E. Editorials

Category: ECONOMY

1. From a standoff to a stalemate

Background

• Foreign trade is an important contributor to economic growth. Exports play a significant role. It helps in expansion of business and employment opportunities.
• But India’s exports have suffered a slump. Its merchandise exports have collapsed by over 60% as per the official trade data released for the month of April.
• Only two of India’s 30 biggest export products clocked positive growth — iron ore and pharmaceuticals.

Reasons for the decline in Exports

• Sharp dip in global oil prices means lower exports of petroleum products.
  • India’s main export items comprise petroleum products, gems and jewellery, engineering products, pharmaceuticals, and textiles and clothing.
• COVID-19 resulted in a lack of economic activity.
  • The trade collapsed as nations were under lockdowns.
  • This not only dented demand and investment, but also severely disrupted global supply chains and shipping routes.

Government’s Economic Stimulus Package

• The Govt. promised to bring improvements in the ease of doing business.
• It offered a few sops for micro, small and medium enterprises (many of which are also export-oriented units).
• The Reserve Bank of India unveiled a few measures, including a special ₹15,000 crore liquidity facility for the Exim Bank of India and a six-month extension for importers to complete outward remittances.
• For exporters, the maximum permissible credit period from banks was extended from 12 months to 15 months, for disbursements made up to July 31, 2020.

Concerns

• In an employment-intensive sector such as textiles/garments, exports fell 16% between January and March, fell 91% in April.
• The outcome for May is unlikely to be any better and the World Trade Organization expects trade flows to slip by between 13% and 32% over 2020.
• The projections are assumed to fall as new barriers on trade in medical and food supplies have been imposed by over 90 countries.
• An increasing tendency to look inward for essential supplies (as India is doing too with its emphasis on self-reliance) will reduce the exports from India.

Companies moving out of China

As a direct fallout of the COVID-19 pandemic, many multinationals with manufacturing plants in China are looking to shift operations out. India should take this as an opportunity to attract them.

• First, we need to identify the sectors where we anticipate shift in investment. We then need to identify the industry size (from macro to medium) and handle their needs accordingly.
• A nodal body of the FDI for timely clearances should be formed and it should work in coordination with facilitation agencies like Invest India for better results.
• Ease of doing business needs to get new wings. It should focus on investors choosing India as their priority. Officers in-charge should ensure proper follow-up and provide full assistance to investors. It is all about going an extra mile.
• There is also a need to identify and list requirements of investors who are shifting their base from China.
• State Governments should establish self-contained “industrial cities” that earmark space for manufacturing, commercial, educational, residential and social infrastructure. Common effluent treatment plants must be provided and clearances must be “single window” and fast-tracked.

Conclusion

• Therefore, we need to be loud and clear in showcasing our strengths. We should keep a track of the policies that our competitors adopt and should come out with better proposals from time to time.

Category: INTERNATIONAL RELATIONS

1. COVID-19 pandemic may create opportunities to deepen India’s engagement with Africa

Background

• Africa Day is observed every year on May 25 to commemorate the founding of the Organisation of African Unity (now known as the African Union).
• India has been closely associated with it on account of its shared colonial past and rich contemporary ties.
• The Manohar Parrikar Institute for Defence Studies and Analyses has hosted an Africa Day Round Table annually for the last four years in order to commemorate this event.

Economic condition in Africa

• The World Bank’s Africa’s Pulse is a biannual analysis of the near-term macroeconomic outlook for the region.
  • Each issue includes a special focus on a particular development challenge that is shaping Africa’s economic future.
    • In its April report, it assessed that the COVID-19 outbreak has sparked off the Sub-Saharan Africa (SSA) region’s first recession in 25 years.
  • Growth is expected to plummet to between -2.1 and -5.1 per cent in 2020, from a modest 2.4 per cent in 2019.
• With high rates of HIV, malaria, diabetes, hypertension and malnourishment prevalent, a large number of Africans were already faced with a health and economic crisis.
  • The steep decline in commodity prices has spelt disaster for the economies of Nigeria, Zambia and Angola.
• Precarious fiscal positions have ruled out any major governmental stimulus. Public debt has mounted.
• It is clear that without outside support, Africa will find it very difficult to meet the challenge.

Economic Opportunities in Africa

• Africa’s rich natural resources, long-term economic potential, youthful demography and influence as a bloc of 54 countries in multi-lateral organisations are apparent.
• In recent years, several extra-regional economies have strengthened their engagement with African states, with an eye to rising opportunities, including in energy, mining, infrastructure and connectivity.

1. China

• China’s engagement of Africa, as elsewhere, is huge but increasingly regarded as predatory and exploitative. Its annual trade with Africa in 2019 stood at $208 billion, in addition to investments and loans worth $200 billion.
• Traditionally, China’s participation in infrastructure projects has been astonishing. Having famously built the 1,860 km Tanzania-Zambia railway line in 1975, and the Addis Ababa-Djibouti and Mombasa-Nairobi lines more recently, China is now eyeing to develop the vast East Africa Master Railway Plan.
• At the Forum for China-Africa Cooperation (COCAC) in 2018, China set aside $60 billion in developmental assistance, followed by a whopping $1 billion Belt and Road (BRI) Infrastructure Fund for Africa.
• China has followed up with robust health sector diplomacy in the wake of the pandemic.

China’s image was tarnished.

• This was due to supply of defective PPE gear and discriminatory behaviour against Africans in Guangzhou, leading to an embarrassing diplomatic row.

2. Japan hosted the 7th Tokyo International Conference for African Development (TICAD) in August 2019.
3. Russia hosted the first-ever Russia-Africa Summit in 2019.
4. Brazil, home to the largest population of people of African descent outside of Africa, has also sought to develop closer ties.
5. Cuba has sent medical teams to help Africa.

India’s relationship with Africa

• Prime Minister Narendra Modi has redefined India’s relations with Africa. India-Africa trade reached $62 billion in 2018 compared to $39 billion during 2009-10.
• After South Asia, Africa is the second-largest recipient of Indian overseas assistance with Lines of Credit (LOC) worth nearly $10 billion (42 per cent of the total) spread over 100 projects in 41 countries.
• Ties were boosted at the India Africa Forum Summit (IAFS) in 2015.
• Approximately 6,000 Indian soldiers are deployed in UN peace-keeping missions in five conflict zones in Africa.
• Bilateral cooperation includes solar energy development, information technology, cyber security, maritime security, disaster relief, counter-terrorism and military training.

Amidst COVID-19 Crisis

• India has already dispatched medical assistance to 25 African countries and PM Modi has had a telephonic talk with President Cyril Ramaphosa of South Africa who is the current chairperson of the African Union, and separately with others such as the Presidents of Uganda and Ethiopia.
• The Minister of External Affairs has also reached out to counterparts in Africa to reiterate India’s support in the fight against the coronavirus.

What should India do?

• India could consider structuring a series of virtual summits in zonal groups with African leaders across the continent over the next few months that could both provide a platform for a cooperative response to the pandemic and also serve as a precursor to the actual summit in the future.
• The Aarogya Setu App and the E-Gram Swaraj App for rural areas for mapping COVID-19 are technological achievements that could be shared with Africa.
• Since the movement of African students to India for higher education has been disrupted, India may expand the e-VidyaBharti (tele education) project to establish an India-Africa Virtual University.
• With the locust scourge devastating the Horn of Africa and the pandemic worsening the food crisis, India could ramp up its collaboration in this sector.
• It is also time for the Quad Plus, in which the US, India, Japan and Australia have recently engaged other countries such as the ROK (South Korea), Vietnam, New Zealand, Israel and Brazil, to exchange views and propose cooperation with select African countries abutting the Indian Ocean.

H. UPSC Prelims Practice Questions

Q1. Bimal Jalan panel was appointed-

1. To look into the faster resolution of stressed assets
2. To review the Regulatory and Supervisory Framework for Core Investment Companies (CICs)
3. For strengthening digital payments ecosystem
4. To review the Economic Capital Framework of the Central Bank

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Q2. Consider the following statements about Indian Rhinoceros:

1. Its IUCN status is Critically Endangered.
2. India has two populations containing more than 100 rhinos in Kaziranga National Park and Chitwan National Park (CNP) in Assam.

Which of the above statement/s is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

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Q3. With reference to FDI investments in India, which of following statement/s 
is/are incorrect?

1. Foreign direct investment (FDI) in India grew by 13% in the 2019-20 financial year.
2. Singapore is the top source nation in FY20.
3. The sectors which attracted maximum foreign inflows during 2019-20 include, first computer software and hardware, followed by telecommunications, and then services.

Options:

1. 1 and 2 only
2. 2 only
3. 3 only
4. 1 and 3 only

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Q4. Which of the following is/are correctly matched with respect to location of 
the passes?

1. Zoji La –Ladakh
2. Nathu La – Sikkim
3. Bomdi La –Arunachal Pradesh

Options:

1. 2 and 3 only
2. 1 only
3. 1, 2 and 3
4. 2 only

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