Ahead of next year’s Assembly elections in Karnataka, politics in virtually all political parties has peaked with leading players positioning themselves for the race that could be both close and exciting. In the Congress, Rahul who is banking on a big victory for the Congress in the Southern State recently had one on one meetings with prominent leaders, Siddaramaiah and D.K.Shiva Kumar in order to take stock of the situation. He is understood to be in favour of the former chief Minister, who in is his estimation was best placed to wrest power from the BJP. However DK.Shiva Kumar who has made no secret of his ambitions is not the one to easily give up, and has communicated to the party High Command that he alone should be the face of the party, since he had been instrumental in raising finances for the organization. The clear indication was that he had a bigger role to play than being virtually the ATM. Shiva Kumar was elevated to the post of the State President, after Sonia Gandhi’s closest aide, the late Ahmed Patel convinced her that he was possibly most suitable for that position. A Vokkaliga by caste, Shiva Kumar has endeared himself to several prominent party leaders at the national level. Siddaramaiah on the other hand remains the most popular and acceptable leader in the State and it is doubtful that without him being there, the Congress stands any chance in the Assembly polls. In another development, former Union Minister, KH Muniyappa has conveyed to the High command that he was planning to move to Janata Dal (Secular). The reason for this is some local level conflict. In order to convince him not to leave, Shiva Kumar is believed to have visited his home, a few days ago. The Congress wants to take advantage of the poor graph of the current Karnataka Chief Minister Basavaraj Bommai who has courted controversy by proceedings against two senior officials who once worked under him directly when he was the Home Minister in the BS Yeddyurappa government. Some strong BJP leaders in Delhi have been protecting Bommai but sources said that the RSS favoured a change and wanted a well-known Lingayat to replace Bommai who like Yeddyurappa also belongs to the same community. In this connection, the name of former Chief Minister Jagdeesh Shettar is doing the rounds in power circles though the final call for a change would be taken by Prime Minister Narendra Modi. Leaders supporting Bommai are of the view that if he is changed, the decision would not be endorsed by Yeddyurappa whose son is seeking to become the deputy Chief Minister. One view is that ahead of the polls, the BJP should maintain a status quo while certain RSS leaders feel that Bommai should be replaced in the larger interests of the party. The Janata Dal (Secular) is watching the developments very closely and hopes that if the tussle in the two large parties continues till elections, it shall have to play the role of the King Maker. The Janata Dal (S) is being guided by former Prime Minister H.D.Deva Gowda and his son, H.D.Kumaraswamy, also a former CM. The next few weeks would perhaps keep Karnataka on the political centre stage with so much likely to happen.
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Challenges in ameliorating death penalty sentencing
For several decades, there has been an extreme and perpetual unfairness in announcing the death sentence in India. Procedural unfairness has consistently been reflected in the judgements of the Supreme Court of India by our erstwhile judges, lawyers, researchers, et cetera. In the middle of such a crisis, they are concerned about an unwelcome prevalence of lack of control of the authority in sentencing methods that inflict the death penalty. Additionally, experts have noticed that the courtroom witnesses almost no information about the accused during the passage of a death sentence. The recent judgement of Manoj and Ors. vs the State of MP pursues the long snubbed, but a pivotal aspect of sentencing the death penalty. One must observe this particular attempt in Manoj with the Supreme Court’s evident uneasiness in the previous year where lower courts executed unfairness in the declaration of the death sentence.
The Supreme Court validated the constitutionality of the death sentence in 1980 in the case of Bachan Singh vs the State of Punjab and brought individualised sentencing to the foreground. It also instructed courts to examine the crime and life situations of the accused. Since the case of Bachan Singh, there have been various disagreements about which criminal cases require death sentences and what type of information is needed to validate the sentence. Most prisoners are poor and cannot afford top-class lawyers to represent them. So, the courts make little effort to gather information and know the circumstances of the accused during the passing of a death sentence.
In September 2021, Justice N.V. Ramana was the Chief Justice of India. At this time, three benches of the Supreme Court of India heard arguments over 13 death penalty appeals and provided judgements in 10 cases. It declared three acquittals in one case and commutations in the other. A common point of profound concern runs through these cases—the amount of fairness in passing the death penalty and the lack of complete information available to the court about the accused.
Another bench headed by Justice U.U. Lalit and comprising Justices Ravindra Bhat, Bela Trivedi and P.S. Narasimha have presented their concern about the lack of information about the accused. Having recognised the importance of such information for passing a fair death sentence, the Bench in September 2021 ordered the presentation of reports of probation officers, prison officers and mental health professionals for the Manoj case. From the final judgement passed by the Supreme Court, it is evident that the court has taken necessary steps towards the realisation of the need for “individualised sentencing inquiry” as envisioned by the court 42 years earlier in the case of Bachan Singh.
The life-history approach furnishes a framework to view the circumstances of life as connected to each other. Courts have acknowledged the socio-economic circumstances of an individual as a mitigating factor in several death penalty cases. The fact that the socio-economic circumstances of a person are interconnected to other factors, like the impact of poverty on the individual’s access to proper housing, education, and health facilities, makes the matter quite engrossing, and all of these combined impact the life choices of that person.
For the first time, the Supreme Court has presented information like family background and any record of violence or ignorance (called remote factors or experiences) that would act as a mitigating factor. Negative experiences are not a one-day case, but amass over a period. The life-history approach is a perfect solution for such an inquiry. It helps to gain cognizance of how early life situations have played a role in shaping a human character and how these situations affect the choices of an adult.
While we hope that the life-history approach adopted by the Supreme Court in affecting the passing of the death sentence would find its way into the lower courts, the real difficulty lies in comprehending such rich information by these courts. The requirements of individualised sentencing are poles apart from the conventional checklist-based method of presentation of mitigation. Individualised sentencing is a vital fundamental principle of the criminal justice system of our country. Also, one should remember that with the introduction of non-legal expertise into courts, courts need preparation to acknowledge the evidence. Questions on contradicting findings from reports and opinions while the passage of the death sentence may also arise, and courts should address these by acknowledging the existence of evidentiary standards and judicial dicta. Hence, courts should remain curbed by the boundaries of the evidence act during death sentencing.
The decision in the “Manoj” case is a big and positive step towards a more significant and enlightened sentencing inquiry. More inquiry into complicated questions regarding sentencing will be inexorable to offer procedural fairness for the accused under death sentences.
Amaresh Rai is a political mentor.
NITISH’S MOVE IS A RESPITE FOR OPPOSITION, BUT QUESTIONS REMAIN
Nitish Kumar’s decision to dump BJP and pull out of the NDA government in Bihar may have come as a respite for an ineffectual and weak opposition, but the important question is whether the Congress will allow the JD(U) leader’s prime ministerial ambition to come to fruition. Nitish has now been pitched as a prime ministerial candidate for the 2024 elections by some of his supporters after he dumped BJP. This was not seen openly in 2017.
This is not the first time that he has taken a U-turn. The entire political journey of Nitish Kumar is marked by somersaults like this. Mindful only of his own political convenience, the JD(U) leader has been delivering blows to leaders like Sharad Yadav, Lalu Yadav and Ramvilas Paswan who have all been associated with Jayaprakash Narayan. He hurriedly went with the NDA as he was eyeing the post of Bihar CM. He strengthened his political position after becoming a Union minister during the NDA regime at the Centre. While holding various ministries in the Atal Bihari Vajpayee government, Nitish Kumar continued to keep the focus on Bihar politics. He became CM of Bihar for seven days for the first time with the help from BJP in 2000. Then in 2005, as an NDA partner, Nitish threw RJD out of power. He continued to be with NDA till 2014. But after massive defeat of the opposition in the 2014 parliamentary polls, Nitish appointed Jitan Ram Manjhi as CM in what was seen as a dramatic political development in Bihar. After this, Nitish removed Manjhi from the CM post and succeeded him. He dumped NDA and fought Assembly elections in alliance with his arch rival parties RJD and Congress, and finally got a big victory. It was then only that Nitish started having prime ministerial ambitions. Opposition leaders like Lalu Prasad and Sharad Yadav wanted Nitish to be prime ministerial face in view of the rapidly growing stature of Narendra Modi. But Congress did not agree. The grand old party made it clear that Rahul Gandhi will be the PM face. The relations started turning sour after this development. Nitish got disappointed and switched partners to join hands with the BJP. He formed the government with support from BJP. Nitish contested the 2020 Assembly polls in alliance with BJP. When his prime ministerial plan got derailed, Nitish started expecting to be considered for president or vice president posts. But his hopes got shattered again.
Now the latest Bihar development suggests that Nitish would like to be prime ministerial candidate in 2024. The politics has undergone a drastic change between 2017 and 2022. The opposition has been weakened tremendously, with Congress being involved only in existential fight. The opposition is looking for a face that could challenge PM Modi. Whatever allegations the JD(U) may be levelling against the BJP, the fact is that Nitish could rise in politics just because of the saffron outfit. What will be interesting to see is whether Congress will agree on Nitish as a PM candidate.
What needs to be taken into consideration is that the Congress has already rejected Mamata Banerjee’s proposal to project a non-Gandhi leader as PM face. Telangana CM K. Chandrashekar Rao is also trying to be prime ministerial candidate for which he is seeking to stitch a non-BJP and non-Congress alliance. He has met Tejashwi and Akhilesh Yadav as well.
Nobody had any prior idea about Nitish’s move to snap ties with BJP. Undeniably, the entire opposition would like Nitish to lead the bloc. But much of it will depend on Congress. The grand old party may also see big organizational changes. What will also be interesting to see is whether Nitish becomes a pivotal figure of opposition politics or Congress will bring up some other face. The question here is whether Nitish will not take another U-turn if his bid to be prime ministerial face comes a cropper. Lok Jan Shakti leader Chirag Paswan has already said that Nitish will again switch partners if his ambition remains unfulfilled. With all this in view, the turf ahead is not smooth for 71-year-old leader Nitish Kumar either.
Implications of the rupee going international
Internationalization would enable the Indian rupee to be transacted easily by both residents and non-residents; however, on the flip side, if not supported by strong domestic financial markets, it will hinder independent monetary policy.
As the rupee breached the psychological barrier of INR 80 vs USD, there are increased calls for internationalization of the INR. The Indian Rupee depreciated by around 7.5% from 74.4 to 80.0 from January to July 2022. During the same time, Indian forex reserves depleted by 9.1% (i.e., USD 569.9 billion at the beginning of 2022 to USD 518.1 billion in the first week of July) on the account of capital outflows. To strengthen the INR and halt depreciation, the Reserve Bank of India (RBI) sold around $30 billion in the open markets from October 2021 to May 2022, but with little success. Rising import prices contributed to current account deficit which increased to over 33.5 billion USD. At the same time, increased inflationary risks and subsequent rise in interest rates in the developing world contributed to a net outflow of foreign exchange, putting more pressure on the weak rupee.
In this backdrop, the Reserve Bank of India issued a notification on 11 July 2022 about trade settlements in Rupee; i.e allowing all cross-border transactions in Indian rupees. Internationalisation of currency would enable the Indian rupee to be transacted easily by both resident and non-residents, while at the same time be used as a reserve currency in global trade. Some of the positives of internationalization is that it lowers the transaction costs of trade and investments by reducing the currency fluctuation risks. However, on the flip side, if not supported by strong domestic financial markets, it will hinder independent monetary policy which is essential for developing countries in controlling inflation and credit growth.
To understand whether the RBI’s action will be successful, we must first examine global commerce as well as India’s trade with the rest of the world. It is significant that around 60% of global trade is conducted in US dollars, and this trend dates to the post-World War II rebalancing of the global power structure. When it comes to international trade, India conducts 86% of its business in USD, whereas trade in INR is less than 1%. However, there are many instances where India has engaged in INR trading. Rupee-Ruble trade during the erstwhile Soviet Union was a popular practise. Iran recently agreed to trade in INR, but with the US-led Western block’s imposition of partial sanctions, it ceased even before it began in full. Recently, the RBI has allowed trade settlements between India and Sri Lanka and Russia, in rupees in the wake of economic sanctions.
India’s trade with Bhutan and Nepal happens predominantly in rupees, and recently, India and Sri Lanka agreed to trade in rupees. Given their cordial ties, India and Japan have agreed to swap their respective currencies for US dollars. The large-scale trade in USD always puts the emerging economies like India at an exchange rate risk and the RBI’s notification last week is the first step in the right direction. However, the success of RBI’s attempt to internationalize the INR depends on multiple factors. The trading partners’ willingness to accept the INR is not as easy as it can be thought of since most of the exporters and importers invoice their products in USD. In addition, the prices of raw materials, intermediate goods and other input prices are set in USD. It is yet to be seen how India trades with countries like China, given the geopolitical problems. The biggest trading partners of India accept only USD. A quick look at India’s trade scenario shows that, except for Iraq (22.0%), UAE (15.2%) and Saudi Arabia (8.6%), India’s trade as proportion of total trade of its major trading partners is very meagre. Even India’s export share to total world exports is just around 1.7%. Moreover, around 60% of global currency reserves are held in USD dollars, followed by Euro (20%) and Yen (5%). Even though China accounts for nearly 15% of global trade, only 3% of global reserves are held in Renminbi, predominately due to shallow financial sector reforms.
A country’s currency strength is determined in the long run by fundamentals—roughly speaking, a country’s currency tends to settle at the level at which its industry is competitive on world markets. Inefficiencies in infrastructure, logistics and supply chains, and regulatory rent seeking practices contribute to low productivity and cost efficiencies for businesses operating in India. For example, it takes 22 days to clear a ship in Indian ports, compared to 5 in China; the median ship turnaround time globally is 0.97 days, compared to 2.59 days in India. India labour productivity at $8.3 (GDP per hour worked) is one of the lowest among its Asian counterparts. No wonder compared to industrialized economies, India’s trade openness is still quite low at 44%. Given such tepid performance over the years, internationalization of INR will not provide any quick fix solutions to the depreciating currency. On the other hand, India’s goal right now should focus on addressing the regulatory bottlenecks that restrict competitiveness in the markets which make our goods less attractive. India’s trade policy over the years has been overly protectionist, while at the same time ignoring global/regional value chain integrations. India’s record in preferential trade agreements and regional trade agreements, remain at best patchy. India’s intra-regional trade in South Asia is among lowest in the world. It should work out rupee denominated bilateral trade with friendly and nearby nations, especially in the South Asian region.
Dr Steven Raj Padakandla is an Associate Professor at IMT Hyderabad. Dr B.M. Rao works in the area of Open Economy Macroeconomics.
Remittances are the lifeline for many developing countries
For more than 60 nations, international remittances represent at least 5% of their GDP.
India is the largest recipient of remittances in the world. The data from the balance of payment indicates that private transfers mainly representing remittances by Indians employed overseas remained at $83 billion in FY19 and FY20. After declining modestly to $80 in FY21, it again improved to $89 billion in the financial year ending March 22.
Remittances are an important part of the national income of developing and low income countries. They play a significant role in economic development of these countries. As per the World migration report 2022, there were 281 million (or 3.6% of the world’s population) international migrants globally with 169 million (60% of total migrants) labour migrants in 2020. Assuming an average household size of four, more than 1 billion people benefited from the remittance flows in 2020. Furthermore, the data shows that the top destinations of international migrants were the USA, Germany, Saudi Arabia, Russia and the UK. Meanwhile, the largest number of international migrants in 2020 originate from India followed by Mexico, Russia, China and Syrian Arab Republic, with Syria having a large number of refugees due to widespread displacement over the last decade.
Meanwhile, global remittances have increased more than 5 times over the past 2 decades. Of the total international remittances of $702 billion recorded in 2020 (decline from $719 billion in 2019 owing to Covid-19 pandemic) around 77% or $540 billion was received by low and middle income countries. High-income countries including the USA, UAE, Saudi Arabia, Switzerland and Germany are the top countries sending remittances. On the other hand, developing countries, India and China received the maximum remittances ($83 billion and $59 billion respectively) in 2020, followed by Mexico, the Philippines and Egypt. Even though in absolute terms the remittances are significantly higher in India and China, their share as % of GDP is very low (3.1% of GDP and 0.1% of GDP respectively). But certain smaller countries like Tongo, Kyrgyz Republic, Tajikistan, Lebanon, Nepal depend significantly on remittance flows. The share of remittances in GDP of these countries is more than 24%.
When travel restrictions were imposed due to the pandemic, it was thought that remittances would be badly hit. However, the overall decline in 2020 was only modest when compared to 2019, -2.4% yoy. This has been possible due to policy response to support remittance flows together with shift from informal channels (movement of cash through borders) towards more formal channels through increased digitalisation of financial transactions. The impact of the pandemic on remittances, though limited, has been uneven with certain countries (Europe and Central Asia in particular) and certain workers (those engaged in severely affected sectors as travel and tourism) being affected more than others. Many workers lost their jobs or had to come back to their native countries while others got stuck in foreign countries with no job and money or had to undertake pay cuts. However, some migrants benefitted due to various welfare programs of their respective host countries and sent back more money.
Another incident which is likely to have a negative effect on remittance flows is the Russian invasion of Ukraine. It is more than 5 months with no signs of the war drawing to a close. Countries of Central Asia including Tajikistan and Kyrgyz Republic where the dependence on Russia for remittances is quite high (82% for the latter and 76% for the former) will be impacted significantly by the persisting war. As per the World Bank, the remittances flowing to Tajikistan from Russia are likely to fall by more than a fifth, thereby leading to shrinking of its economy by 2%. Even Kyrgyzstan economy is projected to decline by 5% with the remittances from Russia expected to fall by a third. Coming to India, it is the largest recipient of remittances in the world. The data from the balance of payment indicates that private transfers mainly representing remittances by Indians employed overseas remained at $83 billion in FY19 and FY20. After declining modestly to $80 in FY21, it again improved to $89 billion in the financial year ending March 22. The RBI survey-based remittance estimates 2020-21 shows that India received maximum remittances from USA, followed by the UAE, UK, Singapore and Saudi Arabia. These top 5 countries accounted for 59% of the total remittances flow to India. Interestingly, UAE was the top source country as per the previous survey 2016-17 and it has been replaced by the USA now. Apart from that, the UK and Singapore too emerged as important source, replacing Qatar and Kuwait from the top 5 sources of remittance inflows. In fact, the share of Gulf Cooperation Council (GCC) group together has declined to 30% from more than 50% in 2016-17, owing to various factors, including low oil price and slow pace of migration amidst stricter labour laws, higher work permit renewal fees and taxes. The pandemic further led to lower demand for white collar workers in these countries.
If we look at the state wise distribution of remittances, Maharashtra is the top recipient with its share in total inward remittances increasing significantly to 35.2% (from 16.7% in previous survey), pushing Kerala to the second position (10.2% share compared to 19% earlier). Tamil Nadu (9.7%), Delhi (9.3%) Karnataka (5.2%) are the other major recipients of remittances. These top five sates account for around 70% of the total remittances. The remittances are the major source of foreign exchange for India besides being used to finance our huge trade deficit. This necessitates building and developing a conducive policy ecosystem for these flows such that they flow to India at lower cost. In line with the crucial role that NRI remittances play in our country, the RBI has recently liberalised NRI deposits.
To conclude, remittances are the lifelines for low income developing countries. This can be supported by the fact that for more than 60 countries, international remittances represent at least 5% of their GDP. Those against migration and remittances argue that there are potential costs to the country receiving remittances if moving out from the country creates labour shortage in the home country or if the remittances sent are significantly high, then it can lead to appreciation of the currency, thereby making its exports less competitive. However, these costs are not of value when seen in the context of resource scare low income developing countries. Remittance inflows for low and middle income countries are even higher than FDI and aid. Efforts should thus be made by the authorities to reduce transaction costs. As per the World Bank, global average cost of sending the remittances is currently 6.09% of the amount sent for US$ 200 and the UN SDG target is to reduce it to 3% by 2030. In this context investment in digital technologies by remittance service provider will help a long way in reducing the cost of remittance flows and will also ease the KYC process.
The author works as a senior economist in the Indian banking sector with core interests in public administration, external sector dynamics and global economics. Previously, she has worked on country risk analysis of emerging market economies with a French consulting firm. She holds a Master’s degree in economics from the Jawaharlal Nehru University and a bachelor’s from Sri Venkateshwara College, Delhi University.
NITISH DOES ANOTHER U-TURN
There’s a good reason why Tejashwi Yadav used to refer to the JD(U) leader as Paltu Uncle (someone who does U-turns). Tejashwi was referring to Nitish Kumar’s habit of changing coalition partners to suit his moods and personal ambitions. Certainly, Nitish has been vacillating between the BJP and the Opposition. In 2013, he ditched the BJP with whom he had a cordial rapport during the Vajpayee-Advani era, protesting against the elevation of Narendra Modi as the BJP’s Prime Ministerial candidate. Two years later, he tied up with the RJD and the Congress to form the Mahagathbandhan for the 2015 polls. Although the NDA got only 58 of the 243 seats in the Assembly polls, the JD(U) was pushed to the second position with the RJD winning 80 seats, while the JD(U) got only 71, though both had contested 101 seats each. However, as a senior leader, Nitish Kumar became the CM with Lalu Yadav’s son and heir apparent, Tejashwi as his deputy CM. That alliance did not last very long and Nitish was soon back with the BJP. He contested the 2019 Lok Sabha with the NDA, at a point when the Opposition needed a face and Kumar could have emerged as a leader uniting all the opposition parties together. In the 2020 Bihar Assembly polls, the JD(U) came third with RJD emerging as the single largest party and even the BJP getting more than the JD(U), but again it was Nitish who was made the CM.
However, his having walked back to the Mahagathbandhan has happened at a time when the Opposition still lacks a viable face to take on Narendra Modi. As a six-term CM representing a state in the Hindi belt, certainly Nitish’s bid would have a certain appeal that is missing from Mamata Bannerjee or K. Chadrasekhar Rao’s candidature. Nitish also has a cross-party goodwill for his 2015 swearing-in ceremony had seen leaders from various parties, including the Abdullahs, Kejriwal, Mamata Bannerjee, Yechury and Rahul Gandhi present. Given the fact that the Congress is in no shape to lead the charge against the BJP and Modi, a united opposition would do well to throw its weight behind Nitish’s candidature.
That is not to say that Nitish’s popularity has not waned. Certainly he is not the same leader that he was in 2013 when he took a stand against Modi’s candidature as PM. Much water has flown under that bridge since then, his own credibility has also taken a hit after he tied hands with Modi after first opposing him. Neither is the JD(U) the single largest party in the state. Riding on Nitish’s coat-tails, the BJP has made considerable inroads—which makes you wonder about the former’s political smarts. But the Opposition is currently so bankrupt that any viable alternative to the Gandhis will do, even if it’s one with a slightly damaged political aura. Over to 2024, and we may see a Modi Vs Nitish face off, that is, of course, if Nitish remains put in one place till then and doesn’t do another U-turn.
United States still searching for a regional role
Through the Indo-Pacific Economic Framework, the United States tends to assure its Indo-Pacific partners that it still has geo-economic clout in the region, but the US has been continuously compelled by China to find a regional role in Asia-Pacific at least since 2009.
The United States-led Indo-Pacific Economic Framework (IPEF) is calling for prosperity in the region. It, therefore, solicits a critical assessment. We need to evaluate if it is a serious effort toward “region-building” in the Indo-Pacific or just another geopolitical manoeuvring by the United States to find a regional role. The context has to be how the American partners in the region would benefit, and not what the United States thinks it must do. The members must, therefore, approach this framework with adequate caution. Here’s why.
First, a White House statement of 23 May clearly asserted the significance of the Indo-Pacific region for the United States. It suggests that trade with the Indo-Pacific supports more than three million American jobs and attracts approximately $900 billion FDI in the United States. So, in congruence with a previous American initiative viz. Build Back Better World (B3W) that aimed to create American jobs, IPEF, too, carries similar ambitions. In fact, countries which supported the B3W are yet to decipher any pragmatic gains. B3W, a G7 backed $40 trillion infrastructure plan launched in June 2021, was positioned to focus on four potential areas viz. climate, health and health security, digital technology, and gender equity. It has been almost a year now, and the initiative continues to remain in political vacuity. Interestingly, B3W was apparently positioned against China’s Belt and Road Initiative (BRI).
Today, for the IPEF, the real challenge is whether it can create a win-win situation for other developing countries in the region, or is it all about the agenda of restoring “American exceptionalism”. Instead of laying down a concrete geo-economic roadmap for the B3W, and for instance, how private sector capital as mandated can be mobilised to finance it, the United States has brought its partners into a new bandwagon–the IPEF. Interestingly, IPEF carries some overlapping agenda on similar lines as the B3W, amid its call for supply chain resilience, clean energy, or digital economy. In 2019, the United States launched a Blue Dot Network (BDN) as a certification system that aimed to ensure transparency in infrastructure financing. This was also positioned against the BRI –reflecting an American impatience to counter China even through frameworks with unmatched mandate. The IPEF discourse, too, is moving in this direction.
Second, IPEF is not positioned as a traditional free trade agreement. And cannot be compared with a mega-regional bloc like Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CP-TPP). This is because, for a cooperation framework like IPEF, it is not easy to define concrete deliverables e.g. on standards, or for that matter, supply-chain resilience. The propositions envisaged under the Supply Chain Resilience Initiative (SCRI) and China+1 policy, both aiming to reduce dependence on China, are yet to yield any pragmatic outcome. Such deliverables, however, can be defined only in case of mega-regional trade agreements.
Third, IPEF cannot even be compared with congregations like Asia-Pacific Economic Cooperation (APEC) that was formed in 1989 and includes countries on both sides of the Pacific Ocean. Almost all the issues that comprise the core mandate of both B3W and IPEF are already there on APEC’s agenda, and all countries currently in IPEF except India are also APEC members. So, at least for India, joining APEC would create more geo-economic gains instead of relying on IPEF–a congregation that seems to be yet another non-serious American effort after BDN and B3W. It’s no longer about geographic eligibility because United Kingdom which does not share the Pacific has already applied to join the CP-TPP. And China, too, which was deliberately kept out from President Obama’s TPP owing to stringent TRIPS-plus commitments has also expressed its interest in joining it now. With such reconfigurations, a rule-based system can’t be determined by economic frameworks like IPEF, but by mega-regional blocs which not only hosts China, but also Australia, Japan, South Korea, and others.
Fourth, on a strategic note, a crucial issue for the Asian allies of the United States is to decipher for themselves the relationship between Quadrilateral Security Dialogue (Quad) and Australia-United Kingdom-United States (AUKUS). AUKUS was formed by the United States last year by including its old ally i.e. the UK, along with Australia, but by excluding Japan and India which are already there in Quad. Quad’s mandate has been gradually diluted since 2007, so the question remains if AUKUS complements its security role or not.
Therefore, the Indo-Pacific countries need to exercise caution in approaching the IPEF. Through IPEF, the United States tends to assure its Indo-Pacific partners that it still has a geo-economic clout in the region and that China has yet not displaced it. Perhaps, it is largely mistaken because it has been continuously compelled by China to find a regional role in Asia-Pacific at least since 2009. Moreover, IPEF is a unique deal for the United States, but “just another” plan for its partners especially India and Southeast Asian countries. IPEF can make sense only if it advances “region-building” in the Indo-Pacific, but without prioritising American interests. Also, the American narratives against China, even if appealing for few Indo-Pacific countries, cannot help sustain their geo-economic interests.
Faisal Ahmed is a Professor of International Business at FORE School of Management, New Delhi. Alexandre Lambert is the Academic Director at Geneva Institute of Geopolitical Studies, Geneva. They are authors of the book The Belt and Road Initiative: Geopolitical and Geoeconomic Aspects published by Routledge, c.2022.
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