US speaker Ms Nancy Pelosi, finally landed in Taiwan yesterday , despite the stern warnings issued by China, it is to be seen now, as to how things unfold in near future, in this region.

The events are likely to have implications not only in Taiwan or US or Pacific region, but may be in India as well.

In 1979, US President, Jimmy Carter strategically switched diplomatic recognition from the Republic of China (ROC) i.e Taiwan to the People's Republic of China (PRC) on January 1, 1979, to counter the political influences and military threats from the Soviet Union.

 The US Embassy in Taipei was 'migrated' to  Beijing  and the Taiwanese Embassy in the US was closed and it had been supporting Chinese claim of One China. However, it continued providing economic and military support to Taiwan stating that It does not support unilateral change of status through force.

What Next

After what China's foreign ministry spokeswoman Hua Chunying said : The US side will bear the responsibility and pay the price for undermining China's sovereign security interests,". It will certainly leave Chinese President Xi fuming and embarrassed, if he does not act , Post Ms Pelosi's visit.

Xi Ping who was unanimously elected as a delegate for the once-in-five-year party Congress to be held in the next few months is looking for a rare third term for President, this meet is scheduled to be held in the second half of 2022.

One can assume that he would not like to appear weak and embarrassed by USA at this meet.

It appears that both were acting in accordance to the MAD MAN Theory.

And this is the danger of this theory.

More so, the above, also indicates that International politics is like India’s domestic politics where there are no permanent allies and foes.

As a matter of fact, USA was compelled to take this kind of action, because, its Global leadership is under Challenge from China and Russia, particularly, after its messed up withdrawal from Afghanistan and the Russian invasion of Ukraine. These events found US allies in a precarious situation leaving them exposed to the bullies.

At this stage, we in India must not think that this will have an impact only on US – China relations , rather we need to look beyond ; Can China do to India what Russia did to Ukraine to prove that It is a World power , particularly we also irked China recently when Dalai Lama visited Ladakh. It may not launch an offensive but can surely carry out intrusions across the LAC like it has done previously. OR it may cosy up with India to win friends locally and satisfies India's security concerns by moving its troops back from Friction points in Ladakh region or may be something else. 

Only time will tell ;  this event may have long term implications on not only US- China relations but also in the entire region or US has finally called the Chinese bluff.

In 2021, I had written that the COVID-19 pandemic would have substantial implications on the Nations and Societies as the World War II had and that’s proving to be right - refer to India’s difficult neighbourhood https://www.bharatamrising.com/india-s-difficult-neighourhood and also Did We Know Our Room Was Full of Dust - I? https://www.bharatamrising.com/challenges-features-2/did-we-know-our-room-was-full-of-dust

The entire world now appears to be in the grip of economic slow-down if not recession. Many developing economies are facing the heat and some of them are our neighbours: Sri Lanka, Myanmar, Nepal and Pakistan.

Vicious Circle of Recession/ Economic Crisis.

The economic crisis of Sri Lanka has resulted into an unprecedented political crisis, as the elected President has been forced to flee, by his own people, who elected him a few years back. Bad decisions like sudden banning chemical fertilizers to encourage organic farming that hit the country’s farm sector and triggered a drop in the critical rice crop, huge expenditure on infrastructure which did not generate revenue, country’s lucrative tourism industry and foreign workers’ remittances sapped by the pandemic, pushed Sri Lanka into a vicious circle of debt, reduced income, reduction in foreign exchange reserves, inflation and balance of payment crisis.

Decisions taken to manage the crisis did not work because of corruption and Russia – Ukraine war. “Sri Lanka is a classic twin deficit economy,” said a 2019 Asian Development Bank working paper. “Twin deficits signal that a country’s national expenditure exceeds its national income, and that its production of tradable goods and services is inadequate”.

Ruchir Sharma, a renowned Indian author of an international bestseller,The Rise and Fall of Nations, who is also a contributing op-ed writer at the New York Times, Wall Street Journal and the chief global strategist at Morgan Stanley Investment Management, wrote ;

“one of the major causes of fall is when the Nations invest in non-productive schemes which do not get them the desired revenue”. For instance, the Hambantota sea-port was economically unviable and could not generate enough revenue for Sri Lanka to repay the huge loan from China and the accrued interest, so much so that they had to hand over the port on a 99-year lease to China. The network of roads and bridges constructed through loans could not generate the revenue as the tourism suffered first due to the 2019 terrorist attack and then due to the pandemic.

Let’s compare India’s situation with that of Sri Lanka. Are we not indulging excessively in building things which may not generate enough revenue, particularly when we are going through difficult times? Think of central vista project or huge statues being constructed to get votes, this is what Rajapakse also did.

Please refer to Figure 1 to understand vicious circle of Economic crisis. Pakistan is also nearing the crisis and is now in the grip of this same vicious circle.

What has Prompted some to warn of Danger.

Although this Srilankan crisis has encouraged many to warn that India may also face the same collapse, however, Let me at the outset clarify that it’s not easy for a 3 trillion economy to get trapped into a vicious circle. At the same time, we also need to assess our current situation and judge if we are moving in a direction, which may bring pain to us.

1. The 2016 demonetisation hit the unorganised sector the hardest, causing loss of jobs and initiating a spiral effect in which consumption declined due to loss of earning, particularly in villages. Nearly 90 percent of the workforce in India is engaged in the informal sector to earn their livelihood and they are highly cash dependent and cash sensitive (Figure 2). Massive lay-offs and weak economic sentiment dented GDP growth. According to most estimates, there was nearly a 2 percent decline in country’s GDP growth due to demonetisation.

1. A rushed GST rollout further hit the MSMEs and unorganised sector which had not recovered from the demonetisation setback. Small-scale businesses must pay the expense of compliance, which led to closures and disruptions.
2. COVID-19 shrunk the Indian economy by almost 23% The Third shock came in the form of Covid. Due to the sudden lock down during April-June 2020 and only by end of March 2022 the economy could reach the output level of April 2019-March 2020.
3. In 2020, an estimated 10 million migrant workers returned to their native places after the imposition of the lockdown. The surveys conducted by the Centre for Monitoring Indian Economy shows a steep rise in unemployment rate, in the range of 7.9% to 12% during the April-June quarter of 2021. Millions of jobs were lost and many are now employed in low-paying jobs, which has adversely impacted consumption in both rural and urban areas.
4. Russia-Ukraine war has pushed up fuel prices.The retail inflation jumped to an 8-year high of 7.8% due to higher oil prices and increased food inflation. This has further impacted Indians, especially the poor who will be cutting back on the necessities like food and clothes.
5. Global growth is now slowing down due to the disruptions from the ongoing Russia-Ukraine war. This will dampen global demand for India’s exports and rising commodity prices like that of food and fuel is already pushing up imports.The Indian Rupee has dropped to record low levels of 79 to US Dollar which would make imports more expensive. India’s trade deficit (exports minus imports or how much we sell abroad minus how much we consume from abroad) is already at record high level and it may widen further.
6. , Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. India's Debt has increased in terms of value and many Indian states are under heavy debts. Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves increased to 20.0 per cent at end-March 2022 (17.5 per cent at end-March 2021). This has also to be viewed in relation to the sliding value of Rupee against Dollar.
   
   
    

Thus, in the last few years all these factors outlined above have impacted the following and place India in a difficult position:

1. Employment
2. Prices or inflation
3. Household demand.
4. Trade deficit.

Figure 2. Unemployment .

Actions taken by RBI and the Govt.

Read more ...

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The Foreign ministers from G-20 nations had gathered on 06 Jul on the Indonesian island of Bali for a two-day meeting in which the impact of war in Ukraine was the main issue of discussion.

This was yet another opportunity for the world’s largest economies to take stock of the economic impacts of the war as many nations that have decided to stay neutral in the conflict, like India, Brazil, and host Indonesia are now feeling the pinch as the war has prolonged and there is no hope that it will end soon.

It’s for this reason that Indonesia has invited Russian President Vladimir Putin to attend, (despite pressure from Western nations to keep him away ) and also the Ukrainian President for the G20 , Head of states meeting scheduled to be held in Nov this year..Although the question of whether Putin will attend Nov’s summit is still open, however, his chief diplomat Sergey Lavrov was in Bali and had met the Chinese Foreign Minister Wang Yi but not with U.S. Secretary of State Antony Blinken.

However, US secy Blinken met his Chinese counterpart Yang to highlight the U.S. commitment to continue with talks and keeping lines of communication open with China. There is no doubt that after what has happened in Ukraine and in South Pacific , it is natural that there are fissures in relations and are not easy to fill those. Both have different perception about the so called rules-based international order, as well .

As many non-aligned nations been caught between the West and Russia over the war in Ukraine, Indonesia like India has been walking a diplomatic tightrope. Both have a stake in both camps. Indonesia like India is a customer for Russian military equipment and is also relying on Ukrainian wheat.

Caught between the deep sea and the devil , Indonesian President Joko Widodo , In June, had visited both Kyiv and Moscow in a bid to free up food and fertilizer supplies frozen by the war. 

Conclusion.

So, Analysts who were skeptical as to how much can be achieved by the G20, which is already fraught with rifts over how to manage the war in Ukraine have proved to be right.  As expected , despite the severe impact of war on these economies, Deeply divided diplomats from the world’s largest developing nations have failed to find common ground over Russia’s war in Ukraine and how to deal with its global impacts. 

CONSEQUENTLY, All these nations doing a balancing act since the outbreak of war will continue to do so, because no one knows which side may blink first and also to mitigate their own DOMESTIC challenges.

Listened to the Press briefing of three chiefs yesterday, It would be inappropriate to comment on what they said in favour of the Govt’s Agnipath policy because , being a Govt servant, they had to do this. But , there are few uncomfortable questions and suggestions that need to be pondered by the Govt ;

One, Is Agniveer, that is, recruiting Contractual soldiers for a period of 4 years, is the only possible option that is available to bring down the average age of a soldier.

Suggestion ; Although it is not a new one, but is being discussed in army since 80s ; Abolish the rank of Subedar/Naib Subedar who is around 45 years -52 years of age and the average age of army would automatically come down.

We will have young ones commanding Platoons.

Two. Why do we need a Subedar in current times, an old man as Platoon commander who is the bedrock of a fighting force. How can an old man lead his Platoon into a battle.

Suggestion ; You should have a young man leading a Platoon which is the most important fighting subunit. What an irony the Commanding Officer is around 38 years old, Company Commanders are in late 20s or early 30s and the Platoon Commander is in 40s or 50s.

So a Havildar must be made capable to lead a Platoon like it happens in US army and most of the armies where he is called as SERGEANT. AND GIVEN THE SAME SALARY AS PAID TO THE SUBEDAR.

Three. How did the armed forces reduce the average age of a Commanding officer from 43years to 39 years , over a period of time?, The same can be done with Jawans.

Suggestion ; The armed forces abolished lieutenant’s rank, expedited the promotions which were time bound, till Lieutenant colonel, As a result, today we have Lieutenant Colonels with just 13 years service and Majors with 6 years service. Why cann’t we do the same with JAWANS. In many regiments, today, it is so damn difficult to become a Havildar even after serving 15 years, because there is a Congestion. Why don’t we decongest the same instead of doing this hara-kiri.

Four. Why can’t we Train our men extensively so that by 10 years of service a Jawan is able to become a Havildar ?

Suggestion ; If he is made capable he would be able to lead a Platoon at the age of 30 years for five years and then moved laterally for staff duties and rest who don’t make it can leave the organization. After that what the Govt is proposing to Agniveers they can do the same with the Havildar, who will still be young. Your average age of combatants will come down automatically.

Five. Indian army won 1965 war, ‘71 war, Kargil war, Did we achieve those feats with AGNIVEERS ; the contractual staff or the same guys whom we today say they are over aged.

Suggestion ; Many of the battles were fought in world’s most difficult terrain , if our jawans were good enough to beat the enemy why cann’t we with little changes as mentioned above can continue with same system which has stood the test of the time ?

Conclusion.

For many many years this was being discussed that the rank of a Subedar is a British gift. Subedars(JUNIOR COMMISSIONED OFFICERS) were needed because the British wanted an educated Man as a link between their English speaking officers and the jawans, but now this rank can be done away with because our jawans are well educated now and there is no such link needed now between the Jawan and the officer. But we kept delaying this change , now in the guise of innovation we are disturbing the whole set up.

In the guise of INNOVATION lets not fool the country and ruin a fine organization.

PM’s statement that Agniveers will do great service to the nation is not palatable because much better contribution can be given by a Havildar who retires after 15 years service rather than some one who has worked with army for 4 years.

As regards , allurement by industry that they will offer jobs is sheer bogus because at most they can employ them as a security guard.