India and the Fight Against Climate Change: From a Domestic Issue to Global Leadership

While Donald Trump took a step backward by pulling the United States out of the Paris Agreement, Indian Prime Minister Narendra Modi did not shy away and stepped forward to reaffirm India’s strong commitment to the accord. The Paris Agreement was reached at the COP21 United Nations climate change conference in 2015. It aims at providing a global response to climate change by preventing the average global temperature from rising above 2 degrees Celsius compared to pre-industrial levels. The deal is an opportunity to tackle the international challenge of climate change, which is also a domestic issue for India. More so, the convention is part of an environmental, international regime for which India could assume a leadership role.

While climate change is an international issue, it is in India’s national interest to abide by the Paris agreement since global warming has already had many adverse effects on India’s environment. The World Bank published a report exposing the consequences, some of which include: impacts on the monsoon season, reduced rates of rainfall, and intensified droughts. These phenomena induce water shortages and damage agriculture.

Furthermore, glaciers are melting, thus prompting disruption of rivers’ flow and impacting irrigation capacities. The country is also susceptible to heatwaves, killing thousands of people each year. Along with food and water scarcity, rising temperatures may cause the spread of diseases like malaria, more easily transmitted in warmer climates. The sea level rise threatens India’s many coastal areas and cities like Mumbai or Kolkata are likely to experience frequent and larger floods with 40 million lives at risk.

Yet, India is a developing country that needs the industrial and urban development undertaken decades ago by developed countries. Millions of Indians still do not have access to electricity with many living in poverty. However, the path to progress has the chance to be different and environment-friendly. This is where renewable energies come into play as they do not produce CO2 emissions and present other advantages.

Unlike coal and oil, renewable energies can be homegrown. Although reliant on the weather, these energies are not at the mercy of international politics or prices fluctuations. Renewable energies fit India’s search for strategic autonomy from other nations. These energies can also be decentralized, which is an asset in a large country with many remote villages. They also consume less water, reducing the risk of water shortage. Above all, leaving aside the cost of energy storage, renewable energies are economical as solar power is now cheaper than coal power.

Under the Paris Agreement, India pledged, among one of its Nationally Determined Contributions (NDCs), to produce 40 percent of its electricity through renewable energies by 2030. The government has been eager to turn to these energies and claimed that by 2027, the nation would have already achieved a rate of 57 percent. India must also reduce its CO2 intensity (greenhouse gas emissions per GDP) by 33 to 35 percent by 2030. To do so, the government has chosen to accompany the modernization and urbanization of the country with various green schemes to promote energy savings and pollution reduction.

India first launched the Street Lighting National Programme, which aims at replacing conventional street lights by less energy-consuming LED lights. The Minister of State for Power, Coal, New and Renewable Energy and Mines, Piyush Goyal, launched the Energy Conservation Building Code 2017, which sets energy-performance standards for new buildings. The program would lead to 50 percent energy-savings by 2030. The minister also stated that every car in India would be electric by 2030, thanks to government subsidies.

All these steps taken in the direction of a greener society contradict the image held by India prior to COP21. PM Modi arrived at the conference displaying the usual rhetoric of juxtaposing developing countries against developed nations, declaring that climate change was the product of developed countries during the Industrial Revolution while countries like India were paying the costs. Yet, his later behaviours contrasted with his discourse; he signed the deal, took measures to implement it, pledged to go beyond, and reaffirmed this stance several times.

This marks a shift in India’s stance towards international regimes. To borrow Randall Schweller’s typology, India has often been deemed either a spoiler, by blocking the talks at the World Trade Organization’s Doha round, or a shirker, for reaping the benefits without bearing the costs of UN bodies. This time, India could be a supporter or even a leader of the environmental regime. A premature example would be India’s fulfilling of its NDCs earlier than required. By doing so, the country shows its good faith, as well as sets an example to other countries by demonstrating the proof that development and renewable energies can go hand in hand. However, India could also be getting ahead to claim the moral high ground or, more pragmatically, to be able to export its environment-friendly technologies to other developing nations.

This proactive stance goes further with the International Solar Alliance (ISA). PM Modi, along with French President Francois Hollande, launched the organization during COP21. The alliance, mainly composed of developing countries, aims at promoting solar energy in sunshine countries with India as the steering wheel. India has a tradition of leading alliances of developing countries, as done before in the Non-Aligned Movement or at the WTO, but this practice takes another shape in ISA. The goal is not to endure or to contest the international order anymore, but to actively fashion it, in order to create an international environmental regime matching India’s demands.

The US has backed off, but India is not the sole contender inclined to take control of the international environmental regime. China has expressed its willingness too. The other Asian giant was proactive at COP21 and has remained so since then. China has reached out to developing countries, notably in sub-Saharan Africa, and is already the largest producer of solar energy. India wants to lead the fight against climate change, but it may have to share the pilot seat.


 

Security Before Ideology: South Asia's Most Overlooked Regional Rivalry

Dialogue over the struggle for regional power in South Asia typically concerns the same few conflicts. Pundits typically discuss India and Pakistan, India and China, and Pakistan and Afghanistan. Often overlooked but no less important is the Pakistan-Iran relationship, which involves 200 million people, nuclear weapons, and a series of interlocking military entanglements that include several of the region’s aspiring powers. Last week, the relationship between the two nations came to a head with the downing of an Iranian drone by the Pakistani Air Force in Balochistan.[1] The incursion, which was three to four kilometers within Pakistani airspace, was significant in its own right, but more importantly the strike highlights the deterioration of the Pakistan-Iran relationship.  

Recent attacks on Iranian troops from militants based in Balochistan have stalled Iran-Pakistan relations. The Iranian regime has even accused Pakistan of complicity in these attacks, although Pakistan vehemently denies these claims. In May, the insurgent activity culminated with the death of ten Iranian military personnel at the hands of the Balochistan-based insurgent group Jaish-al-Adl.[2] In recent years, a growing number of Sunni militants based in Pakistan-Balochistan have launched attacks over the border at Iranian forces, and Iran has threatened cross-border action.

In the past, Iran and Pakistan’s shared strategic interest of suppressing Baloch nationalism has created the conditions for cooperation[3].  In the 1970s, Pakistan put down a Baloch uprising with the help of Iranian intervention. Iran committed over 200 million dollars and helicopter pilots to crush the insurrection.[4] The joint approach to counterinsurgency was successful. This is unsurprising, because multilateral cooperation is crucial to counterterrorism; it allows allies to divide operations according to comparative advantage by doing what they are each best at, and creates networks of experts to solve problems that each state cannot fix on its own.[5]

More recently, a growing relationship between Pakistan and Saudi Arabia has placed stress on cooperation with Iran. Saudi Arabia has long been considered one of Iran’s chief regional rivals. Not helping matters, Pakistan joined the Saudi-led Islamic Military Alliance, which notably excludes Iran.[6] Pakistan has grown closer to the Saudis in recent decades because of their shared majority Sunni populations, and has received billions of dollars in economic aid from them.[7] These developments have been noticed in Iran, as Iranian General Bareqi was quoted as blaming the recent Balochi attacks on “Saudi-hired terrorists,” implying the Pakistani government was collaborating with Saudi Arabia.[8] The Iranians also suspect that Pakistan and Saudi Arabia are providing material support for the powerful Baloch separatist militia Jundallah.[9] Pakistan’s growing entanglement with Saudi Arabia makes future cooperation with Iran over Balochistan appear even less likely.

Pakistan has always stressed its sunny relations with other Muslim-majority nations. National rhetoric centers around Pakistan as a ‘fortress of Islam,’ and has consistently trumpeted its support for the Organization of Islamic Cooperation. Therefore, rivalries with India have been justified in defense of Islam, and national textbooks have painted the conflict as part of an enduring Hindu-Muslim conflict. Even tensions with Afghanistan, a Muslim majority nation, are justified under the frame of fighting Indian influence in the region.

Recent problems with Iran recast Pakistan’s role in the region from ideologue to typical realist power broker. Unwillingness to cooperate with Iran, a fellow Muslim nation, shows that the Pakistani central government prioritizes sectarianism and power projection over religious ideology. Instead, in order to contain aspiring regional rivals, political maneuvering is dictated by an expansionist security policy. Pakistan has been friendly with nations of different faiths and sects when it has suited them, and been hostile to religious compatriots when it has been in their interest Washing away Pakistan’s ideological discourse and replacing it with a logic of security is far more useful when unpacking the country’s motives and strategies. It is a mistake to attribute Pakistan’s actions to some unique ideological position rather than a simple, raw desire to maximize its regional power.

International relations scholar John Mearsheimer once famously wrote, “[the] ultimate aim [for any nation] is to gain a position of dominant power over others, because having dominant power is the best means to ensure one's own survival.”[10] This sentiment is echoed in Pakistan’s recent jostling with Iran. The Saudi-led military alliance that Pakistan is a part of excludes Iran – even though it is a Muslim nation – because the alliance is a part of a broader regional effort at containment. The unwillingness of the Pakistani military establishment to help Iran deal with the Baloch insurgency highlights the prioritization of political and security objectives over the state’s supposed pan-Islamic ideology.   

The recent conflict over the Iranian drone in Balochistan represents the latest development in the increasingly tense relationship between Iran and Pakistan in the region. Furthermore, the conflict underscores Pakistan’s regional military ambitions at the expense of ideological purity. Pakistan can no longer confidently claim to operate in the best interest in all of its Islamic neighbors, as it remains uncooperative with Iran regarding counterinsurgency. This spat is unlikely to be the last event in the escalation over Balochistan, and central Asia should brace itself for more tension along the Iran-Pakistan border in the near future.

 

[1] Siddiqui, Naveed. "Iranian Drone Shot down by PAF, Confirms FO." DAWN. N.p., 21 June 2017. Web. 22 June 2017.

[2] Aryan, Vikram. "Iran Threatens Pakistan, Says May Cross Border." Defense Updates. N.p., 09 May 2017. Web. 22 June 2017.

[3] Khan "South Asia | Pakistan Risks New Battlefront." Ibid

[4] Jugdep S. ChimaEthnic Subnationalist Insurgencies in South Asia: Identities, Interests and Challenges to State Authority Routledge, Mar 24, 2015

[5] Multilateral Counter-Terrorism: The global politics of cooperation and contestation Peter Romaniuk Routledge, Apr 5, 2010

[6] "Pakistan Caught in Middle of Saudi Arabia-Iran Conflict." Time. Time, 10 Jan. 2016. Web. 22 June 2017.

[7] Ibid

[8] "Pakistan Summons Iranian Envoy on General's Remarks." Financial Tribune. N.p., 10 May 2017. Web. 22 June 2017.

[9] Hardy, Roger. "Profile: Iran's Jundullah Militants." BBC News. BBC, 20 June 2010. Web. 22 June 2017.

[1] John Mearsheimer “Structural Realism” University of Chicago, July 2006

Looking past the economy: What Modi and Trump cannot ignore in hopes of strong U.S.-India relations

With just one day to go until Prime Minister Narendra Modi and President Donald Trump meet, hope and anxiety are in the air about whether the two will be able to cultivate a relationship beneficial to India and the U.S. Although both leaders are known for their bold decisions, this meeting cannot afford audacious tactics, as they will cripple any existing ties.

While the most important part of the U.S.-India bilateral relationship is economic, Modi and Trump cannot forget other pressing topics that still exist, specifically energy and defense. Modi should strategically place India at the top of America’s interests, advocating that India’s support is beneficial to the Trump presidency in these two major ways.

Energy partnership

Trump may have pulled out of the Paris Climate Agreement, but the U.S.-India’s partnership in the energy sector must continue. There have been key efforts from the two nations in the past, beginning with the Partnership to Advance Clean Energy (PACE) in 2009, which the Obama administration created to collaborate on clean energy technology through research, deployment, and access. The energy initiative grew through 2014 and 2015 during the Obama-Modi summits, shaping the U.S. and India’s joint legacy on the fight against climate change.

More recently, the United States Energy Department announced 30 million dollar in funding for clean energy research as part of PACE, playing a pivotal role in transforming the production and consumption of electricity and carbon emissions. In order to continue these efforts and create new ones, Modi and Trump must take a moment out of creating a close, personal friendship and understand that India can accomplish more than simply reaching an energy goal of 175 GW by 2022.

Although Trump has never been the most reliable partner in combating climate change, there is no reason that the U.S. cannot help itself and India, through increased natural gas exports. With the recent crackdown on Qatar, a major natural gas exporter to India, the U.S. should seize an opportunity to use its position as the world’s largest natural gas producer and to consistently export to India. Not only would this give India’s economy a much needed, new source of energy but it would also greatly expand the U.S.- India joint energy vision.

Defense procurement

Before moving onto bilateral defense procurement, it is critical that Modi and Trump first address their individual efforts in promoting internal growth through their respective “Make in India” and “America First” campaigns. As India strives to turn itself into an arms manufacturing hub through foreign suppliers, a conflict might occur, as the U.S. is strongly  advocating investing domestically instead of investing abroad. Without resolving this rising issue, defense cooperation between the two countries might be impeded.

With the number of foreign arms suppliers increasing in the defense market, the U.S. lacks the control it once had over equipment, a fact that that Trump’s defense policies must take into account. India could just as well find another supplier in the competitive market - especially in an age of advanced defense technology - but the reality is that both countries are best secured by each other.

One strategy to facilitate closer defense ties would be to change the U.S. export control system and making the purchase of arms more efficient. By doing so, the U.S. would be get rid of any disadvantage that it grapples with in defense trade unlike foreign competitors such as Russia whose exports on technology are not as controlled. A first step that Trump could make is to follow through with his expected approval of India’s drone purchase, a key agreement in deepening defense ties.

Furthermore, it is imperative that Modi and Trump attend to the issue of the South China Sea, particularly because the rising Chinese militarization dampens India’s influence in the region. A commonly discussed strategy is joint patrols of the area, but that would come with the possible consequence of angering China. Although joint patrols in the interest of maritime safety should be a priority, Trump’s growing relationship with China - one that India must take caution of- could easily disengage any cooperation.  

In the end, there should be no expectation that either nation will change from this meeting. The point of any bilateral relationship is not to find measures for drastically altering the nature of a country, but rather to find a connector that fits in between the two. It must be a give and take system. Political realities may clash between Modi and Trump on June 26th, but that simply means rhetoric must be stepped up. All eyes are on you, Mr. Modi.

 

 

Aircraft Carriers and Submarines of the People's Liberation Army Navy (PLAN) and the Indian Navy

This article originally appeared in Bharat Shakti

Introduction

In December 2016 China’s first aircraft carrier Liaoning conducted its first seagoing voyage, travelling from China’s Northern coast to the Southern coast. It left its homeport at Qingdao in Northern China and took a politically charged route through Japan’s Ryuku Island chain and the East China Sea. From there it passed through the South China Sea nearing Taiwan and the Philippines and finally berthed at Sanya Naval Base on Hainan Island. Chinese nuclear submarines have been observed at various parts of the Indian Ocean causing consternation to South Asian countries. As on date there are 37 aircraft carriers in the world with 12 navies. It would be pertinent to observe that the United States has 10 nuclear powered fleet carriers. In addition, the United States has nine amphibious assault ships, which can carry either helicopters or about 20 vertical or short takeoff and landing (V/STOL) fighter jets, and are similar in size to light fleet carriers. Aircraft carriers operate with a Carrier Battle Group providing an offensive role to a Navy. A former Chief of the Royal Navy, Admiral Mark Stanhope, has said, “To put it simply, countries that aspire to strategic international influence have aircraft carriers”. Submarines are significant operational assets of any Navy. Their strength lies in remaining undetected and their ability to launch weapons at targets under water. Nuclear powered submarines with nuclear weapons form a strategic portion of the Triad and have tremendous capabilities. Often submarines have surprised various adversaries by their stealth and firepower capabilities.

China and India have focused on their aircraft carriers and submarines. It would be of interest to note their inventories and employment in the India Pacific region.

Read more below: 

 

 

 

Select Intitatives by Tax Authorities and Professional Organizations in Imparting GST Training and Awareness in India

India’s GST (Goods and Services Tax) reform represents a fundamental break in tax arrangements for goods and services, going so far as to require a constitutional change. The GST splits up taxation responsibilities by allowing the states to tax the supply of services, and the Union Government to tax the supply of goods. This new formula will dramatically change the Indian tax landscape, creating new challenges for buisnesses and regulators alike.

India’s new GST is intricate and complex. The tax has a complicated dual nature, which divides responsibilities between the Union and the States. The new tax system also involves a multiple rate structure, a shift from the origin (where production takes place) to the destination (where consumption or supply takes place), and involves the establishment of GST council to which both the Central Government and 29 State Governments have ceded some tax authority. The GST also establishes a centralized IT platform for some components of administration, called the GST Network in a Public Private Partnership.

Stakeholders recognize that the potential benefits of the GST in creating a unified internal market, simplifying complex supply chain logistics, and decreasing tax compliance costs crucially depend on the smooth implimentation of the new tax.

This smooth transition is in turn dependent on appropriate training of tax administrators at Union, State, and Local levels. Taxpayers, and of those advising the taxpayers, must also be trained in the nature of the new tax. Finally, efforts must be made to create awareness about the GST among the stakeholders, including the general public.

Given the enormous complexity of the GST reform, it is essential to change the  ‘business as usual’ mind-set of policymakers, tax officials, and those affected by the GST. Educating these stakeholders on the nature of the GST is the only way to actually lower logistics and supply chain costs, reduce comliance costs, and help increase the share of recorded transactions in total transactions.

In their public outreach, training, and awareness campaigns, the States need to play their part in bringing similar awareness to their ULBs (Urban Local Bodies) and RLBs (Rural Local Bodies). This is because as explained by Asher and Aggarawal, who write that the ULBs and the RLBs will also be impacted by GST(https://www.myind.net/Home/viewArticle/indias-landmark-gst-reform-implications-for-the-states-ulbs-and-the-pris).

The importance of commercially sensible transition provisions should be recognized, and clarity regarding them need to be imparted to all the stakeholders, including the tax officials.

This reform has been on the public policy agenda for many years, but it is only in recent months that the sense of urgency about finding a political consensus to implement it has been exhibited. As a consequence,  the GST is expected to be implemented from July 2017, or due to the Constitutional requirements, latest by September 2017. This is a short time to prepare the stakeholders who have widely varying capacities to be prepared for complying with the GST. The fact that even in mid-june 2017 there is uncertainty whether the GST will begin from July 2017 highlights the challenges in preparing the stakeholders for its implementation.

The challenge of preparing for the GST is made more acute because the relevant law has not been completely finalized. The rules, procedures, and regulations of the GST have not yet fully been explained. For example, rules relating to E-way Bills are not in place as yet. Also, the GST rule that are available are not set in stone, leaving a possibility of any last-minute deviation from the existing version. This has created lot of uncertainty in the minds of trade and professionals. A complete version of law at least 30 days before its implementation would have been a much better idea.

Implementing a law like the GST to all business transactions in a country like India is a difficult and demanding task, and a need will always be felt for supplementing the awareness and training efforts being made in this direction. It is clear that a clear draft of rules and procedures seems to be an essential pre-requisite for the smooth implementation of the law.

This column provides an overviewof select initiatives by the Indian tax

Authorities, by the Institute of Chartered Accountants of India (ICAI), and by Confederation of All India Traders (CAIT) in imparting training on the GST, and increating awareness among the stakeholders about India’s GST reform.

 The MANTHAN Initiative of the Tax Authorities

 The Union government has launched an outreach programme called ‘Manthan’ for creating awareness of the GST laws and implementing regulations. The outreach programme is aimed at explaining the new system, its benefits, registration and compliance, and transition provisions. Many programmes have already been conducted for educating taxpayers on legal and procedural aspects, as well as the compliance expected under GST. The program is also aimed at educating and training the tax officials at the Union and the State.

As on 2nd June 2017, 4015 workshops have already been conducted throughout the country. The geographical distribution of the workshops is provided in Figure 1.

It should however be emphasized that merely holding workshops is not necessarily an indicator of whether requisite training is being imparted. The Central Board of Excise & Customs (CBEC) is therefore strongly urged to analyse the extent to which the objectives of the workshops are being realized. In such workshops, including ways to alter the attitudes of tax officials should be an important part of achieving the GST’s objectives.

In order to be successful, workshops need to focus on the goals of the GST, and the deficiencies of the current tax collection system. Namely, the soft-skills component which is often given less than the requisite focus, is particularly essential.

                                                                                               

ashman.PNG

Source: www.cbec.gov.in accessed on 02-06-2017

Apart from conducting workshops for educating and training people and officials, the awareness efforts of the Union Government have included the following:

As part of the publicity campaign, print advertisements have been taken out in almost 200 different newspapers both national media and in regional languages creating awareness about GST in major cities by use of rail train panels, bus queue shelters, bridge panels, billboards, and others means. This has been termed the ‘GST Outdoor Campaign’.

 There is also special GST awareness campaign displayed through 12 Air India aircrafts. Advertisements on GST are being run on major TV and radio channels. The You-Tube channel named 'GST INDIA' contains major interviews and parliamentary discussions on GST. The social media campaign through Facebook and Twitter focus on dissemination of information on GST and clarifying queries on GST procedures and law.

The twitter handle of Revenue Secretary Dr. Hasmukh Adhia (@adhia03) and CBEC twitter accounts (namely @CBEC_tweet, and @askGST_GoI) are contributing to GST awareness campaign and addressing the concerns and queries of public.

As on May 31st 2017, more than fifty thousand State and Central government officials have been trained on the relevant laws and procedures pertaining to GST.

The Central Board of Excise & Customs is being renamed as the Central Board of Indirect Taxes & Customs (CBIC) to supervise the work of all its field teams implementing the GST, and to provide policy relevant inputs to the Government in policymaking in relation to GST.

Initiatives of the Institute of Chartered Accountants of India (ICAI)

The Institute of Chartered Accountants of India (ICAI) has been extensively supporting the government in creating awareness and undertaking the knowledge update exercises pertaining to GST. ICAI has been doing research on GST and has published several useful reports and studies to disseminate knowledge about GST practices and implications.

 When the First Draft of the GST became public, the ICAI came out with Background Material on GST Acts(s) within one month, and after that with every Revised Draft and Final version of the Law, the ICAI has come out with publications of Background Material on GST Acts(s) and Draft Rule(s) and FAQs & MCQs on the GST for the benefit of Government, trade and industry, and professionals. Further, to support the government with smooth implementation of GST, the ICAI has regularly submitted its suggestions on draft GST Rules as well as GST Act(s) to the government, many of which have been considered in revising the law and the implementing regulations. 

More than 1500 workshops, seminars and conferences on the GST covering more than 50,000 professionals and over 20 Interactive Programmes on the GST for trade associations have been organised by the ICAI across the country since January 2017.

ICAI has also launched a Certificate Course on the GST at more than 36 locations all over India for its members. To meet the massive demand, ICAI has also launched Virtual Classes for Certificate Courses on the GST through Live Telecasts Sessions at more than 40 locations across the country. They have set up GST ‘Sahayata’ desks at various branches across the country to help resolve the GST related issues relating to traders, industry, and public at large. 

Initiatives of the Confederation of All India Traders (CAIT)

The CAIT has also launched national campaign — “Mission GST” — under which 5,000 officials of trade and commerce bodies from across the country are being trained in the GST to empower and educate the trading community about the GST across the country.

In addition, the trade associations such as the FICCI, CII, and even regional and sectoral trade organisations like organisations of Textile manufacturers, Jewellery trade, Builders and Developers are conducting seminars, workshops, and training program on the GST. Many trade bodies have made representations also to the Central and the State Governments expressing their specific concerns related to their industry which is being considered by the respective governments while finalising rules, regulations and procedures.

Concluding Observations

Wide ranging efforts by various national and regional bodies for helping trade, industry, and government officials to become GST ready are being made. Nevertheless, much more is still required to implement the GST successfully in a federal country with multi-speed economy across the States and regions. Varying levels of technological capacity to get accustomed to technology-intensive GST design and administration also makes this transition complicated.

There is also an urgent need to bring about a shift in the mind-set of the government tax officials towards facilitation and taxpayer service rather than narrowly construed compliance. Reorganization of tax administration, with stress on building needed skills rather than continuing with traditional approach to human resources will also be needed.

 

Read the Original at: https://www.myind.net/Home/viewArticle/select-intitatives-by-tax-authorities-and-professional-organizations-in-imparting-gst-training-and-awareness-in-india

Reasonable, Yet Radical: The Complexity of the Madhesi Movement in Nepal

Although Nepal successfully held local elections for the first time since 1997 last month, heavy protests from Madhesi political groups largely dampened the accomplishment. Madhes is a cultural and geographic region in southern Nepal that takes up less than 20 percent of the country’s area, but contains over half of its population. After the government propagated the new constitution in 2015, Madhesi politicians argued that it inadequately supported their needs. At that time, Madhesi citizens led a months-long blockade of the Nepal-India border, stifling trade and causing a fuel shortage in the small Himalayan country. Since then, they have pushed for a constitutional amendment that increases political representation and makes clear distinctions on provincial borders, Madhesi cultural heritage, and citizenship.

In April, six Madhesi political parties joined together to create the Rastriya Janata Party – Nepal (RJP-N). While local elections in the Madhesi provinces were initially scheduled for June 14, they have been postponed in three provinces until June 28 and until September in another.

While the RJP-N has legitimate political concerns, its hardline approach could have disastrous implications for a Nepalese democracy still rebuilding from a decade-long civil war that killed over 13,000 people. On June 7, Sher Bahadur Deuba was named prime minister for the fourth time in two decades, after receiving 388 out of 593 votes in Parliament. However, he must hold nationwide parliamentary elections by January in order to avoid a constitutional crisis. While PM Deuba expressed resolving the Madhesi conflict as a top priority, in such a short timespan it appears quite difficult for him to pass a constitutional amendment with the requisite two-thirds majority.

However, it appears as if the RJP-N is unwilling to compromise, with leader Anil Jha stating that Madhesi people will not take part in elections until their political grievances are addressed, and that if necessary they will disrupt the upcoming vote. This stance shows little appreciation for the complexity of the current Nepalese situation, and is a cheap attempt at exerting leverage against a vulnerable government. Furthermore, forcing a constitutional amendment right now makes little political sense; even with success PM Deuba’s government will still face the specter of parliamentary elections, and failure would undoubtedly bring greater instability to the Nepalese political system. Again, while Madhesi demands for increased political representation are valid, the RJP-N should practice patience and wait until political crisis is averted to pursue constitutional reform. 

Conflict between Madhesi political activists and the Nepalese government has further complicated the situation. In March, three Madhesi supporters were killed after their attempts to disrupt an event held by the Communist Party of Nepal (Unified Marxist-Leninist) turned violent, and the police were forced to intervene. This Sunday, a bomb detonated near an electoral office in Kapilvastu, injuring five people. While the RJP-N has not claimed responsibility for the attack, Kapilvastu is located in one of the provinces where the group said it would disrupt elections next week. Resorting to violence will delegitimize the RJP-N’s claims to the rest of Nepal, and has the potential to foment widespread conflict in the country.

The weeks and months ahead will be precarious for the Nepalese political system. If the RJP-N follows through with its threat to boycott the upcoming local elections, tensions might break out between pro-Madhesi and anti-Madhesi political factions. These pressures could potentially escalate into political violence, and further complicate PM Deuba’s position as he attempts to hold elections within the year. Thus, the most prudent strategy for the RJP-N would be to wait until PM Deuba receives an electoral mandate before calling for constitutional amendments. However, given their urgent desire for change, it seems likely that such advice will be ignored, leaving the possibility that Nepal will relapse into the political conflict it has sought to escape.  

Afghanistan’s Strategic Problem: Lessons from Indian Counterinsurgency

It is no secret that Afghanistan has been recently struggling to deal with suicide terrorism. Earlier in June a series of bombings killed dozens, prompting a surrogate of Chief Executive Abdullah Abdullah to admit “you can’t search everyone.” The government’s seeming admission to the futility of counterterrorism efforts at targeting suicide attacks is underscored by a seemingly endless war against the Taliban, and the over 400 dead in suicide blasts in 2016 alone. While the number of attacks has gone down since their recent peak in 2014, the lethality of the attacks has more than tripled from 2005. Afghan security forces should dig in and copy the well tested model of its South Asian neighbors. Read more below.

 

How States Can Leverage NITI Aayog for Better Governance and Outcomes

 

Recent data from the Indian government highlights the critical importance of obtaining better outcomes from government expenditures. According to India’s Public Finance Statistics in 2016, India’s total government expenditure at all levels (on cash accounting basis) at all levels was ₹38 trillion, equivalent to 27.9 percent of GDP. However, revenue receipts and tax revenue was ₹28.4 trillion (equivalent to 20.9 percent of GDP), and ₹24.2 trillion (equivalent to 17.8 percent of GDP).

 In spite of spending such large share of GDP, outcomes from the government expenditure in terms of public amenities and services are not commensurate with resources spent. Expanding government expenditure without reallocating funding and continuing with ‘business as usual’ will be counterproductive, because the household’s burden in supporting government spending is already so high. The Indian government needs to employ urgent sustained efforts at obtaining more effective outcomes in order to guarantee India’s future governance and growth.

Obtaining better outcomes requires significantly improving the government data collection, creating a system to manage and analyze the resulting data, and fostering the appreciation and capabilities for using data among decision makers. Leaders need to learn how to use data analysis as an integral part of designing and evaluating government programs and schemes.

In conjunction with the introduction of the Cooperative Federalism initiative, the GST (Goods and Services Tax), the 2016 amendments to the Benami Transactions Prohibition Act, and other reforms, the establishment of National Institution of Transforming India (NITI) Aayog has dramatically altered India’s fiscal-political landscape. Properly used, the NITI Aayog may help India make its policy more effective.

The NITI Aayog was established on January 1, 2015. The NITI Aayog replaced the Planning Commission which has operated as an extra -Constitutional body since the 1950s, as well as the Economic Advisory Committee of the Prime Minister. Since the 12th five-year plan, which ended in March 2017, India no longer has official plans designed to allocate resources to various sectors and the States.

In the name ‘NITI Aayog’, the term ‘transformation’ is significant because it implies a transformation in India’s mind-set and governance, as well as in the design and administration of government programs. The goal is to obtain better outcomes in terms of delivery of public amenities and services, including internal security and justice processes, and make them accessible and affordable uniformly across the country. This is captured in the Modi administration’s vision of ‘Sabka Sath Sabka Vikas’, which translates to ‘collective efforts, inclusive growth’.

The NITI Aayog was designed to suggest methods to obtain better outcomes from government schemes, and to act as a think tank on issues deemed important by the Union government and by the individual states.

The knowledge and expertise that is essential for improving governance exists at all levels of government. However, the NITI Aayong recognizes such knowledge is scarce, and will help coordinate the intelligence and efforts of the many branches of government. Therefore, by objectively analyzing specific governance challenges in a non-partisan manner, the NITI Aayog will be an important shared service for the Union Government but also for the States, their Districts, the ULBs (Urban Local Bodies) and the RLBs (Rural Local Bodies).

NITI Aayog has already been responsible for reports on rationalisation of Centrally Sponsored Scheme(CSS), the Swacch Bharat Abhiyan, and on skill development (as of April 2017). Their recommendations have been translated into reforming these programs and schemes, making them more effective.

NITI Aayog has undertaken useful studies on monitoring outcomes in health care, education, and water supply, areas of particular interest to Haryana. It also provides a forum and a meeting point for States to learn about and from each other. Reforms in health sector, education, and digital inclusiveness are some of the priority areas. It has expertise (or access to it), and modest resources to help incentivize the States in these areas.

The NITI Aayog represents a fundamental shift in the institutional structure and the relationship between the Centre and the States, as well as the ULBs and the RLBs. NITI Aayog can be of considerable relevance to the States and their ULBs and the RLBs as a think-tank, an expert group to suggest feasible measures to improve governance and obtain better outcomes in specific areas.

In order to make NITI Aayog successful, individual states and their ULBs and RLBs will need to focus on implementing efficient policy suggestions and appreciate the importance of outside expertise and new perspectives. They also need to establish formal arrangements for interacting with the NITI Aayog. Some States (including Maharashtra, Madhya Pradesh, Rajasthan, and Gujarat) have already begun to utilize NITI Aayog as a think tank. Such utilization of NITI Aayog should be an integral part of India’s cooperative federalism.

Effective Indian federal policy needs to be coherent and organized between the many layers of government. The Union Government, the States and their Districts, the ULBs and the RLBs, all represent different layers of Indian government which need to be on the same page in order to ensure better outcomes. The NITI Aayog will assist in obtaining better outcomes by creating coherence and coordination between the many layers of government.

For those states which have not yet done so, it would be useful to establish designated liaisons with the NITI Aayog, preferably in the office of the Chief Minister of the State. This is because political commitment to achieve better outcomes must be communicated to all the Departments through the chief Minister’s office for the liaison to yield anticipated results in terms of better outcomes. It would also be useful to designate a small group of officials to identify urgent challenges for the States where the expertise of the NITI Aayog could help improve governance and outcomes.

Systematizing the communication between the state and NITI Aayog should be followed by regular interactions with the NITI Aayog not just by the State officials, but also by select officials from the Districts, from the ULBs, and from the PRIs. This is because while the Districts, ULBs, and RLBs provide many day-to-day services, they have limited opportunities to interact with knowledge and domain specialists who could help generate context -specific measures to address specific challenges. In short the government bureaucracy needs to tailor itself to take advantage of the wealth of new information provided by NITI Aayog.

Originally published at the Narendra Modi website

http://www.narendramodi.in/reflections/how-states-can-leverage-niti-aayog-for-better-governance-and-outcomes-28

What Brexit Means for India: Renewed Relations with Europe?

 Brexit, the withdrawal of the United Kingdom from the European Union, has reshuffled the deck in terms of relations between India and European countries. India might benefit from this break-up by enhancing ties with both parties. The UK and the EU are losing trading partners in the process, so they will both be looking for replacements, and India looks like a promising contender. Europeans have acknowledged India’s economic rise and are now seeking to take advantage of it. Being courted by both parties, India is in an advantageous position to strike a favourable deal. 

By leaving the EU, the UK risked a slump in its foreign trade and economic growth. To countervail it, Britain is looking for renewed relations with India. After Indian independence in 1947, India and the UK managed to sustain a relatively good diplomatic relationship, and their economic ties remained strong. The UK is the third largest investor in India and a major trading partner. A large Indian diaspora living in Britain also helps sustain bonds between the two countries.

Former PM David Cameron had recently used the discourse of special relationship to reinforce economic ties between the two countries. His successor Theresa May has been keen on following this path. Her first visit out of the EU after the Brexit referendum was symbolic; she went to India to signify who would be Britain’s next main trading partner. A free trade agreement was on the negotiation table, yet most of the talks were monopolized by the visa issue. The British government has been reluctant to ease up on the visa regime for Indian students and workers. Her opponent in the next General Election, Labour Party leader Jeremy Corbyn, has criticized May’s approach. He called for a fairer partnership between the two countries and talked in favour of Indian immigration. If he wins the upcoming elections, a deal may be easier to reach. But the free trade agreement is also hampered by the Brexit process. Nothing can legally be achieved until the UK formally leaves the EU, which will not happen before two years. By then, India might have struck a deal with a bigger partner. 

Last May, Indian Prime Minister Narendra Modi went on a European tour and visited Germany, the steering wheel of the EU, and India’s most prolific trading partner. The EU and India established a strategic partnership in 2004, setting a broad cooperation from trade to security matters. Negotiations were launched in 2007 to include the Broad-based Investment and Trade Agreement (BITA), but faced a stalemate. After Brexit released the EU from Britain’s various restraints, Germany Chancellor Angela Merkel has been eager to reactivate the talks. Both parties should win from a comprehensive free trade agreement replacing bilateral deals and their cumbersome negotiations.

Germany and India could both benefit from the BITA, since it would enhance their economic relations. Worried about the post-Brexit British economic slowdown, India is seeking to diversify its trade and investment partners, while Germany is looking for replacing Britain as India’s primary European investment partner, in addition to already holding the status of India’s number one trading partner.

After Germany, PM Modi visited France. Even if Modi has praised French President Emmanuel Macron’s election for the pro-European stance it represented, their meeting focused more on the strategic bilateral ties of the two countries. The main subjects, terrorism and climate change, emphasized recent events, but Indian-French relations have much deeper substance.

France and India carried out diplomatic relations throughout the Cold War, with both countries supporting each other’s foreign policy of strategic autonomy. France did not condemn India’s nuclear weapon test in 1998 and a strategic partnership started that year. Since then, they have cooperated in the fields of defence, space, energy, railways, and urban development. Several projects epitomize this cooperation. France and India are conducting the Jaitapur Nuclear Power Project to build six new nuclear plants in Maharashtra. They have worked together to launch the International Solar Alliance initiative set by PM Modi in 2015, and in 2016, France sold 36 Rafales fighter aircrafts to India as part of a weapon package deal crucial for the modernization of the Indian military.  The two countries also carried out joint military exercises, both having interests at stake in the Indian Ocean, and being wary of China’s growing presence in the region. Macron is likely to continue and increase the cooperation with India, whether or not the BITA is reached.

European countries are competing to benefit from the windfall of India’s economic rise. If the UK seems in an unfavourable position to set a free trade agreement, the country can still play the card of old historical and cultural bonds, while the EU, Germany and France only rely on politically driven, government-to-government ties. The lack of people-to-people links (a poll conducted by the BBC in 2014 showed that only 40 percent of the French public and 16 percent of the German public had a positive view of India) and small and medium enterprises’ involvement could lead to trade stagnation and frustrate a sustainable relationship in the long run.

Silk Roads and Spice Routes: The Future of 21st Century Connectivity and Opportunities To Build on the India-U.S. Cooperation Agenda

 Having recently returned from the palm-lined beaches of Thiruvananthapuram, India, along 

the Kerala coast, I was struck once again by India's incredible place in history and of her unique 

position and promise for the future. Not far from Thiruvananthapuram lies the ancient port of 

Muziris, where more than two thousand years ago, trade flourished between India and the 

West, the Greeks and Romans. In what would later become known as the Spice Route, Indian 

merchants and ships traded with the Mediterranean and the Red Sea region sailing with the 

Monsoon winds. These sea routes also connected to the maritime Silk Roads linking India 

with Southeast Asia and China. In the twenty-first century, the silk roads and spice routes are 

returning, and India stands at the center once again. The question is—will these new routes run 

through India or around her? 

 

India's geostrategic position at the center of the Indian Ocean and astride the major shipping 

lanes and energy corridors of the region coupled with its long maritime tradition and rich 

history of civilizational influence could provide tremendous opportunity for India in this Asian 

Century. Regrettably however, India’s commercial maritime capabilities and infrastructure may 

not be up to the challenge. This could have serious strategic consequences in the increasingly 

competitive global environment. There is an accelerating competition to connect Asia through 

its port infrastructure, shipping routes, and road and rail networks. This is an important 

competition and one that does not have to lead to confrontation, but one where there are 

potentially significant consequences for the parties that come in second or third. 

 

While India's economy, is by many measures, currently the fastest growing major economy 

in the world, some in India’s strategic circles have expressed concern that significant 

investment is needed in its maritime infrastructure to secure these gains and to ensure India 

realizes its full economic potential in the coming decades. In the globalization era, much of an 

economy's strength flows through its major ports and containerized shipping capacity. The bulk 

of India's container shipments are trans-shipped in Sri Lanka as India lacks the deep water ports 

and cargo handling infrastructure necessary to service many of today's supertankers and large 

volume container ships. The Indian government certainly recognizes this problem and seeks to 

rectify this situation with port development initiatives such as the Sagarmala (string of 

ports) project. Conceived by the then Indian Prime Minister Vajpayee, Sagarmala, in addition to 

port development, also sought to improve road and rail connectivity to transform ports into 

multimodal logistic hubs. Sagarmala is comprised of 415 projects running the gamut from port 

modernization and new port development to coastal community development. Much like 

India’s previous “Maritime Agenda 2020”, the Sagarmala project is a good but ambitious plan, 

of which much remains to be implemented. 

 

If we contrast where India is today in terms of maritime infrastructure and economic 

integration supported by maritime connectivity, to where China was ten to twenty years ago, 

we can begin to see the strategic implications of proper planning and maritime capacity 

building. Much of China’s current strength has its roots in strategic investment and industrial 

policy decisions dating from the mid to late 1990’s and early 2000’s. China’s planned Belt and 

Road Initiative (BRI), which seeks to link, through infrastructure provision, economies across 

Eurasia and East Africa, also reflects a long-term strategic vision. 

 

China’s BRI, which is comprised of both land-based routes (Belt) connecting China with Eurasia, 

and sea-based routes termed the Twenty First Century Maritime Silk Road (Road), could well 

become one of the biggest infrastructure projects of the twenty first century, with significant 

geostrategic consequences. If competitiveness in connectivity and supply chain networks 

becomes the future measure of a nation’s power, then China appears to have established a 

comfortable lead in this race. China's infrastructure provisions in the Arabian Sea, Gulf of 

Aden, and the Bay of Bengal, as well as the “Belt” which involves land routes through Pakistan, 

including the Kashmir region, deeply concerns Indian strategists. However, this race is a 

marathon, not a sprint. It is also important to note that China, as part of its own grand strategy 

developed its domestic infrastructure first, and is now expanding to the BRI. As mentioned 

above, the land portion of the BRI involves the intractable Kashmir problem. Because of this 

the Chinese Pakistan Economic Corridor (CPEC) in particular, and the BRI in general, will likely 

be resisted by the Indian government. This despite the belief in some Indian strategic quarters 

that New Delhi should partner with Beijing on the BRI. 

 

So how can India better address its maritime infrastructure challenges? And are there broader 

opportunities to partner with the U.S. in this area? If maritime capacity building and other 

critical issues in the maritime sector could be brought into the India-U.S. cooperation agenda it 

might well be a win-win for both countries. Building on the good work that has already been 

done with the Sagarmala project, it may be time for a new maritime infrastructure strategy co- 

developed with the U.S. This could prioritize key nodes and port projects, and develop 

implementation guidelines. Its goal should be to enhance peace and security in the Indo- 

Asia-Pacific region through better balancing and a more nuanced strategic approach toward 

China. This in turn can help to create a multilateral, multipolar space where states can pursue 

their interests freely, all the while preventing dominance of the region by a single hegemon. 

Targeted investment in maritime infrastructure will be essential to achieving this goal. Such 

investments will provide economic and social benefits to the Indian people independent of the 

BRI. In addition, Indian infrastructure improvements and increased connectivity will provide 

the Indian Ocean region (IOR) partners with a competitive alternative to China and the BRI. 

Absent of this alternative, they may feel compelled to align with China or be left out. 

 

In this vein, the U.S. should make supporting Indian port design and management a top priority. 

The new deep-water port to be located at Vizhinjam, India could be a prime candidate for such 

cooperation. 

 

It should also be noted, that a major strategic objective of the U.S. led Trans-Pacific Partnership 

(TPP) was to foster economic integration with Pacific Rim nations excluding China. Now that 

the TPP has been abandoned by the Trump Administration, the proposals mentioned 

above may provide the U.S. with more of a stake in the physical connectivity that is taking 

place in the region and more leverage in the future policy debates to come. Additionally, with 

the TPP derailed and the BRI moving ahead, India needs a strategy to avoid being left behind. 

 

The Trump Administration’s rejection of the TPP is an important factor that raises separate 

questions of what India, other IOR players, and the U.S. do next. If the IOR nations pursue 

closer economic integration (some type of TPP) without the U.S., India could be a key player 

and Indian maritime infrastructure a key enabler. Additionally, in the absence of a TPP, if the 

Trump administration prefers bilateral deals and chooses to visibly partner with India, maritime 

infrastructure and connectivity could be a good opportunity for cooperation. India and the U.S. 

working together with other partners and allies, can also provide the additional infrastructure 

and connections needed in this vital region. 

 

India and the U.S recognize the need to work closely together in the Indo-Asia-Pacific. The 

Joint Strategic Vision, signed by the U.S. and India in 2015, calls for increasing regional 

connectivity, ensuring freedom of navigation, and promoting collective security. Now begins 

the important work of implementing this vision, and ensuring that India takes it rightful place as 

a leading power in the Indo-Asia-Pacific. Projects like the Defense Technology Trade Initiative 

(DTTI) and others are important, but perhaps now is the time to dream bigger and set our sights 

a little higher. If India can improve its maritime infrastructure, then a better future of increased 

prosperity and connectivity awaits. A stronger and more prosperous India is in the U.S.’s 

strategic interest. 

 

With improved ports and increased access, one could envision a future where U.S. Navy ships 

would frequently make calls in multi-use Indian ports while transiting Indian Ocean waters 

enroute to Southwest Asia, the Mediterranean, or Western Pacific. Each port call would 

provide an opportunity to deepen relationships and improve interoperability. This in turn could 

provide better maritime domain awareness and data connectivity on what is occurring in India's 

littoral and costal environment, all contributing to greater maritime security. Additionally, like- 

minded democracies like Japan and Australia, also making use of India’s improved naval and 

commercial ports could work with India to ensure maritime security in the IOR and to uphold 

the rules-based international order. 

 

Global supply chains and physical connectivity will define geoeconomics in the twenty first 

century. The noted author, Parag Khanna, wrote that “The most significant geopolitical 

interventions could prove to be not military but infrastructural.” As mentioned above, when 

India achieves its maritime infrastructure goals, and improves its connectedness and capacity 

creation, greater prosperity and wealth creation will ensue. With this improved maritime 

infrastructure, India’s security situation can improve as well. India’s long history as a maritime 

nation and civilizational influence can only be strengthened by once again becoming the center 

hub of the twenty-first century silk roads and spice routes. 

Decreased Indian Economic Growth Rates: A Cause for Concern?

Recent Indian economic growth figures have been a cause of concern for some observers. In the fourth quarter of the latest fiscal year GDP growth rates shrank to 6.1 percent, which allowed China to once again pass India as the world’s fastest-growing economy. Some experts attributed lower growth to Prime Minister Narendra Modi’s demonetization campaign, which when announced in November 2016 took the 500 rupee and 1,000 rupee banknotes out of circulation. This sudden move to remove 86 percent of all cash from the Indian economy was initiated to fight corruption, but it still caused panic for many Indian citizens, as the Indian economy is highly dependent on cash transactions. Even so, while the Q4 rates were lower than anticipated, growth rates for the 2016-2017 fiscal year still finished at 7.1 percent - approximately the same level predicted by many economists.

Despite reasons for skepticism, some larger policies implemented by PM Modi since he came to power in 2014 allow for optimistic prognostications about India’s economic growth. The effective rollout of the new Goods and Services Tax (GST), which will be implemented July 1, would go a long way towards instilling confidence in the Indian economy. This initiative will simplify the Indian tax code by placing a single tax on supplying goods and services, where participants will only be taxed according to the value added to the product by contributors to the previous stage of the supply chain. When combined with a favorable monsoon season that will aid agricultural production and potential interest rate cuts, the GST will hopefully help India experience greater economic growth.

Another way PM Modi’s government has attempted to spur economic growth rates in the past three years is through significantly increasing foreign direct investment (FDI). In addition to rising growth rates, FDI is also essential to the Indian government’s Make In India program, which seeks to build India’s manufacturing sector and make it more attractive to outside investors. In the 2013-2014 fiscal year before Modi took power, India received $24.3 billion US dollars in FDI. However, in the 2016-2017 fiscal year, FDI reached $43.5 billion US dollars, almost double what it was three years earlier.

Specifically, the services sector of the Indian economy generated the highest levels of FDI, attracting $8.69 billion dollars (almost 20 percent of total FDI) in the 2016-2017 fiscal year. Attracting foreign businesses in this sector was one of the most important economic goals for Modi’s government, and thus far it has received commitments from Marriott, Ford, Holitech Technology and Pepsi, among others, to invest in the Indian economy. These commitments have happened at the same time as increases in gross capital formation in the services industry, which grew from 1,868,271 crore rupees in 2013-2014 to 2,285,687 crore rupees in 2015-2016. In the first year after Modi took office, there was also a 63.7 percent increase in gross capital formation in financial services, as well as a 22.9 percent increase in real estate. This further demonstrated Modi’s commitment to making India more hospitable to business transactions.

Although the 2016 UNCTAD World Investment Report placed India as the country with the tenth largest FDI inflow in 2014 and 2015, in order to sustain increased levels of foreign direct investment, the Indian government must make it easier for international investors to do business in the country. Despite increases in FDI, from 2015 to 2017 India only improved its score in the World Bank’s Ease of Doing Business index by four places: from 134 to 130 out of 189 countries. Therefore, while the Indian government has tried to make it easier to start businesses and engage in international trade, enforce contracts and strengthen intellectual property rights, it needs to provide investors with further assurances to give them a greater sense of security while doing business in India.

After a disappointing economic performance in Q4 of the last fiscal year, there are some signs that the Indian economy will bounce back in the new fiscal year. In its most recent World Economic Outlook, the IMF projected that the Indian GDP growth rate will increase to 7.7 percent by the 2018 fiscal year. Similarly, the World Bank also posted optimistic projections for India, predicting 7.5 percent GDP growth for India by the 2018 fiscal year. Although it conceded that demonetization had short-term negative consequences, the World Bank argued that India’s “economic fundamentals remain strong”, and that in the long-term demonetization will help reduce corruption, increase tax collection and lead to higher levels of economic inclusion.

While the statistics from the most recent quarter are concerning, the Indian economy has experienced GDP growth around 7 percent or higher in each year since PM Modi came to power, consistently placing it as one of the world’s fastest-growing economies. Importantly, promising projections by the IMF and World Bank for the Indian economy are contingent on improved GDP growth rates in the first quarter of the new fiscal year; if the economy bounces back, it is likely that demonetization was a temporary setback. However, if there is no rebound, it might signify that PM Modi’s demonetization campaign simply concealed greater deficiencies in the Indian economy. Therefore, we must wait until the first quarter returns of this fiscal year before declaring India’s recent economic issues an aberration, rather than an indication of larger systematic issues in the Indian economy

The Art of Dealing with the Taliban

There is no military solution to the Afghan conflict must be the mantra in Washington. The Trump administration is mulling sending 3,000-5,000 more troops to train and assist the Afghan forces, but we have already witnessed more than 100,000 US and NATO troops being unable to end the guerrilla conflict in Afghanistan. After 16 years of non-stop fighting, the US policy regarding the war in Afghanistan must focus on the political dimension rather than solely the military dimension.

In recent history, peace accords have been signed off on three continents over long standing political and territorial disputes. The ‘Good Friday Agreement of 1998’ was inked between Ireland, Northern Ireland and the United Kingdom and put an end to decades of unrest in the British Isles. The National Peace Accord of 1991 paved the way for the 1994 general elections in South Africa that resulted in National Unity government headed by Nelson Mandela. The National Reconciliation Process ended the decades long strife of the South African people for self-determination and an end to Apartheid. This process once again proved that a resolution by non-violent means is still possible. More recently, the Sri Lankan military defeated the Tamil Tigers separatist insurgency in May 2009, bringing an end to a 26-year old civil war. However, the 16-year long war in Afghanistan has eluded all educated guesses about putting an end to a protracted insurgency.

The 2016 US presidential debates were mostly focused on personal insults at the expense of largely ignoring the international hot spots of Afghanistan, the Levant and the Middle East. Afghanistan, where US troops are engaged in the longest war in American history, was not mentioned even once in the entire campaign season, nor did it even make it into President Donald Trump’s inauguration speech. Similarly, Pakistan, which holds the master key to resolving the Afghan war, was hardly mentioned. The stakes still remain high, as shown by the Trump administration’s mulling over a troop increase and the dropping of the MOAB on ISIS fighters in the eastern part of the country. There seems to be no end in sight.

Pakistan’s double role, as a US ally on the War on Terror while simultaneously abetting Taliban that kill US troops, has been highlighted on numerous forums, but US policy and lawmakers are not very confident as to how to deal with Pakistan. Recently, the Hudson Institute put together a comprehensive list of 10 policy proposals to deal with Pakistan, which can rightly be described as a mixed bag of carrots and sticks. The authors, however, stopped short of declaring Pakistan a State Sponsor of Terrorism, though they did propose to avoid viewing and portraying Pakistan as an American ally.

Pakistani officials claim that if the US and 45-countries strong NATO Coalition have failed to defeat the Taliban in 16 years, then how can our thinly-stretched army be expected to dismantle Taliban strongholds in Pakistan? At a cursory glance this looks like a legitimate position, but the truth is far from it.

The fact is that US and NATO allies have comprehensively defeated the Taliban inside Afghanistan, but this is a war in which fresh foot soldiers are supplied continuously from across the border. With two exceptions, the US has not targeted Taliban leadership entrenched in Pakistan, more specifically in Quetta, the Tribal belt and Karachi. The Taliban enjoys sanctuaries in Pakistan with some level of support from Pakistani officials. This is evidenced by the fact that funerals of Taliban fighters killed in Afghanistan are heavily attended by terror sympathizers in Dir, the hometown of Jamaat-e-Islami Chief Sirajul Haq. Pakistani conservative leaders have always legitimized the war in Afghanistan as Jihad, which is considered a duty in Islam.

The question on everyone’s mind is how to go after the Taliban leadership in Pakistan, especially the Haqqani Network, from a tactical standpoint and what can be done on the diplomatic front to dissuade Pakistan from nurturing extremist militants. There is a broad consensus among US policy makers and analysts but the devil lies in the details. There is a growing concern in Washington and patience is running out. If the proposed mini-surge is not accompanied by coercive measures taken against Pakistan, then it is probably aimed at buying more time for the Trump administration to admit defeat in Afghanistan.

No matter which approach is adopted, it is now abundantly clear that a cocktail of coercive actions need to be in place to force Pakistan abandon its use of terror as a tool of foreign policy, as the carrots have not yielded any positive outcomes. The other piece of the puzzle to resolve the Afghan quagmire lies inside Afghanistan itself.

Afghanistan, despite massive aid from the US and international community, is a hotbed of corruption and failed governance. Eight hundred million dollars down the road, the Afghan National Defense and Security forces are nowhere near the level to secure their own country. The recent attacks in Mazar-e-Sharif, Kabul and Balkh exposed the chronic weaknesses of the Afghan forces. In almost all these attacks, the Taliban have received insider help. If 16 years of donor assistance didn’t prepare the Afghan forces, it is unclear what an additional 5,000 troops will achieve.

The National Unity Government of Ashraf Ghani and Abdullah Abdullah is anything but “Unity”. Vice President Rashid Dostum is in exile in his own country and had only recently visited Kabul. Amid torture and rape allegations, Dostum is reportedly flying to Turkey, which has been dubbed as another long exile for him. This will result in more uncertainty in Kabul, where shadow of former President Hamid Karzai has long been lurking.

In all this murkiness, China may come as an unwilling interlocutor. The Taliban have held several rounds of peace talks in China. The Trump administration has the option to take China aboard in helping resolve the Afghan imbroglio, as it is a key Pakistan supporter and holds reasonable stakes in the Afghan economic development through regional alliances.

Resurgence of an affiliate of the Islamic State has added another dimension to an already very complex situation. It is imperative for the Trump administration to come up with a comprehensive Afghan policy as soon as possible, as abandoning the country at this point is tantamount to handing it back to the Taliban.  Ultimately, the US cannot afford it, especially with the Islamic State on the run from the Levant and looking for new abodes. The mayhem in Kabul today that killed and injured hundreds underscores the need for dealing with the Taliban and other terrorists at the earliest.

Dr. Asim Yousafzai is a Washington DC based geo-science professional who regularly writes on technical and geo-strategic issues. He is the author of the book “Afghanistan: From Cold War to Gold War”. He can be followed @asimusafzai

Implications of the GST for the States, ULBs and the PRIs

This piece originally appeared on myind.net

In analyzing India’s landmark GST (Goods and Services Tax) reform, it is essential that its implications for the States, the ULBs (Urban Local Bodies) and the PRIs (Panchayati Raj Institutions, including Gram Panchayat, Panchayat Samitis and Zila Parishad) be well understood by those entrusted with the GST implementation in the States and at the local levels.

This column attempts to analyse these implications and suggests how the PRIs and the ULBs, under State’s overall supervision, can address them.

Selected Features of The GST Design and Structure

India’s Goods and Services Tax (GST) will tax domestic goods and services under a single tax all across India uniformly. An appropriate Constitutional Amendment has been made to enable States to levy taxes on services in addition to taxes on goods, and for the Union Government to levy taxes on supply of goods in addition to taxes on services. The GST will subsume many of the existing taxes on domestic goods and services levied by the Centre and by the States.

The GST structure which has emerged is complex, with multiple tax rates applied to different goods and services (each good or service classification will have a nationally uniform tax), and in a federal structure (with 29 States and 7 Union Territories). Nevertheless, the GST is expected to significantly address the limitations of India’s current convoluted, dysfunctional taxation on domestic goods and services which has evolved over the last seven decades. Moreover, India’s large population, 1.32 billion persons in 2016, makes the GST reform among the most ambitious tax reforms globally. Given the above features of the GST, it is appropriate to use the term “landmark” to India’s GST reform.

The GST, expected to be implemented by 1 July 2017 (or due to Constitutional provisions, by 16 September 2017 at the latest) has the potential to enable India to emerge as a unified market, permitting significant savings in logistics and compliance costs, as well as enabling economics of scale and scope in production and distribution of goods, services and in tax administration to be realized.

The GST would not only change the structure of existing taxes on domestic goods and services and redefine the related taxable events, but would also transform the manner of levying the tax, e.g. from ‘origin’ to ‘destination’ basis. This means the manner of collection will utilize the method of crediting taxes paid on inputs from the output tax, so that only value addition is taxed at each stage with respect to all the taxes subsumed in the GST. This manner of collection implies that those entities which are ‘exempt’, i.e. not registered for GST, will still need to pay applicable GST on their inputs, but will not be able claim these taxes as input tax credit. This implies that for exempt entities, only the value added by such entities is not liable to the GST.

Under the ‘origin’ basis arrangements, tax revenue occurs to the State in which the goods and services are produced or originate from, while under the ‘destination’ basis arrangement, tax revenue occurs to the State of consumption of goods and services. Globally, destination basis is the norm. Therefore, India’s GST reform aligns its domestic taxes on goods and services with the global norm.

Broad Implications of the GST for the States, ULBs and PRIs

The GST will have three broad implications for the States and its ULBs (Urban and Local Bodies) and the PRIs (Panchayati Raj Institutions).

First, the Centre has committed itself to providing 14 percent growth each year for five years, beginning from the 2015-16 base year, for agreed upon value added tax (VAT) and related tax collections by each State. To provide transparency and confidence to the States, the GST (Compensation to States) Act, 2017 has been passed by the Parliament.

The rationale is to ease the transition period, as the States will need to become adept at levying taxes on services, and States will need to adapt to the complexities of the GST design and implementing requirements.

The States will need to explicitly plan to ride on the GST ‘learning curve.’ Those States which focus on the ‘learning curve’ will gain competitive advantage over other States. Thus, the GST also shifts some of the responsibilities and accountability to the States.

As State tax revenues, of which the VAT currently constitutes a large share, forms part of the revenue base for allocating State Finance Commission (SFC) grants to the ULBs and to PRIs, any SFC would need to analyse this aspect carefully. The 2015-16 base year revenue will also include taxes that a State is required to subsume under the GST. This aspect will also need to be carefully analysed. This will also involve examining whether under the GST structure, additional tax revenue sources could be made applicable to the ULBs and to the PRIs.

Second, selected transactions of the ULBs and the PRIs will be subject to GST. This has implications for their tax and expenditure levels, and for the need to create capacities and capabilities for GST collections, deductions and filing of returns. The legal compliance with GST will need to be ensured. Currently, these bodies do not perform these functions. So, the centre must decide how these functions will be performed by the ULBs and the PRIs. 

Third, currently, the State Finance Commissions (SFCs) of several States are in the process of deliberating on their reports to the State governments. The main Constitutional responsibility of a SFC is to recommend allocation of State resources to ULBs and PRIs, to suggest ways to strengthen public financial management, and to suggest how public services and amenities could be better delivered to ULBs and PRIs. The GST arrangements, noted below, will therefore impact the work-plan and recommendations of the SFCs as well.

Specific Implications of the GST for the States, the ULBs and the PRIs

These implications may be broadly grouped as follows:

(i)      Tax Revenue Base of the States: GST will continue to be the single largest source of tax revenue in nearly all States. The GST (Compensation to States) Act, 2017 gives a list of taxes collected by the State or local bodies during the year for 2015-16, which will constitute base revenue of the State for the purpose of compensation to be made by the Centre to the State in case of any gap in its GST revenue collection. The list includes Value Added Tax (VAT), Central Sales Tax(CST), purchase tax, works contract, Luxury tax, Entertainment Tax, Lottery, Betting and Gambling, Advertisement Tax, Duty of excise on Medicinal and Toilet Preparation Act, 1955 (MNTP Act), Entry Tax not in lieu of Octrai, Entry Tax in Lieu of Octrai/Local bodies Tax, Cesses and Surcharges, and fee leviable under entry 66 of the State List of the Constitution read with entries, 52,54,55 and 62 thereof.

The SFC of each State should take into account the GST revenue base of the year 2015-16 provided by each State to the Centre, and the resulting GST revenue over next five years in its work-plan and recommendations.

It should be noted that the 14 percent guaranteed compensation is what the Centre has promised. If a State can grow its GST revenue more than 14 percent, it will be able to generate greater fiscal space. This is what each State should aim to achieve.

 (ii)     Shift in the power of local bodies to levy specific taxes:  Under the powers granted by the Constitution of India, each State has empowered the local bodies (both Municipalities and Panchayati Raj Institutions) to levy certain kind of taxes and fees through the respective State Legislations and Delegated Legislations.

For instance, municipalities in Haryana may levy property taxes, advertisement fees, water charges, octroi, toll taxes, tahebazari and entertainment taxes, among others, under the respective legislation.

In the GST regime, local bodies will not have power to levy some specified fees or taxes, like advertisement taxes and octroi. A review of the revenue configuration of some of the Municipal bodies in Haryana suggests that advertisement revenue constitutes a significant portion of its own tax revenue.

The impact of this part may need to be examined in detail by the legal division of the State of Haryana, as entry 55 in List II of Schedule VII to the Constitution of India, which empowers States to levy tax on advertisements, has been omitted by the Constitution (101th) Amendment Act effective from 16 September 2016.

Similar analysis of advertisement taxes will need to be conducted by each State, and its implications addressed.

(iii)    Local Bodies may start levying and collecting Entertainment Taxes: In the present context, though the power to levy entertainment taxes resides both with the State as well as the local bodies, in many of the States, this tax is levied and administered only at the State level; the local bodies currently do not levy this tax. During the GST regime, the States would no longer be able to levy this tax, as it is subsumed under the GST. However, local bodies will continue to have the power to levy and collect entertainment taxes. Accordingly, if a State wishes to let local bodies levy entertainment taxes, they would need to realign the tax legislation, with appropriate tax design and administrative and compliance arrangements.

Under the GST, if the local bodies acquire capabilities to levy this tax, they may have an additional source of revenue available, positively impacting their potential to generate Own-Tax-Revenue (OTR). To realize this potential, willingness to tax and capacity to collect this tax will need to be effectively addressed by each State in its own context. This will not be addressed automatically, and legal, administrative, and other changes will be needed.

The GST also provides an opportunity for the local bodies of each State to earn higher revenues under this head by realigning the basic coordinates of the entertainment tax keeping into account the newer electronic mediums of entertainment like cable TV and others. There would also be a need to create robust tax collection mechanisms.

Implications for Selected State and Local Level Fees: This point is referring to levies like State Rural Development Fees (SRDF), which are usually collected by the related bodies (which may be a Board or other entity) at a given percentage, such as 2 percent of the sale proceeds of the agricultural produce bought or sold or brought for processing in the notified market area.  The amount collected is spent by such Boards in rural areas for the development of roads, establishment of dispensaries, sanitation, other public facilities, and for any other purpose considered appropriate by the Boards.

Such fees are presently levied under entry 66 of List II of the Schedule VII to the Constitution of India. The said entry is the last entry of the List II and reads as follows – “Fees in respect of any of the matters in this List, but not including fees taken in any court”. The above entry therefore empowers a State to levy a fee in respect of the subjects listed in List II of the Schedule VII to the Constitution of India.

Since the Constitution (101th) Amendment Act has omitted entry 54 from this list relating to the subject matter of ‘sale of purchase of goods’, a fee on agricultural produce bought or sold may not be allowed to be levied under entry 66 of the same List II. This aspect also requires legal analysis by the State(s) based on the specific subject matter of the levy.

If such fees are not collectible in the GST regime, this will affect the funds available for rural development.  Therefore, each State needs to review arrangement for the SRDF-type and other similar levies designed to fund rural development.

(iv)   Applicability of the GST on Local Bodies: As the concept of GST law is broadly based on near universal coverage of transactions and input tax credit method, most of the activities of the governments, ULBs and the PRIs are, in principle, covered under the GST.

Some specific exclusions have, however, been made for the basic functions of the ULBs and the PRIs from the of the GST. For instance, services provided by a Government or local authority to individuals in discharge of its statutory powers or functions such as issuance of passport, visa, driving license, birth certificate or death certificate; and assignment of right to use natural resources to an individual farmer for the purpose of agriculture are not subject to the GST.

Services provided by a local authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution of India; or any activity in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution of India; health care; and education are not subject to the GST. There are also many specific activities of the ULBs and the PRIs on which the GST would not be applicable.

However, there are likely some activities of the ULBs and the PRIs on which the GST could be applicable. For instance, various local bodies are generating income by way of auction of land for limited period or renting of property, among other activities. These activities are likely to be subjected to the GST if the taxable revenue crosses the INR 20 lakh threshold limit. Each State needs to prepare the ULBs and the PRIs to meet these requirements.

(v)    Responsibility for GST Compliance in relation to TDS and Information Returns:

The GST Law contains provisions in Section 51 of the Central GST Act to require the persons, including ULBs and PRIs, to deduct and deposit taxes from the payments to be made to the suppliers of goods or services to them, in case the value of such procurements exceed specified threshold of ₹2.5 lakhs.

Further, the ULBs and the PRIs may be required to furnish Information Returns (IRs) under Section 150 of the Central GST Act, wherein persons responsible for maintaining record of registration or statement of accounts, or any periodic return or document containing details of the payment of tax and other details of transaction of goods or services or transaction of purchase, sale or exchange of goods, property, right or interest in a property, under any law in force, shall be required to furnish an information return of the same in respect of such periods, within such time, in such form (including electronic form) and manner, to such authority or agency as may be prescribed.

This is a requirement which the ULBs and the PRIs have not been asked to meet in the past. Each State needs to ensure that the ULBs and the PRIs in the State are capable of meeting the above requirement in compliance with the GST regulation.

The above discussion thus leads to the three key areas of GST’s impact on the ULBs and the PRIs.

 First, the functions andactivities of the ULBs and the PRIs will need to be mapped to identify such activities on which the GST might be leviable. Second, in case of meeting GST requirements, ULBs and PRIs would need to create capabilities and capacities for related compliance. Third, relevant agencies in each State, particularly the Finance and Taxation Departments and Urban and Rural Departments, will need to function under a different mind-set and administrative arrangements if the GST is to be effectively and competently implemented.

There is considerable need for undertaking systematic study of the GST’s implications on each State, its ULBs and its PRIs, along the lines sketched above.

Hello, World!

Equidistance to Equi-proxomity: Nepal-India-China Relations Post-BRI

Connectivity infrastructure inherently aids expansion. The railroad connectivity in the US in the 19th century helped its westward expansion. Now, the Chinese version of “Manifest Destiny” – the Belt and Road Initiative (BRI) – will soon bring the China’s east coast closer to South Asia. In the latest episode of this connectivity plan, India’s special neighbor Nepal signed the BRI in Kathmandu and further negotiated the deal in the recent high-profile international summit Belt and Road Forum for International Cooperation in Beijing. The question that remains is what this unprecedented Nepal-China proximity will mean for India.

There are legitimate doubts about the successful implementation of the BRI in India’s close neighbor Nepal, especially in the context of India protesting the Initiative for its own reasons. Therefore, how the BRI projects will play out in Nepal, if they will, certainly remains to be seen. However, it cannot be denied that India, despite serious levels of mistrust of China, can neither continue its policy of avoidance nor severely minimize its engagement with China in Nepal. Regardless of commentators’ narratives of India’s continuous influence in Nepal, the graph of Chinese outreach in the country has only spiked, and is highly likely to go further up in the post-BRI days, as physical distance will narrow with growing connectivity. India clearly has lot at stake in post-BRI Nepal.

For China, Nepal becoming a member of the BRI is a welcome step, but it could have lived without Nepal signing the agreement, as it already secured its vital security interests there pre-BRI. Also, the fact that Nepal shares over a thousand kilometers of border with Tibet explains China’s interests in Nepal. If Nepal and China remain committed and implement the projects well, even without considering China’s possible hidden agenda in Nepal, then India will have to actively engage to safeguard its interests in certain areas of historic concern: security, trade, water resources and environment. 

Regarding security, Nepal and China have just conducted a joint military exercise, which got mixed responses from New Delhi; in trade, China recently used its land route to send merchandise to Nepal, skipping the traditional maritime route through Calcutta. This prompted a strong reaction from India, as it perceived the action as encroachment into its privileged market. Not to mention Chinese-built road, rail, and air connectivity infrastructure in Nepal or India’s long fear either of flooding in the monsoon or insufficient discharge from tributaries to the river Ganges in the dry season, discharge of chemical waste of factories into rivers, and many more issues which the new Nepalese-Chinese relationship may further aggravate.  

Nepal is also somewhat wary about any possible overreach from Chinese side, and has concerns about environmental issues, balance of payment problem and skyrocketing Chinese debt, controversial Chinese firms and their bad track records, lack of transparency, corruption, and many other factors. The recent behavior of PM Prachanda, who awarded, without competition, the construction contract of a major hydroelectric project to a controversial Chinese firm one day before his resignation, added to that wariness. The deal was discussed in Beijing during the visits of PM Oli and PM Prachanda. It is uncertain how far Nepalese leaders would go in signing agreements and contracts with China, but in any event, the Nepalese are pretty clear that they need China.

Meanwhile, Indian hawks are defining Nepal joining the BRI in “either with India or against India” terms, and are portraying it as a tool of Chinese expansion against India by totally disregarding sovereign Nepalese views. However, that is only antagonizing people in Nepal more. Similarly, claims about Chinese influence in political and cultural patterns are unfounded, because studies show that regional integration and physical connectivity do not automatically erode differences created by geography. In fact, the EU is a good example of an area where citizens of every member country are aware and proud of their distinct culture and character. So, if India chooses to block projects for its own strategic concerns that Nepal does not share, it can definitely do that, but it will come at the cost of deep antagonism in Nepal, which can be pernicious in the long-term. There is also a “moral hazard” for India to not to block Chinse investment, because Nepal is among the poorest countries in the world.

Nevertheless, contrary to these views, the Indian establishment has apparently recalibrated its policy by showing restraint and taking a pretty reasonable approach with Nepal since Prachanda took office to improve bilateral relations. India has shown some flexibility in terms of Nepal-China relations, as evidenced by its tolerance of Nepal conducting military exercises with China and signing the BRI. India also endorsed the first phase of local elections in Nepal in the larger interests of the country, although the Madheshi leaders were not satisfied.  There is also a hint of a shift in the strategic thinking of India vis-à-vis China as it encourages building connectivity in states along the Chinese border, as opposed to its traditional policy of leaving them underdeveloped connectivity-wise to keep the Chinese at bay. This shift will be a welcome policy for Nepal, as India’s traditional thinking deprived Nepal of Chinese investment on infrastructure and kept distance between the two countries.

Therefore, it is in Nepal’s and India’s long-term interests to strategically engage in a trilateral dialogue with China. India will not necessarily have to counter China’s BRI in Nepal (in fact, Nepal and India had reportedly consulted on the BRI matter before Nepal signed it) but rather engage to safeguard its own interests.  That way, India will experience benefits post-BRI without damaging its status.

 

 

 

                                                                                                                                                             

A Pakistani's Perspective on India-Pakistan relations

Since both Pakistan and India gained their independence, the two nations have had an antagonistic relationship. After August 1947, unresolved geographical and resource issues sowed the seed of grievances on both sides of the border. As a result, Pakistan and India have engaged in wars and unconventional hostilities till present. To have normal and reciprocally constructive relations, Pakistan and India have to increase interdependence. One element of the wide area of confidence building measures is economic integration between both countries. The potential for trade is considerable between New Delhi and Islamabad. The trade volume is less than $3 billion currently but normalized trade relations (both formal and informal) could eventually send the figure to $40 billion, representing an increased interdependence that is vital for a peaceful South Asia.

A quick review of the world gives us few examples where major rivals for centuries have become prosperous partners today. The European Economic and Steel Community (ECSC) followed by the European Economic Community (ECC) the European Union (EU), had its origins in the destruction and despair of the Second World War. Europe lay in ruin, its principal powers were devastated and its eastern periphery was occupied by the Soviet Union. The ECSC was proposed by French Foreign Minister Robert Schuman aiming to "Make war not only unthinkable but materially impossible" by the virtue of interdependence among the member states.

After a long history of bloodshed including two world wars (WWI-WWII) Germany and France decided to put aside their animosity. Both counties moved towards strengthening regional stability in EU to avoid further economic, social and psychological tensions. In 1963, signed a “Special Relationships” agreement embodied in the Franco-German Friendship. Coal and steel community was established in 1951 by the treaty of Paris to start economic cooperation with each other. Pakistan and India may seek lessons from the above mentioned examples.

For instance, SAARC is a good platform to discuss regional issues, particularly the grave state of Pakistan-India relations. The full potential of trade relations can be capitalized through improvement of infrastructure and removal of tariff barriers. However, this can be only be achieved after reduced tensions between the two countries.

The Kashmir Conflict

The Kashmir issue has always been the major bone of contention between Pakistan and India. From United Nations Resolutions (38, 39, 47, 51, 80, 91, 96, 98, 122, 123, 128) to Dixon's Plan (1950), none of the solutions have worked for either Pakistan or India. Options for talks have been offered by the governments of both countries but marred by the mutual mistrust that exists between them. The Four Point Formula (2004-2007) discussed between the former Pakistani President Pervez Musharraf and former Indian Prime Minister Manmohan Singh can provide an effective roadmap to the resolution of Kashmir issue. In his book ‘Neither a Hawk nor Dove’, the Pakistani former foreign Minister Khurshid Mahmud Kasuri mentions that “in 2007 the solution to Kashmir was in a grasp of both governments”. The two sides had agreed on a four-point formula that envisaged demilitarization and joint control of the disputed territory. It also suggested making Line of Control irrelevant by allowing Kashmiris on both sides to move freely. Many politicians from the ruling party in India had also agreed upon the four point formula. Senior Indian Politician and current Chief Minister of Jammu and Kashmir, Mehbooba Mufti had also lent support to Musharraf’s Kashmir Policy. Prime Minister of Azad Jammu and Kashmir (Pakistani controlled part of disputed region) in 2005, Sardar Sikander Hayat, also supported Musharraf’s Kashmir policy and was hopeful for the resolution. However due to domestic pressures and unrest, Pakistani President Pervez Musharraf resigned in 2008. And with Musharraf, any potential opportunity for resolution that the four point formula offered also ended. Since there were many loopholes and details to be ironed out, the successive governments moved away from the four point formula.  

Stemming from the Kashmir issue are the constant military standoffs that the two countries need to avoid. Several reports suggest that 70,000 people have died and more than 8000 disappeared in Kashmir in recent years. The human cost of Kashmir conflict and skirmishes along the border must be realized by both governments. Given that, expanding the areas of existing military, political and economic Confidence Building Measure (CBMs) will help to enhance the mutual understanding and resolution of issues. The two governments also need to initiate talks on nuclear and conventional security, as per the 1999 Lahore Declaration. The existing mechanism of a direct hotline between the Director General Military Operations of both countries is currently not actually being used. Restarting the direct hotline would also be a strong preemptive measure.

Diplomatic, Cultural and Economic Opportunities

Pakistan and India can also focus on diplomatic and cultural options which may pave the way for better relations and increase in trust. Apart from the four point formula, the last substantial dialogue that took place between India and Pakistan was the composite dialogue in 2004. However, the peace process soon came to standstill after the Samjhota Express bombings in 2007 and the Bombay terror attacks 2008. Both nations can take steps towards eliminating the strain in relations through Track 1 and Track Two Diplomacy. This includes diplomatic options such as the Neemrana Dialogue and Pugwash Conference that may help to keep the channels of communication open, even during the times of crises at the official level.

The collaborative educational, medical, technological and cultural exchange programs can also serve as tools to foster positivity and deepen linkages between the people of both the countries. Establishing more institutions like the South Asian University can also help towards this goal. The practicality of such programs can be witnessed through the success of similar programs. For instance the cultural and educational exchange programs between China and United States of America. Much in the same manner new cross-border arts and cultural conferences can also be promoted. The shared history, cultural traditions, languages, art, music, literature and theatre of both countries can provide a golden opportunity for friendly ties between them. Encouragement of existing Pakistani theatre companies like Ajoka’s Play presentations in India, can also help foster positivity between the citizens of both countries. Pakistan and India must realize that they are more alike than different in cultural norms and mores. One detrimental factor for more than a decade has been the media of both the countries. It has contributed to the escalation of tensions for most of the times. For instance the media coverage of unrest in Kashmir and respective terrorist attacks in both countries has always been controversial. Media at both sides have been playing a never ending blame game with each other. To restore cordial bi-lateral dialogues, media of both countries have to differentiate between civic and yellow journalism. They have stop hate speech, combative talk shows and the promotion of controversial statements by and large.

Final Thoughts

It is crucial that the governments reduce interference in each other’s affairs as well as marginalizing non-state actors and faith-based radical beliefs that hamper the Pakistan-India relations. It is important that Pakistan and India continue to talk and isolate these militant or radical elements in society. As neighboring states, they must fight against common issues such as corruption, poverty and climate change. They must collectively initiate large-scale counter terrorist operations irrespective of the country being targeted. Despite the intractable issues faced by two nuclear armed states, there is scope to increase talks in many areas. And especially given the security situation, it is imperative that the two countries continue to talk and dialogue be preserved in all scenarios.

Roads and Religion: How CPEC Will Pit Pakistan Against Itself

“Exclusive: CPEC Master Plan Revealed”, read a headline this week in Pakistan’s daily newspaper, Dawn. Instantly, news outlets from across the world scrambled to analyze the text of the now-viral article and provide their own respective analyses of this said Master Plan.

The plan includes details of leasing large tracts of land to Chinese companies for ‘demonstration projects’ in agriculture with similar concessions in land granted for the construction of industrial zones, with their own set of tax breaks and logistical supports. Interesting also is the piloting of a ‘safe city’ program in Peshawar which uses a ‘full system of monitoring and surveillance’ to be replicated in all major cities of Pakistan. There are several other seemingly asymmetrical agreements in port control, trade and manufacturing. The article itself says it best:

“The plan envisages a deep and broad-based penetration of most sectors of Pakistan’s economy as well as its society by Chinese enterprises and culture. Its scope has no precedent in Pakistan’s history in terms of how far it opens up the domestic economy to participation by foreign enterprises.”

Then perhaps the scramble towards drawing first blood from the government for this unfathomable ‘surrender of sovereignty’ as some have called it is justified. After all, it is, according to another news outlet,  ‘Another East India Company is in the offing’. What is troubling is that several prominent theorists and politicians have made this analogy for impact rather than analysis; for if what they say is true, there is a reimagining of Pakistan in the works that few could have predicted. It shall challenge Pakistan’s most fundamental core, the centrifuge around which its ideology, politics and culture revolve: religion.

One of the most interesting aspects of the plan is the construction of a fiber-optic system which will in part be used by the Chinese media to initiate in Pakistan ‘a dissemination of Chinese culture.’ One has to look past typical arguments of cultural hegemony to understand what ‘Chinese culture’ means specifically for a Pakistani context.

This is the same country that has banned Indian entertainment, YouTube for posting blasphemous content, and has introduced an extensive Electronic Crimes Bill so vaguely phrased that any dissent on Islam in the previously safe space of social media may been seen as criminal. This principle is reinforced by non-state actions, such as the indiscriminate killing of religious minorities by terrorist factions and the alleged abduction of vocal opponents of authoritarianism by the intelligentsia. The Islamic Republic of Pakistan is no doubt vociferously Islamic, and its religious lobby will go to all extents to preserve the status quo.

It shall be interesting then, to see how media content green lighted by the Chinese government – termed as ‘officially atheistic’ – will play to Pakistani audiences who are nothing if not sensitive of the unIslamic.

This doesn’t just apply to culture. The Master Plan also includes visa-free entry of Chinese nationals, and with them their own conceptions of the place of religion in society. This entry of Chinese citizens has the potential not just to shape demographics but also the cultural undertones of Pakistan’s current demographic. According to a Pew Study from 2008, more than 90% of Pakistanis consider religion to be very important. Meanwhile a study by Gallup found China to be least religious country in the world. It is difficult to imagine how people from both sides will mesh together with these diametrically opposed views on religion, in the religiously charged environment of Pakistan.

Another facet of the Master Plan is to ensure security for Chinese operations. This has somehow been related in the last line of the chapter on agriculture, and states that Government of China will:

“[s]trengthen the safety cooperation with key countries, regions and international organizations, jointly prevent and crack down on terrorist acts that endanger the safety of Chinese overseas enterprises and their staff.”

As ominous as that sounds on face value, it is even more problematic when one thinks of how difficult a position the Pakistan government will be put in, consideringits stance on ‘Good’ and ‘Bad’ terrorists. It is difficult to imagine how Pakistan’s government and intelligentsia can maneuver their way out of this quandary, especially considering that several infrastructure projects under the ambit of CPEC run through north- and south-western territories where many of these terrorist factions have taken refuge. An example of this emerged just this week, when it came to light that three back-to-back terrorist attacks which claimed the lives of three dozen individuals in Pakistan’s south-west were targeted at CPEC operations in Baluchistan.

This is a watershed moment for the current Pakistani administration. From one perspective, they have pushed Pakistan into a corner, where a bloody and violent conflict between religious ideology and economic liberalization is inevitable. From another perspective, CPEC might finally arm the Pakistani government with the clout to reduce the influence of religious puritanicalism on Pakistan’s way of life.

The East India Company brought with it misery and exploitation that no amount of reparations can forgive, but also technology and ideas that shape intellectual thought in the subcontinent to this day. Pakistan should be wary of China for several reasons, but it can use this economic partnership to bring about a cultural transformation that Pakistan has desperately needed since Zia. Perhaps then, CPEC may become the ‘game-changer’ that Mr. Sharif envisioned, in more ways than one.

Photo Credit: CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=2791258 

Leveraging Centrally Sponsored Schemes to Obtain Better Outcomes an Imperative For Indian States

This article originally appeared in Myind.net

In the evolving dynamics of Co-operative (which also implies competitive), Federalism in India, it is imperative that the individual States undertake necessary governance, administrative, and fiscal management reforms design to leverage CSS (Centrally Sponsored Schemes) for maximum benefits in terms of delivering public services and amenities to the citizens. Implications of the CSS for the work plans of the State Finance Commissions (SFCs), several of whom are currently in the process of submitting Reports to their respective State governments are also briefly mentioned.

The SFC is a Constitutional body mandated every five years to recommend devolution of State resources to municipalities and rural bodies, and to recommend how delivery of public services and amenities to them could be improved within a State.

The Scope, Design, and Implementation Features of CSS

The CSS cover social sector services deemed to be of national importance, primarily rural employment provision, health, education, improving agriculture and horticultural sectors, urban amenities and management as exemplified by the Smart City and AMRUT (Atal Mission for Rejuvenation and Urban Transformation) initiatives, 0ld age pension, and support for population which is currently economically and socially in need for it.

Economic reasoning behind the CSS is as follows. Sharing of funds between the Centre and the States reduces relative price of activities involved in the CSS to the States. As demand curve is downward sloping, lower relative price increases the quantity demanded of the concerned activities by the State. This enables India as a country to provide at least the minimum level of public services and amenities throughout the country.

The extent to which the increase in public services and amenities is actually realized depends on the individual State’s capacity to leverage on the CSS.

Among the key characteristics of the CSS are co-funding by the Centre and States, and implementation of the Schemes by the States. In addition, most States have initiated their own schemes, some of which are consistent with the design and objective of the CSS, and some are not. The tendency of the both the Centre and of the states is to initiate plethora of schemes, but without adequate outcome assessment or periodic outcome based review.

The above characteristics thus require effective co-ordination and policy coherence between the Centre and the individual States, and among the Central government agencies, and agencies in individual States. They also require better governance and more result-based administrative structures and a change in bureaucratic process-oriented to outcome – oriented mindset. Effectively communicating intent and procedures for such large number of Schemes has also proved to be a major challenge.

The total budgetary expenditure by the Union government on the CSS was 2.26 lakh crore in 2016-17, equivalent to one- sixth of its Current (Routine)expenditure, and 1.5 percent of 2016-17 GDP. When the State’s sharing is added total expenditure on CSS could reach around 3.0 percent of GDP. If effectiveness of CSS is improved by 10 percent, this would provide public services and amenities equivalent to around 0.3 percent of GDP, not an insignificant addition to fiscal space.

In terms of the resource envelope, i.e. mix of financing from various sources, (excluding budgetary expenditure from the State on them), Urban and Local Bodies (ULBs), including Zila Parishads, Panchayat Samities, and Gram Panchayats in most States, depend nearly fully on the CSS, and on Central Finance Commission(CFC), and on State Finance Commission(SFC) grants. Their Own-Tax and Non-Tax Revenue on the whole account for only a small share of the total in predominant number of States. The mind-set of dependency on grants from higher levels among the urban and rural bodies will need to be addressed before improvements in resource generation at their own level are to be realized.

The implementation of the CSS is however at the State level. With few exceptions, such as for MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), the funds for the CSS do not include expenditure for additional staff, for maintenance of assets created, and for data gathering and outcome assessment.

Even when additional staff and improving data reporting and monitoring system are present as in MGNREGA, there has been limitations in providing desired benefits across the country. As Prime Minister in a speech (March 3,2016) in the Indian Parliament, quoting from the 2012 Report of India’s CAG (Comptroller and Auditor General), observed that the MGNREGA “…Scheme was implemented better in states where the population of the poor was less. But the states in which it was needed the most, the scheme was utilised the least. This means we could not target the poor through this scheme properly…He stressed that measures to address these limitations are being undertaken.” (This is an English translation by the Author of Prime minister’s speech in the Hindi language

Selected interviews with State and local officials in India’s selected States strongly suggest that the above omissions in the Scheme design and in fund allocation, in conjunctionwith too many schemes without overall integration bybroad objectives to be achieved, and the absence of sunset clauses for the Schemes based on outcome assessment have led to substantially less than achievable improvements in quality of living and quality of life of the Indian households when compared with the society’s resources utilized by the CSS, and by the State initiated Schemes.

A Report of Subgroup of Chief Ministers (chaired by Mr. Shivraj Singh Chauhan, Chief Minister of Madhya Pradesh), formed by NITI (National Institution of Transforming India) Aayog, was submitted in October 2015 to reduce and rationalise CSS. (http://niti.gov.in/writereaddata/files/Final%20Report%20of%20the%20Sub-Group%20submitter%20to%20PM.pdf )

The reported proposals by NITI Aayog, and by the Central government to further the reduce number of CSS further and to subject them to outcome-based review with sunset clauses are to be welcomed.

( http://www.livemint.com/Politics/T9CkGMEfpjbnlpeml8AjyO/Govt-may-cut-down-social-schemes-to-improve-quality-Finance.html ).Indeed, all future schemes at the Centre and at the State levels should have outcome-based evaluation and sunset clauses as part of the design

Two Complementary Types of Analysis of CSS Needed

To analysis the potential avenues and specific measures to better leverage the CSS for obtaining greater benefits for its citizens, the states could consider two types of complementary analysis. These are Funds-Flow or Financial analysis and assessment of impact on actual delivery of services. This is a critical component of outcome analysis.

Funds-Flow (Financial) Analysis: For the initial diagnosis of the extent to which Funds-Flow could be improved, the following is suggested. In the CSS, funds flow from the Centre to the States based on the whether a State has fulfilled them. Any variation between the Centre’s Funds estimated in the state Budget, actual release of Funds by the centre, and the actual amount spent needs to be estimated, and the reasons for the variance ascertained. The reasons could be the Centre not releasing the promised funds, States not meeting conditions set for the release of funds by the Centre, or a combination of the two need to be ascertained, and limitations addressed.

Such as analysis needs to be undertaken for each major CSS, as considerable variations in funds-flow by each Scheme is the norm.

A Similar analysis between the budget estimate, amount released, and the actual amount spent should be undertaken, both at an aggregate and disaggregate levels by the Scheme, and the reasons for the variance ascertained.

Preliminary analysis along these lines suggests that there is large variance among schemes in the extent to which budgeted funds are released, and then actually spent.

As a result, actual fund sharing ratio by the Centre is less than the statutory or specified ratio. This suggests that fiscal space of the state, and of its ULBs and Central fund ratio to statutory or specified ratio. It also suggests the strong need to rely just on increased allocation from higher levels of governments to the ULBs and Panchayats, but to examine the funds flow performance.

Currently, State Finance Commission (SFCs) in many states (e.g. Haryana, Rajasthan, Madhya Pradesh) are working on their respective Reports for the allocation of State funds to ULBs and Panchayats. It is strongly urged that the SFCs consider undertaking the Funds –Flow analysis along the lines suggested above.

Impact of CSS on Delivery of services: A study of the CSS on actual delivery of services to the ULBs and Panchayats involves a more complex analysis. This would also involve improving their capacity to spend consistent with “Spend less” (obtaining a given quality of good, service, or asset as lowest possible cost over life cycle) “Spend well” (obtaining better outputs from given financial and physical inputs) and “Spend wisely” (given expenditure to meet citizen’s need and aspirations).

There are several key areas where service delivery for the ULBs and PRIs need to be substantially improved. These include sanitation, ensuring availability of drinking water, solid waste management; streets and their amenities, including cleaning and lighting; schooling; health care facilities; connectivity; and community safety.

This type of assessment would need to focus on whether there exists alignment between functions (services), funds provided, human resources needed, and technological preparedness. This in turn would require governance and administrative reforms, and a change in mind-set of officials and public. How to communicate appropriate messages to the stakeholders also acquires much greater importance. The digital economy provides considerable opportunities in this regard.

State Level Co-ordinating Task Force Needed

It is strongly recommended that each State consider setting up an Inter-Departmental task force, led by the Finance Department, with inclusion of independent experts in specific areas as required to obtain maximum leverage from the Centrally Sponsored Scheme(CSS) for the State. Clear signals from the top political leadership of the State, particularly the Chief Minister and the Finance Minister would be essential.

It would be essential to set accountability for enhancing this leverage, with benchmarks. The SFC urges that administrative reforms, including in human resource management (obtaining persons with requisite skills) and in enabling technology, be undertaken to achieve the above goal.

As suggested by Asher (2017), establishment of a State level Public Financial Management (PFM) Institute could provide continuing research and other support for the above task. https://www.myind.net/Home/opinions/economics

Suggestions for the State SFCs

The above analysis has following implications for the State Finance commissions (SFCs).

First, the challenges of delivery of public amenities and services to citizens of ULBs and PRIs are not primarily financial.

Second, enhancing capacity to spend less, well and wisely, and capacity and willingness to raise own resources so that the share of SFC and other grants become less prominent as the Indian Constitution (243 I) intends, are the areas which require much greater analysis and focus. These will require governance and administrative reforms.

Third, the SFC’s Reports should incorporate the substance of the above two messages. Arrangements are needed to ensure that the data gathering, analysis and other work undertaken by the SFCs at five year intervals should be continued in the interim.

Establishing effectively functioning PFIs at State level could help continue SFCs work, with substantial saving in terms of costs and time in undertaking SFCs work, while improving quality and policy-relevance of the Reports.

Photo credit: A. Savin, Wikimedia Commons

South Asia Satellite : Dawn of India’s Space Diplomacy

“We're convinced that, if we're to play a meaningful role nationally and in the community of nations, we must be second to none in the application of advanced technologies to the real problems of man and society which we find in our country,” famously said Prof. Vikram Sarabhai, the father of the Indian Space Programme. 

It was in 1962 that India first established the Indian National Committee for Space Research (INCOSPAR) under Prof. Vikram Sarabhai’s leadership. Following the establishment of the INCOSPAR, the first rocket launch from India took place in November 1963.The ICONOSPAR grew and transformed to become the Indian Space Research Organisation (ISRO) in 1969. With the establishment of the ISRO and further with India forming the Department of Space, space related enterprises got a boost. In the last 47 years, ISRO has improvised and developed technology, launching several indigenous vehicles into space.

One such effort was witnessed on May 5, 2017 when the important South Asia satellite was launched. The genesis for the Satellite began on June 30, 2014, when India joined in the celebrations for the successful launch of Polar Satellite Vehicle (PSLV), belonging to France. During the launch, Indian Prime Minister Narendra Modi, in a geopolitically significant move, challenged the ISRO to develop a Satellite that would serve the nations that are part of the South Asian Association for Regional Cooperation (SAARC). 

India launched the historic South Asia Satellite to enable a full range of applications and services to its neighbours in the areas of telecommunication and broadcasting applications viz. television, direct-to-home (DTH), very small aperture terminals (VSATs), tele-education, telemedicine and disaster management support. In addition to having a relatively affordable launchpad, with the launch of the South Asia Satellite, India went a step further in providing technological leadership towards solving some of the subcontinent’s socio-economic issues.  Besides India, the Satellite will cater to Nepal, Bhutan, Maldives, Bangladesh, Sri Lanka and Afghanistan. Pakistan chose not to participate in the project. 

The launch of the Satellite was seen as an important step towards regional integration, which is significant as the SAARC countries have often been criticized for not having achieved this key objective. Tshering Tobgay, Prime Minister of Bhutan, put this aspect into perspective at the launch, where he said, “The launch also ushers in a new era of regional cooperation.”

Late Dr. A.P.J. Abdul Kalam, Former President, also known as the Missile Man of India, in his paper, ‘The Future of Space Exploration and Human Development,’ wrote, “The world population today is 6.6 billion and is projected to be more than 9 billion by 2050. The critical issues arising from this population growth are a shortage of energy, a shortage of water, and increasing damage to the natural environment and ecology.” Dr. Kalam felt that space technology could help in solving these issues. 

True to this, the South Asia Satellite also caters to understanding and solving ecological issues. “This is an extremely important step to know nature and nature's patterns,” said Mohammad Ashraf Ghani, President of Afghanistan, at the launch. The Satellite, which focuses on disaster communications, is stated to be particularly beneficial to the region which is home to about a quarter of the world's population and prone to tropical cyclones, heat waves, earthquakes, tsunamis, landslides and floods.

As India showcases geopolitically the South Asia Satellite as a gift to South Asian countries, the scientists from ISRO are most interested to watch the launch vehicle's performance, as the success of the mission depends wholly on the rocket performing flawlessly. The South Asia Satellite also saw India developing its indigenous space technology. With the international space scene changing rapidly, for the South Asia Satellite, India developed its own cryogenic engine technology. India’s pursuit to develop such capabilities began more than a quarter century ago. The use of the special engine, as observed, is predominantly for energy efficiency. 

In addition to the much coveted Mangalyaan (the Mars Mission), in February 2017, India launched 104 Satellites using its workhorse PSLV-C37.  Although it is uncertain whether India will be in a leading position to win the space race, which is shifting from the Pacific-Atlantic to the Indo-Pacific, the launch of the South Asia Satellite has certainly posited the nation in the global space arena. 

Indian experts have noted that India has used space as civilian means and developmental means. However in 2007, when China conducted its anti-satellite test, it in a sense shook up and prompted the DRDO (Defence Research and Development Organisation) to build India’s own military architecture in the field of space.  India has also created the Integrated Space Cell, which is currently operated jointly by the three service arms, the DRDO, and the ISRO, making it more of a central information network system. In fact, in October 2014, India instated the country’s first defence space agency, an interim body.

What is pertinent to note though is, in the region, countries are also using space as a tool of nationalism as an integral part of their innovation driven strategies. It is in this context, China leads the pack. In the last 5 years, China has already signed 43 space co-operation agreements or memorandums of understanding with nearly 30 countries, space agencies and international organizations.

Days before the launch of the South Asia Satellite, China’s Global Times came out with an editorial praising India for the initiative and sought to be 'taken along’ in future endeavours. This read, “The effort that the Modi administration has made in providing satellite services to South Asian countries is worth praising.” The article went on to add, “China must not be excluded from Delhi’s moves of strengthening space collaboration with its neighbouring countries.”

China’s strategic influence in South Asia in the space domain is not new either. In 2011, Beijing launched a communications Satellite for long-time ally Pakistan, followed by the launch of another one for Sri Lanka in 2012.

In addition to China, other countries in the Indo-Pacific, like Singapore, Japan, Australia are also taking numerous initiatives in order to hone their space related technology and capability. Therefore, it is significant to note that space today is no more a domain controlled by the US or Russia. Asian countries are looking at space exploration as a medium of foreign policy, in specific for developmental purposes. Of the ten countries that have independently successfully launched a satellite into orbit, six are Asian, namely: China, India, Iran, Israel, Japan and North Korea. Today there are more than 60 countries involved with several public and private players in Asia, Africa and Latin America, who are coming forward to tap into the potential of space, be it for socio-economic purposes, for tele-education, tele-medicine or even strategically for military purposes.  

However, on its part, India is building on the firm foundation laid out by some of its space pioneers for an enhanced quality of living. This vision was once elucidated by Dr. Kalam himself, where he said, “Space research and technology is truly inter-disciplinary and has enabled true innovations at the intersection of multiple areas of science and engineering. It has been consistently aiming at the “impossible” and the “incredible,” every time moving the frontiers of our knowledge forward and enhancing the quality of human life.”

Nepalese Army, West’s Human Rights and China’s Deep Pocket

The major vernacular Kantipur in Nepal published news in December 2016 that Nepal Army had made a plea to the political leadership to not agree to India’s request to bring the Nepalese army (NA) under a potential India-led South Asian regional command for the UN peacekeeping operations as that would be a huge blow to Nepal’s independence and sovereignty. However, not any Army officials, or the Defense Minister, acknowledged that there had been any such communications officially. Interestingly enough, this “unofficial story” appeared more or less around the same period when the historic agreement on China-Nepal military exercise was made public.

Therefore, one could speculate that the long-standing geopolitical tug of war between India and China in Nepal had reached a new height, with the deepening defense cooperation between Nepal and China. China’s General Fang Fenghui had expressed his country’s willingness to expand bilateral security cooperation with Nepal during the visit, with Nepalese army chief Rajendra Chhetri in early 2016. After a one time postponement owing to lack of preparation, Nepal Army and China’s PLA concluded their 10-day long exercise in Kathmandu, which undoubtedly added a new dimension to the relationship.

But if we interpret the NA-PLA ties only in security or geopolitical terms vis-à-vis India, we would be reading too much into it because there are two other main factors that would make Nepalese Army go ahead with the military cooperation with China at this level. One is of course China’s deep pockets and the other is the fact that there was no love lost between Nepalese Army and the West regarding NA’s accountability in terms of human rights records during the Maoist insurgency.

With regards to the financial factor, the post-conflict Nepal saw further increase in its tendency of depending on foreign aid, which it immediately began from requesting the United Nations to oversee the post-conflict management of combatants, that ended up in the Maoist leadership being charged with massive fund misappropriation. While a plethora of nongovernmental organizations were operating under external funding, state institutions for their part also eyed external resources to improve their conditions.

The Armed Police Force of Nepal received a gift of around 200 million RMB from China to build an academy during the visit of Chinese Foreign Minister Wang Yi in 2014. In that visit, China announced a five-fold increase in its aid to Nepal as the two countries agreed to enhance cooperation in several vital areas including security and counter-terrorism. The Nepalese Army itself had also received aid from China in previous occasions. For their part, Nepal’s political parties were notorious in receiving financial aid from outside, especially the Maoist doing so from China. Similarly, Nepal Police also received financial aid from India after the Armed Police Force did so from China.

Therefore, put simply, Nepal’s institutions because of their financial constraints would happily accept financial aids from any place. And in terms of the state regulation regarding the reception of foreign aid, although institutions receive foreign aids through the government, the government itself does not have much of a say in it rather than its role to carry out the process as per receiving institutions’ request.

Similarly, regarding the human rights factor, the pressure on the Nepalese Army, (which has a phenomenal record of peacekeeping operations in conflict countries) from national and international human rights organizations and Western states to cooperate in the investigation into any war time crimes during the Nepal Maoist insurgency through a truth commission, irked them. The Neplaese Army hence does not have the most positive view of the human rights community, which  from their viewpoint sided with the rebels who were responsible in waging the war.

The UK police arresting Colonel Kumar Lama, who was serving in Sudan peacekeeping mission while he was in the  United Kingdom in 2013, under “universal jurisdiction” for alleged torture in Nepal in 2005 jolted the NA and its rank and files. Multiple requests by the NA and the government for releasing Col. Lama to the United Kingdom government and the United Nations went in vain. The NA’s grudge against the UK was manifested when the Nepal government, mainly the army, refused to accept British help by turning away three Chinook helicopters when Nepal was hit by massive earthquakes in 2015. Meanwhile, in 2016 Col. Lama was freed as the case “collapsed” for the lack of convincing evidence.

Nepal is now confronted with two choices. One is the moderate Western aid targeted towards social political engineering with the obligation for state institutions to meet international standards of human rights. The other is the massive aid from China simply for assuring China’s principal concern in Nepal, which is to curb any anti-Chinese/pro-Tibetan activities. This comes at the back of the 2008 Beijing Olympics which saw a rise in Tibetans protesting, hence further increasing Nepal’s geopolitical significance for China .

As Nepal has failed to satisfy the human rights community regarding truth commission’s functioning, the pressure has been increasing on stakeholders. The latest drama of the Prachanda government trying to impeach the Chief Justice Sushila Karki was seen by the UN as yet another attempt to undermine human rights in Nepal. For its part, the NA is preoccupied with potential war era crime charges on its officials and possible international sanctions hampering its participation in peacekeeping operations. Against this backdrop, for the Nepal Army -- a permanent institution of a politically unstable and ramshackle country -- China has become a natural choice.

India’s Act East Policy : From ASEAN to the Pacific

ASEAN (Association of South East Nations) and India have the vigour and enthusiasm of their youth and wisdom, and understanding of their ancient civilisations. Rapidly developing India and ASEAN can be great partners for each other. We are both keen to enhance our cooperation in advancing balance, peace and stability in the region.” These words by Indian Prime Minister Narendra Modi, as he enunciated India’s Act East Policy at the East Asia summit in Myanmar, only reiterated India’s intent of not being reluctant or shying away from the international stage, but instead showcased how India was willing to play a larger strategic role as a responsible stakeholder. 

The Act East policy not only seeks to revive and reinvigorate India's relations with ASEAN but expand the country's engagement beyond the region to encompass the Koreas in the North to Australia and New Zealand in the South, and from neighboring Bangladesh to Fiji and Pacific Island countries in the Far East. During Bangladesh President Abdul Hamid's visit to India in December 2014, the first after a gap of 40 years, PM Modi said that India's Act East Policy would begin from Bangladesh.

India’s relations with the countries under the purview of its Act East Policy (AEP) have broadened to encompass security, strategic, political and counter-terrorism realms, as well as defence collaboration. This is in addition to furthering economic ties, which was the primary focus of the Look East Policy (LEP). Collaboration to curb terrorism has become a priority, especially considering the rising strength and influence of the Islamic State and other terrorist organizations.

There are several key strategic players in India’s AEP with ASEAN remaining at its heart. For instance, Myanmar, contiguous to India's Northeast region, shares a land boundary of 1,700 km with four Indian states including Manipur, Mizoram, Nagaland and Arunachal Pradesh. There are several major infrastructure projects such as the India – Myanmar – Thailand Trilateral Highway which can prove to be a game changer to connect India’s northeast with the ASEAN region. Projects such as the Trans – Asian railway project and the Kaladan Multimodal Transport Project - which seeks to connect Kolkata with Sittwe port in Myanmar, going farther to Lashio via Kaladan River and to Mizoram in India by road - are seen as potential opportunities to upgrade India’s ties with ASEAN countries. 

Thailand is another country which occupies a strategic place in India's Act East Policy. In addition to the ancient and historical cultural, maritime, business, religious and linguistic ties between the two countries, the large Indian diaspora which has settled in Thailand since the end of the 19th century presents a unique opportunity to nurture a rapidly expanding mutual relationship.

Singapore is the first ASEAN nation to establish a Comprehensive Economic Partnership Agreement (CEPA) with India. Among the ASEAN, the second largest trading partner is Indonesia. Vietnam stands as a significant trade, strategic and defence partner of India. ONGC Videsh Limited (OVL) entered into an agreement with Vietnam regarding oil blocks 127 and 128 off the Paracel Islands, which fall within the exclusive economic zone of Vietnam. 

ASEAN collectively constitutes the seventh-largest economy in the world and is home to nearly 230 of the world’s largest companies. As articulated by India, connectivity forms an indispensable element of the three Cs of ''culture, commerce and connectivity'' of its AEP. 

Mongolia is another country with which the current Indian government is working to strengthen economic relations. With South Korea, discussions on upgrading the bilateral FTA in goods to a balanced and equitable Comprehensive Economic Partnership Agreement have been initiated.

The importance which India attaches to ASEAN nations is discernible with the extensive high level visits to all of these nations by the Indian President, Vice President and the Indian Prime Minister.  Indian officials have consistently emphasized freedom of navigation, peaceful resolution of disputes and importance of international law in the ASEAN region.

India’s decision to upgrade its Look East Policy to AEP is a reflection of the longer-term economic and strategic benefits of closer relations with the Indo-Pacific. In this vein, the present Indian Government has devoted considerable diplomatic energy to strengthening relations with key East and Southeast Asian partners, with particular emphasis on Japan, Australia, and vitally with the US.

Japan is the other nation in India's 'east' with which it is working to build stronger relations. Japan was PM Modi's first overseas bilateral visit outside the subcontinent. The visit resulted in Japan's commitment to invest $35 billion in India over the next five years, including investments in some flagship initiatives such as smart cities, Delhi-Mumbai Industrial Corridor and the Shinkansen bullet train between Mumbai and Ahmedabad. All these initiatives witnessed a pronounced push during the reciprocal visit by Japanese PM Shinzo Abe to India in December 2015.


Another key strategic partner for India in its AEP purview in the Indo- Pacific region is Australia. India has signed the historic civil nuclear agreement, an agreement which will prove to be immensely beneficial as India seeks to enhance its energy generation from nuclear reactors from the current 5,000 MW to 62,000 MW by 2032. PM Modi's bilateral visit to Australia, following his participation in the Group of Twenty (G-20) Meeting in Brisbane in November 2014, was the first by an Indian Prime Minister in 28 years. 


India has also left no stone unturned and has successfully reached out to the Pacific Island nations as well. In 2014, PM Modi visited and interacted with the 12 leaders and representatives of the Pacific Island nations. It was the first visit by an Indian Prime Minister in 33 years. The visit was followed by a conference in India with 14 Pacific Island countries in August 2015. 


India’s AEP received a renewed push with the visit of past US president Barack Obama to India, and this is how the India – US joint statement, “Shared Effort: Progress for All”, read: “Noting that India's Act East Policy and US' Rebalance to Asia provide opportunities for India and the US and other Asia Pacific countries to work closely to strengthen ties.” True to this, the leaders announced a joint strategic vision to guide their engagement in the region. It will however be noteworthy to see how best the Trump administration takes this vision forward in the region.  

These significant developments show how much India is doing to fulfill the imperative of ‘acting east’. Although there is more to be done in concretizing the policy, India has moved beyond the norm of limited engagement and given its relations with ASEAN countries and other partners in the Indo-Pacific region, enough scope by furthering vital economic and strategic dimensions of its AEP. By acting east and prioritizing its deeper engagement with the region, India will seek to fulfill its broader strategic objectives of balancing against China’s increasing presence in the Indian Ocean and carve out a prominent role.