Daily Editorial Analysis for 22nd July 2020

The main planks in a counter-China policy

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Context:

The situation along the China-India border in Ladakh region is still tense. The disengagement process is proving difficult, and the latest meeting of the Corps Commanders on July 14 has not resulted in any demonstrable progress regarding troop disengagement/de-escalation. India is standing firm on both sides ensuring complete disengagement of troops along the Line of Actual Control (LAC), while China is laying emphasis on strengthening Confidence Building Measures in the border areas, and proper handling of border issues in a timely manner to “avoid differences becoming disputes”.

Background:

• The situation along the China-India border in the Ladakh region is still tense. The disengagement process is proving difficult, and the military meetings have not resulted in any demonstrable progress regarding troop disengagement/de-escalation.
• China seems intent on managing the ground situation to its advantage, and bring about a realignment of the LAC. 

Key Details:

Causes of the stand-off:

Non-delineated borders:

• The Line of Actual Control (LAC)has never been demarcated.
• Differing perceptions of the border, particularly acute in certain spots across the Western (Ladakh), Middle (Himachal Pradesh and Uttarakhand), and Eastern (Sikkim and Arunachal Pradesh) sectors of the India-China border lead to face-off and stand-off situations.
• Though the boundary in the Sikkim sector is broadly agreed upon, that too has not been delineated.

India’s moves to strengthen infrastructure:

• China, along the LAC, has enjoyed an advantage in infrastructure as well as terrain that is more favourable to mobilisation of troops and resources.
• The broader context for the tensions appears to be a changing dynamic along the LAC, wherein India seems to be catching up with China by improving its border infrastructure.

Increasing assertiveness of China:

• The latest skirmishes at the Galwan Valley and Sikkim are somewhat unexpected as the contours of the LAC are broadly agreed to in these sectors.
• The Galwan Valley incident was triggered by China moving in troops and equipment to stop construction activity by India. India is claiming that the construction activity was well within India’s side of the LAC.

Boundary negotiations:

• A three-stage boundary negotiationwas proposed between India and China.
• Agreement on political parameters and guiding principles
• Evolving a framework to resolve the dispute
• Delineating and demarcating of the boundary
• In 2005, the agreement on political parameters and guiding principles was completed. The current and most difficult stage involves agreeing to a framework to resolve the dispute in all sectors.
• The 22nd round of talks between the Special Representativeswas held in Delhi in December 2019.
• Both sides noted that an early settlement of the boundary question serves the fundamental interests of both countries and resolved to intensify their efforts to achieve a fair, reasonable and mutually acceptable solution.

Military option:

• despite repeated incursions by China along the LAC, it would be a mistake to think that China is preparing for a conflict over territory. The author suggests that India should not be taken in by Western propaganda about China’s territorial ambitions and should not presume an imminent warbased on the following reasons.
• China is well aware that it cannot be certain whether it will emerge a victor from an all-out conflict with India. With this uncertainty, China would never attempt a military confrontation.
• China has set itself two big targets in the form of Made in China 2025 and China Standards 2035.China cannot and will not jeopardise its future targets by a military confrontation with India.
• Made in China 2025 seeks to engineer a shift for China from being a low-end manufacturer to becoming a high-end producer of goods. It is a key industrial policy for industrial development in China through which China aims at becoming a major manufacturing power by the year 2025.
• The China Standards 2035 plan will lay out a blueprint for China’s government and leading technology companies to set global standards for emerging technologies like 5G internet, the Internet of Things (IoT), and artificial intelligence, among other areas. This will allow China to become a global leader in high-tech innovation.
• The author argues that India’s strategic thinkers and planners must keep this in mind while drawing up plans to counter China’s actions along the border regions.
• However, India should remain prepared for any eventuality and should urgently implement the plans to set up the Mountain Strike Corps divisions. This move is bound to deter China far more than the stockpiling of state-of-the-art weapons.

Non-military options:

• Although maintaining a strong military is important, even more important would be to know when or how to use it. With a country such as Pakistan, the military option is more often than not the most suitable one, however, with countries such as China, one has to consider a variety of options.
• India should consider the ‘subtler tools’ of power available to it, rather than only considering the military option. India may well find non-military tools not only more cost-effective but also less risky.

Diplomatic offensive:

• Exploiting the current widespread opposition to China, India must embark on a diplomatic offensive to create international opinionin its support regarding border violations.
• A diplomatic offensive, involving the government, business leaders, persons of international standing, etc., can achieve a great deal in convincing international opinion that India is right and China is wrong, as also in conveying a message about India’s peaceful intentions vis-à-vis China’s expansionist ambitions.

Nurturing relations:

• India should consider building bilateral relationswith countries with a view to draw their specific attention to China’s aggressive policies and designs.
• Though countering China’s moves to ‘buy’ influence will not be easy, India could use developmental and aid routesto help countries and help win their trust.
• India can upgrade its technical aid programme to help countries across Asia and Africa.
• Such programmes not only provide an enduring link between India and these countries but also help contrast India’s ‘untied aid’ with that of countries such as China whose aims are political and economic subjugation.
• India’s involvement with the Non-Aligned Movement (NAM)could also help India. India’s relationship with NAM needs to be revitalised.
• India must pay particular attention to relations with countries in its neighbourhood, such as Nepal and Bangladesh, and allies such as Iran and Vietnam, relations with whom have taken a back seat with India being more intent on strengthening relations with the West, especially the U.S., and bodies such as the Quadrilateral Security Dialogue (Quad).
• Smaller countries of Asia, which constantly face China’s aggressive interference in their internal affairs, have not received much support from India, and this needs India’s attention.

Effective messaging:

• To effectively counter China’s offensive across the world India must also overhaul its ‘messaging’ capacity. Given that in today’s world social media plays a dominant role, sustained messaging has become critical.
• It should make greater use of technology to send across its message and ideas to people and countries in its vicinity and across the globe, highlighting its peaceful intentions in stark contrast to China’s aggressive policies and tactics.

A united face:

• India’s true strength is its unity in diversity. A truly united and resilient India is the best antidote to China’s attempts to humble India. The impact of a united India will be far greater than establishing closer links with the U.S. or the West.

Soft power:

• India derives strength from its spiritual, religious and cultural attributes, which are a part of its civilisational heritage. India attaches significant value to reaching out to different religions.
• India has always reached out to the Tibetan spiritual leader, the Dalai Lama, with no strings attached. In recent years, possibly with a view to appeasing China, India has somewhat distanced itself from the Dalai Lama, which has, without doubt, been a mistake that needs to be rectified.
• Restoring the Dalai Lama to the same level of eminence in India’s official thinking should be an important plank in India’s anti-China policy.
• Simultaneously, India should also make efforts in propagating ‘Himalayan Buddhism’which China has been seeking to subvert. India’s credentials here far outweigh that of China’s and should produce excellent dividends. It needs to become a key plank in India’s ‘forward policy’. 

Conclusion

India needs to analyze Chinese objectives behind its incursions along the LAC, to avoid making a strategic miscalculation during a difficult period. Making sense of China’s actions would be critical for India’s response.

The COVID-19 fiscal response and India’s standing

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Context:

COVID-19 fiscal response in other developing countries and evaluates India’s fiscal response.

Key Detail:

• Cash transfers constitute the largest category of support provided by the governments of developing countries. This has been the prominent demand-side intervention in developing countries.
• Of the World Bank’s list of 621 measures across 173 countries, half were cash-based.
• The World Bank reports that, on average, such transfers amount to 30% of monthly GDP per capita, reaching 46% for lower-middle-income countries, for an average of three months.
• Countries have also significantly expanded coverage of their cash transfer programmes from pre-COVID-19 levels.
• Countries like Bangladesh and Indonesia have increased the number of beneficiaries. Indonesia’s cash schemes now cover almost 60% of the population. Indonesia has created two new unconditional cash schemes to reach 20 million individuals in urban and rural settings excluded from the current social protection measures.

Other measures:

• Other significant measures related to food assistance(23%) or waiver/postponement of financial obligations (25%).
• Only 2% related to public works, a clear indication of the popularity of cash transfers over public works for income support, perhaps in part due to concerns over physical distancing.
• Countries like Mexico and Indonesia have enlarged their employment schemes and allocated higher resources to fund public works schemes.

Financing:

• Developing countries are resorting to drastic means to finance COVID-19 responses like the amendment of legal budget limits and the enhanced issuance of bonds — including a ‘pandemic bond’ by Indonesia.
• Central banks in many emerging economies are experimenting with purchases of public and private bonds in the secondary market (quantitative easing) or directly purchasing government bonds on the primary market (monetising the deficit).

Fiscal response in India:

• The Atmanirbhar Bharat packagehas been the major fiscal response in India. The total Atmanirbhar package is billed at 10% of GDP.
• The central government had also initially announced a Rs. 1.7 lakh crore relief package – Pradhan Mantri Garib Kalyan Yojanain response to the COVID-19 pandemic and countrywide lockdown, providing free food and cash transfers to support the poorest and most vulnerable citizens during the crisis.
• A significant demand-side intervention in the Atmanirbhar Bharat package was ₹40,000 crore of additional outlay for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
• The government has also extended issuance of free rations under the Public Distribution System.
• The Reserve Bank of India has been buying sovereign bonds in the secondary market.
• There is debate on whether the Indian government should invoke the “escape clause” in the Fiscal Responsibility and Budget Management (FRBM) Act, to enable the central bank to directly finance the deficit.

Concerns:

• the relief measures do not seem to be commensurate with the economic disruption caused by the lockdown.
• India had one of the most stringent containment measures in place. The extent of relief measures announced does not seem to be commensurate with the economic disruption and dislocation caused by the severity of the lockdown.
• Vietnam, Indonesia, Pakistan, and Egypt, all while averaging less stringent measures than those in India, have announced stimulus measures that are as large or more substantial, as a share of GDP.
• Before the announcement of the Atmanirbhar Bharat package, India lagged significantly in terms of fiscal response, as compared to developing countries that are similar in GDP per capita, state capacity, and structure of the labour force. As of early July, the gap seems to have narrowed.

Unclear numbers:

• Given the blurring of the distinction between fiscal and monetary components in the Indian measures, ensuring accurate figures for fiscal responses is a challenge.
• The Atmanirbhar package is billed at 10% of GDP. The headline number for India’s fiscal response in international databases is around 4% of GDP. But the article claims that the current fiscal response including all the major announcements of the government would only add to 1.7% of GDP.

Window dressing of measures:

• The article notes that most demand-side measures announced by the government involved frontloading, consolidation, or rerouting of existing fundsand don’t add to the effective fiscal intervention by the government.
• For example, the recently announced ₹50,000 crore Garib Kalyan Rojgar Abhiyan, consolidates projects of 12 ministries/departments and does not have any additional allocations.

Wrong policy measure:

• In India, one reason for the subdued fiscal response and the resort to monetary measures is likely a concern with the debt-to-GDP ratio, which is higher than for most countries in our set.
• However, aggregate demand and confidence in the economy have slumped and may not recover for many months. Not spending more now might only worsen the debt-to-GDP ratio if growth remains depressed.

Way forward:

• Demand-side interventions announced by other developing countries could provide lessons for additional measures in India.
• Additional fiscal outlay— in the form of cash and in-kind transfers and expanded public works schemes — would save lives and jobs today and might prevent a protracted slowdown.
  • India could consider expanding existing transfer programmes or even creating new ones.
  • India could consider expanding entitlements in its flagship MGNREGAprogramme as well as introduce an urban version of the programme.