Category: INTERNATIONAL RELATIONS
India-Oman Joint Commission
The issue in news
9th session of India-Oman Joint Commission virtual meeting held.
- The meeting was attended by representatives of various government departments/ministries from both sides.
- During the meeting, both sides reviewed the recent developments in trade and investment ties and reaffirmed their commitment to expand the bilateral trade and encourage businesses to invest in each other’s country in order to realize the untapped potential in the commercial and economic relationship.
- Both sides, among other things, agreed to cooperate in areas of agriculture & food security, standards & metrology, tourism, information technology, health & pharmaceuticals, MSMEs, space, civil aviation, energy including renewable energy, culture, mining, and higher education.
- The Indian side appreciated Oman for signing and ratification of the International Solar Alliance (ISA) Framework Agreement.
India – Oman Economic Ties:
- India is among Oman’s top trading partners.
- For Oman, India was the 3rd largest source for its imports and 3rd largest market for its non-oil exports.
- Bilateral trade between India and Oman grew at 8.5% in 2019-20 over the previous year to reach USD 5.93 billion.
- While India’s exports to Oman were valued at USD 2.26 billion, India’s imports from Oman amounted to USD 3.67 billion in 2019-2020.
- Indian firms have invested heavily in Oman in various sectors like iron and steel, cement, fertilizers, textile, cables, chemicals, automotive, etc.
- There are over 4100 Indian enterprises and establishments in Oman with an estimated investment of US$ 7.5 billion.
- Cumulative FDI equity inflows from Oman to India during the period April 2000-June 2020 amounted to USD 535.07 million.
- Malabar naval exercise: Australia.
The issue in news
Recently the Ministry of Defence of India has announced that Australia will participate in the Malabar 2020 naval exercise, consisting of India, Japan and the U.S.
- Australia had first requested to join the Malabar naval exercises more than three years ago but India had been reluctant over possible concerns that such a move would antagonize China.
- However, the on-going stand-off with China along the LAC seems to have convinced India of the strategic significance of including Australia in the Malabar naval exercise.
- The move to include Australia comes in the backdrop of India seeking to increase cooperation with other countries in the maritime security domain and in the light of increased defence cooperation with Australia.
- In June 2020, India and Australia signed the Mutual Logistics Support Agreement (MLSA) and also announced a joint declaration on a shared vision for maritime cooperation in the Indo-Pacific.
- The move to include Australia will formally bring together the militaries of the four countries in the Quad group – India, Australia, Japan and the United States.
- This showcases the increasing relevance of cooperation between the four major Indo-Pacific democracies and their shared will to work together on common security interests.
- High-end military exercises like Malabar would play a key role in enhancing the participant nations’ maritime capabilities, building interoperability with each other.
- The exercise is scheduled to be held in November-end. This year, the exercise has been planned on a ‘non-contact – at sea’ format.
- Sri Lanka’s growing reliance on China
The issue in news
Sri Lanka’s borrowing from China.
- The pandemic has had a detrimental impact on the already fragile economy of Sri Lanka (SL). The World Bank and the International Monetary Fund (IMF) have forecasted a GDP contraction of up to almost 7% for SL. It is witnessing falling revenues and rising living costs. SL also faces $4.5 billion foreign debt due in the coming year.
SL’s increasing economic reliance on China:
- The SL administration has sought a new $700 million loan from China. This would be in addition to the already sanctioned $500 million loan in March 2020. Sri Lanka owes China over $5 billion so far.
- Sri Lanka is also negotiating a nearly $1.5-billion currency swap facility with the People’s Bank of China.
- Government critics and the Opposition in Sri Lanka have raised concerns over the current administration’s growing reliance on China. They have instead advocated the administration to engage with the IMF rather than fall into a “Chinese debt trap”.
SL government’s response:
- The government has ruled out an IMF bailout. The Minister in charge has brushed aside the concerns stating that given that currently, China has huge reserves of cash it is natural that it will invest all over the world including SL.
- The Reserve Bank of India had signed a $400 million swap agreement with Sri Lanka in July, to help boost Sri Lanka’s foreign reserves, and is considering a further $1 billion requested by Sri Lanka.
- India is yet to respond to SL’s request for a debt moratorium. Sri Lanka owes $ 960 million to India.
- Centre said to ask at least eight PSUs to consider buy-backs
The issue in news
Reports of the central government having asked at least eight state-run companies to consider share buy-backs in the current fiscal year.
- The firms asked to consider share buybacks include miner Coal India, power utility NTPC, minerals producer NMDC and Engineers India Ltd.
- A buyback occurs when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors.
- The move to ask the PSUs to buy back shares is part of the central government’s measures to raise funds to rein in its fiscal deficit.
- India is highly unlikely to meet its fiscal deficit target of 3.5% of GDP for 2020/21 as the pandemic induced curbs hit tax collections substantially and have also delayed governmental efforts to raise funds through disinvestment like the proposal to privatise Bharat Petroleum Corp. and flag carrier Air India.
- Buy-back could prove to be an important tool for the government as apart from raising revenues it also helps in building market price for the PSU shares.
- Some PSUs, particularly in the oil sector, may not be able to do buybacks due to the following reasons:
- The government’s stake in them is about 51% and any further reduction will end up in the government giving up its position as a majority holder.
- These PSUs also face competing claims on their cash in the form of huge capex commitment and dividend payments.
- In February, the government had set itself a target of raising more than $27 billion from privatisations and sale of minority stakes in state-owned companies in the ongoing fiscal year.
- The government’s new policy for public sector enterprises, which will notify strategic sectors where at least one public unit needs to operate, is being finalised and will be put up for the Union Cabinet’s approval soon.
- The government had tasked 23 state-run companies with capital expenditure of Rs. 1.65 trillion ($22.5 billion) in the current fiscal year. This move is aimed at increasing public expenditure to aid the economic recovery process in India.