Current Affairs for UPSC IAS Exam – 12 May 2021

Contents

1. China’s population growth lowest rate in decades
2. Commodities in super cycle
3. Israeli armed forces storm Jerusalem
4. Saudi announces over 100 projects for Pakistan

China’s population growth lowest rate in decades

Context:

The seventh census released by the National Bureau of Statistics (NBS) in Beijing, noted 12 million babies were born in 2020, the lowest number since 1961.

Relevance:

GS-I: Indian Society (Population and Associated Issues)

Dimensions of the Article:

1. About the recent census and trend in China’s Population
2. About the Problem of China’s dropping Population and Age
3. Population Growth in India and the Challenges
4. How does China’s and India’s growth fare?

About the recent census and trend in China’s Population

• The latest census shows that the number of births in China in 2020 is lower than 1961 – to put it into perspective, 1961 is the year when China was in the midst of a four-year famine unleashed by Mao Zedong’s Great Leap Forward policy in 1958 that devastated the farm sector and claimed millions of lives.
• China’s population was 1.41 billion in 2020, according to the census, increasing by 72 million since the last census in 2010, recording a 5.38% growth in this period. The average annual growth was 0.53%.
• The slowing growth rate, a consequence of China’s stringent family planning rules over decades – known as the “one-child policy” but involving a range of varying restrictions across urban and rural areas – has evoked concerns of a rapidly ageing society and the impact on China’s labour force, and fears that China will, as some experts have said, “get old before it gets rich.”
• The census recorded 264 million in the age group of 60 and over, up by more than 5% since 2010 and accounting for almost 20% of the population. Those in the 15-59 age group were 894 million persons, down by almost 7% since 2010 and accounting for just over 60% of the population.
• The findings from the census were not entirely dire. The census also shed light on China’s increasingly educated workforce and its rapid pace of urbanisation.
• With the number of births falling for the fourth consecutive year, experts say that we will likely see China’s population peak – and be overtaken by India’s – by as early as 2025.

About the Problem of China’s dropping Population and Age

• Chinese experts acknowledged the seriousness of the problem, without linking it directly to the history of the Communist Party’s harsh family planning policies.
• China loosened family planning rules and allowed couples to have two children in in 2016, but that has failed to mark a boom amid changing lifestyles and declining preferences, particularly in urban areas, for larger families.
• The impact on the labour force and healthcare is a particular concern. China’s workforce in the 15-59 age bracket peaked at 925 million in 2011, the Ministry of Human Resources and Social Security said previously. That number was down to 894 million in this census and would drop to 700 million by 2050, according to the ministry.
• The census did not offer a specific year for the population to peak, but experts said that could happen by 2025.

Population Growth in India and the Challenges

• According to the UN’s World Population Prospects 2019 report, India is projected to become the most populous country by 2027 surpassing China and host 1.64 billion people by 2050. The fertility rate in the country still lies in the range of 2.1-4.
• It would be a challenge to achieve optimal fertility rate in states such as Bihar, Uttar Pradesh, Haryana, Madhya Pradesh, Jharkhand, and Chhattisgarh — which have higher fertility rate as per Sample Registration System data.
• India’s low literacy rate and poor skilling of human capital will turn demographic dividend into a burden. There will be a need to spend more on education, healthcare system, grow more food, and to add capacity to basic infrastructures, such as roads, transport, electricity, and sewage to provide a minimum quality of life to every citizen.
• As per India Ageing Report 2017 by the United Nations Population Fund (UNFPA) the share of the population over the age of 60 could increase from 8% in 2015 to 19% in 2050. India will have to spend more on their health along with geriatric care.
• In the face of an increasing population, unequal distribution of income and inequalities within the country would be a possible outcome.

How does China’s and India’s growth fare?

• China and India started rebuilding their economies as independent nations in the 1950s, with India having a greater structural advantage.
• Both economies struggled after the initial euphoria and faced tremendous challenges in tackling a burgeoning population and a very poor growth rate.
• Excessive government control, corruption and civil dissatisfaction were proving to be a serious menace in both.
• In 1978, after the death of Mao, China liberalised its economy, by inviting foreign capital and promoting its coastal areas for investment. Agriculture was freed from state control and “One-child policy’ was introduced to reduce population in China.
• India took to liberalisation in 1991 after an economic crisis and grew at around an impressive 8% per annum from then. India incentivised capital-intensive industries and missed focusing on job creation in the initial years and India’s policy of reserving many goods for the MSME sector and the regressive labour policies inhibited free business. Only an effective 4.7% of India’s GDP was invested whereas the need was at least 6.5%, which was 8.5% in China’s case.
• With a $2.5 trillion economy compared to China’s $12.5 trillion economy (the 2nd largest in absolute terms and the largest in PPP terms) – India is currently way behind China.

-Source: The Hindu

Commodities in super cycle

Context:

An across-the-board rise in global commodity prices is leading to input cost pressures and is a growing concern, as it is not only expected to have a bearing on cost of infrastructure development in India but also have an impact on the overall inflation, economic recovery and policy making.

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Mobilization of Resources)

Dimensions of the Article:

1. What is a Commodity super cycle?
2. “Commodity supercycle” in the past
3. Current Situation

What is a Commodity super cycle?

• Commodity super cycles are decade-long periods in which commodities trade above their long-term price trend.
• Some market analysts are seeing signs that a new super cycle is beginning in 2021 pointing to a weakening dollar and supportive central banks and fiscal stimulus geared towards infrastructure spending as well as renewable energy.
• To define: A commodity super cycle is a sustained period of abnormally strong demand growth that producers struggle to match, sparking an increase in prices that can last years or in some cases a decade or more.

“Commodity supercycle” in the past

• 2000 – BRIC: Brazil, Russia, India, and China represented 2.6 billion people in 2000, or about 40% of world population. The idea was that the BRIC countries were on a path of rapid industrialization, which would require an unprecedented amount of raw materials, food and energy commodities.
• The cycle continued for more than 10 years, starting around the turn of the millennium and lasting well into the 2010s.
• The commodities boom began showing signs of slowing when the great financial crisis and the subsequent Euro crisis roiled markets in 2008 and 2011.
• It finally came to a halt when the Chinese economy cooled off in 2015.
• The last supercycle was supported by a steadily eroding U.S. dollar. The currency had been on a depreciating path since the bursting of the dot-com bubble in 2001.
• It touched record low levels just as oil prices hit all-time highs in the summer of 2008. Since then, the U.S. dollar had been appreciating until the onset of Covid-19 in March 2020.

Current Situation

• Steel, the most commonly used input in the construction sector and industries, is at all-time highs, as most metals including base and precious metals prices have increased a lot in the last one year.
• Sugar, corn, coffee, soybean oil, palm oil — have risen sharply in the US commodities market, the effect of which is being seen in the domestic market, too.
• This current scenario of the start of a “Commodity Supercycle” is leading to input cost pressures and is a growing concern, as it is not only expected to have a bearing on cost of infrastructure development in India but also have an impact on the overall inflation, economic recovery and policy making. Higher metal prices will lead to higher Wholesale Price Index (WPI) inflation and so the core inflation may not come down.

To summarize, the new commodity super cycle is resulting from:

1. Recovery in global demand (led by recovery in China and the US)
2. Supply-side constraints
3. Loose monetary policy of global central banks (A monetary policy that lowers interest rates and stimulates borrowing is an expansionary monetary policy or loose monetary policy)
4. Investment in Asset Creation as a result of expectation of increase in inflation

-Source: Financial Express

Israeli armed forces storm Jerusalem

Context:

Recently, Israeli armed forces stormed Al-Aqsa Mosque in the Haram esh-Sharif in Jerusalem, ahead of a march by Zionist nationalists commemorating Israel’s capture of the eastern half of the city in 1967. More than 300 Palestinians were injured in the raid.

Relevance:

GS-II: International Relations (Important Developments in the International Stage)

Dimensions of the Article:

1. About the Israel – Palestine Conflict
2. Understanding the Territory
3. What is behind the current escalation?
4. What is the Sheikh Jarrah dispute?
5. Why Jerusalem?

About the Israel – Palestine Conflict

• The Israeli–Palestinian conflict is the ongoing struggle between Israelis and Palestinians that began in the mid-20th century.
• The origins to the conflict can be traced back to Jewish immigration and sectarian conflict in Mandatory Palestine between Jews and Arabs.
• Despite a long-term peace process and the general reconciliation of Israel with Egypt and Jordan, Israelis and Palestinians have failed to reach a final peace agreement.
• The key issues are mutual recognition and security, borders, water rights, control of Jerusalem, Israeli settlements, Palestinian freedom of movement, and Palestinian right of return.

Understanding the Territory

• The West Bank is sandwiched between Israel and Jordan. One of its major cities is Ramallah, the de facto administrative capital of Palestine. Israel took control of it in the 1967 war and has over the years established settlements there.
• The Gaza Strip located between Israel and Egypt. Israel occupied the strip after 1967, but relinquished control of Gaza City and day-to-day administration in most of the territory during the Oslo peace process. In 2005, Israel unilaterally removed Jewish settlements from the territory, though it continues to control international access to it.

What is behind the current escalation?

• The Israeli authorities had given permission to the Jerusalem Day march, traditionally taken out by far-right Zionists through the Arab Quarter of the Old City.
• Tensions have been building up since mid-April 2021 when Israeli police set up barricades at the Damascus Gate outside the occupied Old City, preventing Palestinians from gathering there.
• Hamas issued an ultimatum to the Israeli troops to stand down from Al-Aqsa. By the evening, they launched rockets. Israeli strikes followed.

What is the Sheikh Jarrah dispute?

• Hundreds of thousands of Palestinians were forced out of their homes when the State of Israel was created in historical Palestine in 1948 (the Palestinians call the events ‘Nakba’, or catastrophe). Some of those Palestinian families moved to Sheikh Jarrah in East Jerusalem to settle there.
• In 1956, when East Jerusalem was ruled by Jordan, the Jordanian Ministry of Construction and Development and the U.N. Relief and Works Agency facilitated the construction of houses for these families in Sheikh Jarrah. But Israel would capture East Jerusalem from Jordan in 1967.
• By the early 1970s, Jewish agencies started demanding the families leave the land. Jewish committees claimed that the houses sat on land they purchased in 1885 (when Jews were migrating to historic Palestine that was part of the Ottoman Empire).
• Earlier, in 2021, the Central Court in East Jerusalem upheld a decision to evict four Palestinian families from their homes in Sheikh Jarrah in favor of Jewish settlers.

Why Jerusalem?

• Jerusalem has been at the centre of the Israeli-Palestinian conflict. According to the original 1947 UN partition plan, Jerusalem was proposed to be an international city.
• But in the first Arab Israel war of 1948, the Israelis captured the western half of the city, and Jordan took the eastern part, including the Old City that houses Haram al-Sharif. Al-Aqsa Mosque, Islam’s third holiest site, and the Dome of the Rock are situated within Haram esh-Sharif (Noble Sanctury).
• Israel captured East Jerusalem from Jordan in the 1967 Six-Day War and annexed it later.
• Since its annexation, Israel has expanded settlements in East Jerusalem, which is now home for some 220,000 Jews. Jews born in East Jerusalem are Israeli citizens, while Palestinians in the city are given conditional residency permits.
• Israel sees the whole city as its “unified, eternal capital”, a claim endorsed by Donald Trump when he was U.S. President but not recognised by most other countries.

-Source: The Hindu

Saudi announces over 100 projects for Pakistan

Context:

Saudi Arabia has announced 118 humanitarian projects worth over $123 million for cash-strapped Pakistan in food security, health, education and water during Prime Minister Imran Khan’s two-day visit.

Relevance:

GS-II: International Relations (India’s Neighbors, Foreign Policies affecting India’s Interests)

Dimensions of the Article:

1. Economic and Strategic Aspects of Saudi-Pakistan Relationship
2. 2015 Strains in the Relationship
3. India-Saudi Relations

Economic and Strategic Aspects of Saudi-Pakistan Relationship

• Pakistan has benefited enormously from Saudi Arabia – the Muslim world’s wealthiest nation – through generous financial aid, the supply of oil on a deferred payment basis and aid during crises.
• For instance, the Saudis provided a grant of US$10 million during the 2005 earthquake, $170 million during the 2010/11 floods, and a $1.5 billion grant when Pakistan faced an economic crisis in 2014.
• Besides, there are around two million Pakistani expatriates in Saudi Arabia, and they send back remittances worth over $5 billion every year.
• Not only has Saudi Arabia helped Pakistan avoid major economic crises, it has also supported Pakistan’s defence by providing logistic support and financial assistance. For instance, the Kingdom assured Islamabad that it would supply 50,000 barrels of crude oil per day on a deferred payment basis in case Pakistan’s nuclear tests resulted in US and other European sanctions in 1998.
• Pakistan has been importing mainly oil from Saudi Arabia and exports rice, meat, meat products, spices and fruits, footwear and leather goods, and chemicals.

2015 Strains in the Relationship

• When, in 2015, Saudi Arabia asked Pakistan to join the coalition it was leading to undertake the ground offensive in Yemen against the Iran-backed Houthis, Islamabad refused and let it be known that it would prefer to stand “neutral” in the Iran-Saudi rivalry.
• The decision was taken keeping in mind the possible implications of joining the coalition on domestic politics and on bilateral relations with Iran.
• The Saudi-Iran conflict in West Asia has serious ramifications for Pakistan’s relationship with Saudi Arabia. Saudi Arabia sees Iranian involvement and growing salience in regional politics as a threat to its security.
• Pakistan, for its part, is worried about India’s improving relations with West Asian countries in general and Saudi Arabia in particular. While Pakistan wants to maintain a delicate balance between Saudi Arabia and Iran, the Saudis are not happy with this balancing game and want Pakistan to support them.

India-Saudi Relations

• The geostrategic position of Saudi Arabia makes it an important country for India, with trade and cultural links dating back thousands of years.
• There is a rational calculation regarding Saudi interest in expanding trade and investment in India and collaboration in the energy sector.
• Saudi Aramco is interested in partnering with the Abu Dhabi National Oil Company in developing an integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra, a $44 billion joint venture with Indian public sector involvement. Saudi Arabia is already one of the three largest suppliers of oil to India.
• That the two countries are moving beyond the traditional buyer-seller relationship is best exemplified by the joint venture for the $44 billion worth Ratnagiri refinery and petrochemical project.
• The assumption that Saudi Arabia is tilted towards India is nothing more than an unrealistic hope.
• The Saudi Foreign Minister’s statement in Islamabad during MBS’s visit that Riyadh is committed to “de-escalating” tensions between India and Pakistan over Kashmir must not be read as an endorsement of the Indian stand but as an attempt to intervene in the dispute rather than accept its bilateral nature.
• Good relations with Riyadh and other West Asian capitals is essential for the welfare of the expatriate Indian community and their emergency evacuation should there be such a need. West Asia is also an important partner in the domains of counterterrorism and maritime security in the western Indian Ocean.
• Indians in Saudi Arabia are the second-largest providers of remittances to their home country. They are also an important aspect of our soft-power diplomacy in the region.

-Source: The Hindu