July 2020 India and the World

Sakshi Education

RBI Signs Currency Swap for Sri Lanka
Recently, India and Sri Lanka had a virtual meeting in the wake of the Covid-19 pandemic.

It was attended by the officials from the Ministry of External Affairs, Ministry of Finance, representatives of the Sri Lankan government and the Export-Import (Exim) Bank.

Exim Bank is the premier export finance institution of India.

Key Points
The Reserve Bank of India has agreed to a USD 400 million currency swap facility for Sri Lanka till November 2022 to boost the foreign reserves and ensure the financial stability of the country.

Currency Swaps are used to obtain foreign currency loans at a better interest rate than could be obtained by borrowing directly in a foreign market.

Central banks and Governments engage in currency swaps with foreign counterparts to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis till longer arrangements can be made.

The decision comes five months after Sri Lankan Prime Minister Mahinda Rajapaksa had visited New Delhi and a recent bilateral discussion on rescheduling Colombo’s outstanding debt repayment to India.

Sri Lanka owes USD 960 million to India.

Government and industry representatives from both countries also participated in a webinar on ‘Deepening Economic Collaboration between India and Sri Lanka’, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in association with other institutes.

Sri Lanka highlighted that non-tariff barriers in receiving countries create difficulties in market access.

A nontariff barrier is a way to restrict trade by using barriers other than a tariff. These include quotas, embargoes, sanctions, and levies.

To resolve that, it urged FICCI to collaborate with the Sri Lankan Mission in New Delhi to help boost the export of its spices and concentrates to the Indian market.

Current Dynamics of India-Sri Lanka Relations
Sri Lanka has not commented anything on the ongoing conflict between India and China, both of which are its closest partners.

Sri Lanka has not taken any final decision on the East Container Terminal (ECT) project at the Colombo Port.

There have been widespread protests alleging the Sri Lankan Government of giving away national assets to India even though Sri Lanka’s Port Authority will retain 100% ownership of the facility.

In 2019, Sri Lanka, India and Japan signed a tripartite Memorandum of Cooperation and agreed to jointly develop the ECT Project.

In November 2019, India announced a USD 450 million Line of Credit to Sri Lanka, to help strengthen its infrastructure and economy which showed a proactive, relation-building approach.

India assisted Sri-Lanka in tackling Covid-19 and also helped in the ‘SuwaSeriya’ ambulance service. The assistance shows good links in the health sector, including telemedicine, between both countries.

Popular Tamil leaders in Sri Lanka still invoke India on the pending political solution to the Tamil question, which at times can give an impression of India interfering in internal matters of Sri Lanka.

In 1983, India played an active role in the war between Sri Lankan Tamils and the Sinhalese majority.

In 1987, the Indo-Lanka Accord was signed to provide a political solution to Sri Lanka’s conflict.

It proposed the establishment of a provincial council system and devolution of power for nine provinces in Sri Lanka (also known as The Thirteenth Amendment).

However, Tamil leaders feel helpless and keep appealing to India but with its growing geopolitical concerns in the region, India is unlikely to take any strong position on the issue now.

Concerns:
The Sri Lankan President pointed towards India’s varying amounts of developmental assistance in the northern Tamil region and highlighted the discriminatory tendencies.

India’s attitude and relationship with her immediate neighbours depend on their appreciation of India’s regional security concerns.

India expects her neighbours to serve as buffer states in the event of an extra-regional threat and not proxies of the outside powers.

Suggestions:
Both countries can explore possible collaborations in textiles, information technology and agribusiness, few of the sectors on which India has a stronghold.

Sri Lanka should facilitate, protect and promote a liberal ecosystem for Indian investors and welcome Indian businesses in developing industrial zones, automotive components, pharma, textiles and engineering.

There should be continued high-level engagement on building economic and people-to-people links.

Both of them should focus on increasing the volume and quality of people-to-people links, without assuming they will naturally result from geographical proximity.
India Collaborated with Israel in Defence Sector under FDI
India has collaborated with the Israeli defence companies under the new liberalized Foreign Direct Investment (FDI) regime in defence manufacturing.

Earlier, the government has increased the limit for FDI in defence through the automatic route from 49% to 74%.

FDI is an investment made by a firm or individual in one country into business interests located in another country.

Key Points
Context: Recently, the Defence Ministry has given emergency powers to the Armed Forces to procure weapons systems up to Rs. 300 crore on an urgent basis without any further clearances to cut short the procurement cycle.

Therefore, Indian Armed Forces are undertaking a series of emergency defence purchases amid ongoing tensions with China on the border.

The Army has decided to order launchers, Spike Anti-Tank Guided Missiles (ATGM) and additional Heron Unmanned Aerial Vehicles (UAV), from Israel through the emergency procurement route.

India-Israel Defence Cooperation
Description: The strong bilateral ties of India and Israel are driven by their respective national interests—i.e., India’s long-sought goals of military modernisation, and Israel’s comparative advantage in commercialising its arms industries.

The ambit of defence cooperation has widened to include other domains like space, counter-terrorism, and cyber security and intelligence sharing besides Israeli arms sales to India.

India was the largest arms customer of Israel in 2017 with sales worth 715 million USD.

According to the Stockholm International Peace Research Institute (SIPRI) report, Israel is the third largest supplier of defence items to India after Russia and the USA, the first and second respectively.

Historical Ties: The strategic cooperation between the two countries began during the Sino-India War of 1962.

In 1965, Israel supplied M-58 160-mm mortar ammunition to India in the war against Pakistan.

It was one of the few countries that chose not to condemn India’s Pokhran nuclear tests in 1998.

It continued its arms trade with India even after the sanctions and international isolation after the nuclear tests.

Significance:
Patrolling and Surveillance: The Israeli imports eases the operational ability of armed forces in wartime. For instance, the missile defence systems, and ammunition played a crucial role in controlling the escalation between India and Pakistan post-Balakot air strikes.

Make in India: The export-oriented Israeli defence industry and its openness to establishing joint ventures complement both ‘Make in India’ and ‘Make with India’ in defence.

Trusted Supplier: Israel has always been a ‘no-questions-asked supplier’, i.e., it transfers even its most advanced technology without placing limits to its use.

Its credibility was reinforced during the Kargil War of 1999 when it supplied the Indian Air Force (IAF) with the Unmanned Aerial Vehicle (UAV) ‘Searcher’ and surveillance systems for Jaguar and Mirage squadrons.

Similar weapons were used in the Balakot strike in February 2019.

Ready to Use Technology: India suffers from many constraints in defence production and acquisition including lack of technical expertise, lack of manufacturing infrastructure, inadequate funding and project delays. Israel fills these shortcomings by supplying ready-to-use critical technologies, even on short notices.

Challenges:
Influence of USA: Some of the Israeli technologies utilise USA components because of which the USA has veto powers over the sale of those technologies. Hence, it may cause hurdles in transportation of technologies.

Cold War Politics: The potential of India-Israel ties have been sacrificed on the altar of Cold War politics. Factors like Arab–Israeli conflict, Iran-Israel conflict, constant interference of countries like Russia and USA in such issues and overall relationship of India with these countries have impacted the ties with Israel.

Non Alignment: India’s commitment to the non-alignment causes freezing relations with Israel that were increasingly seen as leaning towards the Western bloc. India must strategically balance its relationship with Israel on conflict issues.

Dependence for Energy Security: India’s dependence on Arab states for oil imports led to a pro-Arab tilt in its West Asia Policy, which has further constrained Israel's options in the region.

Israel Palestine Conflict: The territorial conflicts of Gaza Strip and West Bank have played an important role in shaping India-Israel relationships.

Due to Israel-Palestine peace negotiations (Oslo Accords of 1993) India has started normalising the relationship with Israel.

However, as a part of Link West Policy, India has de-hyphenated its relationship with Israel and Palestine in 2018 to treat both the countries mutually independent and exclusive.
Bipartisan support in US grows for India against Chinese aggression in Ladakh
India has received a strong bipartisan support from members of the US Congress against the recent Chinese military aggression in Ladakh.

In the last few weeks, dozens of lawmakers, across the aisle, both on the floor of the House of Representatives and the Senate and outside the Capitol have praised India for standing strong against the Chinese efforts to grab Indian territories.

Addressing the US House of Representatives, Congressman Frank Pallone, one of the senior-most Democratic lawmakers, asked China to end its military aggression. Other lawmakers also condemned the recent Chinese aggression along the LAC in Ladakh region.

At a time when there is a bitter political divide in Washington DC, influential lawmakers from both the GOP and Democratic Party have been supporting Indian stand against China.
INDIA-UK Free Trade Agreement
Recently, India and the United Kingdom (UK) affirmed their shared commitment towards a Free Trade Agreement (FTA) during the 14th virtual Joint Economic and Trade Committee (JETCO) meeting.

The next meeting is scheduled to be held around September, 2020 in New Delhi to carry forward the dialogue.

Key Points
Description: The meeting was held by India and UK to revive and revitalize the long standing trade and economic linkages between them.
They agreed to an early harvest scheme or a limited trade agreement to lower tariffs on a small set of goods apart from easing rules for select services.
They also resolved to cooperate in the health sector especially in the wake of Covid-19 pandemic. Previously, India and the UK were involved in discussing a preferential trading arrangement under the proposed India-European Union FTA.
In FTA, two trading partners eliminate or significantly reduce import duties on the maximum number of goods traded between them.
India-UK Trade: India has had strong historical ties with the U.K. and currently, it is one of India’s most important trading partners.
It is a significant partner of India as an FDI investor after Mauritius and Singapore which ranked second and first respectively.
Similarly, the U.K. is one of the largest investors in India, among the G20 countries.
The bilateral trade between the two countries stood at 15.5 billion USD in 2019-20 as against 16.87 USD billion in 2018-19.
India has engagement with the UK in sectors like pharma, textiles, leather, industrial machinery, furniture, and toys.
India is also looking to the UK to support it with technology based products such as high quality cameras, medical devices, and automobiles.

Significance:
Brexit: The UK has been pushing India for a bilateral trading arrangement ever since it voted to leave the European Union (EU) in June 2016 and left finally in january 2020.
However, India had been resisting these efforts as it decided that the Brexit process should complete first.
India has been keen to understand how much of a "special and preferential" access the UK will get in the vast European market when it is out of the EU’s single-market dynamics.
Hence, these talks would help in intensifying the beneficial aspect of the UK as a trading partner of India.
Exit from RCEP: India opted out of the Regional Comprehensive Economic Partnership deal in November 2019.
Therefore, there is renewed focus on trade deals with the US, the European Union and the UK, which are key markets for Indian exporters and are keen to diversify their sourcing.
Strategic Partner: The UK is a permanent member of the UN Security Council, and one of the strategic partners of India.
Strengthening bonds with the trade would seek UKs support at global issues like standoff with China in the Ladakh sector of the Line of Actual Control (LAC) and claim for permanent seat at UNSC.
Review of Trades: India could seek a review of trading agreements including renegotiating tariffs on some items along with the tightening of provisions governing country-of-origin certification.
India-Indonesia Defence Ministers’ Dialogue
Recently, the Defence Ministers’ Dialogue between India and the Republic of Indonesia has been held in Delhi.

The Indonesian Defence Minister General Prabowo Subianto is in India for strengthening the ties between the two maritime neighbours.

Key Points
At the dialogue, India and Indonesia aimed at injecting a new momentum to their strategic partnership by expanding security cooperation in a range of areas including defence industries and technology sharing.
India conveyed satisfaction on the military to military interactions and indicated that the defence cooperation between both nations has witnessed an upswing in recent years, in consonance with the Comprehensive Strategic Partnership between the two sides.
The issue of possible export of BrahMos cruise missile to Indonesia by India and ways to further deepen maritime security cooperation figured prominently in the talks.
Even though both countries acknowledge China's aggressive posturing in eastern Ladakh and the South China Sea, there was no official statement on it.

India-Indonesia
Both of them have agreed to work together for peace, security, and prosperity in order to achieve their shared vision on maritime cooperation in the Indo-Pacific region.
The Strait of Malacca - waterway connecting the Andaman Sea (Indian Ocean) and the South China Sea (Pacific Ocean) - runs between the Indonesian island of Sumatra to the West and peninsular (west) Malaysia and extreme southern Thailand to the east.
Both of them recognise the threat of extremism and terrorism and have agreed to work closely bilaterally and globally to tackle them.
India is working with Indonesia to strengthen the ties in the areas of defence, security, connectivity, trade and investment and people-to-people exchanges.

Trade and Commerce:
Bilateral trade has increased from USD 4.3 billion in 2005-06 to USD 21 billion in 2018-19.
Indonesia has emerged as the second largest trading partner of India in the ASEAN region.
India is the second largest buyer of coal and crude palm oil from Indonesia and imports minerals, rubber, pulp and paper and hydrocarbons reserves.
However, there is a need for greater market access for Indian commodities in Indonesia including, pharmaceutical, automotive and agricultural products.
Both countries are members of G20, the Non-Aligned Movement (NAM), East Asia Summit and the United Nations.

Comprehensive Strategic Partnership:
The two countries inked a defence cooperation agreement in 2018 which aimed at reflecting the elevation of the relationship between the two countries to a comprehensive strategic partnership. 2019 marked the 70th anniversary of the establishment of diplomatic relations between India and Indonesia.
In September 2019, Indonesia announced that the country's capital would be relocated to East Kalimantan province on Borneo island from Jakarta.

Bilateral Exercises:
Exercise Samudra Shakti the bilateral maritime exercise.
Garuda Shakti is the joint military exercise between India and Indonesia.
Indian Military Equipment of Russian Origin
According to a paper published by Stimson Center, 86% of the equipment, weapons and platforms currently in military service in India are of Russian origin.

The Stimson Center is a nonprofit think tank based in Washington, USA. It aims to enhance international peace and security through a combination of analysis and outreach.

Key Points
Data Analysis:
Stimson Center data shows that more than 55% of Indian defence imports since 2014 have been from Russia.

For the Navy, more than 41% equipment is of Russian origin while two-thirds for the Indian Air Force (IAF).

The figure for the Army is 90%, as it assigns around 10,000 pieces of military hardware from Russia.

Stockholm International Peace Research Institute (SIPRI) data shows that Russia continues to occupy the First position as India’s defence supplier, with 9.3 billion USD worth of exports to India.

The USA is at second, with defence supplies worth 2.3 billion USD to India in the same period.

Russia's Military Equipment:
The Navy's only active aircraft carrier INS Vikramaditya and it's only nuclear attack submarine in service, Chakra II, are from Russia.

So are the Army’s T-90 and T-72 main battle tanks and IAF’s Su30 MKI fighter.

The country’s only nuclear-capable supersonic cruise missile, BrahMos, is produced by a joint venture with Russia.

As India has been spreading its supplier base with Israel, USA and France, Russia still remains a major supplier. This is indicated by following latest developments:

India has approved proposals to acquire 21 Mig29 and 12 Su30 MKI fighter aircraft from Russia for 2.4 billion USD.

India and Russia had agreed to a joint programme to develop a variant of Fifth Generation Fighter Aircraft Programme (FGFA) in 2007.

As India has not committed to the Fifth Generation Fighter Aircraft Programme (FGFA) programme with Russia.

It is negotiating on the price of AK103 rifles for Make in India.

USA’s Military Equipment: Apache and Chinook helicopters, M777 howitzer guns for the Army.

Reasons: Boeing C-17 and C-130J for IAF and P8I submarine hunter aircraft for Navy.

There are many reasons for India's dependency on Russia for the supply of military equipments:

Legacy Issue: India and Russia have a longstanding defence relationship and there is familiarity with each other’s processes and systems.

Specialised Equipment: The kind of specialised equipment that Russia provides to India makes a difference from other countries, e.g. the S-400 Air Defence Missile Systems, nuclear submarines and aircraft carrier.

Combat Capability: Each of the systems supplied by Russia has its advantages and uses as they have been used effectively to develop maximum combat capability especially when focusing on India’s higher-end strike platforms.

Significance:
Border Clash with China: Notwithstanding India’s growing mutual convergence with the USA against China following the recent tensions on the Ladakh border, its armed forces remain heavily dependent on equipment, weapons and military platforms of Russian origin which form the bulk of its inventory.

USA’s CAATSA: Recently, the USA has asked all its allies and partners, including India, to stop transactions with Russia. The USA can risk triggering sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA).
G20 Digital Economy Ministers Meeting
Recently, a virtual meeting of G20 Digital Economy Ministers was hosted by Saudi Arabia in which Indian Union Minister for Electronics and Information Technology represented India.

Saudi Arabia is holding the presidency of G20 currently.

Key Points
Few major initiatives taken by India to tackle Covid-19 were highlighted:

Early lockdowns which helped in curbing the spread of the virus as well as preparing for the upcoming challenges effectively.

Digital innovations for managing Covid-19:
Initiatives like AarogyaSetu mobile app, Covid-19 Quarantine Alert System (geofencing system for monitoring quarantined patients) and Covid-19 Savdhan (bulk messaging systems).

Direct Benefit Transfers and digital payments ensured that even the weakest in the society was provided various financial relief during the lockdown.

India Emphasised Upon:
Emerging technologies like Artificial Intelligence should be leveraged for inclusive growth and development especially in healthcare and education.

In the wake of a pandemic like Covid-19, there is a need for building a resilient global supply chain.

India’s potential as an attractive destination for investment closely integrated with global supply chains was also brought into focus.

All digital platforms need to be accountable and sensitive towards concerns related to defence and data privacy of citizens of sovereign countries.

The comments follow the Indian government’s move to ban 59 Chinese applications citing a threat to national security and sovereignty.

India’s Step for Data Protection:
India is soon going to put in place a robust personal data protection law (Personal Data Protection Bill 2019) which will not only address the data privacy-related concerns of citizens but also ensure availability of data for innovation and economic development.
UNICEF India joined hands with FICCI’s SEDF to Initiate “#Reimagine Campaign”
United Nations Children’s Fund (UNICEF) India on July 13, 2020, joined hands with Federation of Indian Chambers of Commerce and Industry’s (FICCI) Socio Economic Development Foundation (SEDF) to initiate UNICEF’s “#Reimagine Campaign” for the support of most vulnerable populations and children during the ongoing COVID-19 response and its aftermath in India. Their action plan will be based on the document that is being developed jointly by the International Chamber of Commerce (ICC) and UNICEF for governments and businesses on the measures they can take to support the post-pandemic recovery.

Importantly, Ogilvy, a New York (United States) based advertising agency is offering free of charge support in developing the creative narrative for the campaign.

Key Points:
FICCI-Socio Economic Development Foundation (SEDF) will reach out to its membership base to garner support for the campaign and leverage its resources like cash and core assets to mobilise funds.

The partnership will also help to avoid potential long-term damage to business operations and employment pipelines, and their most important resource, their personnel, their children and their families.

About #Reimagine Campaign:
In response to the COVID-19 pandemic, UNICEF has launched Reimagine – an urgent appeal to governments, the public, donors and the private sector to support UNICEF’s efforts to respond, recover and reimagine a world severely impacted by COVID-19.

Points to be noted:
In India, CHILDLINE 1098 responded to a total of 460,000 calls in 21 days, of which 20 % resulted in interventions for preventing child abuse, trafficking, child marriage and child labour.

According to the newly published study by Johns Hopkins Bloomberg School of Public Health in the Lancet Global Health Journal, due to reductions in routine health service coverage levels, disruption in live saving immunization activities and an increase in child wasting, in next six months up to 300,000 children could die in India alone.
Melghat Tiger Reserve
The Chief Minister of Maharashtra has requested the Union government for considering an alternative alignment for the Akola-Khandwa rail line that passes through the Melghat Tiger Reserve.

Key Points
Location:
It lies in Melghat Forests of Amravati district in Vidarbha region of Maharashtra bordering Madhya Pradesh in the North and East.

It is a part of the Satpura-Maikal landscape.

Tiger Reserve:
It is spread over an area of 2768.52 sq km.

It is among the first nine places in the country designated as tiger reserves in 1973-74.

Project Tiger was launched in 1973.

It was the first Tiger Reserve to be declared in the State of Maharashtra.

Protected Areas within the Reserve:

It consists of Gugamal National Park, Wan, Ambawarba and Narnala sanctuaries.

Features:
It is the Deccan trap and underlying rock is basalt in one form or another.

It has various species of mammals including Tiger, Leopard, Sloth bear, Gaur, etc.

The forests are of deciduous nature and have been classified as ‘dry deciduous forests’. Most prominent is Teak.

It forms a very important catchment to Tapi river systems.

The Korku tribe adds to the cultural diversity of the Reserve.

Other Tiger Reserves in Maharashtra:

Tadoba-Andhari

Pench

Sahyadri

Navegaon-Nagzira

Bor
Agreement on Scientific Cooperation Between India and EU
Recently, India and the European Union (EU) agreed to renew the Agreement on Scientific Cooperation for the next five years (2020-2025) during the virtual 15th India-EU Summit.

Key Points
Renewal of Agreement on Scientific Cooperation:

India and the EU have agreed to further collaborate in research and innovation based on the principles of mutual benefit and reciprocity, as established in the India-EU Agreement on Science and Technology (2001) which expired on 17th May 2020.

Both parties are also committed to launch the renewal procedure for the above agreement and acknowledge 20 years of cooperation on research and innovation.

Significance:
It is expected to enhance research and innovation cooperation in different fields like Water, Energy, Healthcare, Agritech& Bioeconomy, Integrated Cyber-Physical Systems, Information and Communication Technologies, Nanotechnology, and clean technologies, etc.

It will also strengthen the institutional linkages in research, exchange of researchers, students, startups and attract co-investment of resources for co-generation of knowledge.

India-EU Science and Technology Cooperation:

Science and Technology: India-EU Science & Technology Steering Committee meets annually to review scientific cooperation.

The Ministry of Earth Sciences (MoES) and the European Commission (EC) have established a Co-Funding Mechanism (CFM) to support joint research projects selected under European Research & Innovation Framework Program ‘Horizon 2020’ related to climate change and polar research.

Space Technology: Indian Space Research Organisation (ISRO) has had a long standing cooperation with the European Union, since the 1970s.

ISRO and the European Space Agency are working towards enhancing cooperation in earth observation. It also involves the Copernicus programme signed in 2018.

Copernicus is the European Union's Earth observation programme.

India-EU Relations
Evolution of Diplomatic Relations:
India being amongst the first countries to establish diplomatic relations with the European Economic Community in 1962.

The first India-EU Summit was held in Lisbon (Portugal) in 2000. Since then, fifteen annual bilateral Summits have been held between India and the EU.

The relationship was upgraded to a ‘Strategic Partnership’ during the 5th India-EU Summit held at the Hague (Netherlands) in 2004.

The bilateral Strategic Partnership encompasses dialogue mechanisms covering a wide range of issues including trade, energy security, science & research, non-proliferation and disarmament, counter terrorism, cyber security, counter-piracy, migration and mobility, etc.

Trade and Investment:
The EU as a whole was India’s largest trading partner while India was EU’s 9th largest trading partner in 2018.

India is also the fourth largest service exporter to the EU and the sixth largest destination for service exports from the EU.

EU is the largest source of Foreign Direct Investment (FDI) into India.

Over the period April 2000 to June 2018, FDI equity flows from the EU countries into $ 90.7 billion, which is about 24% of the total FDI inflows to India.

Among countries, Singapore is the largest source of FDI in India during 2019 with $ 14.67 billion investment followed by Mauritius ($ 8.24 billion).

India and the EU are in the process of negotiating a bilateral Broad-based Trade and Investment Agreement (BTIA) since 2007.
India is no longer involved in the Farzad-B gas field project of Iran
Recently, the Ministry of External Affairs (MEA) has confirmed that India is no longer involved in the Farzad-B gas field project of Iran.

Further, it said that India has not received any response from Iran since December 2019 on the future of the Chabahar-Zahedan railway project as well.

It cited policy changes by the Iranian government, Iran’s uncertain finances, and the USA sanctions situation as the reasons behind the decisions on Indian infrastructure projects in Iran.

Key Points
Farzad-B Gas Field:
It is located in Persian Gulf (Iran).

The contract for exploration of the field was signed in 2002 by Indian consortium comprising ONGC Videsh, Indian Oil Corporation and Oil India.

The contract expired in 2009 after declaration of commerciality of the field, based on the gas discovery.

It has gas reserves of more than 19 trillion cubic feet.

ONGC has invested approximately USD 100 million.

Since then, the consortium has been trying to secure the contract for development of the field.

The major dispute between India and Iran was over setting up of two pipelines, and also over money to be quoted on the development plan.

Around 75% of the deal was finalised by May 2018, when the USA unilaterally withdrew from the nuclear deal and announced sanctions on Iran.

In January 2020, India was informed that in the immediate future, Iran would develop the field on its own and would like to involve India appropriately at a later stage.

Chabahar-Zahedan Railway Project:
In the ‘New Delhi Declaration’ signed in 2003, both countries had decided to jointly develop the Chabahar Port complex.

The Port development was exempted from the sanctions.

India’s main investment in the Chabahar Port where it has taken over operations of one terminal, had progressed well in the last few years, handling 82 ships with 12 lakh tonnes of bulk cargo in 8200 containers since December 2018.

A contract to develop the 628-km railway line (Chabahar-Zahedan) along the Iran-Afghanistan border was signed in 2016.

IRCON was appointed by the Government of India to assess the feasibility of the project. It was working with CDTIC, an Iranian company.

It had completed the site inspection and review of the feasibility report. The Iranian side was to nominate an authorised entity to finalise outstanding technical and financial issues. India waited for the same.

However, Iran started work on the railway project in July 2020.

India is not part of this project as of now since there is lack of clarity on whether it will attract the USA sanctions. However, it has conveyed to Iran that it is open to joining the project later.

Concerns for India:
Iran’s growing proximity to China.

Further, Iran seems to be sceptical of India’s diplomatic ties with the USA.

Farzad-B gas Field:
India needs gas and Iran remains one of the best options as geographically, Iran is closest to India of all the countries in the Persian gulf region.

Further, it could have improved India-Iran ties as the crude oil import from Iran remains impacted due to the USA sanctions.

Chabahar is not only a key to maritime relations between both the countries, but also provides an opportunity to India to reach Russia and Central Asia.

Further, it allows India to bypass Pakistan which had blocked Indian aid to Afghanistan and all trade over land.
Economic Measures by India Against China
India is considering a range of economic measures aimed at Chinese firms amid the border tensions between two countries.

The ban on 59 Chinese apps is one of the economic measures taken by India, with other measures likely to follow if tensions along the Line of Actual Control (LAC) continue without disengagement.

India wants to indicate that China cannot continue trade and investment relations as normal if China does not agree to return to the status quo of April before its incursions along the LAC began.

Key Points
Economic Measures Planned by India:
The government is considering trade and procurement curbs targeting China.

It is also increasing scrutiny of Chinese investments in many sectors, and weighing a decision to keep out Chinese companies including 5G trials.

Recently, the Union Minister for Road Transport and Highways has announced that Chinese companies would not be allowed to take part in road projects.

China’s History in Trade and Procurement Curbs
Background:
Economic sanctions have been one of the key tools of Chinese coercion.

China usually uses economic sanctions with the countries with whom China faces territorial claims where sanctions include restrictions on trade, encouragement for boycotts, and cutting off tourism.

China used these measures to inflict immediate economic pain.

China’s coercive actions are always selective and focused on targets where the economic cost of coercing is low but the impact is high.

Affected Countries:
South Korea:
China had boycotted South Korean goods in 2016 and 2017, when South Korea had deployed the U.S. Terminal High-Altitude Area Defense (THAAD) missile system. In October 2017, South Korea had issued a list of assurances meant to clarify to China that it would not expand the scope of THAAD.

China had also placed curbs on tourism to South Korea, costing the country millions of dollars in tourism revenue.

Japan:
In 2010, China had restricted the exports of rare earth elements to Japan – a key ingredient for many electronics industries – following a collision near disputed East China Sea islands.

Two years later, mass protests organised by China led to boycotts of Japanese brands and, in some instances, violence targeting Japanese branded-cars and stores.

Philippines:
A dispute over the Scarborough Shoal in the South China Sea in 2012 led to China curbing imports on bananas and restricting tourism, costing the country millions of dollars in revenue.
World Bank's Support to India for MSMEs
Recently, the World Bank (WB) and the Government of India has signed the USD 750 million agreement for an Emergency Response Programme for Micro, Small, and Medium Enterprises (MSMEs).

Emergency Response Programmes are dedicated towards enhancing the resilience of communities and livelihoods in order to address fragility, poverty and vulnerability to conflict and disaster.

Key Points
Financial Support:
The USD 750 million loan which is being granted from the International Bank for Reconstruction and Development (IBRD - a part of the WB group), has a maturity of 19 years including a 5-year grace period.

The WB groups and its private sector arm – the International Finance Corporation (IFC), will support the government’s initiatives to protect the MSME sector which is severely impacted by the Covid-19 crisis.

Covid-19 pandemic has severely impacted the MSME sector leading to loss of livelihoods and employment.

Earlier, the World Bank has committed to support India’s emergency Covid-19 response, including the new MSME project with USD 2.75 billion.

The first USD 1 billion emergency support was announced in April 2020 for immediate support to India’s health sector.

Another USD 1 billion project was approved in May to increase cash transfers and food benefits to the poor and vulnerable, including a more consolidated delivery platform – accessible to both rural and urban populations.

Significance:
Unlocking Liquidity: Considering the current uncertainties, lenders remain concerned about borrowers’ ability to repay – resulting in limited flow of credit.

Therefore, the program will support the government's efforts to channel liquidity to the MSME sector by de-risking lending from banks and Non-Banking Financial Companies (NBFCs) to MSMEs through a range of instruments, including credit guarantees.

Strengthening NBFCs and SFBs: The programme will address the urgent and varied needs of the MSMEs by improving the funding capacity of key market-oriented channels of credit, such as the NBFCs and Small Finance Bank (SFBs).

This will support the government's refinance facility for NBFCs.

In parallel, the IFC would provide direct support to SFBs through loans and equity.

Enabling Financial Innovations: Currently only about 8% of MSMEs are served by formal credit channels. The program will incentivize and mainstream the use of fintech and digital financial services in MSME lending and payments.
India-China Conflict
Recently, the third round of Corps Commander-level talks was held between India and China.

Both the sides emphasised on expeditious, phased and step-wise de-escalation in areas close to the Line of Actual Control (LAC) in Ladakh as priority.

Key Points
Background:
In the previous two rounds, India sought restoration of the status quo as it existed before the standoff began in May 2020.

Indian and Chinese troops scuffled at Pangong Tso in Ladakh on 5/6th May.

After the first round of talks on 6th June, 2020, clashes occurred in Galwan Valley (Ladakh) that claimed 20 Indian soldiers’ lives and an unknown number of casualties on the Chinese side.

While faceoffs and standoffs keep occurring on the LAC due to differences in perception on the alignment, there has been no instance of firing on the LAC since 1975.

India and China fought a war in 1962.

India’s Response:
Military:
India has moved in additional divisions, tanks and artillery across the LAC to match Chinese deployments.

Further, India has approved the purchase of 33 Russian fighter jets and upgrades to 59 war planes at a cost of Rs. 18,148 crore.

Economic:
Citing the “emergent nature of threats” from mobile applications, including popular ones of Chinese origin such as TikTok, ShareIt, UCBrowser, and Weibo, the government has banned 59 apps.

Further, India’s trade deficit with China fell to $48.66 billion in 2019-20 on account of the decline in imports. The trade deficit stood at $53.56 billion in 2018-19 and $63 billion in 2017-18.

However, the tensions on the border, as well as the Covid-19 pandemic, have thrown light on India’s economic dependencies on China.

India remains reliant on Chinese products in several critical and strategically sensitive sectors, from semiconductors and active pharmaceutical ingredients to the telecom sector, where Chinese vendors are involved not only in India’s 4G network but in on-going 5G trials as well.

Foreign Direct Investment (FDI) from China in India has dipped to $163.78 million in 2019-20 from $229 million in 2018-19.

In April 2020, the Indian government tightened FDI norms coming from the countries which share land borders with India. Government approval has been made mandatory.

Possible Reasons Behind Increased China’s Deployment at the LAC
India’s decision to strengthen its border infrastructure (Darbuk-Shyok-Daulat Beg Oldie road).

India’s United States tilt (e.g. Quad) amid US-China tensions.

China views India’s assertions regarding Gilgit-Baltistan, as an implicit attack on the China-Pakistan Economic Corridor (CPEC), China’s flagship programme.

China’s growing assertiveness over the South China Sea.

Political and economic tensions within China due to Covid-19 pandemic.

India being a growing power in Asian region.