India India as a “global strategic and defence partner” of the U.S. and India-USA Defence relations – Need, Present status and Future suggestions Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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Refer Class Notes
Project Development Fund, India-CLMV Relations, CLMV Region as a source region of raw materials for Indian industries Tax Heavens – Need for an agreement to end the menace India-MERCOSAR Relations – Present status, Need and suggestions to expand WTO Ruling on India’s solar programme, its impact and suggestions to address the problem In a significant ruling in March 2016, a WTO panel found that the domestic content requirement imposed under India’s national solar programme is inconsistent with its treaty obligations under the global trading regime. The ruling has been described as yet another instance of archaic trade rules trumping important climate imperatives. India’s national solar programme, which was launched in 2010, aims to “establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible”. To incentivise the production of solar energy within the country, the government under the programme agrees to enter into long-term power purchase agreements with solar power producers, effectively “guaranteeing” the sale of the energy produced and the price that such a solar power producer could obtain. Thereafter, it would sell such energy through distribution utilities to the ultimate consumer. However, a solar power producer, to be eligible to participate under the programme, is required compulsorily to use certain domestically sourced inputs, namely solar cells and modules for certain types of solar projects. In other words, unless a solar power producer satisfies this domestic content requirement, the government will not ‘guarantee’ the purchase of the energy produced. In 2013, the U.S. brought a complaint before the WTO arguing that the domestic content requirement imposed under India’s national solar programme is in violation of the global trading rules. Specifically, it said, India has violated its “national treatment” obligation by unfavourably discriminating against imported solar cells and modules, a clear violation of its trade commitment. India principally relied on the ‘government procurement’ justification, which permitted countries to derogate from their national treatment obligation provided that the measure was related to “the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in production of goods for commercial sale”. India also argued that
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the measure was justified under the general exceptions since it was necessary to secure compliance with its domestic and international law obligations relating to ecologically sustainable development and climate change. The panel concluded that India, by imposing a mandatory domestic content requirement, had violated its national treatment obligation. In so far as the government procurement derogation was concerned, the panel found that the product being subject to the domestic content requirement was solar cells and modules, but the product that was ultimately procured or purchased by the government was electricity. The domestic content requirement was therefore not an instance of “government procurement”. Finally, the panel found that since India failed to point out any specific obligation having “direct effect in India” or “forming part of its domestic legal system”, which “obligated” India to impose the particular domestic content requirement, the general exception was not available to the Indian government in the instant case. The ruling, however, has come under intense criticism, particularly from environmentalists, as undermining India’s efforts towards promoting the use of clean energy. However supporters argue that there appears to be no rational basis for how mandatory local content requirements contribute towards promoting the use of clean energy. They argue that in fact, by mandatorily requiring solar power producers to buy locally, the government is imposing an additional cost, usually passed on to the ultimate consumer, for the production of clean energy. The decision may therefore stand to benefit the interest of the ultimate consumer. The panel ruling, however, is not final and reports indicate that India will prefer an appeal to the appellate body. Simultaneously, India may be exploring the option of filing a counter complaint against the U.S., with several states in the U.S. such as Michigan, Texas and California having also reportedly been accused of employing mandatory local content requirements in the renewable energies sector. Moreover, while the Jawaharlal Nehru National Solar Mission aims to add 100,000 MW of solar power by 2022, the local content requirement is only for 8,000 MW for rooftop and land-based projects where the government provides a subsidy. India has been arguing that since the power generated through the JNNSM was bought by NTPC, a public sector agency, the transaction qualifies as government procurement and is not covered by WTO rules. It is very unfortunate that the US decided to pursue their case against India in the WTO. All India has done is protect the domestic manufacturers who have so far given 400 MW of equipment to the installed capacity of 6,000 MW When India scales up to a 100 GW all that the Indian manufacturers can produce is about 15-17,000 MW over the next seven years. This would still leave more than 80,000 MW of market for the world. The US took a very myopic view. If Indian manufacturers manage to prove a case of dumping against the US manufacturers, solar power will become expensive forcing the government to abort the solar programme.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Our own domestic manufacturers had won a complaint against US manufacturers for dumping their products in India which would have resulted in high anti-dumping duties, then solar power will again become expensive and we may have to abort the programme.
BIMSTEC vs. SAARC – A comparative perspective. Read Hindu article- BIMSTEC waxes as SAARC wanes India has remained committed to BIMSTEC for 20 years. India is determined to celebrate and rejuvenate the organisation as it was honoured with the enthusiasm by BIMSTEC countries when all accepted India’s invitation for a BIMSTEC-BRICS outreach. India recently declared its commitment to play an “asymmetric” role in energising the Bay of Bengal community that held its first global diplomatic outreach with the BRICS countries during the recent BRICS summit in Goa. Diplomats said the response of BIMSTEC — Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation — countries to India’s call for greater engagement has rejuvenated the organisation, and diplomats are now “duty-bound” to take the organisation to a cooperative future. These ideas of rejuvenating BIMSTEC for a cooperative future is significant as BIMSTEC-BRICS outreach eclipsed the SAARC event that was planned for Islamabad in November but was postponed after several member countries withdrew, citing cross-border terrorism and Pakistan’s interventionist policy. While welcoming the leaders from the regional group during the BRICS Summit, India highlighted the absence of Pakistan and said, “In South Asia and BIMSTEC, all nation states, barring one, are motivated to pursue a path of peace, development and economic prosperity for its people. Unfortunately, this country in India’s neighbourhood embraces and radiates the darkness of terrorism.” Unresolved Issues in BIMSTEC However issues of unsettled borders, refugee issues and ethnic tension among BIMSTEC member countries would pose a challenge to the grouping, especially the Rohingya issue between Bangladesh and Myanmar, the issue of citizenship rights in Nepal and Bhutan, and also the Myanmar-Thailand border problems Challenges of wrong perceptions that India’s leadership role within BIMSTEC would involve possible intervention in the crisis points of the member countries could be raised. With 1.5 billion people and a combined GDP of $2.5 trillion, the countries of BIMSTEC have shared aspirations for growth, development, commerce, and technology.
India-EU Free Trade Agreement – Benefits and Challenges The FTA talks have been deadlocked since 2013 after 16 rounds of negotiations. The talks had begun in 2007.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 The Indian Government has informed a significant number of EU Member States of its intention to terminate BITs concluded with them. These notices have been accompanied by a request to open negotiations for new investment agreements, based on India’s new model (BIT) text. This has raised new concerns which the EU is also likely to raise, what it called India’s “unilateral termination” of existing Bilateral Investment Treaties (BITs) with “a significant number of” EU-member countries. FTA Agreement between the two have been stalled since 2013 as the negotiators failed to arrive at a compromise solution to address the demands of both the sides. The EU’s key demands include India to drastically cut or eliminate duties on automobiles and wines and spirits, while India's main demands pertain to data security status (crucial for India's information technology sector to do more business with the EU firms) and easier temporary movement of skilled professionals.
China’s One-Road-One Belt Initiative – India impacts and India options and suggestions The ‘One Belt, One Road’ (OBOR) initiative of China is likely to become the lynchpin of Chinese engagement with the world. The first was the novel idea of ‘entity diplomacy’ i.e., engaging within and across regions to secure the best interests of an entity that is necessarily larger and with interests broader than those of any sovereign. This follows from the argument of a revival of ‘continentalism’ as the Eurasian landmass deepens linkages and ‘Asia’ emerges. OBOR segues perfectly into this framework. It becomes, for the Chinese, an Asian undertaking that needs to be evaluated on the gains it accrues to the entity, i.e. Asia, as opposed to China alone. It therefore follows, from Beijing’s perspective, that Indian and other Asian nations must support and work for the OBOR initiative. Entity diplomacy also translates into the establishment of “one economic continent”, in which OBOR becomes a vehicle that promotes alignment of infrastructure, trade and economic strategies. For some Chinese speakers, India is already part of the initiative, as its own projects like Project Mausam and economic initiatives such as Make in India and Digital India complement and complete OBOR. Indian participation in the Asian Infrastructure Investment Bank and joint ownership of the New Development Bank only reaffirm India’s partnership in this Asian project for many in Beijing. It is popularly alleged that OBOR is a Chinese scheme similar to the U.S. Marshall Plan. Core Conflicts Structural challenges confront the Chinese formulations and the OBOR proposal. 1. First, the perception, process and implementation to date do not inspire trust in OBOR as a participatory and collaborative venture. It seems as unilateral ideation and declaration by China and the simultaneous lack of transparency in it. 2. The Chinese political leadership is committing too heavily on the project creates security dilemma of whether this project has military and security implications.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 3. Chinese vision document lays out five layers of connectivity in OBOR: policy, physical, economic, financial and human. While no developing country will turn away infrastructure development opportunities financed by the Chinese, they may not necessarily welcome a rules regime built on a Chinese ethos. 4. A formal nod to the project by India will serve as a de-facto legitimisation to Pakistan’s rights on Pakistan-occupied Kashmir and Gilgit-Baltistan under the China-Pakistan Economic Corridor (CPEC) that is “closely related” to OBOR. Options for India Fundamentally, India needs to resolve for itself whether OBOR represents a threat or an opportunity. The answer undoubtedly ticks both boxes. Chinese political expansion and economic ambitions, packaged as OBOR, are two sides of the same coin. To be firm while responding to one facet, while making use of the opportunities that become available from the other, will largely depend on the institutional agency and strategic imagination India is able to bring to the table. First and foremost, India needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region. This will require India to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; OBOR can assist in the latter. Therefore, just as U.S. trade and economic architecture underwrote the rise of China, Chinese railways, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian doubledigit growth. Simultaneously, India can focus on developing last-mile connectivity in its own backyard linking to the OBOR — the slip roads to the highways, the sidetracks to the Iron Silk Roads. Arguably, OBOR offers India another political opportunity - there seems to be a degree of Chinese eagerness to solicit Indian partnership.
India-Japan-USA Trilateral and Balance of power in the Asia and India-Japan Strategic Partnership Balance Of Power In Asia
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 For a politically rising Japan that is beginning to shed its pacifist blinkers, India is central to both its economic-revival and security-building strategies. Asia’s balance of power will be determined principally by events in East Asia and the Indian Ocean. In this light, the emerging Indo-Japanese entente is likely to help shape Asia’s strategic future as much as China’s ascent or America’s Asian “pivot.” Japan and India, as Asia’s natural-born allies, have a pivotal role to play in preserving stability and helping to safeguard vital sea-lanes in the wider Indo-Pacific region — a region defined not only by the confluence of the Indian and Pacific Oceans, but also by its significance as the global trade and energysupply hub. Landmark Event The India visit of Japan’s Emperor Akihito and Empress Michiko an year back promises to be a landmark event as in the more than 2,600-year history of the Japanese monarchy — the world’s oldest continuous hereditary royalty — no emperor has been to India, although India has traditionally been referred to in Japan as Tenjiku, or the heavenly country. Customarily, the Japanese Emperor’s visit to any country is highly significant because it symbolises a watershed in relations with that nation. Complementary Economic Relationship Japan is already doing more for India than any other economic partner of this country: it is the largest source of aid, and is playing a key role in helping India to improve its poor infrastructure, as illustrated by the Japanese-financed Western Freight Corridor, the Delhi-Mumbai Industrial Corridor, and the Bangalore Metro Rail Project. Tokyo is also keen to add concrete strategic content to the bilateral ties. India has the world’s largest youthful population, while Japan is ageing more rapidly than any other developed country. And whereas India has always valued strategic autonomy, Japan remains a model U.S. ally that hosts not only a large U.S. troop presence but also pays generously for the upkeep of the American forces on its soil. Yet, the dissimilarities between the two countries increase the potential for close collaboration. Japan’s heavy-manufacturing base and India’s services-led growth — as well as their contrasting age structures — make their economies complementary, opening the path to generating strong synergies. India’s human capital and Japan’s financial and technological power can be a good match to help drive India’s infrastructure development and great-power aspirations, and catalyse Japan’s revival as a world power. ‘Natural And Indispensable’ For India, Japan is a critical source of capital and commercial technology. Indeed, there cannot be a better partner for India’s development than the country that was the first non-western society to modernise and emerge as a world power, spearheading Asia’s industrial and technology advances since the 19th century. Japan is a natural and indispensable partner in our quest for stability and peace in the vast Indo-Pacific region.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 For a politically rising Japan, India is central to both its economic-revival and security-building strategies. After prolonged economic stagnation, Japan faces difficult challenges, including a shrinking population, a spiralling public debt, a fundamentally deflationary environment, and a security dilemma compounded by constraints arsing from the U.S.-imposed, post-war Constitution. Japan and India, as energy-poor countries heavily reliant on oil imports from the unstable Persian Gulf region, are seriously concerned over mercantilist efforts to assert control over energy supplies and the transport routes for them. So the maintenance of a peaceful and lawful maritime domain, including unimpeded freedom of navigation, is critical to their security and economic well-being. That is why they have moved from emphasising shared values to seeking to protect shared interests, including by holding joint naval exercises. These facts explain why India and Japan boast the fastest-growing bilateral relationship in Asia today. Since they unveiled a “strategic and global partnership” in 2006, their political and economic engagement has deepened at a remarkable pace. Their free-trade pact, formally known as the Comprehensive Economic Partnership Agreement (CEPA), came into force in 2011. They have even established an alliance to jointly develop rare-earth minerals so as to reduce their dependence on China. The level and frequency of India-Japan official engagement have become extraordinary. In addition to holding an annual Prime Minister-level summit, the two also conduct several yearly ministerial dialogues. India and Japan have a shared vision of a rising Asia. Translating that vision into practice demands strengthening their still-fledgling strategic cooperation and working together to ensure a pluralistic, stable Asian order. Japan, in keeping with its pacifist Constitution, does not possess offensive systems, such as nuclear submarines, large aircraft carriers, and long-range missiles. But with the world’s sixth largest defence budget, it has a formidable defensive capability, an impressive armament-production base, and Asia’s largest naval fleet, including top-of-the-line conventional subs, large helicopter-carrying destroyers, and Aegis-equipped cruisers capable of shooting down ballistic missiles. India — the world’s largest arms importer that desperately needs to develop an indigenous armsproduction capability — must forge closer defence ties with Japan, including co-developing weapon systems and working together on missile defence. The most stable economic partnerships in the world, such as the Atlantic community and the Japan-U.S. partnership, have been built on the bedrock of security collaboration. Economic ties that lack the underpinning of strategic partnerships tend to be less stable and even volatile, as is apparent from China’s economic relationships with India, Japan and the U.S. Through close strategic collaboration, Japan and India must lead the effort to build freedom, prosperity and stability in the Indo-Pacific region.
India – France Strategic Partnership Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 As a symbol of friendship and trust between the two countries, India honoured France in its 67th Republic Day Parade through the participation of a French military contingent, making France the first country to receive such an honour. Strategic Partnership As Strategic Partners, the two countries share converging views on key regional and global issues and continue to consult each other closely on strategic and security matters of mutual interest. India and France reiterate the need for urgent reform of the United Nations, including its Security Council, through an expansion in both categories of membership, to make it more representative of the contemporary world. France reaffirmed its support for India’s candidature for a permanent membership of the UN Security Council. France and India share common concerns and objectives in the field of non-proliferation of weapons of mass destruction. In order to strengthen global non-proliferation and export control regimes, France and India committed to continue to work jointly towards India's accession to the multilateral export control regimes, namely, the NSG, the Missile Technology Control Regime (MTCR), the Australia Group, and the Wassenaar Arrangement. France reaffirmed its strong and active support to building consensus among regimes’ members on this issue, recognizing that India’s accession will add value to the aims and objectives of these regimes. France and India underlined their support for negotiations on the Fissile Material Cut-Off Treaty (FMCT) on the basis of the Shannon mandate, which remains an essential foundation for progress on the issue in the Conference on Disarmament. Security India and France reiterated their commitment to counter terrorism and welcomed the separate joint statement on Counter-terrorism cooperation issued by the two sides. Both nations agreed to intensify cooperation between the Indian and French security forces in the fields of homeland security, cyber security, Special Forces and intelligence-sharing to fight against criminal networks and tackle the common threat of terrorism. They looked forward to early conclusion of an Agreement on Prevention of Consumption of Illicit Drugs & Psychotropic Substances between the two countries and expressed hope that cooperation in this field will also lead to the disruption of terrorist financing structures. The first-ever bilateral dialogue on Maritime Security in the Indian Ocean Region held on 14-15 January in Paris which paved the way for enhanced cooperation in maintaining the safety of sea-lanes for trade and communications, countering the threat of piracy and maritime terrorism, maritime domain awareness and fostering trade and economic links in the Indian Ocean Region. Defence The bilateral Agreement on Defence Cooperation concluded in 2006 has advanced cooperation in defence cooperation, production, research and development and procurement of defence material. The two sides agreed that the Agreement on Defence Cooperation will be extended for another ten years.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 The successful air exercise Garuda in June 2014 and naval exercise Varuna in April 2015, in which the French carrier strike group participated. They welcomed the latest round of the Shakti exercise held in India from 6-20 January which brought out useful operational lessons for the two Armies, especially in countering terrorism. There is strong commitment of French companies to manufacturing in India. Both nations called for further intensification of cooperation in agreed areas, including collaboration in defence technologies, research and development. In response to the new emphasis on defence manufacturing by the Government of India, both countries encouraged their respective business enterprises to enter into arrangements for co-development and coproduction of defence equipment in India, including transfer of know-how and technologies. There are also various joint ventures between Indian and French companies already underway and pledged their support to public and private enterprises for intensifying cooperation in this field. The two nations also have concluded the Inter-governmental Agreement (IGA) on the acquisition of 36 Rafale fighter aircrafts in flyaway condition, except for some financial issues relating to the IGA which they agreed must be resolved as soon as possible. Nuclear energy Both countries reaffirmed their commitment to responsible and sustainable development of civil nuclear energy with highest consideration to safety, security, non-proliferation and environmental protection. France and India underscored the contribution of nuclear energy to their energy security and to the fight against climate change. In pursuance of the 2008 Agreement on the Development of Peaceful Uses of Nuclear Energy between India and France, the two leaders encouraged their industrial companies to conclude techno-commercial negotiations by the end of 2016 for the construction of six nuclear power reactor units at Jaitapur, with due consideration to cost viability of the project, economical financing from the French side, collaboration on transfer of technology and cost-effective localisation of manufacturing in India for large and critical components in accord with Government of India’s "Make in India” initiative. France acknowledged the need for India to have lifetime guarantee of fuel supply and renewed its commitment to reliable, uninterrupted and continued access to nuclear fuel supply throughout the entire lifetime of the plants, as stated in the 2008 bilateral IGA on nuclear cooperation.
India-EU Relationship and India-EU Counter Terrorism Cooperation India-EU Relationship as well as Status Report of 13th India-EU Summit The 13th India-EU Summit concluded in Brussels without a consensus on a bilateral free trade deal known as the BTIA (Broadbased Trade and Investment Agreement) even as progress was made in bilateral cooperation in other fields -- from foreign policy to outer space. The talks were a culmination of efforts to kick-start a relationship that has been flagging for at least four years. The very fact that they occurred made them significant.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 While both the parties failed to set a date for the next round of trade talks, the discussions on trade involved an expression of ambitions and degrees of flexibility from both sides. “The EU and India will continue discussions on a possible FTA at a high-level. India has been pushing for opening European markets for its services sector and the movement of people to deliver those services while the EU has been keen on reducing or abolishing tariffs in several sectors, including in the automobile and wine and spirits sectors. The Brussels meetings evidently did not see the closing of gaps between the two sides. Overall, the most important thing is that the Summit put our strategic partnership back on track, is the single most important achievement of this summit, as we really needed a strong political push and an expression of strong political commitment from both sides to define the main directions of our relations and to decide what fields of cooperation are most interesting for both sides and the most promising. The fields of cooperation are many, and defined by the EU-India Agenda for Action-2020, which Prime Minister Narendra Modi and the presidents of the European Council and European Commission endorsed. The sectors of partnership range from foreign policy, counter terrorism and disarmament to transport and space. While at least six agenda documents and declarations were issued by the EU on their website, the extent to which they will be acted upon and not share the current fate of the BTIA, remains to be seen. There was some promise of action that would be taken in areas such as water, climate and energy, with the adoption of joint declarations on the India-EU Water Partnership and a Clean Energy and Climate Partnership. Government-to-government and business-to-business level meetings to exchange best practices in these areas, including deadlines for setting the work programmes in some instances, have been agreed. The cost of these programs will be borne by the parties that incur them. India is no longer eligible for development assistance from the EU. However, India will still have access to concessional loans from the European Investment Bank (EIB). India and the EIB signed the first tranche of a Euro 450-million-loan at the Summit towards the construction of a metro rail line planned in Lucknow. The joint declarations and Agenda for Action suggest that the EU has specifically courted Mr. Modi on several of his pet projects including the ‘Clean India’ initiative and the ‘Ganga Rejuvenation Initiative,’ where the EU will help in developing a solution to clean up the river as well as developing legal and governance frameworks for managing the basin. The two sides agreed to cooperate in countering violent extremism, disrupt recruitment of terrorists and prevent the free passage of foreign fighters in a joint declaration on counter terrorism, which also called for the early adoption of the Comprehensive Convention on International Terrorism in the UN. They have also agreed to explore the possibility of India and EUROPOL, the EU’s law enforcement agency, to share intelligence.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 The Common Agenda on Migration and Mobility (CAMM), which was also adopted, is designed to control and organize migration – a pressing concern for the EU. Significantly for the EU, the Agenda for Action includes items on facilitating the return of irregular migrants and the possibility of exploring a ‘Readmission Agreement’ — returning visa over-stayers to their home countries. The Agenda also includes the prevention of human trafficking and promoting international protection as priority areas. Points of special interest to India on the agenda are likely to be easier visa procedures for skilled workers, IT professionals, and business travellers. For now, the CAMM is a political declaration and not a legal agreement. Regarding ‘sensitive issues’ that were to be discussed at the summit, both parties have officially expressed their confidence in the legal processes of the Permanent Court of Arbitration, where the case of the Italian marines, Massimiliano Latorre and Salvatore Girone, is currently being heard. The EU also expressed a swift solution, “through due process of law” in the case of MV Seaman Guard Ohio, where 14 Estonians and six Britons were arrested in 2013 and sentenced in India. India, EU and human rights One of the ostensible reasons for stalled talks between the European Union (EU) and India had been the EU’s concern over human right violations in India. Several Members of the European Parliament (MEP) have, in the past, expressed concerns in this regard. A recent letter from Human Rights Watch, an international NGO, to the EU leadership brings up issues of NGO harassment and the overlooking of rights of marginal groups in development projects in India in the context of the India EU Summit. A joint statement from India and the EU reiterates the importance that both countries officially accord human rights and the rights of women.
India FTA benefited others but not India – Reasons, Suggestions India has signed 15 free trade agreements and 15 more are in the pipeline. Yet, weighed down by a sluggish manufacturing sector, India's exports have not got the expected fillip. India tops the list of countries that are signing free trade agreements (FTAs) with partner countries in order to gain preferential market access for its goods and services. But gradually as the results come in, it appears that the purpose of these agreements is only partially being met. While imports from these countries and regions have increased sharply, India's exports have stagnated. So, while consumers have benefitted from the FTAs, the Indian manufacturing sector has failed to take advantage. The rising trade imbalance can be seen in two ways: one, these so-called "free" trade agreements have led to the dumping of goods into India, thereby threatening the livelihood of millions, which is a concern for all developing countries; and two, India is simply a huge market with an insatiable appetite for imported goods. Whatever the viewpoint, the question remains: what is the relevance of these FTAs which India had been signing or negotiating at a blistering pace for past few years?
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Since 2009 India has signed large-scale bilateral deals encompassing all sectors with Japan, Korea, Malaysia and the Association of Southeast Asian Nations (ASEAN), to name a few. Meanwhile, it has also initiated similar deals with Canada, Australia, European Union, New Zealand, Africa, Chile and Israel, among others. According to some critics, this has resulted in huge trade distortions rather than a "spaghetti bowl" of benefits. One of the reasons why India embarked upon this journey was the decreasing relevance of the Doha round of global trade talks under the World Trade Organisation (WTO) where the developing countries were not able to clinch favourable deals with the developed ones; so regional or such bilateral arrangements probably seemed a more comfortable route. But it seems today that the government's strategy has sort of boomeranged. As of now, India has clinched 15 such trade agreements with various countries and regions and a similar number of agreements are in the pipeline. However, if one looks at the export numbers, the situation looks grim. In 2012-13 the country's total exports stood at $300.60 billion, down 1.76 per cent from 2011-12. In 2011, India's trade in goods with its FTA partners was about 39 per cent of the total trade. This figure has not registered much change since 2006. According to experts, the problem lies with India's uncompetitive (read inefficient) manufacturing sector, thanks to which India has not been able to achieve any gain compared to its partner countries. Our manufacturing sector has failed to raise its level of efficiency in order to compete in the markets of our partner countries, though one could argue that the enterprises operating in India are too focused on the domestic market that they have not felt the need to export in order to remain in business. For example, in 2011 India signed an ambitious bilateral Comprehensive Economic Partnership Agreement (CEPA) with Japan. India's trade deficit with Japan was at $3.6 billion in 2010-11 before the CEPA was implemented and it almost doubled in 2012-13 to $6.3 billion. Opportunities for enhancing India's exports are definitely there in these markets but there are challenges as well. India is facing tough competition from China, Japan and Korea in accessing the markets. These countries are very strong in manufacturing. On the contrary, Indian manufacturing has not been doing well in recent past. The recently announced National Manufacturing Policy (NMP) promises to create 100 million more jobs and contribute 25 per cent to the country's GDP in a decade, up from around 15 per cent at present. It is hoped that this change in policy will change the fate of manufacturing in India and turn around the overall economy. Recently, there had been some sharp criticism over the ongoing talks for a bilateral trade and investment agreement between India and the European Union (EU) since it covers a wide range of subjects including goods, services, investment, government procurement and intellectual property rights. Business and industry have failed to fully exploit the potential of the FTAs signed by India in terms of market access opportunities, while the enterprises from the partner countries have strengthened their presence in the Indian market. Therefore, the net impact would seem to be unfavourable to India.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Indian industry needs to become more aggressive and exploit opportunities that the FTAs provide rather than remaining as passive onlookers to Indian domestic market. There may be cases where the FTAs may have given unfair advantage to partner enterprises. In such cases it would be possible to invoke safeguards that are built in each agreement.
RCEP – India As the Regional Comprehensive Economic Policy negotiations enter the fourth year, forms of the probable final outcome are gradually emerging. Firstly, RCEP will not create a large integrated market. Experts are convinced that replacing the current ‘noodle-bowl’ of numerous competing free trade agreements (FTAs) with an overarching RCEP would have simplified trade rules and created stronger production bases in the RCEP area. To become a large integrated market, RCEP must agree to a zero tariff area among members. However, this ambitious solution was never on the agenda. The next best solution could have been RCEP countries agreeing to a single tariff concession list providing uniform tariffs for products across member-countries. However, even this was not agreeable to all. Following the negotiations, all current FTAs will continue and RCEP will just be adding numerous new concession lists. Secondly, RCEP will not slash tariffs substantially in most cases. Large-scale slashing is theoretically not possible among the countries already connected through FTAs. For example, Asean countries and their FTA partners have already opened over 80 per cent trade through existing FTAs. They can, at best, make small incremental offers to each other, under RCEP. Country groups such as India-China, India-Australia and New Zealand or China-Japan do not have any existing FTA relationship with each other and hence there’s scope for exchanging deeper tariff slashing. However, many countries in the group are not enthusiastic about this, probably due to a tough economic climate. The level of tariff slashing these countries will finally agree upon is yet to firm up. Thirdly, consensus on adopting common Rules of Origins (ROO) will make movement of goods easier, predictable across the member-countries. However, this is just a framework and product level details for almost 5,200 product sub-headings are yet to be negotiated. ROO criteria determine nationality of goods. For instance, if squash is made in India from Nagpur oranges, the squash obviously originates in India. But what if the squash is made in India from oranges grown in the US? Which is the country of origin for squash here: India or the US? There is no standard answer. However, two broad interest groups are visible: Export-driven trading economies such as many Asean countries argue that even minor processing should qualify a product for FTA benefits whereas manufacturing economies such as the US, China or India argue that processing should be substantial else non-FTA country products will enter the domestic market. RCEP will have a tough time balancing the conflicting needs of the stakeholders, comprising a mix of manufacturing and trading economies. While a few countries are pushing for large MNC-centric rules, RCEP being home to over 100 million SMEs, may struggle to find a balance. Fourthly, contours of the final outcome are yet to emerge in the area of IPR, services and investments. RCEP will have to reconcile the interests of many conflicting interest groups to ensure that IPR provisions do not compromise on public health issues as it contains 45 per cent of the world population, of which the majority
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 is poor. Another contentious issue before it is ‘investor-state dispute settlement (ISDS)’ that seeks to enable an investor to sue a foreign government. Detailed provisions of these issues are expected to be debated till the last day of negotiations. Industry trends These developments at the RCEP negotiations would broadly translate into the following trends for industry sectors and countries: RCEP will influence new investment decisions in textiles, leather, processed food, machinery and electronic component sectors. This will happen on account of the common ROO framework and the entry of China as the new FTA partner of Japan, India and Australia. However, no change in business strategy is expected in sectors such as basic agriculture and automotive products as these may not see fresh tariff concessions and face restrictive ROOs. New investment in steel may not happen on account of large over-capacities. Intra-Asean trade will come down. This trade for intermediate products such as integrated circuits accounts for over 60 per cent of Asean import of these. Much of this trade may relocate to one or two Asean countries or even to China on account of the common ROO framework and to achieve economies of scale. China’s exports to India may increase. Today, China exports to India at full duty as it does not have an FTA with India. But for products where duty differential matters, it needs to set up joint ventures in Thailand or Malaysia from where products can be exported to India at zero duty under the Asean-India FTA. With RCEP, many such facilities will not be required as China will export directly to India. While China’s exports to India may increase, most of these will be at the expense of Asean’s exports to India. However, China and Asean’s combined exports to India may not see much change. Preparing the ground India may emerge as an attractive investment destination for China. To offset the increasing labour costs, Chinese firms have been relocating labour-intensive manufacturing to Vietnam, Cambodia, Thailand and Indonesia. By setting up manufacturing joint ventures in India, China can effectively reach India’s domestic market and also a large European market once India signs an FTA with the European Union. If this story plays out, India’s trade deficit with China will come down as well. RCEP may still take over a year to conclude. We may use the intervening period to tie up loose ends. The Cabinet’s decision in June 2016 on introducing labour reforms for the textiles and apparel sector may prove to be a welcome grand step in this direction.
India-ASEAN and LEP vs. AEP The Act East Policy (AEP) has been depicted as ‘the cornerstone’ of India’s external relations. It encompasses all aspects of interactions such as strategic, political, security, socio-economic and cultural with numerous countries east of India, stretching from Myanmar, through other ASEAN countries, to China, Japan, South Korea, Australia, the Pacific island- states and the U.S. The fact that in the past 22 months India’s top three dignitaries – the President, Vice President and PM – visited nine out of ten member-states of ASEAN; that the PM, in addition, paid visits to China, Japan, Australia, South Korea, Mongolia and Fiji; a Policy: Origin and Evolution First, India’s extensive exchanges and linkages with the eastern countries should be viewed as ‘four waves’ – pre-colonial, colonial, post-independence and since 1990.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Secondly, the origin of Prime Minister Narasimha Rao’s Look East Policy (LEP) may be traced to the diplomatic initiatives his predecessor, Prime Minister Rajiv Gandhi, took in 1980s while specific factors appeared in early 1990s in India. Prime Minister Narendra Modi specifically mentioned the transformation of LEP into AEP at the IndiaASEAN Summit in Naypyitaw in November 2014. Difference between LEP and AEP Critics suggest that there is little difference between this policy and LEP. Yet a careful comparison of LEP and AEP shows that the new edition of the previous policy has five notable features: Firstly, the focus on tangible action and concrete results is inherent in the change from ‘Look’ to ‘Act’. Secondly, while ASEAN continues to be the central pillar or core of the policy, India is investing much more (than before) in deepening cooperation with the extended region, comprising in particular US, Japan, Australia and South Korea, in order to cope with a marked increase in China’s assertiveness. Consequently, the third feature is boldness on India’s part in the security, defense and strategic domain. Fourthly, India might become even more cordial and cooperative with ASEAN, but hard-nosed too. At the first summit itself, the Indian PM called for conducting ‘a review of our free trade agreement.’ A strong push is being given to negotiations for the Regional Comprehensive Economic Partnership (RCEP) with the aim to conclude them in 2016. Finally, the new government indicated clearly that India’s North Eastern Region (NER) would receive a higher priority in the implementation of AEP. State of Play 2016 Of the two components of the policy – vis-à-vis ASEAN and the extended region, let us first take up the former. India- ASEAN India-ASEAN dialogue partnership began in 1992 and the summit partnership in 2002. Thus in 2017, the two sides will celebrate the silver anniversary of the former and the completion of 15 years of the latter. A year earlier, at the beginning of 2016, the strategic partnership is in good shape, even though its full potential is yet to be realized. This is evident from the following: India has welcomed and supported the creation of the ASEAN Community in December 2015. (It is still work in progress.) ASEAN has been deeply appreciative of the Modi government’s new policy initiatives at home and abroad. New Delhi views India and ASEAN as ‘two bright spots of optimism amidst ongoing economic uncertainties.’ Two summits (in 2014 and 2015) produced substantive outcomes. Thirty annual dialogue mechanisms are in existence. Three funds, namely ASEAN-India Cooperation Fund, Science and Technology Fund and Green Fund are in operation to finance a variety of projects. The S &T Fund has been enhanced from $1 million to $5 million. Action Plan for 2016-20 has been adopted in August 2015. Cooperation encompasses diverse sectors such as trade and investment, food, agriculture, tourism and ICT etc.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Unlike a few other nations, India adheres to the principle of ‘the centrality of ASEAN’ in East Asian affairs. It is hoped that ASEAN will appreciate the need for its own unity, solidarity and integration as the fundamental basis on which this centrality is clearly dependent. India is taking the question of security, including maritime security (both against traditional and nontraditional variety), with utmost seriousness. Its views on the situation in the South China Sea have been articulated frequently with clarity and consistency. The essence is a call for ‘restraint’, ‘responsibility’, adherence to international law and norms, upholding of freedom of navigation and security of sea-lanes and, above all, avoiding the threat or use of force. ASEAN has reason to be assured of India’s continuing support for an early conclusion of negotiations for a binding Code of Conduct (COC), building up on the previous Declaration on Code of Conduct (DOC). India advocates an inclusive, balanced, transparent and open regional architecture for security and cooperation in the Asia-Pacific. ASEAN-India consultations and cooperation are getting deepened through various ASEAN-led fora, including the East Asia Summit, ASEAN Defense Ministers’ Meeting and expanded ASEAN Maritime Forum. The Modi government has announced two new initiatives: (a) a Project Development Fund with a substantial corpus of `500 crores (about $75 million) to develop manufacturing hubs in CLMV countries, and (b) a new Line of Credit of $1 billion to promote projects that support physical and digital connectivity between India and ASEAN. Extended Region With regard to the extended region covering non-ASEAN countries, it may first be useful to pinpoint the key trends reflected in main developments during the current decade. Territorial disputes between China and a few countries in the South China Sea and the East China Sea, the arms’ buildup, the unspoken competition between two emerging economic groupings – TPP and RCEP, debate on a new regional security architecture and on cooperation to counter non-traditional threats to security, and China’s drive towards ‘One Belt, One Road’ (OBOR) and ‘Maritime Silk Route’ (MSR) initiatives – all combine to reflect the current concerns and priorities. What these trends reflect in their essence, is a strategic contestation between the US – the dominant power – and China – the rising power – for re-ordering of their roles in the Asia-Pacific region. In this light, the Indian government pursues a policy that blends India’s economic, political and strategic imperatives. The focus is on accelerating economic growth, connectivity with ASEAN and beyond, and maritime security. At the same time, there is evidence of calibrated boldness on strategic issues. This is reflected in endeavours to improve relations with China, while taking the strategic partnerships with US, Japan, Australia and South Korea to a new level of consolidation as evident from the new agreements signed in the past two years and several other actions. India call for the region to concentrate on economic development and avoid tensions and conflict. A significant element of this policy is to help the East Asia Summit (EAS) to be strengthened and made more effective. Conclusion
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 A five-point yardstick, as articulated by this author elsewhere and delineated below, may be useful for the proposed evaluation: Trade ($77 billion in 2014-15) and investment ($71 billion during 2007-15) between India and ASEAN need to increase. Without this, AEP may be unable to claim spectacular success in the future. India-ASEAN connectivity projects, started long ago, need to be completed at the earliest. Deadlines for completion of the Kaladan multi-modal transport project in Myanmar and the trilateral highway project (linking India, Myanmar and Thailand) are 2019 and 2018 respectively. India has to do everything possible to avoid further slippages. The two new initiatives mentioned above – for CLMV and for ASEAN – should also be put into effect as soon as possible. Considering that the Trans Pacific Partnership (TPP) is heading towards fruition, parties to the negotiations for RCEP pact (i. e. ASEAN, India and others) can hardly afford further delay in finalizing and signing it. The common objective is to complete this task before the end of 2016. Countries concerned about the situation relating to the South China Sea might just succeed in persuading China not to rock the boat too much. Military conflict or accidents have to be avoided, even if political tensions and arms race might continue. This will bear a close watch. Finally, elevation of the East Asia Summit (EAS) into an effective platform for policy coordination would be another important facet to watch.
Effect of policies and politics of developed and developing countries on India’s interests China-Pakistan Economic Corridor (CPEC) project – Details of the project and its implications for India The flagship project of OBOR is the China Pakistan Economic Corridor (CPEC), which is a 2,700kilometre highway that would stretch from Kashgar to Gwadar. Gwadar port, under CPEC, is one of the points of intersection between the Road and the Belt. CPEC consists of two major packages: transportation and energy. Transport-wise, CPEC aims to invest US$ 12 billion to build a rail link connecting Gwadar port in Pakistan with Kashgar city in China, building road connectivity between the two countries, and upgrading Gwadar port as well as a number of existing highways. On the energy front, $ 34 billion are to be invested to add 10,400 megawatts of power generation capacity using coal, wind, solar and hydel energy plants, pipelines to transport oil and gas to Kashgar, and for completion of the Iran-Pakistan gas pipeline. Implications for India India accounts for merely 2 percent of global trade and this share is unlikely to increase much with the ongoing stalemate in WTO. The emerging trend is of multilateral groupings which are based on norms more stringent than WTO.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India is not invited to join either the TPP or the TTIP. India is looking to join the Regional Comprehensive Economic Partnership (RCEP) and APEC. All this means is that, whichever group India joins, it will have to make some compromises. India should look at CPEC with the same outlook and then decide its approach. Looking at the CPEC corridor from an economic perspective, CPEC offers a huge potential in terms of leveraging connectivity due to India’s unique geographical position. India can use CPEC to increase its access to the Middle Eastern as well as the Central Asian countries. The Iran-Pakistan-India pipeline could be constructed under the aegis of CPEC, which can provide it with the requisite funds and geo-political support. China’s Iran railway project is one project which will increase connectivity between India and Iran, an initiative which India has been unable to pursue on its own due to resistance from Pakistan. Connecting CPEC with the International North South Transport Corridor can further gravitate an economic power shift from the US-EU axis to an Asia-EU axis, which will immensely benefit India. Strategically, India needs to be cautious about joining CPEC as it passes through the China-annexed parts of Jammu and Kashmir, and joining it can weaken India’s claim over these territories. India does not have the option to sit in isolation because that will further increase Chinese influence in Pakistan as well as in the Middle East and Central Asia. Increased cooperation between Russia and China, under the auspices of CPEC, can further distance Russia away from India and bring it closer to Pakistan, which is a potentially troubling scenario for India. The way forward The solution to the CPEC conundrum lies in the way China engages with India. At the Raisina Dialogue, India favoured the approach of increasing connectivity through a consultative process, rather than unilateral approaches. India is open to joining CPEC if it is based on a consultative approach. India’s joining of the AIIB provides a framework in which India inserted a clause stating that projects being financed in the disputed regions are required to have agreements from the disputant parties. This way India can work on those components of CPEC which foster its connectivity with major markets and resource centres. China has been open to integrating CPEC with India’s Project Mausam. India’s Digital India and Make in India initiatives will also get a boost with such an integration. Economic cooperation can be decoupled from the boundary tensions, as has been the case with rising trade between India and China, in spite of the growing border tensions between the two. India also needs to focus its limited resources on building up its offshore assets, building up its ports, and developing its islands. India is not seeking global parity with China, but it is more interested in being the dominant player in the Indian Ocean Region. India should develop the Andaman and Nicobar Islands by creating them into a major entrepot.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India also needs to develop the military potential of the islands and should invite cooperation from Japan and USA in this regard. Other projects which need to be developed are the Mekong-Ganga corridor and BCIM. The CPEC initiative posits a complex problem, but manoeuvring it skilfully will yield proportionate rewards.
India is emerging as one of the brighter spots among all the emerging markets today, especially when compared to China As China, Russia and Brazil slow down, India is barreling ahead. India is emerging as one of the brighter spots among all the emerging markets today, especially when compared to China. Indian economy: challenges Notoriously slow bureaucracies. Lack of good infrastructure. Too much regulation and corruption. Reliable data measuring India’s economy are fuzzy. Most businesses are tiny and unregulated. Many people are employed off the books. India also uses wholesale, not final, prices to deflate nominal GDP. However, India has following advantages over China: China’s one-child policy, while now relaxed, will result in fewer entrants into the labour force for decades. That could choke growth: Younger people tend to be more geographically mobile and flexible in terms of occupation and ability to learn new skills. By contrast, India has had few constraints on population growth. The dependency ratio—the number of children and seniors relative to the workingage population—will continue to fall in India as it rises in China. English language usage is widespread in India compared to China. It also acts as a unifying force in a country with hundreds of languages and dialects. India also inherited a free press and a legal system from the UK. As a result, India’s rule of law is vastly better than the Communist party-dominated courts of China, complete with show trials and forgone convictions. India has historically had more of a free-market orientation than other large, developing countries, notably Russia and China. State-controlled enterprises in India account for only 13% of GDP compared with 29% in China. Also, the pharmaceutical and technology sectors in India never suffered the burdensome regulations that bogged down the steel and airline industries. Also helpful is the Indian natural bent toward technology. Its booming information-technology sector relies more on new technologies such as satellite transmission, and is able to leapfrog Indian-regulated utilities and the crumbling infrastructure.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 American and European firms outsource many back-office and even legal and medical services to India. Outsourcing revenue is now $95 billion a year and accounts for a fifth of Indian exports. India’s lower wages and English-speaking ability are the attractions. Many Indians have strong entrepreneurial inclinations, and the economic growth they can spark is vital to reducing high poverty rates and corruption as economic power shifts from politicians to entrepreneurs. The rupee has been relatively free of government intervention. The Reserve Bank of India, the central bank, is largely independent of government influence, while the People’s Bank of China is completely government controlled. In contrast to China’s 36% consumer spending component of GDP in 2014, India’s consumers are responsible for 59% of the economy, despite an equally high savings rate. This is a better balance in a world where exports and capital spending are no longer the easy route to economic growth for developing countries. Problems with Chinese economy: China is burdened with government-controlled banks and other inefficient, state-owned enterprises that still produce half the country’s output and employ a quarter of the workforce. China is moving slowly to open its financial and currency markets to foreigners. The yuan, however, remains tightly controlled. It’s allowed to appreciate in good times but is held stable whenever the economy is weak. Way ahead: Many reforms in India are still needed. Bribe demands are routine, the bureaucracy is byzantine and the infrastructure is backward. All of this impedes entrepreneurial activity. India also has a culture that penalizes risk-taking. Business is concentrated among long-existing and well-connected conglomerates with close ties to the government, much like the state-owned enterprises in China and the chaebols in South Korea. When it comes to the cost of starting a business, India is off the charts—ranked 173rd out of 189 countries, according to the World Bank—compared with the US, Germany, the UK and even China. Only China tops India for the amount of time it takes to start a company. India also ranked 130th for the ease of doing business, behind the notoriously difficult Russia (51st) and Brazil (116th). Even China, at No. 84, ranks higher. Opening the economy to entrepreneurs remains a long-run challenge for India, as does the education of hundreds of millions of students. About 90% of children enter school but more than half drop out before completing high school. Cheating on tests and bribing teachers for passing grades is rampant. Conclusion: For India to maintain its position, it needs to address its challenges before economic growth can explode. With improved education, faster deregulation and other reforms, India’s many advantages could translate into higher productivity and faster economic growth than in China.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India warned against pitfalls in ASEAN trade agreement - RCEP As talks for a Regional Comprehensive Economic Partnership (RCEP) — a regional trade agreement among the 10 ASEAN countries continue in Auckland, MSF has warned India that it will no more remain ‘the pharmacy of the developing world’ if the proposals in the pact are adopted. MSF Access Campaign and other civil society organisations are pushing for the removal of harmful intellectual property provisions in RCEP that could potentially increase drug costs by creating new monopolies and delaying the entry of affordable generics in the market. Unless negotiators remove harmful provisions from RCEP, this trade deal is set to follow the dangerous path of the U.S.-led Trans-Pacific Partnership agreement, which is recognised globally as the worst trade deal ever for access to medicines. India is committed to maintaining TRIPS flexibilities to ensure access to affordable medicines. However these RCEP provisions are extremely harmful for countries like India that export drugs A leaked copy of the intellectual property text being discussed at the RCEP negotiations shows Japan and South Korea have made several “alarming” proposals that go beyond the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights. Two of the most worrying are the demands for ‘Data Exclusivity’ and ‘Patent Term Extensions’ — both intellectual property obligations that Least Developing Countries are exempted from till 2033. Data exclusivity is a form of legal monopoly protection for a drug, over and above the patent protections. This is given expressly to compensate for the investment made during clinical trials. It implied that regulators cannot approve a similar drug with similar data for the next five years, delaying the entry of generic, affordable versions Patent term extensions are given to compensate the company for delays in processing patent applications. A company gets a 20-year patent monopoly on a drug from the date that the application is filed. Sometimes processing these applications takes time and the companies get only 13 years instead of 20. A patent term extension will give another five-year monopoly to the innovator company, again delaying the entry of generic drugs in the market. For India, agreeing to data exclusivity will mean amending the Drugs & Cosmetics Act (FDA law) so that the Indian Drug Regulatory Authority (DRA) is prohibited from registering a more affordable version of a medicine as long as the exclusivity lasts over the clinical trial data.
Brexit – India impact, and India-UK Relation as a whole With the majority supporting Britain’s exit from the European Union (EU), India’s IT majors are likely to see a phase of uncertainty in the near term. However, Nasscom said it saw a mix of challenges and opportunities in the longer term. Some of the near-term ramifications that is expected on the technology and services sector include — a likely decline in the value of the British Pound, which could render many existing contracts losing propositions unless they are renegotiated; Indian IT companies may need to establish separate headquarters/operations for EU which may lead to some disinvestment from UK.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Europe is the second largest market for the Indian IT-BPM industry, constituting almost 30 per cent of the industry’s export revenue. For the fiscal FY 16 overall IT exports was about $110 billion of which 62 per cent was contributed by the US, UK contributed 17 per cent and continental Europe contributed 11 per cent. As per industry watchers, of the total revenue from the European market the UK contributes major portion to Indian IT companies. Many India IT companies use Britain as the hub of their operations in Europe and are expanding their business in continental Europe using Britain as the gateway. India’s third largest IT services company Wipro which employs around 4,000 people in the UK. For India’s second largest IT services provider Infosys also Europe is a huge market with significant presence in the UK. Of the company’s overall revenue about 23.4 per cent comes from Europe.
Ending of immigrant visa programme for the wealthy in the US- EB-5 Programme – Impacts The United States of America's EB-5 Programme, labelled as the 'Green Card for greenback' scheme, has made many high net worth individuals the world over, including in India, to get worried as the controversial immigrant visa programme for the wealthy is set to expire. The programme grants rich entrepreneurs — as well as their spouses and unmarried children below the age of 21 — an opportunity to bag the coveted U.S. Green Card (or status of permanent residence) and Citizenship. All they have to do is invest in just over half a million dollars in the U.S. and ensure that the funds help generate at least ten full-time jobs for qualified U.S. workers. The visa, given in exchange for investments, grants the holder a conditional permanent residence status. After two years, the conditions may be removed, when it becomes permanent green card that can lead to citizenship, provided it has resulted in the creation of 10 jobs. The programme is named EB-5 as it is the fifth preference category under the Employment-Based (EB) immigration visas. The EB-5 programme was created in 1990 with the approval of the US Congress. It aims to boost the American economy by attracting investment from foreign nationals and generating employment for locals. In 1992, its scope was widened through an Immigrant Investor Programme, or the Regional Centre Programme. Regional Centres are certain designated organisations permitted to collect money from overseas investors seeking the EB-5 visas, and then pump such foreign investment (which is usually much cheaper than other forms of funds including bank credit) into officially approved projects. Though the EB-5 Programme has had similar ‘sunset’ periods earlier, 'Invest In the U.S.A.' (or IIUSA, a not-for-profit association associated with the programme) stated that it had been re-authorised ten times since 1992. In order to be considered for permanent residency status in the U.S., the Programme mandates a qualified foreign investor to invest at least $1 million — or a minimum of $500,000 if the investment is made in certain rural areas or regions with high unemployment — and show that ten or more full-time positions were generated or preserved directly or indirectly as a result of that investment. Indian Diaspora
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 In 2015, the U.S. authorities issued 111 EB-5 visas to Indians — that is 15 more than the previous year, and 74 more than the number of such immigrant visas issued in 2011. The rapid rise in the number of EB-5 visas to Indians in the last few years had led to the filing of over a thousand applications under that category from India in 2015. In the backdrop of allegations of fraud and corruption — including against Indian-origin individuals — related to the programme, the U.S. Congress will soon have to consider whether to renew it or to pay heed to growing criticism and wind it up altogether. If the EB-5 is given a new lease of life, it will most certainly be reformed through restrictions (such as a higher level for minimum investment), more stringent norms for fraud prevention, as well as steps to protect America's national security (through foolproof measures to prevent terror- and other illegal finance flowing into the programme). There could also be new clauses to ensure greater transparency in the functioning of 'Regional Centres'. Under the programme, around 10,000 EB-5 visas are handed out every year to qualified investors. According to American authorities, there is a yearly limit of 700 visas per nation. However, if a country crosses that limit, there is a clause that allows U.S. authorities to make available the “unused visa numbers” to applicants from countries (such as China) that have crossed that limit. Foreign Direct Investment (FDI) from India into the U.S. under the EB-5 programme was worth only $161.5 million during 1992-2014, an analysis by the IIUSA showed. China, however, outshone the rest with $6.7 billion worth FDI into U.S. during 1992-2014, as per the IIUSA data.
China’s stand on South China Sea creates fault lines in the unity of SEA
region – India’s policy options The Permanent Court of Arbitration (PCA) in The Hague, Netherlands, has ruled that China’s claims of historical rights over South China Sea (SCS) has no legal basis. The case against China was initiated by the Philippines. The PCA is not a ‘court’ per se, but organises arbitration tribunals between member countries, should issues arise. What did the arbitration panel rule? The Hague-based PCA ruled that China has no legal basis to claim historical rights to islands in the SCS, and has violated Philippines' sovereign rights. It said Beijing “had no historic rights to resources in the waters of the South China Sea” and that “such rights were extinguished to the extent they were incompatible with the exclusive economic zones provided for in the Convention.” Why is South China Sea considered so important? The SCS is a busy international waterway, being one of the main arteries of the global economy and trade. More than $5 trillion of world trade ships pass through the SCS every year. The SCS is also resource rich, with numerous offshore oil and gas blocks. So what is the dispute about?
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 There are a few hundred small islands in the SCS, a part of the Pacific Ocean. Some of the main ones are Spratly Islands, Paracel Islands and Scarborough Shoal — the bone of contention between China and the Philippines. China claims most of these islands as its own. Vietnam, Malaysia, Brunei, the Philippines and Taiwan have rival claims. China has said it will not permit other nations to infringe on what it considers its sovereign rights in the strategically vital area. The U.S. has no claim in the South China Sea, but has been highly critical of China's assertivenessand says it will protect freedom of navigation. When did China start taking this position on SCS? China laid claim to the SCS back in 1947. It demarcated its claims with a U-shaped line made up of eleven dashes on a map, covering most of the area. The Communist Party, which took over in 1949, removed the Gulf of Tonkin portion in 1953, erasing two of the dashes to make it a nine-dash line. What is the ‘nine-dash’ line? The ‘nine-dash line’ stretches hundreds of kilometers south and east of its southerly Hainan Island, covering the strategic Paracel and Spratly island chains. China buttresses its claims by citing 2,000 years of history when the two island chains were regarded as its integral parts. But Vietnam rejects the Chinese argument, justifying its own claims, on the basis of written records, which, in its view, establishes its administration over the area since the 17th century. Beijing and Manila clash on account of their dispute over the jurisdiction of the Scarborough shoal, which is 160 kilometres from the Philippines. If the SCS islands are claimed by so many countries, why is the ruling about the Philippines alone? Back in 2013, the Philippines raised the dispute with China to the PCA, saying China’s claims violated Philippines’ sovereignty under the 1982 U.N. Convention on the Law of the Sea. A five-member panel of
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 international legal experts was appointed in June 2013 to hear the case. The result of this arbitration was announced on July 12, 2016, with the panel saying China had no “historic rights” over the SCS. Will this ruling affect China? Unlikely, because PCA is an intergovernmental organisation and not a ‘court’, hence the ruling is not binding. The Philippines has asked the tribunal to declare China’s claims and actions invalid under the U.N. Convention on the Law of the Sea. China has swiftly rejected the ruling, saying it was null and void and that Beijing would not accept it. “China opposes and will never accept any claim or action based on those awards,” a Chinese Foreign Ministry statement read. What is India’s stance? India follows the policy of not involving in disputes between sovereign nations. India, too, has commercial interest in the region. Vietnam has offered India seven oil blocks in its territory of SCS, a move that didn’t get down well with China. India has signed energy deals with Brunei too. In addition, the Ministry of External Affairs on Tuesday released a statement saying India was “carefully studying” the Hague panel’s ruling. “India has noted the Award of the Arbitral Tribunal constituted under Annex VII of the 1982 United Nations Convention on the Law of the Sea (UNCLOS) in the matter concerning the Republic of the Philippines and the People’s Republic of China and is studying it carefully,” it said.
Indian diaspora Saudi decision on resolving the foreign workers issue Saudi Arabian Government has ordered authorities to address “once and for all” the grievances of distressed foreign workers, especially Indians and the Filipinos, stranded in the Kingdom after not being paid for months. The King, in a series of directives in a day recently has ordered the Minister of Labour and Social Development to take necessary measures, in coordination with the Ministry of Finance, to oblige companies who have contracts with the government to pay the salaries of their employees in accordance with the government’s Wage Protection Programme. The King’s directives comes amid increasing complaints by workers that they have not been paid their salaries for months. Construction giant Saudi Oger has been the subject of complaints by thousands of its workers for not paying their salaries for the past nine months. In one of his directives the King Salman authorised the Labour Minister to also immediately address the housing and accommodation services of the distressed workers.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 India and the Philippines as well as their communities in the kingdom have rallied behind their compatriots at Saudi Oger by providing them food. Indian Minister of State for External Affairs V.K. Singh also visited Saudi Arabia to resolve the issue. Currently, a total of 7,700 affected Indian workers are living in 20 camps in the country and the embassy is in the process of collecting information about others residing in different parts of Saudi Arabia.
US elections Indian Diaspora significance Pew Research reported that 65% of Indian-Americans lean towards the Democrats while only 18% lean towards the Republican party. As one of the largest-growing and most affluent immigrants, the choice of the Indian-American community is seen as important. However, it is important to remember that diaspora voting patterns offer little for relations with the home country; Indian-American votes do not reflect the choice of how India views the U.S. elections. Another important point is that the Indian-American community is currently too small in number to affect election outcomes even though they currently form the third-largest minority amongst AsianAmericans. However, they do play an important role in election funding, as both the Democrats and the Republicans have important donors from the Indian American community. Shalabh Kumar, IndianAmerican businessman, recently made the single largest donation to the tune of $898,800 to the Republican campaign. Trump has also claimed that Hillary Clinton’s campaign relies on Indian-American donations from the likes of the Confederation of Indian Industry, politicians and businessmen.
India-EU seeks to broaden their relationship by leveraging the Indian diaspora India and the European Union today sought to "broaden" their bilateral engagement, in various fields, by leveraging the strength of Indian diaspora in EU countries. As far as our relationship with the diaspora is concerned, currently we are at a very interesting junction as India is asserting its position on various world forums. So, as India grows in stature, so does its diaspora and as the diaspora grows, it benefits India too. We need to have a very different kind of interaction. And, Indian diaspora is very fascinating. Nearly 30 million Indians are residing in various countries outside of India and about 6.3 million live in countries which are part of the European Union. Not just the economic benefits they bring to EU, but also cultural enrichment.
Philanthropy of Indian diaspora to India
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 It has been generally perceived that Indian diaspora funds were distributed through formal and mostly in informal channels for various development projects. And, it has become trendy for Indian diaspora to give back to their villages and towns. Their inspirations for philanthropic activities are a combination of traditional concerns of family, kinship, castes and religious sentiments and the added modern idea of doing something good for the poor and the needy. The Indian Diaspora especially those who migrated to the U.S. after the liberalization of U.S. immigration law in 1965, along with the immigrants of the 1990s constitute a “Successful Knowledge Diaspora.” Indian diaspora that has settled in America now numbers more than 1.9 million Indian-born immigrants and another 1.6 million Americans who report having Indian ancestry. Traditionally, money has flowed from Indian Americans primarily to family and community. Now it is increasingly supporting organizations with broad social missions. The timing of this trend is important. Much attention has been paid to India’s growing middle class, but the country still needs massive investment to create more jobs, housing, and infrastructure to meet soaring aspirations, according to the World Bank.4 The United Nations Development Program found that nearly 75 percent of India’s population lives on less than $2 a day, and the average Indian attains fewer than five years of schooling. A shift in giving from family and community to broad-based social issues could advance the pace of change to address India’s pressing needs. If their philanthropic contributions were consistent with those of other US households in similar income brackets, and if they directed 40 percent of their philanthropic giving to India, $1.2 billion per year would flow from Indian diaspora donors to Indian causes. This sum would dwarf official US foreign aid to India ($116.4 million in fiscal year 2014). What’s more, it would represent more than half the entire amount of annual official development aid received by India from all countries—$2.2 billion, on average, from 2005 through 2013. Indian Americans also have significant nonfinancial assets to offer. They are highly educated and well represented in science, technology, engineering, and math professions. They have been active and successful in technology and entrepreneurship, and they increasingly occupy roles of political and social influence that track their economic ascendance. These nonfinancial assets—education, expertise, and positions of influence, combined with familiarity with Indian culture and communities—could all be applied to great effect in India to build the capacity and professionalism of India’s civil society organizations and the philanthropic entities that support them. Diaspora Giving Has Evolved A watershed moment in Indian diaspora giving occurred on January 26, 2001, when a 7.9 magnitude earthquake struck Gujarat in northwest India. More than 19,700 people died, and 166,000 were injured. By June 2015, AIF, a body of Indian diaspora in America, which does not operate with an endowment, had raised and distributed about $100 million to 248 Indian NGOs. Many Indian Americans stepped up their efforts to meet social needs in India as well.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 More recently, an increasing number of Indian NGOs have opened US offices, typically focused on fundraising alone. Some, such as Pratham, have successfully targeted various segments of the IndianAmerican population to raise funds. Government Support for Diaspora Giving Meanwhile, during the past 15 years, the Indian government has taken several steps to make diaspora giving easier: New visa standards for nonresident Indians, adopted in 1999, made it easier for diaspora members to visit, invest, and open rupee bank accounts in India. An annual conference of overseas Indians—Overseas Indian Day (Pravasi Bharatiya Divas—was created in 2003 to facilitate networking and to celebrate emigrants who have helped India. The Ministry for Overseas Indian Affairs was established in 2005 to coordinate trade, academic exchange, heritage exploration, and philanthropy between India and its diaspora. A 2011 law allowed Indian citizens residing abroad to cast votes in their home constituencies. By and large, the trend looks set to continue under Prime Minister Narenda Modi, who announced a further easing of visa and travel requirements during an appearance at Madison Square Garden on his inaugural trip to the United States in September 2014. As Modi cultivates the diaspora, a new law at home has initiated a tectonic shift in India’s social sector, with positive implications for diaspora giving. The 2013 Companies Act requires large firms to spend 2 percent of profits on corporate social responsibility (CSR) activities in India. Over time, increased corporate sector activity in India’s civil society should nudge NGOs and intermediaries toward greater transparency with regard to performance data, which in turn will offer them another lever to use in engaging and mobilizing the already motivated Indian diaspora. Barriers to Giving Back Although the shift to more strategic diaspora giving has unmistakable momentum, it faces numerous challenges. In fact, three serious barriers hamper giving by the Indian-American community: donor distrust, regulatory constraints, and disconnected second-generation Indian Americans. Donor distrust - Virtually all the people we interviewed said that widespread distrust of NGOs and intermediaries in India is the primary obstacle to increased giving, strategic or otherwise. Many seem to consider corruption in India systemic. Regulatory constraints - Despite the Indian government’s steps to make diaspora giving easier over the past several years, the country’s active scrutiny of foreign money flowing to India’s NGOs remains an issue. The 2010 Foreign Contribution Regulation Act (FCRA) restricts giving to NGOs by foreigners, reflecting official apprehension about foreign contributions to groups considered a threat to national security. Under the act, NGOs must register if they wish to receive funds from sources outside India. To be eligible, an organization must have been in operation for at least three years. Younger organizations can accept foreign funds only if they apply for and receive permission from the Indian government for a specific purpose and amount.
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Important International institutions, agencies and fora- their structure, mandate. Double disadvantages that are faced by India and some other countries at the World Trade Organisation’s (WTO) Dispute Settlement Body (DSB) Developing nations, including India, are facing a double disadvantage at the World Trade Organisation’s (WTO) Dispute Settlement Body (DSB). These nations are challenged not only by the lack of a sufficient pool of trade law experts to represent them effectively at the DSB but also by certain efforts to bring within the body’s ambit non-trade issues such as labour and environment. There have been efforts to include within the DSB, the disputes, very specifically labour and environment issues arising out of decisions in other forums. Such cases would pose a great challenge for developing nations because very often these are conditions that add as restrictions in the freedom of trade particularly for developing countries. With the global trade slowdown and the consequent rise in trade restrictive measures taken by many countries, the world is witnessing increasing use of trade remedies (such as anti-dumping duty, safeguard duty and countervailing duty). Many of these measures are also ending up as disputes at the DSB. Suggestions - Building Indian capacity There are only a few Indian law firms in trade law practice. Therefore, to handle India’s trade disputes with other countries, the government has been engaging both international and Indian law firms. However we would like to see an increase in the number of Indian experts so that the government can rely entirely on local firms to deal with such issues. The commerce ministry was trying to build capacity to comprehensively track the trade restrictive measures taken by other countries, especially those that hurt India’s exports. The above mentioned necessity of efforts to include non-trade issues in the DSB’s jurisdiction assume significance as India has been advocating that certain issues, including labour and environment, must be kept out of the WTO’s purview and instead be dealt with by the global bodies concerned such as the International Labour Organisation and the United Nations Framework Convention on Climate Change. The developed world, however, is keen that the WTO addresses, what they call, global trade’s “new challenges”, including labour and environment.
Paris Agreement on climate change – Good, Bad and the Needs that are to be done in the future On December 12th, 2015, a new Paris Agreement on global climate change was born after four years of taxing labor. The birth of the Paris Agreement should be cause for both hope and caution. Certain political
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 developments are principally good and welcome. Other changes are largely bad. And some purposeful omissions may be plain ugly. Good of Paris Agreement The Paris Agreement signals that climate change is back at the center of the global political agenda – at least for now. For the past six years world countries have been struggling to recover from the Copenhagen fiasco in 2009, where countries failed to agree on a common strategy. Unprecedented participation by world leaders, including President Obama, Chinese president Xi Jinping and other heads of state, at the beginning of the summit helped set the tone that then allowed national delegates to make the necessary compromises. The Paris Agreement signifies a very welcome return to multilateralism. Much of the Paris conference was also refreshingly transparent; the attempt to be inclusive was honest. A major strength of the Paris Agreement is its near universal participation and acceptance of responsibility. This is much-welcome progress from the 1997 Kyoto Protocol, which only required mitigation action by a limited number of industrial country emitters responsible for bulk of historical emissions. It is also an important step forward from the 2009 Copenhagen Accord, which was put together at great haste by a small group, leaving most countries on the political sidelines. On November 4, 2016, the Paris Climate Agreement went into force as the needed threshold of at least 55 countries, responsible for at least 55 percent of total global heat-trapping emissions hve joined the agreement. The historic Paris Agreement was a signal triumph of global diplomacy, demonstrating our ability to rise above narrow national interests and commit to a shared vision of future good. An ambitious long term temperature and decarbonization goal - countries have committed to the aim of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.” To achieve this temperature goal, the long-term goal is to reach net zero global heat-trapping emissions by the latter half of the century, with developed countries taking the lead so that equity considerations for developing countries are respected. A process to raise the ambition of country climate actions over time, recognizing that the current commitments (the so-called NDCs) are not nearly enough. This will happen via a facilitative dialog in 2018, and global stock-taking every five years thereafter. A call for an Intergovernmental Panel on Climate Change (IPCC) special report in 2018 that will highlight the impacts of global warming if the global average temperature rises to 1.5°C above preindustrial levels (also compared with impacts at 2°C). Commitments (although lacking in sufficient detail) about helping developing countries make the clean energy transition and cope with the impacts of climate change. This is an area where further work, including financial assistance, is clearly required. Paris gave us hope. Now comes the hard work of implementing and improving upon the Paris Agreement, living into the promises nations made there.
Prepared By: Rajkumar.SP, Senior Faculty, Vetrii IAS Study Circle
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Marrakech Climate Meeting, COP22 It will be all about catalyzing action to deliver on the Paris Agreement. Here’s what we hope to see: Progress on developing rules, timelines, and processes to help achieve the goals of the agreement. Further elaboration of how developed countries intend to help developing countries switch to lowcarbon development pathways and build climate resilience, including firm financial commitments from developed countries and deadlines for meeting them. A clearer understanding of how the 2018 facilitative dialog, alongside the IPCC special report, will help increase the ambition of the NDCs over time. Strong signals from countries about the domestic policies they are implementing or intend to implement to achieve their global commitments. Reasons for optimism There are lots of reasons to be optimistic about climate progress these days. Just to cite a few: We’re continuing to see remarkable progress on clean energy deployment globally, not incidentally accompanied by rapidly falling costs. The global community just reached a successful agreement on phasing down hydro fluorocarbons (HFCs), another set of powerful heat-trapping emissions, through an amendment to the Montreal Protocol. Earlier countries also reached an agreement on limiting aviation emissions, a growing contributor to global carbon emissions that was not covered under the Paris Agreement. More and more countries and jurisdictions are moving to implement a price on carbon. Coal use and carbon dioxide (CO2) emissions from the power sector continue to decline in the US (although rising methane emissions add a note of caution). And coal use in China also seems to have peaked. At the same time, there’s a lot of work ahead to accelerate and deepen these trends. We also need to invest in a just, inclusive clean energy transition with benefits flowing to all communities. What Should be Done? All countries, including the US, have to implement ambitious domestic policies to live up to their global climate commitments. Current US policies—including the Clean Power Plan and vehicle efficiency standards—are critical to driving down our carbon emissions. The following should be done - Actions to set methane standards for the oil and gas industry; increase efficiency measures; achieve further emissions cuts in the power and transportation sectors; and build up carbon storage in our forests, soils and grasslands. Ahead of 2020, we should also put forward a strong 2030 emissions reduction goal and develop policies consistent with that. Regardless of the new USA administration, we need continued strong leadership on global and domestic climate action from the president and from Congress. Bad of Paris Agreement The 1992 United Nations Framework Convention on Climate Change laid down a broad legal structure for global cooperation to which future agreements were intended to provide more specificity. Paris did nothing of the sort.
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INDIA’S FOREIGN POLICY EXPECTED TOPICS – MAINS 2016 Instead, the Paris Agreement introduces a new, and mainly worrisome, model of voluntary “nationally determined contributions” by governments. Many of the results are expected to be delivered by the magic of markets and not-yet-commercially available revolutionary technology, with world leaders cheering the change along. The Paris Agreement sends a signal but actual emissions reductions and their timetable is essentially left voluntary. For different reasons, this new model of voluntary national measures fits the interests of many key players, including the United States, China and India. But it leaves the future timetable for actual emission reductions squarely in the hands of the largest polluters with no collective system in place to enforce that individual countries meet clear targets. The success of the system depends too much on the good will of world leaders. Many national politicians who invested political capital in making the Paris Agreement a reality – for example, US President Barack Obama – will not be in office to oversee even initial implementation. The result is a global system characterized by political uncertainty about the future scope of action and a lack of a clear price signal for carbon. This is a situation that markets will not respond well to and the planet may not be able to afford. Ugly of Paris Agreement This so-called “bottom-up” approach may have been necessary to reach a deal in Paris. But the fact is that the agreement is essentially void of clearly actionable commitments. On both the two high-profile issues that matter the most – emission reductions and financial investments – there are no new explicit numerical targets for individual countries and no meaningful mechanism for ensuring accountability. The Paris Agreement includes the mention of ‘loss and damage’ in the case of devastating effects of climate change, such as displacement of people from sea level rise, but no firm financial commitments from industrialized countries. The Paris Agreement does not anywhere dare use the words “pledge” or “commitment.” Paris endorsed the new 1.5°C temperature target. But what is not in the agreement is any clue to how this might be achieved. What is in the agreement suggests that it will not. Similarly, it is nice that Article 7 on adaptation to climate change (a perennial developing country concern) is amongst the longest. But there is nothing concrete in that section, especially not on financial support. The inclusion of the language “loss and damage” to deal with potentially irreversible costs of climate change in vulnerable developing countries (Article 8) is a step in the right direction. But the related conference Decision attached to the Paris Agreement makes it clear that the article “does not involve or provide a basis for any liability or compensation”. The collective result is a Paris Agreement that makes it necessary to continue talking about the same set of issues we have now talked about for a quarter of a century. Meanwhile, the reality of climate change grows worse.
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