IASbaba’s Daily Current Affairs – 23rd November, 2016
TOPIC: General Studies 2
India and its neighbourhood- relations.
Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
Emergence of the Asian Century
Rising Significance of Asia
Today, the case for Asia’s emergence as an economic power is stronger than it ever was. Such a rise is validated by the following facts:
Asia produces about 40% of the world’s gross domestic product (GDP), in terms of purchasing power parity (PPP).
Even during the recent economic crisis, Asia accounted for more than half of global GDP growth.
Indian Ocean is one of the most important regions globally as half of the world’s container traffic and one-third of its bulk cargo traverse it. Also, 40 per cent of the world’s offshore oil production and 50 per cent of the world’s energy supplies emerges through this region.
Challenges for Asia
USA and Europe still maintain an advantage in terms of global strategic influence and the Asian countries are facing major political, economic, and security challenges. A few of the challenges are as follows:
China is trying to achieve a smooth transition from major economic expansion to an easier and smoother approach.
Japan for long has been suffering from slow economic growth and is trying to overcome the impact of the same. Further, unlike India, it does not enjoy the advantage of a young demography and hence has to tackle issues concerned with an ageing population.
Economic powerhouses of Asia such as India, Indonesia, and South Korea face respective economic and political problems.
Problems such as rising income inequality, financial instability, and environmental degradation are also hampering overall development.
A major problem is the lack of unity amongst the nations of this region due to persistent power struggle, historical resentments, and territorial disputes.
Asia which is home to some of the world’s most dangerous flashpoints and is at risk of armed clashes in the East and South China Seas.
North Korea continues to develop nuclear weapons and ballistic missiles despite tougher sanctions pushed by the US and the UN. It poses a continuous threat to the peace and security of the region.
Ambiguity regarding a common vision of Asian leaders towards regional integration similar to the European Coal and Steel Community in 1951 and the creation of European Union in 1993.
Opportunities for Asia
Considering the challenges the West is facing as a result of the Brexit vote in the UK and the election of Donald Trump as US president, there a lot of areas where the Asian nations can capitalize and create an Asian Century.
Intra-regional trade and investment: Cooperation in trade and investment brings along both economic and political benefits. A more integrated Asia will enjoy more influence on the international stage.
Conflict Mitigation: Countries in this region must resolve regional military and political conflicts to promote a long-term vision for regional integration.
International Cooperation: Stronger cooperation among Asian countries amongst themselves and with the international community could ease regional tensions and resolve various disputes in this region. Such an approach can also focus on making North Korea abandon its nuclear weapons programme.
Regional Cooperation Institutions: Regional cooperation institutions such as Association of Southeast Asian Nations (ASEAN), Asean+3 (ASEAN plus China, Japan, and South Korea) and the East Asia Summit (EAS) can be highly useful for establishing a framework for peace, regional prosperity and global leadership.
Single Market: For economic integration the countries of this region should try to create single market with common rules governing trade and free movement of workers. Along with the Regional Comprehensive Economic Partnership (RCEP)( RCEP is a free-trade agreement currently being negotiated by ASEAN and six partners Australia, China, India, Japan, South Korea, and New Zealand), other multilateral groupings with different members such as SAARC should try to create such agreements.
Financial Cooperation and Crisis Management: Emerging economies in Asia must also pursue joint action on financial supervision, surveillance, and regulatory issues to prevent and manage crises. Initiatives such as the Chiang Mai Initiative, a $240 billion currency-swap arrangement, and its surveillance unit, the Asean+3 Macroeconomic Research Office need to be strengthened. For better economic integration and support the nations can even establish an Asian Monetary Fund with a broader membership.
Multi Stakeholder Approach: All stakeholders including the bureaucracy, the private sector and academicians must actively support high-level political commitments to integration. As a result of these efforts, integration would facilitate exchange of valuable knowledge including economic and social policies and technological and scientific insights.
People to People Cooperation: People to people ties can be useful in promoting cooperation on cross-border challenges, epidemics, natural disasters, and environmental degradation.
With all the above suggestions, one thing should be kept in mind that none of these efforts would aim to replace existing sub-regional, regional, and global institutions. The new regional trade and financial measures should instead aim to complement and strengthen current arrangements.
In times of global uncertainty, Asia not only has a lot of opportunities, but also faces a lot of challenges in the realties that it has come face to face with. Asia should take its fate into its own hands, by pursuing closer economic and political regional cooperation. The Asian countries should aim for a shared vision for an economic community and a political association if they intend to define this century.
Connecting the dots
The 21st Century is bound to shape up as an Asian Century. Comment. Also, highlight the challenges that would act as hurdles and the opportunities that would give a push to the Asian Century in the making.
General Studies 3
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Conservation, environmental pollution and degradation
General Studies 2
Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
What has happened to ‘Green GDP’?
Though India and 104 other countries have ratified the Paris Agreement on Climate Change and now weaving out finer details of the deal, the central government at domestic level is still struggling to assess the impact of economic activities on the environment.
The Paris deal is an attempt to keep global temperature rise under 2°C as developmental activities take an increasing toll on the environment.
In 2009, the centre had announced plans for unveiling “green GDP” figures.
The Green GDP figure accounts for the environmental costs of depletion and degradation of natural resources into the country’s economic growth figures.
Subsequently, the Ministry of Statistics and Programme Implementation set up an expert group in 2011 to work out a framework for green national accounts in India. This process was supposed to be culminated in 2015 but is still pending.
What is Green GDP?
Green GDP is conventional gross domestic product figures adjusted for the environmental costs of economic activities. Simply, it is used to express GDP after adjusting for environmental damage.
It’s a measure of how a country is prepared for sustainable economic development.
The System of National Accounts (SNA) is an accounting framework for measuring the economic activities of production, consumption and accumulation of wealth in an economy during a period of time.
When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting.
Environmental accounting includes three types:
Physical accounting- determines the physical state of resources, types and extent in spatial and temporal terms.
Monetary valuation- determines its tangible and intangible values
Integration with national Income- after the initial calculation, the net change in natural resources in monetary terms is integrated into the GDP to get Green GDP.
Thus, Green GDP is expected to account for the use of natural resources as well as the costs involved. This includes medical costs generated from air and water pollution, loss of livelihood due to environmental crisis such as floods or droughts etc.
Challenges in calculating Green GDP
There is not sufficient micro level data on natural capital. For this, the inter-ministerial group is looking into solutions to bridge the data deficit.
For example, there is no information on issues such as the total volume of surface water or the different sectors where water is used and the quantum used.
Natural Capital is the world’s stocks of natural assets which include geology, soil, air, water and all living things. It is from this capital that humans derive a wide range of services, often called ecosystem services, which make human life possible.
The calculation of Green GDP is a complex process and hence there is a need for enhanced budgetary allocation to bridge the data gaps.
Also, the externalities of economic growth which are not factored into conventional GDP numbers have a massive monetary value.
In 2013, a World Bank study estimated that due to air pollution, India suffered a loss of over $550 billion, or 8.5% of GDP.
Similarly, there are economic costs of water pollution and land degradation which will add more to deteriorating numbers.
India is one of the largest importers of products such as fossil fuels whose sustainability is not known in future. Yet, the pollution cost by it is not included in the GDP and in long term, this has direct impact on economy.
Another report of WWF- ‘Living Planet’- finds that 25% of India’s total land is undergoing desertification, while 32% is facing degradation. This is bound to have a direct impact on the future food production capacity of India’s agrarian economy as there could be a loss of 10-40% in crop production by end of century.
China and Norway had already started experiments with Green accounting. However, China dropped it in 2007 (started in 2004) after it realised that factoring in environmental costs had a significant impact on the country’s perceived “economic growth”.
There is a need of comprehensive and macroeconomic indicator which is consistent with the concept of sustainable development as GDP is mistakenly considered as primary indicator of well-being whereas it is the Green GDP that is more accurate indicator or measure of societal well-being.
The Green GDP accounting has to make efforts across the world to factor in environmental and social costs. If such is not the case, then this method won’t be successful as no country wants drop in the growth figures.
Connecting the dots:
What do you understand by Green GDP? How is it calculated? What are the challenges pertaining to implementing ‘Green GDP’ for a nation? Examine.
The recent climate change agreement has brought back the focus on ‘Green GDP’ which India wants to experiment with. Critically analyse the need for Green GDP and its significance with respect to India’s economy.