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Trade protectionism or liberalization? India faces a policy dilemma

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In recent times, the Government of India has undertaken several measures to improve export performance and attract FDI into the country. For the first time ever, in FY 2021-22, exports from India reached US$ 421 billion. This can be attributed to schemes such as Production-Linked Incentive Schemes (PLI) to boost domestic manufacturing, implementation of trade agreements and introduction of RoDTEP (Refund of Duties and Taxes on Exported Products) scheme for exports, among others. In the same period, India also received highest annual FDI inflow of US$ 83.57 billion. These positive developments raise optimism of economic recovery beginning to gain momentum post Covid pandemic. However, it is also important to highlight that in 2021–22 imports too surged to US$ 612.6 billion, leading to a trade deficit of US$ 191 billion.

There is a dichotomy that underlines India’s policymaking process, especially when it comes to trade and FDI. While there are ample measures taken to boost exports and FDI, there have been several import restrictive measures being applied to reduce import flows and thereby reduce the trade deficit.

As India strives to be a world leader and aspires to achieve a US$ 5 trillion economy, the dichotomy of its trade and FDI policy needs re-thinking and re-working.

FOCUS OF TRADE POLICY IS ON EXPORTS PROMOTION

The broad focus of India’s trade policies has been on increasing exports, which is supplemented by a combination of policy measures comprising fiscal incentives, export promotion schemes, institutional changes, streamlining of procedures, improved market access and diversification of export markets. Despite India’s focus on increasing exports, trade policy has often also been used “as a means to regulate domestic supply and to address short-term objectives such as containing inflation and fluctuations in commodity prices”, as WTO Trade Policy Review 2015 put it. For instance, in May 2022, the government banned wheat exports on grounds of concerns of domestic food security. Trade policymakers in recent times have also been concerned about the rising trade deficit and have often introduced stricter forms of trade protectionism. Data from World Bank suggests that simple MFN tariffs for all products have risen from 12.5% in 2010 to 14.6% in 2020. Frequent changes to trade policy and rising protectionism are disruptive, as they reduce predictability and create uncertainty for the industry players and adversely affect the long-term strategic development.

FOCUS OF INVESTMENT POLICY IS ON FDI PROMOTION

The broad focus of India’s foreign investment policy has been on attracting inward flows of FDI, particularly in the manufacturing sector. The government has established a favorable environment for FDI by reducing restrictions on foreign equity investments, expanding the number of sectors in which foreign investment is allowed, lowering sectoral restrictions, liberalizing foreign exchange regulations providing incentives, launching programmes (such as ‘Make in India’) to boost the manufacturing sector and simplifying procedural requirements. These policy initiatives have resulted in significant improvement in India’s Ease of Doing Business rankings from a rank of 142 in 2014 to 63 in 2020.

THE POLICY DILEMMA

The basic policy issue facing India today is not, primarily, one of more or less trade liberalization, but it is about how best the country can integrate the FDI liberalization such that its international trade participation promotes economic development. While the liberalization of trade and FDI policies has been successful in increasing trade flows and investment into the country, there is a lack of coherence between these two policies.

First, in terms of institutional framework, the evolution and formulation of rules and regulations governing both trade and FDI policies have remained disjointed, with limited evidence of coordination. A more inclusive and cohesive procedure must be adopted to formulate complementary rules and regulations that are mutually reinforcing in support of India’s growth and development.

Second, India’s trade policy should not be viewed merely as an export promotion tool. In a globalized world, trade is no more a zero-sum game. Exports and imports are intrinsically interdependent, and any policy measure that reduces one will also reduce the other. In addition, with the advent of FDI and multinational corporations, trade and FDI have simply become two complementary ways of servicing foreign markets and are interlinked in a variety of ways. Thus, any policy impacting the flow of trade will have an impact on FDI as well.

Third, there is a stark contrast in the objectives and implementation of the trade and FDI policies. India, on the one hand, has been implementing policies aimed at attracting investments from across the globe and strengthening its domestic industry. It has, on the other hand, been implementing trade protectionist measures that have often resulted in restricting imports to shield its industries. The former objective cannot be attained without liberalizing the trade policy, and this includes both exports and imports.

In a globalized world, if an MNC invests and sets up its operations in India, it is bound to engage in both exports and imports. As India’s manufacturing sector is still at a nascent stage in terms of technological advancement, the MNC may choose to import raw materials or intermediate goods and parts that may be necessary to manufacture products. In fact, around 80% of global trade takes place in ‘value chains’ linked to MNCs and is intra-industry in nature. Needless to say, in order to make the most of FDI, we need complementary trade policies that support linkages and spillovers and foster integration with global value chains.

India needs to recognize the significance of investment liberalization and its inseparable connection with trade liberalization. The sooner the policy dilemma of trade protectionism and investment liberalization is resolved, the faster India will make its way towards achieving its vision of becoming a major player in the global economy. It is proposed that liberalization of trade and investment should be undertaken in a holistic and complementary manner that bolsters, and not refutes, the openness that has until now been a distinguishing feature of India’s trade expansion and its integration into global markets.

Samridhi Bimal is a Trade Economist.

The basic policy issue facing India today is not, primarily, one of more or less trade liberalization, but it is about how best the country can integrate the FDI liberalization such that its international trade participation promotes economic development. While the liberalization of trade and FDI policies has been successful in increasing trade flows and investment into the country, there is a lack of coherence between these two policies.

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Opinion

Bottom of the pyramid group holds the key to India achieving a $5 trillion economy

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“Rural development by empowering India’s villages is critical to realizing the dream of Aatmanirbhar Bharat,” said Union Home Minister and Minister of Co-operation, Amit Shah, emphasizing the importance of rural strength and how training has become increasingly clear as a key tool in the fight against poverty.

According to a Financial Express report, by 2024-25, India hopes to have a $5 trillion economy. To get there, India must grow at a real-terms rate of 9% per year between FY20 and FY25. Rural economies account for 25–30% of GDP. Agriculture used to be the primary source of revenue and employment in rural regions, but the non-farm economy has surpassed it. To end poverty, education and training are now more important than ever, especially for those at the bottom of the pyramid (BOP) group. Education is required for the BOP group to enhance the quality of life, boost literacy rates, and encourage proactivity and self-control. Additionally, education is essential for a country’s success in terms of its social, cultural, and economic development. To achieve the Prime Minister’s $5 trillion economic aims, training is being provided to increase the quality of skills in rural India’s youth force.

The BOP group in India comprises of low-income families living paycheck to paycheck or in an unstable rural setting where there is no employment stability, and future aspirations are restricted to a single geographical region. BOP segment has been the focus for many marketing activities in terms of selling items to them in large quantities. This idea may be used to educate the nation’s general populace as well as to sell goods and services and generate impressive profits. Education may also be considered a game-changer to fulfill the Prime Minister’s objective for the country by the fiscal year 2024–25, a fully realized reality. Urban regions will play a significant role in the eventual transformation of India into an “atmanirbhar” state.

$5 TRILLION ECONOMY

The labour and agricultural reforms undertaken by his government in the last couple of months will help increase growth and returns in the manufacturing and agriculture sectors besides sending positive signals to the world about India’s intent. PM Modi in an interview also said that India as a nation is optimistic of the future, of reaching the $5 trillion target. With this confidence we will try and run faster in the next year to make up for the loss cause by the pandemic. The $5 trillion target will help us become the third largest in terms of current US dollar prices as well.

CHALLENGES

Rural India has distinct characteristics that must be considered; for example, one of the major challenges in tier 3 and other smaller cities is a complete lack of exposure to industrial culture among both children and educators. Educating kids is a monumental effort that necessitates the use of innovative ways.

According to a sample survey conducted by NSO in 2017 in India, 77.7% of those aged 7 and up are literate. Literacy rates were 73.5% in rural areas and 87.7% in urban areas, with male literacy rates (84.7%) being higher than female literacy rates (70.3%). In rural regions, just 5.7% had a bachelor’s degree or higher degrees, and metropolitan areas had 21.7%. In the past, India has approached a variety of issues deftly and imaginatively to find solutions to complicated challenges that caused a commotion in the BOP group’s everyday lives. Education has always been one of the most valuable resources in the fight against these challenges. In the upcoming years, promoting education must be a top priority. This must be comparable to programs like “Padhe Bharat,” by the Ministry of Education, a 100-day reading campaign that asks “young friends” to share their reading lists. Such programs will improve language proficiency and develop a culture of constructive reading and writing. BOP groups should receive an education beyond sales revenue to enable India’s population to produce more dazzling minds and achieve even higher economic heights. The National Education Policy (NEP) 2020 states that education is a requirement that should be available in even the most rural and distant locations. The Socio-Economically Disadvantaged Groups (SEDGs) paper, calls on the government to provide these areas with the appropriate consideration and incentives in the future. BOP groups are bound to be a driving factor but require a lot of support in terms of infrastructure, quality of education, and adequate teaching methods. Students today have a wide range of opportunities to study and develop. Many rural students now have it easier because of internet schooling in the post-Covid age of education. Online lessons are so convenient, skipping school is no longer an option. According to a Financial Express Economic Survey, the availability of smartphones climbed from 36.5 percent in 2018 to 67.6 percent in 2021, and lower-grade students found it more challenging to complete online tasks than their higher-grade counterparts. Children encountered obstacles such as the lack of smartphones and network or connectivity concerns. To address these issues, the Ministry of Electronics and Information Technology’s Digital India initiative has completely transformed the country with its programs. India now has 123 crore Aadhar cards, 120 crore active mobile connections, 49 crore internet subscriptions, and a network of 3.12 lakh common service centers. Providing rural youth with a wealth of possibilities for exploring their options for making a difference in the world is important.

To offer rural India a great education that leads to a quality life, filled with goals and aspirations, responsible authorities and educational institutions must face these difficulties head-on. Rural India has emerged as the key route to the Prime Minister’s $5 trillion economic plan.

Education and the accessibility of vaccinations were the key drivers in achieving such a remarkable success. The nation is generally headed in the right direction. India has generated brilliant minds throughout the 20th and 21st centuries and has consistently come up with original solutions to problems. The current rate of rural literacy in India is 73%, according to the India Brand Equity Foundation (IBEF). In India’s rural areas, 81% of men and 65% of women are literate. Literacy in rural areas is crucial for the Indian economy because it now accounts for 25–30% of the GDP of the nation.

All of nation’s citizens and leaders must come together and cooperate to work in the direction of making it a great nation. Prime Minister Modi’s vision of making India a $5 trillion economy and a global economic powerhouse by 2024-25 is “challenging” but “realisable”, as more reforms are being made, according to the Finance Minister. As a nation who believes in educating people and investing in education, no targets are unachievable if the focus is maintained, we can be confident that the Indian economy will soon be a $5 trillion economy.

Dr Prashant Bhalla, President, Manav Rachna Educational Institutions (MREI).

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Opinion

BJP, BSY NEED EACH OTHER MORE THAN EVER

R. Jayaprakash

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Whoever wrote the political obituary of former chief minister Lingayat strongman B.S. Yediyurappa and added him to the latest list of BJP’s margadarshak mandal, will now have to swallow their pride!

Just a fortnight after BSY declared that his son B.Y. Viyendra would be his political heir by making a strong pitch for the latter to contesting the 2023 elections from the family’s home turf Shikaripura constituency, the BJP has sought his services by bringing him onboard the parliamentary board and central election committee, highest decision making bodies of the world’s largest political party. Rising like a phoenix, BSY responded to the party’s move with a tweet thanking the Prime Minister, Home Minister and party president. In the same breath he says now he has the responsibility of building the saffron party in South India and bringing back BJP to power in Karnataka. The writing on the wall is bold and clear–BJP and BSY both need each other more than ever.

BSY had gracefully made way for the new leadership exactly a year ago and since then he has been patiently waiting. The last year saw Karnataka making national headlines, be it on hijab row or the political killings in the coastal areas of the state among others, some proved counter-productive too. Sometimes there was buzz of change in the chief minister, some hush murmurs about an unhappy BSY caged in his official quarters of Cauvery in Bengaluru.

The aura and persona of BSY is such that any top leader party who visited Bengaluru didn’t leave the city without meeting him. On the whole the party top brass realized that BSY is yet not a spent force and there was a lot of politicking left in him, and if the timing of Wednesday’s announcement is anything to go by, the coming assembly elections will be a prelude to the all-important 2024 general elections, with BSY will have his stamp all over these elections.

So what prompted the party leadership to revive BSY’s political journey? The Karnataka Congress gaining ground under D.K. Shivakumar and Siddarmaiah; Backlash and resentment amongst the Lingayat community, which is the dominant block in the state electorate; lack of mass leaders at the state level to carry the party forward; neutralize redemption by BSY by seeking to promote his son Viyendra thereby giving no scope for creation of another power center; stop Congress from breaking away the Lingayat vote share as grand old party’s MB Patil is perceived to be their heir apparent from the community…the points to ponder just grows. The importance attached to BSY at this hour is now seen as a master stroke by the political pundits as it couldn’t have come at a better time. The current situation warrants BSY to take charge of the state BJP first as the outgoing state president hasn’t made any significant impact on the party, secondly, there is heightened activity of internal squabbles and mud-slinging in public under the Chief Minister Basavaraj Bommai regime, what with his own law minister J.C. Madhuswamy’s leaked audio where he is heard saying this government is barely managing things.

As far as BSY role in Southern India is concerned, he has a daunting task as the party hasn’t made any kind of breakthroughs in Andhra, Telangana, Tamil Nadu or Kerala. While it played the second fiddle in Tamil Nadu, KCR in Telangana and Jagan in Andhra have conceded even a local body. The prospects of BJP was looking bright a couple of years ago in Kerala with polarization and political killings but diminished over a period of time. BSY has to reinvent himself if he has to flex his muscles in these states. But having said that one cannot discount the fact that the bold move to bring BSY back in the political equation at a higher pedestal, the party has now contained implosion and expanded BSY’s acumen in the larger interest of the party which till now was restricted to furthering the political fortunes of his family after stepping down as the chief minister.

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Opinion

Nitish’s big jobs vow may dent BJP’s Bihar poll show

Election promises are given an unceremonious burial as soon as they have served their purpose—lure the voters. But this time around, Nitish Kumar has added a new dimension to the issue with his promise of 20 lakh jobs.

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Nitish Kumar

After promising 2 million jobs for the youth of the state on Independence Day, Bihar Chief Minister Nitish Kumar has once again thrown the spotlight on unemployment and creation of jobs in political discourse of the country. It is not something new, though, as all political parties make such wild promises every time there are elections round the corner. They forget such tall promises as soon as elections are over. Parties making such promises simply do not bother about them after coming to power.

Unemployment and creation of jobs became a hot topic in 2019 parliamentary elections. The BJP had come to power in 2014 on twin planks of corruption and unemployment. The party promised to provide over 2 crore jobs every year, but failed miserably to fulfil it. Finding himself cornered on the issue by the Opposition, Prime Minister Narendra Modi defended his government saying self-employment had significantly increased during his first term. He even considered selling pakodas on a roadside cart could be an attractive employment opportunity for the young aspirants that led to a lot of hue and cry mong various sections of citizenry.

However, such poll promises are given an unceremonious burial as soon as they have served their purpose—lure the voters. The reason is that the Opposition is not strong enough to rally people around the issue and make it cause worth fighting for. It is no surprise then that the issue petered out after 2019. But this time around Nitish has added a new dimension to the issue.

There are two reasons why the topic is drawing so much attention. First, he had ridiculed a similar promise RJD leader Tejashwi Yadav had made during 2020 assembly elections that, if voted to power, his government would provide 10 lakh jobs. Nitish asked him how he would create so many jobs, where are the resources?

Nitish was then an alliance partner of the BJP-led NDA and he thought Tejashwi’s promise was making a profound impact on the aspiring youth of the state. So, he questioned Tejashwi’s poll promise.

The second reason is that Nitish’s volte face has forced the BJP to sit up. The party may find it difficult in the state if the promise of 20 lakh jobs makes an impact on voters in coming elections. Political observers feel that Nitish’s parting ways with his alliance partner BJP was a considered decision. He knows that it is his last innings as chief minister. If he had stayed with the BJP, he would have not been made chief minister again after the next assembly elections. But he may hold to the chair since he is with RJD now. The reason is his party JD(U) is losing steam and there is no face as powerful as Nitish in the party. It would have been logical, therefore, for the BJP to deny him the high chair in 2025. The BJP might have as well orchestrated his party’s merger with it. It is also possible that JD(U) may merge with RJD in days to come.

There is every likelihood, according to political pundits, that Tejashwi might seek the chief minister’s chair for himself either before the parliamentary elections or after assembly elections. Nitish, perhaps, has already seen such a possibility and has started playing his cards accordingly. His statements and acts so far indicate that he is eying Delhi. Nitish is well aware of the fact that there is no alternative to Prime Minister Modi at present and the Opposition has not yet a leader who could challenge Modi. The Congress party is finding itself on a sticky wicket on the issues of nepotism and corruption.

Under such circumstances, political analysts say, Nitish might give prime ministerial candidacy a shot in 2024. Though he might not create a major impact in other states, if his party and RJD win all 40 Lok Sabha seats, the BJP may find it difficult to form government at the Centre.

After Uttar Pradesh and Maharashtra, Bihar is the third state which returns the largest number of parliamentarians. The BJP and JD(U) had together won 39 Lok Sabha seats out of 40. The BJP might have come back to power in Maharashtra by engineering a vertical split in the Shiv Sena, but if the Udhav Thackeray-led Shiv Sena, NCP and Congress are able to hold together till 2024, the BJP may not be able to repeat the success it had in 2019.

Nitish is undoubtedly a seasoned politician. He knows it well that making the promise of providing 20 lakh jobs would certainly win youth over to the Grand Alliance. He is also aware of the fact that providing 20 lakh jobs is a tall order. There is no doubt that in the present worsening economic scenario it will be nigh impossible for any state government to create jobs in such big numbers. When he was an NDA partner, he had said that RJD chief Lalu Yadav had provided only 95,000 jobs in 15 years of his rule, whereas his government provided over 6 lakh jobs.

As far as unemployment is concerned, Haryana has the highest number of the unemployed and Bihar has the third largest number of the unemployed. However, there are 3 lakh posts lying vacant in the state Education Department alone. If the vacancies in all government departments are collated, the numbers stand at around 7–8 lakh, far less a number than promised. Tejashwi has stated that the government has already started work in this direction and the chief minster did not make the promise just for the heck of it. The BJP, on the other hand, has challenged him and has asked to present a blue print first as it is not possible under prevailing dismal economic situation.

The overall job situation in both the government and the private sectors is gloomy at best in the wake of the Covid-19 pandemic, with almost no significant employment generation. Businesses and enterprises in unorganised sector are facing an unprecedented squeeze with dwindling incomes. Bihar is no exception where industry is in shambles. The number of registered unemployed persons in Bihar stood at 78 lakh till March 2021 and 30 lakh more have been added to the numbers.

Undoubtedly, Nitish has made the promise in view of the coming parliamentary elections, but the issue has the potential to dent the BJP’s electoral performance in 2024. The BJP knows it well and has already started making strategies to counter that.

Ajit Maindola is a senior journalist.

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Is ‘blended finance’ a possible solution to the financial crunch in agriculture sector?

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If one sector has invariably encountered a finance shortage, it is agriculture. The gap between what is received and what is needed has been widening. No doubt, the government recognises it. Despite the recognition of such a stark issue, it has been seven decades since the problem has been continuing unabated.

Banks did not like financing agriculture because of the risks and uncertainties. Our country’s agriculture sector is subject to the vagaries of nature. Erratic precipitations, the lopsided irrigation system, and the magnitude of shocks like droughts and floods have made farmers’ life precarious and magnified their exposure and vulnerabilities. Banks never like such uncertainties.

But it is not just the climatic problems and natural disasters. Uncertainties come in other forms too. For example, the market is never stable. Variation in rainfall affects the level of production. Hence, the supply in the market also changes. Every year we see cases of skyrocketing prices of crops and vegetables. Someday it is onion, some other day it is tomato or potato.

To add to the above problems, we have loan waiver policies issued from time to time. There are price regulations and trade restrictions. The crux of the matter is that agriculture is not the comfort zone for the financers. Under such circumstances, the farmers suffer. Also, there are not many entrepreneurs who venture into agriculture enterprises. No wonder there are few takers for core agri-startups. Most agri-startups are related to the application of information technology, like app-based aggregation.

One way to deal with such a financing shortage is to change the mode of finance. Instead of only debt or equity, we can have a mix of them. There are also possibilities of blending it with grants and concessional loans. We call it “blended finance”.

When entrepreneurs start a business, they put their own money into it. That is called equity. But equity contribution is not always sufficient to initiate a business. One needs other forms of finances also. While equity financing is feasible, equity does not provide a guaranteed return; instead, a risk premium is attached to such financing. Hence, one can take debt to avert the risk of equity. In equity financing, one receives a dividend when there is a profit, which is also not guaranteed. In short, equity financiers bear the risk of the business along the stages. Debt financiers have less chance of taking the risk upon finance. While they are guaranteed a constant return, they are also subject to risks of business failure.

Grants come to the fore to reduce such a risk. With a small grant, one can start a business, and once such a business shows some success, it is easier to attract additional finance in the form of debt or equity. Theoretically, a mix of grants, debt, and equity, blended finance, can be used to solve a slew of problems of agricultural financing. An estimate suggests that blended finance has the potential to plug an annual financing gap to the extent of USD 2.5 trillion in emerging or developing economies. If such is the potential, every bank and every financier should support and encourage blended financing mechanisms. It should become a mainstream product of financial institutions. But that does not happen. Financial institutions, usually do not like such a blended finance structure.

A recent study of an integrated fish farming project in Odisha (Mainstreaming Blended Finance, published in Journal of Rural Studies, May 6, 2022) received financial support from NABARD, the apex refinancing agency of India. Additionally, the project received concessional loans, a smaller grant, and contributions by farmers, which can be compared to equity. The total project cost was about INR 50 million. The project was a success in terms of returns to the farmers and recovery of the loans. But the banks hardly followed such financing models.

Internationally, too, such blended finance structure has become popular. Smallholders in Ghana accessed blended finance facilities to procure high quality seedlings of export-oriented crops and Nigeria fish farmers used it for meeting the income shock and food security. There are several such examples. The potential is high, but we need to be careful of the factors that hinders such a facility to be followed commercially.

It requires multi-agencies collaborations and a lead agency to manage it. Unfortunately, our financial institutions are neither trained nor oriented in managing such complex-looking transactions. The study mentioned above says that many bankers, during the consultation, admitted that they appreciated the power of blended finance, wanted to join the bandwagon, and even lead such initiatives. But their hands are tight because of strict financing protocols. If blended finance becomes a mainstream product, government support and clear policy directions are necessary. It has proven its mettle and is considered the most feasible and effective approach to financing risk-prone agriculture in India. If all agriculture financing agencies come together and make a rule, implementation becomes easier and taking care of financial shortages is a possibility. Let’s give it a try. Indian farmers and Indian agriculture need it.

Prof Pradeep Mishra is faculty of Rural Management at XIM University Bhubaneswar. Prof Kushankur Dey is faculty and Chairman of Centre for Management of Agriculture at IIM Lucknow.

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Opinion

INDIA IN AMRIT KAAL

Joyeeta Basu

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From the time Narendra Modi has become Prime Minister for the first time in 2014, his speeches on Independence Day have gone beyond listing the achievements of the government and walked into a territory where a very strong reformist streak comes to the surface, with the aim being to reform Indian society for the better—a push that can come only when someone has had a very close connect with the grassroots, which the PM has had throughout. Before 2014, who would have thought that an Indian Prime Minister could pick up issues such as sanitation, cleanliness, and even the problem of single use plastic during the most important speech that he delivers in a year—on Independence Day? But he has been doing so over the years—picking up various issues, seeking reform, promising action, and eventually making policy and getting them implemented on the ground. Take the Swachh Bharat movement for example, a promise, which when translated into policy has resulted in the world’s largest toilet building exercise, and notwithstanding the carping by critics, a very successful one too. This single campaign has been a life changing exercise, for the better, for a huge swathe of the population, something many of us used to a modern, urban lifestyle may not always realise. What we are witnessing is a constant push towards development, where incremental steps will not suffice, but quantum leaps have to be taken for sabka vikas with sabka saath and sabka vishwas. It is in this context that the Prime Minister’s vision of India in 25 years, when India completes 100 years as an Independent nation has to be seen—the vision that he spoke of from the ramparts of the Red Fort on Independence Day. It’s the beginning of Amrit Kaal that will culminate into 15 August 2047. He spoke of the “paanch pran”—roughly translated as five pledges or five vows—that will take India towards this goal. These are: making India into a developed nation; removal of the slavery of the mind; feeling proud of our heritage and legacy; unity in the form of Ek Bharat, Shresth Bharat; and the citizen’s duty towards the nation.

To pick up the point of the goal of becoming a developed nation, it is not every day that such a challenge is given to a country with a population as huge as India’s, with a per capita income of $2,227 (World Bank, 2021). Certain economists take $12,000 per capita income for a country to be considered as developed. By that standard, China, with a per capita income of $12,556 (World Bank, 2021), has achieved developed status. In other words, India has to reach China’s current economic status ($17.7 trillion GDP) in another 25 years to be called a developed nation.

Tough? Yes. Impossible? No.

It is all about taking quantum leaps—of making “huge resolutions”—which the Prime Minister believes can be taken given the way India has achieved vaccinating 200 crore people in little over a year, the way electricity has been given to a record number of people in record time, the way the work towards renewable energy is going on, etc.

If we look at India’s growth trajectory, there is reason to hope. It is after all the fastest growing major economy in the world, in spite of the setbacks it has faced in the last few years because of Covid and because of the fallout of the Ukraine-Russia war. India’s projected growth rate for 2022-2023 is expected to be in the range of 9%. Economists say that India needs to aim for a growth rate of over 10% for at least a decade to grow to at least a $10 trillion economy in another decade or so. Even otherwise, the $5 trillion target by 2025 does not look unachievable, given that India is hovering in the range of $3 trillion already. But it will not be an easy task, because of the resistance to reform that comes from certain sections of the political class and from vested interests within the bureaucracy and others who are part of the system. Think of the farm laws and how misinformation and disinformation scuttled a huge opportunity the country had to increase the income of the marginal farmers. In fact, reforming the agriculture sector, which employs around 50% of the country’s workforce, will automatically fast-track our growth trajectory. Let’s also not forget manufacturing, another area where India can grow at a much faster pace. The need of the hour is decoupling from China and creating the right kind of environment for businesses that are looking to shift out of China and go to countries that have the potential to absorb the humungous investments that they have to offer.

If these two core issues start getting sorted out, almost everything will start accelerating in the right direction. And this is where India believes that the Prime Minister’s innovative governance has planted the seeds to actualize the vision of India becoming a developed nation in this Amrit Kaal.

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Opinion

Smoke and fire in Khyber Pakhtunkhwa

Khyber Pakhtunkhwa is emerging as a battleground for China, Pakistan, Tehrik-e-Taliban Pakistan, and the Afghan Taliban.

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Pakistan is facing a severe economic crisis, rising discontent and security threats nationwide. In the north, Gilgit Baltistan (G-B) residents are living amid fears of the region being ceded to China to repay loans which Islamabad is struggling with. In the southwest, Balochistan is in flames, with the locals vehemently protesting against the absence of any employment opportunities in the Chinese projects, and forced disappearances of the Baloch activists.

However, there is a fourth front to Islamabad’s panic, beyond G-B, Balochistan, and economic woes. It is now Khyber Pakhtunkhwa (KP) that has become the crossroads for Pakistan, China, Afghanistan, and various militant groups, each fighting a different battle. As the region becomes a battleground, the great power competition is also returning.

Khyber Pakhtunkhwa is the third largest populated province in Pakistan, with Gilgit-Baltistan to its Northeast, Afghanistan in the Northwest, Balochistan in the South, Pakistan-occupied Kashmir (PoK) to the East, Punjab, and Sindh to its east and southeast. This makes it one of the most volatile regions in the world. The majority ethnic group in the province is Pashtuns, which is also the primary ethnic group that forms the Afghan Taliban.

While endowed with substantial natural resources, it contributes to only 10% of Pakistan’s GDP. As the government focused on Sindh and Punjab provinces over the past decades, this province has remained largely undeveloped.

In 2018, the Pakistani government decided to merge the adjacent semi-autonomous Federally Administered Tribal Areas (FATA) into KP. For long, the FATA (locally referred to as “Qabalistan” or the “Land of Tribal Militias”) served as home to various militant groups fighting against the US-led campaign in Afghanistan. A Pashtun leader remarked in 2016 that if Afghans are harassed in other parts of Pakistan, they should come to KP province as no one can ask them for refugee cards here because this province belongs to the Afghans.

THREAT OF TEHRIK-E-TALIBAN

PAKISTAN (TTP)

While Pakistan has shared a close relationship with the Afghan Taliban for decades, it has hit rock bottom over the past year. Islamabad is now finding it the hard way that their interests do not converge with the Afghan Taliban as much as they hoped. Beyond disagreements over the border demarcation, a critical issue between Afghanistan and Pakistan is now the stance toward the TTP. With the stated objective of removing Islamabad from the KP province and establishing an Afghan Taliban-like governance structure in Pakistan, TTP has conducted regular attacks in Pakistan over the years and is now the most prominent militant group fighting against the Pakistan state.

In 2018, TTP formally excluded the call for a “greater jihad” in Afghanistan and al-Qaeda’s global jihad from its manifesto. In 2020, the group re-emphasized that it no longer pursues any regional or global agenda beyond Pakistan. But this has been primarily seen as a strategy to divert global attention to other militant regional actors like the Islamic State-Khorasan.

TTP claimed hundreds of attacks on the Pakistani army and other agencies last year. It has been considered behind the April 2021 hotel bombing in Pakistan’s Quetta, which was about to be visited by the Chinese ambassador. More recently, in April this year, the group attacked a Pakistan army convoy, killing seven.

The Afghan Taliban denies its influence over the TTP or uses it as a rebel proxy. However, as the TTP consists of the Pashtun brethren who fought against the US-led coalition, the reluctance in Kabul to act over increasing Pakistani and Chinese demands to eliminate the TTP is evident. On the other hand, TTP has resisted any attempts by the Afghan Taliban to influence the TTP agenda. Its leadership even threatened to switch loyalties to the IS-K if the TTP is pushed to compromise its agenda against the Pakistan state.

A WORRIED BEIJING

Beyond Islamabad, the emerging dynamics in KP have caused panic in Beijing for multiple reasons. While China continues to witness opposition toward the China-Pakistan Economic Corridor (CPEC) in Balochistan and G-B, Chinese personnel and resources in the KP province have been increasingly targeted in recent years. In July 2021, a bus carrying Chinese workers was attacked, resulting in the deaths of 10 Chinese nationals and leaving 28 others injured.

Beijing sees TTP as an instrument of proxy terrorism. While Beijing pressurizes Islamabad to neutralize the Baloch threat, it has sought to influence both the Afghan Taliban and Islamabad to act against the TTP. TTP also worries Beijing as it maintains relations with the IS-K, a group which has jihad in mainland China on its agenda to avenge China’s persecution of Uyghur Muslims. The TTP is believed to have associations with The East Turkestan Independence Movement (ETIM), which has conducted several attacks in China over the years and seeks independence of Xinjiang and the liberation of the Uyghur Muslims.

For China, the growing TTP-ETIM-IS nexus can prove fatal not only for its BRI ambitions but also for its internal security. It remains to be seen what steps Beijing will take in the absence of any concrete steps by Pakistan and Afghanistan to neutralize threats against Chinese interests. In the shadows of the much-highlighted Taiwan visit by US Congresswoman Nancy Pelosi, another significant visit, albeit with less fanfare, took place later that week.

The event was the US ambassador Donald Blome’s visit to Pakistan’s Khyber Pakhtunkhwa (KP) province.

The ambassador highlighted the US government’s extensive economic and development assistance, which has benefitted the residents of KP. As Pakistan’s financial woes grow and Chinese projects face difficulties, there have been whispers in Pakistan to turn to the West for help. Recent reports even alleged that Pakistani officials could abandon the CPEC if the US offers a similar deal.

With Pakistan increasingly isolated on international platforms and bereft of options for international support, the TTP and IS-K threat have significantly raised Pakistan’s threat profile. Islamabad is now seeking the Afghan Taliban’s help in mediation with the TTP as it continues to suffer losses against the TTP.

Meanwhile, The Afghan Taliban stresses that it does not want to interfere in the India-Pakistan issues. Recently, Afghanistan warmed up to India last month by extending a welcome to India-trained Afghan cadets who returned to Kabul. These developments have raised tensions in Islamabad.

Like the BLA, Islamabad alleges that the TTP is an Indian tool to foment unrest and instability in Pakistan. For the Afghan Taliban, the TTP and India are increasingly becoming leverage options against Pakistan. As India views progress on anti-terrorism as a prerequisite to engagement, it will seek the Afghan Taliban’s commitment against the use of Afghan land for any activities that are against India’s security and interests.

New Delhi will wait for Islamabad to realize the perils of supporting terrorism as it now threatens Pakistani interests. With Islamabad now having too much on its table, it is being forced to rethink the “all-weather friendship”.

Divyanshu Jindal is a Research Associate at the Centre for Air Power Studies, New Delhi.

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