iastoppers-india-and-china
Editorial Notes

Editorial Notes 13th October 2016

Direct Benefit Transfer (DBT) for Kerosene; Indian Ocean opportunity; Sino-India Relations; SAARC, BRICS and BIMSTEC; IBSA.
By IT's Editorial Notes Team
October 13, 2016

Contents

Economy

  • Towards a kerosene-free India

Bilateral & International Relations

  • Narendra Modi’s Indian Ocean opportunity
  • India and China must show mutual restraint to avoid a major crisis
  • The alphabet soup at Goa

 

Economy

GS (M) Paper-3: “Public Distribution System objectives, functioning, limitations, revamping”
GS (M) Paper-2: “Government policies and interventions for development in various sectors and issues arising out of their design and implementation.”

Towards a kerosene-free India

Introduction:

  • After the success of Direct Benefit Transfer (DBT) for liquefied petroleum gas (LPG)/cooking gas, the government has now decided to launch DBT for kerosene (DBTK), starting with pilots in the State of Jharkhand.
  • While the move is well-intentioned, it may not be simple to implement at scale, and may even fail to eliminate the diversion of subsidised kerosene that it intends to.

iastoppers-kerosene

What are the hurdles?

1) Digital consumer database:

  • Unlike DBT scheme of LPG, it lacks a streamlined and unified digital consumer database.
  • The entire database across India was managed by just three public sector oil marketing companies, which are directly under the Ministry of Petroleum and Natural Gas. This enabled easier coordination for a nationwide rollout of the LPG scheme.
  • The database of subsidised kerosene beneficiaries falls under the Public Distribution System (PDS), which is managed and maintained by each State government. Coordination among the large number of State-level actors, especially in the case of a non-digitised PDS beneficiary database, can create barriers.
  • While e-PDS is being implemented across India, a digital PDS beneficiary database is not yet available for all the States to enable implementation of DBTK.

2) Political economy associated with subsidised kerosene.

  • While the Centre burns the fiscal impact of subsidy, the States determine who gets the subsidy and to what extent.
  • The political alignment of States to buy into the idea of DBTK is critical in ensuring effective implementation of the scheme. The good news is that many States have expressed interest in conducting the pilot, which reflects the remarkable efforts made by the Centre towards aligning the States, including those governed by the Opposition.

3) Issue of diversion:

  • A major drawback is the limited ability of DBTK to reduce incentives for diversion. Currently, subsidised kerosene is mainly diverted as a substitute or as an adulterant to diesel.
  • Given the significant Central excise and State taxes on diesel, its market price remains much higher than the unsubsidised price of kerosene.
  • Analysis by the Council on Energy, Environment and Water (CEEW) shows that unless the government restructures the market price of kerosene, the price differential between unsubsidised kerosene and diesel would be in the range between Rs.18 and Rs.32 per litre. Such an incentive would still be significant for middlemen as well as end consumers to divert the fuel as diesel substitute.
  • Another challenge is in ensuring that the subsidy is accessible to its major beneficiaries — poor households.

4) Promoting alternative fuels

  • The CEEW’s analysis of National Sample Survey Office data highlights that kerosene is predominantly used as a lighting fuel in rural India, with less than 1% of households using it as a primary cooking fuel.
  • In urban-poor households, it is used for both lighting and cooking.
  • A recent report by the CEEW shows how shifting from kerosene to alternatives such as solar-assisted solutions for lighting and LPG for cooking could be economically beneficial for both the government as well as households.
  • The shift would provide households with much better end-services and avoiding the adverse health impacts associated with kerosene use and huge savings to the exchequer.
  • Moreover, there is a bottom-up demand for such a change. Survey shows that 78 per cent of rural households in six major States are willing to adopt solar-based lighting solution.

Conclusion:

  • As LPG is a clean and efficient fuel, it is rational to continue subsidising it for the underprivileged.
  •  However, with energy security and clean energy access high on India’s priorities, we must look beyond kerosene to provide cooking and lighting solutions to poor households, while ensuring affordability, reliability and universal availability of these alternatives.
  • The government has been persistently focussing on structural reforms in various sectors of the economy, and moving away from subsidised kerosene, and envisioning a kerosene-free India would be one such visionary step.
[Ref: The Hindu]

 

Bilateral & International Relations

GS (M) Paper-2: “Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests”

Narendra Modi’s Indian Ocean opportunity

Introduction:

iastoppers-modi-indian-ocean-opportunity

  • India could be at the heart of future global growth by forging economic links with Indian Ocean rim countries.
  • Recent attack in Uri has created an existential crisis for the SAARC forcing the eight-nation body to cancel its meeting next month in Islamabad.
  • SAARC is often viewed as ineffectual. Many observers are now asking whether its position has become untenable.
  • Earlier this month, Sri Lankan PM questioned whether the grouping could survive, musing that a body focused on the Indian Ocean should replace it.

Indian Ocean Region- Prospects:

Foreign secretary S. Jaishankar
Foreign secretary S. Jaishankar
  • Foreign secretary S. Jaishankar argued in favour of “reviving the Indian Ocean as a geopolitical concept”.
  • Modi has also talked up the importance of the “Indian Ocean region”, visiting a quartet of East African nations earlier this year, alongside trips to the Seychelles, Mauritius and Sri Lanka.
  • But these Indian Ocean ambitions risk being distracted by narrow cultural concerns on the one hand, and vague geopolitical worries about China on the other. Instead, India should be focused squarely on the potential economic benefits from greater regional trade.
  • Research from Harvard University, suggests that along India’s 7% growth per year, the world’s six fastest growing economies over that same period, four will also be in east or southern Africa, including Kenya and Tanzania.
  • A host of other countries likely to grow comparably quickly, not least Myanmar and Indonesia, are part of the wider region too.
  • This potential growth is already attracting corporate India, with groups like Tata and Mahindra targeting African markets.
  • If Make In India export drive is to succeed, goods manufactured in domestic factories must seek buyers around eastern Africa and South-East Asia.
  • Indian Ocean, which encompasses roughly 40 nations and stretches from Australia to East Africa, is hardly any better connected. Estimates suggest that a third of global bulk cargo and two-thirds of oil shipments cross the Indian Ocean. But most of this heads off elsewhere, rather than being traded between countries in the region.
  • In his speech, last month, Jaishankar floated the idea of expanding the Indian Ocean Rim Association, of 21 countries.

Hurdles:

  • This is better than nothing, but it has obvious drawbacks. If SAARC’s flaw is that it’s dominated excessively by India, an expanded Indian Ocean forum would suffer the opposite problem, bringing together a diffuse grouping with little in common.
  • The record of previous attempts to push alternative regional bodies is also hardly encouraging, not least the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, whose six other members Modi has invited to meet alongside this week’s Brics summit in Goa.

India’s approach:

  • A better approach would see India making a bigger, unilateral push to improve regional connectivity, including greater financial support for new infrastructure investment, and a new push to reduce trade barriers, beginning with its own.
  • The success of China’s grand One Belt, One Road initiative shows that tangible projects between countries are normally the best basis for new economic cooperation across regions.
  • Here, India has work to do, be it pushing projects like the mooted Myanmar-Bangladesh-India gas pipeline, or providing greater development funding assistance to poorer neighbours.
  • The Indian Ocean has the potential to become the most important source of new global growth over the next 20 years, just as the Pacific rim powered the world’s economy for much of the last 20.

This fact alone should justify Modi placing much greater emphasis on it. But if India is to emerge at the heart of a new regional order, it needs to open its wallet first.

[Ref: LiveMint]

 

GS (M) Paper-2: “Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests”

India and China must show mutual restraint to avoid a major crisis

Introduction:

Chinese President Xi Jinping will meet Prime Minister Narendra Modi in Goa later this week. The two leaders will prepare to confer on the side-lines of the BRICS summit.

iastoppers-india-and-china

Recent trajectory of India-China relations

  • Ahead of Xi’s visit in September 2014, observers in both countries expected these politically strong and decisive leaders to inject a dose of dynamism into bilateral ties. But these hopes have curdled.
  • The standoff initiated by Chinese forces even while Xi was in India dealt the opening blow. Beijing then ignored Modi’s pitch to clarify the Line of Actual Control (LAC).
  • The two governments have since been visibly at loggerheads over Pakistan’s sponsorship of terrorism and India’s membership in the Nuclear Suppliers Group (NSG).
  • Add to this their differences on issues ranging from the proposed economic corridor through Pakistan to maritime security.

Three broad phases India China relationship

First phase:

  • From 1950 to 1958: The development of bilateral ties was spurred by their ability to cooperate on wider issues, ranging from the Korean War to Afro-Asian solidarity.
  • Their subsequent inability to resolve or manage disputes over the boundary and Tibet set the stage not only for the war of 1962 but a cold peace that persisted until 1989.
  • During these three decades, the boundary dispute dogged the relationship and both countries struggled to craft a fresh paradigm of engagement.

Second phase:

  • The meeting between Deng Xiaoping and Rajiv Gandhi in December 1988 inaugurated a new phase in the relationship.
  • It was based on the understanding that the unresolved dispute should not hold the relationship hostage and that they needed a peaceful external environment to focus on their economic development.
  • Over the next two decades, India and China managed to stabilise the LAC and their economic ties strengthened and they cooperated again on the global stage.

Third phase

  • We are now in another phase where core disputes are quiescent yet both countries seem unable to respect each other’s key concerns.
  • China is unwilling to take on board India’s concerns about terrorism because Pakistan seems more important to it now than ever before: To secure overland access to the Indian Ocean, to roll out the Belt and Road Initiative, to contain separatism in Xinjiang, to keep a weather-eye on Western military technology.
  • India is insouciant towards China’s concerns about American naval activity near its seaboard. In a series of joint statements with Washington, New Delhi has called for upholding “freedom of navigation” in the South China Seas.

Cooperation is the key to grow:

  • First, both sides must refrain from steps that undercut each other’s growing international profile. New Delhi has supported Beijing-led initiatives such as the AIIB and the New Development Bank — and Beijing must not thwart India’s aspirations in forums like the NSG.
  • Further, while conceding the importance of China’s ties with Pakistan and of India’s with the United States and Japan, the two sides can agree to be mindful of each other’s key sensitivities.
  • India must convey to China that Pakistan’s continued resort to terrorism threatens regional peace more than ever before.
  • The recent Indian strikes across the Line of Control will lend credibility to this point. China has to understand that if it wants the status of a great power then it must behave as other great powers have in the past — by curbing the aggressive instincts of its junior allies.
  • At the same time, India must reassure China of its benign interests in the South China Seas. Finally, the two sides must agree to revivify the special representatives process — even if a solution to the boundary dispute looks elusive.
  • So, the major sources of friction in India-China relations arise not from bilateral disputes but from wider issues.
  • Learning from the past experiences, both the countries need to demonstrate mutual restraint before the onset of any major crisis.
[Ref: Hindustan Times]

 

GS (M) Paper-2: “Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests”

The alphabet soup at Goa

Introduction

  • The recent BRICS summit held in Goa is undeniably the main course but hidden in the main course is a set of ingredients with an independent chemistry, the IBSA along with the plat d’accompagnement, BIMSTEC, that has as much potential as the main course.
  • India will need to use this opportunity to respond to the current realities in India’s north and west.

The American factor:

  • India’s is vigorous engage with the U.S. on defence, counterterrorism, as well on global-commons issues such as climate change.
  • Both countries now speaking the same objectives, and confronting similar challenges.
  • This deep engagement with west is a lynchpin of the Indian strategy towards being a putative great power seeking to shape international norms in the 21st century.

 India-China-Russia:

iastoppers-india-china-russia

  • There is also genuine convergence in certain areas — such as non-interventionism and on political-economy issues, between India and China and India and Russia.
  • In the case of China, the tyranny of bilateral disputes (mostly on the strategic side) has prevented both countries from exploring much common ground.
  • And with Russia, the U.S.-India entente is being understood by Moscow as a substantial shift in the intent of India towards the bilateral relationship.
  • There seems to have been a serious underestimation in both capitals of the drift in the India-Russia relationship. Perhaps the Uri terror attack was an important moment for both to realise that extent.
  • India in BRICS seeks to downplay its bilateral disputes with China and engage with it on issues where there is space for beneficial cooperation.
  • The China relationship today is heading south, and with effort, it may at best become a well-managed one.
  • With Russia, on the other hand, India needs to use this summit meet and the BRICS engagement to reclaim its traditional space and reassure the Kremlin that Moscow is India’s foremost global partner.
  • The decision to invite BIMSTEC countries, in place of SAARC, to the BRICS summit is clearly a decision that relocates India’s ‘neighbourhood first’ policy to its east.
  • By playing the role of a ‘sincere interlocutor’ between BRICS and BIMSTEC, India stands to gain influence in both (despite China’s growing presence) as a benign transcontinental bridge.

The IBSA (India-Brazil-South Africa) potential:

iastoppers-india-brazil-south-africa

  • This BRICS summit will also be an occasion for IBSA meet on the side-lines and plot their future course.
  • The three democratic countries, are truly southern and developing economies and have the potential to emerge as a marquee example of south-south cooperation of emerging liberal economies across three continents.
  • Without the presence of two military/economic behemoths, IBSA is a grouping of equals, more than BRICS can ever be. However, IBSA, it seems, struggles to excite either South Africa or Brazil, who feel sated in the presence of China and Russia at the BRICS.
  • This can be changed. Going forward, IBSA should engage with both the U.S. and one European power, like Germany, to promote a true concert of democracies across each continent, bringing advanced economies alongside emerging ones.
  • Brazil and South Africa have had differences with China in the past over Beijing’s heavy-handed economic policies. Brazil, under its new president Michel Temer, wants to pivot back to its traditional economic partners, the U.S. in particular. This bodes well for IBSA to emerge as a liberal bridge between the north and the south.

Conclusion:

  • The antidote to the common perception of BRICS as a pawn in the grand strategy of China and Russia lies within BRICS itself, the IBSA.
  • Along with BIMSTEC, IBSA points to the multiple collateral possibilities at Goa, and to a new moment that may see recalibration of Indian foreign policy.
[Ref: The Hindu]

 

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