Geopolitics Leadership Policy

Tactical Power Shift

India & Japan for open Indo-Pacific, game changing bilateral ties define Prime Minister Fumio Kishida’s visit to New Delhi Prachi Mishra Japanese Prime Minister Fumio Kishida’s two-day visit to India is part of on-going bilateral engagement between the countries agreed in 2006. Since then, Indian and Japanese leaders have consistently worked on strengthening ties and auguring a stronger and open Indo-Pacific. Prime Minister Kishida’s visit signals growing influence of QUAD. It is also significant as India and Japan presently hold the G20 and the G7 presidencies respectively. Kishida’s visit comes in the wake of San Shinzo Abe’s tragic death. Prime Minister Abe is regarded as a great friend of India seeking to reconnect two classical civilizations. Kishida’s statements have pointed to a turning point with continuity in bilateral strategic relations. Highlight of his visit was to unveil a plan on Open and Free Indo-Pacific for which he committed US $ 75 billion. Japan and India have a long and shared history of bilateral relations, strategic cooperation, and a resolve to build a peaceful Indo-Pacific. Historical connect India and Japan share centuries-old relationship. Their ties can be traced back to the sixth century when Buddhism was introduced in Japan and adopted as a way of life in Japanese society. In 752 AD, Bharatiya Buddhist monk Bodhisena consecrated the Todaiji Temple at Nara. The towering Buddha statue at Tara has weathered many storms and stood the test of times. All through the last few centuries, India and Japan have never been adversarial towards each other and their relations have been free of disputes. In the recent past, Swami Vivekananda, Netaji Subhash Chandra Bose, Rabindranath Tagore, and JRD Tata have been Indian cultural ambassadors to Japan[1]. In contemporary times, India and Japan signed a peace treaty after the Second World War which not only established India’s diplomatic relations in Japan but also uplifted morale of Japanese people who were recovering from the aftermath of the war. India also extended its iron resources to the war-torn Japan and helped immensely in its reconstruction. The first yen-loan was extended by Japan to India after Premier Nobusuke Kishi’s official visit to India in 1957. The two nations also find a lot of commonality in upholding democratic principles and rule of law. There have been umpteen trade and commerce deals between India and Japan. Set up in 1903, the Japan-Indian Association is the oldest global informal organisation in Japan. Economic and commercial cooperation Trade and commerce ties between India and Japan have steadily strengthened over last few decades. Both nations have a mutually beneficial relationship; Japan has tapped into India’s emerging and expanding market while India has relied on Japan for technology transfers and financial assistance. India-Japan Comprehensive Economic Partnership Agreement signed in 2011 is the most holistic agreement that not only facilitates movement of goods and services but also human resource, shared development of intellectual property, and custom processes. Japan has been the largest financial donor for India. Over the years, Japan has supported India in infrastructure and technological development in sectors like railways and roadways, power, and environment. The most recent and the most relevant projects are Ahmedabad – Mumbai High Speed Rail, Western Dedicated Freight Corridor, Delhi-Mumbai Industrial Corridor, and the Chennai-Bengaluru Industrial Corridor. The Delhi Metro Rail Corporation was also facilitated by Japanese assistance. Table 1 lists items of trade between India and Japan. Table 1. Import-export goods in Indo-Japan trade ties. Imports from Japan to India Exports from India to Japan Machinery and instruments Petroleum products Transport equipment Chemicals and compounds Iron and steel goods Fish and by-products of fisheries Electronic equipment and goods Metal ores and scrap Organic chemicals Clothing, textiles, accessories Tools Iron and steel products During financial year ending March 31, 2022, India was the 18th largest trading partner for Japan. Concomitantly, Japan was the 13th largest trading partner for India. Also, Japan’s foreign direct investment has soared in the last few years, with India becoming the 5th largest investing country for 2021-22. India has seen a sharp rise in the number of Japanese firms totalling to 1455 that operate in India. Fig. 1 and Fig. 2 show the value of trade carried out between the two countries since 2008. Fig. 1.Trade values of Indo-Japan trade. Source: Ministry of Trade and Commerce, Government of India. Ministry of Economy, Trade, Industry, Government of Japan. CIHS Analytics Fig. 2. Foreign direct investment from Japan to India in the last few years. Source: Ministry of Trade and Commerce, Government of India. Ministry of Economy, Trade, Industry, Government of Japan. CIHS Analytics. India has been the biggest recipient of the Japanese Official Development Assistance (ODA) loans in the last few years. India receives these loans from Japan under the latter’s “Act East” policy and “Partnership for Quality Infrastructure”. Table 2 summarises Japan’s ODA towards India. Table 2. Japan’s ODA towards India[2] Loans 312.25 billion Yen 2021-22 Grants 5.12 billion Yen 2020-21 Technical Cooperation 8.5 billion Yen 2021-22 The two countries have strengthened their relationship by focusing on developing strong supply chains through the India-Japan Industrial Competitiveness Partnership. Both India and Japan have also been striving for environmental protection and reduction of greenhouse gases. Their Clean Energy Partnership which was formulated in March 2022 focuses on achieving carbon neutrality and working towards energy security. Along with the Japan-India Energy Ministerial Dialogue, it also aims for a strategic cooperation plan in the fields of hydrogen, ammonia, and LNG. Science and technology cooperation Both India and Japan have benefitted from their science and technology cooperation over last several decades. While Japanese firms have revolutionised the Indian technology market, Indian software engineers, scientists, mathematicians, and technologists have contributed immensely to scientific research and development in Japan. India and Japan signed bilateral Science and Technology Cooperation Agreement in 1985 to foster an era of scientific advancement in the Indo-Pacific. Subsequently, the India-Japan Science Council (IJSC) was set up in 1993 facilitated several advancements. Till date, it has[3] Over 550 students have attended exchange programs through a

Leadership Media Policy World

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PM Modi at G20 in Bali, Indonesia

Prachi Mishra / New Delhi Indian Prime Minister, Narendra Modi, in his speech at the first working session on Food and Energy Security of the G20 Summit in Bali, called for all the world leaders to strive for peace, security, and harmony. Deriving from the lessons learnt during the wars of yesteryears, he urged for a path to ceasefire and diplomacy in conflict-ridden Ukraine. Basing on the ethos of vasudhaiva kutumbakam, he stated that the time is ripe for all nations to collectively resolve the ongoing conflict between Russia and Ukraine. This statement holds much gravitas as India enters its year-long G20 presidency on December 1st. He said that the G20’s presidency in the land of Buddha and Mahatma Gandhi will send a strong message of peace to the entire world. In a world which is gripped with many issues, India is bound to play a key role in shaping the course of global development in the coming year. He asserted that in the post-pandemic world, where climate change, COVID-19, and the Ukraine conflict have wreaked havoc on global supply chains and disrupted systems as were known earlier, the onus of setting the new world order now lay entirely on multilateral groupings like the G20. He stressed that the relevance of G20 has increased insurmountably in the present times, especially when age-old institutions like the UN have been unsuccessful in resolving pressing global challenges. On the issue of food security, he stated that during the pandemic, India ensured that each and every of its citizens had access to and availability of food grains. In fact, India also lent a helping hand to many other countries by not only providing them with medical aid, vaccines, and equipment but by also providing them with food grains. He also brought to focus the issue of fertiliser shortage. Since fertilisers are directly linked to food grain production, their global shortage should ring a bell for the world leaders to address this paucity. Moving forward, he recommended a mutually agreed instrument that can be developed to facilitate supply of both fertilisers and food grains. He also laid stress on promoting organic farming and that many Indian states have revolutionised and re-popularised natural farming and have been promoting traditional food grains like millets to ensure sustainability. In fact, the revival of these grains has been given a strong thrust by the Indian government in the last few years to eradicate malnutrition, ensure food security, improve the livelihood of marginalised farmers, and make farming more climate friendly. Moving on to the next major point of consideration, he stressed that India’s energy security is crucial for growth globally and that vehemently opposed restrictions imposed on the supply of energy. Apropos of this, he stated that stability of the energy market must be ensured. Since there has been a clear opposition from many nation states to purchase Russian oil and gas, this tilt away from the global crude oil leader can create an astronomical imbalance in the oil and gas trade, eventually leading to energy instability. Imposing restrictions of such nature can have catastrophic consequences on global supply chains, manufacturing, and industrial production in many countries. In fact, to balance the supply scale, India increased its imports of Russian crude oil from 0.2 percent (as of March, 2022) to 22 percent (as of October, 2022). He also affirmed India’s commitments to Sustainable Development Goals and asserted that by 2030, half of Indian power needs will be met by renewable energy sources. At a time when the energy crisis has been looming in many parts of the world, India is well placed to boost its renewable energy sector. India is the founding member of the International Solar Alliance and is on the cusp of transitioning towards green energy. He also spoke about more inclusivity in technology transfer and financing so that developing countries are also able to ensure a smooth energy transition. Prime Minister Modi met and greeted other leaders of the G20 and is expected to engage with them on the sidelines of the Summit. These bilateral interactions will not only pave the way for the Indian presidency of the Summit but also bring everyone together on India’s G20 priorities. (Prachi is a research consultant at Centre for Integrated and Holistic Studies.)

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Ban Crypto Currencies, No Exceptions

Without ‘ifs or buts’, crypto-money fueling speculation, online frauds, financing drug trade and terror through dark web be shut K.A.Badarinath / New Delhi India is not one of those Baltic republics where economic governance structures are either weak or non-existent. Neither is India run on exotic market instruments as is the case with a few European economies and the US. Indian economic management is also distinctly different from ‘commanding heights’ oligarchs that control communist regime in China. Since, India has its own thinking on economic and development issues and a population of 1.4 billion, the country may have to chart its own course on key issues like crypto-currencies. Prime Minister Narendra Modi’s meeting with various stakeholders last week, finance minister Nirmala Sitharaman and Reserve Bank of India’s governor Shakti Kanta Das have outlined India’s policy towards crypto-currency mania that continues to sweep several geographies like a storm. In Indian context, it’s not desirable to introduce or legalize crypto-currencies. Block chain based technologies may have other financial sector applications that can definitely be pursued for digitizing Indian economy. No one has an issue with exploring full potential of block chain technologies. But, one cannot make crypto currencies, a legal tender. Neither can crypto-currencies be treated as an asset that can be held, transferred or traded on market platforms or on the dark web, legally or illegally. It does not matter as to what’s the intention of countries like El Salvador in creating exclusive crypto-currency city. India cannot afford to gamble on crypto-currencies on which even advanced market based economies like US are to come to terms with. Union cabinet’s decision after several rounds of stakeholders’ consultations is significant as it seeks to ban all private crypto currencies. Simultaneously, Narendra Modi government’s move to introduce digital rupee beginning next year is precursor to digitizing US $ 3.08 trillion strong Indian economy. Digital rupee to possibly be introduced by RBI will be backed by sovereign assets and guarantees like any other banking instrument or paper. Digital currencies as legal tender have been contemplated by several central banks around the world. Even as Parliament’s winter session began on Monday, lobbies continued to work behind the scenes to push government towards either status quo on crypto-currencies or their weak regulation. These lobbies must be shown their place. Modi government need not be either apologetic or apprehensive on its decision to slap a complete ban on private crypto-currencies. In the sense, holding cryptos, their transfer and trading becomes an illegal activity and punishable under statute. This measure would also insulate Indian economy and markets from possible destabilization due to these speculative instruments. RBI governor Shakti Kanta Das has rightly pointed to ‘instability’ and economic gloom that crypto-currencies would ring in for India. The ban in itself cannot be viewed as Modi government being anti-reforms or new age technologies. For the youngsters that are high on block chain based trading of crypto money on unregulated exchanges or dark web, the decision may be a wee-bit unsettling. Retail investors in India that reportedly are over15 million with exposures up to US $ 6 billion on crypto speculations may be better off with protective cover of the state. Given that crypto-currency transactions cannot be brought under either banking regulator RBI or markets watchdog, Securities Exchange Board of India (SEBI), the best possible option exercised by government is to ban them. Hence, these crypto-currencies related transactions cannot be taxed as well. Apart from validity or valuation issues, crypto-currencies misuse leading to serious security issues is what Prime Minister Modi hinted while chairing a meeting of stakeholders, bankers and investors last week. For instance, Enforcement Directorate has pointed to about Rs 4000 crore worth funds routed through crypto-transactions to launder ill-gotten funds by economic offenders. Can we open another channel for tax evaders, corrupt people and traders to legitimize their ill-gotten wealth? A recent study of Paris-based Financial Action Force (FATF) flagged 56 million illegal transactions on one crypto exchange named Liberty Reserve that was busted by US enforcement agencies. Liberty Reserve is just one of such exchanges whose numbers run into thousands and enable illegal transactions in billions. Crypto-currencies and exchanges by design do not allow for any regulation or enforcement and operate outside of banking channels in most geographies including India where banks wisely kept off from such operations. In the infamous Aryan Khan case last month, Narcotics Control Bureau had pointed to payments made using crypto-currencies to acquire drugs that were recovered from a ship owned by Cordelia Cruises. Drug pedlars were paid in bitcoins for the narcotic substances busted from the ship off the Mumbai coast in the aftermath of a rave party. World over the narcotics drug trade, laundered funds, credit card frauds, identity theft, investment frauds, computer hacking scandals were linked to crypto-currencies as per the FATF report. Terror financing by Pakistani outfits, Afghanistan’s Taliban and jihadists apart from Church using crypto-currencies were reportedly flagged by government officials in internal discussions. United Nations Centre for Counter Terrorism (UNCCT) had been pushing for a workable framework to prevent use of digital money including crypto-currencies to finance terrorist activities globally. Crypto-currency and Regulation of Official Digital Currency Bill 2021 to be piloted by Finance Minister Nirmala Sitharaman in the on-going winter session of parliament may have to take 360 degrees view and ban the crypto-currencies without exceptions. SEBI panel has rightly pointed out that since there are no underlying assets, crypto-currencies cannot be bracketed as a class of assets like stocks, debt paper, legal tender, real estate or commodities. Even in most advanced economies like US, the banking regulators are yet to make comprehensive plans on crypto-currency while some states have gone ahead with their set of rules. Federal Reserve in US, Federal Deposit Insurance Corporation and Comptroller of Currency may take the entire 2022 to chart a plan for crypto-currencies. While China has gone ahead to ban crypto-currencies beginning with issue of coins, all mining operations were shut down to safeguard its small investors. In

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Tactical Power Shift

PM Modi at G20 in Bali, Indonesia

Ban Crypto Currencies, No Exceptions