GS 2
CATEGORY: INTERNATIONAL RELATIONS
- India-Vietnam Meeting
THE ISSUE IN NEWS
The 17 meeting of India-Vietnam Joint Commission on Trade, Economic, Scientific and Technological Cooperation was recently held.
- The recent developments were viewed by both sides in India-Vietnam Comprehensive Strategic Partnership (since 2016) and discussed the future trajectory of their wide-ranging engagement.
Main Points
Indo-Pacific Region:
- Both India and Vietnam agreed to enhance their bilateral cooperation in line with India’s Indo-Pacific Oceans Initiative (IPOI) and the ASEAN’s Outlook on Indo-Pacific to achieve shared security, prosperity and growth for all in the
- All This has come in the backdrop of China’s aggression in the Indo-Pacific region including South China Sea region and its actions along the Line of Actual Control (LAC) with India.
- several ASEAN (Association of Southeast Asian Nations) member countries, including Vietnam, Philippines and Brunei, dispute the Chinese claims of sovereignty over most of the South China Sea.
Indo-Pacific Oceans Initiative
- It was launched by the Prime Minister of India at the East Asia Summit in November
- IPOI focuses on seven central pillars conceived around Maritime Security, Maritime Ecology, Maritime Resources, Capacity Building and Resource Sharing, Disaster Risk Reduction and Management, Science, Technology and Academic Cooperation, and Trade Connectivity and Maritime Transport.
Cooperation at Multilateral and Regional Forums:
- Both sides agreed to coordinate closely at multilateral forums, including at the UN Security Council, where both India and Vietnam will serve concurrently as non-permanent members in 2021.
- They also agreed to step up cooperation and coordination at important regional forums under the ASEAN framework.
- India and Vietnam closely cooperate in various regional forums such as East Asia Summit, Mekong Ganga Cooperation, Asia Europe Meeting (ASEM).
- Vietnam is the chair of ASEAN for 2020.
Economic Engagement:
- They agreed to explore closer cooperation in emerging areas such as civil nuclear energy, space, marine sciences and new technologies.
- India invited Vietnam to take advantage of India’s new economic capacities and demands.
- India underlined its vision of Atmanirbhar Bharat for enhancing resilience through self-reliance and human-centric globalisation as the basis for its economic revival.
- India reaffirmed its development and capacity building assistance to Vietnam through initiatives such as Quick Impact Projects (QIP), Indian Technical and Economic Cooperation (ITEC) and e-ITEC initiatives, PhD fellowships, as well as projects in water resource management in Vietnam’s Mekong Delta region, SDGs, digital connectivity and heritage
Way Forward
- Vietnam is a key pillar of India’s Act East policy and there is a scope for further cooperation between the countries.
- The close relationship between the two countries is significant for the maintenance of strategic balance in South East Asia which is witnessing aggressive Chinese activities.
- BRICS 5G Innovation Base
THE ISSUE IN NEWS
Recently China proposed the creation of a BRICS innovation base in China to take forward 5G and Artificial Intelligence (AI) cooperation among the five countries of BRICS i.e. Brazil, Russia, India, China and South Africa.
Main Points
- Urging the fellow nations, including India, china proposed to boost cooperation in areas including 5G and Artificial Intelligence.
- This move could pose a conundrum before India who is having issues with China in recent times but other countries seem to willing to allow China’s participation in their 5G networks.
- India is unlikely to allow Chinese participation in the roll-out of its national 5G network, particularly in the wake of recent moves to tighten investment from China and to ban 59 Chinese apps, citing national security concerns.
- A high-level committee on 5G is opposed to including Chinese vendors including Huawei in the 5G trials.
- Indian intelligence assessments have also expressed concerns on the possible direct or indirect links of several Chinese companies, including Huawei, with the Chinese military.
- India has made clear that a return to normalcy cannot be possible while tensions along the Line of Actual Control remain unresolved.
- It needs to be noted that India has recently joined the ‘Global Partnership on Artificial Intelligence (GPAI)’ as a founding member to support the responsible and human-centric development and use of Artificial Intelligence (AI).
- Russia has agreed to work with China on 5G and with Chinese telecommunications firm Huawei, which has been largely banned by the United States.
- Huawei has been at the centre of rising USA-China tensions over technology and security.
- The USA has restricted China’s access to chip making tools. Huawei may face shortages in supply of processor chips for which it relies on the USA.
- In South Africa, Huawei is providing services to three of its telecom operators in the roll-out of their 5G networks.
- Brazil has allowed participation of Huawein in 5G trials. More than a third of Brazil’s 4G network operators use Huawei equipment. Brazil maintains that Huawei has capacity above its international competitors.
Way Forward
- China announced in 2017 its ambition to become the world leader in Artificial Intelligence (AI) by 2030 with its Artificial Intelligence Development Plan.
- Alongside the USA, it is already a world leader in terms of AI research.
- Though India has started taking steps in this direction like National Strategy on Artificial Intelligence, it is yet to acknowledge that superiority in critical technologies like AI, cyber and space will decide the future superpowers.
- India cannot afford to sever all its economic links with the world’s second-largest economy, even in the digital space. However, through initiatives like Make in India and Atmanirbhar Bharat Abhiyan, India can try to replace chinese technology with domestic ones. Further, it needs to boost up its economic relations with other countries.
- The ongoing trade war between China and the USA has also created a dilemma for India. India is a party to many trade and diplomatic engagements with China like RCEP, Russia-India-China Grouping, BRICS etc.
- In such a scenario, it is imperative for India to seek a middle path for balancing its strategic interests between the USA and the Russia-China axis, maintaining its historical Non-Aligned
- Internal conflict in LIBYA
THE ISSUE IN NEWS
The internal conflict in Libya that has been running since 2011 has shown signs of de-escalation as the rival authorities in the country have called for a ceasefire.
Main Points
- Rival Forces: The Self-proclaimed Libyan National Army (LNA) led by Khalifa Haftar has been battling forces aligned with the Tripoli-based, internationally recognised Government of National Accord (GNA).
- Both sides are formed from local armed factions, whose shifting loyalties have steered the course of the conflict.
- LNA has long enjoyed backing from countries including the United Arab Emirates, Egypt, Russia and Jordan. The USA, Turkey and Qatar support the GNA.
- Ceasefire: The ceasefire call by GNA head proposed demilitarising Sirte city and resumption of oil production until a political deal is reached. It has also called for elections in March 2021.
- The LNA dismissed this proposal, but a parallel ceasefire call by the LNAaligned parliament has proposed Sirte as the seat of a new government.
Background Of the issue
- Libya was ruled by Muammar Gaddafi for 42 years from 1969 to 2011 after he overturned the previous monarchy and proclaimed the new Libyan Arab
- In 2011, the first civil war broke out in Libya against the regime of Gaddafi. This war was a part of a series of anti-dictatorial protests in countries of Arab world like Tunisia, Morocco, Iraq, Algeria, Lebanon, Jordan etc, known as the Arab Spring. In response to the civil war, a multi-state NATO-led coalition began a military intervention in Libya in March 2011, aimed at protecting civilians and providing cover for a rebel advance.
- The NATO intervention was backed by a UN Security Council resolution 1973 which was supported by 10 countries. 5 countries viz. India, Brazil, Germany, Russia and China abstained from voting.
- A UN-backed internationally recognized government was put in place called the Government of National Accord (GNA) which was supposed to bring out a democratic transition.
- However, GNA failed to provide political stability to the country. LNA captured the East of Libya and has been running long campaign against Islamist groups and other opponents since then.
- Libya has no single government currently, with LNA backing the Tobruk-based parliament which governs East of Libya, and the GNA which controls Libya’s western parts fromTripoli.
- Both sides have been in constant conflict since 2014, in what has been termed as the second Libyan Civil War. In addition to these, there are also smaller rival groups in the country like the Shura Council of Benghazi Revolutionaries, Islamic State of Iraq and the Levant
Impact
- Nearly 4,00,000 Libyans have been displaced over the past nine years. Thousands more have
- The conflict has cost tens of billions of dollars in lost oil revenue, damaged infrastructure, and sharply reduced living standards. Covid-19 infections have started to surge.
- The collapse of public services and corruption has fuelled protests in western Libya against the political elite.
- Libya, a member of OPEC, holds Africa’s largest oil reserves, producing 1.6 million barrels per day before 2011. Blockades and presence of military forces have caused output to fluctuate sharply since then, affecting the oil prices.
International Response:
- The International Berlin conference, held on 19 January 2020, was attended by Libyan parties and other concerned countries.
- As a result of this conference, the UN Security Council endorsed a 55- point road map for ending the war in Libya in February 2020.
- The resolution demands that all countries refrain from interfering in Libya’s conflict and its internal affairs and observe a UN arms embargo, including ceasing all support for and withdrawing all armed mercenary personnel.
- Egypt, in association with LNA, proposed the Cairo Declaration on 6 June, 2020, for the Second Libyan Civil War ceasefire.
- The USA has ordered evacuation of its troops stationed in India evacuated its contingent of peacekeeping forces consisting of 15 CRPF personnel from Tripoli. India has also asked its citizens there to exercise extreme caution.
- Foreign powers officially back the process of restoring peace in the country, but have also shipped arms to their allies, undercutting diplomatic efforts.
India’s Stand:
- India has expressed concern over continuing conflict and instability in Libya and said it supports efforts towards immediate cessation of all hostilities in the country.
- Although India has been critical of the USA military intervention in Libya on the ground that civilians would be affected, its stand on Libya has been more of a realistic one as it has many vested interests in Libya.
- Economic : The regime in Libya needs to be a friendly one since Libya is an oil rich country and political instability could affect Indian industrial investments and energy security interests Indian companies, especially in the hydrocarbon, power, construction and IT sector, have several ongoing projects in Libya.
- Diaspora: Considering an estimated 18,000 Indians who work in Libya, it is a considerable contribution to the remittance economy and adds to India’s foreign exchange
- Foreign Policy: Supporting western intrusion into sovereignty of a country will not set a good precedent for other third-world countries.
Way Forward
- Achieving peace in Libya is crucial not just for the country itself but also for stabilizing the global oil market and set a precedent for other such war-torn countries.
- However, a lasting deal will require political and economic agreements that have proved elusive for years, and cooperation from foreign
- The western wishful thinking that the exogenous establishment of human rights democracy is possible through expeditionary intervention in domestic affairs of a country needs to end to give way to a more organic building up of trust in democratic institutions and sovereign control.
GS 3
CATEGORY: ECONOMY
- Annual Report by RBI: 2020
THE ISSUE IN NEWS
The Reserve Bank of India (RBI) recently released its annual report for 2019- 2020.
Main Points
Financial condition of Banks:
- Deferment of interest payments, Moratoriums on loan installments, and restructuring may have implications for the financial health of banks, unless they are closely monitored and judiciously used.
- These regulatory initiatives were taken by RBI to reduce the economic impact of Covid-19 pandemic. These measures have averted a big spike in Non Performing Assets (NPAs) till now.
- RBI in its July 2020 Financial Stability Report had warned that the NPAs of all Scheduled Commercial Banks (SCBs) may increase from 8.5% in March 2020 to 12.5% by March 2021. In the severe pandemic situation, the NPAs may also worsen to as high as 14.7%.
Risk Aversion by Banks:
- Indian banks need to shed high risk aversion which is impeding the credit growth to productive sectors.
- Banks have become extremely careful while giving fresh loans to borrowers due to the fear that loans could turn bad in future.
- Bank credit growth has slowed significantly in 2020 despite the RBI’s efforts to infuse a significant amount of liquidity into the banking system.
- Since March 2020, the RBI has infused around Rs. 8-9 lakh crore through various schemes into the banking system including multiple rounds of long-term repo operations.
- The RBI also cut the repo rate or the key lending rate by a total 115 basis points since March 2020.
Bank Fraud:
- Frauds reported by banks of Rs.1,00,000 and above value have more than doubled in FY 2019-20. The number of such frauds have increased by 28% in volume.
- While there were 6,799 frauds involving Rs. 71,543 crore as of March 2019, the number of frauds jumped to 8,707 involving a whopping Rs 1,85,644 crore.
- Majority of these frauds are in loan portfolios of banks, both in terms of number and value. The public sector banks accounted for most of these frauds (80%).
- However the average lag in detection of frauds remains long.
- Weak implementation of Early Warning Signals (EWS) by banks, non-cooperation of borrowers during forensic audits, inconclusive audit reports and lack of decision making in joint lenders’ meetings account for delay in detection of frauds.
Slow Economic Recovery:
- The economic contraction triggered by pandemic will take longer time to regain the pre-Covid momentum, as the shock to consumption is severe.
- The discretionary elements in private consumption has significantly reduced, particularly in transport services, hospitality, recreation and cultural activities.
- The discretionary spending includes spending on vacation and entertainment.
- Urban consumption demand has suffered significant loss, passenger vehicle sales and supply of consumer durables in the first quarter of 2020-21 have dropped to 1/5 and 1/3 , respectively, of their level a year ago. Air passenger traffic has also ground to a halt.
- Citing the data of e-way bills for the month of July 2020, RBI said that the consumer confidence fell to an all time low, because of pessimism relating to the general economic situation, employment, inflation and income.
- e-way bills are an indicator of domestic trading activity.
- The pandemic has also exposed new kinds of inequalities g white collar employees can work from home while essential workers have to work on site, exposed to the risk of getting infected.
- The sharp cut in corporate tax rate announced by the government in 2019 did not help in restarting the investment cycle as was intended. Instead it has been used by companies to reduce debt and build up cash balances.
Inflation:
- Headline inflation may remain elevated in the second quarter of 2020-21 but may moderate during the second half of 2020- 21.
- Retail inflation was at 6.93% in July, above the upper tolerance limit of 6%.
Suggestions Made by RBI
- Targeted public investment funded by asset monetisation and privatization of major ports is a viable way to revive the economy.
- Goods and Services Tax (GST) Council type of apex authorities can be set up in respect of land, labour and power to drive structural reforms and speedier implementation of infra projects.
- Recapitalisation of public sector banks, this assumes significance as the minimum capital requirements, which are calibrated on the basis of historical loss events, may no longer suffice to absorb post-pandemic losses.
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