Low Retail Inflation.

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▪Why in news?
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
Consumer price inflation had slipped to 1.54%.
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
▪Why there is a reduced inflation?
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
Activity in the manufacturing sector has also slowed down.
GST-related adjustment and subsequent destocking may have reduced industrial growth.
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▪Why it is a matter of concern?
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
Moderate inflation levels are needed to drive consumption, under the assumption that higher levels of spending are crucial for economic growth.
Monetary Policy Committee (MPC) fixed the inflation levels to maintain in the zone between 2 and 4%.
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▪What is now expected of the RBI?
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
RBI has been maintaining the Repo rate at 6.25% since October 2016.
Since the inflation is lower now, a cut in the rate is expected.
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
▪Why RBI should be cautious before lowering Repo?
➖➖➖➖➖➖➖➖➖➖➖➖➖➖
Several State governments have taken fiscally expansive measures like loan waivers.
This is will increase the purchasing power of people which in turn might increase the inflation.
The monsoon and its effect on prices is yet to be felt.
The impact of the introduction of the GST, will reflect in the prices.
Increased allowances under the Seventh Central Pay Commission’s award could also transmit into price gains.
All these would have had a complementary effect of low inflation.
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⚠
Source: The Hindu

20 years of BIMSTEC

In news:

On June 06 this year, the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) completed 20 years of its establishment.

About BIMSTEC:
Comprising of Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan, BIMSTEC is home to 1.5 billion people, accounting for approximately 21 per cent of the world population, and a combined GDP of US$ 2.5 trillion. The growth rate sustained by the BIMSTEC countries is around six per cent per annum.
Initially known as the Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC), it was formed after representatives from the aforesaid four countries met at Bangkok in June 1997. With Myanmar joining the grouping as a full member in December the same year, the ‘BIST-EC’ was renamed as ‘BIMST-EC’. In February 2004, when Nepal and Bhutan too joined, the grouping was renamed as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation or BIMSTEC.
So far, BIMSTEC has held three summit meetings.
The first one was held in Thailand in 2004, seven years after the establishment of the grouping; the second one was held four years later in India in 2008, and the third one six years later in Myanmar in 2014. The fourth summit meeting is expected to take place later this year in Nepal, the current Chair of BIMSTEC.

Objectives:

According to the June 1997 ‘Declaration on the Establishment of the Bangladesh-India-Sri Lanka-Thailand Economic Cooperation (BIST-EC)’, also known as the Bangkok Declaration, the founding objectives of the sub-regional initiative were:
Creating an enabling environment for rapid economic development of the sub-region.
Encouraging the spirit of equality and partnership, promoting active collaboration and mutual assistance in the areas of common interests of the member countries.
Accelerating support for each other in the fields of education, science and technology, etc.

Recent developments:
Recently, Prime Minister Narendra Modi, in his message on the 20th anniversary of the establishment of BIMSTEC, described the sub-regional grouping as “a natural platform” to fulfill India’s “key foreign policy priorities of ‘Neighbourhood First’ and ‘Act East’”.
Earlier in October 2016, India had hosted the BIMSTEC members at Goa during the BRICS (Brazil, Russia, India, China and South Africa) Outreach Summit. It was viewed as a pragmatic step on India’s part, demonstrating its potential to play the role of a regional leader, an aspiration which was instrumental in transforming its ‘Look East’ into ‘Act East’ policy. The BRICS-BIMSTEC Outreach Summit is believed to have given BIMSTEC its due importance by inviting its members to participate in a larger platform comprising five major emerging economies of the world.
Within few months of the Goa Summit, India hosted the first meeting of the BIMSTEC National Security Chiefs in New Delhi in March 2017.

Potential of BIMSTEC:

BIMSTEC provided opportunities to all its member countries
For India, the establishment of BIMSTEC, was an opportunity, besides the Association of Southeast Asian Nations (ASEAN), to engage with Southeast Asia, at least partially. BIMSTEC provided scope for direct connectivity with Southeast Asia via Northeast India and Myanmar. Counter-terrorism and anti-insurgency cooperation with Myanmar and other members, potential access to alternative energy resources in Myanmar as well as economic opportunities available in the ASEAN region had evoked sufficient interest.
Besides India, other members too considered it as an important mechanism to achieve their national goals and regional aspirations. Myanmar, for example, became a member at a time when the junta in the country was facing serious international criticism. Membership in regional and sub-regional groupings like ASEAN and BIMSTEC provided its military rulers an opportunity to gain some sort of recognition among the regional stakeholders.
Thailand, on the other hand, was looking for an opportunity to enhance its trade and connectivity with the South Asian countries under the ambit of its ‘Look West’ policy. So, in a way, India’s ‘Look East’ and Thailand’s ‘Look West’ policy complemented each other within the ambit of BIMSTEC.
The ongoing India-Myanmar-Thailand Trilateral Highway and the India-Myanmar Kaladan Multimodal Transit Transport Project are expected to further augment connectivity and economic cooperation in the sub-region and beyond.
Countries like Sri Lanka considered BIMSTEC as an opportunity to engage with the economically booming Southeast Asian countries, especially after several failed attempts to join ASEAN in the decade prior to the establishment of BIMSTEC.
For the land-blocked countries like Nepal and Bhutan, BIMSTEC holds the prospect of enhancing their connectivity with the rest of the region.

Challenges:

BIMSTEC does not seem to have made much progress. Despite its huge potential in terms of enhancing regional cooperation between parts of South and Southeast Asia, BIMSTEC has long suffered from lack of resources and proper coordination among its member states.
India, the largest member of the grouping, has often been criticised for not providing a strong leadership to BIMSTEC. Both Thailand and Myanmar are criticised for having ignored BIMSTEC in favour of ASEAN.
Absence of a permanent secretariat for a long time and lack of commitment to invest in several priority areas identified by the member states were seen as some of the key institutional factors holding the BIMSTEC back. It took 17 long years for BIMSTEC to finally establish its permanent secretariat in Dhaka in 2014.
The ‘noodle bowl effect’ of regionalism too was at work as formation of another sub-regional initiative, the Bangladesh-China-India-Myanmar (BCIM) Forum, with the proactive membership of China, created more doubts about the exclusive potential of BIMSTEC.

Renewed Interest:
India has been clearly signaling its renewed interest in BIMSTEC. India is already the lead country for four priority sectors, namely, transportation and communication, environment and disaster management, tourism, and counter-terrorism and trans-national crime.
In an effort to strengthen sub-regional cooperation on combating terrorism and trans-national crime, the BIMSTEC member states are trying to implement a
convention on anti-terrorism . Except for Nepal and Bhutan, all member states of BIMSTEC have ratified it.
BIMSTEC is now trying to sign a Convention on Mutual Legal Assistance in Criminal Matters .
Progress made in other sectors are- India hosting a working group meeting to finalise the BIMSTEC Motor Vehicles Agreement, finalisation of a Memorandum of Understanding (MoU) on Grid Interconnection to facilitate electricity trade in the sub-region, and a meeting of BIMSTEC Trade Negotiating Committee to fast-track the process of trade facilitation in the region.
The declaration issued at the Goa Summit had also stated that BIMSTEC needs to have a Coastal Shipping Agreement to allow the member states to trade freely within the sub-region.
It is noteworthy that between 2002 and 2014, the intra-BIMSTEC trade registered a very marginal growth, from 3.6 to 4.3 per cent only.
A former Thai ambassador described it as a ‘complimentary organisation’ which can support the people in the region.

Way ahead:

For BIMSTEC to become an enabler of regional cooperation, it will have to evolve as an organisation that works through a bottom-up rather than a top-down approach. The people-centric approach seems to be the best as BIMSTEC seriously lags behind ASEAN and other regional organisations in terms of people-to-people contacts.
Also, the organisation needs to focus on fewer priority areas for purpose of better implementation. It needs to undertake projects that are economically feasible and result-driven. This would add to the credibility of BIMSTEC.
Finally, since the BIMSTEC region is notable for its diversity, the member states need to build on the regional synergies and work towards utilising the available resources in the most optimal manner. This would help build a stronger and a more dynamic BIMSTEC.

. Conclusion:
In today’s context, the possibility of enhancing physical, digital and people-to-people connectivity in the sub-region is huge. Similarly, the potential to tap the vast energy resources and scope for intra-regional trade and investment too is enormous. BIMSTEC member nations must work on in a cooperative manner to take advantage of huge potential BIMSTEC offers.

Government, RBI in talks to postpone Basel-III norms for banks

The government is in talks with the Reserve Bank of India, in a bid to postpone the implementation of the international capital norms or Basel-III norms in the Indian banking sector, which is struggling with the issue of surmounting bad debts. It has been made mandatory for the banks to abide by the Basel-III regulatory norms by March 2019.

The extension of the last date to meet the capital needs will provide the banks an opportunity to increase their lending while they settle their bad loans tussle and also raise capital.

Basel III (or the Third Basel Accord) is a global, voluntary regulatory framework on bank capital adequacy, stress testing, and market liquidity risk. It was agreed upon by the members of the Basel Committee on Banking Supervision in 2010–11.

Indo german relationship​ in the changing global scene

PM of India recently signed eight major agreements with German Chancellor. India is looking at outcome oriented momentum at India-Germany ties and quantum jump especially in economic ties. German Chancellor has long cultivated relations with India and stresses that Germany and EU must compete with new emerging economic giants. She has also said that Germany cannot completely depend on traditional allies like USA and Britain in age of new US president and Brexit.

Importance of India and Germany today

The people of both nations have displayed that desires of both governments is to develop ‘middle power cooperation’.
It is a time when USA is becoming unpredictable and China more assertive, and hence a lot of other countries in middle are thinking of stepping up into gaps created.
Germany is the most powerful and wealthiest of the EU nations and India being dominant player in South Asia and Indian Ocean region are looking to work with each other more intently.
Germany needs to look elsewhere apart from traditional allies. It has also mentioned that china insisted Germany to endorse OBOR initially and then later on disagree with certain agreements.

Trade and investment-
India and Germany are a win-win proposition for both countries by coming together in several of initiatives taken by GoI like Make in India, Skill India, Smart cities, infrastructure, Digital India etc. where Germany has great competence.
There have been problems between two nations regarding bilateral trade and investment negotiations which started in 2007.
At that time, it was thought to conclude negotiations in two years. But they are still on. Thus, there is a need to conclude these agreements as soon as possible considering the fact that both the nations now need each other to develop themselves.
Bilateral investment treaties have also been cancelled by India and new draft submitted by India is not found acceptable by EU.
Hence, these critical aspects of trade relations between two nations need an energetic boost.
However, now India has initiated reforms with GST, bankruptcy code, is also a largest recipient of FDI and its fast growing nature economy. This will help developed countries to look at India as an attractive investment destination.
At present, 1600 German companies are working in India and 60 joint ventures with India. 25 working groups are operational. With their interactions and deliberations, there is a lot of potential in future.
The investment opportunities are also high in India.
The German MSMEs had traditionally five radius mile concept which they have not looked beyond. This can provided fillip to develop the relationship.
Also, uncertainty about America can be motivation for Germany.
Security
France, UK, Germany have suffered from terrorist attacks and India has been a victim of terrorism.
Thus, there is a need for two countries to cooperate and collaborate to deal with the menace of terrorism.

Strategic partnership

As Germany gets disillusioned with Trump’s America, it is looking around for partners. India has also been looking around for development and sustainable partners since a while and is closely related to Japan, Australia etc.
Thus, it is an opportunity where middle powers can get together .
India and Germany have been on same wavelength, whether it is about Indian Ocean region, South China Sea, in terms of freedom of avigation, importance of award by UNCLOS.

A strategic relations doesn’t exist for now between both countries. Take for example Japan. Japan has now made a committed official decision across its parties and
government to try and build up India as an economy and as an Asian power for strategic reasons. It is for them about balancing china and other issues.

They are investing millions of dollars to build infrastructure, develop projects with India in third countries, Japanese companies have come here even if not making a profit .
Germany in many ways is similar to Japan- WWII legacy, has a pacifist constitution, generally being reluctant to play global role. Thus, Germany can also follow the footsteps of Japan or walk on similar lines.
With Germany, Indian government is hoping to transform the relation. Germany is sceptical about India somewhere as India is a reluctant free trader .
Due to large population and need to create jobs, many times India has taken two steps forward and one step backward . This is the reason why RCEP has not yet borne fruit.
The concept of proving jobs, getting up the manufacturing ladder from 17-18% to 25% etc. is finding a difficult terrain in India. If the markets will be opened, then Make in India project will suffer the most.
Thus, there are all these issues to deal with. China is more attractive as far as Europe is concerned. Germany was never really interested in India and India had own problems in region.
Now, going forward, India has an opportunity to develop a partnership with Germany. The OBOR initiative has been termed as ‘new colonial enterprise’ as it is sino-centric road arrangement . It means that all belts and all roads lead to china.

Climate change

With US withdrawing from it, India and China are looked as future strong partners to uphold the paris agreement.
India has ambitious programmes in renewable energy. In this area, India and Germany have a bright future.
German companies are looking forward to India’s large market with USA and China’s stand on globalisation.
http://www.facebook.com/Aovious1
( here)
Germany in India

The paradox of indo-German relationship has been, despite hardly any political problems, the trade remains modest at 17 billion USD whereas with China it is 10times.
This limits the degree of interest which Germany has on the trade and economic front.
The Germans are keen to have government to government defence procurement agreement like with France. But with India there are certain challenges-
The Germans have been reticent in transfer of technology
Offset clause
The German export control regime which has statutory restrictions about transfer of weaponry to conflict prone areas.

Civil nuclear cooperation
Nuclear safety is an area where both countries can have equal cooperation with each other.

Conclusion
The relevance and importance of Germany has grown in the eyes of India considering the state of EU today.
German chancellor has bright prospect in winning the election. Indian PM has tried to give a nudge to India-EU FTA but it is still not moved forward. But there are positive hopes in the direction as
Germany and India are both in favour of globalisation and keeping trade open.
Indo-German development is more of an incremental type of progress than transformative. In the era of unspecified times, all the major players are simultaneously engaging all major players. Each relationship is going to have its own dynamism and momentum . With Germany, it is important to maintain slow and steady consolidation and keep on emphasising that India is a strong opportunity.

New Dynamics In India-US Relationship

 Source: Indian Express
20-Jun-2017

Why in news?

Indian Prime Minister is about to encounter with President Donald Trump next week in Washington.

What are the areas of convergence?

It is the prospect of America supporting a larger Indian role in securing the Subcontinent and the Indian Ocean.
The shared interest in an Eurasian balance of power and a complementarity between an America shedding its global burdens under domestic pressure and a rising India taking larger responsibilities is not difficult to see.

What is the assumption behind strategic partnership?

The effort to construct an India-US strategic partnership in the last two decades was based on the assumption that the American unipolar moment will endure.
America looked at partnering a rising India to sustain US primacy in the Indo-Pacific.
Delhi acknowledged American primacy, but was afraid of becoming a “junior” partner.
It was concerned that US strategic indulgence towards Pakistan and China — the two main sources of India’s security challenges —may make Washington an unreliable partner.
As a result, the hype about India-US security cooperation never really lived upto its potential.

Is there any new opportunity?

As Trump challenges the traditional assumptions about America’s global role, there is an opportunity, for Modi to explore a new framework for strategic cooperation with the United States.
If Trump believes that an exhausted America must step back from being the first responder to Eurasian crises, Modi has talked up the idea of India as a leading power that must take greater regional and international responsibilities.

What are the areas of divergence?

During his recent visit to Europe, Modi strongly committed India to the 2015 Paris accord on climate mitigation, after Trump walked out, claiming it imposes too many costs on the US economy.
In Washington, though, the PM is unlikely to touch on climate change and other global issues.

Whether India is willing to be a regional security provider?

Until now, India has been hesitant to take on a regional security role beyond the Subcontinent.
In the aftermath of independence, there was the opportunity of India working with Britain for a regional order under the rubric of the Commonwealth.
Although Pandit Nehru accepted the responsibilities of the Raj for the Subcontinent’s security, he was unwilling to back a Commonwealth military framework.
Two decades later, when Britain ended its security commitments “east of the Suez”, the post-Nehru India had neither the political will, nor the material resources to consider regional security leadership. Its preference was to indulge in vacuous collective security rhetoric.
As the Indian Ocean went through multiple convulsions from the 1970s, India has remained a mere bystander.

Darjeeling Unrest

 PDF ☜

Indian express. 19-Jun-2017
What is the issue?
Separate statehood movement of get renewed and intensified in Darjeeling district of West Bengal.

What sparked the renewed protest?

Gorkha agitation stir renewed after West Bengal government makes Bengali mandatory in all schools in the region.
Gorkha Janmukti Morcha-led by Bimal Gurung intensifies its demands for a separate state of Gorkhaland calling an indefinite bandh in the region.

Nepali population:

Census figures over the years show that the state with the largest Nepali-speaking population is West Bengal — 10.23 lakh in 2001, which is almost twice as many as in Assam, the next highest state with 5.65 lakh.
Sikkim has the highest concentration of Nepali-speaking people, at 62.6 per cent.
Although the Nepali-speaking segment makes up just 1.2 per cent of Bengal’s population.
Darjeeling evokes more interest in Nepal than any other Indian region where Nepali-speaking persons are settled.
The idea of a “Greater Nepal” still motivates a section of Nepal activists who want Darjeeling restored.

How strong is the cultural bridge?

In the late 1970s, Nepali scholars from Darjeeling as well as Assam led a movement for recognition of the language under the Eighth Schedule.
The Morarji Desai-led government, however, turned it down. Sikkim, which became part of India in 1975, joined the movement and the language was eventually given that status in 1992.
Darjeeling’s Nepali-speaking population also contributed to the growth of trade union politics, their affiliations mostly to the CPI in the initial stages.
Darjeeling, along with Sikkim, has also been where promotion of the Nepali language and literature has been largely concentrated.
Sikkim and a couple of the other Northeastern states, on account of their high concentration of Nepali-speaking people, too have made efforts to promote Nepali culture and language.
Each year, Sikkim celebrates the poet’s birthday on July 13 as Bhanu Jayanti, with literary figures from both countries invited.
Why the Nepali people agitate?

The tactful and rigid segregation of workers from the British era to the line of ethnicity in the hills, where the Nepalese were brought in and the plains, where the Chottanagpur migrants worked, rendered one community hostile against the other.
The few Bengalis present in the hills were and have always been the babus, working for the British and then the State. The marwaris have controlled most of the wealth, further isolating the Nepali population.
The Nepalese find themselves reduced to second class citizens, at the hands of these otherwise miniscule inhabitants.
The movement led by the Gorkha National Liberation Front, projected the CPM-led government in Bengal as anti-Nepali.
The demand for Gorkhaland has always found its support among the tea plantation workers. Kipat (ownership of land by a community) and Maato (mud) remain central to the movement.
Is there any peace process took place before?
Long back, the Gorkhaland movement was called off following a tripartite agreement that led to creation of an autonomous hill council.

Trans pacific partnership

In 2005, three countries viz. Chile, New Zealand and Singapore came together and created a free trade agreement called Trans-Pacific Strategic Economic Partnership or
TPSEP .
Later Brunei joined them and it was now also known as P4 .
From 2010 onwards, there have been discussions to make it more wider, more disciplined free trade agreement to be known as TPP or Trans-Pacific Partnership (TPP).
On October 5, 2015, an agreement was reached among the twelve Pacific Rim countries in the form of largest trade liberalization pact since WTO.

TPP is still in proposed state and would come into force when each of the 12 members ratifies it.

Members
Objectives
Salient Features

Members
The 12 countries among which TPP has been agreed upon include – United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

These countries are home to 800 million people and account for 40% of global trade.

Objectives

TPP is essentially a Free Trade Area that among other things, seeks to:
lower trade barriers such as tariffs
establish a common framework for intellectual property

enforce standards for labour law and environmental law, and
establish an investor-state dispute settlement mechanism.

The agreement aims to liberalize trade in nearly all goods and services by eliminating tariff and non tariff barriers.

This will lead to creation of a unified market like in Europe which will help different countries in different manner.

For example, while the Japanese carmakers would get cheaper access to United States for their exports; US vehicle makers would get cheaper access to sell their products in Vietnam and Malaysia. Further, the TPP negotiations have included elaborate but mostly secretive negotiations on intellectual property rights, foreign investments, environment and labor related matters; government and private enterprise, government procurement, technical barriers to Trade (TBT), transparency and regulatory coherence.

Salient Features

There are 30 chapters in the TPP agreement text.
The salient Provisions of TPP can be summarized in five defining areas as follows:
Comprehensive market access
This involves reduction or complete elimination of tariff and non-tariff barriers in a huge list of goods, services and investments.
Regional approach to commitments.
The TPP agreement facilities seamless integration of economies of members facilitating development of production and supply chains; opening markets and cross border trade.
Addressing new trade challenges
The agreement promotes innovation, productivity, and competitiveness by addressing new issues such as of digital economy, ecommerce etc. It also includes the role played by state enterprises in the countries.
Inclusive trade
It tries to create an environment where members with all levels of development and businesses of all sizes can benefit from trade.
Platform for regional integration
The agreement seeks to serve as a platform for regional economic integration.

Issues and Analysis TPP versus APEC

TPP is though a collective of APEC Members, it does not include major APEC economies like China and Indonesia. APEC is a conglomeration of 21 countries and non-country economies.
APEC includes most countries with a coastline on the Pacific Ocean. However, the criterion for membership is that the member is a separate economy, rather than a state. As a result, APEC uses the term member economies rather than member countries to refer to its members.
The result is that APEC members include Taiwan and Hong Kong also.
The belo tables shows APEC members vis-à-vis the TPP members:
APEC Members TPP Members
Australia         Australia
Brunei             Brunei
Canada           Canada
Chile                Chile
Japan             Japan
Malaysia        Malaysia
Mexico           Mexico
New Zealand New Zealand
Peru                Peru
Singapore      Singapore
United States United States
Vietnam           Vietnam
China
Chinese Taipei
Hong Kong
Indonesia
Papua New Guinea
Philippines
Republic of Korea
Russia
Thailand

US versus China and TPP
The main driving force of TPP is United States and as expected, US has successfully tried to keep China at bay from TPP.

The group’s economic significance has increased with the addition of Canada and Mexico and has become even more when Japan and Vietnam have joined it.

The Chinese view regarding TPP was that it would be a US-led alliance for reducing China’s strategic clout in the Asia Pacific region.
Critics put forth the point that in the wake of increasing china’s influence through its soft power diplomacy under “Maritime Silk Road” and ‘One Belt One Road Initiative’ will be countered by the U.S presence in Asia-pacific region.

U.S ambition to engage the countries of the region can be gauged by Obama’s statement wherein he said that ‘ we’ve got to make sure we’re writing the trade rules in the fastest-growing region of the world, the Asia-Pacific, as opposed to having China write those rules for us’.
Therefore TPP will pull Vietnam and other signatories economically closer to the United States, thus, reducing Chinese economic preponderance. Given that South Korea is likely to quickly join in any completed TPP agreement, these shifts can have a long-run economic impact on China.
Further the deal is seen as a relief by various countries in Asia. They envision it as a counterweight to China’s efforts to expand its influence not just in trade but in other areas, including its island-building in the disputed South China Sea and its assertiveness in maritime disputes.

Some of the potential signatories to the TPP, such as Vietnam, South Korea, Japan, etc, are hoping for such an outcome.
However, undermining China at such phase when TPP is yet to come into operation is not a good idea.
China has very strong trade and investment links with several TPP members. Since 2005, China has been taking more steps to improvise its own regional integration efforts. These include:
ASEAN+3: China is part of ASEAN+3 (China, Japan, Korea)
East Asian Summit (EAS) : this includes ASEAN, China, Japan, Korea, India, Australia, New Zealand, US and Russia.
Regional Comprehensive Economic Partnership: RCEP involves the integration of the ASEAN’s FTAs with non-ASEAN Asian economies. It would aim to consolidate the FTAs that ASEAN has with Australia, New Zealand, China, India, Japan and Korea.
The consolidation would result in the ASEAN connecting to the rest of the major Asian economies in a ‘hub and spoke’ economic framework with ASEAN as the hub.
In the years to come, there is an expected growth of both TPP and RCEP. The TPP is having a head-start over the RCEP. These negotiations might be influenced by developments in the TPP since there are members common to both such as Australia and New Zealand and ASEAN countries like Brunei, Malaysia, Vietnam and Singapore.
The common members would probably include Japan and Korea too in the long term. Further, financial picture is also changing rapidly, with China becoming the major lender in the region. The China led Asian Infrastructure Investment Bank has the support of 47 regional and 20 non-­regional members, including TPP nations, such as Australia, Brunei, Malaysia, New Zealand, Singapore and Vietnam.
Therefore it is certain that challenges lay ahead for china once TPP gets implemented but the exact outcomes will only become clear with time.

Effects Of Agreement On India
The TPP is an economic arm of United States’ Rebalance to Asia Policy . Since India has been an important part of the Asia policy, and is not a signatory to the TPP, there are widespread speculations as to how the TPP will impact India. While several opine that the overall impact is uncertain at this point, there are various channels through which the TPP can affect India.
1. A large proportion of India’s exports are in services. With the anticipated reduction in barriers to trade in services among TPP members, there is the possibility that some of India’s services exports to those countries will be replaced by services trade within the TPP.
2. Critics argue that the TPP would set a precedent to high global standards and the standards set by TPP are too high for India to join.
This requires India to revitalize its manufacturing industry, and induce efficiency in its export sector, otherwise it would be increasingly difficult for India to be able to compete.
Apart from goods; labor, environmental regulations and intellectual property rights (IPR) protection is a significant component to the TPP negotiations.
The IPR standards are much more demanding than those of WTO. Most of the standards in the TPP negotiations are to converge to US standards or to the standards of developed markets.
India may not be able to meet many of the commitments given its history of intellectual property rights issues.
Further by not being a part of TPP, India is going to lose the preferential access to the US market which is a big market for Indian exports, however, the extent of the impact from trade diversion would depend on the concessions finally agreed.
While the US and India has started negotiating a bilateral investment treaty (BIT), and these negotiations may shelter India for some of the adverse impacts of the TPP but these negotiations is going to be slow. This is because there is vast divergence between the two countries’ model BITs, especially on issues of IPR and market access commitments. Thus, significant foreign investment diversion, including a deceleration in foreign investment flows to India, is a possible consequence of the TPP. In addition, the TPP reduces India’s bargaining power in its BIT negotiations with the US, as it expands the set of options available to the latter.
However ,India’s bilateral free trade agreements (FTA) with some of the TPP members – Japan, Malaysia, and Singapore – and FTAs, which are underway with Australia, Canada and New Zealand, may dilute the impact of trade diversion caused by TPP to some extent.
With the TPP in place, Indian industries are likely to face trade diversion effects in some of the key sectors such as textiles and clothing industries. The United States accounts for 30-35% of India’s ready-made garments exports and the TPP is expected to affect India’s textile and clothing sector in two ways: First, TPP member countries will get preferential access in the US market vis-a-vis exporters such as India. This would disadvantage India as US import duties on ready-made garments are high; Secondly, the ‘Yarn– a key feature of the TPP — makes it mandatory to source yarn, fabric and other inputs from any or a combination of TPP partner countries to avail duty preference and could impact yarn and fabric exports from India to countries such as Vietnam etc. This would change the dynamics of the existing global supply chain in textile and clothing sector. This is one instance of the adverse impact of TPP on India. Similarly, the loss of market access may also impact other products such as grains and other crops, processed food and heavy manufacturing.

Concluding Remarks
Even though the magnitude of impact from trade diversion on India when the TPP is in place can be debated, it is certain that trade and investment diversions hurting the Indian economy is most likely to occur. Some of this impact may be mitigated due to a combination of inclusion in RCEP and other bi-lateral agreements. India should also re-engage the US in advancing BIT negotiations. However, a new ‘trade order’ is expected with much higher standards congruous to TPP standards and hence, efforts are required on the domestic front for India to acquire preparedness across industries to be able to compete globally. Moreover, TPP should be regarded as a challenge because it offers an opportunity to India to raise its standards and trading competitiveness.

Recently US try to quit it know more why
https://netajiias.com/indias-world-fallout-of-us-leaving-tpp/

India - Japan Nuclear Deal

Source: The Hindu

Why in news?
Japan’s Parliament, the Diet, had recently approved the India-Japan civil nuclear energy deal.

What is the significance?

Japanese PM believes that nuclear exports are key to kick-starting the Japanese economy.

2008 waiver it received from the Nuclear Suppliers’ Group so far has had limited tangible benefits for the country’s power industry.

This deal represents hope that it might finally begin paying off.
It is also a necessity for enabling India’s bilateral nuclear deals with other countries.

Key elements of certain reactors like the AP 1000 and EPR, including safety components and domes, are a near-Japanese monopoly.

Has Japan lost significance in nuclear market?

Circumstances in the nuclear industry are undergoing tumultuous changes.
It makes the India-Japan deal less significant than it would have once been.
Recent developments have diminished Japan’s previously formidable nuclear capabilities.

The most dramatic example is that of Toshiba, once a titan of the Japanese nuclear reactor industry that is currently struggling to stay afloat following the enormous losses.

Hitachi Ltd., another nuclear heavyweight, also booked ‘an estimated $588 million write-down for fiscal 2016.

The company said ‘demand for nuclear fuel in the U.S. was unlikely to grow as strongly as had been expected’.
In the aftermath of the 2011 Fukushima nuclear disaster, the nuclear industry is facing a global crisis.
Stricter safety regulations have spiked the costs of constructing plants and ‘some countries have become more cautious about new reactors.

In Japan there has been no domestic construction on a new reactor for the past eight years.
Hitachi, Mitsubishi and Toshiba are all focussing on repair and maintenance of existing plants rather than on construction of new ones.
The emergence of cheap shale oil and gas has made competition in the energy sector tougher than ever.

Wind and solar power generation are also growing as viable, alternative energy sources.

According to the International Atomic Energy Agency (IAEA), just three nuclear reactors started construction worldwide last year, and only 51 were begun between 2010 and 2016.
In contrast 20 to 30 new were being built every year in the 1960s and 1970s.

Source: The Hindu

GSAT 19

Why in news?

June 6 launch of GSAT-19, is perhaps ISRO’s most important mission in the last three decades.
This is bigger in technological significance than even the hugely popular Chandrayaan or Mangalyaan space missions.

What is the background of the issue?

Behind the success of the launch is nearly three decades of hard work in taming cryogenic technology and an interesting history of this technology was denied to ISRO by the United States in the early 1990s, forcing it develop it on its own.
ISRO had planned the development of a cryogenic engine way back in the mid-1980s when just a handful of countries the United States, the erstwhile USSR, France and Japan had this technology.
In 1991, ISRO and the Russian space agency, Glavkosmos, had signed an agreement for supply of two of these engines along with transfer of technology.
However, the United States, which had lost out on the engine contract, objected to the Russian sale, citing provisions of Missile Technology Control Regime (MTCR) that neither India nor Russia was a member of.
In an alternative arrangement, Russia was allowed to sell seven, instead of original two, cryogenic engines but could not transfer the technology to India.
But ever since the cancellation of the original Russian deal, ISRO got down to develop the cryogenic technology on its own at the Liquid Propulsion Systems Centre at Thiruvananthapuram.

It took more than a decade to build the engines and success did not come easily.

What is a Cryogenic engine?

Cryogenics is the science that addresses the production and effects of very low temperatures.

A cryogenic rocket engine is a rocket engine that uses a cryogenic fuel or oxidizer.

That is, its fuel or oxidizer (or both) are gases liquefied and stored at very low temperatures.

Notably, these engines were one of the main factors of NASA's success in reaching the Moon.

Amongst all rocket fuels, hydrogen is known to provide the maximum thrust.
But hydrogen, in its natural gaseous form, is difficult to handle, and, therefore, not used in normal engines in rockets like PSLV. However, hydrogen can be used in liquid form.

The problem is hydrogen liquefies at very low temperature, nearly 250 degrees Celsius below zero.

To burn this fuel, oxygen also needs to be in liquid form, and that happens at about 90 degrees Celsius below zero.

Creating such a low-temperature atmosphere in the rocket is a difficult proposition, because it creates problems for other material used in the rocket.
That’s why cryogenic upper stage engines are used.

What are the specifications of the project?

The launch is a giant leap for ISRO because of the rocket it is using.
The mission happens to be the first “developmental” flight of the next generation Geosynchronous Satellite Launch Vehicle, called GSLV-MkIII with an entirely indigenous cryogenic upper stage.

This cryogenic stage, that involves handling fuel at very low temperatures, is crucial to providing the extra thrust required by the rocket to carry heavier satellites deeper into space.

GSLV-MkIII is meant to carry payloads up to four to five tons and that was not possible with conventional propellants used by ISRO’s main launch vehicle, called PSLV.

PSLV can take satellites only up to 2 tons to orbits and that too until orbits of 600-km altitude from the earth’s surface.
It will not just help ISRO probe deeper into space but will also bring it extra revenue, enabling it to make commercial launches of heavier satellites.

By it successive successful launches ISRO once again proved India’s Space Exploration capability to the world.

Source: Indian Express

Tax On Agricultural Income

Tax On Agricultural Income

Why in news?

Niti Aayog member Bibek Debroy suggested of bringing agricultural income into the income tax structure.

What is the legal position of tax on agriculture?

In the Seventh Schedule, Entry 82 in the Union List mentions taxes other than agricultural income, while Entry 46 in the State List mentions taxes on agricultural income.
Therefore, it is in the State List.
Section 2 (1A) of the Income Tax Act defines agricultural income as rent/revenue from land, income derived from this land through agriculture and income derived from buildings on that land.
Section 10 (1) of the Income Tax Act excludes agricultural income from a computation of total income.

What are his justifications?

The intention was to increase the government’s revenue.
There are also other following reasons.
Chartered accountants and lawyers have been misusing Section 2 (1A) and Section 10 (1).
Agricultural income was taxed till 1886.
We still have the Assam Agricultural Income Tax Act (1939), the Bihar Agricultural Income Tax (1939), the Kerala Agricultural Income Tax Act (1991), the Tamil Nadu Agricultural Income Tax Act (1955), the Orissa Agricultural Income Tax Act (1947), the Maharashtra Agricultural Income Tax (1962) and the Bengal Agricultural Income Tax Act (1944).
So it isn’t true that states don’t tax agricultural income.
It encourages laundering of non-agricultural income as agricultural income.
e.g In 2014-15, a company made profits of Rs 215 crores, but claiming the agricultural income exemption, it paid no tax.
Hence there must be a unified system of taxation across states.
Agricultural income taxation must be integrated with non-agricultural income taxation.
Why it is wrong?

Agriculture’s share in India’s GDP is around 14-16% while it has 49% of the total manpower and 64% of rural manpower.
The main reason for a large part of the population being dependent on agriculture is small land holdings and less productive farming techniques.
Moreover, agricultural output fluctuates far more than the industrial and services sectors.
Given the level of informal occupation prevalent in agriculture, implementing an agricultural tax will not be easy.
Any agricultural tax system would have to evolve crop-specific norms of return to the land, while accommodating external shocks like droughts, floods or pests.
Imposing tax on value of goods produced, the mechanism would fail to take individual farm economics into account, thereby taxing a farmer even if he makes a loss on sale.
Lack of clarity on land titles and cropping patterns based on lease/share-cropping shall further introduce randomness to the system.
It shall disincentivise farmers to sell through organised formal channels, thereby increasing risk to farmer’s income.
Many farmers save seeds from one harvest for the next and the practice remains critical to running Indian agriculture — proposals based on value of goods produced would end up taxing such sustainable practices as well.
Further complications arise if farmers suffer from multiple crop failures followed by one successful crop, for the income in that period may be subjected for tax payment.
In this bleak situation, the proposal to tax agricultural income is irrational.

Source: The Hindu, The Indian Express

Germany looks eastward as it welcomes Modi

Angela Merkel believes the U.S. and the U.K are no longer dependable and her nation hence has to shift its gaze and find new friends

•A day after warning that Europe can no longer “depend” on its Western partners, the U.S. and the U.K., German Chancellor Angela Merkel met Prime Minister Narendra Modi shortly after he landed in Berlin on Monday.

•Ms. Merkel’s comments are likely to set the atmosphere for her meetings this week with Mr. Modi, followed by Chinese Premier Li Keqiang, who will visit Germany on May 31, as she discusses closer cooperation with leaders from the “East” after her stated disappointment with those from the “West”.

•Mr. Modi and Ms. Merkel, who met informally for dinner at the Schloss Meseberg castle outside Berlin, will address a press conference on Tuesday after the announcement of expected agreements on investment, technology, counter-terror, clean energy and water partnerships as well a joint statement likely to focus on cooperation on global issues such as climate change and UN Security Council reform.

G-20 agenda

•Germany will host the next G-20 summit in Hamburg in July, and Mr. Modi is expected to discuss Chancellor Merkel’s agenda at the multilateral forum.

•Germany is expected to raise issues over trade with India after their bilateral treaty lapsed this year and push for the resumption of the India-EU Free Trade Agreement talks. Mr. Modi is likely to pitch his government’s recent reforms on foreign investment and the rollout of the GST to attract more German investment in India, and take trade beyond its current levels of €17.42 billion.

•“Both (the German and Indian) governments are firmly committed to strengthening economic relations,” Mr. Modi was quoted as saying in an interview with the Handelsblatt newspaper of Germany. “I am very optimistic about our future partnership.”

•After his meeting with Ms. Merkel, Mr. Modi will meet many top CEOs and business leaders to strengthen the push for bettering economic ties.

•While the economy was always expected to top the agenda for the Prime Minister’s Germany visit, it is now likely to be overshadowed by Ms. Merkel’s comments after the just-concluded G-7 summit in Italy as well as the NATO-U.S. summit. The Chancellor told a party convention in Munich on Sunday that the “days when Europe could completely count on others are over to a certain extent”.

•Ms. Merkel was responding to U.S. President Donald Trump’s refusal to commit to the U.N. climate change accord this far, his insistence on more contributions from other NATO partners, as well as Britain’s exit from the European Union.

Concern over OBOR

•In what is being described as her version of the U.S.’s “Pivot to Asia”, Ms. Merkel is expected to discuss closer cooperation with both India and China as part of Europe’s quest for alternative coalitions, raising speculation that the moves could make Germany an unusual new venue for India-China rivalry.

•“It would be wrong to see Germany-India and Germany-China as a zero sum game,” said the spokesperson of the Federal Foreign Office, when asked at a press briefing on Monday in Berlin, ahead of the high level visits. “Improving our relations with any country in the world will not come at the cost of any other.”

•Mr. Modi would also like to discuss shared concerns over China’s Belt and Road initiative that India has refused to join on sovereignty issues. Germany is part of the B&R connectivity initiative, but refused to sign a statement on trade — along with other EU countries — that they said would contravene World Trade Organisation (WTO) commitments.

•“We maintain concerns over China’s ambiguity on free trade commitments and human rights,” conceded a foreign ministry official who didn’t wish to be named. “But the fact is there is no way around China if you want to achieve anything on the global stage in today’s world,” he added, in a possible reference to a bilateral trade partnership of €169.9 billion which saw China surpass both U.S. and France in 2016.

Source.  The hindu��

Regional comprehensive economic partnership

Regional Comprehensive Economic Partnership

What is the issue?

There’s a rush to finalise RCEP this year which is pushing India into covering most tariff lines that destroy its economy.

What is RCEP?

RCEP is being negotiated between India and 15 other countries including the 10-member Asean, Japan, South Korea, New Zealand, Australia and China.
India had very rightly maintained a cautious approach in its FTAs on goods, intellectual property rights, and many new issues such as investment, government procurement and competition policy.

Why RCEP is becoming a disaster for India?

There was clearly huge pressure on India to conclude negotiations this year and to make major concessions in goods, services and investment at the ministerial of the RCEP in Hanoi.
It has the potential to overthrow India’s policies of rural development and industrialisation especially ‘Make in India’, and the promise of the Prime Minister to provide accessible healthcare and medicines to all.
Most important, it threatens the policy flexibility and sovereignty to pursue independent economic, social and environmental policies.
In goods trade, India has already agreed to give up the three-tier tariff reduction proposal that offered different coverage for Asean, Japan and South Korea, and a much lower level of tariff reduction coverage for New Zealand, Australia and China.
In agriculture and allied products, the plantation sector is already reeling from the impact of the India-Asean FTA even with relatively high protection of agriculture and a tariff-coverage of 73-80%.
If tariff cuts cover 92-80% of products, the impact will be huge.
On the other hand, New Zealand’s export-oriented dairy products will decimate India’s growing dairy sector, which is still largely small-scale.
If India has to cut duties on 92% of goods in RCEP, India will face threats from both Asean and China.

What are the other possible threats to Indian economy?

E-commerce commitments, if any, will allow companies such as Alibaba from China to displace Indian manufacturing especially in the SME segment.
Further, India is being asked to eliminate export restrictions on minerals and raw material by Japan and South Korea, which may threaten domestic raw material availability.
India is openly pitching services as its offensive area of interest and may be willing to sacrifice goods tariffs for gains in services.
This can be the most dangerous of India’s current trade policy stance.

India has demands for both Mode 3 (investment) and Mode 4 (movement of people) with a proposal for a RCEP business visa for professionals.
India’s demand for Mode 4 is unlikely to be granted.

What India hopes to gain in Mode 3 for its outward FDI is not clear as it is not competitive in most services except for IT and ITES.

India is under heavy pressure to agree to the investor state dispute settlement provision in RCEP without the safeguards provided in the Model BIT.

The investment chapter in RCEP is also pitching for strong provisions on IPRs.
Agreeing to data exclusivity, extending patent terms and unduly strong enforcement measures will weaken the entire generic medicine sector and take away several health safeguards in India’s Patent Act, notably section 3(d).

This will make medicines inaccessible not only for Indian patients but for those in the entire developing world.

In addition, since India has rightly fought against ‘TRIPS plus’ provisions in its FTA negotiations with EU and European Free Trade Association, there is no rationale for it to change its stance in RCEP.

Source: Business Line

Con of GM mustard

Why in news?

Genetic Engineering Appraisal Committee (GEAC) recently cleared the proposal for genetically modified (GM) mustard.

How effective was Bt Cotton?

Bt cotton promised of higher yield and lower pesticide usage in the 1990s.
Despite increased fertilisers and irrigation, the expectations of enhanced cotton yield have not been realised.
Most of the countries that have higher cotton yields than India do not grow GM cotton.
What are the shortcomings of GM Mustard?

Yield - The yield claims on GM mustard are not very reliable.
U.S. and Canada uses GM mustard.
But the highest yields in mustard are from the five countries which do not grow GM mustard — U.K., France, Poland, Germany and Czech Republic.
Evaluation - The risks to health, environment and agriculture have not been evaluated.
Those inadequate tests which were conducted on Bt brinjal were also ignored, even though mustard is far more extensively grown and consumed than brinjal.
HT (herbicide tolerant) GM crops have been condemned by a number of medical professionals.
Weed - A herbicide-tolerant crop promotes constant exposure to a single herbicide — which eventually results in weeds becoming resistant.
Health - A scientific report from Argentina found a fourfold increase in birth defects and a threefold increase in childhood cancers in HT soya areas.
Studies have shown a strong correlation between growth of GM crops & herbicides used in U.S. and diseases such as acute kidney injury, diabetes, autism, Alzheimer’s and cancers.
Seventeen of the 20 most developed countries — including Japan, Russia, Israel and most of Europe — refuse to grow GM crops.
The millions of poor women who depend on weeding to support their family will be displaced.
Indian will lose its seed diversity and the international competitive advantage of its non-GM mustard.
What should be done?

If India wants to increase its mustard yield rapidly and safely, this can be done by adopting the practice of System of Mustard Intensification.
Successful trials have been done in Bihar through a World Bank and results showed higher yields and better income.

Source: The Hindu
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What is the Real Estate Regulation Act (RERA)?

The Real Estate (Regulation & Development) Act, 2016, the landmark realty law to protect home buyers from unscrupulous developers,

What is Real Estate Act, 2016?

The Act which is envisaged to regulate both commercial and residential real estate projects, seeks to set up a state level regulatory authority called Real Estate Regulatory Authority (RERAs) for regulation and promotion of the real estate sector.
The Act makes it mandatory for uploading the details of a Real Estate project on the website of the RERAs. Real estate agents also need to register with the RERAs.
The Act also makes it mandatory for the builders to put 70% of the amount collected from buyers in a separate bank account. This must only be used for construction of the project. However, the state government can alter this amount to less than 70%.
The Act also seeks to establish fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal.

Here’s all you need to know about the new realty law:

• It makes it mandatory for all builders - developing a project where the land exceeds 500 square metre - to register with RERA before launching or even advertising their project. Developers have been given time until July 31 to register.
• Not doing so will invite up to a maximum imprisonment of 3 years or fine of up to 10% of the total project cost.

• Developers will have to submit as well as upload project details, including approved layout plan, timeline, cost, and the sale agreement, that prospective buyers will have to sign to the proposed regulator.

•Only developers who fulfil this disclosure clause would be permitted to advertise their project to prospective buyers.

•Real Estate Appellate Tribunals to be set up in every state.
•As of now, the real estate sector was largely unregulated in India. If a consumer had a complaint against a developer they had to make rounds of consumer or civil courts. Now, in case of any grievance, the consumer can go to the real estate regulator for redressal.

• Developers will have to put 50% of the money collected from a buyer in a separate account to meet the construction cost of the project. This will put a check to the general practice by developers to divert buyer’s money to start a new project instead of finishing the one for which money was collected. This will ensure that construction is completed on time.

• The law is likely to stabilise housing prices. It will lead to enhanced activity in the sector, leading to more housing units supplied to the market.

• It will weed out fly-by-night operators from the sector and channelise investment into it.

• Builders will also benefit as the law has penal provisions for allottees who do not pay dues on time. The builder can also approach the regulator in case there is any issue with the buyer.

What are some of the key issues?

Major issue is Parliament’s jurisdiction to make laws related to real estate as “land” is in the State List of the Constitution. However, the primary aim of the act is to regulate contracts and transfer of property, both of which are in the Concurrent List.
Some states already have laws to regulate real estate projects. And the act differs from these state laws on several grounds.
The Bill mandates that 70% of the amount collected from buyers of a project be used only for construction. In certain cases, the cost of land more than 30%.
The real estate sector has some other issues such as a lengthy process for project approvals, lack of clear land titles, and prevalence of black money. Some of these also fall under the State List.

Why establishing RERA is important?

Only 4 States and 6 Union Territories so far notified the final Real Estate Rules. So, the Minister of Housing & Urban Poverty Alleviation has urged the Chief Ministers of states to implement the Act before April 30, 2017.
From May 1, 2017, under the provisions of the Act, both buyers and developers of real estate property can approach RERA seeking relief against violation of the contractual obligations and other provisions of the Act.
For this to happen, Real Estate Authorities and Appellate Tribunals were required to be in place and in a position
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How it works in other countries

United States

Real estate in the US is regulated at numerous levels. There is no single regulatory body, but a series of bodies that regulate different ownership and usage aspects. To safeguard the interest of the end-users, the US department of housing and urban development (HUD) has rules under the real estate settlement procedures act to protect consumer interests pertaining to residential properties.

If a buyer enters a contract with the developer, and the developer does not deliver on the terms agreed upon in the contract, the developer can be taken to court for breach of contract. In the US, there are state real estate licensing laws and a code of ethics in place.

United Kingdom

There is no regulator to monitor development. The financial services authority (FSA), which is now part of the Bank of England, regulates almost all investments in real estate. The Property Misdescriptions Act, 1991, prohibits making false or misleading statements on property matters in the course of estate agency business and the property development business.

(Source: Realty decoded: Investing across borders by Ernst & Young and Ficci)