IASbaba’s Daily Current Affairs – 23rd June, 2016

IASbaba's Daily Current Affairs Analysis, IASbaba's Daily Current Affairs June 2016, International, UPSC

IASbaba’s Daily Current Affairs – 23rd June, 2016

INTERNATIONAL

TOPIC: General Studies 2

India and its neighborhood and International – relations.

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.

India and its NAM policy: confusion or solution?

India, since the inception of its NAM policy, has been finding itself tough to stand in a place somewhere in the middle. Its famous policy was criticized then by the US and its allies as a “sham”, and now it has invited laughter and mockery about its concept from the South Block. The below post describes the present India’s scenario with regard to its non-aligned policy.

After India and the Soviet Union signed the Treaty of Friendship and Cooperation in August 1971, the then Indian foreign minister had to fly to US to sign an identical treaty with the US government.
But, the US government complained about how the treaty made India’s policy of non-alignment look like a “sham” (sham – a thing that is not what it is purported to be)
Now, a remarkably similar incident can be seen in PM Modi’s own task in recent months, however in reverse order.
e. PM Modi’s recent visit to US, finalized the Logistics Exchange Memorandum of Agreement (LEMOA) on defence and India declared the U.S.’s major defence partner.
Next, Mr. Modi must fly to Tashkent to finalise documents for India’s accession to the Shanghai Cooperation Organisation (SCO), a “political, economic and military alliance” spearheaded by Russia and China.

The term ‘Non-Alignment’:

Background

Jawaharlal Nehru, as early as in 1946, mentioned that India’s foreign policy would rest on eight pillars: non-alignment with “power groups” was the third.
India’s greater push for the Non-Aligned Movement (NAM), formed in Belgrade in 1961, came as a result of its disillusionment with the U.S., China, and colonial powers.

Present

Now, the term ‘non-alignment’ now invites raised eyebrows and laughter in South Block (as it alleges that India is moving more to the right than the left).
The term has yet to find a mention in the Prime Minister’s speeches, it may still be a necessity in his actions, especially with India’s desired Nuclear Suppliers Group (NSG) membership hanging in the balance.
History is indeed strange, former enemies became the best allies, and India today stands once again in a place somewhere in the middle (albeit more to the right than the left).

Shifting sands of alliances

It is alleged that India is now more to the right than the left

India has close defence exchanges like Operation Malabar with the U.S. and Japan on one side, and on the other, joining a conference that has Russia and China at the helm.
The alliance with the U.S. and Japan is yet to be spelt out, but it is clear from the Indo-U.S. joint vision statement of 2015 that Mr. Modi now envisages closer military cooperation with the U.S., and as a corollary its allies, both in the seas and on its military bases, airspace and cyber centres as well.
Of particular importance will be the lines in the joint vision statement for Asia-Pacific and the Indian Ocean region, signed by Mr. Modi and President Obama last year, on “ensuring freedom of navigation and over flight throughout the region, especially in the South China Sea”.

Clashing terms of engagement

What SCO membership for India entails?

The 2001 declaration on the establishment of the SCO clearly states that its aim is “jointly preserving and safeguarding regional peace, security and stability; and establishing a democratic, fair and rational new international political and economic order”.
Analysts have always believed that the reference to the “new order” juxtaposes the Eurasian SCO as a counterpoint to the transatlantic North Atlantic Treaty Organisation. It was further spelt out vividly at the Astana SCO summit declaration in 2005, a summit in which India, Pakistan and Iran were admitted as observer countries.
At Astana the members formulated joint mechanisms for regional security, joint planning and conduct of anti-terror activities, and jointly contributing to security issues “on land, at sea, in air space and in outer space”.
The SCO also has a formulation on ‘Asia Pacific’, with members making a declaration “against fault lines appearing both in the Asia Pacific region and in its separate constituent parts”.

The issue: confusing concept called NAM

India’s clear adherence to the terms spelt out above (in both the western and eastern alliances) would be absurd, as they could conceivably see the Indian Navy in joint patrol with the U.S. and its allies, challenging China in the South China Sea, even as it cooperates with China and Russia to counter U.S.-backed forces across the “fault lines”.
Equally strange is the possible vision of the future this brings: one of India discussing nuclear safety and non-proliferation on an equal footing with known proliferator Pakistan at the NSG, and also sharing counter-terror operations with it as part of the SCO’s Regional Anti-Terrorist Structure (RATS).

Conclusion:

In this scenario, NAM, with its inherent confusion and often “lip service-only commitment” to neutrality, is not desirable.
The next host of the NAM summit, Venezuela, has not been able to declare a date for the summit. This gives the Modi government some time to consider their position. India boasts itself of being the leader of NAM and non-alignment as “India’s heritage”.
Given the stormy waters and multiple criss-crossing alignments India now envisions, NAM may be a safer shore for India’s future as well. It is vital that the Modi government clearly defines the NAM policy and its position in the upcoming NAM summit.

Connecting the dots:

India’s NAM policy is often criticized, by both of its western and eastern alliances, as confusing and a mere “lip service-only commitment” to neutrality. Critically comment.
Is Non-Alignment Policy still relevant for India in the present changing global context and conditions? Elucidate on your view.

ECONOMICS

TOPIC:

General Studies 2

Government policies and interventions for development in various sectors and issues arising out of their design and implementation; Governance issues
Welfare schemes for vulnerable sections by the Centre and State and the Performance of these schemes; Mechanisms, laws, institutions constituted for protection and betterment of these vulnerable sections

General Studies 3

Indian Economy and issues relating to mobilization of resources, growth, development and employment.
Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

A stitch in time for a rise in India’s Employment numbers

Why is there a need for an increase in employment opportunities for India—

Growth in industrial and service sector jobs is of utmost importance for the demographic dividend to exist positively & profitably
Inter-related:
- As jobs grow, incomes rise and so do savings
- Based on higher savings, the investment rate to GDP grows, resulting in faster GDP growth
Creation of new non-agricultural jobs: Job growth leads to an increase in consumer demand which has the effect of sustaining GDP growth and reducing volatility in the output growth rate
Have the potential for broader social transformation

Apparel/garment sector—an excellent vehicle for an employment creation strategy

Has always been on a high priority as visible by almost all the successful economic growth take-off in post-war history in East Asia— rapid expansion in apparel exports in the early stages and thus, registering apparel export growth in excess of 20 per cent per year, sometimes closer to 50 per cent

High labour intensity

Every unit of investment in clothing generates 12 times as many jobs as that in autos and nearly 30 times that in steel
World Bank employment elasticities estimates that rapid export growth could generate about half a million additional direct jobs every year

Social transformation—Women

Generate large number of jobs for women— Highest amongst all sectors
Increased decision-making power as they are more financially empowered
Increased support by husbands is doing basic household activities
Provide boost to the low and declining female labour force participation

Bangladesh: Female education, total fertility rates, and women’s labour force participation moved positively

Shrinking window of opportunity in the global order:

Window of opportunity: Provided by China due to the rising wage levels—led to the loss of market share of China— evidence of deteriorating competitiveness

Why is India best positioned to benefit from China’s woes— Wage costs in most Indian states are significantly lower than in China

Reality— Bangladesh and Vietnam have overtaken Indian apparel exports, rushing with full speed to fill the space vacated by China

Why is India losing out?

Better market access for the competitors—
- By way of zero or lower tariffs to the two major importing markets (US and Europe)
- Average tariffs faced by India and its competitors in the US and EU:
  - EU: Bangladesh’s exports enter mostly duty free while Indian exports face an average tariff of 9.2 per cent
  - EU-Vietnam & Trans-Pacific Partnership if comes into existence— India will be majorly disadvantaged while Vietnam will enjoy duty-free access
- Solution:

Reduce tariffs and import barriers

To ease access to manmade fibres — such as more transparency for duty drawback schemes and bonded warehouses
Removing anti-dumping duties on manmade fibres
Lower excise taxes or provide other incentives to develop a domestic man-made fibre industry

Promote foreign investment

Move quickly to ease barriers to the import of manmade fibres
Facilitate market access & encourage foreign investment to reach more end markets, which would also yield dividends for other light manufacturers like footwear and toys

Connect Globally: Look at ways to help its apparel sector connect to global value chains (where production processes are situated in different countries). Consider joining mega free trade agreements such as the Trans-Pacific Partnership to get preferential access to huge and lucrative markets such as the U.S.

Domestic Challenges—
1. Logistics Costs:
  1. High costs and longer time involved in getting goods from factory to destination
  2. Very few large containers come to Indian ports to take cargo— which means that the frequency of trans-shipment through Colombo is very high— extra travel costs proving to be a disruption in flexibility for manufacturers
  3. Solution:
    1. Could shorten lead times by using industrial parks to provide better infrastructure
    2. Port development and National Waterways development— impetus to Make In India and blue economy under the Union Government’s ambitious Sagarmala Project emphasizing on port-led development
    3. Increase port capacity with the help of private companies
  4. Sagarmala Project:
    1. To develop port infrastructure in India that results in quick, efficient and cost-effective transport to and from ports
    2. It also includes establishment of rail / road linkages with the port terminals, thus providing last mile connectivity to ports; development of linkages with new regions, enhanced multi-modal connectivity including rail, inland water, coastal and road services.
2. Labour costs:
  1. Regulations on minimum overtime pay
  2. Onerous contributions that become de facto taxes for low paid workers
  3. Lack of flexibility in part-time work
  4. High minimum wages
  5. Smaller size of the Indian apparel firms compared to firms in China and Bangladesh
  6. Solution: Ease labour norms
    - Take advantage of economies of scale with less complex labour policies
    - Promote foreign investment for apparel by adopting clear and transparent policies on foreign ownership (already in place for textiles) and within Export Promotion Zones
3. Shift in the world-demand towards clothing based on man-made fibres
  - Indian domestic tax policy favours cotton-based production
  - Man-made fibre sector is highly inefficient (financially as well as technologically)

Policy road-map by the Government:

Provision of relief to offset the impact of state taxes embedded in exports (could be as high as about 5 per cent of the exports)
- Not a subsidy but a drawback scheme
- Should be WTO-consistent because it offsets taxes on exports
Provision of subsidy for increasing employment: Contribution of government towards the employers’ 12 per cent contribution to the EPF
To provide an advantageous position for the Indian exporters in the foreign markets:

More emphasis on new free trade agreements while weighing the pros and cons of it

IASbaba’s Views:

Government needs to not only focus on skill enhancement and flexible labour markets but also conduct an assessment of
- Proper enforcement of the laws
- Situation of different categories of employers
- Coverage of the social protection system
Labour-intensive industrialization carries the potential to break the cycle of distress and therefore, more efforts needs to be taken for building up on a consensus-derived decision by taking the trade unions as well as the State government into confidence.
Need to encourage industry-academia collaborations to understand innovation requirements better— Funds should be attracted from private sector to support research at academic and research & development (R&D) institutions