An unclear revamp
GS Paper III
Topic: India and its neighborhood- relations
Mains: Restructuring of the Ministry of External Affairs
What’s the News?
There has been persisting gap between India’s potential to play a global role and performance, which shows us more as a regional power.
Restructuring of the Ministry of External Affairs (MEA):
The Ministry of External Affairs (MEA) has undertaken a major overhaul of departments and reporting structure that will effectively empower seven different Additional Secretaries and re-organise their tasks along themes like culture, trade and development, and consolidated geographical divisions for better coordination.
Departments merged: With the changing geopolitical realities in Europe, Africa and west Asia. All of Europe, Africa and west Asia and of the Indian Ocean and Indo-pacific region Departments has been merged.
Need for the restructuring:
- Secretary-level officials are “overburdened and overworked” with day-to-day duties, and lack much-needed time to strategize.
- In the new structure, additional secretaries will be empowered to look at more long-term solutions and give political direction to their assigned portfolios.
- It will consolidate the government’s push to promote its cultural, heritage, history, tourism objectives and showcase the diaspora.
- It will help in acting as the government’s “soft power” vehicle.
Concerns:
- Strategic goals: There is less discussion on strategic goals which needs to be updated and the new capabilities match with expected outcomes.
- Over-emphasis of soft-power: India is focusing on shaping the preferences of others in terms of culture, instead of focusing on other important issues like sharing the technology layer powering Aadhaar, in which many other countries have been showing an interest.
- There is silence on the role of the Public Policy and Research Division, now headed by an outstanding officer.
- Lack of vision: There is need to have a vision in making difficult choices about what is most important and to assess the future impact and consequences of today’s decisions.
Steps needed to make India a Global Power:
Kautilya’s Arthashastra is an excellent treatise on statecraft, economic policy and military strategy. It is still relevant.
- Role of Economic power:
- In international relations, power is by and large measured in terms of resources, economic wealth, and military might in particular.
- It is economic power that not only allows a nation to invest in building its military capabilities, but also makes it possible for it to enhance its influence abroad through economic diplomacy and soft power.
- The wealthier a country becomes, the more its ambitions expand, and it invests in those resources which enhance its ability to project power.
- If military resources allow it to target its adversaries and draw red lines, trade and investment relations allow it to attract partners. Economic success, therefore, is seen as the principal propeller of a country’s rise to power.
It was a robust economic profile that enabled Indian policymakers to think of an expansive global footprint beyond just South Asia and the Indian Ocean region and position itself as a maritime power and a continental power simultaneously in the emerging geographies of the Indo-Pacific and Eurasia.
- Defence diplomacy:
It attained greater salience because it had more resources to devote to militarily engaging other nations. It has been acquiring land-, air- and sea-based assets and obtaining greater coercive power to shape outcomes in its favour on the back of higher rates of economic growth.
- Strategy and long-term policy:
- Strategy matters even more when resources are in short supply. Any nation can claim to have global ambitions when its gross domestic product growth is high.
- It is only when the domestic and global economic situation is tight that the real value of strategy becomes palpable.
- So, even as the nation awaits a budget that can hopefully spur India on to a high growth trajectory, policymakers in New Delhi should be crafting a long-term response to what are likely to be challenging times in the days and months ahead.
Conclusion:
- In a fast-changing global environment, resources need to be concentrated on a limited number of objectives, to be achieved within a defined time-frame.
- The institutions and rules established by the U.S. and the Belt and Road Initiative of China are examples.
- For this India need to have a concrete strategic goals and a vision to be achieved within a defined time-frame. To become a global power an economic revival would grant India the resources for power projection but strategy matters even more if those are scarce.
So, merely restructuring the Ministry of External Affairs and rearranging silos do not dilute the role of politicians and of officials in working across departmental boundaries.
Mains question:
‘’There has been persisting gap between India’s potential to play a global role and performance, which shows us more as a regional power.’’ Analyse the reasons behind the persisting gap in the light of recent restructuring of the Ministry of External Affairs.
The $5 trillion arithmetic
Paper: III
For Mains: Indian Economy and issues relating to Planning.
Context of News:
- India is set to become a five trillion dollar economy by 2024,India is currently the fifth largest economy in the world .By purchasing power parity (PPP), an exercise that seeks to find the ‘true’ value of a currency vis-à-vis the dollar, India’s current GDP is around $9.45 trillion, and its global rank is third, behind the US and China.
Drivers of Growth:
- Consumption:
- Consumption has always been a strong and major driver of growth in the economy. Within total final consumption, it is the private final consumption expenditure that has a major share (close to 60 per cent) in the economy’s GDP, with its growth rate mostly being higher than the overall GDP growth rate.
- The huge size of the economy serves as a big market for businesses. Share of private consumption in GDP remains high; the pattern of consumption has undergone some change over time – from essentials to luxuries and from goods to services.
- Government final consumption:
- The second component of consumption is the government final consumption expenditure (GFCE). Growth of GFCE decelerated from 15.0 per cent in 2017- 18 to 9.2 per cent in 2018-19. GFCE is calculated using growth of revenue expenditure net of interest payments and subsidies.
- Investment:
- The third major component of demand is investment. Investment (Gross Capital Formation) accounts for nearly 32 per cent of GDP, within which fixed investment (Gross fixed capital formation) accounts for about 29 per cent of GDP.
- Fixed investment mainly refers to the value of new machinery and equipment and the value of new construction activity of dwellings and other structures. Cultivated biological resources and intellectual property products are the other two components of fixed investment, although they constitute a very small share.
- As the saving rate has declined, so has the investment rate. However, the decline in investment rate has been greater than the decline in the saving rate leading to continuous narrowing of the saving-investment gap. The saving investment gap has narrowed continuously. This is reflected in the narrowing of current account deficit to GDP ratio.
- Export:
- The fourth component of demand is net exports. Exports are the external component of demand of domestic goods, and imports are a leakage of income of the country for demand of products from other countries.
- The contribution of exports and imports to GDP would matter in rupee terms for national accounting purposes rather than US dollar.
- As India is a net importer, net exports are always negative. However, the growth contribution of net exports is positive in many years. In 2018-19, there was improvement in contribution of net exports to GDP growth, owing to higher growth of exports and lower growth of imports at constant prices as compared to previous year. Going forward, the prospects of export growth are dependent on the impact of rising trade protectionism and effectiveness of export promotion measures of Government.
Why, India is far-far away from reaching $5 trillion Target by 2024:
- Achieving $5 trillion Target by 2024 requires growing at 10.5 per cent for six consecutive years at this time is nearly impossible. For one, our investment-to-GDP ratio has crashed to 30 per cent and this takes time to re-build. If we can get back to a growth rate of 7 per cent we will be lucky.
- Increase in stressed assets of banks in recent years due to regulatory changes which forced them to recognize the troubled assets is one of the key problem in form domestic front.
- The global trade conflict will hurt emerging countries the he most as they depend a lot on exports for economic growth. Rising trade war among major developed countries and rising protectionist policy based upon country first priority has put lot of pressure on economic growth of India.
- Twin balance sheet problem today appears worse than during the last two episodes of global turbulence – 2013 and 2008 – the ability of private investments to respond to a stimulus might be correspondingly weaker. The ongoing slowdown in consumption demand only complicates matters.
- Savings rate continues to decline, putting further borrowing under stress and pressure on our external metrics, raising imports and widening the trade deficit. The twin deficit (fiscal and current account deficit) problem which India tamed successfully after the 2013 mini-crisis may be back in play.
Way Forward:
- Constructing a model of the macro economy on the basis of a theoretical framework and with a chosen degree of disaggregation. The framework will incorporate the sectors and variables that are affected by the shocks as well as policy variables that can be used to counter them.
- India should develop a stable model that can have very less influence form the global shock on sector wise priority.
- What the government needs is to train a critical mass of people across all institutions of economic governance — legal drafting, taxation, regulatory bodies, banking — who can create a credible regulatory culture.
- On the other hand, there is a perception that the system as whole is moving in a direction where a couple of groups will exercise disproportionate influence on the political system. We are at the risk of moving from decentralized to centralized and concentrated cronyism (centralized both in terms of givers and recipients of benefits). The combination of half-done clean-up of the old, and new cronyism at the top is not a recipe for credibility