Contents
- India, Russia diverge on Indo-Pacific strategy
- NATO to exit Afghanistan along with U.S.
- Moody’s on India’s public debt level
India, Russia diverge on Indo-Pacific strategy
Context:
- Russian Ambassador to India said that India and Russia are “committed” to completing their contract for the S-400 missile system, due to be delivered to India at the end of 2021 and also that both countries oppose U.S. sanctions on the issue.
- The S-400 contract is on track for a delivery of the systems despite America’s repeated threat that the $2.5-billion deal could attract sanctions under its CAATSA law.
Relevance:
GS-II: International Relations (Foreign policies affecting India’s Interests)
Dimensions of the Article:
- About S-400 Triumf
- Issues with Acquisition of S-400
- About India’s acquisition of S-400
- About U.S. Objections
- Countering America’s Adversaries Through Sanctions Act, CAATSA
About S-400 Triumf
- S-400 Triumf is one of the world’s most advanced surface-to-air missile (SAM) systems designed by Russia.
- The system is a large complex of radars, control systems and different types of missiles, with the capability to simultaneously track numerous incoming objects in a radius of a few hundred kilometres.
- It can employ appropriate missile systems to launch the counter attack and to neutralise the objects with the potential of ensuring a high success rate.
- It is the most dangerous operationally deployed modern long-range SAM (MLR SAM) in the world, considered much ahead of the US-developed Terminal High Altitude Area Defense system (THAAD).
Issues with Acquisition of S-400
- The acquisition of S-400 by countries has taken centre stage in the American diplomacy regarding Russia.
- U.S. believes that S-400 could access sensitive U.S. military technologies in service with the potential buyers.
- Russia has also deployed at least two S-400 systems in Syria, which is of much concern to observers who fear the system could contribute to a global conflict breaking out in Syria.
- Among the countries under pressure from the U.S. to not buy this weapon are India and Turkey.
- NATO countries objected strongly to reports of Russia giving its systems to Iran and Syria.
About India’s acquisition of S-400
- Russia had offered its highly advanced Air Defence System to India, which agreed to purchase five of the S-400 Air Defence Systems.
- Before India, Russia had only sold this system to China even though Iran, Saudi Arabia, Qatar and Belarus were eyeing it as well.
- This is the first time that Russia is providing a different system to India, a departure from its tradition of supplying only attacking weapons.
- India needs high end weapons for very valid reasons. It is the only country in the world that is flanked by two nuclear armed neighbours– Pakistan and China and has fought wars with both of these countries.
- India maintains close military relations with both United States and Russia.
- But over the years, Russia has been the largest supplier of military weapons to India.
- In 2012-2016, Russia (68%), US (14%) and Israel (7.2%) were the major arms suppliers to India.
- India is the second largest market for Russia’s defence industry and Russia is the chief supplier of defence equipment to India.
About U.S. Objections
- United States has raised concerns of India purchasing S-400 system on two counts:
- The official count is that US has a legal position where any country that is taking systems or military equipment from their adversaries, the US expects to put sanctions on that country.
- The other count is that US is planning to put F 16 factories in India and sell drones to it.
Countering America’s Adversaries Through Sanctions Act, CAATSA
- The Countering America’s Adversaries Through Sanctions Act, CAATSA is a United States federal law that imposed sanctions on Iran, North Korea, and Russia.
- The Act empowers the US President to impose at least five of the 12 listed sanctions on persons engaged in a “significant transaction” with Russian defence and intelligence sectors.
- The State Department has notified 39 Russian entities including almost all major Russian defence manufacturing and export companies/entities.
India and CAATSA
- In 2018, India inked an agreement worth more than 5 billion $ with Russia to procure four S-400 Triumf surface-to-air missile defence system, the most powerful missile defence system in the world ignoring the CAATSA act. The U.S. threatened India with sanctions over India’s decision to buy the S-400 missile defense system from Russia.
- Two oil companies ordered crude oil from Iran for November ignoring CAATSA. The United States threatened India with sanctions over India’s decision to buy oil from Iran.
-Source: The Hindu
NATO to exit Afghanistan along with U.S.
Context:
Foreign troops under NATO command will withdraw from Afghanistan in coordination with a U.S. pull-out, after Germany said it would match American plans to leave after two decades of war.
Relevance:
GS-II: International Relations (International Groupings, Foreign policies affecting India’s Interests)
Dimensions of the Article:
- About North Atlantic Treaty Organisation (NATO)
- Important Points regarding NATO
- India and NATO – Non-NATO Ally Status
- About the coordinated withdrawal of troops
About North Atlantic Treaty Organisation (NATO)
- The North Atlantic Treaty Organisation (NATO) is an international organisation for collective security by the United States, Canada, and several Western European nations to provide collective security against the Soviet Union in 1949, in support of the North Atlantic Treaty signed in Washington.
- NATO’s Headquarters are located in Evere, Brussels, Belgium.
- Since its founding, the admission of new member states has increased the alliance from the original 12 countries to 30 member states with North Macedonia being the most recent member state to be added to NATO in March 2020.
- An additional 20 countries participate in NATO’s Partnership for Peace program, with 15 other countries involved in institutionalized dialogue programs.
Important Points regarding NATO
- A key provision of the treaty, the so-called Article 5, states that if one member of the alliance is attacked in Europe or North America, it is to be considered an attack on all members. That effectively put Western Europe under the “nuclear umbrella” of the US.
- From a political perspective: NATO promotes democratic values and enables members to consult and cooperate on defence and security-related issues to solve problems, build trust and, in the long run, prevent conflict.
- The North Atlantic Council (NAC) is the body which has effective governance authority and powers of decision in NATO, consisting of member states’ permanent representatives or representatives at higher level (ministers of foreign affairs or defence, or heads of state or government).
- All 30 allies have an equal say, the Alliance’s decisions must be unanimous and consensual, and its members must respect the basic values that underpin the Alliance, namely democracy, individual liberty and the rule of law.
- NATO has an integrated military command structure but very few forces or assets are exclusively its own. Most forces remain under full national command and control until member countries agree to undertake NATO-related tasks.
India and NATO – Non-NATO Ally Status
- Non-NATO Ally Status is a designation given by the United States government to close allies that have strategic working relationships with the US Armed Forces but are not members of the North Atlantic Treaty Organization (NATO).
- While the status does not automatically include a mutual defense pact with the United States, it still confers a variety of military and financial advantages that otherwise are not obtainable by non-NATO countries.
- The move brings India on par with North Atlantic Treaty Organization (NATO) allies and countries such as Israel and South Korea for increasing defence cooperation.
- Increased cooperation between the United States and India in the areas of humanitarian assistance, counter-terrorism, counter-piracy and maritime security in the Indian Ocean.
About the coordinated withdrawal of troops
- Non-U.S. forces from mainly NATO countries, also from Australia, New Zealand and Georgia, outnumber the U.S. troops in Afghanistan, but still rely on U.S. air support, planning and leadership for their training mission.
- An integral part of NATO’s current mission, Resolute Support, is to train and equip Afghan security forces fighting the Islamist Taliban, which was ousted from power by a U.S. invasion in late 2001 and has since waged an insurgency.
- With non-U.S. troop numbers reaching as high as 40,000 in 2008, Europe, Canada and Australia have moved in tandem with the U.S., also providing long-term funding to rebuild Afghanistan despite the resurgence of Taliban-led violence and endemic official corruption in the country.
- A key reason for a coordinated withdrawal is the fact that NATO relies on U.S. airlift capabilities and shipping to move valuable equipment back home out of landlocked Afghanistan.
- NATO also wants to avoid any hardware falling into the hands of militants, as happened after the U.S. withdrawal from Iraq.
-Source: The Hindu
Moody’s on India’s Public Debt Level
Context:
Moody’s Investors Service said that India’s public debt level is among the highest in emerging economies with a quantitative easing programme underway, while its debt affordability is among the weakest.
Relevance:
GS-III: Indian Economy (Economic Growth and Development in India)
Dimensions of the Article:
- What are Emerging markets/economies?
- What is Public Debt?
- Is Public Debt good or bad?
- Trends in India’s Public Debt
- Highlights of Moody’s report
What are Emerging markets/economies?
- An emerging market/country/economy is a market that has some characteristics of a developed market, but does not fully meet its standards.
- This includes markets that may become developed markets in the future or were in the past.
- The nine largest emerging and developing economies by either nominal or PPP-adjusted GDP are 4 of the 5 BRICS countries (Brazil, Russia, India and China) along with Indonesia, South Korea, Mexico, Saudi Arabia and Turkey.
What is Public Debt?
- The public debt is how much a country owes to lenders outside of itself.
- The term “public debt” is often used interchangeably with the term sovereign debt and these lenders to the country can include individuals, businesses, and even other governments.
- Public debt usually only refers to national debt and it is the accumulation of annual budget deficits (A nation’s deficit affects its debt and vice-versa).
- Also, if interest rates go up on the public debt, they will also rise for all private debt.
- Public debt is different from External debt – External Debt is the amount owed to foreign investors by both the government and the private sector and Public debt does impact external debt.
Is Public Debt good or bad?
- In the short run, public debt is a good way for countries to get extra funds to invest in their economic growth.
- Public debt is a safe way for foreigners to invest in a country’s growth by buying government bonds – much safer than Foreign Direct Investment.
- However, when Governments tend to take on too much debt because the benefits are making them popular with voters, investors usually start demanding a higher interest rate (wanting more return for the greater risk as the country is more likely to default on its debt).
- If the country keeps spending by borrowing, then its bonds will lose their value and ratings and as interest rates rise, it becomes more expensive for a country to refinance its existing debt. In time, income has to go toward debt repayment, and less toward government services.
Trends in India’s Public Debt
- Till 1972, India’s general debt—for the Centre and states—rose steadily to about 39% of gross domestic product (GDP) and then fell sharply in 1974.
- After 1996, it saw explosive growth, reaching 57% in 2005.
- In 2018, general debt was approximately 57% of GDP.
Should India be worried?
- A 2020 research paper argues that the pandemic has depressed real interest rates despite ballooning government debts in the industrial world.
- Lower interest rates mean countries are less constrained by fiscal space.
- Large fiscal expansions can thus improve fiscal sustainability by raising GDP more than they raise debt and interest payments.
- For example: Despite a ballooning US federal debt/GDP ratio from below 50% in 2000 to about 100% in 2020, federal interest payments in the US as a percentage of GDP in the last 10 years have hovered between 1% and 2%.
- In simple words: in a world of low interest rates, advanced economies can run limited primary deficits and still keep their public debt stable.
- However, because interest rates are falling, this does not mean that debt servicing costs are going down due to rising debt.
- Also, high levels of public debt in India have historically been associated with fiscal dominance, and more uncertainty and volatility in the economy. Therefore, there are good reasons for India to worry about its public debt.
Highlights of Moody’s report
- Most of the 11 emerging markets, except Chile, have weak government effectiveness, suggesting potential risks executing fiscal reforms or consolidation plans.
- Debt affordability varies widely, with Ghana and India rated the weakest.
- With the exception of the Philippines, Indonesia and Ghana, most emerging market central banks have not yet announced maximum purchases nor a clear time frame for their programs, hence, there is a risk that central banks will not taper these programs once they fulfil their primary objectives unless they are supported by strong fiscal policy frameworks.
- The report warned that depending on recovery prospects and future debt servicing costs, high debt levels may become unsustainable for the more vulnerable economies.
-Source: The Hindu, Livemint
