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IASbaba’s Daily Current Affairs – 21st Oct 2017
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INTERNATIONAL
TOPIC: General studies 2:
- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
- Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
- Important International institutions, agencies and fora- their structure, mandate
Nuclear agreement with Iran: Objection from U.S.
In news:
Recently President Donald Trump announced that he could no longer certify that continuing the sanctions waiver for Iran, under the Joint Comprehensive Plan of Action (JCPOA), contributes to U.S. national security interests in view of Iran’s aggressive behaviour.
Mr. Trump’s new policy therefore aims to “neutralize Iran’s destabilizing influence and constrain… its support for terrorism… and ballistic missile [programme]”.
Background:
- The JCPOA, signed on July 14, 2015, was the result of prolonged negotiations between Iran and P5+1 (U.S., U.K., France, Russia, China, Germany and EU). Talks began in 2003 between Iran and E-3 (Germany, France and U.K.), and in 2005 expanded to the P5+1 format. Negotiations frequently stalled leading to new sanctions on Iran but became purposeful after Hassan Rouhani’s election as President in 2013.
- In 2004, Iran had around 1000 centrifuges, and by 2015 the number had grown to 20,000. The U.S. concluded that Iran had recovered from the Stuxnet debacle and was barely months away from producing enough highly enriched uranium (20-25 kg) to produce a nuclear device. While other aspects of Iran’s regional behaviour remained worrisome, the rationale driving the Obama administration was that a nuclear armed Iran would be more threatening. Therefore, the JCPOA focussed exclusively on rolling back Iran’s nuclear activities.
- Under the JCPOA, Iran ended certain activities (converting the underground Fordow enrichment facility into a research centre and dismantling of the Arak heavy water research reactor), accepted restraints on other activities (reducing the number of operational centrifuges to 5060 at Natanz for 10 years, restricting enrichment level to 3.6% for 15 years, limiting the low enriched uranium stocks to 300 kg by shipping out nearly 10 tonnes of extra stocks and refraining from setting up a research reactor for 15 years) and accepted a highly rigorous inspection regime.
In return, about $100 billion of Iranian assets were unfrozen and Iran was allowed to resume sales of oil.
The UN Security Council (UNSC) unanimously adopted Resolution 2231, endorsing the JCPOA and lifting the UNSC sanctions.
U.S. sanctions waiver:
A multiplicity of sanctions (relating to nuclear and missile activities, human rights violations and terrorism) were imposed which also had extra-territorial application, implying that third country companies would be penalised if they engaged in activities from which U.S. companies were barred.
An isolated U.S.:
Withholding of renewal of sanctions waiver by Mr. Trump would have triggered re-imposition of secondary nuclear sanctions and violated international law since Iran remains in compliance with the JCPOA.
In case US congress puts an end to some of the sunset clauses of 10/15 years in the JCPOA by making it permanent it would imply an implicit renegotiation of the JCPOA, something that would attract a veto by both Russia and China were it to be taken up in the UNSC.
A divide:
- For the first time since 1945, a clear divide with European allies has emerged, with German, French and British leaders jointly declaring that preserving the JCPOA is in their shared national security interests.
The European Union (EU) foreign policy chief Federica Mogherini said that the world cannot afford “to dismantle a nuclear agreement that is working”. - Only two countries have applauded Mr. Trump’s decision — Saudi Arabia praised the U.S.’s firm strategy and Israeli Prime Minister Benjamin Netanyahu conveyed his congratulations.
- International Atomic Energy Agency (IAEA) Director General Yukiya Amano has publicly stated that Iran is in full compliance with the deal and subject to the world’s most robust nuclear verification regime.
Implications:
Implications of the breakdown are not limited to U.S.-Iran relations.
- Iran can make things difficult for the U.S. in Afghanistan as also in Iraq and Syria.
- The U.S.’s ability to work with Russia in Syria or with China regarding North Korea will also be impacted.
- Questions will be asked in Iran about why it should continue with the restrictions and inspections that it accepted under the JCPOA, which would have far-reaching implications for the global nuclear architecture.
- Coming after the rejection of the Trans-Pacific Partnership, the Paris climate change accord and the North American Free Trade Agreement, Mr. Trump’s decision further diminishes U.S. credibility.
Future:
The deal has broken down because Iran is not prepared to renegotiate it. Other countries have promised to uphold it but their ability to do so will depend on how their companies can be firewalled from U.S. sanctions if they continue their engagement with Iran.
Connecting the dots:
- The nuclear agreement with Iran is in jeopardy with U.S. changing its stance towards the deal. Discuss the implications of such decision and how it has created a global divide.
ECONOMICS
TOPIC: General Studies 3:
- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
- Inclusive growth and issues arising from it.
Avoiding demographic crisis
Background:
A study from 2014 indicated that 76 per cent of the youth belonging to farming households in India were not interested in pursuing farming as an occupation, and a large share of landless and marginal farmers preferred exploring livelihood options in cities.
The reason behind agriculture’s decreasing appeal among even its practitioners is simply that the economics of farming is failing in India.
It has to be understood that sustaining 50 per cent of the population gainfully on what constitutes less than 12 per cent of the GDP pie has proven untenable.
Farm loan waivers are no solution akin to only a temporary symptomatic relief to a deep-rooted disease.
Troubling economy:
On all fronts, India’s recent record is troubling.
- Exports have fallen by and large.
- Right now, with banks under duress, gross fixed capital formation (GFCF) — a proxy for private investment in the economy — has hit rock bottom.
- The battered banking sector — thanks to corporate India’s bad loan problem — does little to help the already under credited MSMEs.
- Construction — which is the second largest employment generator in India — is undergoing its biggest slowdown since 2008. This is worrisome as the diversification of even rural employment towards non-farm is principally owed to construction.
- The skilling mission has failed to meet the target by huge gap. A fraction of DDUGKY trainees (under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana) went on to be placed, and even fewer of them continued with their jobs.
- In jobs higher up the skill ladder, all is not well. We have seen unprecedented layoffs in IT sector recently. And then there is the potential impact of artificial intelligence on relatively low-end service sector jobs.
Way ahead:
Increasing agricultural productivity is part of the solution. But not an end to all woes as it is often a supply glut in perishables that induces price crashes leading to poor or no recovery and trapping the farmer in debt. For example, in 2016-17 bumper harvest notwithstanding, farmers suffered. The inflation targeting mandate of the macroeconomic policy dispensation (RBI and finance ministry) is also problematic for farmers already operating in a fragmented supply chain with grossly inadequate access to either infrastructure, the market, credit or proper insurance.
Intelligent ways forward to keep at bay a demographic disaster include:
- A China-like push to engender an en masse shift from farm labour to industry, or millions of rural micro-enterprises that are in agro-industries or otherwise.
- A specific push for value chain upgradation including food processing, packaging, etc. by cooperatives or farmers groups / producer companies can be explored.
- To create mass employment in industry, the manufacturing sector needs to take the lead and perform. This need not be big manufacturing. Even MSMEs are fine. Farmers can be absorbed in manufacturing without much additional skilling, and with an export-oriented thrust, the sector might actually bypass muted demand scenarios domestically.
According to latest estimates, MSMEs contributed 37.33 per cent of total manufacturing output in the country. During 2015-16, MSMEs made up almost as much as 50 per cent of total exports. It needs no underlining as to the importance of MSMEs with respect to job creation. - The MUDRA initiative — aimed at creating microenterprises across India’s villages, towns and cities — has proven to be a dark horse among all of Prime Minister Modi’s policies.
One report goes on to claim that 16.18 million incremental jobs have been created under MUDRA in the last two years. But more rigorous evidence about MUDRA’s impact on job creation and incomes is needed. - Government-backed infrastructure projects such as ‘Housing for All’ reflect some hope for construction sector job creation nonetheless. As it would give boost to construction sector.
Conclusion:
At a time when the Labour Force Participation Rate (LFPR) has been steadily going down (from 63.7 per cent in 2012-13 to 55.6 per cent in 2015-16) — indicating possible spike in youths, including females, enrolled in formal higher education — the economy has to be ready to offer young people jobs — 1 million every month.
Connecting the dots:
- With trouble brewing in farming and realty, factory output slackening and joblessness on the rise, radical solutions are needed if our demographic dividend is to be a dividend and not a crisis. Discuss.
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