The Union Budget 2023-24 has been characterised as the first budget for “Amrit Kaal”— A vision to see a transformed Bharat by the time the nation celebrates its Independence centenary on 15 August 2047. For the first time, we have a long-term road map of what Bharat should be in terms of its human and developmental index, with clear markers for reaching the desired end state over the course of the next quarter century.

This, by itself is a quantum leap forward from the incremental development policies followed for the most part since 1947. There was a hesitancy in envisioning a great and prosperous Bharat, which perhaps was a result of a socialist mind-set, mired in a philosophy that pedalled poverty as virtue and derided wealth as being sinful and corrupting. For decades since independence,  the state set about controlling the means of production and telling the people what, how and how much they could produce and at what cost. The bureaucracy became all powerful as the arbiters of the nation’s destiny and this soon morphed into a political-bureaucratic-criminal nexus.

This was a recipe for disaster and by 1990, the nation was on the verge of bankruptcy. Then came the era of reforms, which since the last decade, have taken on a more focussed approach with major initiatives like the rolling out of the GST and the JAM trinity (Jan Dhan Yojana which has provided access to India’s poor to the banking sector, Aadhar—a unique biometric identifier and the Mobile penetration). This has enabled targeted provision of benefits to millions below the poverty line with near zero pilferage and brought about a sense of inclusivity to an unparalleled extent. Rural housing, electricity access, toilets for all, are but a few of the myriad schemes which has seen wide penetration across the length and breadth of Bharat in a truly transformative manner.

Budget 2023-24 builds on the India story which saw a rejuvenation in 2014 after a decade of stalled economic reforms. There is renewed focus on digitisation, indigenous defence manufacture, green energy, transparency in government, skilling of the work force, education sector reforms and the like. A host of initiatives have been announced to unleash the full potential of all citizens. In this new Bharat, there  is little doubt that every citizen will stand up to be counted. But a slew of challenges remain.

It would be naive to think that the major powers will look on benignly as India moves ahead. A strong and economically powerful Bharat poses a threat to the economic interests of other powers. An Atmanirbhar Bharat would be an economic challenger, and with defence indigenisation taking place at a rapid rate, a rival to the worlds military industrial complex as an arms exporter. So, there will be attempts made by both India’s enemies as well as those with whom India has friendly relations, but who may view India as a serious competitor in future, to sabotage the Bharat growth story. An inkling of what the coming year holds can be seen in attempts being made to create rift in society by inciting the public. The ham-handed manner in which the BBC tried to inflame passions by making a documentary on the post-Godhra riots of 2002, is a case in point. Another is the hit job done by a US based short-seller on the Adani business group. We are now seeing fringe Khalistani elements raising their ugly heads in a clear bid at destabilising the country. We are likely to see radical Muslim elements within the country creating discord over inane issues. There will be others with perceived grievances, who will be funded by external actors like the George Soros Open Society Foundation, the Ford Foundation and the Rockefeller Foundation, all of whom, through a network of NGOs, will attempt to spread a divisive agenda. And in all this they will receive support from both China and Pakistan, who have their own axe to grind. Unfortunately, there will be elements of certain political parties who have their own agenda, who will also lend political support to such groups.

But these challenges are an intrinsic part of trying to create a strong and vibrant Bharat. But while the Government can provide the vision and the policy support, it is also up to each and every citizen to rise to the occasion, to achieve the objectives of Atmanirbharta. The nations public and private sectors too will have to play their role. The same goes for the nation’s bureaucracy. Can they measure up to the Prime Minister’s vision and play an enabling and supportive role? Therein lies the challenge.

On February 1, the Hon’ble Finance Minister Srimati Nirmala Sitharaman, presented her FY 2024 Budget to Parliament. The Hon’ble Prime Minister termed this the Amrit Kaal Budget—the budget for a golden age for India. It proved to be so. Unlike most other budgets, which are almost always criticised on multiple counts, this budget has been hailed by all stakeholders. The people of India appreciated the continued support for key welfare programs and infrastructure investment. Taxpayers loved the judicious tax cuts. Businesspeople expressed their happiness for policies supporting green growth and robust job creation. The capital markets praised the stability and continuity in policymaking. And economists were gratified to see that all the key macroeconomic parameters ranging from growth to the fiscal deficit to open market borrowings were deftly managed.

The Amrit Kaal budget was prepared under daunting circumstances. The last three years have drastically disrupted the world. The global economy has suffered from high inflationary pressures and interest rates, low investments and, more recently, a wave of layoffs in technology-based companies. Through the economic slowdown of the last three years, India has emerged as the shining star of the global economy. According to a United Nations study^[1], growth prospects in the developed world have taken a sharp downturn – with the United States and the European Union growing by a low 0.4% and 0.1% in 2023, respectively. On the other hand, India is expected to grow at close to 6% in 2023, while the average growth rate in South Asia is projected to remain at 4.4%.

From being a Fragile Five country in 2013-14, India is now among the Top Five economies in the world! The Indian government’s strong and stable fiscal policies have allowed the country’s economy to not only emerge relatively unscathed from the pandemic, but also aid the developing world. To put the Union Budget of 2023-24 in context, it is important to understand how the major events of the past three years have impacted the world economy.

• Covid-19 Pandemic: Following the once-in-a-century pandemic, the World Bank projected the growth of the developing world, much like Covid-19 vaccine accessibility, to be quite uneven. As a result, Low-Income Countries (LICs) have fallen into extreme poverty due to rising food and energy insecurity. As per the Bank’s projections^[2], LICs with extreme poverty over 50% will rise to a positive figure by 2024, as opposed to the pre-pandemic expectation of poverty reduction. The strict, yet poorly managed, lockdowns in China have also impacted supply chains and global trade even as the world starts to recover from the pandemic.
• Russia-Ukraine War: The conflict has had significant spill over effects on both the South Asian and global economy due to disrupted supply chains and increased food and energy prices. The impact was further magnified due to increased energy requirements, owing to climate change and disrupted energy supply following the war. As median inflation^[3] reached a new high of 9% in the second half of 2022, central banks around the world tightened monetary policy, reducing inflation but temporarily slowing down growth as well.
• Climate Change and Natural Disasters: Even as the world was reeling from the post-Covid impact on local, regional, and global economies, it was further shaken up by grave climate change-induced disasters in the form of hurricanes, cyclones and floods. The ‘State of the Global Climate 2021’^[4], published by the World Meteorological Organization, reported loss and damages worth USD 100 billion in 2021. In 2022, the floods in neighbouring Pakistan devastated the country’s economy^[5] – with total damages at USD 15 billion, total economic losses at USD 15.2 billion, and the cost of rehabilitation and reconstruction at USD 16.3 billion, Over 33 million people were affected and almost 9 million were pushed below the poverty line. India also witnessed more frequent extreme weather events, as storms and flooding alone cost the country over USD 7.5 billion in 2021. Once the loss and damage from weather events in agriculture and other sectors are quantified, the figure will be much larger.

This year’s budget is historic for two major reasons: first, it seeks to lay the foundation for the next 25 years to ensure continuity and stability in development decisions and, second, it divides policy priorities into seven interdependent, yet holistic ‘saptarishis’ (seven sages). Together, they make the budget people- and development-friendly. They are:

1. Inclusive Development:

Equal benefit to all sections of society through investments in agriculture and farmers’ welfare, as well as medical infrastructure.

• Agriculture (BE 2023-24 = Rs 1,25,036 crore or a 5% increase over last FY RE): The proposed additions under the Budget will cater to the entire agricultural supply chain. Enhanced agriculture credit to the tune of Rs 20 lakh crore for animal husbandry, dairy, and fisheries aims to improve the quality and care of farm resources. The proposed Digital Public Infrastructure will revolutionise agricultural practices in India by providing open-source access to solutions, inputs, credit, and insurance to farmers. Decentralised storage capacity for farmers will help them realise competitive prices, and additional cooperative dairy and fishery societies will further organise the sector and bring in more formal agricultural employment. Finally, in line with the Atma Nirbhar Bharat vision of the Hon’ble Prime Minister, the Agriculture Accelerator Fund will reach young entrepreneurs in rural areas and give them an opportunity to innovate and revolutionise agricultural practices.
• Health (BE 2023-24 = Rs 89,155 crore or a 12% increase over last FY RE): Post the Covid-19 pandemic, the focus of the health sector has shifted to infrastructure development. The Budget speech announced the establishment of 157 new nursing colleges, introducing multidisciplinary courses at medical colleges on technology, allowing private players to access the Indian Council for Medical Research (ICMR) facilities, and pushing R&D in the pharmaceutical sector. In addition, health infrastructure via the old and new All India Institute for Medical Sciences (AIIMS) has received an increased outlay, and additional expenditure under Ayushman Bharat shall further the mission of achieving universal healthcare.

2. Reaching the Last Mile:

To ensure inclusivity of tribal groups, the Budget lays special emphasis on schemes for their benefit, specifically through the new Pradhan Mantri PVTG (particularly vulnerable tribal groups) Development Mission, and by increasing the number of teachers in the Eklavya Residential Model Schools for tribal children in remote areas. Education has received a significant boost this year of 8.3% as compared to last year.

3. Unleashing the Potential:

Micro, Small and Medium Enterprises (MSMEs) form a core part of the Indian economy. India has over 63 million MSMEs, contributing 30% to its GDP, 40% to its manufacturing output, and 48% to its exports. One of the biggest challenges of the sector has been the provision of safe credit opportunities. The Standing Committee on Finance^[6], in our ‘Strengthening Credit Flows to the MSME Sector’, had noted that more than 60% of the MSMEs currently avail credit from informal sources, depending on costly and unreliable credit. The Budget provides additional support to MSMEs through the infusion of Rs 9000 crore under the revamped Credit Guarantee Scheme. This will potentially lower the cost of capital and allow MSMEs to avail collateral-free credit guarantee of Rs 2 lakh crore. Access to reliable credit will significantly boost their output, accelerate formalisation, and increase creditworthiness.

Additionally, the Standing Committee also recommended bringing MSMEs into the digital ecosystem both for credit access and formalisation, especially given India’s UPI success story. The Government further establishes an enterprise DigiLocker for MSMEs, other businesses and trusts as a one-stop solution for foundational identification and digital safe-keeping of documents.

4. Youth Power:

With a strong belief in the power of the youth and their ability to take our nation forward through the Amrit Kaal, the Budget aims to enhance the layout for skilling. The PM Kaushal Vikas Yojana 4.0 (PMKVY 4.0) will focus on technical skills like robotics, artificial intelligence, and coding to provide a stimulus to India’s already booming start-up industry. Previous editions of PMKVY have provided over 10 million certifications, out of which a quarter have materialised into meaningful employment. The increased outlay for school and higher education, coupled with the National Education Policy, will provide an impetus to infrastructure-oriented, multidisciplinary, and skill-based education. The power of India’s youth will be unleashed by providing them with high-quality modern education with a special focus on skill development and entrepreneurship.

5. Green Growth:

The Hon’ble Prime Minister’s commitment to net zero by 2070 at COP26 laid the foundation for India’s green growth. With the announcement of the target, India also committed to utilising renewable power for 50% of its energy requirements, reaching 500 GW of non-fossil energy capacity by 2030, reducing the total projected carbon emissions by one billion tonnes by 2030, and reducing the carbon intensity of the economy by 45% by 2030. The announcement came at a crucial juncture for the world, as the United Nations Environment Programme^[7] projects a 2.8 degrees Celsius rise in temperature by the end of the century, as opposed to the target of capping it at 2.0 degrees Celsius by 2100. It is estimated that by 2070, over 75% of greenhouse gas (GHG) emissions will come from countries from the Global South (developing countries).

India is one of the few Global South countries that has declared a net zero target for itself. The 2023-24 Budget takes this vision forward with Rs 35,000 crore allocated for capital investments into the green transition and net zero. Additionally, support shall be provided to set up battery storage systems with a capacity of 4000 MWh. The Green Credit Programme, along with the additional outlay to the National Green Hydrogen Mission, will provide further momentum to the green transition in India. The Government is also planning to introduce an Emissions Trading System unique to India, based on buying and selling of credits earned from reducing emissions intensity, as opposed to absolute emissions reductions.

At COP26, the Hon. Prime Minister announced a requirement of $1 trillion from developed countries for climate finance.^[8] India’s Budget proves that it is on track to achieve its Nationally Determined Contribution (NDCs) and achieve net zero, which shall also require mobilisation of finance from the developed world, in line with the principle of common but differentiated responsibilities (CBDR).

6. Infrastructure Investment:

The last nine years have been extremely positive for India’s infrastructure story. For example, the Government doubled the number of airports to 146, added close to 43,000 kilometres to the national highways, and tripled the capital expenditure on higher education institutions like AIIMS and IITs. The budget streamlines the investment pipeline for the country across sectors. Firstly, it simplifies the administrative structure for investments. It creates an Infrastructure Finance Secretariat for more private investment in public-dominated sectors like urban infrastructure, power, and others. It creates a ‘Harmonised Master List of Infrastructure’, with recommendations from experts on classification and financing requirements for the Amrit Kaal.

Secondly, the Budget lays great emphasis on city and urban planning through the ‘Sustainable Cities of Tomorrow’ mission, focusing on resource efficiency and enhanced availability and affordability. It creates the foundation for significant investment opportunities in urban infrastructure through the introduction of municipal bonds. Urban investments also get a renewed push through the Urban Infrastructure Development Fund worth Rs 10,000 crores.

Lastly, regional connectivity, railways, and logistics have been given a boost via enhanced allocation of Rs 2.4 lakh crore to the railways.

7. Financial Sector:

To reduce the cost of compliance, regulators shall be expected to review regulations through public and private consultation. Further, in order to enhance the governance of public sector banks, the Government shall propose amendments to the Banking Regulation Act, the Reserve Bank of India Act, and the Banking Companies Act. Additionally, the focus will be on setting up better digital infrastructure for payment security by using PAN as the common identifier on platforms and providing subsidies to banks on UPI payments.

Conclusion

In summary, the Amrit Kaal Budget is a visionary, well-balanced budget as it provides fresh stimulus through two key measures. Firstly, enhanced capital expenditure (capex) to boost employment, help crowd in private investments, and improve operational efficiency. This year, capex has been increased to Rs 10 lakh crore (3.3% of GDP), and effective capital expenditure, inclusive of grants-in-aid to states, to Rs 13.7 lakh crore (4.5% of GDP). Secondly, a significant middle-class tax cut to put money in the hands of consumers, generate demand, as well as increase spending and consumption. Together, both sources of stimuli will stabilise macroeconomic parameters, increase growth rate to 6-7%, and make India a shining star in the global economy by driving digitisation and decarbonisation.

Author Brief Bio: Jayant Sinha is the Chairman of the Standing Committee on Finance in Parliament and a Lok Sabha MP from Hazaribagh, Jharkhand. Views are personal.

Reference:

^[1] https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-february-2023-briefing-no-169/#:~:text=Average%20GDP%20growth%20is%20projected,weigh%20on%20investment%20and%20exports.

^[2]https://openknowledge.worldbank.org/bitstream/handle/10986/38030/GEP-January-2023.pdf?sequence=34&isAllowed=ypage 25

^[3]https://openknowledge.worldbank.org/bitstream/handle/10986/38030/GEP-January-2023.pdf?sequence=34&isAllowed=ypage 11

^[4]https://library.wmo.int/doc_num.php?explnum_id=11178

^[5]https://www.worldbank.org/en/news/press-release/2022/10/28/pakistan-flood-damages-and-economic-losses-over-usd-30-billion-and-reconstruction-needs-over-usd-16-billion-new-assessme

^[6] https://eparlib.nic.in/bitstream/123456789/994373/1/17_Finance_46.pdf

^[7] https://www.unep.org/resources/emissions-gap-report-2022

^[8] https://pib.gov.in/PressReleasePage.aspx?PRID=1768712

Introduction

The Union Budget, which is an annual report on the government’s revenue and expenditure, is often perceived as a platform for major policy announcements. However, it actually accounts for a decreasing share of public expenditure, with much more spending happening at the state level. As a result, State Budgets deserve more attention and scrutiny. The hype around the Union Budget stems from a bygone era when taxes changed frequently, and people were eager to know how prices would be affected. However, stability and predictability are essential for tax reform. While there may be a need to simplify the GST and reduce the number of tax rates, this is the responsibility of the GST Council, not the Union Budget.

The current budget is a stark contrast to N.D. Tiwari’s “sindoor budget” of 1988-89 made headlines for its symbolic tax exemptions on items like sindoor and kajal. Instead, this budget is all about empowering women, youth and progress. The government is gearing up for the ‘Amritkaal’, charting a path towards a developed India by 2047. It’s a budget focused on real change and investment in the future, leaving the quaint symbols of the past behind. This is a budget for a new India, ready to embrace its destiny and unleash its full potential.

The Finance Minister encountered a nuanced predicament in navigating the current economic terrain. Mindful of the importance of upholding macroeconomic stability, the budget strikes a delicate equilibrium between tackling inflationary constraints and promoting economic growth hindered by external factors. This conundrum entailed a precarious balancing act, which necessitated the Finance Minister to display unwavering composure.

The art of budgeting is a crucial component in fulfilling the commitment to proficient and impactful governance. Substantial deviations in the projection of revenue and expenses can impede the execution of government initiatives and policies, ultimately jeopardising social welfare results. Against this background, we highlight four areas where the budget has done exceptionally well.

Fiscal Discipline

Democratic political systems often face choices between present and future welfare. According to Nordhaus’ influential work published in 1975 on the political business cycle, a democracy that evaluates political parties solely based on their past performance is likely to make decisions that are unfair to future generations. This is because politicians may prioritise short-term gains over long-term benefits in order to secure immediate political success. Nordhaus (1975) further goes on to say, “within an incumbent’s term in office, there is a predictable pattern of policy, starting with relative austerity in early years and ending with the potlatch right before elections” (pp.187)^[1].

Hence, the political business cycle theories posit that incumbent political parties engage in opportunistic behaviour, manipulating economic instruments before elections to enhance their chances of being re-elected. In other words, Governments are known to employ a strategic approach by exploiting the short-term Phillips curve to further their objectives^[2]. In addition, governments may also take advantage of the limited knowledge and simplistic expectations of voters in order to attain their goals. This reveals a complex interplay between political manipulation and the economic implications of short-term policies.

At the same time, the work of Rogoff (1990) and Rogoff and Sibert (1988) suggests that in situations where information about the competence of an incumbent is limited, expansionary policy measures implemented prior to an election are often viewed as an indicator of high competence^[3]&[4]. As per their analysis, a potential outcome of the political business cycle could be an increase in the budget deficit, as well as an increase in the money supply via the monetisation of the deficit. In addition, there may also be an increase in inflation during the electoral period, as politicians prioritise short-term economic gains in order to increase their chances of re-election. In the case of India, too, some studies have found clear evidence of an increase in revenue deficit in the years leading to an election^[5].

However, under the incumbent government in India, things have changed. What Narendra Modi’s government is doing is completely opposite to the basic tenets of the political business cycle theories. The Prime Minister has proved Nordhaus and other PBC theorists wrong.

With the upcoming elections, many expected the government to unleash a spree of spending, showering voters with loan waivers and other financial goodies. But the Finance Minister and the government have taken a different approach, choosing to prioritise long-term stability over short-term gains. By resisting the temptation to indulge in vote-winning measures, the government has demonstrated a commitment to responsible financial management, even in the face of political pressure. This budget stands as a testament to the government’s determination to put the country’s future first.

The government has demonstrated exceptional fiscal discipline in recent years, consistently meeting or exceeding its deficit target. India’s fiscal deficit shot up to a record 9.3% in 2020/21, from 4.6% the previous year due to pandemic-related spending. This year, despite formidable fiscal challenges owing to the ongoing Russia-Ukraine conflict and global economic uncertainties, the government deserves accolades for reinforcing its resolve to stick to the fiscal deficit target of 6.4%.

For the next year, the government has committed to bringing down the fiscal deficit to 5.9%. This reduction is in line with the government’s earlier commitment towards the fiscal deficit target of 4.5% of GDP by the end of 2025/26. Obviously, this doesn’t have to be linear. Even if the reduction is by 0.5% next, there may be more opportunities for substantial consolidation and growth as the global recession and headwinds would be behind us in the first year of the next government. Thus, there will be more room for fiscal consolidation in the next two years.

The endeavour to simultaneously achieve rapid economic growth and social welfare improvement while maintaining responsible fiscal management is a multifaceted challenge. Nevertheless, recent studies indicate that the fundamental means of accomplishing these goals is not merely through the reduction of fiscal deficits but rather by diminishing expenditures of inferior quality. This necessitates abstaining from the temptation to artificially generate capital account surpluses that come at the cost of enlarging gross fiscal deficits.

Capital Expenditure

In the midst of the Great Depression in 1933, economist John Maynard Keynes penned a passionate letter^[6] to President Roosevelt urging him to take bold actions to jumpstart the economy. Keynes argued that the government should borrow money and use it to increase spending rather than raise taxes, as a way to boost national purchasing power and ignite growth. While it’s unclear if Roosevelt actually read the letter, he did ultimately turn to government spending to revitalise the economy through his New Deal.

A lot has already been written about the union government setting aside ₹ 10 lakh crore (~3.3% of the country’s GDP) for Capital Expenditure in this budget, a 37.4% increase from last year’s Revised Estimates. Economists talk about the multiplier effect. The multiplier effect is a concept that highlights the exponential impact of changes in government spending on a nation’s output. When the fiscal multiplier is greater than one, an increase in government spending leads to a corresponding increase in output that is greater than the original investment. In simpler terms, a single rupee increase in government spending could result in a return that is worth much more than one rupee.

The economic survey may have shed light on the resurgence of private investment, but with global challenges and monetary constraints, it alone may not be enough to drive growth. This is where the government steps in, with their unwavering commitment to revive the economy demonstrated by allocating a record-high ₹ 10 trillion for long-term capital expenditure in 2023-2024, surpassing the previous year’s budget of ₹ 7.5 trillion, thus providing a cushion from global headwinds. A 33% increase year-on-year shows that the government is putting their money where its mouth is and that growth is within reach. This, in turn, will also help in crowding in private investments.

But what is the extent of the fiscal multiplier in the case of capital expenditure in India? There is a dearth of studies on the subject. However, the most influential study out of these is that by Bose & Bhanumurthy, which first came out as a NIPFP Working Paper in 2013 and later got published in the Journal of Applied Economic Research^[7]. According to their calculations, the multipliers for capital expenditures, transfer payments, and other revenue expenditures are 2.45, 0.98, and 0.99, respectively. However, the multipliers for taxes are approximately -1. Goyal & Sharma (2018) find that capital expenditure exhibits the greatest cumulative multiplier, with a size ranging from 2.4 to 6.5 times that of revenue expenditure.

Furthermore, capital expenditure has a more pronounced impact on long-term inflation reduction. Nonetheless, capital expenditure is susceptible to greater volatility due to its vulnerability to discretionary spending cuts^[8]. However, the multipliers of public capital expenditure would not be as high as they used to be in 2013. The explanation for this phenomenon is straightforward. During the past nine years, the government has made significant expenditures on infrastructure development, including roads, railways and logistics. Infrastructure no longer poses as significant an obstacle for private capital influx as it did during the UPA era. Thus, the government is not just focusing on capital expenditure but also on addressing institutional weaknesses.

At the same time, the capital expenditure multipliers of the states are much higher the that of the union government’s capital expenditure. Thus, it is crucial to encourage states to prioritise capital expenditure as a means to revitalise the economy, especially after the shocks^[9].

Incentivising States for Capital Expenditure

In pursuit of fostering cooperative fiscal federalism, the Union Government has extended a program of financial assistance program for capital expenditure for the upcoming fiscal year of 2023-24. This initiative has received a significant boost in allocation, with an increased budget of 1.30 lakh crore, representing a 30% escalation from the previous year. In terms of the current fiscal year, this amounts to approximately 0.4% of the nation’s GDP. The importance of empowering the states to undertake capital projects cannot be overstated, and this expanded allocation represents a progressive step forward.

The FM has decided to continue a 50-year interest-free loan to the state governments for one year. The states have been given autonomy to spend this at their discretion, with a catch – a portion of it is contingent upon increasing their actual capital expenditure. But what will they spend it on? The Union Government has tied parts of the outlay to either reforms or allocation to priority areas. This includes urban planning reforms, financing reforms in ULBs to make them creditworthy, the State share of capital expenditure of central schemes etc. Thus, there will be an inherent incentive for the state governments to also ensure the quality of public expenditure.

However, states should focus on the quality of the capital expenditure. There is a significant variation in capital expenditure by different states. Delving into the granular details, the states of Uttar Pradesh, Maharashtra, Madhya Pradesh, Karnataka, and Tamil Nadu collectively contribute over 40% towards the consolidated capital outlay carried out by all states. In a particularly fascinating trend, states such as Uttar Pradesh, Odisha, Assam and Jharkhand exhibit a relatively larger proportion of capital outlays in relation to the size of their respective economies.^[10]

Similarly, the RBI’s State Finances report has also pointed out that fiscal marksmanship relating to capital outlay also varies across the state. During 2017-18 to 2019-20, states & union territories like Andhra Pradesh, Delhi, Jammu & Kashmir, Goa, Tripura and Punjab have cut their budgeted capital expenditure by more than 40%. Himachal Pradesh, Haryana, and Nagaland were the sole outliers in exceeding their budgeted targets for capital expenditure.

The RBI report has also flagged the issue of a residual approach to spending. Over the past five years, a substantial portion, amounting to one-fourth, of total expenditures occurred solely during the month of March. This presents a grave matter as the primary objective of spending by the year’s end results in a compromise in the quality of expenditures. The Union budget can only nudge the states to improve their quality of public expenditure. But under a federal structure, states will have to do more if they want to ensure higher growth rates for a prolonged period.

Transparency

In the past two budgets, the government has taken bold steps to bring off-budget borrowings, like those of the Food Corporation of India (FCI) previously, in its own light. By doing so, they aim to offer a clear picture of the government’s financial obligations, enabling informed decisions and assessments.  Previous finance ministers acknowledged the issue with off-budget borrowings and made hollow announcements which were never fructified. P. Chidambaram, in his budget speech (2008-09), stated – “I acknowledge that significant liabilities of the government on account of oil, food and fertilizer bonds are currently below the line. This accounting arrangement is consistent with past practice. Nevertheless, our fiscal and revenue deficits are understated to that extent. There is a need to bring these liabilities into our fiscal accounting.” However, it was Nirmala Sitharaman who made it a reality. The finance minister has continued with this tradition again this year.

Social Sector

Some have argued that the union government’s outlay on the social sector, as a percentage of its overall expenditure, has displayed a persistent stasis. In FY 2009-10, the government allocated 21% of its total expenditure towards social sector expenditures, which subsequently saw a slight decrease to 20% by FY 2019-20. Over the past fourteen years, the average proportion of social sector spending by the government, amounting to nearly one-third (30%), was dedicated to the provision of subsidised food to the country’s poorest two-thirds. However, the percentage of such spending exceeded 50% in FY 2020-21 amidst the global health crisis caused by the COVID-19 pandemic.

While the percentage of overall expenditure on the social sector would have remained same in the last few years, there is an incremental improvement on quality of expenditure in the social sector. Notably, today, intended beneficiaries get 100% of funds which they are supposed to get. During a visit to the drought-stricken Kalahandi district in Odisha in 1985, Rajiv Gandhi made a statement indicating that only 15 paise out of every rupee spent by the government actually reached the intended recipient. One should quote Justice A. K. Sikri’s majority opinion on the constitutionality of the Aadhar Act: “Resultantly, lots of ghosts and duplicate beneficiaries are able to take undue and impermissible benefits… It cannot be doubted that with UID/Aadhaar much of the malaise in this field can be taken care of.”^[11]

The digital public infrastructure has not only enhanced accessibility of public services to the most disadvantaged and susceptible sections of the nation, but it has also facilitated the detection and elimination of fraudulent beneficiaries from various government schemes. The system has effectively curbed leaks caused by non-existent and duplicate beneficiaries who use fake identities to obtain benefits. While one should acknowledge that there are some exclusion errors, but the government is ensuring that there are enough safeguards against exclusion in the cases of authentication failure. The digital public infrastructure and Aadhaar based biometric authentication (ABBA) also makes it easier to ensure portability of benefits.

More importantly, use of Aadhaar to identify and authenticate beneficiaries in government scheme has led to considerable fiscal savings. Thus, even if the social sector spending has remained stagnant, the use of DPI and ABBA, has ensured that more people, especially the one who are marginalised and vulnerable are able to get intended benefits.

Moreover, criticism has been raised regarding the allocation of funds for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme in the 2023-24 budget. The budget for MGNREGA in 2023 is 18% lower than the budget estimates of Rs. 73,000 crore for the current year of 2022-23, and approximately 33% lower than the revised estimates of Rs. 89,000 crore for the current year.

MGNREGA operates on a demand-driven model where households seeking employment are entitled to a minimum of 100 days of unskilled manual labor during a given financial year. In the ongoing fiscal year of 2022-23, nearly all rural households, or 99.81%, have been offered wage employment according to their demand. If a job seeker does not receive employment within 15 days of application, they are eligible for a daily unemployment allowance as per the provisions of the Scheme.

As there is reduced demand of MGNREGA, the number of person days generated by MGNREGA has also been going down. While the person days generated under MGNREGA was 389.09 crore in FY20-21 due to the migration to rural areas owing to pandemic, it has been going down subsequently.

	FY2022-2023	FY 2021-22	FY2020-21	FY 2019-20
Person days generated (in crores)	248.08	363.33	389.09	265.35

Source: Ministry of Rural Development^[12]

It should also be highlighted that the budget estimates are revised once there is more demand for work under MGNREGA. Over the past seven years, actual funds released to states under MGNREGA have consistently exceeded budget estimates. For example, in the fiscal year 2019-20, the budget estimate for MGNREGA was Rs.60,000 crore, but due to increased demand, it was revised to Rs.71,001 crore. Similarly, the COVID-19 pandemic and the sudden influx of population into rural areas led to a revised estimate of Rs.1,11,500 crore in 2020-21, compared to the original budget estimate of Rs.61,500 crore. In the fiscal year 2021-22, the budget estimate of Rs.73,000 crore was revised to Rs.98,000 crore. These figures demonstrate that the government is willing to allocate additional funds to MGNREGA in response to demand.

Source: Ministry of Rural Development

Conclusion

The Union Budget is no longer the sole platform for major policy announcements, as much more spending happens at the state level. The hype surrounding the budget is a remnant of a bygone era, and stability and predictability are essential for tax reform. The current budget is focused on empowering women, youth, and progress, leaving symbolic tax exemptions of the past behind. The Finance Minister has done an exceptional job of balancing tackling inflationary constraints and promoting economic growth. The government’s commitment to responsible financial management is commendable, even in the face of political pressure, and this budget stands as a testament to putting the country’s future first. The government has demonstrated exceptional fiscal discipline in recent years and deserves accolades for reinforcing its resolve to stick to the fiscal deficit target of 6.4%. The endeavour to simultaneously achieve rapid economic growth and social welfare improvement while maintaining responsible fiscal management is a long-term goal that requires prudent budgeting, and this budget is a step in the right direction.

Author Brief Bio:  Bibek Debroy is the Chairman, Economic Advisory Council to the Prime Minister & Aditya Sinha is Additional Private Secretary (Policy & Research), Economic Advisory Council to the Prime Minister.

References:

^[1] Nordhaus, W. D. (1975). The Political Business Cycle. The Review of Economic Studies, 42(2), 169-190.

^[2] Dubois, E. (2016). Political Business Cycles 40 Years after Nordhaus. Public Choice, 166(1-2), 235-259.

^[3] Rogoff, K. (1990). Equilibrium Political Budget Cycles. The American Economic Review, 80(1), 21-36.

^[4] Rogoff, K., & Sibert, A. (1988). Elections and Macroeconomic Policy Cycles. The Review of Economic Studies,, 55(1), 1-16.

^[5] Sen, K., & Vaidya, R. R. (1996). Political Budget Cycles in India. Economic and Political Weekly, 31(30), 2023-2027.

^[6] Keynes, J. M. (1933). An Open Letter to President Roosevelt. Retrieved from University of Texas: https://bit.ly/3ScJVa2

^[7] Bose, S., & Bhanumurthy, N. R. (2015). Fiscal Multipliers for India. The Journal of Applied Economic Research, 9(4), 379–401.

^[8] Goyal, A., & Sharma, B. (2018). Government Expenditure in India: Composition and Multipliers. Journal of Quantitative Economics volume, 16, 47-85.

^[9] Swaroop, E. (2022). Estimation of Expenditure Multiplier for India. Retrieved from IES: https://bit.ly/3YSly44

^[10] RBI. (2023). State Finances: A Study of Budgets of 2022-23. Mumbai: Reserve Bank of India.

^[11] Justice K S Puttaswamy (Retd.) and Another versus Union of India and others, 494 of 2012 (Supreme Court of India September 26, 2018). https://bit.ly/3XNTsph

^[12] Ministry of Rural Development. (2023, February 3). Clarifications of Union Rural Development Ministry on budget cut to MGNREGA. Retrieved from Press Information Bureau: https://bit.ly/3SdCmzP

The global economy has been experiencing severe economic downturns since 2008. Much before the sub-prime crisis triggered the collapse of global trade, the world economy started experiencing recessionary trends. The European debt crises, the US-China war, the Covid-19 pandemic, and the Russian-Ukraine war, among others, have significantly influenced the world economic outlook in the last decade. Amid such a crises prone period, even though the growth of trade has also been sluggish, the world trading platform has experienced a structural transformation creating several new opportunities for emerging and developing market economies. More than ever, international trade and commerce are now considered as critical weapons to ensure world peace and harmony, as these escalate the cost of future conflicts. This ideology though is not new. Mill (1848) also emphasised how international trade renders inter-country wars obsolete by enhancing their interdependences. However, today, the definition of trade has changed drastically. Unlike the traditional concept where production processes used to happen domestically and countries were engaged in the export and import of only final goods and services, in today’s world, there is no product which is made in a single country. The new trade reality is now demonstrated by the so-called Global Value Chains [or, GVCs], which are guided by fragmented production structures spread across different countries in the world. For example, as explained in a recent study by Xing and Huang (2021), a smartphone finally assembled in China contains components from several countries, such as visual design and power management module from the USA, computer codes from France, printed circuit board from Taiwan, silicon chips from Singapore, memory chips from Korea, and precious metals from Bolivia.^[1] Another example is that of a Boeing 787 Dreamliner (originally an American product), the fragmented value chain of which, is shown in Figure 1 below.

Figure 1: GVC of a Boeing 787 Dreamliner Aircraft

Source: Adapted from <https://modernairliners.com/>

Thus, Figure 1 clearly demonstrates how in the new world of highly complex international production chains, goods cross several borders multiple times before reaching their end customers. To put it another way, this suggests that what we see happening in the world today isn’t really trade in final goods or services, but rather trade in intermediate inputs, materials, components, activities, or tasks. Rapid technological development, a steady decline in tariffs, lower costs for shipping and logistics, organisational innovations, etc. are just a few of the factors that remarkably decreased the cost of coordination between nations and enabled this process of global production sharing. The upper panel of Figure 2, based on OECD’S TIVA database, shows how, in the past few decades, this type of trade has dominated global exports and imports, and today, contributes to more than 60 per cent of the world trade.

Figure 2: Gross Trade in (Final and Intermediate) Goods and Services, 1998 – 2018

Source: OECD TIVA (2021 Ed.); Authors’ Calculations.

In addition, it is crucial to understand that the network of trade is expanding not between countries or industries but rather between businesses/firms, the majority of which are overseas affiliates or subsidiaries of various multinational corporations (i.e., the carriers of Foreign Direct Investment).^[2] This is what is referred to as intra-firm trade in the literature, which is distinct from international trade carried out between unrelated parties. In a recent interaction with Financial Express, Pant and Bimal (2020) noted that

“Estimates suggest that about a third of global trade occurs in the form of intra-firm trade among MNEs;^[3] the remaining two-thirds occur either as exports by MNEs to non-affiliates or trade among non-MNE national firms.”

In fact, the value of these intra-firm trade flows has increased as a result of MNCs’ expanding operations and rapidly emerging GVCs in the past decade or so. Based on the OECD’s database on Activities of Multinational Enterprises [AMNE], it has been estimated that these companies contribute to approximately 36 per cent of the global output, which accounts for about two-thirds of the world exports and more than 50 per cent of world imports. The UNCTAD [United Nations Conference on Trade and Development] estimates also suggest that around 80 per cent of global trade takes place under the purview of MNCs. However, this type of trade occurs only when MNs make investments abroad, referred to as Foreign Direct Investment [or, FDI]. Thus, in today’s GVC-driven era, FDI is serving as a conduit for the growth of trade flows. The main argument is that, in the present-day world, it is impossible to examine trade policy in isolation or to disentangle it from FDI policies.

To discuss the linkages between international trade and FDI, let us first understand the definition of Foreign Direct Investment, and how it differs from Foreign Portfolio Investments (FPI) or what we call Foreign Institutional Investors (FII) in India.

Until about the early 1960s, FDI, like other forms of international investment used to be considered as a part of international capital theory. It was actually seen as a response to interest rate differentials between countries around the globe. Thus, it was recognised that, similar to trade in goods, a capital-scarce country (the one which offers higher return) imports capital and this continues up to the point where the return to capital gets equalised internationally. This explanation is analogous to the predictions of the standard Heckscher-Ohlin (H-O) theory of trade.^[4] Hence, it was thought that trade in goods could substitute for the international movement of factors of production, including FDI. But, with the failure of this capital theory in explaining most of the rise in international production (in contrast to just capital movement) during the late 1950s, efforts were made to analyse them from the trade theorist’s point of view. Only then, it was realised that trade and FDI are actually two different sides of the same coin (Pant and Srivastava 2015) and hence, they cannot be studied or analysed in isolation.

It was John Dunning who, in his 1980 seminal work, defined foreign direct investment based on what is popularly referred to as the ‘OLI’ paradigm, where O stands for Ownership, L for Location, and I stands for Internalisation. According to him, these three are potential sources of advantage that underlie a firm’s decision to become a multinational corporation. The first component ‘O’ addresses the question that why some firms go abroad, and suggests that a successful MNC has some firm-specific advantages, which allow it to overcome the costs of operating in a foreign country. Location advantages, on the other hand, deal with the question of where an MNC chooses to locate and suggest why it sometimes becomes profitable for a firm to locate itself in different countries, rather than producing and exporting from its parent country. Lastly, internalisation advantages influence how a firm chooses to operate in a foreign country, trading off the savings in transactions, hold-up and monitoring costs of a wholly-owned subsidiary, against the advantages of other entry modes such as exports, licensing, or joint venture. This implies that Foreign Direct Investment, as distinct from FPI or FII, does not just include the transfer of foreign capital from an enterprise in the source to another related entity in the host country, but also the transfer of know-how in the form of advanced technology, managerial expertise, or any other firm-specific factor.^[5] Put differently, FDI combines three elements, viz. trade in commodities, services (for example, managerial services) and international technology flows. Secondly, most direct tax treaties between nations provide favourable treatment in the withholding tax rates applied on dividends/royalty payments among related enterprises, acknowledging the relationship between FDI flows and the production capacities of firms (Pant 2014).

In fact, as explained in Pant and Srivastava (2015), an investor in the parent country decides to switch to domestic production in the other country (i.e., it opts for FDI), when either entry barriers like tariffs make its exports uncompetitive, the other location gives it access to critical inputs at comparatively lower costs (vis-à-vis, the parent country), or when such a move becomes necessary to internalise the firm-specific advantages. With the establishment of the World Trade Organisation [WTO], the world has already experienced a gradual decline in tariff rates imposed by different countries. Hence, as argued in Huria and Pant (op. cit.), it is the latter reason that presently explains the expansion in the flows of FDI. This is because even if trade is free but FDI flows are restricted, it will be difficult for an economy to deepen its integration with the world market via GVCs. For one, restrictions on FDI inhibit the flow of technology and hence, the country’s technology-based trade. Secondly, no or lower levels of integration with global value chains (due to restrictions on intra-firm trade) may limit trade in intermediate inputs, which, in turn, could render a nation less competitive in the manufacture of a good (or goods) in which it had previously enjoyed a comparative advantage. Nevertheless, it is equally important to recognise that this association between FDI and trade could be complex and vary across countries, industries, production stages, and types of investment, etc. For example, while liberalised trade and FDI policies may foster a favourable correlation between the two, higher regulatory interventions in an industry in the form of tariff or non-tariff barriers, tax-based subsidies, etc. could potentially offer substantial incentives to the MNC to replace trade with FDI.

Tables 1 and 2 encapsulate Pearson’s pairwise correlation coefficients (measuring the strength and direction of the linear relationship) between different FDI and trade indicators (at the aggregate and sectoral level) for the world economy.

Table 1: Pearson’s Pairwise Correlation Coefficients – Trade and FDI, World (1970-2021)

Percentage Shares in GDP	Total Exports	Total Imports	Total Trade
Net FDI Inflows	0.714*	0.731*	0.821*
Net FDI Outflows	0.654*	0.676*	0.780*
Total FDI Flows	0.701*	0.719*	0.817*

 

Source: World Bank’s World Development Indicators (WDI) Database; Authors’ calculations. Note: * represents significance at 1 per cent level, Total trade represents the total of goods and services trade, Green highlights represent the top three correlations. Interestingly, all the correlations are above 50 per cent, and the majority of the correlations are above 70 per cent (i.e., closer to perfect correlation).

Table 2: Pearson’s Pairwise Correlation Coefficients – Goods, Services Trade and FDI, World (1970-2021)

Percentage Shares in GDP	Goods Exports	Goods Imports	Goods Trade	Services Exports	Services Imports	Services Trade
Net FDI Inflows	0.717*	0.745*	0.721*	0.729*	0.662*	0.704*
Net FDI Outflows	0.665*	0.699*	0.669*	0.660*	0.581*	0.635*
Total FDI Flows	0.707*	0.736*	0.711*	0.711*	0.638*	0.686*

 

Source: WDI; Authors’ calculations. Note: * represents significance at 1 per cent level, Green highlights represent the top three correlations.

At the aggregate level for the world economy, Table 1 shows that trade and FDI are significantly and positively correlated with each other – be it the association between inward FDI and exports/imports, or the outward FDI or total FDI with exports/imports. Further, Table 2 replicates the analysis by incorporating information separately, on goods and services trade. Once again, we find that there exists a direct positive association between the two, indicating their complementarity. Though our analysis is indicative, it clearly makes a strong case for examining trade and FDI policies in a comprehensive and coherent framework.^[6]

But, is this link well established in India’s trade and FDI-related policies? – Below we discuss some of the evidence in this regard, and suggest a possible way forward.

The Case of India

The lower panel of Figure 2 and Tables A.1, A.2 in the appendix to this article, show that India’s trade composition and the trade-FDI link are in line with our observations for the global economy. In fact, the correlation coefficients, on average, are higher in the case of India, than in the world, indicating the strength of the positive association between international trade and foreign direct investment. The last decade has witnessed several initiatives on the part of the country’s government to improve the ease of doing business, and make the country one of the most attractive FDI destinations in the world. In 2011, the Department for Promotion of Industry and Internal Trade (erstwhile Department of Industrial Policy and Promotion [DIPP]) introduced the National Manufacturing Policy [NMP] to increase the share of the manufacturing sector in India’s GDP. National Investment and Manufacturing Zones have been established as an instrument to implement NMP, with an overall objective to facilitate the access to a requisite ecosystem for promoting world-class manufacturing activity (Press Information Bureau [PIB] 2018).

In September 2014, the government launched the Make In India [MII] programme with an endeavour to create and encourage domestic and multinational firms to develop, design, manufacture, and assemble products in India (PIB 2022b). As an initiative to simplify the process of approvals of inward FDI flows under government approval, the Union Cabinet abolished the Foreign Investment Promotion Board [FIPB] in May 2017. Henceforth, all the FDI proposals are required to be submitted through the DPIIT-managed Foreign Investment Facilitation [FIF] Portal, and respective applications are then screened by the concerned administrative ministries/department (PIB 2022a). Further, the government has also opened up several sectors for which FDI up to 100 per cent is permitted through the automatic route. A few examples are – ports and shipping, railway infrastructure, renewable energy, agriculture and animal husbandry, automobiles and auto components, single-brand product retail trading, and insurance intermediaries, among others.

While several other policy initiatives have also been undertaken to position India as the most attractive location for investment and conducting businesses (such as the Production Linked Incentive Schemes, PM Gati Shakti, India Industrial Landbank, the National Logistics Policy, Remission of Duties and Taxes on Exported Products, and the National Single Window System), however, at the same time, the country’s trade policy has been found to be highly restrictive in nature in the past one decade. Figure 3, based on the Global Trade Alert Database, shows the share of harmful trade interventions defined as those that restrict trade practices, as a percentage of total trade interventions for India for the period 2009-2022.

Figure 3: Harmful Interventions (% of total trade interventions), India (2009-2022)

Source: Global Trade Alert Database; Authors’ Calculations.

Except for the year 2011, as shown in Figure 3, the number of harmful trade interventions has always exceeded the number of liberalised trade interventions by the country. In fact, very recently, India was also flagged as highly restrictive in its trade practices by the industry associations of the United States of America, who pointed out that “although Prime Minister Narendra Modi has taken steps aimed at improving India’s business environment, India’s high tariff rates and restrictive border measures continue to limit manufacturers’ ability to invest in and export to India.”^[7] This is a concern in itself as trade and FDI go hand in hand, and the rapidly expanding international production networks have only strengthened their association in the recent past.

The recent Budget announcements, however, seem to take a positive step in this direction. While the country’s long-due Foreign Trade Policy is still in the making, in this year’s Union Budget 2023-24, the country’s finance minister has reduced custom duties on a selected set of intermediate inputs to enhance domestic value addition, promote export competitiveness, and correct duty inversion. This is in contrast to the Union Budget 2021-22, where duties on imports of inputs were raised to ensure higher value addition within the country (even though the majority of India’s imports are of the intermediate category (see Figure 2, Lower panel)). Examples include some components used in TV manufacturing, electric heat coils, capital equipment for electrically operated vehicles and lithium battery production, parts of mobile phones, denatured ethyl alcohol for manufacturing of industrial chemicals, lab-grown diamonds, etc. Certain tariffs have been raised though for competing imports that may impact the local industry, such as rubber, toys and parts of toys.^[8] Other initiatives include skill training programmes, the development of data processing centres, etc.

Despite these initiatives, one issue that still remains pertains to the bureaucratic separation of trade and FDI in India. While the definitional aspects of FDI are looked after by the country’s Ministry of Finance, the policies and control of FDI is with DPIIT. On the contrary, India’s international trade and trade-related policy matters are governed by the relevant trade policy division in the commerce ministry. More so, no chapter in its Foreign Trade Policy (FTP 2015-2020) thus far deals with investment-related provisions/norms (except for the section on Special Economic Zones/Export Oriented Units). This demands immediate attention especially when today, trade is determined more by technology and FDI, than by access to cheaper and abundant factors of production, and the emerging dynamics make it imperative for India to become a part of international production networks. The latter, as discussed above, are guided by MNCs to a great extent. The recent restructuring in the department of commerce may take this into account and create a separate wing to deal with trade and FDI policies simultaneously. Similarly, the government should consider the trade-FDI interlinkages while drafting India’s new FTP.

Lastly, akin to India’s policy framework, even at the multilateral level, there is no such comprehensive agreement that guides the trade in goods-services-investment nexus. However, acknowledging the link between the three, it seems that countries around the world are trying to bridge this gap by signing more and more regional trade agreements – now that these agreements also contain a specific chapter on investment-related provisions.^[9] On the contrary, in India, the majority of the trade agreements still focus only on trade liberalisation, and exclude substantive provisions for foreign direct investment. Our recent work shows that this will not create significant gains for India, especially when it is now willing to conclude such deals with countries which are amongst its top FDI source economies.

Author Brief Bio: Prof. Manoj Pant is former Director/VC of IIFT and Sugandha Huria is a faculty member, IIFT.

References

Batra, R. N. (1973). Studies in the pure theory of international trade. Springer.

Dunning, J. H. (1980). Toward an eclectic theory of international production: Some empirical tests. Journal of international business studies, 11(1), 9-31.

Gereffi, G., & Lee, J. (2012). Why the world suddenly cares about global supply chains. Journal of supply chain management, 48(3), 24-32.

GOI. (2021). Union Budget 2021-2022: Speech of Nirmala Sitharaman. New Delhi: Government of India.  Retrieved from <https://www.indiabudget.gov.in/doc/bspeech/bs202122.pdf>

GOI. (2023). Union Budget 2023-2024: Speech of Nirmala Sitharaman. New Delhi: Government of India.  Retrieved from <https://www.indiabudget.gov.in/>

Huria, S., & Pant, M. (2018). Foreign direct investment, welfare and wage inequality in a small open economy: theory and empirics. Indian Economic Review, 53, 131-166.

Huria, S., & Pant, M. (2019). Trade, Investment, and the Multilateral Trading System. In 20 Years of G20 (pp. 93-111). Springer, Singapore.

Krugman, P., Obstfeld, M., & Melitz, M. (2017). International Economics: Theory and Policy. Pearson Education.

Mill, J. S. (1848). Principles of political economy with some of their applications to social philosophy. 1857. George Routledge and Sons, Manchester, 467-474.

Mishra, A.R. (2022, November 27). US industry associations red-flag India’s ‘restrictive’ trade barriers. Business Standard. Retrieved from <https://www.business-standard.com/article/economy-policy/us-industry-associations-raise-concern-over-india-s-trade-measures-122112700668_1.html>

Pant, M. (2014, June 16). FDI or trade: end the confusion. The Mint. Retrieved from <https://www.livemint.com/Opinion/d35M6kulhSuMF4H5Bamc3N/FDI-or-trade-end-the-confusion.html>

Pant, M., & Bimal, S. (2020, May 28). Combating economic downturn post Covid-19 pandemic: Sync trade and FDI policies. Financial Express. Retrieved from <https://www.financialexpress.com/opinion/combating-economic-downturn-post-covid-19-pandemic-sync-trade-and-fdi-policies/1972883/>

Pant, M., & Srivastava, D. (2015). FDI in India: history, policy and the Asian perspective, New Delhi: Orient BlackSwan.

Press Information Bureau (2018, December 27). Establishment of NIMZs. Retrieved from <https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1557424>

Press Information Bureau (2022a, May 24). Foreign Investment Facilitation Portal (FIF) completes 5 years since Union Cabinet decision to abolish FIPB. Retrieved from <https://pib.gov.in/PressReleasePage.aspx?PRID=1827889>

Press Information Bureau (2022b, December 16). Make in India facilitates investment, fosters innovation, helps build best in class infrastructure. Retrieved from <https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1884260#:~:text=’Make%20in%20India’%20is%20an,manufacturing%2C%20design%2C%20and%20innovation.>

Xing, Y., & Huang, S. (2021). Value captured by China in the smartphone GVC–A tale of three smartphone handsets. Structural Change and Economic Dynamics, 58, 256-266.

[Data] Global Trade Alert Database: https://www.globaltradealert.org/

[Data] OECD Activities of Multinational Enterprises Database: https://www.oecd.org/sti/ind/amne.htm

[Data] OECD Trade In Value Added Database: https://www.oecd.org/sti/ind/measuring-trade-in-value-added.htm

[Data] World Bank’s World Development Indicators Database: https://databank.worldbank.org/source/world-development-indicators

[Website] Organisation for Economic Co-operation and Development <https://www.oecd.org/>

Appendix

Table A.1: Pearson’s Pairwise Correlation Coefficients – Trade and FDI, India (1970-2021)

Percentage Shares in GDP	Total Exports	Total Imports	Total Trade
Net FDI Inflows	0.898*	0.883*	0.892*
Net FDI Outflows	0.721*	0.733*	0.745*
Total FDI Flows	0.876*	0.867*	0.876*

 

Source: WDI; Authors’ calculations. Note: * represents significance at 1 per cent level, Green shaded cells represent correlation above 0.8.

Table A.2: Pearson’s Pairwise Correlation Coefficients – Goods, Services Trade and FDI, India (1970-2021)

Percentage Shares in GDP	Goods Exports	Goods Imports	Goods Trade	Services Exports	Services Imports	Services Trade
Net FDI Inflows	0.863*	0.867*	0.871*	0.916*	0.800*	0.903*
Net FDI Outflows	0.686*	0.705*	0.703*	0.741*	0.711*	0.755*
Total FDI Flows	0.840*	0.849*	0.851*	0.895*	0.799*	0.888*

 

Source: WDI; Authors’ calculations. Note: * represents significance at 1 per cent level, Pink highlights represent the top three correlations while green and pink shaded cells together represent correlation above 0.8.

^[1] The Organisation for Economic Co-operation and Development [OECD] has also demonstrated several such cases with the help of it Trade In Value Added [TIVA] Database.

^[2] Gereffi and Lee (2012)

^[3] Multinational Enterprises (MNEs) and Multinational Companies (MNCs) are used synonymously in the trade-FDI literature.

^[4] In a 2-country, 2-sector, 2-factor world, Hecksher-Ohlin Theorem states that a country should export the good which utilises its abundant factor of production intensively, and import the commodity which is intensive in the use of its scarce factor of production. For example, if the world market comprises of only India and the United States of America, with India having comparatively higher access to labour relative to that of Capital, while the US is relatively richly endowed with capital, then as per the H-O theory, India should export the labour-intensive good (say, textiles) to the USA. On the contrary, the USA should export machinery (i.e., the capital-intensive good) to India (See any textbook on trade theory such as Krugman, Obstfeld, and Melitz (2017) or Batra (1973) for details).

^[5] Huria and Pant (2018)

^[6] The literature now consists of a plethora of empirical studies examining the link between trade and FDI at various levels of analyses. For a detailed review, refer to Pant and Srivastava (op. cit.).

^[7] Mishra (2022)

^[8] Government of India [GOI] Budget Speech (2021, 2023)

^[9] Huria and Pant (op. cit.)

The FY 24 Union Budget, formulated amidst global headwinds and a bleak economic outlook in much of the developed world also had the conflicting domestic demands of growth and fiscal consolidation as challenges. With India ranking amongst the top 5 global economies, the Union Budget was awaited with bated breath not only by India, but by several friendly nations. The Hon’ble Finance Minister did not disappoint, with the vast majority of Indians at home and abroad, cheering a path breaking set of announcements!

While the economic growth in FY 23 is estimated to be at 7%, FY 24 growth is expected to range between 6 and 6.8%, in stark contrast to other large economies. This while continuing the downward trend of fiscal deficit from 6.4% of GDP in FY 23 to a targeted 5.9% in FY 24, and a target of 4.5% fiscal deficit by FY 25 – a challenging ask by any yardstick.

The FY24 Budget aims to propel economic growth via a record capital outlay of Rs 10 lakh crore, and rekindle animal spirits in the private sector, with the thrust areas being infrastructure development and green energy while keeping an eye on food security for the world’s largest population, and indirectly providing an impetus to manufacturing activity associated with these sectors.

Construction and Manufacturing being the largest employment generators, this budget lays the foundation for a developed and modern economy, catalyse job creation and aid demand generation, especially in rural and semi-urban clusters. The increased demand for skilled labour, would bring into sharp focus the various skilling initiatives kick-started in previous years and supported by the corporate sector.

India’s manufacturing sector of which MSMEs are the back-bone, has often been characterised by low returns on investment due to the high cost of logistics, high energy costs, low productivity, high working capital requirements coupled by meagre credit facilities, multiple labour laws, under- utilisation of capacity, and the absence of entire industrial eco-systems such as semi-conductor manufacturing, the last aspect resulting in supply chain vulnerability in testing times.

The Government’s relentless push to lower the cost of logistics and connect Tier 2 towns via construction of expressways, freight corridors, the Gati Shakti programme and the National Logistics Policy carries its unmistakable stamp on the FY 24 budget too, via a capex outlay of Rs 75,000 crore towards 100 critical projects including airports and Rs 2.4 lakh crores for Railways.

The PLI scheme launched two years ago including in areas such as mobile manufacturing, along with the very large scale of digital financial transactions via UPI, resulted in a large demand being created for smartphones, which are now manufactured in the country. An eco-system of semi-conductor manufacturing thus received due impetus, with large investments already committed.

Ease of Doing Business also received due focus, with a reduction in the number of compliances and de-criminalisation of several offences, and the PAN card being notified as the single identifier for businesses in FY24 budget. This should be of relief to firms with input tax credits in one state being able to offset tax dues in another state, as private sector working capital is presently blocked on this count. Green initiatives in the Power sector received a capex outlay of Rs 19,700 crore towards the Green Hydrogen Mission, with an additional Rs 35,000 crore being earmarked for transition to green energy and a further Rs 20,700 crore to connect renewable energy from Ladakh via a 13 GW transmission line. In addition to a significant reduction in carbon footprint with a target of net zero by 2070, large scale generation of renewable energy would help in lowering the cost of industrial power as well, to aid competitiveness in manufacturing.

The private sector has been making significant investments in defence manufacturing facilities and in R&D over the last few years. The sector received a further thrust over the last two years with the notification of four positive lists for indigenisation to substitute imports. While defence exports did make their presence felt in recent times with a stellar performance, the Hon’ble Prime Minister’s target to the sector of USD 5 billion in defence exports by 2025 at the recently concluded Aero India event, has far reaching implications for growth and transformation of the defence sector.

The budget features a capex outlay of Rs 1,62,600 crore for defence manufacturing in FY24—a 7% increase over the previous fiscal. Although a higher increase in the Defence capex would have been desirable, for now much shorter evaluation and ordering cycles and superlative execution are clearly the need of the hour, in light of both domestic imperatives and the exports target. The private sector defence industry which is now beginning to take the lead in order generation and execution, does require certain measures by way of enabling policies; hopefully they will be heard once again.

The Space sector has also been churning out a spectacular performance and has received a budgetary allocation of Rs 12, 543.91 crore, for FY 24, up 19% from the previous fiscal, including a capital outlay of Rs 6356.8 crore for space research for the forthcoming year, bringing cheer to the Space start-up and research eco-system.

The Space economy will be a game changer in times to come for the nation, by way of enhanced connectivity via 5G with the remote regions, ushering in a wave of education, financial inclusion, tele-medicine, tourism opportunities as more locations are discovered by both domestic and foreign tourists, growth and development – all key enablers to Ek Bharat Shrestha Bharat!

An examination of how key parameters in the attached table published by CII (with data sourced from CSO, RBI, Ministry of Commerce & Industry and CGA) have moved since 2018, will reveal the rationale behind many of the recent initiatives undertaken by the present Government. While per capita income has been steadily rising, inflation held in check, a rising trend in current account balance as a percentage of GDP underscores the urgent need to further enhance manufacturing activity and exports from India, as opposed to outright imports.

In order to increase exports especially in high tech areas, cost competitiveness and quality would be of paramount importance. Since a large part of the cost of the product is built into the design itself, once again, Indian industry’s famed frugal engineering skills—amply demonstrated by the Auto, Defence and Space sectors, would once again come into play! Adoption of industry 4.0 practices in manufacturing has already met with success at several plants in the country and the numbers are only expected to grow.

With execution being key, the Budget indirectly also places the onus onto laggard States to get their act together in dramatically improving on ease of doing business parameters and in creating a business-friendly environment in order to attract serious investors. With several steps now in place for a transition from a developing country to an emerging super-power, it’s all hands-on deck!

TABLE: KEY PARAMETERS OF THE ECONOMY

Sno	Category	Unit	2018-19	2019-20	2020-21	2021-22	2022-23
1	Population	Million	1327	1341	1355	1369	1383 (AE)
2	GDP & related indicators
2.1	GDP (2011-12 prices)	Rs Lakh Cr	140.0	145.2	135.6	147.4	157.6 (AE)
2.2	Growth Rate	%	6.5	3.7	-6.6	8.7	7.0 (AE)
2.3	GVA at Basic Prices (2011-12 prices)	Rs Lakh Cr	127.4	132.2	125.9	136.1	145.2 (AE)
2.4	Growth Rate	%	5.9	3.8	-4.8	8.1	6.7 (AE)
2.5	Gross Savings Rate	% of GNDI	30.6	29.4	27.8	N.A.	N.A.
2.6	Gross Capital Formation Rate	% of GDP	33.8	30.7	27.3	31.2	31.7 (AE)
2.7	Per Capita Net National Income (at Current Prices)	Rs.	1,25,883	1,32,115	1,26,855	1,50,007	1,70,620
3	Production
3.1	Food Grains	Million Tonnes	285.2	297.5	310.7	315.7	149.9 (AE)
3.2	Index of Industrial Production (Growth)	%	3.8	-0.8	-8.4	11.4	5.5 (Apr-Nov)
3.3	Electricity Generation (Growth)	%	5.2	0.9	-0.5	8.0	9.8 (Apr-Dec)
4	Prices
4.1	WPI Inflation (average)	%	4.3	1.7	1.3	12.8	11.6 (Apr-Dec)
4.2	CPI (Combined) inflation (average)	%	3.4	4.8	6.2	5.5	6.8 (Apr-Dec)
5	External Sector
5.1	Merchandise Export Growth	%	8.7	-5.1	-6.9	43.8	9.1 (Apr-Dec)
5.2	Merchandise Import Growth	%	10.4	-7.7	-16.9	55.1	25.0 (Apr -Dec)
5.3	Current Account Balance	% of GDP	-2.1	-0.9	0.9	-1.2	-3.3 (H1 FY23)
5.4	Foreign Exchange Reserves (end of year)	USD Bn	411.9	475.6	577.0	617.6	573.7 (as on 20 Jan 23)
5.5	Average Exchange Rate	Rs / USD	69.9	70.5	74.2	74.5	79.9 (Apr-Jan)
6	Money & Credit
6.1	Broad Money (M3) Growth (Annual)	%	10.5	8.9	12.2	8.7	9.7 (as on 13 Jan 23)
6.2	Scheduled Commercial Bank Credit Growth	%	13.2	6.1	5.6	9.6	16.5 (as on 13 Jan 23)
7	Fiscal Indicators (Centre)
7.1	Gross Fiscal Deficit	% of GDP	3.4	4.6	9.2	6.7	6.4 (RE)
7.2	Revenue Deficit	% of GDP	2.4	3.3	7.3	4.4	4.1 (RE)
7.3	Primary Deficit	% of GDP	0.4	1.6	5.7	3.3	3.0 (RE)

 

Source : as published by CII with data sourced from CSO, RBI, Ministry of Commerce & Industry and CGA

Legends : AE : Advance Estimates : RE : Revised Estimates; H1 refers to first half of fiscal year (Apr – Sep); NA indicates Not Available.

Smt Nirmala Sitharaman, the Hon’ble Finance Minister, presented her fifth successive Union Budget on 01 February 2023. By all accounts, it appears a growth-oriented budget and was hailed by eminent economists and captains of industry. No election freebies are visible in the budget in this pre-election year, which was a relief. The budgetary numbers at the macro level are summarised below.

GDP: The government has estimated a nominal GDP growth rate of 10.5% in 2023-24 (i.e. real growth plus inflation). The real GDP growth is estimated in the band of 6.1% to 6.8% with 6.5% as the base case.

Fiscal Deficit: The Fiscal Deficit is estimated to be 5.9% of GDP with the three year rolling target given as 4.5% of GDP (by 2025-26).

Expenditure: The government proposes to spend Rs 45,03,097 crore in 2023-24, which is an increase of 7.5% over the Revised Estimate (RE) of 2022-23.  Out of the total expenditure, Revenue Expenditure is estimated to be Rs 35,02,136 crore (1.2% increase) and Capital Expenditure is estimated to be Rs 10,00,961 crore (37.4% increase). Excluding loans and advances, the Capital Outlay has increased by 35% over the RE  2022-23.

Receipts: The receipts (other than borrowings) in 2023-24 are expected to be to the order of Rs 27,16,281 crore, an increase of 11.7% over RE of 2022-23.

Source : Note on Demand of Grants 2023-2024.

Defence Budget

Unlike previous budgets, the specifics of Defence Budget were conspicuous by their absence in the budget speech. There were no big-ticket announcements made. Allocations at the macro level are summarised below.

Total Allocation: Rs 5.94 lakh crore, an increase of 13% over Budget Estimate (BE) of previous year (Rs 5.25 lakh crore).

Capital Outlay: Increased by 6.7% to Rs 1.63 lakh crore. Distribution amongst the three Services is as follows:

Army:        Rs 37241 crore (increase of 14.25%)

Navy:                   Rs 52804 crore (increase of 10.64%)

Air Force:   Rs 57137 crore (increase of 6.3%)

DRDO:       Rs 23,264 crore (increase of 9%)

BRO:                   Rs 5000 Crore (increase of 35%)

iDEX & DTIS: Rs 116 Crore (increase of 93%) and Rs 45 Crore (increase of 95%).

Revenue Expenditure: An increase of 8.8% to Rs 2.7 lakh crore

Defence Pensions: Rs 1.38 lakh crore (increase of 15.5%).

MSMEs: Credit Guarantee Scheme with a corpus of Rs 9000 crore

MoD (Civil): Rs 8775 crore (Capital) and Rs 13838 crore (revenue)

Source : Note on Demand of Grants 19,20,21,22  for  2023-24

Comparison of Defence Budget with RE 2022-23

The present budget allocation of Rs 5.94 lakh crore, although 13% higher than BE 2022-23, yet it is just 1.5% higher as compared to the Revised Estimate (RE)  2022-23 of Rs 5.85 Crore (on an overall basis). This is evident from the interesting table below, which reveals that at the RE stage 2022-23, revenue budget had to be increased by more than Rs 26,000 crore, which as per the PIB release of 01.02.2023, was to ensure liquidation of the entire carry over liabilities during the current year thereby ensuring that there is no dent in the next year’s operational outlay of the Services. Clearly the major factors were the operational exigencies obtaining in Ladakh and North East as also the OROP arrears.

Defence Budget Composition (in Rs Crore)

Major Head	BE 2022-23	RE 2022-23	BE 2023-24	% Change 2022-23 RE to 2023-24 BE
MoD (Civil)*	43675	45183	45919	1.6%
Defence Services (Revenue)	239743	266984	277033	3.76%
Capital Outlay (Defence)	152369	150000	162600	8.4%
Defence Pensions	119696	153414	138205	-10% (15.4% BE FY 23

 

Extracted from Page 9 Serial 19-22, Demand For Grants 2023-24

*Excluding revenue receipts

As far as Pensions are concerned, there was a huge increase of about Rs 33,000 crore (28%) at the RE stage, which as per the PIB release included an amount of Rs 28,138 Crore to meet the requirement on account of revision of Armed Forces Pensioners/ Family Pensioners under One Rank One Pension (OROP). Thus, the BE 2023-24 reflects a decrease of about 10% in the Pension outlay vis a vis RE 2022-23.

Analysis of Overall Defence Budget

As outlined earlier, Defence Budget 2023-24 has an allocation of Rs 5.94 lakh crore including approximately Rs 1.38 lakh crore in pensions. There is a perception of Defence Budget being large and the need to cap it, especially the need for reducing the ever-burgeoning Pension bill. Every year sees an increased allocation to Defence; every year it is called the highest ever defence budget allocation. True, in terms of absolute figures but the whole gamut of figures associated with the defence budget need a nuanced scrutiny and ratio analysis with standard yardsticks along with their progression over the years to arrive at a meaningful inference. Accordingly, the official statistics for the last decade need to be examined under the following parts:-

• Growth Rate of Defence Budget Allocation
• Defence Expenditure as a ratio of GDP
• Defence Expenditure as a ratio of Central Govt Expenditure (CGE)
• Comparison with Major Countries/Countries of Interest

Budget of Ministry of Defence (in Rs Crore)

Source : Union Budget Documents 2010-2020; PRS.

The Defence Budget, as seen from the above figure, between Financial Years 2011 and 2021 has grown at a CAGR of 9%. During the same period, India’s GDP has grown from approximately USD 1676 billion to USD 2667 billion  (source IMF, Statista 2022). Adjusted for the USD-Rupee exchange rate (45.03 on 01.01 2011 and 73.05 on 01.01.2021), the GDP has grown at a CAGR of 9.94%, higher than the growth of Defence Budget, even when the defence budget includes expenditure on numerous civilian establishments like PSUs and ordnance factories with total strength of serving civilians being approximately four lakh.

Defence Expenditure as a Percentage of GDP (in Rs Crore)

Source:  Union Budget 2010-20, Central Statistics Office; PRS

The above Figure shows the Defence expenditure reducing as a % of GDP, a secular decline. To put things in perspective, throughout the decade of eighties, defence budget as a percentage of GDP was upwards of 3.5% while now the defence budget (including pensions) may barely exceed 2% of GDP. The inference is that while their is an annual increase in the Defence Budget, the same is declining in terms of percentage share as part of the GDP. If GDP is visualised as a piece of national cake, then defence is getting a smaller and smaller, ever reducing slice of this cake! A former Prime Minister had spoken of the necessity of maintaining the defence budget at 3% of GDP. The same was reiterated by the Standing Committee on Defence (2018) which had recommended that the Ministry of Defence should be allocated a fixed budget of about 3% of GDP to ensure adequate preparedness of the armed forces.^[i] As per official figures^[ii], the defence expenditure as a percentage of GDP has declined from 2.3% in 2012-13 to 2% in 2022-23. Just as a matter of reference, agricultural subsidies alone in India are usually about 2.25% of GDP, while distortions in power sector require another 4% of GDP.

As per the latest analysis, Defence expenditure has grown at an annual average rate of 8.6%, while total government expenditure has grown at 10.8%. The defence expenditure, thus, as a proportion of Central Government Expenditure, over the period 2012-13 to 2022-23 has decreased from 16.4% to 13.3%.  As per the BE of 2023-24, it is still lower at 13.18%

Defence Expenditure As a % of CGE (2012-13 to 2022-23) (in Rs Crore)

Sources:  Union Budget documents (various years); PRS.

As per the latest Stockholm International Peace Research Institute(SIPRI) report, India is the third largest military spender in the world. It will also be of interest to compare the defence spending of our neighbouring and developed countries, the budgets as a percentage of GDP and overall Govt expenditure. According to the data submitted by the Ministry of Defence to the Standing Parliamentary Committee on Defence, relevant to year 2018^[iii], the Defence Expenditure comparison is as follows:-

Country                          As % of GDP                                   As % of Govt Expdr

China                                        1.9                                                                 5.5

Pakistan                                     4                                                                   18.5

US                                             3.2                                                                 9

Russia                                      3.9                                                                 11.4

UK                                            1.8                                                                 4.6

It is evident that India’s Defence Expenditure as a % of GDP pales in comparison to expenditure of Pakistan, US and Russia. China’s defence budget as a % of GDP appears lower; However, as per the SIPRI report, India has a defence budget at USD 71.1 billion, while China’s defence budget is more than three times that of India at USD 261 billion.

Modernisation of Forces (Capital Expenditure)

It is evident that India can afford higher defence expenditure (from the perspective of GDP progression), yet the defence allocation is reducing in comparative terms vis a vis the overall Govt expenditure. Budget allocation to defence every year falls short of the resource projection by the Forces. For the current Financial Year 2023-24, out of the defence budget allocation of Rs 5.94 lakh crore, revenue expenditure on salaries, Operational Maintenance of Forces (stores, spares and repairs) along with pensions is Rs 4.08 lakh crore, which is 68.7% of the defence budget. Capital outlay of Rs 1,62600 crore forms just 27.4% of the defence budget.  The remaining allocation is towards border roads, research, and administrative expenses. It is the Capital outlay which is relevant for modernisation of Forces and a cause of concern as evident from the figure below^[iv].

Expenditure on Capital Outlay (2012-13 to 2022-23) (in Rs Crore)

Source: Union Budget documents (various years); PRS

It is evident that there is only a marginal increase in % share of Capital Outlay during last ten years. In fact, in absolute terms, between 2012-13 and 2018-19 the average annual growth rate of Capital Outlay was just 5% while between 2019-20 and 2022-23 it has increased to approximately 11%. The overall impact of a largely stagnant defence budget (adjusted for inflation) and within the budget, higher increase of revenue component (mainly pay and pensions) vis a vis Capital Outlay is that there is not enough capital allocation for modernisation of forces.

The Standing Committee on Defence (2018) had noted that modern armed forces should have one-third of its equipment in the vintage category, one-third in the current category, and one-third in the state-of-the-art category.  However, Indian Army had 68% of its equipment in the vintage category, 24% in the current category, and 8% in the state-of-the-art category. The Committee also noted that over the years, the Army has accumulated a substantial deficiency of weapons, stores and ammunition. It found that adequate attention has been lacking with respect to both policy and budget for modernising the aging armoury^[v].

Of late, the Govt has aptly prioritised Capital Expenditure at the national level as well as in Defence; the Capital outlay in national budget 2023-24 has increased by 35% over last year. However, the defence budget 2023-24 has only a modest increase of 8.4% in Capital outlay (vis a vis RE 2022-23), allocating Rs 1,62,600 crore vis a vis 1,50,000 crore at RE 2022-23, which itself was a reduction from BE figure of Rs 1,52,369 crore. The inference is that while Govt wants to alter the Capital to Revenue expenditure ratio in favour of Capital so that Forces are modernised at a faster pace, yet it has realised that after excluding committed and contractual liabilities, there are limitations in absorption of Capital allocated on an annual basis.

In order to tackle the limitations in annual absorption of allocated modernisation funds, the 15^th Finance Commission recommendation of constituting a non lapsable, dedicated Modernisation Fund for Defence and Internal Security has to be implemented. This will also be a reassurance for industry and encourage them to enhance their production capacities. It is also to be noted that higher Capital Expenditure as part of defence spending has a multiplier effect on industrial productivity and thus the national GDP, not to emphasise the strengthening of defensive capability itself. Overall, it gives a fillip to the Comprehensive National Power of which military strength is an important component.

Defence Pensions (Revenue Expenditure)

The next perception to be addressed is the inordinate burgeoning of the pension bill. As seen from the Figure on Defence Pensions, the same have increased at a CAGR of approx. 13.5%. This pension bill increase is again lower than the nominal GDP growth, despite grant of OROP and arrears during the period. However, there is no denying the fact that the defence pensions are increasing at a faster pace (13.5%) than the defence budget itself (9%), ie pace of increase is 50% higher.

If we take the 10 year window as 2012-13 to 2022-23, Expenditure on defence pension has grown at an annual average rate of 10.7%. This is again higher than the average annual growth of the defence budget at 8.6%. In the budget for 2023-24, the expenditure on defence pension is estimated to be Rs 1,38,205 crore which is 15.5% higher than the BE of Rs 1,19,696 crore in 2022-23. This is ostensibly due to payment of arrears of OROP, due since July 2019.

Expenditure on Defence Pensions (2010-11 to 2020-21) (in Rs Crore)^[vi]

Source:  Union Budget 2010-20; PRS.

Expenditure on Pensions as % of Defence Budget (in Rs Crore)

As far as the share of pension in the defence budget is concerned, it increased from 19% in 2012-13 to 26% in 2019-20.  It has since fallen to about 23% as per the budget estimates of 2023-24.  In the budget for 2023-24, the expenditure on defence pension is estimated to be Rs 1,38,205 crore which is 15.5% higher than the BE 2022-23 of Rs 1,19,696 crore, but 11% lower than the 2022-23 RE figure of Rs 1,53,414 crore. This is ostensibly due to payment of arrears of OROP, due since July 2019.  It is likely that there would be additional allocation at RE stage.

It is also worthwhile to mention that average per capita pension of defence personnel is much lower than a Central Govt civil employee. For 11,28,441 civilian pensioners, the Govt paid Rs 64,684.44 crore as pension in year 2021-22 while for 36,03,609 defence pensioners, the outgo was Rs 1,21,983.9 crores^[vii]. The Defence Pension Budget, however, is big in absolute numbers due to large number of retired personnel which itself is a function of soldiers being compulsorily retired early from 36 years age onwards owing to the requirement of maintaining a young and physically fit military. The total number of defence pensioners stands at 34,10,567 while the total number of all Govt pensioners is 68,62,465^[viii]. The inference is startling, ie today, half of the total Central Govt pensioners today are defence personnel and it only corroborates the analysis above. It also indicates that that India has 2.4 defence pensioners for every serving soldier while the ratio for civilians is approximately one pensioner for each serving employee.  The reason for high pension bill of the Services, is now evident; it is this problem which would have made a real dent in the pension bill, if tackled.

Various proposals have been made over the years to check the pension budget, ie lateral absorption in Govt jobs on retirement or re-calibration of retirement ages. However, they have not been implemented. Last year, in June 2022, the Agnipath scheme of recruitment of soldiers has been introduced. Although, reduction of pension budget was not been listed as one of the objectives of the Agnipath scheme in the Govt website, yet it is likely to result in reduction of revenue expenditure, depending upon the annual recruitment intake.

Revenue Expenditure (Excluding Pensions)

Revenue expenditure (excluding pensions) for the year 2023-24 as per the budget estimates is Rs 2.7 lakh crore, which is approximately 45.5% of the total defence outlay, a major chunk. It caters for salaries, operational maintenance of Forces, stores, spares and repair expenditure. Since the limelight at the national level is invariably on the requirement of speeding up defence modernisation and limiting the defence pensions, the less glamorous revenue component of defence expenditure does not get enough attention of analysts. In any case, salaries is a rather inelastic component of Revenue Expenditure, based on Central Govt Pay Commission awards, while the variable factor of Revenue Expenditure happens to be the Operational Maintenance of Forces.

The Revenue allocation of Rs 277033 crore for 2023-24 is a significant increase of 15.5% from BE 2022-23 (Rs 2,39,743 crore) but just a 3.8% increase from RE 2022-23 (Rs 266984 crore). This needs to be seen in the backdrop of salary budget which is expected to increase 6-8% annually due to inflation based DA increases alone. The inference is clear, either the Revenue allocation will have to be enhanced again at RE 2023-24 or there will be a severe squeeze on operational maintenance of Forces, including stores, spares and repairs.

Indigenisation and Atma Nirbhar Policy

Make In India initiative was launched on 25 Sep 2014 with the primary goal of     making India a global manufacturing hub by encouraging both domestic as well as foreign companies to manufacture their products within the country. Since then, Make In India has introduced many new initiatives viz promoting FDI, implementing IPR and developing the manufacturing sector, thereby facilitating job creation and fostering innovation and skill development. The major focus of Make In India in Defence Sector has been on Indigenisation in manufacturing of weapon systems and Govt’s commitment to transform India into a Defence Industrial Hub for both import substitution as well as to export Indian made defence products to other countries. During the recent Air Power Show in Bengaluru on 13.02.2023, the Hon’ble PM, Shri Narendra Modi stipulated the Export target of USD 5 billion for defence systems by 2025.

The Govt has taken a number of initiatives to promote indigenous manufacture of defence equipment. In 2017, a Make II – a time bound, fast track procedure – was introduced in Defence Acquisition Procedure to encourage private sector to design and manufacture prototype of equipment which meet the requirements/voids of defence and field them with the three Services. It is felt that a similar procedure for revenue acquisitions also needs to be introduced as part of Defence Procurement Manual; can be termed as a Make III procedure or any other suitable nomenclature. This will also give a huge fillip to the MSMEs, manufacturing assemblies/modules/spare parts for defence.

In September 2020, the Central Govt increased the limit for foreign direct investment (FDI) in defence sector from 49% to 74% under the automatic route^[ix]. FDI beyond 74% is permitted with government approval which may be given where FDI is likely to result in access to modern technology. Since the increase in limit, an FDI inflow of Rs 186 crore has been reported in the defence sector in the very next year^[x].

This year’s budget 2023-24 was silent on Indigenisation; last year, budget speech 2022-23, the Hon’ble Finance Minister had announced that 68% of defence procurement will henceforth be from indigenous manufacturers. Hon’ble Defence Minister has now stated in Bengaluru on 15 February that the Govt will earmark 75% of defence procurement budget for the domestic industry. The move will throw open Rs 1 lakh crore in defence contracts for Indian private and public sector defence companies in the new fiscal year^[xi]. However, for this to happen, the production capacity of domestic Industry (DPSUs and private Sector) has to increase significantly.

In order to deeply entrench the indigenisation drive of weapon systems/ equipment, the focus on R & D in defence also has to improve. In the last six years, the expenditure on R&D by DRDO, the primary research agency for defence, has remained between 0.08% to 0.09% of GDP. This is too low as noted by the Standing Committee on Defence (2021), much lower than what developed countries spend. The total national spend on R&D has to go up to at least 1% of GDP, for the success of indigenisation policy in defence. Innovation in the defence domain has to be given a further boost through start-ups eco system, IDEX and DTIS schemes and collaboration with academia.

Inferences

• Indian Defence spending, whether as a percentage of GDP or on pro rata basis is decreasing gradually and continuously.
• The spending is lower in comparison to most countries of interest, even though India has higher security concerns.
• Apparently, while security concerns get adequate attention, priority is development, ie infrastructure and poverty alleviation.
• However, there is evidence of commendable flexibility in additional funding of defence requirements at RE stage, based on operational requirements.
• Within the Defence Budget, focus is on modernisation and infrastructure; however, procedural constraints seem to hamper absorption of allocated funds. The recommendations of 15th Finance recommendation on non lapsable modernisation fund have to be implemented. It is also evident that Capital Outlay for procuring modern Weapon Systems/Platforms can increase significantly only if higher funds are allotted to defence, ie a higher % of GDP or Central Govt Expenditure.
• Pension Budget is large due to sheer number of retired personnel, even though per capita pension of defence personnel is lower than national average, despite OROP granted by the present Govt.
• Higher ab-initio allocation is required for operational maintenance of Forces to avoid adhoc additional funding at RE stage.
• Salary and Pension bills being rather inelastic (based on Central Pay Scales and norms), the funding squeeze will either be on Capital Expenditure or on Operational Maintenance of Forces.
• The initiatives on Indigenisation of Defence Manufacturing are a potent way to conserve Capital and need to gather further pace. Atma Nirbhar is the way to go, but will require increase in domestic production capacity and higher R&D expenditure.
• Overall, a way has to be found in the ensuing decade to reverse the decline in defence spending as a percentage of GDP, accelerate the modernisation of Forces and have higher defence contribution in Comprehensive National Power of India.

Author Brief Bio: Lt Gen Kapil Kumar Aggarwal, AVSM, SM, VSM retired as the Director General, Electronics and Mechanical Engineering. Earlier, he was the Chairman, Army Pay Commission Cell. He is a Post Graduate Engineer from IIT Kharagpur and also an alumnus of Defence Services Staff College, Wellington.

References:

^[i] 40th Report: Demands for Grants (2018-19) General Defence Budget

^[ii] https://prsindia.org/budgets/parliament/demand-for-grants-2022-23-analysis-defence#

^[iii] P13, Demand for Grants 2020-21, Standing Committee for Defence (2019-20)

^[iv] https://prsindia.org/budgets/parliament/demand-for-grants-2022-23-analysis-defence

^[v] 41st Report, Demands for Grants (2018-19) Army, Navy and Air Force, Standing Committee on Defence, Lok Sabha, March 2018, http://164.100.47.193/lsscommittee/Defence/16_Defence_41.pdf.

^[vi] https://prsindia.org/budgets/parliament/demand-for-grants-2022-23-analysis-defence

^[vii] Lok Sabha Unstarred Question No 2961 of 03.08.2022

^[viii] Lok Sabha Unstarred Question No 2324 of 16.03.2022

^[ix] “Press Note No. 4 (2020 Series), reviewing Foreign Direct Investment (FDI) Policy in Defence Sector”, Press Information Bureau, Ministry of Commerce & Industry, September 18, 2020.

^[x] Starred Question No. 161, Rajya Sabha, December 13, 2021, https://pqars.nic.in/annex/255/AS161.pdf.

^[xi] Economic Times, New Delhi, 16 February 2023

Introduction

This Union Budget 2024 continued on the path to enabling increased allocation to digital infrastructure, including Digital Platform Infrastructure, thus ensuring that the Indian economy accelerates towards a lower cost, higher efficiency, competitive economy.

Let us analyse the budget from an overall perspective, before we deep dive into the digital aspects. The announcement of significant tax reductions for the middle class made it a “feel great” budget for the masses, while avoiding populist measures and avoiding unnecessary freebies. It was thus another mature budget presented, with budgetary support being extended to only the vulnerable sections of the society such as those who require food grain support or for MSMEs that are the backbone of the economy and not resorting to mass populisms that lead to fiscal pressures and ultimately to inflation. Hence, in this context, a budgetary support of Rs 2 trillion for food grains is most welcome. In the same spirit, targeting a spend of 2.5% of GSP on healthcare by 2024 is a very desirable step.

The budget appeared to focus on enabling people and small businesses to earn their own living, that is to be economically self-sustaining. In other words, it was a budget that enabled people to be ‘Atmanirbhar’. How does the budget achieve such an objective? The massive capital outlay of Rs 10 lac crore or 3.3% of the GDP ensures that the public sector spend creates the demand for cement, steel, labour, transportation, logistics and so on that would give an opportunity for people to provide the goods and labour. This is further amplified by proposed increase in budgetary support for PM Awas Yojna (housing for all) to the extent of 66%, making it a Rs 79,000 crore outlay. There is also INR 2.4 trillion of additional investments for the Indian Railways, which is the highest in a decade and four times last year’s budget. This outlay is double of what was generally expected. In addition, there are multiple other infrastructure outlays such as 50 new airports and heliports, coastal shipping etc. The multiplier effect of such an unprecedented capital expenditure will ensure that all sectors of the economy grow in an economically sustainable manner.

Along with economic sustainability, there is very significant focus on environmental sustainability, both in terms of moving the economy away from polluting industries and energy sources to promoting production of green capital goods such as batteries, solar power, hydel power etc. To this goal, committing Rs 20,700 crore to generation of 13 GW from Ladakh has repercussions in not only making our energy sources green, but also making Ladakh a green energy hub and increasing local job opportunities in a future industry. There is also a very significant commitment of Rs 19,700 crore to accelerate the green hydrogen industry and a humungous target of having capacity for battery storage of 4 GWH.

As with all Indian budgets, this budget continues to provide significant support to agriculture. Agriculture has grown by a sustained average annual rate of 4.6% in the last six years. However, what is different in this budget is that it aims to steer the agriculture industry towards more sustainable practices such as growing of millets that are natural, indigenous crops for India that require less water, and thus making India the global hub for millets, to moving away from chemical pesticides and fertilisers through 10,000 support centres. I am assuming such a change would be effected responsibly and in a graded manner such that we do not fall into the trap that Sri Lanka fell into by adopting natural agricultural practices in a knee-jerk manner without scientifically sanctified practices for the same.

The budget also continued this government’s quest for enhancing ease of doing business by creating centralised KYC infrastructure and having PAN as single identifier. It also aims to build a Digilocker for companies so that they can have the same benefits as individuals. It also provides significant relief to MSMEs.

The Nudge to Digital

The above steps help in increasing the demand for digital from both consumers and the industry. With extra money in their hands, taxpayers would spend some of it on digital such as access devices (smartphones or laptops), broadband connection, intelligent machines such as smart washing machines etc. The industry too will consume more optical fibre as the large scale housing projects are built-out. In addition, with the push to ensure that fibre optic is laid out with all linear infrastructure, there would be a significant uptick in consumption of fibre optic.

The budget also brought in sharp focus on future industries, be it industry 4.0, with considerable focus on Artificial Intelligence (AI) to the next generation of diamond industry that is driven by lab grown diamonds (LBG) which is environmentally responsible and can feed the massive diamond cutting and polishing industry of India that sustains an army of skilled labour. The budget proposed to leverage digital for multiple sectors, including what caught people’s attention was digitisation of one lac ancient inscriptions, thus democratising the quest for discovering more about our rich cultural and scientific heritage. There is also push for drone adoption, thus incentivising to create future industries.

Specific Provisions for Digital

Besides the nudges to Digital, the budget has specific provisions for supporting Digital. It has allocated INR 16,549 crore to the Ministry of Electronics and Information Technology, which is a 40% higher allocation than that of last year. This allocation includes INR 3,000 crore for the Indian Semiconductor Mission. Semiconductors are the heart of digital and are extremely strategic, as has been made amply clear during the COVID induced semiconductor shortages, which were exacerbated by the Ukraine war. Without semiconductors, most modern manufactured products can come to a grinding halt, as most modern gadgets and white goods are run using semiconductors. This includes automobiles, washing machines, air conditioners, displays, televisions etc. Even solar panels are based on semiconductors. With a giant push towards switching to carbon-neutral energy generation, solar panels have become critical for India and therefore, semiconductors have become even more of a strategic requirement for India. Thus, India having a negligible semiconductor manufacturing capacity requires urgent attention to kickstarting the manufacturing of semiconductors in India. The budget does well in ensuring that we finally get around to pushing for semiconductor manufacturing in India. In December 2021, the government had announced a corpus of Rs 76,000 crore to promote the semiconductor and display manufacturing ecosystem in India. The budget this year signals the seriousness of the government to promote an atmanirbhar semiconductor industry.

The allocated INR 3000 crore corpus includes INR 1,799 crore that has been allocated for the modified scheme for setting up compound semiconductors, silicon photonics, sensors fab, discrete semiconductors fab and semiconductor assembly, testing, marking and packaging (ATMP), outsourced semiconductor assembly and test (OSAT) facilities in India. These are critical for establishing the semiconductor ecosystem in India.

In addition, the budget has allocated Rs 1,000 crore for the modified scheme for setting up of semiconductor fabs in India, while Rs 4 lakh has been allocated for the scheme to set up display fabrication units in India. Such units are required in televisions, mobile phones and other such devices. To back the semiconductor wafer fab proposals by various corporate entities, the scheme involves the central government making a large, upfront investment which would possibly be to the tune of 50% fiscal support as per recent modifications. The budget also allocated INR 200 crore for design-linked incentive scheme to incentivise companies to design semiconductor chips and wafers in India.

The budget also supported the Digital Platform Infrastructure that India has created and is a pioneer in the world. To augment the digital payment capacities, the budget has allocated INR 1,500 crore for promotion of digital payments. This scheme will push banks to develop robust digital payment ecosystem, and to promote RuPay debit card and BHIM-UPI digital transactions across all sectors. Such a move will make the Indian economy significantly more efficient. UPI has grown by leaps and bounds in the past couple of years as it facilitated transactions worth Rs 125.94 trillion in the calendar year 2022, jumping 4X from Rs 33.88 trillion in 2020.

To promote more of electronics manufacturing in India, with more indigenisation of components, the budget has also allocated INR 4,499 crore for the production-linked incentive (PLI) scheme for large-scale electronics manufacturing. The scheme envisages incentives between 3% and 6% on incremental sales of goods manufactured in India. The PLI scheme for IT hardware, which offers incentives between 2% and 4% on incremental sales for goods such as laptops, servers, tablets, and all-in-one PCs manufactured in India, has been allocated Rs 146 crore. These allocations will significantly strengthen electronics manufacturing in India. Such measures have helped India pull back from a situation where it was predicted that by 2016, India’s import bill for electronics will be more than our oil import bill. Instead, we have shot from having almost no production of mobile phones to becoming the second largest producer of mobile phones in the last few years. Such scale up has been unprecedented globally, and the budgetary incentives and PLI schemes have played a significant role. In addition, the budget has allocated significant funds for the modernisation of the semiconductor laboratory at Mohali, while Rs 533 crore has been allocated for other expenditures of SCL.

The budget has also announced support for an open-source, digital public agriculture infrastructure that will facilitate the agricultural sector in the country. A digital agricultural stack, a data repository of the farm sector, is already being built and the new open-source initiative, which will be accessible to the private sector, is expected to be based on it. It is expected that such an initiative will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.

So clearly, the budget has given a significant push to greater digitalisation of the Indian economy and has also built in sufficient signalling of the path that the nation will take. However, it is important to also understand issues that are not necessarily solvable through budgetary provisions.

What did the industry want?

To understand the impediments to an accelerated digitalisation of the economy, it is important to understand some of the key asks of the digital economy.

The foremost is that we still have large parts of the country that are not connected through broadband. As has been oft repeated, the Wuhan Covid pandemic has made it amply clear that broadband is a necessity for survival. Under such circumstances, accelerating the rollout of BharatNet III Saturation Project, which aims to connect every village with a broadband, is critical. The more time we lose, the more we lose the chance of educating the youth, providing services to the old and connecting the workers to opportunities. Each of these lost opportunities will quickly come back to bite India, as India propels to greater levels of growth and prosperity. We would be staring at problems of not finding appropriately trained workers while having the largest population in the world. We may need to import skilled workers to fill the gap, while not being able to offer jobs to our citizens, as they did not get trained. Therefore, it is imperative that we execute the Bharat Saturation Project on an urgent basis.

In the above context, it needs to be noted that given the criticality of universal broadband connectivity, the government has gone on a war footing on the 4G saturation project, which aims to cover every village in the country with 4G connectivity. However, for such an infrastructure to operate effectively, the towers would need to be connected by optical fibre, which brings us back to the issue of rapid implementation of BharatNet Saturation Project.

In addition, given that the Indian environment takes a toll on the optical fibres been rolled out, it is important that we roll out bend-resilient optical fibres, which do not degrade when bent. Fortunately, India manufactures such fibres domestically, while the poorer quality fibres are imported. It would be beneficial for an atmanirbhar optical fibre industry that India adopts bend-resilient fibre for government initiated projects, which will not only ensure that higher quality infrastructure is created, but will also ensure a future-proof infrastructure, supported by the local industry.

As part of atmanirbhar, the government has taken proactive steps to mandate use of Atmanirbhar products for any component that is a significant percentage of a project. This was part of the Public Procurement Preference to Make in India (PPP-MII) order. However, what we observe is that a project has many components and could include large amount of cement and steel and the digital component such as switches etc, become a minuscule portion of the project. It would be important to fine tune the atmanirbhar policy and use percentage of the product as a key metric to enforce atmanirbhar product, rather than using percentage of project as a metric.

And as dwell on the topic of atmanirbhar digital ecosystem, we see a strange phenomenon happening. While the government has pioneered the much-needed policy of “Atmanirbhar”, we observe that where the industry is getting marauded by dumping from foreign players, with poor quality fibre, there seems to be a laxity in providing the trade remedies required in such cases. In fact, the industry is observing a strange situation where anti-dumping duty cases are being approved and recommended by the DGTR, but the same appear to be rejected by Ministry of Finance. The budget was an excellent opportunity to provide clarity on the issue and on the larger vision of the government, before we again see our industry getting decimated, rather than becoming the capital of digital production globally.

There are also more proactive steps that can potentially be taken to promote digitalisation of the nation. This may include making it mandatory to provide in-building connectivity, especially for multi-storied buildings and low-cost housing, so that it becomes cheaper to access broadband, as it would be cheaper to layout the connectivity while the buildings are being constructed.

Conclusion

The question at the end is always on how the budget will get funded, with the lofty and desirable goals of getting back to the fiscal responsibility targets, gliding back to 5.9% fiscal deficit in the coming year and to less than 4.5% in the year after? Such a fiscal deficit target also makes the inflation target of sub 6% more believable. But where would the Government get the funds to fund this budget? The budget speech was silent on the disinvestment targets. Perhaps the actual budget documents will have the details. Going by previous track record, there is reason to believe that the budget numbers will add up, especially on the back of higher formalisation of the economy which is also reflected in record GST collections. If we are able to implement this budget in the way it has been presented, it would be a great start to the ‘Amrit Kaal’, supporting sustainable agriculture, next generation industries, massive infrastructure rollout and supporting the vulnerable sections of the society, that will further accelerate the growth of per capita income from the current USD 2,500, bringing more prosperity to the common people.

A great budget will have considerable positive impact on India’s journey towards accelerated digitalisation. So, while the government has made stunning progress in steering India towards a path of rapid digitalisation, with initiatives that are path-breaking and first of its kind globally, there is more to be done, given the size and complexity of India. There is also a need to ensure that we continue to keep a hawk-eye on our still young digital manufacturing industry and protect them from unfair trade practices of foreign players.

Author Brief Bio: Dr Jaijit Bhattacharya is a noted expert in technology policies and technology-led societal transformation. A recipient of the prestigious APJ Abdul Kalam Award for innovation in Governance, he is currently President of Centre for Digital Economy Policy Research. He is also CEO of Zerone Microsystems Pvt Ltd, a deep-tech startup in the fintech sector.

Introduction

The macro-economics of the Union Budget 2023/24 is simple, but not simple minded. A classical budget, it seeks to pump-prime the economy through autonomous investment and engender dependent consumption demand thereby increasing incomes, both aggregate and disposable.

Be it the underwriting of food consumption of the poor with a Rs 2 lakh crore allocation for free grain for the poorest, or to increasing public capital expenditure for “crowding in” capital formation by the private sector or the increasing disposable incomes of the high consuming segment of middle class through direct tax relief.

Key Takeaways

This budget makes a break from past in two ways; first, from the time-honoured tradition of being populist ahead of elections. Nirmala Sitharaman has been practical, not populist. Second, a move away from current expenditures and transfer payments, a hallmark of the earlier NDA budgets. The focus of this year’s Union Budget is on capital expenditure. The Capex allocation is, unlike in the recent past, likely to “crowd in” capital formation by the private sector because the gross market borrowing program in relation to the nominal growth of the economy is lower. This will ensure that the much-needed private corporate investment is not crowded out from the financing side. Till now, because of the massive pre-emption of financial resources for financing investments, an increase in public investment has resulted in a decrease in private investment, especially private corporate investment.

While the public expenditure policy is decidedly expansionary, the fiscal policy can’t be called that. It is, at best, accommodative in its stance and substance. While the size of the gross fiscal deficit is budgeted at fifty basis points lower than the previous year, the cyclically adjusted fiscal deficit is almost 100 basis points lower at 5.5 per cent. This reduction in the overall fiscal deficit comes along with an increase in capital expenditure. Not only is this the key highlight of the budget but it also underlies the real gains in fiscal management over the years.

Given the overall increase of 7.5 per cent in total expenditure, the substantial increase in the capital expenditure that has been budgeted implies a significant change in the structure of expenditure away from revenue expenditure which is budgeted to grow by 1.3 per cent.  Notwithstanding the sharp reduction of one third in food subsidy and by a quarter of the fertiliser subsidy bill, revenue expenditure is still 11.6 per cent of GDP; more than three times of capital expenditure which is budgeted to rise to 3.3 per cent of GDP. This points towards the emergence of serious macro-economic anomaly of interest payments overtaking capital expenditures. In other words, the amount of money that the Union will spend to defray past borrowings will be more than that earmarked for creating new capacities. Obviously, this anomaly is a consequence of the national debt having gone up nearly four times from Rs 32.3 lakh crore to Rs 115 lakh crore in FY22. The increasing debt burden has resulted in interest payment shooting up from 2.2% of GDP to 3.1%.

But for now, key takeaway from the underlying fiscal policy is that the revenue deficit, which used to account for more than two thirds of the fiscal deficit and pre-empted as well as raised the cost of finance for productive private investment is beginning to show a decline. It is still not quite at the level of being one-third that it was earlier. This change in fiscal consolidation can free up productive resources for the private sector and contribute to lowering the cost of capital, thereby raising the growth rate of the economy in 2023-24.

An interesting and important initiative in the Union Budget has been to try and delink the Capex in the states from their fiscal deficit. Even as the Centre has fixed States’ gross fiscal deficit at 3.5 per cent of the gross state domestic product for 2023-24, it has decided to continue with the 50-year interest-free loan to States for one more year with an enhanced allocation of 1.3 lakh crore. The loan amount will have to be spent in 2023-24. While most of the loan will be at the discretion of the States, a part of it will be contingent on States increasing their actual capital expenditure.

A part of the outlay will also be linked to, or allocated for, scrapping old government vehicles, urban planning reforms and actions, financing reforms in urban local bodies (to make them creditworthy for municipal bonds), housing for police personnel above or as part of police stations, constructing Unity Malls, children and adolescents’ libraries and digital infrastructure, and States’ share of capital expenditure of central schemes. The Union Budget also proposes to incentivise cities to improve their creditworthiness for municipal bonds through property tax governance reforms and ring-fencing user charges on urban infrastructure. Additionally, an Urban Infrastructure Development Fund (UIDF) is proposed to be established. It will be managed by the National Housing Bank and used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

Despite this, the transfer to states is becoming an area of concern. While the gross transfer to the States is budgeted to increase in 2023-24 (BE) because of an increase in allocation for special assistance to States for capital expenditure, the Finance Commission Grants are budgeted to decline in 2023-24, due to a lower amount of the fixed Revenue Deficit Grants. While a lower post-devolution deficit grant, reflecting a reduced need on account of revenue deficit is a good fiscal trend, the overall transfer to states are lower.

The total transfers to the states are projected to decrease in the upcoming fiscal year, with the states’ share of tax revenues reduced to 30.4% from the previous year’s 33.2 per cent. Furthermore, the states’ share of tax revenues is much lower than the promised 42 per cent share by the 14th Finance Commission. These reductions in transfers may negatively affect the states’ ability to fund critical infrastructure and social welfare programs.

At the same time, the transfer to the local bodies shows an increase. While the increased resource flow and the associated financial empowerment of the third tier of governance is desirable, kt is debatable whether this should come at the expense of the state governments. Given that the budget has an accommodative fiscal stance, more so in the structure of expenditure than the level of fiscal deficit, the attention should now shift from Raisina Hill in New Delhi to the Mint Street in Mumbai.  Whether or not the growth targets set out in the budget will be met, will now depend on how the RBI, Indian Inc and banking sector responds to the challenge.

The RBI is already set on a path of hiking interest rates and is far from done yet. With the global uncertainties, especially the impact of the Russia-Ukraine war, RBI will keep a watch on how world energy prices behave and what would be the impact of these on inflation and indeed growth. In such a situation, there is a real risk of the RBI looking to follow a conservative monetary policy. A contractionary monetary policy in the face of an expansionary public expenditure policy will cause the same kind of policy schizophrenia that was the hall mark of the economic policy making in the late 80s which eventually resulted in a macroeconomic imbalance and a balance of payment problem.

The starting point for the RBI must be the gross market borrowing program implicit in the Budget. While the nominal rate of growth is assumed to be 15 per cent, the gross market borrowing program is budgeted to increase at around 8 per cent. Clearly, the pre-emption of resources by the government will be lower. Indeed, the moment the FM announced the borrowing number, it led to a rally in government bond prices with a drop in the yield to 7.28 per cent from the levels of 7.35 per cent that it had reached consequent upon the tightening cycle of the RBI. The prime focus of the credit policy will have to be on ensuring adequate liquidity in the market for the credit cycle to gain momentum and engender growth.

The budget has made significant changes to personal income taxation by reducing tax slabs from seven to five and lowering the top slab tax rate from 42% to 39%. The rebate has been raised from Rs 5 lakh to Rs 7 lakh at the lower end, and the exemption limit has been raised to Rs 3 lakh with an enhancement of standard deduction. These changes could be seen as a pre-election sop to the middle class, but they are likely to incentivise taxpayers to switch to the new tax regime.

The growth strategy underlying the budget, which is one of decisive reliance on the home market, must be seen to insulate the Indian economy from the impending global recession. Yet, the budget is not insular, and in its underlying themes, is global. There are three clear themes in the budget. First, of course is Decarbonisation; be it Rs 35,000 crore for energy transition, or the 5 MMT of hydrogen, or concession for green mobility, this is pretty much a green budget. In the long run, the focus on decarbonisation is perhaps second only to poverty alleviation in terms of ensuring sustainability of growth. For in the short term, fossil fuel-based energy prices are the single biggest risk to this Budget panning out as planned.

Second is Digitalisation, across the board, and not sector or industry specific. Indeed, the budget has been used creatively to push even the artisanal sector and seek to link it to the digital global supply chain network. Third is Decentralisation in infrastructure, agriculture and MSME in terms of creation of new production and transactional platforms. More importantly, along with new concessions and tariffs, these will improve the operational efficiency of transmission and distribution networks, thereby responding adequately to the growing challenges of energy in India.

Challenges

The ten Union Budgets presented by the BJP led NDA government over the last decade have, in a sense, laid the foundation of a structural transformation. But while the scaffolding has been erected, subsequent budgetary policies have not leveraged the initiatives of the preceding budget to erect the complete structure. As an example, major policy initiatives have been made to formalise the Indian economy through initiatives such as the GST, but this has not found adequate resonance in subsequent budgets to the degree required. This is perhaps, still a work in progress.

The current Union Budget also could have focussed more on addressing the “transitional” decline in the unorganised sector, resulting in lower growth than what the official statistics indicate. This can have long term adverse implication of a widening income inequality as the unorganised sector suffered a substantial loss of income in the last three years, primarily due to the pandemic and the war in Ukraine. The short-term transitional troubles could have been addressed in the budget by providing more focussed and structured credit to the unorganised sector en-route to its formalisation. This can prove to be the Achilles heel, not just in terms of meeting the budgetary growth arithmetic but of the larger political economy, at a time when the elections are just around the corner.

Budgetary Naam-Karan: Seeking a Civilisational Connect

There is a distinct shift in the earlier inherited lexicon, which in a sense, perpetuated the colonial legacy. We see now a ‘vernacularisation’ of the Union Budget, through terms such as ‘Amrit Kaal’, the phrase being used for the first time by Prime Minister Modi on Independence Day, 2021. ‘Amrit’ literally translates to “nectar of immortality” in Sanskrit while “Kaal” refers to a specific time period. The Finance Minister has characterised this budget as the “the first budget of Amrit Kaal”—setting the stage for India to be a developed country by 2047.

So, we see terms such as Shree Anna being used by the Finance Minister, while announcing the goal of positioning India as a global hub for millets. Or GOBARdhan being announced as a scheme under which 500 new ‘waste to wealth’ plants would be established. The seven priorities of the Union Government in the Budget—inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and financial sector, were described as Saptarishi, a reference to the wise sages, who would guide the country through to Amrit Kaal. The youth of India were referred to as Amrit Peedhi; Panchamrit, a Sanskrit word used for the five nectar elements, was used to refer to PM Modi’s push for net-zero carbon emission by 2070 and the budgets focus on green growth.

Other terms which found resonance were MISHTI which means sweetmeats in while referring to a scheme for the ‘Mangrove Initiative for Shoreline Habitats & Tangible Incomes’. Then we had Vishwakarma for the Artisans, the acronym UDAN for a scheme to make air travel affordable, another acronym, SHAKTI for harnessing coal power, SAGAR, reflecting India’s vision for the Indian Ocean Region and USTADD for upgrading skills training. Other acronyms /phrases which found their way into the budget were GIAN for a global academic network and PRASAD—Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive— a scheme to facilitate religious tourism through provision of appropriate infrastructure.

Conclusion

The Budget, as mentioned earlier, is a path-breaking one, which has shunned populism, but has still found great resonance with its focus on a growth strategy. By associating the budget with our civilisational ethos, there is an attempt to connect with the past, so that we can move confidently into the future.

Author Brief Bio: Mr. Haseeb A Drabu is former Finance Minister of J&K.

We are witnessing a moment where humanity has reached a juncture to again question the concept of What is Money and Who can use it. There is a visible clash between three different formats of currencies. The Private Cryptocurrencies backed by blockchain technology, claiming to be a de-centralised version of modernity, current Fiat currencies which began with 1971 unhooking from the Gold Standard, backed by the Central Banks, and a new, multi-polar pegged currency which is in the making process by the BRICS+ nations.

I am forthright ruling out the private cryptocurrencies for the role of legal tender of money usage, as no central bank or polity would allow it. Neither does it makes sense for rational citizens to use it as a store of value or as a stable medium of exchange as there is lack of jurisdiction; what would happen if tomorrow the screen shows zero as its value? A good store of value does not fluctuate so wildly with the words of mouth or news. The Central Bank Digital currencies are being brought in a way to counter private cryptocurrency popularity of modernness.

That leaves my research to confining the analysis between the current fiat currency format, the pegged currency format and the CBDC. It is important to lay some background as to why did we arrive at this stage where a currency needs a reset. Let us begin.

Barter System

Humanity began a peaceful, sustainable living with a simplistic barter system. A barter is a simple exchange of goods and services between two or more person or entities.

Benefits of the Barter System (most of which do not exist today)

1. Only if your product is ready for end-user consumption, you could conduct the barter for another finished product or service in exchange. There was no sense or visibility of unemployment virtually because entire value-addition was done by the individual, family or the community jointly. Entire society was equally empowered. Since the value-chain involved the entire family and community circle, there was never a concentration of huge chunks of wealth in a few hands. In the contemporary world, the final product or service is built after running through several de-centralised processes amongst unknown entities and individuals, totally disconnected from family or community.
2. There was no massive storage of production to the extent of creating the ability of artificial price manipulation. Most commodities or goods were perishable in nature. There was no over or under production. The society auto-adjusted the output based on their requirements for the barter. In this sense, the region or village was inherently self-sufficient and content. Optimum utilisation of resources meant that the nature’s gift of resources was used with the wisdom of minimalism. In the contemporary world, there are widespread manipulations by all actors by weaponisation of over-production and by hoarding. The natural resources stand ruthlessly exploited. The height of extreme capitalism has resulted into speculative trade (derivatives) in the commodities determining the price of the underlying asset (commodity) instead of the physical asset determining the prices of the derivative. The output or production is altered to fix a maximum profitability scenario, irrespective of nature’s capacity or human needs.
3. There was complete price stability & almost zero inflation. The barter trade wasn’t re-negotiated for over years. The understanding of what many hours of hard work should measure the exchange between the buyer and seller was inherently understood and largely remained non-disputed. There was no requirement of the idea of socialist welfare in an inflation-free society. In the contemporary world, the exploitation of extreme capitalism for profits causes income inequality between the rich and poor. As the by-product of the exploits of 18^th century Adam Smith Capitalist-industrialisation, we had Karl Marx communism born, making a fit case for a huge Government format launching communist freebies politics.
4. The national and international trade was smooth. It did not require maintenance of foreign reserves or facing deficits like in the current world. Strong society meant strong governments and hence zero outside interference in the policies of the state. Individual and national sovereignty, both were equally maintained. In the contemporary world, globalisation has entered like a Trojan horse removing the physical security of the borders. It’s an open invitation to enemies for all kinds of internal sabotage without requiring a war at the border.
5. There was a very negligible credit-based sales and hence almost zero chance of bad debts. This massively contributed to the social harmony further. In the contemporary world, the West is enabled to pass on their socialist freebies bills with the reserve currency format on the rest of the World. While the East is totally unaware of that fact that these government offerings in the West are actually from their pockets and hence, they admire the western lifestyle out of ignorance. The East does not have a reserve currency endless printing privilege for their Governments to take care of their aged parents or issue entitlement benefits, social benefits, income security, food stamps, low interest loans and so on.

What was the World promised to jump out of the Barter system? We are going to make your life easy & super convenient, and how!

• Bringing a unit of account as your goods are not divisible into units for conducting transaction any point of time.
• Bringing a stable store of value as your goods are perishable in nature.
• Bringing a common measure of value as a tool for trading and universally accepted medium of exchange you can easily carry with you.
• Bringing a standard for deferred payment in case you don’t have your goods ready to exchange with something you want to consume right away. It will serve as a basis of credit. You can’t grow rich without debts.
• Bringing a fairer payment for your produce as you are not getting good exchange deals beyond a geographical or practical limit.

So, the question now was – how to shift to coins and paper currencies? How to make people trust these?

Gold and Silver as precious metals is the real purchasing power accepted worldwide. So, minting the coins made a lot of sense. Faces of Gods, Kings & Queens as an addition made people trust it for usage as currency.

De-monetisation by Monarch: The Kings or the State de-monetised by calling back all the gold and silver coins, and issued cheaper metal coins in return to accumulate wealth. Then, again, they could re-introduce and de-monetise when needed. Today, benefits of physical gold as currency has been lost.

Civilisational wisdom of Gold as the real Purchasing Power

1. Physical Gold is the best store of value for passing wealth over generations and life-cycles as emergency/insurance fund, seed fund for enterprising, for Streedhan and ornamental usage. It is Sanatan wisdom which is why all Indian Bhagwans are laden with gold.
2. Physical gold is the best absorber of inflationary pressures and de-centralised from day-to-day state policy fluctuations.
3. Physical gold has zero political risk, zero geo-political risk, zero default risk, zero counter-party risk, zero liquidity risk and zero convertibility risk.

Conclusion: A Currency Reset only happens by accumulation of gold or silver (De-monetisation from whoever has it physically with them)

Now, if we want a seamless and fair credit system, a middleman will be required, which would save the people from exploitative, unorganised lenders. That gave birth to the formal banking sector. Welcome to the World of printed notes as currency across the state.

Interest started being offered on deposits to divert family’s enterprising savings and corpus to corporates via banks. This broke the entire entrepreneurship, perpetually rich economy worldwide. The entire chunk of family savings went to companies via banks and the entire society got converted to jobbers. The formation of joint stock company with the support of the state rights to specific trade and business became the norm. Now, these companies wanted to pay lesser to their employees, knowing well that their family savings are all diverted and that they cannot do enterprise. These companies also wanted cheaper loans from the banks. The powerful private banking groups did not listen to the State. Politicians wanted to declare socialist freebies for vote bank as well. This gave birth to the Central Banking system for regulating the banking services nationwide.

There are only two ways to recover the cost of socialist freebies and massive government expenditure: taxes or printing more currency notes to fund that expense. The printing of more notes drives the purchasing power down automatically. This way, without more taxes, the cost of freebies can be recovered without masses knowing about it. More supply by printing of currency notes also means that corporates can continue paying the same amount of salary (with lesser purchasing power which the employees won’t understand is a reduction in pay). The Corporates also enjoyed lower interest rate loans from the banks compared to the loans offered in the unorganised banking.

Now you reach the printed paper currency world driven by the Capitalists where printed notes are several times more than the actual physical gold backing it. An era of debt-based lifestyle began.

What was the World promised to jump out of the Precious and Cheap metal coins? We are going to make your life easy & super convenient, and how!

• Bringing a printed note backed by the central bank as a legal tender of money.
• Bringing an easy to carry currency compared to coins in terms of weight.
• Bringing a common measure of value throughout the nation which won’t require a third party to convert the precious metal or coins into a different local measure of value.
• Bringing a note which is printed, based on a fixed Gold Standard (pegged currency) and easily convertible to gold as and when you want. If at all you lose faith in the government or our financial systems, walk in with your notes and take back the gold in exchange. We guarantee these notes are safe and backed by the State for a promise to pay the denomination worth mentioned. Please understand that physical gold is very limited in stock and in order to grow the economy, we need to print notes in some proportion to Gold, not equal to the actual physical gold that we hold.

Britain as the global power, imposed the British Pound as the Reserve currency worldwide.

DEMONETISATION BY CAPITALISM – US started collecting physical gold in exchange of war supplies from the EU allies during the World War. In the Bretton Woods agreement, with the strength of physical gold accumulated, it imposed the US dollar as the new reserve currency replacing the pound. In this formula, the US dollar maintained the Gold Standard, while the rest of the World’s currencies were pegged to the US dollar for referencing, valuations and invoicing of all bilateral and multilateral trade. The International busybodies like the UN, World Bank, IMF, WTO and so on, sold the idea of Unipolar dollar (police) World of trade by packaging it as “Globalization”.

To counter the anti-religion communist USSR during the Cold War, the words “In God we Trust” were added to the printed dollar. The deep state companies started forming strength in the US by the legacy funding for the few aristocrat families and support from the UK. President JF Kennedy was the first casualty within the US. The military industrial complex was gradually able to take over the polity as the retired army generals took plum postings in deep state companies. These post-retirement temptations lure the currently serving generals to follow the diktats of the deep state companies. While the deep state companies covered several sectors, the top military appointments taking plum postings post retirement in them was the turning point which made it very lethal. For example, you can make out Donald Rumsfeld talking Iraq attack even before being appointed in the government. By the stretching of the Vietnam war, the economy of the US started weakening. Upon losing faith many nations started demanding physical gold in exchange of the US dollar. President Nixon banned the Gold convertibility and the Gold standard on 15^th August, 1971. This move made all the currencies of the world fiat, meaning backed by nothing. The concept of Fiat currency was born.

The 1973 Oil for security program with Saudi Arabia and OPEC gave birth to the petrodollar. Both petrodollar recycling air and reserve currency bubble started accumulating in the Dot com by late 1990s. In order to cover up the wall street manipulations from the masses, REG D and the Gramm Leach Bliley Act was introduced to mix commercial and investment banking, so that public deposits are mixed with the reserve currency bubble. EU launched Euro currency in the first ever fiat de-dollarisation attempt (without accumulating or pegging the EURO with physical Gold). Furious with this move, US brought China in WTO and started passing on all the manufacturing from the West. EU retaliated by refusing to park excess in US treasury and pin-pricked the reserve currency balloon accumulated. This collapsed the IT sector valuations by 78% in what came to be known as the Dot Com crash in 2002. The Euro currency eventually managed to win 20% of reserve currency status in the world.

The Services sector was born out of 1971 fiat currency format & the IT sector was born out of the reserve currency status bubble. Both caused artificial suppression of valuations of farming, precious metals and manufacturing sectors worldwide. For example, paper gold floating around today is several times higher than the real physical Gold in the market. Specific few financial entities are playing the manipulation game in the West to curb the value of gold and silver worldwide for 5 decades now, to ensure central banks don’t get attracted to accumulate it, just to avoid them from de-dollarization temptations. This is how the West artificially suppresses value of all what Asia and Gulf produces. This artificial suppression of valuations of enterprising MSMEs, SMEs, farming and manufacturing sectors causes inequality of revenues in all countries making a use case for issuing massive socialist freebies by the state.

(Note: What do you expect if Fiat currency formula is killed and de-dollarization is done?

1. Services sector and specifically the IT sector to take a big hit worldwide.
2. Farming, manufacturing & precious metals to zoom in valuations.
3. Too much paper will chase too less physical and cause massive chaos in the West.)

Nothing surprising; Karl Marx’s communist theory was born out of 18^th century industrial capitalism exploitations. The destruction of farming, precious metals and manufacturing sectors worldwide presented a tempting use case of exploiting the reserve currency status with endlessly printing huge socialist freebies. Politicians were also happy as they got their vote bank served, Capitalists were happy that these socialist freebies broke families, which meant more selling, cheap labor and lesser competition from family-based entrepreneurship.

Where does this cost of socialist freebies go? It takes the form of increased taxes or inflation by printing more notes, as too many notes chase too less goods. The reserve currency status of dollar and EURO passed on the chunk of these costs to the rest of the world as all other nations have to compulsorily do bilateral and multi-lateral trade in consistently sliding purchasing power of both the currencies.

(Note: Humanity was made to jump from the barter system because you were told goods are perishable and not a good store of value. Turns out, you could buy a good suit for 20$ in 1970 and today you hardly buy a good pair of socks with 20$. Whoever heard of this kind of a store of value. You were told it will be a fairer payment for your work. Turns out, salaries increase in absolute numbers, the purchasing power goes down every day. You were told you may not want to buy what the seller produces for a barter to happen. Turns out, you land up paying premium and even taking loans for buying basic things you want.)

For the EU & the US, the debt-based lifestyle accumulated huge mountain of debts. After the 2008 crisis, the US started pushing private cryptocurrencies like Bitcoin aiming to give a back door entry to the dollar in nations if they de-dollarise. The printing of dollars to solve the 2008 crisis at home caused massive inflation worldwide and the food inflation brought down the middle-east governments in the form of Arab spring. This was the time the Middle-East realised the heavy cost of continuing with the reserve currency status of the dollar.

Asia started serious de-dollarization moves with India taking the lead by launching a gold monetisation scheme to channelise domestic gold to coffers by 2015. Russia and China were totally unaware of how fast India was moving. We started cancelling out multilateral trade pacts which are by default dollar based, so that in future we can flip individual Free Trade Agreements when we want to move to any other currency. The RUPAY and UPI will certainly have a first mover advantage in the new world order based on a de-dollarised economy. The US printed trillions of dollars during Covid era and that bounced back as inflation to Americans instead of the world this time. This occurred partly because most nations including allies have stopped parking their excess funds in the US treasuries. The extreme capitalism of the West is now at a juncture of a global currency reset to solve the mountain of debts they have accumulated. US alone sits on a 31 trillion plus debt and has reached the stage where all erstwhile global powers lost their status—the point when debt servicing (interest expense) crosses defence spending. Extreme capitalism is now looking at extreme communism as a solution. The only way out now is to give in to full-scale communism to conduct a regulated collapse with a completely controlled currency regime.

Welcome to the World of Fully-Controlled Central Bank Digital Currency (CBDCs)!

What is being promised to jump out of the Paper currency? We are going to make your life easy & super convenient, and how!

• Bringing an electronic token-based currency to reduce the cost of transactions.
• Bringing an electronic token-based currency to speed up your transactions worldwide.
• Bringing an electronic token-based currency that will increase liquidity in a click. This will let us shut down needless costs of ATM services, Banks’ front desk operations clogging, credit-debit cards, private crypto manipulations and other payment methods.
• Bringing an electronic token-based currency which aligns the end user directly with the Central bank and reduces maintenance.

My Concerns about what this Communist money can actually turn out to be –

• Least Safe payment system of all: No country is dynamic and sophisticated enough to handle external cyber sabotages like say data theft or transaction theft.
• Least Inclusive of all: Very doubtful in terms of who could be sanctioned, who could be bailed out and what if the criminal history of someone causes problems to the account, transactions, money or reputation of an innocent user who transacted with him?
• Most prone to manipulations and governmental interventions: What is the future of the masses with a fully controlled currency usage that is tracked 24×7? Can some draconian actions be taken by some future government weaponising this format? Do note that Trudeau administration recently froze some bank accounts of protestors.
• How does it address transactions in areas with lack of electricity and internet?
• While zero interest rates are clarified already on these tokens. What if some government in the future does negative interest rates? Say for example, the salary deposited of Rs. 20,000 in the account is tweaked to Rs. 19,000 applying negative interest rates. At least in the paper currency, people weren’t losing the principal amount denominated on the note.
• Least Transparent of all: What if the currency is used to discriminate citizens or community?

Conclusion: The Path Forward for India

Sanatan Economics

An evolved Barter system with full Privacy and Control with the retail end users. This will make Corporate modest and cut the size of the State. It empowers the family and the individual.

• Retail Users: Paper currency pegged with commodities like gold and others. Individual citizens need to be made aware of the dangers of completely shifting to a digital currency and legislation should explicitly prohibit cancellation of paper currency at any time in the future.
• Wholesale and Inter-country Users: (sections of trade which need scrutiny and does not involve individuals or families or specific communities). Digital currency pegged with commodities like gold and silver.

Extreme Capitalism

It attacks family, community corpus and enterprises, while perpetrating toxic individualism and hyper consumerism. The control of the policy lies with the state, but users still have decent privacy in dealings with the physical possession of the currency notes.

Extreme Communism

It thrives on a bigger State concept to enforce forced equality of outcomes as an excuse for freebies. It attacks the wealth creators, family and the individual. The control lies with the state and the user has no privacy of his dealings.

Demonetisation by Communism

If the physical currency notes are completely removed, this currency format itself will become a tool to establish a communist government. Entry, exit, movement, access, supply and payment can be scrutinised and tampered for each individual. This can become the case of losing all individual sovereignty, human rights of the citizens and even national sovereignty in the worst-case scenario. Historically, extreme Capitalism has always managed to create scenarios for extreme Communism to thrive. The danger is real!

Author Brief Bio: Dr. Ankit Shah is a Fellow Chartered Accountant & a Qualified Company Secretary, and a keen observer of foreign policy & security for the Indian subcontinent. His predictions include many major geo-political events like Doklam, 370-35 A removal, LAC standoff, Balakot, Ukraine & Taiwan conflicts, the De-dollarization process, and so on. He introduces US hegemony as a Two Buckets Theory in his book – GEOPOLITICS – DECODING INTENTS, LIES, NARRATIVES AND FUTURE. He laid out a Chakravartin Bharat 2047 & its Sphere of Influence as a concluding chapter in another recently launched marvel. As a Geo-Economics observer, he is currently working on a Sanatan Economics Model to plug the gaps of Adam Smith’s Capitalism and Karl Marx’s Communism theories. He has served in IIM-Ahmedabad as an Academic & Research Associate.

Gaurie Dwivedi:

The Economic Survey survey projects a very positive outlook for the Indian economy, especially when viewed in the context of the headwinds which the global economy is facing. In one of your interviews you had stated that the economic survey is actually an annual economic story, so I begin by asking you: In your assessment, what is the India economic story for the next 12 months, 24 months or even beyond?

Anantha Nageswaran:

The next 12 months story is one of continued economic growth. The momentum  set in 2021-22, will continue this financial year. Soon after the Union Budget 2022-23 was presented last year, within a few weeks the conflict in Ukraine broke out and then over the next 4 to 5 months we witnessed commodity prices and oil prices shooting through the roof. But we navigated the impact of the war through government’s proactive supply measures, central bank hiking interest rates and by ensuring adequate supply of food and fuel inside the country. The estimate today is that we will grow at about 7% in real terms for the current financial year. That’s a very creditable achievement. The only country within G-20 that is going to grow faster than India is Saudi Arabia, which is largely the result of the oil boom. Over the next year, even though the international agencies project a slightly lower growth for India, it will still probably be the fastest growing economy.

India’s growth story, I think is about a steady recovery. We have got through the impact of the pandemic and the economy is steadily marching on. We did have a difficult second decade because the financial system, the banking system, overextended itself in the first decade of the millennium. We therefore had to do an adjustment and what I call digestion of the excess credit which the government and the corporate sector had created. The corporate sector had to reduce their balance sheet, sell assets, pay off debt, etc. All that is now behind us. Therefore, I expect the financial cycle and the capital investment cycle to be in our favour. What were headwinds in the last decade is going to turn into tailwinds in this decade. The second reason for my hope and optimism about the Indian economy is the digital transformation of the economy. This took place not just because of the pandemic, but because fortuitously, the building blocks had been put in place well before the pandemic struck. This is also going to propel growth in the country, drawing segments of the population which we had not hitherto included in the formal economy. So, it is the formalisation, financial inclusion facilitated by digitisation and the resumption of the credit and capital investment cycle, that is what will drive India’s growth not only in the next 12 months but 24 months and beyond as well.

Gaurie Dwivedi:

On growth projections, you have spoken off variations of course that typically happen between the finance ministry projections, the economic survey and projections by international agencies. You have also stated that these numbers give us a false sense of precision. But how far off could we be from these numbers and are there any reasons to worry for us to be off this track?

Anantha Nageswaran:

How far could we be from the numbers that we are projecting for 2023-24? That itself is a question which is difficult to forecast. So, forecasting how far off your forecast will be from reality is also as challenging as making the initial forecast. So, I would not venture into that, but I do give some clues as to where I see the balance of risks lies. When I picked the number of 6.5 % as real GDP growth for 2023-24, deliberately, I gave the range as 6 to 6.8. I  could have given the range as 6 to 7 on my baseline of 6.5, but I picked the range of 6 to 6.8, to indicate that the downside risk is higher than the number being exceeded. So, while 6.5 is my base case scenario, it could go all the way down to 6 on the lower side, but on the upper side it could only go up to 6.8. So, I’m adding only 0.3% to the upper end, but adding 0.5% on the lower end of the range, which kind of tells you that I still see challenges and those challenges stem primarily from the global environment. We have no idea of what will happen to the conflict in Ukraine and how that may impact on the price and supply of crude oil. Just last week we saw Russia deciding to cut the oil supply by 500,000 barrels per day! Also, we do not know the speed with which or the smoothness with which Chinese economy will reopen and what kind of demand it will create for commodities. Should the US and European economies avoid a complete economic recession, then it will also add to the demand for fuel, etcetera. Then we need to see how that will impact oil supply and oil prices. So much of the risk that India faces stems from external factors, and those uncertainties are still quite big. So, there are large number of unknown unknowns and that is why I feel while the baseline number is 6.5, I do see downside risk dominating the upside.

Gaurie Dwivedi:

Global factors do impact on the level of risks to the economy. Now, if China opens up faster, it grows faster. There will be, accordingly, major spike in commodity prices and so on and so forth. On the other hand, we are looking at probably the global economy reaching its lowest level in terms of growth rates,  especially when we view the European market. This will have a direct bearing on our exports and our economy. How do you see that panning out?

Anantha Nageswaran:

It’s a fair question. Obviously, whatever happens in the global economy, whether it is performing better than expected 3-4 months ago or performing worse than expected 3-4 months ago, both will have their own implications for India and those implications will be a mix of good and bad. Ultimately, we have to come to a judgment on balance, whether the good effects dominate the negative effects or vice versa. So, with that framework in mind, I can say that a global economic slowdown will, on balance, be more beneficial to India than a global economy that does better than what we expected a few months ago. And the reasons are yes, you are absolutely right, export growth will be impacted. But remember, India’s services sector growth in the developed world is mostly recession proof. Recently, a major IT company executive told me, based on empirical record over the last couple of decades that when the global advanced economies slow down, the demand for IT services from India comes from their need to tighten back-end operations and control costs. When their economies are doing well the need for India’s IT enabled services come from their front end wanting to expand their markets and so on. So, whichever way their economies are going, one or the other side of the company’s operations seem to be having the need to use Indian IT enabled services. That’s a good thing. So, services are reasonably recession proof. And we can verify that with the data as well. Exports of course will be hurt, but set against this, what are the benefits? Global oil demand will come down, imports will be lower, oil price will come down, the central banks in the developed world will stop raising interest rates and may even drop them. So the pressure on the US dollar to appreciate will be less intense, which will provide relief to many emerging economies and currencies, including India. Therefore, investors from developed countries whose economies are slowing will be looking for investment opportunities in countries like India which have a current account deficit. India’s need for  external financing thus becomes easier to obtain. So, you have these multiple benefits and against that there is a little bit of impact on goods exports. So, I would consider the positives outweighing the negatives of a global slowdown. That is why I will be somewhat relieved to see a world economy doing somewhat less better or somewhat worse than expected.

However, I must say that since the beginning of the year, the feeling is that the European economies have dodged the recession because the winter has been much warmer than expected and gas prices haven’t gone up to that extent. Also, the US economy, even with the most recent employment data, seems to be pretty strong. So, at the moment I would say the indications are that the global economy would be performing better than what we thought, let’s say in October 2022 when the IMF brought out its World Economic Outlook, but in January the World Economic Update that they provided was a tad better in terms of sentiments and China’s reopening and the speed with which the reopening happened was also completely unanticipated. So, we have to wait and see.

Gaurie Dwivedi:

So, China is like the X Factor in the equation right now, you know because how far it will grow, how fast it will grow, and also how much will there be, will impact globalisation sentiment. There may or may not be, alternate supply chains, and all of which,  of course, will have a direct bearing on the India story and the manufacturing side of it. How do you foresee India’s presence in these supply chains that are getting realigned? India’s manufacturing has been stuck at about 15 to 16 percent for decades. As the chief economic adviser how do you see these global scenarios pushing that upwards?

Anantha Nageswaran:

I think this global scenario does provide us an opportunity. I would say India’s industrialisation story is not a story of missed opportunities, but it is a story that is still waiting to unfold because I think we never really had the kind of infrastructure that facilitates this manufacturing growth. Now we have that. There is a certain critical mass, whether it is roads, railways, ports, telecom network, digitisation, I think we do have the building blocks that can facilitate a rapid growth in manufacturing. And also, the geopolitical environment is making many companies, even though they may not spell it out very clearly for various reasons, look for opportunities that India provides, both in scale and capacity. Foreign companies are definitely also going to countries like Vietnam, Bangladesh, Mexico etc. but all those countries, being relatively smaller compared to India, will have at some point, limitations in capacity creation, etc. India provides not just a large domestic market for these companies, but also the ability to set up manufacturing at scale. What India is therefore aiming to do is to create local manufacturing capacity at scale to be able to cater to domestic and overseas markets. And that, I think, is a story that can happen and will happen. The entire Production Linked Incentive (PLI) is geared towards making that happen and it is too premature to talk about its success or failure because many of those sectors under the PLI were opened up only in 2021. Therefore, you receive applications in 2022, take time to evaluate, and then you grant them the license approvals and then they go about setting up the capacity and then they start producing and then they start exporting. So, this is not something that’s going to happen at the speed with which one can write out a tweet. So, I think the PLI scheme, the national logistics policy and the PM Gatishakti program are all elements of India’s manufacturing becoming a force to reckon with in the economy, and I think it’s an important policy goal. I am confident that global conditions are also getting aligned with India’s goal for its own manufacturing.

Gaurie Dwivedi:

And how soon do you see this panning out? Today, some of the building blocks are in place, so infrastructure costs are now going down for companies and power supply too is more stable. What kind of an outlook do you foresee over the next 3 to 5 years.

Anantha Nageswaran:

I think in the next 3 to 5 years we will see the results of all these policy initiatives. Unfortunately, even as these policy initiatives were being rolled out, we faced shocks caused by the pandemic, followed by the commodity price shock and then the synchronised monetary policy tightening. So naturally, what happens is investors tend to become cautious. They want to re-evaluate in the light of higher cost of capital for them and then in the light of higher commodity prices. They have to factor in the risk element. Say, for example, a ship is blocked in the Suez Canal for two weeks! So, there are many risk elements that have to be factored in. So many of these exogenous factors are external developments of the last 12 to 24 or even longer months, which naturally makes investors cautious and a little bit slower in responding. That is why we sometimes feel a little bit frustrated and concerned that the results are not showing, but once these one off shocks slowly go out of the system, we will begin to see the results of the various policy initiatives meant to push India’s manufacturing share higher.

Gaurie Dwivedi:

As a policymaker, do you now think that the policy framework is nimble footed, and responding as fast as it can? It’s not cast in stone; it wants to attract investments and is responding to markets.

Anantha Nageswaran:

I think I would say yes to all of those questions, because the intent is very clear whether it is in public pronouncements or actual policy decisions. We have taken decisions to supplement and complement the PLI with the logistics policy ‘Gatishakti’, which enables government projects to be timely implemented without cost overruns and then a tax policy that allows lower tax rate for new manufacturing established within the country, which has now been extended to cooperatives as well. We had the reduction in the corporate tax rate in September 2019, that allowed the corporates to rebuild their financial health.  These are all part of the policy package and they’re acting in sync. So, there is quite a bit of clarity and sure footedness in terms of doing our best to achieve these aspirational goals and the creation of public infrastructure by the government when the private sector was still repairing its balance sheet and sort of getting back to good health. All of these things are quite clearly focused on the idea and aspiration of bringing India’s manufacturing onto the global stage and plugging India into the global supply chain networks.

Gaurie Dwivedi:

When we talk about aspiration, we talk about a 10 trillion-dollar economy. We understand that this  cannot be achieved overnight, but those are aspirations that most of India has. Do you share them and do you see us realising the same? Is there a path that you see for that?

Anantha Nageswaran:

At a personal level, I do not subscribe to this idea of these number-based GDP targets. They are placeholders, but media and several commentators are very focused on these numbers and they try to pin the government to the same. But we know that to achieve a particular level of GDP, it is not just the government policies or efforts or project implementation. It is a whole lot of factors well beyond our control, happening outside our borders that also matter. So, in fact, it is not just a philosophical statement in line with what the Lord said in Bhagavad Gita- “What is in your control is your efforts.” So, whatever we must do with the government sector, with the private sector, with households, we will do. But whether they result in a particular GDP outcome this year or next year, depends also on other factors which are beyond our control. But we must keep doing what we have to do. So that is my personal philosophy. But having said that, I think right now in March 2023, we are going to have a GDP level of about USD 3.5 trillion. And just to give you a sense of where we came from – In 1993, our GDP was only around 300 billion dollars and we’re talking about 3 .5 trillion dollars now—a tenfold increase in 30 years, in dollar terms. This indicates a growth rate of about 9.1- 9.2% per annum in dollar terms, despite the depreciation of the rupee from Rs 30 or 32 to the dollar in 1993 to about Rs 83 to the dollar as at present. So, we have achieved a 9 % annual growth rate in dollar terms. I, in fact, said in my post economic survey press conference interviews or even before that from a 3.5 trillion dollar economy in March 2023, to get to 7 trillion by 2030 March, a 7-year period, is possible because the rule of 72 tells you we need to grow at 10% per annum in dollar terms to get to that number. We have achieved 9% growth in the last 30 years on average and over the next seven years, we could actually see the dollar depreciating against the rupee, because interest rates in the developed world may not go up so much and their inflation rates are not going to be as low as before. So, in real terms their interest rates could be quite low or even negative. And that doesn’t make the case for a stronger dollar. So, in fact, if the Indian rupee rather than depreciating, if it were to appreciate, it will happen even faster. So, to talk about 7 trillion dollars by the end of the decade isn’t particularly outlandish.

Gaurie Dwivedi

Yes. That’s very positive and very good to hear. We have today, the largest population of young people. They need jobs, they need skills and we have to see that the demographic dividend materialises. This can only happen when we have growth engines. As we sort of wrap this conversation, Dr. Nageswaran, what are your concluding thoughts in terms of some of the important initiatives that the government is taking, whether it is in terms of free trade agreements that it is looking to ink, or coming up with newer ideas to look at fresh growth avenues? What do you see as areas as potential and growth inflection points?

Anantha Nageswaran:

The growth inflection, as I mentioned earlier to your first question I think is going to come from the resumption of the credit and capital investment cycle and the other inflection point for us has been the advancement in digital technology and digitisation of the Indian economy. But the free trade agreements that we are signing are going to help us with our energy security and energy transition and opening up markets for exporters, even though initially some of these free trade agreements may actually result in a widening of the trade deficit because we are going to lower our duties more than they do because we start from a high level of duties. And if you are a country with a trade deficit with the other country with whom you are signing an agreement, the country with the trade deficit will be the one that will give in more and therefore you will initially see imports coming in. But that should not discourage us because eventually you are creating a market, opening a market for India’s exporters. So, one of the important things I want to leave for you and your readers is, that we often think in terms of what the government should be doing when it comes to economic growth. But there is plenty that the private sector and households also have to do. I mean skilling and educating our youth is not just the government’s responsibility, it is also their own responsibility. And similarly, the private sector always looks for ease of living, lower taxes, infrastructure, etc. But they also have to invest in R&D and realise the importance of social stability for their own business stability and viability, and therefore they have to strike the right balance between labour and technology on their part, etc. And they have to pay micro and small and medium enterprises on time for the goods that they purchase. So, I think all three segments—the public sector, the private-corporate business sector and the households have to do their part to realise the economic dreams of every Indian.

Gaurie Dwivedi:

Absolutely. And that’s how we get to that Atmanirbhar and Amrit Kaal phase that everybody’s been the government has been talking about and is pushing. But thank you so much for this conversation, Dr. Nageswaran. It was important to highlight some of those aspects where the Indian economy is growing and we look forward to the next phase, as you said, 7 trillion and more, sooner than probably at the end of the decade.

India and China had been having cultural exchanges since several centuries in a relatively peaceful manner simply because Tibet stood in between these two civilisations as a buffer zone.  Tibet played the role of a catalyst in bringing about a synergy between the two ancient Asian societies. Despite its geographic proximity with China, Tibet had evolved its distinct identity even before its coming in contact with Buddhism. The Tibetan empire built under King Songtsen Gampo (604-650) brought about geostrategic transformations in terms of its equation with China.  The king sent a scholar named Thonmi Sambhota to India in the 7^th century CE in order to create a distinct script for the Tibetan language. The written language of Tibetan was constructed on the basis of Gupta script and the Sharda letterings (which is based on Brahmi script), that originated in India. With the advent of Buddhism in Tibet, its physical and spiritual contacts with India increased across the Himalayas. Historically speaking, since time immemorial, Tibet has been the immediate neighbour of India, maintaining an independent entity for centuries. In ancient times, China never ruled over Tibet.  In fact, in 763 CE, the Tibetan army under King Tri Songdetsen captured Chang’an (present-day Xi’an), the then capital of the Tang dynasty. Under the influence of Buddhism, Tibet transformed into a peaceful country, eventually becoming the purest repository of the Tantric Buddhist traditions. India maintained its contiguous borders with Tibet. China never shared its borders with India till Tibet stood obliterated from the world-map following the Chinese occupation of Tibet. Yet, India maintains its Indo-Tibetan Border Police (ITBP) force along the northern borders.

In the light of the recent developments in the sphere of India-China relations, one might ponder why the bilateral ties have suddenly reached the nadir.  However, as a Sinologist and a pragmatist, I have never been surprised to witness such a deterioration since there has never been an ideal neighbourliness between India and China ever since the Chinese Communist Party (CPC) came to usurp the seat of power in mainland China. Negating history and wilfully seeking to extend its so-called imperial legacy is what the CPC pursued all around its neighbourhood. Its outright dictatorial domestic conduct, no doubt, has been extended to the domain of international relations as well, right from 1949. On the contrary, any move to extend imperial legacy has never been initiated by India unlike China despite India’s deep cultural influence—both tangible and intangible heritage—having extended up to Central Asia including the present-day Xinjiang in China, and significantly throughout South-East Asia. The antithesis in myriads of facets, philosophies, worldview etc. between the two countries of India and China have created an impasse in terms of good neighbourliness.

India under Nehru was overzealous in setting up an “Asian solidarity” with the People’s Republic of China (PRC). Thus, India happened to be the first non-socialist country to establish diplomatic relations with the PRC on 01 April 1950.  By the end of that year, China invaded Tibet. Nehru meekly accepted China’s domination over Tibet.  The grand strategy of the CPC followed the age-old Han-Chinese stratagem of annexing the neighbouring regions of non-Chinese ethnicities. China has expanded its territories through centuries with mainly two objectives: One, to capture more resource-rich lands for their profit-oriented ventures towards generating wealth for China, and two, to build a buffer zone around the predominantly Han-Chinese habitats with non-Chinese territories in order to safeguard the Chinese population against any foreign aggression.

The CPC quite conveniently used its army, the so-called People’s Liberation Army (PLA) to dislodge the Tibetans from their own land and lay claim over all the regions that were considered having Tibetan cultural influence even along the Indo-Tibetan border. As the PLA had done in East Turkestan (renamed as Xinjiang), similarly, they moved this time to capture the world’s highest plateau—the Tibetan plateau— the source of all major rivers and water resources in Asia.  Thus, the PLA swiftly turned into a Perfidious Land-grab Army.

India, on the contrary, in its futile effort, repeatedly made mistakes by relying on China over myriads of agreements. The Indian consulates in Lhasa and Kashgar were closed down in early 1950s under hostile circumstances created by China. Yet, Nehru struck conciliatory posture and signed non-aggression pacts, including the Panchsheel, which China never followed in words or deeds. Indeed, it was India’s failure to secure for Tibet an honourable settlement in terms of sovereignty. Once the Indo-Tibetan border evaporated to become an illegal frontier between India and China, all the peaceful atmosphere across the Himalayas too vanished amidst an unending onslaught from China. Whether physical or cartographic aggression, China brandished brute force in order to extract maximum concessions from a submissive Indian side.

The CPC’s disdain for other countries was amply revealed in the daily propaganda of its mouthpiece, ‘People’s Daily’, since the very first day of its capturing power in China. The media focus was fully geared to portray China as the most ideal nation on earth while deliberately conducting a smearing campaign against all other countries.  It would be relevant to highlight in this context how historically China considered other ethnicities other than the Han-Chinese as barbarians. The non-Han Chinese ethnicities dwelling in the east of China were called Yi (夷).  They were often referred to as Eastern Barbarians, the non-Chinese tribe living around 2200 BCE.  The northern ethnic groups or the Northern Barbarians were called Di [pron. Tee] (狄).  The Southern Barbarians or savage tribes who lived along the southern fringes of China were called Man [pron. Maan] (蛮).  Ethnic groups in the northwestern regions of China, who were mainly from the Turkic culture, or from the Central Asian regions, were called Hu (胡). These were known as nomadic barbarians. Among the barbarians, an ethnic group of northeastern frontier of China, or those inhabiting the southeastern part of southern Mongolia were called Eastern Barbarians, or Donghu [pron. Tung-hu] (东胡).  The non-Chinese ‘man-eating barbarians’, called by the Chinese as aboriginal savage tribes, were named as Shengfan (生番).  One can fathom the degree of self-superiority complex of the Han-Chinese with their ostensible display of civilisational greatness. That complex is being carried on by the Chinese xenophobes and Sino-centric elements to this day even in their academic discourses. The ethnic minorities were time and again sought to be Sinicized and their culture and traditions were eventually assimilated by the Han-Chinese majority. The demographic composition of the non-Chinese regions have been deliberately altered by settling Han-Chinese and thus virtually obliterating the ethnic minorities in their own homeland, all in the name of ushering economic development but actually committing cultural genocide.

Winding the relations fast forward, we arrive at the doorstep of 1980s where we witness the economic reform drive in China under Deng Xiaoping. China embarked on becoming the factory of the world with its labor-intensive growth trajectory in order to capture the centre-stage of the global economy. It was quite evident as my personal observation during my higher studies in China would suggest, that China, through its cheap labor or, in many cases, unpaid labor enforced on prisoners in jail-cum-production units, captured the world market in an unprecedented manner. Then came the era of dumping China-manufactured products in various countries, especially in the Third World. Clearly, such mass dumping by the Chinese practically sought to destroy indigenous products and industry in many parts of the world. The deceitful practices of the Chinese were manifested through their proclaimed adherence to socialism but, on contrary, in their actual pursuance of hardcore capitalism, both internally and externally.  Material aggrandisement was adopted to subvert regimes in other countries, and thereafter install dictators with allegiance to Beijing. Such modus operandi was implemented with a certain degree of subtlety at least till 2012.

Mao Zedong, the founder of the People’s Republic, was excessively obsessive with an ultra-communist ideological brand, combining Marx, Lenin and Stalin. After his death in 1976, his successor Deng Xiaoping brought an end to the Maoist ideological obsession and advocated a theory, namely “Socialism with Chinese Characteristics” under which the CPC remained a Communist Party solely in name. Deng had literally discarded the Marxist theory in public life, and had rapidly expanded the role of the market in the Chinese domestic economy and embraced a foreign policy that maximised China’s participation in a global economic order led by the USA. The CPC, in fact, reinvented itself in the mould of capitalism in order to stay relevant for the sake of remaining in power, and also for abiding with time to extract all the benefits from the liberal world but strike back at an opportune moment. However, practically, CPC could never abandon its genetically feudal mindset embedded in its “civilisational baggage of sanctimonious hypocrisy”. Despite being an ideological opponent, the US-led western world, in its penchant for building an anti-Soviet bloc in the East, kept nurturing and pampering the CPC in its vain hope of turning China into a free society like the West.

Then came the era of Xi Jinping as the president of the PRC. The era of pragmatism, non-ideological governance came to a crashing halt as Xi echoed his diktats that the country might be steering back to its Maoist ideological moorings.  Today, Xi controls the party as its General Secretary, the state as its President, and the armed forces as the Chairman of the Central Military Commission. The military strategic culture of China started showing its ugly face under Xi Jinping’s wild ambition of establishing himself as the new Hegemonic Emperor of the world through his pet projects of “One Belt, One Road”, “Belt and Road Initiative”, or even the illegal “China-Pakistan Economic Corridor”. China continued resorting to its hidden agenda of enticement and creating debt-traps in the greater part of the world. Sinister designs were invented to internally weaken the countries that did not fall into its trap. China’s ever-increasing hunger in terms of exploiting natural resources in every part of the world has enhanced the danger of catastrophes not only on Earth but also in the outer space.

Xi Jinping uses his covert scheme of “Chinese victimhood” and claims avenging Western injustice and prejudices down the line in history. His using the ‘victim card’ arose from his own experiences as a son of a Communist apparatchik, especially during the ‘Cultural Revolution’. In fact, within the CPC, after having ascended the highest echelons of power, Xi is actually playing the victimhood card by developing a negative view of life — both internally and externally. Xi used his “anti-corruption” drive against top leaders, both within the government hierarchy and also outside the public sector, in order to capture the imagination of the common Chinese. He abolished the presidential term limits and incorporated a powerful new agency called the National Supervisory Commission into the Chinese constitution, and used this tool to persecute all those whom he perceived as his political adversaries. He appointed himself as the life-time emperor of China, virtually setting the clock of history upside down. One would recall how Yuan Shikai had become the self-proclaimed emperor of China, though briefly, after the foundation of the Republic in 1912. Sun Yat-sen might have repented having trusted Yuan.

Probably Hu Jintao too might have regretted about why he had chosen Xi Jinping as his successor. At the closing ceremony of the 20^th Party Congress of the CPC held in October 2022, Hu Jintao was unceremoniously dragged out of the hall. Xi was apprehensive that Hu might abstain from voting for Xi’s continuation in power before the media. Premier Li Keqiang, being the protégé of Hu Jintao, was ousted from the Politburo. The announcement about the new Politburo came just after Hu was taken out of the hall. Xi took no probable risk of facing an agitated Hu who could have expressed annoyance at Li’s exclusion. Instead of promoting greater balance and openness within the party, Xi completely undermined the past conventions. He instilled distrust within the party, the state and even within the officers of the armed forces. The whole country is under surveillance through highly sophisticated systems of monitoring each and every person’s movements and whereabouts by intruding into one’s private life.

Following more or less in the footsteps of Mao Zedong, Xi enshrined “Xi Jinping Thoughts” in the Constitution, in the school curriculum, and even in other walks of life with impunity by virtue of his unbridled power. Deng Xiaoping worked to a great extent in order to tune China up with the pace of the world in the post-Mao era. But Xi scrapped those positive factors and brought China once again, and probably more virulently, in a mode of direct confrontation with the rest of the world. One might be interested to know about Xi’s zodiac sign. He was born in 1953, the year of the Snake. It is believed that men of Snake Year combine lofty ideals and inherent strength of action, enabling them to reach the pinnacle of their careers. Their shortcomings lie in their character. They are stubborn, not listening to people’s persuasion, suspicious in character, keeping words in heart and not confiding to others, and are complete hedonists.

By the end of 2019, Xi Jinping unleashed a clandestine biological war across the globe. Of course, the initial connivance came from the USA but later it turned out to be a game changer against the western world. All the theories going around the Wuhan virus laboratory leakage, or the accidental spilling of virus in a wet-market in Wuhan, would eventually be proven deliberate fabrications. The actual blueprint of the global pandemic was drawn several years ago after Xi’s coming to power.  The preliminary ploy was to liquidate the old-age population within China and thereby save financial resources that could have otherwise been expended in pension. Thus, Wuhan became the ‘Experimentation Lab’.  Later, the lethal viruses of the bio-war was deliberately planted far beyond the borders of China, thus bringing death in almost every part of the world.  The secret document referred by me in my earlier article indicates that the export of virus was primarily aimed at annihilating the Whites in the West. Around the same time, when the pandemic raged across the globe, Xi unleashed an entire bunch of Wolf Warriors all over the world to deal with other countries. Wolf Warrior Diplomacy is a style of coercive diplomacy adopted by Chinese diplomats under the Xi Jinping administration. It is an assertive diplomatic tactic that goes as far as insulting or threatening those deemed to violate “China’s interests”. Xi made use of this tactic in asserting China’s unjustified claims over the entire South China Sea or the Indo-Pacific region.  Creating and militarising artificial islands, and capturing of shoals, or even naming the illegally occupied isles in the ocean, have been a part of Xi’s coercive methods of fabricating a Chinese narrative of supremacy and an “ancestral inheritance” of the high seas.

Amidst the Covid pandemic, Xi Jinping preferred to destroy the India-China relations completely with his aggressively expansionist manoeuvres along the border. Starting right from the communist takeover of China, through various developments of events across seven decades, it is quite apparent that Communist China has never been a friend of India at any point of time in history. China’s increasing adherence to the abhorred policy of “Might is Right” has brought disrepute to China and its self-proclaimed ‘civilisational superiority’. China’s stubborn imposition of its decisions on other countries in the name of preserving its national interests has been witnessed in its usurping the liberal policies in other countries but never conceding anything in return to others within its own jurisdiction. Ludicrously, this is what China terms as “win-win” policy.  Nibbling at the borders of India, and initiating the salami-slicing tactics even at the height of pandemic displays the viciously malicious intents of Xi’s China.

The Galwan Valley incident with bloodshed on 15 June 2020 was preplanned by the perfidious land-grab Army of China. It was a blood sacrifice offered by the PLA on the birthday of Xi Jinping. The official rhetoric from China kept blaring against India ever since the PLA had unilaterally changed the status quo of exercising control over the areas of domination along the India-China frontier.  As a China-watcher, I had already foreseen the violent clashes a week prior to the incident. Greater crudity by ordinary citizens of China was manifested after the unfortunate assassination of the former Japanese premier Shinzo Abe in July 2022, when they celebrated his death. The Chinese, in multifarious ways, also ridiculed India when, during the first few waves of the pandemic, several funeral pyres were seen burning on the ghats of Varanasi. But Indians never derided China for the recent cataclysm brought about due to the sudden relaxation of lockdown in China.  This is the civilisational difference between India and China.

Xi Jinping’s weakness was reflected through his excessive lockdown policy imposed upon the ordinary citizens across the country in the name of reaching a Zero-Covid level for entire China. He wanted to root out any challenge to his absolute power and authority. China’s hardline Covid-19 strategy stoked public frustration, with growing pain around snap lockdowns, lengthy quarantines and mass testing campaigns. Exercising Zero-Covid excesses restricted the public movement outside their home, and thus neutralised any possibility of a popular uprising.  Xi made the system completely opaque, and thus inaccessible to both his countrymen and the world beyond. The excessive measures adopted against the commoners in China gave rise to public resentment against China’s authoritarianism, and steered the protests ultimately against Xi.  Right in the heart of the capital city of Beijing, big banners were displayed with slogans — (1) Say no to Covid test, yes to food.  (2) No to lockdown, yes to freedom.  (3) No to lies, yes to dignity.  (4) No to Cultural Revolution, yes to reform.  (5) No to great leader, yes to vote.  (6)  Don’t be a slave, be a citizen.  (7) Remove dictator and national traitor Xi Jinping. Lastly, it was inscribed—“Our generation loves freedom.

Similar situation arose in Shanghai and Beijing in 1986 during my student days in China. That was the precursor of the students’ protest which culminated with the Tiananmen Square Massacre on 4 June 1989. In those days, the common citizens and even a portion of the press were in support of the students’ movement. Their demand for democracy and greater freedom was dubbed as a foreign interference. Then, Deng Xiaoping was the paramount leader. Tanks were brought onto the streets of Beijing. The exact figure of casualty still remains a state secret.  Quite analogous to the rolling of battle tanks against its own citizens, this time around July 2022, during the height of pandemic, large-scale protests erupted in many parts of China. Amid a massive bank scam, bank depositors protested against the official decision that impeded them from withdrawing their own money. They demanded the release of frozen funds. Displaying its utter insensitivity, the government rolled out battle tanks to scare the people.  Millions of people were summarily terminated from their posts during the pandemic, thus giving rise to unemployment in China.

Communist China has been brutal in handling dissidence across the globe. Very recently, countries woke up to the unpleasant fact that China has been blatantly violating international law by secretly sending their police to at least twenty-five cities in twenty-one countries—setting up more than fifty illegal police stations across five continents to monitor, threaten and terrorise Chinese nationals living overseas. China’s illegal deployment of police with covert global network has been operating on foreign soil, primarily in Europe. The clandestine operation by the Chinese police involves physical and mental torture of dissidents outside China, and even forcing them to return to China to face criminal proceedings through a well-coordinated surreptitious network of locating, pressurising, blackmailing, and silencing by making reference of bringing harm to their relatives back in China.  This is China’s underground overseas police force conducting “long-arm policing and transnational repression.” The Chinese government seeks to control its diaspora through illegal methods such as intimidation, harassment, detention or imprisonment of suspects and their families back in China. Their children are even deprived of education as part of a “guilt by association” campaign. The handling of the Uighurs, Kazaks, and other ethnic minorities in East Turkestan (Xinjiang) has been equally ruthless. Massive violations of human rights, including clandestine business in human organs, have been reported. Yet the western world as well as the Islamic world remain mute spectators just because the Chinese state overtly fills their coffers. Hypocrisy of the recipient countries is glaring.

The diabolic features of Xi Jinping’s regime have been manifested in multifarious forms. China’s unrelenting ambition of becoming a global superpower by dislodging the USA and turning the world into a unipolar one has pushed humanity to the brink of an impending Yellow Peril that also underlines rampant exploitation of natural resources globally for the sake of China’s embellishment. Xi Jinping’s malignant and malevolent approach towards relationship with the world, based on sheer muscle and money power is being loathed by most people the world over except some corrupt power-hungry politicians and dictators. Taiwan, which has never been a territory under the CPC, is being threatened with forcible occupation by the communist warmongers of the mainland China.

An unprecedented scale of weaponisation of various countries is taking place, following China’s hegemonic expansionism and the consequential response from countries far and near. The USA that nourished and armed the Chinese dictators since the 1970s, is suddenly finding itself vulnerable in the face of China’s ever-increasing military might and giant leaps in technological innovations. Unprecedented changes in the global climate pattern has resulted from excessive exploitation of natural resources and wanton denudation of forests, thereby bringing ecological destruction and an overall imbalance in the weather-changing patterns. All such occurrences underscore selfish policies, protectionism and rampant corruption. Fast depletion of energy and subterranean water resources, and exhaustion of financial resources, coupled with rapid draining of human patience are dangerous indicators for a catastrophic future of our global village. Untimely occurrence of torrential rain-causing flash floods, melting of glacier at an alarming rate, resulting in the rise in sea level, endanger the entire biosphere. Due to global interdependence, no nation can thrive for long at the cost of the rest of the world.

A series of antithesis characterises a rather unpleasant coexistence of India and China as neighbours. Across the Himalayan heights, lie the diametrically opposite worldviews or antithetical philosophies of India and China. The Indic philosophy believes in inclusivity, and thus professes the values embedded in Vasudhaiva Kutumbakam (the World is one Family). On the contrary, the Chinese philosophy is all about exclusivity, and thus advocates the concept of Middle Kingdom (中国) that is “ordained to receive tributes” from the world far and wide, and is “mandated by Heaven” to establish Chinese supremacy in the global arena.  Hence the coinage of the Chinese phrase “天下第一” which means “Number One in the World” — thereby reflecting the Chinese aspiration for a worldwide domination. Unlike the Indic worldview of a peaceful coexistence of cultures, the Sinocentric view of the world aggressively seeks to project China’s civilizational superiority and Sino-supremacist outlook that is potentially destructive. To my analysis, the Indic faith is sāttvik (सात्त्विक), whereas the Chinese faith is tāmasik (तामसिक).  Correspondingly, India epitomizes Yang (阳), and China symbolizes Yin (阴). With such realities, howsoever unpleasant and with everlasting contradictions, we must learn to live like incompatible neighbours.

Author Brief Bio: Prof. Priyadarśī Mukherji is Professor in Chinese & Sinological Studies, JNU, New Delhi.

At the southernmost corner of the Japanese archipelago in the East China Sea, a cluster of uninhabited small islands is currently a frontline of what might turn into a new hotbed of potential conflict. This group of islands, named “Senkaku” in Japanese and called “Diaoyu” by China consists of five islets and three rock formations with a total cover area of 7 square kilometres located at about equal distance of 170 km from Taiwan and the closest Japanese island in Okinawa Prefecture, and 330 km. from the mainland China. The Islands are currently under Japanese administration, though their sovereignty is contested by both China and Taiwan. This tiny string of islands lies close to significant oil and gas deposits, strategic shipping lanes and rich fishing grounds.

On the issue of sovereignty, Japan holds that the Senkaku Islands are under its valid control and in light of historical facts and based on international law are clearly an integral part of its territory. From 1885, the Government of Japan initiated the surveys of the Senkaku Islands and on 14 January 1895 installed a sovereignty marker and formally incorporated the islands into Japanese territory. In 1932, the Japanese Government revised the status of four islands from state-owned to privately-owned land and sold them to a Japanese family. After World War II and under the 1951 San Francisco Treaty, Japan renounced all its claims to Korea, Formosa (Taiwan), the Pescadores, and the Spratly Islands in the South China Sea. In 1953 the United States was granted formal administrative rights on Okinawa in accordance with Article 3 of the San Francisco Treaty. An important feature of that arrangement was that the United States recognised Japanese “residual sovereignty” over the islands, meaning that at a future date all sovereign powers obtained by the United States were to be returned to Japan. The Senkaku Islands are not explicitly mentioned in the treaty, though there was a tacit understanding that Japan will administer them as a part of Okinawa Prefecture. The Senkaku islands under U.S. trusteeship were returned to Japan in 1971 in compliance with the Okinawa reversion deal. In 1968 Japan began enforcing its Air Defense Identification Zone (ADIZ) on the area covering the Senkuku islands. An ADIZ is a defined area extending beyond national territory in which unidentified aircrafts are liable to be interrogated and, if necessary, intercepted for identification before they cross into sovereign airspace.

In contrast to China’s claims to the South China Sea (the so called ‘nine-dash line’) that was formalised back in 1947, the first official statement of the Chinese Ministry of Foreign Affairs disputing the title over the Senkuku/Diaoyu islands in the East China Sea was issued on 30 December 1971. China claims that the islands have been part of its territory since ancient times, serving as important fishing grounds administered by the province of Taiwan. According to Beijing, ancient Chinese records dating back to the Ming Dynasty era (1368-1644) mention the islands, while more recent documentation indicates that the islands were incorporated into the Ming and Qing dynasties (1644-1911) maritime defence. Beijing further argues that Taiwan was ceded to Japan vide the Treaty of Shimonoseki in 1895 after the Sino-Japanese war and with Taiwan’s return as of implementation of the Treaty of San Francisco, all islands associated with it should have been returned too.

The other claimant, Taiwan (officially Republic of China or R.O.C.) maintains that the islands it refers to as “Diaoyutai” form an inherent territory of Taiwan based on the islands’ geographical location, geological structure, historical evidence, usage, and international law. However, Taiwan’s position is complicated by the fact that the R.O.C. retreated to Taiwan in 1949 and the People’s Republic of China (P.R.C.) was established in the mainland in the same year and has maintained a strict “one China” policy asserting that Taiwan is a part of China, and by the fact that neither the R.O.C. nor the P.R.C. were parties to the 1951 San Francisco Peace Treaty. Although Taiwan and China have made similar claims owing to their shared history, Taiwan has chosen to make its own claims and to pursue a different diplomatic initiative in the face of geopolitical realities as well as the overall interactions with Japan in view of the fact that Tokyo does not officially recognise Taiwan as a sovereign state.

Japan and China normalised their relations in 1972 and concluded their “Peace and Friendship Treaty” in 1978. In the course of the related negotiations, Japan raised the issue of the Senkaku Islands but in the end both parties decided to unofficially shelve the issue so as to avoid negative effect on the otherwise successful outcome of their talks. The Chinese side apparently was keen to avoid raising issues that might have hindered or otherwise put at risk the outcome of bilateral negotiations. China’s policy under Deng Xiaoping (1978-1992), was said to be aimed at deferring the dispute and to seek joint exploitation of the area’s natural resources with Japan.

China and Japan also disagree on application of the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which both nations have ratified. Article 57 of the convention defines the limitation of exclusive economic zones (EEZs), which are permissible up to 200 nautical miles from the baseline, or to the median line if claims from opposing coasts overlap. Meanwhile, UNCLOS’s Article 76 defines the extended continental shelf, permissible to the shorter of the end of the continental shelf or 350 nautical miles from the baseline. Japan, based on UNCLOS proposes the Median line division of the EEZ. China instead insists on the application of UNCLOS, considering the natural prolongation of its continental shelf and its extension as far as the “Okinawa Trough” and beyond 200 nautical miles from the baselines from which the breadth of the territorial sea of China is measured. Thus, the conflicting claims overlap in approximately 81,000 square miles of water.

The dispute between China and Japan reignited into open in September 2012 when the Japanese government announced it was finalising the purchase of three of the contested islands from the private Japanese owner. The move sparked widespread protests in China and counter protests in Japan. The Chinese foreign ministry issued a statement criticising the Japanese Government’s decision to nationalise the islands, on the grounds that this has “altered the status quo” and affected China’s “inalienable rights” over the islands. Since then, Beijing has taken legal and operational measures to strengthen its own hand, and Chinese maritime surveillance vessels, trawlers and investigation boats have regularly sailed in and out of what Japan considers to be its territorial waters around the islands while the Japanese coast guard is used to escorting Chinese ships inside the island’s territorial waters. China’s increased naval presence around the Senkaku Islands appears to be a further attempt to demonstrate that Beijing has a degree of ‘administrative control’ over the islets challenging Japan’s de facto administration. Beijing is taking similar steps to bolster additional sovereignty claims in the South China Sea, as it clearly desires to rise as a greater maritime power.

On 23 November 2013, China announced the creation of a new ADIZ in the East China Sea waters facing its coastline overlapping the already enforced Japanese ADIZ. Japan demanded the revocation of the Chinese ADIZ, while the United States declared that it would ignore the zone and refused to comply with any Chinese regulations involving it. Most third countries criticised the Chinese move and expressed their concern about any potential restrictive reading of customary international laws. Noteworthy was that Washington has also refrained from taking a clear position on Chinese legal claims to the Islands, but has stressed on a number of occasions over the years that since the Senkaku Islands are under the administration of Japan, they are ipso facto covered by the 1960 US-Japan Treaty of Mutual Cooperation and Security. The European Union has so far preferred to take a cautious approach and has not expressed its explicit views on the sovereignty of the contested islands. On 25 September 2012 the then E.U. High Representative Catherine Ashton called on all parties to calm the situation in East Asia’s maritime areas, using the UN Convention on the Law of the Sea (UNCLOS) and other international rules to resolve disputes.

The island issue highlights the more assertive conduct China has undertaken to eventuate its territorial claims in both the East China Sea and the South China Sea. The issue raises serious questions about sustainable regional security as the Chinese military is fast modernising amid the Obama administration’s 2012 “Pivot to East Asia” regional strategy and the increasingly unresilient American posture vis-à-vis Beijing further cemented by President Joe Biden’s first phone call to Prime Minister Suga of Japan reiterating Washington’s stance of “unwavering commitment to the defence of Japan” that covers the Senkaku islands too.

While the dispute has turned into the most significant geopolitical boiling point and locus of security competition between China and Japan, forcing both sides to lodge regular diplomatic protests, the two countries have so far preferred to handle the situation with utmost care and to avoid measures that could turn the dispute into a hot conflict. Tokyo, with better standing in legal and logical arguments, does not seem to be eager to stir up differences with its biggest trading partner while China, in the face of the many other territorial disputes at its immediate and extended neighbourhood, and also the current tough diplomatic and trade battle with the U.S., does not wish to pick an extra challenge with another power, at least, for the time being. The stalled Ukraine war and Russia’s unexpected poor performance in military, diplomatic, economic and public opinion fronts that has compromised Moscow’s superpower status, alongside the evident unified resolve of the west to counter major adversaries might have left their impact on the mindset of Chinese leaders with the result of a more cautious Chinese pursuit of risky territorial claims in a transforming global environment.

Author Brief Bio: Hossein Ebrahim Khani is Senior Fellow at the Institute of Political and International Studies (IPIS), Tehran, Iran.

India’s rise to a USD 10 trillion economy within the next 10 to 15 years has been often spoken off with a great deal of optimism by economists in India and abroad. Now, a recent report by a London-based consultancy, Centre for Economics and Business Research (CEBR), has also reiterated the same. In its report published in December 2022, CEBR states that at a time when the world is moving into recession, India’s growth rate over the next decade will average 6.5 percent, propelling India into the USD 10 trillion bracket by 2035 and to third position in global rankings. But there was a cautionary note too. Political factors, the report stated, could hold India back.^[1]

It is however, not just political factors which we need to be concerned about. There are social and economic factors too, which could spoil the India growth story. India’s rise as an economic power is not something which India’s adversaries are taking kindly to. On the contrary, they are doing all in their power to stymie India’s growth story. Some western countries too, with whom India shares good relations, are also averse to the idea of an economically strong India which is also moving towards self-sufficiency in advanced technology. They see in a growing India, a potential threat to their economic interests. These countries too, would like to see an India which is perpetually dependent on them—an India which perforce plays second fiddle to Western interests.

That of course, is not how the story will play out. Leaving aside a black swan event, India’s growth story can, at the worst be delayed, not denied. But both India’s adversaries as also some who are India’s friends, have been exploiting internal fault lines within India, to muddy the waters of India’s rise. Opposition to India’s rise has come in the political, social and economic domain and while India has faced up to these challenges stoically over the last few years, the coming years will, in all likelihood, see a renewed effort on the part of both internal and external agencies to create trouble and fissures within Indian society.

There was consternation in many capitals across the world when the NDA government was sworn in, in 2014, as they felt that the leverage they enjoyed with earlier governments would not be available. On that score they were right. That led to a series of events, orchestrated from within the country, but with huge funds supplied from abroad, to showcase India as an intolerant country. That is why we saw protests erupt in the country, on various issues, but timed for effect, to peak in January, when the eyes of the world would be on India’s Republic Day celebrations. These protests ranged in the social sphere from allegations of human rights abuses to intolerance towards religious minorities. In the economic domain, we witnessed protests against Sterlite Copper, the Kundankulam nuclear power plant, the Narmada Dam and many others. In the political domain, there were protests against the farm laws and the Uniform Civil Code, which were used to disrupt normal life.

It is likely that some of the protesting groups had genuine concerns about certain government policies. In a vibrant democracy such as exists in India, expressing an alternate point of view is a part of the democratic process. But the methods used to express discontent were uncalled for. It became apparent that the protests were designed to create anarchy and fissures in society through disruption and violence. Many areas were blockaded for months on end in an attempt to shut down parts of the country, but it redounds to the wisdom and maturity of the Indian masses that they did not fall prey to such disruptive tactics and the nation emerged stronger and more united, with a focus on growth. Indeed, since 2014, we have had major reforms in the Indian polity, foremost among them being the Goods and Services Tax (GST) and the revocation of the special status given to Jammu and Kashmir through Article 370.

GST unified the country economically, by making provisions for a single tax on the supply of goods and services, right from the manufacturer to the consumer. With its implementation, a variety of earlier indirect taxes, including the value-added tax, service tax, purchase tax, excise duty, and others were done away with, making it easier for business entities. The apprehensions expressed by some who opposed the GST have been blown away by the successful implementation of this transformative economic reform. Throughout the current financial year, GST collections have been in excess of Rs 1.4 lakh crore, despite the fact that the Indian economy as well as the world economy was badly impacted by the Covid pandemic in 2020 and 2021. The revocation of the Special Status given to the state of Jammu and Kashmir under Article 370 and the bifurcation of the state into two union territories, Ladakh and Jammu and Kashmir, was perhaps the most important legislation passed since independence. The move was bitterly opposed by certain political groups, but the events on the ground since then have thrown up for the first time, the possibility of peace in the Union Territory of Jammu and Kashmir after over three decades of violence and bloodshed. These and many other reforms such as the abolition of instant triple talaq were vigorously opposed by certain interest groups, but were the need of the hour.

But many more important legislations are required, to truly reflect a vibrant, secular and democratic India. As we enter 2023, we need to anticipate the opposition that the reforms process will generate in certain quarters and through positive narrative building, prevent disruptive elements within society to hold the country to ransom. Reforms are required on many sensitive issues such as the Waqf Act, which was first passed by Parliament in 1954 and which was subsequently repealed, only to be replaced by a new Waqf Act in 1995 which gave it extraordinary powers, not in consonance with the Indian Constitution. Other issues pertain to the control of many Hindu temples by the government, which is against the very concept of a secular state. Protecting the rights of Muslim women needs reform on issues such as polygamy, wearing of hijab, the practise of nikah halala as also of equal rights in inheritance. This will have to be undertaken through the legislative process as it will not be forthcoming from within Muslim society and will find resonance when the issue of adopting a Uniform Civil Code comes up.

With the general elections due in the first half of 2024, there will be attempts made to oppose political, social and economic reforms in the year ahead. How these issues are handled will define the nature of Indian polity over the coming decade and will determine how soon India achieves its ambition of becoming a USD 10 trillion economy.

Author Brief Bio: Major General Dhruv C Katoch is Director, India Foundation and Editor, India Foundation Journal.

References:

^[1] https://economictimes.indiatimes.com/news/economy/policy/india-to-become-10-trillion-economy-by-2035-cebr/articleshow/96526283.cms

Introduction

Article 44 presents the idea of a Uniform Civil Code applicable within India. However, a lack of effort to produce an all-encompassing code is witnessed on part of the State. The vast diversity of the country’s demographic renders this topic precarious and extremely sensitive.

The main reason such a mammoth exercise has not yet been undertaken is perhaps due to the absence of conducive strategies which can be utilized to accomplish this statutory instrument. With this paper, the authors recommend three strategies for the implementation of the Uniform Civil Code, a necessary mechanism and one standardised in most developed countries around the world.

Supreme Court’s stand on Uniform Civil Code

The Supreme Court has repeatedly highlighted the importance of a Uniform Civil Code.  Beginning from 1985, the then Chief Justice Y.V. Chandrachud in the Shah Bano Begum^[1] case spoke of how a common civil code will promote national integration by “removing disparate loyalties to laws which have conflicting ideologies”. In the 1995 case of Sarla Mudgal vs Union of India^[2], Justice Kuldip Singh held that securing a uniform civil code throughout India is an “unequivocal mandate” under Article 44 of the Constitution.

Advancing to 2017, Justice Kehar and the present Chief Justice of India, Justice Chandrachud rejected a PIL filed by a Catholic advocate who wanted divorce granted by Church Courts to be deemed legally valid. The Court held that despite Christian marriages being solemnised as per the ‘canon law’ or Christian Personal Law, when it came to divorce-related matters, only that which is granted by courts under the Indian Constitution and the Indian Divorce Act of 1869, is legally valid. Such personal laws have no place in the country if they interfere with the basic tenets of the Indian Constitution. Therefore, the application of an array of different personal laws for communities has been condemned by the Supreme Court.

The need for a Uniform Civil Code is realised repeatedly as the Courts spend judicial time adjudicating, essentially what is the same issue with a different face. Whether it be the right of women in joint family property or the triple talaq – all could have been dealt with fastidiously with one uniform statutory mechanism.

The Controversy Surrounding the Uniform Civil Code

The idea of the application of one common statutory mechanism for personal law throughout the country has various controversies attached to it. This is because governance under the ambit of personal laws is closely linked with the fundamental right to freedom of religion. The Constituent Assembly debates exemplify this tension. One group pressed for the ‘fundamental right to personal law’. An opposing group led by Dr B.R. Ambedkar was staunchly against it. They wanted UCC to be enshrined as a fundamental right. A consensus could not be established and for this reason, the Constituent Committee set the duty of formulating a UCC on the State. A similar incoherence exists today – more than 70 years later.

India, within it, contains much diversity, and people. Transforming laws, bearing in mind the diverse religious communities is a delicate topic to brush upon.  The criticisms of the UCC are that it is detrimental to the pluralist ethos of the nation. That it is not possible to reconcile divergent laws and formulate a uniform statutory code that will be accepted by all communities. Precedence exists of various minorities having the right to govern their personal matters, as an extension of freedom to practise their religion guaranteed by Article 25 of the Indian Constitution.

An extension of the above argument is the failure of the UCC to consider the plight of Scheduled Tribes. Scheduled Tribes roughly comprise 8.6% of the total Indian Population. Tribes based in areas such as the Northeast, Jharkhand, Lakshadweep, etc follow their own customary laws.^[3] These customary laws are unique so with the advent of a prospective UCC – the sentiments of communities will be further marginalised.

However, it can be asserted confidently that personal laws are not based on gender equality. Personal laws perpetuate gender discrimination and sex inequality. Yet, every time this perspective is highlighted – extreme disdain is reciprocated along with the accusation of religious discrimination or even discrimination against minorities. Practices like female genital mutilation, polygamy, and exclusion from inheritance– all squarely showcase the deep-rooted gender bias prevalent in all personal laws. Giving protection as envisaged in Narasu^[4] to these laws, unequivocally limits constitutional guarantees.

Three Strategies towards a Uniform Civil Code

1. Codification

Codification is the process of compiling, arranging, and systematising the laws of a given jurisdiction, or of a discrete branch of the law, into an ordered code^[5]. It regulates without contradiction, exclusively and completely the whole of the law or at least a comprehensive part of it. It is meant to be lasting, comprehensive, and concluding, thereby leaving no scope in adjudication for shaping the law^[6].

A dynamic strategy to implement the UCC – is simply to codify a strictly uniform statutory mechanism like any other codified law – like the Indian Penal Code. The intent behind this is to demarcate the boundaries upon which the UCC can govern and lay jurisprudence on.

A comparative study of the personal laws of different religions will show that the sheer diversity of these laws, zealously adhered to, will not allow any uniformity.  It is the author’s argument that this perspective must be changed – it should not be the case that the law caters to all the sentiments of the community but rather that the practices of the community are valid by virtue of the basic code given. The Uniform Civil Code must act as a sieve allowing only those practices and customs to pass which are constitutionally viable. They must pass the scrutiny of Constitutional tenets.

We cannot expect a secular judiciary to adjudicate upon matters through the eyes of religion, given the task of codifying the vast personal laws, and their regional variances. Every citizen of India must be seen as a citizen first, who has certain rights that arise from the Constitution, and not from personal laws.

Often, when advocating for a Uniform Civil Code, the State of Goa is often referenced. After liberation from the Portuguese in 1961, Goa continued with the Portuguese Civil Code, 1867. It survives in accordance with Section 5 of the Goa, Daman and Diu (Administration) Act, 1962.

However, this parallel might not be as appropriate as within the Portuguese Code itself there exist exceptions for Catholics, and Hindus and Muslims are both covered by the Code and Shastric Hindu Laws. Even though, the case of Goa cannot be applied identically, the authors suggest it can be used as a guiding light to initiate the task of formulating a Uniform Civil Code.

2. De-codification

In 1781, regulations prescribed that both the Hindu and Muslim communities will be governed by their ‘personal’ law in matters relating to inheritance, marriage, religious usage and institutions. The colonial government was not equipped to consider the orally transmitted customary law of villages, castes, and religions. Instead, it relied on classic textual law and its commentaries interpreted by local priests. These priests were not aware of each region’s local practices as every community had its customary laws which were followed by all members regardless of creed.

When personal law Acts were formulated, such as The Hindu Marriage Act and the Divorce Act or the Sharia Act, what occurred was the codification of religious laws. Customary laws were neglected. Even within Hinduism, there are different kinds of customary personal laws specific to groups like Mitakshara, Dayabhaga, Marumakkathayam etc. Therefore, what we witness is the imposition of religious laws of one view over the entirety of members of the religion, in complete disregard of their own customs. These imposed laws are completely alien to people and infringe on their right to practise their long-held customs. Therefore, personal laws are not in consonance with the sentiments and age-old practices of communities as this discrepancy still exists.

After the adoption of the Constitution, secular judges continued to resolve questions relating to the family by relying on religious doctrines. The 1951 landmark judgment of the Bombay High Court, The State of Bombay vs Narasu Appa Mali^[7] lays down the extent to which personal laws can be subjected to fundamental rights. The ratio decidendi of this judgment was that personal laws are not subject to fundamental rights as personal laws are not ‘laws in force’ under the meaning of Article 13(1) of the Indian Constitution. Hence, personal laws cannot be struck down as being violative of fundamental rights.

A subtle critique of the rationale in Narasu can be seen in the judgment of Sabrimala Temple case^[8] wherein Justice Chandrachud under the heading of ‘The Ghost of Narasu’ addressed this issue and its limitation. This limitation is the condition to “public order, morality and health”. It is our view that Narasu Appa Mali needs to be re-looked at and the protection afforded by Narasu to personal law from fundamental rights should be discarded.

Even in the Constitutional text, Article 25(2) empowers the State to make laws to regulate or restrict any “economic, financial or secular activity” associated with religion. Considering this, the authors suggest removing the protection extended by Narasu to personal laws and a gradual de-codification of them.

3. Common Charter of Rights/Obligations

The Supreme Court has taken a cautious approach to decide cases of religious contention. There is a ‘case-by-case’ approach instead of a universal stance. On 22^nd August 2017, the Supreme Court passed landmark judgment^[9] holding Talaq-e-Biddat, or triple talaq, as unconstitutional. Triple talaq has been contentious since the Shah Bano case, involving a woman who was divorced using this practice. In this case, the Supreme Court held that the Criminal Procedure Code was a non-religious law and hence applied to all religions. By virtue of this ratio decidendi, the divorced 62-year-old woman was granted maintenance. This case displays the power the Supreme Court has to nullify the laws which are in violation of fundamental rights guarantees under Part III of the Indian Constitution.

It is the authors’ argument that instead of a case-to-case approach, the legislature can simply formulate a ‘Charter of Rights and Obligations’ in Personal Law, not far from the Fundamental Rights, which are set in stone and cannot be changed, as a prequel to then formulating and applying the UCC.

In place of a perfect all-encompassing UCC, a start can be made with the less contentious issue of a charter empowering women and obliterating discrimination against them.  A slow gradual change in policies will not cause upheaval and will be easier for the various communities to accept.

Conclusion

The constitutional imperative of equality applies to all citizens, irrespective of their status or gender. Therefore, the Uniform Civil Code is a key tool in the national integration of the country with which equality can truly be attained in form of gender justice, and security when it comes to marital issues, inheritance and so forth. The authors suggest any of the three aforementioned strategies may be used to attain the goal of a uniform statutory mechanism governing personal laws, however, they acknowledge that Strategies I and II may seem controversial presently. Therefore, they recommend Strategy III i.e. promulgating a ‘Charter of Rights/Obligations’. It is a pragmatic method which avoids the controversy of assailing customs and instead protects them.  Therefore, it can be used efficaciously to bridge the gap between constitutional mandates of equality and equity in the current societal-religious and traditional structure of India.

Author Brief Bio: 𝗠𝗿. 𝗩𝗶𝗸𝗿𝗮𝗺𝗷𝗶𝘁 𝗕𝗮𝗻𝗲𝗿𝗷𝗲𝗲 is a 𝗦𝗲𝗻𝗶𝗼𝗿 𝗔𝗱𝘃𝗼𝗰𝗮𝘁𝗲, 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 𝗼𝗳 𝗜𝗻𝗱𝗶𝗮 and Additional Solicitor General of India and Janhvi Prakash is an Advocate.  

References:

^[1]  [(1985) 2 SCC 556 : 1985 SCC (Cri) 245 : AIR 1985 SC 945]

^[2] [1995] 3 SCC 635

^[3] As clamour for UCC rises, here’s what you need to know about uniform civil code, India Today (2022), https://www.indiatoday.in/india/story/uniform-civil-code-in-india-ucc-bjp-muslim-hindu-personal-law-marriage-act-1942830-2022-04-28 (last visited Dec 2, 2022).

^[4] The State of Bombay vs Narasu Appa Mali-  AIR 1952 Bom 84

^[5] BLACK’S LAW DICTIONARY 252 (7th ed. 1999)

^[6] FRIEDRICH KOBLER UBER DIE PRAKTISCHEN AUFGABEN ZEITGEMABER PRIVATRECHTSTHEORIE31 (1975). 47. KARST

^[7] AIR 1952 Bom 84

^[8] Indian Young Lawyers Assn v. State of Kerala, (2019) 11 SCC 1

^[9] Shayara Bano v. Union of India, (2017) 9 SCC 1

Introduction 

Currently, within the existing legal framework, there exists no uniform family-related law in a single statutory book for all Indians that is acceptable to all religious communities in India. The Uniform Civil Code (UCC) is an aspiration in that direction. It refers to a common civil law bringing a myriad of complex provisions of family laws under a single system. The Constitutional expression “We the People of India” in its dynamic unity integrally includes a national plurality of the people of India cutting across race, religion, caste. All its citizens need to seek a favourable solution that desiderates harmony and accommodative religious pluralism seeking a balance between right to religion and right to justice. The UCC reaffirms a commitment to a cardinal principle of equal rights in the legal sphere for all communities alike. Justice is the cornerstone that counts.

It is not simply one of minority protection but one of treating each human being with the equality and dignity safeguarding the foundational principle justice that is the Constitutional right of every Indian citizen. The UCC is in the best interest of religions. It does not negate religious sentiments but regressive dogmas that are not in consonance with harmony, justice, equity and good conscience.

In view of a fast-changing world, particularly after the post-partition period, drawing together as a global village, with science & technology expanding with lightning speed, new evolving circumstances in the crucial socio-economic sector have demanded a fresh balancing perspective in various fields, including the legal field. Family, as an integral part of society, needs a similar channelling. Though the exact outlines of such a code are yet to be spelled out, progressive modern aspects from all existing personal laws will need consideration while disregarding those that are regressive. Reform and the formulation of secular laws and the autonomy of communities need not be exclusive processes. One need not threaten the other. Consensus is part of the democratic process. Deliberations for the implementation of a UCC is a crucial step forward. 

Uniform Civil Code (UCC) 

Besieging the Indian political scenario for several decades, the history of the UCC has been ridden with polemics and controversy. Time has not blunted the edge of this debate. The very term is severely contested within the realm of identity and electoral politics as well as the range of interest among feminist groups and activists engaged in social change. To grapple with its complexities in its current context, the predominantly distressing factor is the shrinking area of democratic standards and secular space leading to a sharp divide in opinions in an increasingly communalised national context.

The quest towards a UCC serves as a testing point of the true nature of our democracy. Impressively written into Part IV Article 44 of the Indian Constitution as a Directive Principle of State Policy, its aim to achieve a far-reaching equality for all Indians alike in the realm of civil and personal laws as initially conceptualised by the makers of the Constitution, has simply remained a distant dream. Mired with ferocious debates fuelled with the cataclysm of religious angst, this vision of our founding fathers still remains an aspiration.

It was in 1947 that the idea of a Uniform Civil Code was seriously discussed in the Constituent Assembly. A committee formed for the fundamental rights held the proposal for the Uniform Civil Code to be part of the Directive Principles of State. Thus, Article 44 of the Constitution says that: “the state shall endeavour to secure for the citizens a uniform civil code throughout the territory of India”.

Although Article 37 of the Constitution itself makes clear, that the Directive Principles “shall not be enforceable by any court,” they are, nonetheless, “fundamental in the governance of the country”. A compelling task in post-modern India is the conscious navigation for the required positive change a for a better future. Over the years various directions have been issued by the Apex Court for its implementation. Besides bringing a labyrinth of segregated laws that govern and regulate subjects on areas of a private sphere or family law such as marriage, divorce, maintenance, succession, minority, and guardianship, etc under one umbrella, the objective of this law is to ensure that all human relationships and needs are non-differentiated.

In a democracy, welfare as well as the conceptualisation of social justice are inseparable constituents. Hence, in this debate, the lens of political parties, the clergy, feminists, the state and judiciary should crucially focus and strategise on this neglected long standing issue. Political representatives, often taking shelter behind “safer strategies tend to lessen this prodigious reality. Many of India’s citizens support reformist agenda for reforms. Particularly, feminist movements, within all communities challenge discrimination at all levels. Autonomous women’s groups in India have consistently raised demands for a UCC, staunchly contesting patriarchal, misogynistic attitudes.

During the pre-independence colonial era, the Lex Loci report of October 1840 emphasised the need and necessity of uniformity in the codification of Indian law, particularly in the areas of crimes, proof, and contract. Hence, over a period of time, laws like the criminal, civil laws having a direct bearing on human relationships fruitfully evolved gaining due recognition without a storm. However, as the Proclamation of the Queen of 1859 pledging complete non-interference in religious affairs, personal laws maintained status quo.^[1] Although distinguished leaders like Jawaharlal Nehru and Dr. B.R. Ambedkar campaigned for a standard civil code during the Constitution’s development, but due to religious sensitivities, and perhaps a lack of public understanding at the time, the Uniform Civil Code was not codified, but was only included in the Directive Principles of State Policy (DPSP, Article 44).

After the first post-colonial agenda envisaging legal uniformity in criminal laws was established, the elusive question of the methodology to be employed in skilfully using an altered harmonised model of uniformity of family laws as a viable option that could be turned into the official legal reality in India today, has been fiercely argued, especially by clerics. If, in the introduction of criminal laws, no religious leader insisted on retaining particular religious laws whereby all citizens use these laws equally, what interest would be served to differentiate the applicability of a common personal law to all Indian citizens without obscuration?

Unfortunately, misunderstandings accompanied by misinformation regarding the objectives as well as the implementation regarding the Uniform Civil Code abound. Some Muslims see this as part of an onslaught of Hindu domination over minorities. In view of the recent controversies and the silence emanating from the top leadership on these controversies, minorities insecurities intensify. Nevertheless, the points of consideration are several. Signs of a modern progressive nation—a nation moving away from caste and religious politics with a provision of equal status to all citizens, promotion of gender parity and national integration will bring every Indian, regardless of caste, religion, tribe or ethnicity, under one law. This, besides halting vote bank politics indulged in during every election, will take India forward towards its goal of transformation and development.

While viewing personal laws in the Indian context, it must be stated that it is not Muslim personal laws only, that are in need of urgent reform in several areas besides those relating to gender equity. All communities are structured in a manner where male supremacy dominates within the family and outside. There can be variations in degrees of patriarchy or gender discrimination, but there is little doubt that in the overall context, women’s relegation reinforces itself, generally leaving little space for egalitarianism. A survey conducted by the Census authorities in 1961 on polygamy reveal this fact.^[2]

Muslim Personal Law in the Indian Context

Those from the Muslim community contesting the enactment of a UCC, argue that as the source of personal laws are religion based, their fundamental right to religion under the Constitution are violated. Hence, implementing of UCC would be in contravention to Articles 14, 25, 29 and 30 that permit them the practice and propagation of their religion. However, the valid question here would be whether the practice of the triple talaq may be considered within the purview of religious activity despite the fact that it is not sanctioned by the primary religious text of the Quran?

The existence of the reprehensible instantaneous,”sinful” Talak-i-bidat, a remanent of the customary patriarchal and misogynistic practice of pre-Islamic Arabia, an innovative, heretical irrevocable form of divorce as its name suggests, whereby the husband was given the unwarranted right of a pronouncement of the word talaq thrice in one sitting making the divorce irrevocable was duly practised.

Further, in the expression “Muhammadan law” itself with its variations of spelling, popularly used to describe “Shariah Law” in India, was popularly given currency in India by the British regime. The law is therefore sometimes referred to as the Anglo-Muhammadan Law. “The British rulers in India did, in the exercise of its legislative powers, curtail the scope of Islamic laws in this country. Within the scope of those portions of Islamic Law which survived this process of gradual curtailment, their legislative contribution, however, remained negligible”^[3] Moreover, a critical examination the contours of “Muhammadan Law” as practised in India, establishes the need to move away from the stereotypical colonial interpretations of Islam, reaffirms the vast possibilities of rights of Muslim women otherwise denied to them as a consequence of patriarchal interpretations.

Perhaps the most controversial of these challenges was the well-known case of ‘Shah Bano’ and the ensuing chaos that led to the passing of the Bill entitled “The Muslim Women (Protection of Rights on Divorce Act)”^[4] that overruled the judgement. It was the Supreme Court that came to the rescue of Muslim women through its decision in the Danial Latifi case.^[5] More recently, in ‘Shayara Bano’,^[6] the Supreme Court once again restored our faith in the ideals of equality and justice that it seeks to uphold by abolishing the highly contentious provision of talaq-e-bidat, paving the way for the Muslim Women (Protection Of Rights On Divorce) Bill, 2019, that criminalises the practice.^[7]

The other argument forwarded by the Muslim minorities is that the enactment for the UCC must come from within the community. However, as the above instances demonstrate, every opportunity at their disposal was lost to codify the personal law and re-establish the justice given to them by the religion. Such implementation was ultimately left to the secular courts. Most Muslim personal laws yet remain uncodified and traditional in their content and approach. This is so despite the fact that over the years, several countries with a Muslim majority population like Turkey, Cyprus, Tunisia, Algeria, Pakistan (orthodox and conservative), Bangladesh, Malaysia, Indonesia, Jordon, Egypt, Iran, Iraq, Brunei, the UAE, Indonesia, Libya, Sudan, Lebanon, Saudi Arabia, Morocco and others either outlawed it, declared it illegal or used legal instruments and devices to bring about strictures in laws to reform it. In India, it remained a static practised law with no effort on the part of Muslims towards reform.

The contrasting responses to the Shah Bano and the Sharaya Bano case encapsulated the evolution of Indian society and polity seen in the past three decades. The verdict of the Court underlined the changing social and political dynamics in India that enabled a group of Muslim women to successfully overcome the conformist elements within the community. The liberal intelligentsia and even the sceptics and cynics supported the cause of gender justice.

Khula

Again, with reference to Khula, the recent landmark judgment of the division bench of the Kerala High Court of Justice Muhamed Mustaque and Justice C.S Dias, ruled that Islamic law recognises a Muslim woman’s right to demand termination of a marriage (Khula). “A Muslim woman has the absolute right to terminate her marriage at will and does not need her husband’s consent for it, while dismissing a review petition filed by a man challenging the divorce granted to his wife, under the Dissolution of Muslim Marriages Act,1939. “We declared that the right to terminate the marriage at the instance of a Muslim wife is an absolute right, conferred on her by the holy Quran and is not subject to the acceptance or the will of her husband,” said the division bench of Justice A. Muhamed Mustaque and C.D. Dias, of the Kerala High Court.^[8] The court noted that Muslim women have the extra-judicial option of calling off the marriage “unilaterally” and went on to observe that the husband’s petition against the divorce was not “innocuous” and appeared to have been filed at the behest of “Muslim clergies and hegemonic masculinity”.

This judgment of the Kerala High Court is precisely celebrated for resurrecting the authentic position under Muslim Law reiterating the legal position that is holding the ground since more than 1400 years on the Muslim woman’s right to obtain divorce without Court’s intervention. In perfect consonance with Islam where the famous examples of Jamila and Bariah whose marriages were dissolved by the Prophet at their instance, in spite of the fact that the husbands of both were anxious to continue the marital tie bears testimony to this fact. The right of the wife to initiate the proceeding cannot be denied.^[9] Muslims did not again seize the golden opportunity offered to effect transformation.

The greatest progress in law reform has been achieved by governments who stood firm, despite hostility of the clergy. Women achieved something approximating legal equality with men under the forceful leadership of the charismatic nationalist leaders like Kemal Ataturk (in Turkey in the 1920s) and Habib Bourguiba (in Tunisia in the 1950s), under the Shah of Iran in the 1960s, and in the Marxist states of the Peoples’ Democratic Republic of South Yemen and Somalia in the 1970s.^[10]

Polygyny

It is crucial to state that polygamy in Islam is a restrictive rather than a permissive ordinance. Evidence for this is apparent in the only Quranic verse dealing with polygamy which occurs only in connection with the protection and rights of orphans in Sura Nisa (4:3). Its restrictive intention regarding the subject is underpinned in 4:129 “You are never able to be fair and just as between women, even if it your ardent desire.” The legislation introduced in the Quran on this aspect was a great improvement over unlimited polygamy and accepted sexual mores, thus clearing the way for monogamy. Its revelation occurred during the battle of Uhud when destitution and hardship left women in a vulnerable position, subject to manipulation and exploitation.

Turkey was the first to introduce reform of family laws, issuing the Ottoman Law of Family Rights (Qanun al Huquq qarar al-‘Â’ilah al-‘Usmâniyyah—a Civil Law) in 1917. It was the first Muslim-majority country to legally ban polygyny in 1926. This decision was not based on religious reasons, but rather was an entirely secular ban deeming modern day socio-economic conditions for polygamy as “unrealisable”.^[11],^[12]

Tunisia was the next country to ban polygyny through legislation passed in 1956 and restated in 1964. Unlike Turkey, Tunisia banned polygyny on religious grounds, citing two main reasons. First, the Quran limited the practice of polygyny, thus it did not support the practice and clearly intended for the practice to be eliminated over time (4:3). Second, the Quran demands equal treatment of all wives in a polygynous marriage, which was deemed impossible, thus making the practice illegal and punishable by law (4:129).^[13]

Several other countries introduced strict laws to regulate and restrict polygamy. Algeria’s considerably amended Code de la Famille (Family Code) and Morocco’s new Moudawana (Family Law) (Articles 40-46) have both introduced greater regulation, extremely strict in the case of Morocco. Egypt (1920; Sudan (1929); Algeria (2005); Jordan (1951); Syria (1953) Morocco (1958); Pakistan 1961; Iraq (1959); Iran (1967, 1975); Kuwait, Lebanon, Bangladesh, 1971. Noel Coulson; Doreen Hinchcliffe (1978).^[14] New or amended family codes are awaiting formal introduction in some francophone West African countries (Benin, Guinea, Mali, Niger).^[15]

In India, voices for the demand to outlaw polygamy are rising. Inundated with a sense of misery, gloom, a lack dignity, deprivation, self-respect such a demand is increasing. Despite the trauma and suffering Muslim women undergo in India, despite their pleas, Muslim Personal Laws on polygamy yet retain this practice remaining uncodified and traditional in their content and approach. A study released by Bhartiya Muslim Mahila Andolan (BMMA) revealed “nearly 300 women were interviewed, among which 84 per cent of wives said that polygamy should be outlawed.”^{[16] [17]}

Conclusion

Undoubtedly, the task of actually devising a set of rules that will govern all communities in family law, is both formidable as well as cumbersome, both in view of the legal procedure as well as vast range of interests and sentiments involved. Considering the complexities involved, including compiling and envisaging a comprehensive variegated range of interests to be addressed including minority fears of the imposition of majority’s preferences to override their interests, the task is challenging. It should be noted however, that democracies and developed countries like USA, Canada, Australia, UK, Russia, Turkey and others have adopted the Uniform Civil Code to eliminate discrimination amongst the communities. The status of a Uniform Civil Code is a guarantee of equal rights, regardless of caste, creed and colour, and is essential to prohibit discrimination based on creed or religious persuasion.

The Goa model needs special mention, especially in the light of the Supreme Court Judgement where the court praised the State’s unique position of being the only province with Uniform Civil Code, albeit its concession. While mentioning the fact off its being the only state to where verbal divorce and polygamy cannot be practised, it likewise highlighted the Governments failure of fulfilling the expectations of our Founding Fathers.

Notwithstanding the plethora of challenges, it must also be duly recognised that reform or formulation of a Uniform Civil Code can no longer be skimmed over by avaricious dialectics. The denial of discussion, dialogue and debate towards attainment of goals and legal dictums halt advancement and progress, and can be counter-productive. Strategies can be formulated through the democratic process of consultation and consensus. The undertaking needs to be pursued with consistency and vigour.

To become a legal reality, the mandate of the State accompanied by high-minded statesmen and legal experts, to promulgate laws with a creative vision, diminishing disparity, affirming cohesion with social sensitivity, and with a visualisation of fusion and plurality, both in the majority community and the minority communities, can be constructively generated. Since it involves a change in laws, an obvious prerequisite is sufficient support for the move within Parliament.

Postponement or delay getting caught up in dispute and strife is an old tactic. It will stake the vision, the perspective, the aspiration for social change. In our struggle for implementation of equality, cognisance of justice, incapacitating gender discrimination, rectification, and reform are the key. One might wonder, for how long the citizens of this country will have to bear the law’s delay and the apathy of political offices, in failing to secure for them the ideals of our own Constitution. The possible way is for the Courts to urge the Government for its implementation.

Author Brief Bio: Zeenat Shaukat Ali is the Director General, Wisdom Foundation (World Institute of Islamic Studies for Dialogue, Non-violence, Gender Justice and Peace).

References:

^[1] Muslim and Hindu personal laws be left out of such codification; The Proclamation of the Queen of 1859 pledged complete non-interference in religious affairs.

^[2] The incidence of polygamous marriages was highest among Tribal communities 15.25%; Buddhists 7.97%, Jains 6.72%, Hindus 5.8%, Muslims 5.7%. Scroll In ; “It may be allowed by Muslim personal law, but the incidence rate is not that high,” said Ritu Menon, a feminist publisher and independent scholar, who worked on the subject as co-author of the book Unequal Citizens: A Study of Muslim Women in India. “This is true particularly in relation to Hindus, but across all communities, polygamy is not that common. Bigamy, on the other hand, is fairly common and that’s true across religions.” Monday, December 19th 2022.

^[3] Dr. Tahir Mahmood, “The Muslim Law of India” Law Book Company, Allahabad, U.P. 1980; Dr. Tahir Mahmood is a former member of the Law Commission and ex-Chairman, National Commission for Minorities.

^[4] Mohd. Ahmed Khan v. Shah Bano Begum and Ors, AIR 1985 SC 94 Muslim Women (Protection of Rights on Divorce) Act, 1986 hereinafter written as the Act.

^[5] Danial Latifi & Anr v. Union of India (2001) 7 SCC 740

^[6] Shayara Bano v. Union of India, (2017) 9 SCC 1.S.4,

^[7] “Any pronouncement of talaq by a Muslim husband upon his wife, by words, either spoken or written or in electronic form or in any other manner whatsoever, shall be void and illegal;– Any Muslim husband who pronounces talaq upon his wife shall be punished with imprisonment for a term which may extend to three years, and shall also be liable to fine.”

^[8] The offence is recognized as cognizable i.e., the arrest can be made without a warrant on a report of the same by the wife. Shaukat Ali, Zeenat; ‘The Empowerment of Women in Islam; 1997, Simon and Feffer; pp 336-338

^[9] ‘Khula absolute, not subject to husband’s will’ — Kerala HC on Muslim woman’s right to divorce, Story by Rewati Karan •The Print,  3 Nov 2022

^[10] Ann Elizabeth Mayer; “Law and Women in the Middle East” Women in a Changing World; February 17^th 2010.

^[11] Tahir Mahmood, Family Law Reform in the Muslim World (Bombay: N. M. TRIPATHI PVT. LTD,1972), p. 17

^[12] Muslim Countries introduced reform in family law by means of regulations and legal instruments through the application of a number of legal devices like ijtehad, (creative reinterpretation); maslahah mursalah (public interest); tadwin (codification); tashri (legislation; mudawwanat al-aḥwāl al-ousaria-shakhṣiyyah (personal status code); qanun (statute); marsum (ordinance); manshur (publications); qarar (ruling, regulation)

^[13] DYNAMICS OF TUNISIAN POLYGAMY LAW IN GENDER PERSPECTIVE Ayyus Sahidatul Chusnayaini Fakultas Syari’ah UIN Maulana Malik Ibrahim Malang; Tunisian Family Laws, British Embassy Tunis.

^[14] Noel Coulson; Doreen Hinchcliffe (1978). Louis Beck and Nikki Keddie (ed.). Women in the Muslim World. Cambridge, Massachusetts: Harvard University Press. p. 40.

^[15] Kusha, Hamid R. “Polygyny”. The Oxford Encyclopedia of the Modern Islamic World. Oxford Islamic Studies Online.

^[16] Mirror Now, 84% Muslim women want polygamy outlawed, says study curated by: Aditya Paul Mumbai: Updated Dec 22, 2022 | A nationwide study released by Bhartiya Muslim Mahila Andolan (BMMA) on Tuesday revealed that being in a polygamous marriage causes enormous emotional trauma to the woman. During the research, nearly 300 women were interviewed, among which 84 per cent of wives said that polygamy should be outlawed. The questionnaires were distributed to women in polygamous marriages in West Bengal, Uttar Pradesh, Odisha, Telangana, Tamil Nadu, Karnataka, Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Delhi.

^[17] Protect Our Dignity, Ban Polygamy, Say Indian Muslim Women to PM; Cited a national research by BMMA which claims that out of 4710 Muslim women from 10 states, 92.1 percent women want a complete ban on oral divorce while 91.7 percent are opposed to polygamy. THE QUINT; Updated: 28 Nov 2015, 6:36 PM IST

Introduction

The term waqf (plural auqaf) originates from the Arabic term Waqafa meaning therefore to detain or hold or tie up. The Waqf Act 1995 defines Waqf as “the permanent dedication by a person professing Islam, of any movable or immovable property for any purpose recognised by the Muslim law as pious, religious or charitable…”.^[1] It refers to a class of assets—land, building, tenancies, cash etc and not merely Muslim religious structures like mosques and dargahs. In India, a large bureaucratic scaffolding has been erected around the protection, preservation and expansion of waqfs. In Part-I of this work, I argue that the same is not necessary from the point of view of law, as the secular law of trusts is enough to deliver the outcomes that waqf are meant to deliver. In part-II, I take a historic look at the institution and argue that waqf in India have been used as an enabler of proselytisation, and the centralised and theocratically waqf management structure of medieval era has actually set a template that Islamist groups have demanded in independent India and obtained through the Waqf Acts. In part-III, I look into how waqf laws have developed and argue that it is procedurally inadequate, a refuge for Islamist politics and tends to create social conflict. The work ends with my recommendations and conclusions.

PART-I 

THE CONCEPT OF WAQF IS LEGALLY REDUNDANT BUT USEFUL FOR IDENTITY POLITICS

  There are three kinds of waqfs understood^[2] by Indian law namely

• Waqf by user: Where any land or building or any portion thereof has been used permanently for any religious or pious purpose, with the concurrence or knowledge of the owner, then it will be treated as waqf by user.
• Waqf Mashrut-ul Khidmat: It is a public waqf where the wa’kifs (i.e creator of waqf) has devoted the property for the general benefit of the Muslim community and means a grant stipulated for rendering services.
• Waqf al-al-aulad: A waqf created for the wa’kifs family and children.

Waqfs can be created only for a pious purpose consistent with the Shariat.^[3] The essential features of waqf are perpetuity, irrevocability and inalienability.^[4] There is no formality requirement for setting up a waqf (like say creating a document, registration etc).^[5] The dedication of a given property as waqf need not even be express, it can simply be set up through user or reputation.^[6] Once it has been declared as waqf, it is vested with Allah (the Islamic deity) forever. Other communities in India do not have anything quite analogous to the waqf.

Conceptually, waqf can be seen as a form of a trust, with some differences. First, waqf is fundamentally faith based; there is no waqf outside a sharia sanctioned activity unlike a trust. The waqf presuppose an Islamic regime with a Qazi enforcing it; because unlike the trustee under s. 16, 20, 36 and 40 of the Indian Trusts Act 1882, the mutawalli have very limited powers similar to receivers under the CPC.^[7] Second, unlike trusts which are not necessarily irrevocable or perpetual, these are essential characteristics of a waqf. Third, unlike trusts, especially public charitable trusts, there is no requirement of certainty (i.e. disclose a specific charitable intention). The amounts can be distributed using the doctrine of cy-pres.^[8]

The most important difference perhaps is that the law of trusts is enforced by the civil courts^[9] and have extensive substantive and procedural protections for the trustees, beneficiaries and innocent third parties. There are special provisions under s.92 & 93 of CPC for public trusts that can apply to a Muslim religious trust as well. The best way to see this from the point of view of a layman would be that waqf is a form of preto-trust, that essentially resides in a world of Dar al Islam^[10] where the overwhelming theological benefit of the waqf overrides any other proprietary and social concern that may arise. The common law of trusts on the other hand since its canon law / equity law past^[11] has travelled far, to become a truly fair, secular all weather doctrine, that strives to reconcile different kinds of social and political interests.

Notwithstanding the differences, the entire set of objectives of waqf can be served through the law of trusts and other secular laws.^[12] The civil court is sufficient to decide the disputes and the Waqf Tribunal, strictly speaking is not really necessary either. The existence of a separate law of waqf can only be attributed to historical Muslim identity politics and Islamist demands. In the next two parts I identify how this state of affair came to be and where does it stand now.

PART-II

THE DARK COLOURS OF THE WAQF IN INDIAN HISTORY

I can presume that the purpose of the original creators of waqf was benign. But in India and globally, the institution has acted as an enabler to Islamic imperialism, proselytisation and appropriation of other denominational sites.

During the entire Sultanate and Mughal periods, both the sovereign and private individuals created waqfs^[13]. Throughout this time period, waqf management displayed a centralised and theocratic form of management. At the grassroots level, the waqfs were managed by mutawallis supervised by the Qazis, and in the later Mughal period by a religious office called Sadr-as -Sudur.^[14] The system was centralised insofar as the chain of supervision went up from the Qazis all the way to the Sultan (in Sultanate) and the Padshah (during Mughal rule).

The ranks of the Qazis and Sadr were taken usually from the Ullama (i.e Islamic clergy and scholars). The applicable law and the sitting judge were both committed to the Shariah and not to secular sense of fairness. Thus, in effect, these courts would have displayed an enormous prejudgment bias^[15], regardless of the character and personal integrity of the judge. If a non-Muslim would plead proprietary or other interest in a property sought to be declared a waqf, the Qazi would balance the public policy imperative of waqf as a measure to spread of Islamic ideology, against the limited rights available to the dhimmi^[16], and would have to decide in favour of the former. This logic would have operated with special force when the waqf land in question belonged to a former temple or religious establishment.

Another significant aspect of waqf in pre- British India was the close connection of this institution with proselytisation and religious and cultural appropriation. At the heart of this 700-year long proselytisation drive were the Sufis. There is an enormous literature on this theme, starting with Thomas Arnold’s portrayal of Sufis as Islamic “missionaries” among non-Muslims.^[17] Later, revisionist historians have sought to dilute Arnold’s hard truth in favour of soft narratives. So Muzaffar Alam argues^[18] that from 12^th century onwards, Sufi orders (silsilas) began to expand, encouraging and promoting many beliefs held in common by Hindus and Muslims. Alam goes on to say that though some Sufis were puritanical and tyrannical, their general sense of moderation persuaded many Hindus to convert to Islam. Richard Eaton (an Islamophile and revisionist) calls this process “accretion and reform” whereby the Sufi saints would appropriate Hindu/local customs and nominally convert the population to Islam. Thereafter, later reform processes in Islam would convince them of the essential unity of Islam and they would become firmly integrated in the Muslim Ummah^[19].

The Sufis worked as a network of Pirs/Murshids and disciples (Murids or Shagrids) who together formed a silsilah or tradition^[20]. These Sufi networks were sustained through a special kind of waqf called wajh-i-ma’ash, which is a part of allowance for subsistence. Sometimes, certain Sufis were granted entire villages with some plots of uncultivated land (read forested land) with stipulation to bring it under plough.^[21] Richard Eaton explains this process beautifully.^[22] While taking the example of Chittagong and Sylhet, he shows that the spread of Islam in these areas were led by charismatic Muslim Pirs, who cleared the jungles and established Muslim settler societies, that would overwhelm the demographically sparse indigenous population (animist, Hindu or Buddhist), and slowly impose Islam. These settler societies lay the local mosque and the local congregation is supported by generous land grants.^[23] The land grants were mostly in form of waqf.^[24] Thus, waqf provided the multi-generational finance, necessary to the Sufi order to convert the Indians.

There is a tradition of demolition and conversion of other denominational sites in a waqf, globally. The Ka’ba^[25] and Al-Aqsa Mosque in Jerusalem^[26] are the most famous examples of this phenomenon. This process is subsumed in historical silence in this country. What was the prior legal status of the lands granted in waqf, in Sultanate and Mughal period? Richard Eaton sidesteps this question, as if the lands granted were terra nullis^[27], just because they were forested. The most probable situation is that tribal communities, local Hindu peasant farmers and in some cases Hindu or Buddhist religious institutions had rival claims over these lands, which were suppressed by the Ulama dominated Qazis and local officials; only to be forgotten and denied later. Even now, claims to Hindu sites are made under the aegis of the waqfs. Such claims were made inter-alia in Ayodha Case^[28] and in the Gyanvapi dispute^[29]. Such claims were even made against national monuments^[30]. The enactment of the Places of Worship (Special Provisions) Act 1991 has further enabled these aggressive claims. Even when the legal logic is weak, the idea of a property “belonging to Allah, perpetual and inalienable”, provide strong emotional and polemical force to these arguments.

PART-III

THE ORIGIN AND DISCONTENTS OF THE PRESENT WAQF ACT

After the fall of Muslim rule, the British were not generally supportive of the waqfs. Their attitude was reflected in the Privy Council decision of Abdul fateh Mohammad v Russomoy Dhur Chowdhury.^[31] In the instant case, it was held that a waqf made for the aggrandisement of family and the gift to charity is illusory, whether from small amount, uncertainty or remoteness is invalid. This decision was furiously objected to by Muslim jurists who thought of it as contrary to Islamic law on waqf.^[32] Thereafter, the Empire brought the Mussalman Waqf Validating Act 1913 (validating many waqf -al-al auld). Overall, the British empire generally dealt with cases through secular law, like the Official Trustees Act 1913, the Charitable and Religious Trusts Act 1920 etc.

Post Montagu–Chelmsford Reforms 1919, communal polarisation increased in Indian polity. The Congress, the Muslim League and the British started competitive ethnic bidding for the Muslims. This resulted in a spate of Waqf Acts like Bihar & Orissa Mussalman Waqf Act 1926, Bengal Waqf Act 1934, Bombay Mussalman Waqf Act 1935, United Provinces Muslim Waqfs Act 1936 etc. Though many of these Acts were repealed by the Waqf Act 1954 the basic features continue to exist in our law.

Post-independence, India enacted the Waqf Act 1954. The legislation, based on the earlier waqfs legislation, created a Waqf Board. This Board is essentially a political body which has been provided with a large array of executive and quasi-judicial functions. The most important powers of the Board is to supervise and if necessary remove mutawallis, to sanction “in accordance with Muslim law” any alienation of waqf property and defend suit on behalf of the waqf. It created a corpus of funds in hand of the Waqf Board and also created a requirement of compulsory registration of Waqf properties. The Waqf Boards were to be manned by MPs, MLAs, persons from Muslim organisations like the State Jamiat-ul-Ulama-i-Hind or State Shia Conference, or persons trained in Islamic law or law and finance. They all had to be Muslims.^[33] A Central Waqf Council was added later by an amendment Act in 1969.

This Act created the economic and social power of the waqf. It created a mighty bureaucratic colossus in terms of Waqf Board which in principle is similar to the Mughal Sadr. The centralisation and pooling together of waqf resources concentrate enormous wealth in hands of the community that is not available to any other. From a strict economic point of view, the Waqf Act actually enhances the economic value of the assets by allowing the Waqf Boards to lease, mortgage or even sell waqf property. A property that cannot be alienated or transferred essentially has only a book value but no market value.

The Waqf Act 1954 can be seen as the beginning of appeasement politics in post-independence India. It contributed to the creation of Muslim politics centred around community property and community interests, which paved the way for the later rise of Islamist organisations like the AIMIM, AIDUF, AIMPLB etc. It is to be noted that the Waqf structure is a special treatment given to the Muslims. There are no analogous institutions for Hindus, Sikhs or Christians. The Sikh Gurudwara Act, 1925, merely pertains to the management of Gurudwaras and not the management of a whole class of property. While the post-independence Congress government was creating a Muslim power base, it was not half as generous to the Hindus. For Hindu temples, the law is still the Religious Endowments Act 1863, Indian Trusts Act 1882 and some state legislations like the Tamil Nadu Hindu Religious and Charitable Endowments Act 1959, that puts the Hindu temples and religious institutions under direct state control.

The Waqf Act 1954 was amended in 1964, 1969 and 1984; a major amendment in 1995 would have been sufficient. However, the so-called secular parties wished to virtue signal their Muslim vote bank and a new Waqf Act 1995 came into effect. The new Act added a new and dangerous innovation in terms of the Waqf Tribunal^[34]. The tribunal has wide powers to decide matters pertaining to properties disputed to be a waqf property and interests involved in a property admitted to be a waqf property^[35], lease, tenancy etc in a waqf property. The scope of exact jurisdiction of this court is to be decided by the state governments. The tribunal is manned by a judicial service personnel, a state civil service and one person who has specialised knowledge of Muslim law. The jurisdiction of the civil court is barred in matters covered by the Waqf Act 1995^[36]. More ominously there is no appeal available from the decision of this tribunal or from any interim order by the tribunal^[37]. This tribunal is not the Shariat court of the Qazi or the Sadr, but it is the nearest equivalent to the same in a secular country. Unlike the civil court that is directed towards giving justice, the tribunal is directed towards protection and better management of the auqaf; that is to say, this tribunal, by its very nature, is biased towards waqf. It is therefore far more difficult for innocent third parties to agitate their legitimate interests before this tribunal than the civil court.

The same Act also transferred many of the evacuee properties that were purportedly waqfs to Waqf Boards^[38], thereby depriving many Sikh and Hindu refugees who had taken shelter there since partition. The Hindu Devottar properties in Pakistan and Bangladesh never received such special treatment. However, no matter how many amendments are made, more and more concessions continued to be demanded. The Sachar Committee report^[39] added fuel to this fire. It was found that the total area under Waqf properties all over India is estimated at about 6 lakh acres and the book value at about Rs 6,000 crore.^[40] This is the third largest land holding after Defense and Railways.  Sachar was obsessed with using the waqf as a tool for community development, as theme directly lifted out of Islamic economics. It is moot to ask, if the Indian state has ever sought to use “community assets” similarly for upliftment of any other community – say Hindus? Anyway, it was successful in triggering the draconian 2013 amendment to the Act. It created penal consequences for illegal alienation on waqf properties^[41] and extremely draconian provisions for removal of encroachments.^[42] Many of these encroachers might actually be the poorer members of the “community” that it seeks to protect. However, the biggest legacy of the 2013 amendment is to ring-fence the waqf properties from any claim of national development. Waqf lands cannot be acquired except under very onerous and unviable circumstances.^[43] Considering most of the waqf land is in urban areas, this has created a structural impediment for urban development in India.

So finally, how does the waqf machine works? It can be understood with an illustration.

Consider Mr. X^[44] has a land near Mr. Y’s land^[45]. The lands are not well demarcated, and possibly disputed. Mr. Y created a waqf on, Mr X’s land, say by urging that the land is a burial ground, making himself or some connected person the mutawallis. This is possible since waqf can be created by user and no documentation is necessary. He then gets it registered with the Waqf Board^[46]. The board is obligated to make enquiries about the land and Mr. X, if he would know, may even resist the registration. However, once again the Board has full powers to decide on whether the land is indeed a waqf property or not.^[47] The Waqf Board as specified earlier is a political body with a mandate to protect and promote waqfs. Therefore, the proceeding before the Body is no more likely to result in a just outcome than before the mediaeval Qazi. The State administration is legally bound to follow the direction of the Waqf Board.^[48] Mr X would have a small window appeal to the tribunal, an entity that also suffers from heavy prejudgment bias. There is no further statutory appeal from its decision. It will be particularly hard for Mr. X if the land has been demarcated as a waqf, (based on the registration by the Board) by the state survey of waqfs u/s. 4 of the Act. In between all this, Mr. X would be not only confronting Mr. Y but the entire waqf bureaucracy backed by the Waqf Fund and thousands of staff. He would also be intimidated with criminal prosecution that the 2013 amendments have added to the Act. Off course, Mr. X can offer bribes to Waqf officials and get out of the web. The Waqf Board is a wonderful source of corruption!

This land grab is not a figment of imagination. OPIndia cites at least 21 high profile instances where the Waqf Board has sought to register public or private lands as waqfs.^[49] This includes an entire Hindu village in Tamil Nadu, government buildings in Surat, the so called Idgah Maidan in Bengaluru, Jathlana village in Haryana among others. These instances constitute a tip of the iceberg. The three most common forms of land grab seem to be claiming a land as Qabaristan (graveyard)^[50], creating small Dargah’s and offering prayer in public lands (this can be later claimed as waqf through user). These incidents show that the ill-adjusted legislation and the corrupt land grabbing elite it has created, is a perfect recipe for social conflict and communal disharmony.

CONCLUSION & RECOMMENDATIONS

The institution of waqf is legally unnecessary. The existence of the legal institution of waqf as well as the bureaucracy of the Waqf Board only make sense, as an identity issue and as a rotten borough for Islamist politics. But it may be noted that the in a secular country, only a rational legal system law must serve the common good and not act as a mere “identity marker”. The law of waqf as it stands today is dangerous for public peace, communal harmony, violates private property rights and potentially encourages extremist politics.^[51]

The Waqf Act 1995 and waqf jurisprudence as it stands today, is clearly violative of right to equality under Article 14 in as much it creates a special system of procedural and substantive protection for a class of assets and religious establishments of one community, to the exclusion of all others.

An outright repeal may take time. In the meantime, there are a range of options that must be explored immediately. The first is to remove the extraordinary jurisdiction of the tribunal and restore the power of the civil court. Second, strong protection of third-party rights must be incorporated during the period of registration of waqf. An Ombudsman may be appointed to protect third party rights in waqf. Third, the bar on the acquisition of waqf land for public purpose may be removed. Finally, the Waqf Board must be prevented from claiming any waqf that predates the 1995 Act and was not registered at the point of its enactment. This would prevent the Board from making crackpot demands on historical monuments and government buildings. I believe it can also be seen through the lens of Article 44 that mandates the state to enact Uniform Civil Code for all communities. The discourse on UCC should travel outside personal laws and include waqf as well. In an ideal world the Waqf Act 1995 ought to be repealed, to be replaced with a common system of Trustees of Religious Endowments.^[52]

Author Brief Bio: Prof. Suvrajyoti Gupta is Associate Professor at Jindal Global Law School, OP Jindal Global University.

References:

^[1] S. 2(r) of the  Waqf Act 1995

^[2] AHMEDULLAH KHAN, COMMENTARY ON THE LAW OF WAQF (Asian Law House, 2017) (henceforth referred to as Khan 2017 )

^[3] ASAF ALI ASGHAR FYZEE, OUTLINES OF MOHAMMEDAN LAW, 284 (Oxford University Press, 1974); This includes waqfs made for religious wars.MA Quereshi  Law of Waqf , MUSLIM LAW ,514  (Central Law Publications , 2007), ( henceforth Quereshi 2007)

^[4] Khan, 2017 at 4

^[5] Traditionally waqfs were created in the mosque with Muzzeins declaration or waqafnamas.

^[6]   See the Privy Council decision in Mohd. Imadadullah v Mst Bismillah AIR 1922 PC 384. However once a property has become auqaf the Waqf Board is under a duty to register the same as per s.36 of the Waqf Act 1995

^[7] Quereshi, 2007 at 536

^[8] Cy-pres is a legal doctrine that gives courts the power to interpret the terms of a will, gift, estate, or charitable trust.

^[9] Under s. 9 of the Code of Civil Procedure 1908 (CPC ) the civil court can decide all disputes of civil nature. Explanation I clarifies that , any property dispute or dispute over religious office comes within the purview of suits of civil nature.

^[10] Dār al-Islam, in Islamic political ideology, the region in which Islam has ascendance

^[11] Some jurists argue that the law of trusts originate from Waqf, but this claim may be taken with a pinch of salt.

^[12] A Muslim can create trust. Kassimaiah Charities Rajagiri v. Secy, madras State Waqf Baord  AIR 1964 Mad 18; Garib Das v Munshi Abdul Hamid AIR 1070 SC 1035

^[13] See Khan , 2017 at 8

^[14] Md. Thowhidul Islam Historical Development of Waqf Governance  in Bangladesh: Challenges and Prospects Intellectual Discourse, Special Issue, 1129 ,  1140 (2018)

^[15] An attitude, belief, or impression formed in advance of actual experience of something.

^[16] Protected people in an with second class rights, in exchange of jiziya

^[17] See generally TW Arnold, THE PREACHING OF ISLAM: A HISTORY OF THE PROPAGATION OF THE MUSLIM FAITH,193 ( Library of Alexandria (17 March 2022)

^[18] Muzaffir Alam. The Languages of Political Islam: India1200-1800 (London: Hurst & Co., 2004) 82.

^[19] See generally the theories of conversion in Richard Eaton, Approaches to the Study of Conversion to Islam in India ( November 12^th 2022), https://jan.ucc.nau.edu/~sj6/eatonapproachconversion.pdf

^[20] The Sufis were and continue to be divided into major orders like Qadri, Chsiti & Nashbandhi which in turn were broken into dozens of branches. See generally CAMBRIDGE HISTORY OF ISLAM , 621-622 (Peter Holt, Ann K.S. Lambton, and Bernard Lewis. Edt , Cambridge University Press ) 621-622

^[21] Ahmedullah Khan at 10

^[22] Richard Eaton . THE RISE OF ISLAM AND THE BENGAL FRONTIER: 1204-1760 (Oxford India, 1993)

^[23] See generally Chapter 9, The Mosque & Shrine in the Rural Landscape ,  THE RISE OF ISLAM AND THE BENGAL FRONTIER, 234-267

^[24] Though Richard Eaton argues that these grants had the character of both an waqf and a grant. See THE RISE OF ISLAM AND THE BENGAL FRONTIER, 238 .  However, I would argue that anything that has a character of waqf is essentially a waqf. It is immaterial what is the formal structure of the grant. Richard Eaton being a cultural historian probably does not understand legal conceptions that well.

^[25] Khan, 2017 at 7. It was undoubtedly a ancient site of pagan worship.

^[26] Part of the Jerusalem Islamic Waqf it probably stands on the site of the Second Jewish Temple

^[27] Literally meaning no body’s land. This term have a pungent colonial past. Traditionally European settlers treated lands in the Americas and Australia as terra nullis , though clearly indigenous people had proprietary title over them.

^[28] See M Siddiq & Ors v Mahant Suresh Das & Ors  ( November 12th 2022), https://www.sci.gov.in/pdf/JUD_2.pdf

^[29] The classic example of this remains the case of Gyanvapi Mosque. See Gyanvapi A Waqf Property, Only Waqf Board Can Hear Cases: Anjuman Intezamia Masajid, Times of India Oct 12, 2022, 20:53 IST

timesofindia.indiatimes.com/articleshow/94817653.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

^[30] The Taj Mahal has been declared as an waqf by the Sunni Waqf Board. The matter has been challenged before the courts by ASI ( November 11, 2022) https://www.news18.com/news/india/taj-mahal-a-waqf-property-bring-shah-jahans-signature-first-says-supreme-court-1714967.html

^[31]  Cal XVIII 399, 1894 22 , LA 76

^[32]  The court did apply the Islamic law or Mohamedan law as they called it. Its just that its interpretation was a common law one and not based on traditional Shariah jurisprudence.

^[33] See s. 10 of the  Waqf Act 1954

^[34] S. 83 of the  Waqf Act 1995

^[35] Rashid Wali Beg v. Farid Pindari, 2021 SCC OnLine SC 1003

^[36] S.85 of the  Waqf Act 1995

^[37] S. 83(9) of the  Waqf Act 1995 . Compare this to

^[38] S.108 of the  Waqf Act 1995

^[39] Government of India, Social, Economic and Educational status of Muslim Community of India, Report (New Delhi: Cabinet Secretariat, 2006), 219. (henceforth the Sachar Committee)

^[40] Ibid at 219

^[41] S. 52A of  Waqf Act 1995  and s.54 of  Waqf Act 1995

^[42] S.55 and 55A of Waqf Act 1995

^[43] S. 51 of the  Waqf Act 1995

^[44] Mr. X can well be a Muslim himself. Waqf administration is a state sponsored, elite driven machine that protects community interest and not necessarily members of that community. More importantly Mr. X can also be a public body like Municipal Corporation.

^[45] This example presupposes the culpability of Mr. Y but remember that the Waqf Board can move suo motu as well and just imagine a doubtful waqf and try to grab a piece of land for the greater good of the community.

^[46] S.36 of the Waqf Act 1995

^[47] S.36 and 40 of the Waqf Act

^[48] S. 28 & 29 of the Waqf Act 1995

^[49] How Waqf Boards have been insidiously encroaching upon and occupying various properties and claiming their right over them, OP India, Oct 22, 2022 ( November 14^th , 2022) https://www.opindia.com/2022/10/21-instances-when-waqf-boards-india-illegally-encroaching-various-properties/

^[50] In Islam unlike Christianity a graveyard need not be attached to a mosque or consecrated ground. So it would not be improper for a Muslim to bury the body in any land provided the proper funerary rites have been performed.

^[51] There is a theory in social science called the conveyor theory of radicalisation – it means one starts out with a minor functionary and a moderate organisation, to be progressively become more extremist in their views. Waqf administration is merely the entry point in the Islamist politics.

^[52] There is indeed a Public Interest Litigation pending before the Supreme Court challenging the Constitutional validity of the Waqf Act. See Delhi HC seeks Centre’s stand on PIL against validity of Waqf Act , ( November 13^th 2022), Delhi HC seeks Centre’s stand on PIL against validity of Waqf Act , The Hindu , May  12, 2022, ( November 13th 2022), https://www.thehindu.com/news/national/delhi-hc-seeks-centres-stand-on-pil-against-validity-of-waqf-act/article65407028.ece

Introduction

On 12^th January, 2019, the Constitution (One Hundred and Third Amendment) Act, 2019^[1] (hereinafter referred to as the ‘Amendment Act’) enacted by the Union Legislature received the Presidential assent, thereby making amendments to Articles 15 and 16, under PART III of the Constitution of India. The amendments brought in a provision for the reservation of the economically weaker sections (hereinafter referred to as ‘EWS’) in the Indian society. The Amendment Act came into effect on 14.01.2019. It is an opinion of a set of critics that such an amendment to the Constitution was brought by the ruling Bharatiya Janata Party as an economic gift given to the citizens right before the 2019 Lok Sabha general elections. However, this baseless and accusatory criticism has been crushed by a majority ruling of the Hon’ble Supreme Court in the case of Janhit Abhiyan versus Union of India^[2] which has been elaborately dealt with in this article.

Where on one hand, Article 15(1) and 15(2) of the Constitution of India warrant general protection to the citizens and prohibits the State to discriminate the citizens of India on grounds only of religion, race, caste, sex or place of birth, Article 15(3), 15(4) and 15(5) on the other hand make special provisions for reservation of women and children and the socially and economically backward classes (SEBCs) existing in the Indian society. On similar lines, Article 16(1) and 16(2) provide for equal opportunity for all citizens in public employment. Articles 16(4), 16(4A), 16(4B) and 16(5) provide for reservation of the backward classes in public employment.

By means of the Amendment Act, Article 15(6) and 16(6) were incorporated in the Constitution which provided for reservation of the economically backward class of citizens for admission into educational institutions and for public employment, subject to a cap of 10%.

The opponents of this legislation, who found the Amendment Act discriminatory on various grounds, filed various writ petitions under Article 32 of the Constitution before the Supreme Court of India. These writ petitions were clubbed together and a common order in Writ Petition (Civil) No. 55 of 2019^[3] was pronounced on 07.11.2022 by a Five-Judge Constitutional Bench of the Apex Court in a 3:2 split ratio.

The findings of Hon’ble Justice Dinesh Maheshwari, Hon’ble Justice Bela M. Trivedi and Hon’ble Justice J. B. Pardiwala were to the effect that the Amendment Act was not violative of the basic structure of the Constitution of India. However, the minority/ dissenting Judgment passed by Hon’ble Chief Justice of India U. U. Lalit and Hon’ble Justice Ravinder Bhat was to the effect that The Amendment Act was violative of the Fundamental Rights under Part III of the Constitution of India and therefore, is liable to be declared as unconstitutional.

Primary Issues before the Court

The Five-Judge Bench after hearing the petitioners as well as the respondents in the present case have noticed the following issues which warrant determination:

1. As to whether reservation is an instrument for inclusion of socially and educationally backward classes to the mainstream of society and, therefore, reservation structured singularly on economic criteria violates the basic structure of the Constitution of India?^[4]
2. As to whether the exclusion of classes covered under Articles 15(4), 15(5) and 16(4) from getting benefit of reservation as economically weaker sections violates the Equality Code and thereby, the basic structure doctrine?^[5]
3. As to whether reservation for economically weaker sections of citizens up to ten per-cent in addition to the existing reservations results in violation of basic structure on account of breaching the ceiling limit of fifty per cent?^[6]

In addition to the above, the Court has also dealt with other supplementary issues arising from the above-mentioned three issues which do not form a part of this article.

Contentions raised by the Petitioners 

(a)     The Constitution (One Hundred and Third Amendment) Act, 2019 is violative of the 50% reservation cap. 

The counsels for the petitioners have submitted that providing for a 10% reservation ‘in addition to existing reservation’ under articles 15 and 16 would be violative of the precedent laid down in the case of Indra Sawhney, which has been upheld by the Supreme Court and various High Courts over decades in numerous judgments. Further, that the cap of 50% cannot be breached under any circumstance unless if a law is protected under the 9^th Schedule of the Constitution.^[7]

(b)     The reservation policy was introduced into the Constitution for bringing in an egalitarian society.

The counsels for the petitioners contended that the very purpose behind empowering the State with making reservations for the marginalised class of persons was to ultimately do away with a society wherein certain classes of persons are socially as well as educationally backward. It was submitted that the reservation provisions were made to “address these historical inequalities that, as a vehicle of positive discrimination, the socially oppressed sections were provided reservations and special provisions so as to give them a voice in administration, access to resources such as education and public employment.”^[8]

In support of the same it was submitted that the Amendment Act was violative of the basic structure of the Constitution as it sought to include those persons who were never socially and educationally backward, and therefore such amendment plays a fraud on the Constitution itself (reliance placed on M. R. Balaji case^[9]).

(c)      Economic criteria cannot be the sole ground for reservation.

The Counsels for the Petitioners have placed reliance on various landmark judgments to contend that while passing the Amendment Act, the Legislature has erred in considering ‘socially or educationally backward’ as a ground for providing reservation as against ‘socially and economically backward’. In support of the same, reliance was placed on M. R. Balaji case and Indra Sawhney^[10].

It was further submitted that the idea behind reservations as envisaged under Article 15 and 16 was to make an adequate representation of the caste of people who were not adequately represented. However, the present amendment has failed to consider the aspect of ‘representation’ of the EWS which is evident from the fact that the EWS provides reservation for those people who have already been adequately represented in the society.

(d)     The amendment in question aims to reward ‘poor financial behaviors’

The learned counsels for the petitioners also contended that the amendment in question does not really serve a purpose in improving the drastic economic condition of India. Rather, this amendment is individualistic in its approach and nature which only aims to make provisions for those individuals who are economically weak. That such financial weakness/ backwardness which would be a ground for reservation was not based on a class, rather was dependent from person to person, and is therefore violative of Article 14 of the Constitution which allows for reservation for a ‘class’ of people who are at equal footing. Thus, the Amendment Act is violative of the basic structure of the Constitution of India.

Contentions Raised by the Respondents

The respondents in the present case presented their contentions to support the fact that the Amendment Act does not violate the basic structure of the Constitution, rather fosters it.

(a)     10% reservation would not affect the 50% limit set for the SEBC.

In support of the above contention, the Attorney General contended that the rights of the SEBC, SC and ST are not at all affected as they are already enjoying the perks of reservation in all sectors such as education, public services, legislature, and so on. Hence, the rights of a class of group that has already been provided reservation cannot be said to be violated and that such reservation for the economically weaker section cannot be said to be violative of the Equality Code. It was further contended that the 10% reservation is in addition to the already existing reservation for the SEBCs.

(b)     There is no violation of the basic structure by the Amendment Act.

 In support of its contention that the Amendment Act does not violate the basic structure of the Constitution, the counsels for the respondents have made a submission that mere violation of Article 14 of the Constitution does not amount to violation of basic structure. That for the violation of the basic structure, such violation should be ‘shocking, unconscionable or unscrupulous travesty of the quintessence of equal justice’.^[11]

It was further submitted that the present amendment did not violate the basic structure, rather, was in consonance to the preamble to the Constitution by providing economic justice to the citizens of India by means of EWS Reservation.

(c)      50% cap for reservation can be violated in exceptional circumstances.

The learned Solicitor General of India has vehemently opposed the petitioner upon the issue whether the Amendment Act if brought into effect would cross the ceiling limit of the 50% reservation criteria as laid down in Indra Sawhney case or not. In support of the same it was submitted that the 50% reservation has neither been provided under the Constitution of India nor is said to be forming a part of the basic structure of the Constitution of India. Hence, any reservation made cannot be said to be violative of the basic structure merely because it surpasses the 50% reservation criteria as laid down in Indra Sawhney case.

(d)     The right of EWS arises from the right to live a dignified life under Article 21 of the Constitution.

The respondent counsel Ms. Vibha Dutta Makhija has submitted that the right of the EWS envisaged in the Amendment Act arises from the right to live a dignified life as envisaged under Article 21 of the Constitution. She also stated that poverty affects dignity and that it was the duty of the State to eradicate poverty, thereby providing a dignified life to the EWS.

Last but not the least, the respondents have argued that the Constitution does not debar the Legislature from taking a step away from the traditional approach in achieving economic justice. Additionally, Mr. V.K. Biju has apprised the court of the statistical data on record and submitted that the economic criteria for reservation is the need of the hour on the basis of various reports and statistical data. He has further argued that even in Indra Sawhney, the Court took a conscious note that there may be a group or class of people, who can qualify for benefits of reservation irrespective of caste.

JUDGMENT

The judgment popularly known as the ‘EWS Judgment’ was passed on 07.11.2022 with a 3:2 majority upholding the validity of The Constitution (103^rd Amendment) Act, 2019.

1. UPHOLDING THE CONSTITUTION (103^RD AMENDMENT) ACT, 2019

The validity of the Amendment Act was upheld by a majority in the 5-judge bench of the Hon’ble Supreme Court. Hon’ble Justice Bela M Trivedi, Hon’ble Justice J. B. Pardiwala and Hon’ble Justice Dinesh Maheshwari upheld that the petitions filed challenging the Amendment Act were liable to be dismissed as the said Amendment cannot be said to be violative of the basic structure of the Constitution. A provision for reservation of the EWS neither affects the rights of the SEBCs nor does such reservation made solely on the ground of economic inequality violates the basic structure.

In support of the above ratio passed by the Hon’ble Supreme Court, Hon’ble Justice Bela M. Trivedi has emphasised upon the Statements of Objects and Reasons for the Constitution (One Hundred and Third Amendment) Bill to bring into light that a large chunk of the EWS have been excluded from attaining quality education as a result of their economical incapacity. Such persons are neither eligible for reservation nor have the financial capacity to receive the best education. Hence, the Constitution had been rightly amended. Hon’ble justice Bela M. Trivedi has observed as under:

“Therefore, the constitutional amendment could not be struck down as discriminatory if the state of facts are reasonably conceived to justify it. In the instant case, the Legislature, being aware of the exclusion of economically weaker sections of citizens from having the benefits of reservations provided to the SCs/STs and SEBCs citizens in Clauses(4) and (5) of Article 15 and Clause(4) of Article 16, has come out with the impugned amendment empowering the State to make special provision for the advancement of the “economically weaker sections” of citizens other than the classes mentioned in Clauses(4) and (5) of Article 15 and further to make special provision for the reservation of appointments or posts in favour of the economically weaker sections of the citizens other than the classes mentioned in Clause(4) of Article 16. The impugned amendment enabling the State to make special provisions for the “economically weaker sections” of the citizens other than the scheduled castes/schedules tribes and socially and educationally backward classes of citizens, is required to be treated as an affirmative action on the part of the Parliament for the benefit and for the advancement of the economically weaker sections of the citizens. Treating economically weaker sections of the citizens as a separate class would be a reasonable classification, and could not be termed as an unreasonable or unjustifiable classification, much less a betrayal of basic feature or violative of Article 14.”^[12]

In support and in addition to what has been held by Hon’ble Justice Bela M. Trivedi and Hon’ble Justice D. Maheshwari, Hon’ble Justice Pardiwala emphasised on the need to revise the criteria on which the reservations under the Constitution were made. He emphasised the fact that the reservations were not meant to become a vested interested in a class of people, rather, it was meant to represent the marginalised class of people and ultimately reach an egalitarian society.

The verdict written by Justice Pardiwala reminds us of the fact that the reservations under the Constitution are never meant to be for indefinite period. For instance, the reservation under article 15 and 16 were to bring about social harmony aimed to be achieved within 10 years of the Constitution coming into force, which however continues even after more than seven decades of the Constitution coming into force.

(A similar view was also taken by Justice Bhat and CJI U. U. Lalit, who passed a verdict declaring the Amendment Act as unconstitutional.)

1. DISSENTING JUDGMENT

The minority view comprising of the verdict passed by Hon’ble Justice Ravindra Bhat and Hon’ble Chief Justice of India U. U. Lalit held that the Amendment Act was violative of the basic structure and therefore is unconstitutional.

On the amendment made under article 15 by means of inserting 15(6), Hon’ble Justice R. Bhat has held that 15(6) is unconstitutional on the sole ground that it excludes the representation of the poorest sections of the society who are socially as well as educationally backward. Hence, such a provision discriminating against the down-trodden was violative of the Equality Code. Hon’ble Justice R. Bhat further held that Article 16(6) was liable to be declared unconstitutional on two main grounds. Firstly, on the ground of non-inclusion of the already socially and educationally backward class of persons. Secondly, that since Article 16 purports to solve the issue of lack of representation of a particular community/ class, providing reservation to the EWS under article 16 was clearly violative of the basic structure of the Constitution.

CRITICAL ANALYSIS

Since the enforcement of the Constitution of India, reservation has been an arena which affects every Indian individual intensely, irrespective of the caste one belongs to.  In India, policies with respect to reservations have been in place since the formation of the Constitution of India. However, it is important to remember that the reservation policies post Indian independence were incorporated keeping in mind the societal scenario of India at the time of independence, i.e., these reservations were brought to give proportionate representation in jobs and education to SC, ST, SEBC and OBC groups who bore the pain of social exclusion. However, with the changing socio-economic conditions of the Indian societies, the upliftment of the Scheduled Tribes, Scheduled Castes, Socially and Economically Backward Class and other backward class by means of reservation policies have proved to be unjust for the upper caste individuals who are not equally well-off.

Further, reservation policies favouring the Scheduled Tribes, Scheduled Castes, Socially and Economically backward and Other Backward Class have always been maliciously used for the electoral gains and the reality of India has been ignored. Many state governments such as Andhra Pradesh, Telangana, Tamil Nadu, Maharashtra and so on, have been blatantly violating the precedent laid down by the Supreme Court in the case of Indra Sawhney in order to take political advantage of the reservations policies. These actions of the state governments have been declared unconstitutional by the Supreme Court from time to time.

The actual purpose of the reservations has always been defeated and therefore, the Government has rightly taken a grip on reality of the socio-economic conditions existing in the country and passed The Constitution (103^rd Amendment) Act, 2019. The Government has also vide the particular exclusion of the ST, SC, SEBC, OBC from the EWS quota has ensured that the upper caste group who have been unable to represent themselves in the society primarily benefit from the Amendment Act.

The benefit of reservation should be availed by the persons from the lowest strata of the society and somebody who has taken undue advantage of these policies since generations shall not be allowed to take benefit of such reservations.

It is for the first time that the Supreme Court has, vide its EWS Judgment, showed its concern towards the genuinely weaker sections of the society that have been excluded from attaining quality education as a result of their economic incapacity. Such persons are neither eligible for reservation nor have the financial capacity to receive the best education. The Amendment Act has been rightly passed to represent the marginalised class of people and ultimately reach an egalitarian society.

Last but not the least, the Amendment Act and the ruling of the Hon’ble Supreme Court in the EWS judgment is a true tribute to the makers of the constitution of India and the vision of Dr. B. R. Ambedkar, the father of the Indian Constitution and also an economist. Through his speeches, he always laid emphasis on uplifting the economically weaker sections of society, as reflected in the following statement given by him in the Constitution Assembly debates:

“…that every individual who is qualified for a particular post should be free to apply for that post, to sit for examinations and to have his qualifications tested so as to determine whether he is fit for the post or not and that there ought to be no limitations, there ought to be no hindrance in the operation of this principle of equality of opportunity.”

Thus, by incorporating Articles 15(5) and 16(6) into the Constitution, the Government has ensured that it is not just the socially and educationally backward class that is entitled to get justice but also the poor people of India. The Amendment Act and its confirmation by the Hon’ble Supreme Court is a big step towards achieving economic equality in the Indian democracy.

Present Status of the Case

Congress leader Dr. Jaya Thakur moved Review Application before the Supreme Court seeking review of the judgment passed by three of the five-judge bench of the Apex Court which upheld the constitutional validity of the Amendment Act providing 10% reservation for the economically weaker sections (EWS). However, the same is still pending adjudication.

Author Brief Bio: Siddharth Acharya is a practicing advocate in Supreme Court of India. Apart from legal profession he has directed acclaimed documentary films on Kashmir and CPEC. He writes extensively and frequently on Constitutional issues and judgments pronounced by Supreme Court.

References:

^[1] https://www.india.gov.in/sites/upload_files/npi/files/consti.103amend.pdf

^[2] WRIT PETITION (CIVIL) NO. 55 OF 2019

^[3] https://main.sci.gov.in/supremecourt/2019/1827/1827_2019_1_1501_39619_Judgement_07-Nov-2022.pdf

^[4] Para 31(a), Janhit Abhiyan Versus Union Of India [Writ Petition (Civil) No. 55 of 2019]

^[5] Para 31(b), Janhit Abhiyan Versus Union Of India [Writ Petition (Civil) No. 55 of 2019]

^[6] Para 31(c), Janhit Abhiyan Versus Union Of India [Writ Petition (Civil) No. 55 of 2019]

^[7] https://www.mea.gov.in/Images/pdf1/S9.pdf

^[8] Para 7.1, Janhit Abhiyan Versus Union of India [Writ Petition (Civil) No. 55 of 2019]

^[9] 1963 Supp (1) SCR 439

^[10] 1992 Supp (3) SCC 217

^[11] Para 25.1, Janhit Abhiyan Versus Union of India [Writ Petition (Civil) No. 55 of 2019]

^[12] Para 20, Janhit Abhiyan versus Union of India [Writ Petition (Civil) No. 55 of 2019]

Introduction.  

Under the Indian Constitution, legislature, judiciary and the executives are the three pillars of the State. It is based upon certain doctrines which has established rule of law based modern democratic societies. Some of the examples of such principles are a). Separation of power, b). Doctrine of check and balance and c). Transparency in the state affairs.

To keep a check on three pillars of the government it has been provided with an accountability mechanism amongst each other. Executive is accountable to the legislature and judiciary both. Judiciary is also accountable to the legislature. Similarly, the power of the legislature is also checked by the judiciary as it cannot make any law which is ultra-vires. But finally, it is only the legislature which has been made accountable to the people which has elected it to rule over them. Therefore, judiciary and executive both are accountable for the legislature and ultimately, it is only the legislature which is answerable to the people.

The focus of this article is on two aspects: One, is the Parliament fulfilling its role with respect to the judiciary and two, whether the Supreme Court is meeting its mandate with due observance of the above said basic democratic principles of the governance model adopted in our Constitution?

 24^th Amendment

Article 368 as adopted by the Constituent Assembly was debated as Draft Article 304 of the Constitution on 17^th September 1949. After debating this provision, it was adopted without any change.^[1] Article 368 has been through three amendments: the 7^th, 24^th and 42^nd Amendments. These were necessitated to maintain the supremacy of the Parliament in view of some judgments passed by the Supreme Court curtailing power of the Parliament to amend the Constitution. The 24th Amendment stated: (i) Notwithstanding anything in this Constitution, Parliament may in exercise of its constituent power amend by way of addition, variation or repeal any provision of this Constitution in accordance with the procedure laid down in this article.”^[2]

The power to amend gives the Constitution the capacity to cater to the changing needs of society and to evolve organically. The wide powers given by the 24^th amendment thus gave Parliament the power to overcome the judgment passed by the Supreme Court in Golaknath Case (1967). The Constituent Assembly debates indicate that the original framers of the constitution were well aware of the consequences of having a rigid Constitution. It was never their intent that the Supreme Court should be the final arbiter to decide whether an amendment made under Article 368 is valid or otherwise on Constitutional parameters. At that time, Members were even against allowing State Governments any say in exercise of this power by the Parliament, but in deference to the federal structure of the state, ratification by state clause was accepted by all.

Basic Structure Doctrine

Rigid Constitution comes with its own problems as seen by the example of the Constitution of the Republic of Ireland, which requires the consent of the people through Constitutional Referendum, before any amendment can be made.^[3] Considering the vastness and population of India, a referendum clause would have been counterproductive, which is why this power has been left to be exercised by the elected Parliament, without any limitation. Hence the ratio laid down in Golaknath Case that Parliament cannot amend Part III of the Constitution was overruled in 1972 in the Kesavananda Bharati case^[4] by affirming the Constituent power of the Parliament under Article 368 and that the Act made under Article 368 is not a ‘law’ as mentioned under Article 13. However, the Kesavananda Bharati case also introduced the doctrine of the Basic Structure of the Indian Constitution, and held that this cannot be abrogated, even by a Constitutional Amendment.

What constitutes the Basic Structure now includes an ever-expanding list, which the Supreme Court has taken upon itself to determine, on a case to case to basis. In this series, independence of judiciary was also recognised as a basic feature of the Constitution under the doctrine of Separation of Power in Second Judges Case of 1993, i.e., SCAORA Vs. UOI^[5].

Appointment of Judges

Vide Article 124, every judge of the Supreme Court is to be appointed by the President after consultation with the Chief Justice of the Supreme Court as the President may deem necessary for the purpose. In First Judges case of 1982, i.e., S. P. Gupta Vs. UOI^[6], the Supreme Court, held that under Article 124, the word “consultation” does not mean concurrence. The President was thus not bound to make a decision based on the consultation of the Supreme Court. This meant that the appointment of judges is a function to be exercised by the President (through executive) as per the principle of natural justice that no one should be the judge on his own cause for accountability of the judges under the Doctrine of Checks and Balances.

However, this majority view was overruled in SCAORA Vs. UOI (supra), also known as the ‘Second Judges Case’, wherein a nine-judge bench overruled the decision given in S. P. Gupta case (supra) and gave primacy to the Chief Justice of India (CJI) over the President on appointment of judges and transfer matters by holding that the word ‘consultation’ would not lessen the primary role of the CJI in judicial appointments and started interpreting it as ‘concurrence’ by relying upon the doctrine of separation of power and independence of judiciary. This has later been formalised in the form of Collegium System in 1998 in Third Judges case and since then, the five senior most judges in the Supreme Court are appointing judges of the Supreme Court and High Courts and having the final say in transfer matters also. Therefore, elevation to the bench from the bar since 1993 has become the sole function of the senior most judges of the Supreme Court or Juristocrats of the Supreme Court. It must be noted that this practice of judges appointing judges is unique to India and exists in no other country.

Invention of Basic Structure Doctrine: Permissible Limit of ‘Amendment’

In a constitution which makes no separate provision of total revision but simply prescribes the machinery to amend the Constitution, can such power of amendment include the power to make total revision and substitute the Constitution by another? The Supreme Court, by inventing the concept of ‘un-amendability of the basic structures’ by way of interpretation has held that certain essential parts of our Constitution are so basic that its amendment will change the character of the Constitution itself and hence cannot be amended and that Parliament does not enjoy absolute Constituent Power under Article 368 for this purpose.

But what if the Constitution was required to be amended fundamentally. How would we go about amending the same, without a formal procedure? Some countries have overcome this problem by providing separate provisions for revision in their Constitution. The Constitution of Switzerland provides for referendum before initiating partial amendment or repeal/total revision of the Constitution. The Constitution of West Germany (1949) has a provision that states that if the existing constitution of 1949 is to be replaced in toto or to be replaced by new one, it can be done only by a plebiscite of the ‘German people’ while the partial amendment is left by Article 79 in the hands of Federal Legislature. However, the basic principles contained in Arts. 1-20 are not subject to any amendement. Traces of the Doctrine of Basic Structure adopted by the Supreme Court of India and the necessity behind such adoption can be found here. On the scope of Art. 79(3) it was held by the German Court that “The purpose of Art. 79 para 3 is a check of the legislators amending the Constitution to prevent both abolition of the substance or basis of the existing constitutional order, by the formal legal means of amendment and abuse of the Constitution to legalise a totalitarian regime.”

In the Indian Constitution such power is deliberately absent, and it is not a mistake. The Supreme Court can bar any amendment to the Constitution which it deems to be affecting the basic structure of the Constitution. But what if such an amendment was required? Will it not be the prerogative of the people of India to decide the same by referendum and not the Supreme Court? The judiciary cannot be the final authority to decide on our Polity. This is a matter that can only be exercised by the true representative of people.

The Conflict of two Doctrines

In Keshvananda case, Sikri, C.J. held that ‘the doctrine of basic structure will act as a safety valve against the arbitrary use of amending power by Parliament’. This certainly serves a great purpose in safeguarding the freedom and liberty of the citizen in a case of a totalitarian regime like the emergency imposed by the Indira Gandhi government for 21 months between 1975-1977. But what if the courts start applying the principle of doctrine of basic structure in every case against the popular will of the country and starts interfering with the power of legislature in violation of doctrine of separation of power itself under the garb of independence of judiciary? Should not the Doctrine of Checks and Balances apply to the judiciary too?

Additionally, what constitutes ‘independence of Judiciary’ and when can we say that such independence is being violated or will be violated? Is the judiciary immune to follow the fundamental basics of a rule of law based democratic country, which is the very foundation of its power? Will this not lead to a new form of aristocracy in our country where ‘juristrocrats‘ will have a veto power on deciding the polity & broad policy of the nation?

The Supreme Court itself has already held in Keshavananda Case, State of Bihar V. Bal Mukund Sah,^[7] and then in I R Coelho V. State of Tamil Nadu^[8], that the ‘Principle of Separation of Powers’ between Legislature, Judiciary and Executive is part of ‘basic structure’. It is hence apparent that these two doctrines are in severe conflict with each other.

Legislation should always be a business of political will of the people in a democratic political society. If the judiciary also starts legislating, then it will not only make law more confusing but would also amount to breach of doctrine of Separation of Power as held in a judgment in the year 2020 in the case of Dr. Ashwini Kumar Vs. UOI & Anr^[9]. This can but lead to ‘judicial aristocracy’ where law starts emanating from a selected few intellectual of the Constitutional Courts.

Parliament, working under the Constitution, cannot also change the basic element of the same such as substituting democracy with monarchy or the federalism enshrined in our Constitution as rightly observed by the Sikri C.J. in Keshvananda case. What is needed then is a fine and calibrated balance between judicial powers barring Parliament from making specific new amendments to the Constitution. However, in all other cases, they must have the power to legislate on behalf of the citizen as per their will and their need, which is very essential for organic stable growth of the society and law.

Today what constitutes those certain basic features of Constitution, which are un-amendable and for which Parliament can’t exercise its power, is uncertain and confusing which can only be decided on case-to-case basis as per the satisfaction of the Supreme Court. In Ashok Kumar Thakur V. Union of India (2008) 6 SCC 1; the Court observed that “to determine if a constitutional amendment violates the basic structure, a two-step ‘Effect Test’ as laid down in I. R. Coelho case is to be applied on a case-by-case basis and it has to be examined in each individual case keeping in mind the scheme of the Constitution…”. So, today it’s a complete judicial discretion to hold any amendment in Constitution valid or invalid on the basis of doctrine of basic structure. How then do we deal with judicial reforms, which are a pressing need today?

Brief History

Judicial interpretation of the powers vested in Article 368 first came to the fore in 1951, within a year of the Constitution coming into force, when the Constitution (First Amendment) Act was passed. The amendment sought to curtail the Right to Property guaranteed by Article 31. Its constitutionality was challenged and the matter was decided by a 5 Judge bench of the Supreme Court in Sankari Prasad Singh Deo v. Union of India^[10]. The judgement held that Fundamental Rights are also subject to the amending power of the Parliament under Article 368. The Court distinguished between the Ordinary Legislative Power and Constituent Power and held that this is a constituent power and not ordinary legislative power. The judgement went on to state that…the terms of article 368 are perfectly general and empower Parliament to amend the Constitution, without any exception whatever. Subsequently, in Sajjan Singh V. State of Rajasthan^[11], the Apex Court, in a majority judgement, held that ‘amendment’ includes any change and not necessarily a change by way of improvement. Hence it would include repeal or substitution.

This issue was again considered when the 17^th amendment was challenged and heard before an eleven Judge bench in Golak Nath V. State of Punjab (1967) 2 SCR 762;  though the majority did not give categorical answer regarding the scope of Art. 368, a view was expressed (obiter) by some Judges that it should not go to ‘the extent of abrogating the present Constitution and substituting it by an entirely new one’. In this case it was held that no provision of Part III or Fundamental Rights can be altered by an amendment under Article 368. Thereafter, to provide solution and overcome the difficulty caused due by the Golaknath case for enabling agrarian reforms & to bring right to property outside the ambit of fundamental rights, the ambit of the amending power under Art. 368 was sought to be clarified by enacting the Constitution (24^th Amendment) Act, 1971 which, inter alia, inserted cl. (1) in Art. 368, containing the words ‘amend by way of addition, variation or repeal any provision…’ The validity of this Amendment Act was unanimously upheld by the Special Bench in Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225.

The language used by the several Judges who constituted the majority in the Keshavananda case was not identical. The common ratio however was that the limitation to the power conferred by Art. 368 came from the very meaning of the word ‘amend’. Justice Khanna observed in Para 1427: The words “amendment of this Constitution” and “the Constitution shall stand amended” in Article 368 show that what is amended is the existing Constitution and what emerges as a result of amendment is not a new and different Constitution but the existing Constitution though in an amended form. The language of Article 368 thus lends support to the conclusion that one cannot, while acting under that article, repeal the existing Constitution and replace it by a new Constitution.” 

Similarly, the limitation of the amending power was observed by Justice Mathew in Para 1567 as also by other judges. Justice Mathew summed up his conclusion in Para 1162, stating that… Parliament could under Article 368 amend Article 13 and also the fundamental rights, and though the power of amendment under Article 368 is wide, it is not wide enough to totally abrogate or what would amount to an abrogation or emasculating or destroying in a way as would amount to abrogation of any of the fundamental rights or other essential elements of the basic structure of the Constitution and destroy its identity. Within these limits, Parliament can amend every article. In this view of the scope of the amending power in Article 368, I hold the Twenty-fourth Amendment valid, for it has the same amending power as it existed before the amendment.”

However, contrary to the above majority view, another proposition, advanced by some other Judges (Ray, Palekar, Mathew, Beg, Dwivedi and Chandrachud JJ.) though in minority, negates any implied restriction to be imposed on the powers of the Parliament with respect to Article 368 and held it as against the wish of the framers of our Constitution. Ratio of the arguments can be summarised as observed by Justice Dwivedi in Para 1888 as under:

The grants of legislative power are ordinarily accorded the widest amplitude. A fortiori, the constituent power in Article 368 should receive the same hospitable construction. The word “amendment” should be so construed as to fructify the purpose underlying Article 368. The framers of the Constitution have enacted Article 368 for several reasons. 

• First, the working of the Constitution may reveal errors and omissions which could not be foreseen by them. Article 368 was designed to repair those errors and omissions.
• Second, the Court’s construction of the Constitution may not correspond with the Constitution-makers’ intention or may make the process of orderly government difficult.
• Third, the Constituent Assembly which framed the Constitution was not elected on adult franchise and was in fact not fully representative of the entire people. Fourth, at the apex of all human rights is the right of self-preservation. People collectively have a similar right of self-preservation. Self-preservation implies mutation, that is, adaptation, to the changing environment. It is in the nature of man to adjust himself to the changing social, economic and political conditions in the country. Without such adaptation the people decays (sic) and there can be no progress.

Justice Dwivedi, after analysing Constituent Assembly Debates and Constitutional Jurisprudence worldwide against the implied limitation being imposed on Article 368 in the form of basic structure, observed that Article 368 is the master, not the slave of the other provisions. Acting under Article 368, Parliament is the creator, not the creature of the Constitution for the organic and natural growth of the society as per the need of every generation. Para 1890 goes on to state: It is difficult to believe that those who had fought for freedom to change the social and political organisation of their time would deny the identical freedom to their descendants to change the social, economic and political organization of their times. The denial of power to make radical changes in the Constitution to the future generation would invite the danger of extraordinary constitutional changes of the Constitution.

The Doctrine of Basic Structure

With a narrow margin of 7:6, it was held in the Keshvananda’s Case that there are certain basic features of the Constitution which are un-amendable and Parliament can’t exercise its power under Article 368 on similar line as of Constituent Assembly to amend ‘Basic Structures of the Constitution’ and it can only be done by replacing the existing Constitution. Three modes have been suggested to replace the existing Constitution or amend the basic features: (a) Complete Revolution (b) Parliament converting itself into a Constituent Assembly & (c) Referendum/Plebiscite.

After Keshvananda’s Case the scope of Parliamentary Power to amend the Constitution under Art. 368 have been curtailed and came under the purview of judicial scrutiny, whether it is violative of basic structure of the Constitution or not.  According to Sikri, C.J. the ‘basic structure’ was built on the basic foundation i.e. the freedom and dignity of individual; He observed in (As per Shelat & Grover JJ.)

“Para 582. ….. If the historical background, the preamble, the entire scheme of the Constitution, relevant provisions thereof including Article 368 are kept in mind there can be no difficulty in discerning that the following can be regarded as the basic elements of the constitutional structure. (These cannot be catalogued but can only be illustrated):

(1) The supremacy of the Constitution.

(2) Republican and Democratic form of government and sovereignty of the country.

(3) Secular and federal character of the Constitution.

(4) Demarcation of power between the Legislature, the executive and the judiciary.

(5) The dignity of the individual secured by the various freedoms and basic rights in Part III and the mandate to build a welfare State contained in Part IV.

(6) The unity and the integrity of the Nation. 

After Golak Nath Case no fundamental right could be taken away or abridged. But After Keshvananda’s Case it is for the Court to decide whether a fundamental right is a basic structure or not. In Indira Gandhi V. Raj Narain (AIR 1975 SC 2299), the Supreme Court added the following features as ‘basic structure’ to the list of basic features laid down in Keshvananda’s Case:          

1. Rule of Law
2. Judicial Review
3. Democracy, which implies free and fair elections
4. Jurisdiction of Supreme Court under Article 32.

Further in Minerva Mills Ltd. V. UOI (AIR 1980 SC 1789); the Hon’ble Supreme Court by 4:1 majority struck down clauses (4) & (5) of Art. 368 brought by 42^nd Amendment Act, 1976 to overcome the doctrine of basic structure. It has been struck down on the ground that these clauses destroyed the essential feature of basic structure of the Constitution. The Court held that the following are also the basic features of the Constitution:

1. Limited power of Parliament to amend the Constitution
2. Harmony and Balance between fundamental rights and directive principles
3. Fundamental rights in certain cases
4. Power of judicial review in certain cases.

Doctrine of Basic Structure as it Stands Today

After the re-affirmation and extension of the applicability of the doctrine of Basic Structure in the Minerva Mill’s Case, it is now evident that so long as the decision in Keshvananda’s Case is not overturned by another full bench of the Supreme Court, any amendment of the Constitution is liable to be interfered with by the Court on the ground that it affects one or other of the basic features of the Constitution.

Independence of Judiciary and Collegium system for appointment of Judges

In a recent case challenging the Constitutional validity of 99^th amendment to the Constitution which paved the way for NJAC, Supreme Court Advocates-on-Record Assn. v. Union of India, (2016) 5 SCC 1; the Supreme Court has struck down the amendment brought with overwhelming political consensus to bring transparency in judicial appointments as an alternative to collegium system on the basis of violation of independence of judiciary being one of the basic structure of the Constitution by majority of 4:1. It has held indirectly that collegium system is a basic feature of our Constitution! But it is flying on the face of the doctrine of Separation of Power, the Doctrine of Check and Balance and transparency in all public affairs of the State including judicial appointments.

However, the dissenting view delivered by Justice Chelameshwar also held independence of Judiciary as a part of basic structure but observed that the 99^th Amendment was not violative of any of such basic features of the Constitution and indeed was necessary for increasing the efficiency and accountability of the Judiciary. In his dissenting view Chelameshwar J. precisely tried to balance both conflicting doctrines in Para 1212: Primacy of the opinion of judiciary in the matter of judicial appointments is not the only means for the establishment of an independent and efficient judiciary. There is abundance of opinion (in discerning and responsible quarters of the civil society in the legal fraternity, jurists, political theorists and scholars) that primacy to the opinion of judiciary is not a normative or constitutional fundamental for establishment of an independent and efficient judiciary…” 

Judicial Reform: The Mystery of Elevation and Designation

On careful analysis the minority view taken by Justice Chelmeshwar appears more correct. Independence of judiciary will not be compromised if the executive or parliament have a say in the appointment process. On the contrary, it will increase transparency and confidence of the people in its process. The 99^th Amendment with the National Judicial Accountability Bill was brought to fill the legislative vacuum created after adoption of the Collegium System to codify the process of appointment of judges. The common aspiration of the people was in its support to start with this judicial reform as there were allegations regarding methods being adopted for elevation of few selected classes of the advocates to the Constitutional Courts.

Opacity in the issue of representation among the judges is a matter of great concern, which can easily be assuaged by adopting basic democratic principles adopted to establish the Rule of Law for executive and legislative wing of the State. The issue of designation as senior advocate by the Constitutional Courts is also marred with doubts of favoritism. To become a senior advocate, there is an impression that one has to be very close and known to the judges. Differentiation in the legal profession, as created under the British System between Barristers (UK law Graduates) and Vakils (Indian law Graduates), continues today under Advocates Act, 1961, as Senior Advocates and Advocates.

Today, overall, the Constitutional Courts are rightly under the accusations of opacity and favoritism to give good career prospects to a few selected class, which is continuing to enjoy the independence of judiciary in their own benefit. Therefore, the mystery of elevation to the benches and designation as a senior advocate by the Juristocrats needs to be solved. In judicial appointments and designations both we should start applying the legal principle propounded by Lord Hewart, the then Chief Justice of England in Rex Vs. Sussex (1924) “Justice must not be done but also be seen to be done”, with respect to fairness and transparency in elevation and designations.

Conclusion

In the light of the above discussion, it can be said that the basic structure doctrine lays down a vague and uncertain test. Can anything be called ‘basic’ which is not prone to any definite definition and of which even its creator is not sure about its contour? Further, the basic rational behind an amending provision in any Constitution is to provide an opportunity to the future generations to make suitable adjustments in it and thus bypass the fear of revolt/Constitutional breakdown. If this is the position, then how can it be assumed that certain basic provisions of the Constitution would never require amendment?

History has seen primarily three forms of government, viz monarchy or autocratic dictatorial regimes, aristocratic forms of government, and democratic governance models. Occasionally, in the timeline of history, we find one form of government yielding to another. Inefficient and bad democratic model of governance during the times of Socrates resulted in the rise of autocratic empires in Europe following the teachings of Aristotle. Monarchy of China and Czars of Russia succumbed ultimately to the communist models of governance in China and in the then USSR. Similarly, colonial imperialism gave way to the modern democratic rule-based governance model in USA and Bharat. Which system is better over the other is hugely contested, the entire cold war being based on these fault lines. Even today, it plays a crucial role when we see continuous reflux in the polarity of the world. But history is testament to the fact that conversion from one governance model to the another, is invariably due to bad governance, inability to provide stability and justice and failure to meet the popular will of the people.

We need to avoid the apparent conflict between the Judiciary and Legislature. The reconciliation between ‘Basic Structure Doctrine’ and ‘Doctrine of Separation of Powers’ can only be achieved if the different organs of the State adopt the ‘Doctrine of Self Restraint’. The institutions which enjoy infinite power can only maintain such power if such institutions can preserve its dignity and respect in a democratic society in the long run. Arbitrary and wanton exercise of such extraordinary powers may in future limit the scope of such power itself.

Author Brief Bio: Ayush Anand & Shubhendu Anand are Advocates, Supreme Court of India.

References: 

^[1] https://www.constitutionofindia.net/constitution_of_india/amendment_of_the_constitution/articles/Article%20368

^[2] See Section 3 of the Constitution (Twenty-fourth Amendment) Act, 1971

^[3]https://www.citizensinformation.ie/en/government_in_ireland/irish_constitution_1/constitution_introduction.html

^[4] (1973) 4 SCC 225

^[5] (1993) 4 SCC 441)

^[6] AIR 1982 SC 149

^[7]  (2000) 4 SCC 640

^[8] (2007) 2 SCC 1

^[9] (2020) 13 SCC 585

^[10] AIR 1951 SC 458

^[11] AIR 1965 SC 845

Origins of Hijab in Islam

The practice of veiling predates Islam in the Arabic peninsula. “Khimar” as it is referred to is a head scarf that was practised by both men and women in the pre-Islamic world, which basically is a scarf that is worn to cover the head and extends below on the back of a person. Depending on the length of the “Khimar”, several words in Arabic exist to describe the garment worn by a person. Reference to the Khimar can also be found in verse Surah al-Nur 24:31^[1] of the Quran, which basically prescribes women to use the “Khimar” and use it to cover the chest. Hence, this semantic difference has to be understood in order to understand the debate about Hijab/Burqa being an essential practice in Islam.^[2]  The other Surah in the Quran that discusses cloaking women in Islam is the Surah-al-Ahzab 33:59, which mandates the following,

“O Prophet! Tell your wives and your daughters and the women of the believers to draw their cloaks (veils) all over their bodies (i.e. screen themselves completely except the eyes or one eye to see the way). That will be better, that they should be known so as not to be annoyed. And Allah is Ever Oft-Forgiving, Most Merciful.”

Essential Religious Practice vs Fundamental Rights in India

While arguments including a Karnataka High Court judgement in the Resham v. State of Karnataka and Others (2022) claim “Hijab as a non-essential part of Islam”^[3],[4], it is necessary to understand the fact that the word “Hijab” in its form cannot be found in the Quran. As discussed previously, the word is “Khimar”. It is hence clear from these verses that an objective analysis of veiling or cloaking in Islam can be viewed as “essential practice”. Although this expression “essential practice”, purely from the academic point of view is based on references to the Quran and other religious scriptures of Islam, it has no legal basis. In India, the essentiality test is defined as, “Test to determine whether a part or practice is essential to the religion – to find out whether the nature of religion will be changed without that part or practise”, as per the Commissioner of Police v. Acharya Jagdishwaranand Avadhuta (2004) judgement^[5] of the Honourable Supreme Court. An in-depth discussion on establishing Hijab as an essential practice in Islam and its practice as a fundamental right can be found in Shashwata Sahu’s article.^[6] Although the premise of the argument is centred on individual rights, fundamental rights as well as education of Muslim women, it is clear from Article 25 and Article 19(2) that restrictions on fundamental rights too can be imposed in order to maintain public order, morality and health. Hence, the argument of Hijab as an essential practices from the perspective of restriction on fundamental rights, does not stand on firm ground. Additionally, the Karnataka High Court judgement as referred earlier, also cites examples of how practitioners of Islam, do not always wear the Hijab in public life, therefore, deeming it not as an essential practice.

Hijab in the Global Context

So, what exactly is Hijab and how does one have to reconcile the practice of veiling and contextualise it in contemporary Indian society? The term Hijab itself in Arabic means “barrier” or “partition”, and is applicable to both men and women in Islam. It however, overtime assumed patriarchal connotation and has resulted in its imposition only on veiling women. While, most societies across the world contain one form of patriarchy or the other, Hijab however is viewed as one of the most regressive of patriarchal impositions on women. It is interesting to note that the discussion on “Hijab as an essential practice” in India is contemporaneous with protests against “Hijab” and oppression of women in Islamist regimes like Iran. It is also important to note that even a country like Kingdom of Saudi Arabia is witnessing a slow but steady move towards liberalism and women’s rights under Mohammad bin Salman.  Mohammad bin Salman himself, much to the chagrin of conservative elements of the Saudi society, has made it clear that the practice of Abaya or Hijab is not mandated by Islam and the country is currently undergoing a wave of progressivism.^[7] It is therefore ironical that India is witnessing unending debates on the practice of Hijab, when the country where Islam originated is moving away from regressive patriarchal impositions.

Muslim Women’s Rights are a part of Women’s Rights

While political debates on issues like Hijab in India muddy the waters of women’s progress, it is essential to have a nuanced view on the discussion. Taking political sides in order to shape narratives is detrimental to Muslim women’s rights and reinforces control over them by the religious clergy. The time is ripe in India to initiate serious debates and discussions on the implementation of uniform civil laws in India, which on paper remains secular, yet courts intervene in matters of religious importance such as in the case of the Sabarimala verdict, Ayodhya verdict and even the Triple Talaq abolition. In a sense, Indian courts have assumed the status of religious authority, while the constitution of India declares the country as a secular state. Muslim women in India have been at the receiving end of “protecting secularism” for long, especially if one witnesses the reversal of Supreme court judgements such as in the Shah Bano case of 1986. While freedom of religion is guaranteed by India’s Constitution in Articles 25-28, it is also necessary that religious elements and practices that are deemed unsuitable for the current day be identified and restricted, for the country to progress ahead. It is vital to recognise today, that the onus of upholding freedom of religion should not rest on the shoulders of Muslim women or should not be viewed from the point of view of minority rights. Issues that are faced by Muslim women should only be viewed from the prism of women’s rights. This fundamental change in our judicial processes and public debates has to be emphatically established in order to move beyond religious debates.

Political Agendas as an Impediment to Muslim Women’s Rights

One can argue that there are concerted efforts going on globally and in sections of Indian intellectual class to portray India as undemocratic or being oppressive to minorities. Such efforts are primarily carried out to tarnish the current political dispensation and can effectively be countered by appropriate counter-narratives. Agenda driven and motivated movements should not become an impediment for the progress of Muslim women in India. What such movements essentially do in a country like India are the following:

• Encourage regressive Islamist elements to hijack the debate
• Keep Muslim women oppressed under patriarchal practices
• Prevent Muslim women from achieving their potential

With close to 200 million followers of Islam in India and with half of them being women, the progress of Muslim women in India is integral to the nation’s progress. As the world’s fifth largest economy and soon to become the world’s largest country by population, India is on the cusp of an era of tremendous transformation. It is in this context that Muslim women be equipped with necessary skills, vocational training and education, for them to join the mainstream of the society and contribute in a major way towards India’s economic progress. With women’s progress comes reform within the society, and in India’s Muslims, reform is long overdue. Several issues related to radicalisation, ghettoisation and discrimination against “non-believers”, can be achieved with the emancipation of Muslim women. While, women in India’s other religious denominations have achieved tremendous progress and contribute in a major way to national progress, Muslim women in India are being denied such opportunities and worse, are being subjected to debates on issues like Hijab. This only encourages regressive elements to dictate terms and conditions on the behaviour of Muslim women and hence such elements must be denied that opportunity to do so.

Uniform Civil Laws and Oppressive Elements in Islam

Today, every India is aware of how medieval mindsets have resulted in the complete annihilation of minority rights in Islamist nations like Pakistan. The country is a failed state and has totally marginalised any liberal voice that is critical of elements that have hindered the country’s progress. From abduction and forced conversions of underage girls to intolerance against Hindus, Pakistan is a basket case of religious extremism and its impact on Muslim women’s progress. Similarly, in Afghanistan, women are today accorded second class status with severe restrictions on their rights. In the case of Iraq and Syria, the emergence of ISIS has led to women of Yazidi and Kurdish heritage being viewed merely as sex-slaves and objects for gratification of men’s desires. Europe, thanks to the influx of immigrants from countries like Libya, Syria, Morocco, Tunisia etc, has become unsafe for women, with countries like Sweden figuring among countries with most number of rape cases. Mass molestations and underage girls being groomed for sexual favours are being witnessed from countries ranging from Greece to Germany and from France to the UK. “Sharia no go zones” where even law enforcement agencies cannot effectively enforce law have mushroomed across countries like Belgium, Netherlands, Norway etc.

In such a scenario, the only way to ensure Muslim women are safe is by bringing in civil laws that bring them on equal footing with women from other religious backgrounds in India. Uniform civil laws in India are a major step in the direction of gender equality in India, especially in terms of inheritance and maintenance. Medieval practices like Nikah, Halala and Polygamy are still common in India and Muslim women have for long been victims of such practices. Muslim women often find themselves at crossroads as large sections are kept so oppressed and away from any education that they are even unaware of laws and legality. In such a scenario, discussion around uniform civil laws will make Muslim women of India aware of what their future course of action should be in order to achieve equity with their counterparts from other religious denominations.

Conclusion

There is a need to bring forth discussions related to uniform civil laws in India in an effort to narrow the gap between rights enjoyed by non-Islamic women and Muslim women. Discussions raking up religious sentiments and efforts to divert the discussion away from Muslim women achieving the optimal potential or to keep them oppressed under oppressive patriarchal practices are detrimental to the larger national cause towards progress and development. The onus of secularism by imposing norms like Hijab and Niqab should not lie on the shoulders of Muslim women in India. Muslim women’s rights should purely be viewed from the point of view of women’s progress without political or religious agendas that are the motivation behind the scenes. Finally, the only way for Muslims of India to join the mainstream and contribute in a major way to the nation’s progress is by emancipating the Muslim women, who as professionals equipped with skills to survive in the 21^st century, are likely to usher in the much-needed reform.

Author Brief Bio: Zeba Zoariah is a final year LL.B student at O.P Jindal Global University and is a Bachelors in Global Affairs from the same university. She writes articles on women’s rights, technology and law.

References:

^[1] http://quransmessage.com/articles/a%20deeper%20look%20at%20the%20word%20khimar%20FM3.htm

^[2] LANE. E.W, Edward Lanes Lexicon, Williams and Norgate 1863; Librairie du Liban Beirut-Lebanon 1968, Volume 2, Page 807-808

^[3] https://theprint.in/judiciary/hijab-not-integral-to-islam-says-karnataka-high-court/873548/

^[4] https://www.livelaw.in/pdf_upload/75-resham-v-state-of-karnataka-15-mar-2022-412165.pdf

^[5] https://main.sci.gov.in/jonew/judis/25984.pdf

^[6]https://www.ijllr.com/post/the-hijab-row-a-case-study-of-karnataka

^[7]https://www.youtube.com/watch?v=I1BmwaFIJ0c

The Indian economy recently cemented its position as the world’s fifth-largest economy overtaking the United Kingdom. The Prime Minister of India at the SCO summit 2022 projected GDP growth at 7.5% which would be the highest among the world’s biggest economies.

Amidst these ground-breaking milestones, India needs to stay cautious of the impending dangers surrounding this growth especially from its hegemonic and hostile neighbour China. The threat from China is manifold from the tangible and downright threat of military engagement on the borders to the intangible and largely uninterrupted threats through virtual/technological means. 

The Financial Debt Threat

Driven by its quest for ultimate global dominance and in a bid to out-muscle the US stronghold in strategising military resources in critical locations globally, China has, in the last decade, adopted every trick in and out of the book. The Belt and Road Initiative (BRI) of the Chinese Communist Party (CCP) is one such example, where China is engaged in the financing of infrastructure projects of poor, developing countries in a series of long-term loans at seemingly high interest rates. The consequences of this financing are slowly coming to light with the most recent example being the usurping of the Hambantota International Port of Sri Lanka which is of critical geopolitical importance with respect to exercising control in the Indian Ocean.

A Time magazine article described Chinese debt as methamphetamine of infrastructure finance: readily available, highly addictive and with long-term negative effects that far outweigh any temporary high. A 2021 study titled “Review of How China Lends: What Did 100 Chinese Lending Contracts Teach Us?” Is revealing. The study, which analysed the terms of 100 Chinese infrastructure lending contracts, found a lack of adequate disclosure of terms and conditions and an existing vagueness in the terms. Additionally, it revealed that post-pandemic, debtor capability of repayment of these debts has been greatly endangered owing to the nature of the economic status of the borrowing nations, which simultaneously increased the risk of dire consequences for the borrower nations.

The geo-political locations of the countries who have been beneficiaries to the Chinese loans greatly affect the diplomatic interests of India from a national security point of view. Debt-trapping nations and seizing infrastructural assets of border countries offers the Chinese potent resources to establish strategic military units increasing their ability to acutely monitor and strategise attempts to infiltrate and influence other growing economies like India.

The Data and Cyber Threats 

Christopher Wary, the Director of the Federal Bureau of Investigation (FBI) of the USA, in a 2020 event spoke on the economic and national security threat posed by China to the US. He called the attempted economic espionage threat the greatest long-term threat to the US. He then elaborated on the means used by China to carry out Intellectual Property Theft to bolster their technological innovation. He also spoke of the use of cyber resources to procure high volumes of critical citizen data which China then uses to monitor activity and pose a serious irreversible threat.

State-funded cyber-attacks on top US tech companies poses danger not only to the US citizens but also puts global user data at risk. The growing threat of data attacks and lack of adequate means of detection and seemingly inadequate regulations around data protection make India a soft target for cyber-attacks. The trade and use of data for undesirable purposes not only puts the privacy of citizens at risk but also adds a serious national security threat. A 2021 German study classified all the elements of personal data misuse in 11 different categories including use for derivation of coercive incentives, creating religious and racial disharmony, influencing political narratives, social engineering, organised crime, evidence manipulation, torture, bullying among others.

Considering these threats, India needs a strictly enforced and robust data protection framework. This is the prominent reason why the government has stressed upon the requirement of locating data processing units and data servers of foreign companies within the territorial limits of the country also termed as ‘Data Localisation.’ It is of particular importance to preserve the privacy of the citizens of the country and ultimately secure the sovereignty of the nation and not hinder its socio-economic development through blatant intangible weaponising means of data and cyber-attacks.

An adversarial, resourceful, powerful neighbour, which has hostile intentions against India, and which has ready access to information on all aspects of citizen activity, poses a serious threat to India’s security, sovereignty, integrity, and development. 

The Threat in India

In India, where direct financing, military engagement as well as diplomatic intimidation approaches have failed, China has resorted to more capricious means for causing disturbances in the socio-economic setup. This, after China unleashed the wrath of biological warfare on the world which considerably slackened the growth of the global economy except its own. It is a combination of two of its weapons widely used in the global scenario—finance (debt) and abusing large-scale citizen data.

During the pandemic, China flooded the Indian market with several digital lending apps which fell outside the purview of the RBI’s regulations and carried out large-scale individual lending to desperate borrowers in need of money due to the unfortunate circumstances led by the pandemic. The government bodies, then focused on dealing with the mass hysteria surrounding the crises of the pandemic, failed to take note as it occurred. The modus operandi of the apps was entering into outsourcing agreements with NBFCs (Non-Banking Financial Companies) to carry out digital lending on the furnishing of First Loss Default Guarantees to them.

The hidden aspects of their arbitrary operation included charging fluctuating interest rates and exorbitant penal charges, unclear terms and conditions, illegal data collection, data export and unauthorised processing. The apps engaged Recovery Agents who used sensitive data (extracted without the knowledge and authorisation of the users from their devices) as leverage to blackmail innocent borrowers in paying unreasonably high interest and penal charges. The consequences are only being slowly discovered and acknowledged now, nearly two years after the onslaught of operations of these apps. The borrowers have faced the brunt with incidents of harassment and blackmailing, leading to some borrowers even committing suicide.

It is now being discovered that many of these apps had no legal standing whatsoever and have been since banned from operating in a series of notifications issued regarding the same. The disproportionate, unnecessary, and unauthorised data collection by these apps and particularly exporting of all the data back to China has been the prominent reason why the government has recently, in more instances than one, moved to ban several Chinese apps. It comes as a major threat to the privacy of citizens and has the potential for far-reaching consequences in the future—data monitoring, influencing social/political decision-making, targeted advertising, offshore data trading, social engineering, predictive policing etc.

The other immediate threat of capturing innocent buyers in debt traps makes a sizeable portion of the workforce insolvent and renders them incompetent to contribute to their personal growth thereby restricting the overall growth of the nation. 

The Scope of Illegal Operations 

A recent Directorate of Enforcement (ED) investigation revealed that the Instant Loan Providing Digital Apps also known as Fintech companies backed by Chinese funds carried out large scale digital lending activities on entering into MoU agreements (Memorandum of Understanding) with NBFCs without any interference or checks. The Lending Apps took control of the social media data of the clients. High interest rates and late fees were imposed. The investigation also reveals the major decisions related to the operations of these Fintech companies were instructed by Chinese owners based in Hongkong. 12 NBFCs are said to have been involved in such agreements with various foreign backed Fintech companies having disbursed a total sum of ₹4430 crore leading to a total profit of ₹819 crore.

The entire sum of ₹819 crore is being regarded as proceeds of crime and being further investigated under the provisions of the Prevention of Money Laundering Act, 2002. The operations of the Chinese Digital Lending Applications are indeed audacious. In short, they operate on agreements (with questionable validity) with NBFCs, (several of them said to have expired licenses), exploiting desperate borrowers by charging them unreasonably high interest and variable charges, extracting and exporting high volumes of unauthorised citizen data including personal and financial data, blackmailing and harassing them by hiring recovery agents acting as extortionists, disrupting the financial stability of citizens of the unorganised sector, hindering financial growth of the nation, posing a serious financial and national security threat and quite audaciously making a huge profit out of it all.

The Action: Too Little Too Late? 

The RBI had been aware of these threats by the Digital Lending Apps and a Working Group on Digital Lending was established on 13 January 2021. The Working Group submitted its report of recommendations on 18 November 2021. On 10 August 2022, through a press release, the RBI adopted certain parts of the recommendations of the Working Group for immediate implementation. Finally, on 2 September 2022, an official circular was issued providing further clarity on the details of implementation of the recommendations and brought forth strict guidelines on the operation of Digital Lending Apps and Lending Service Providers. It emphasised the direct movement of funds to and from the bank accounts of the regulated entities and the bank account of the borrower. It also laid down instructions on data collection, storage, and processing mechanisms to be strictly followed by the apps. A deadline of 30 November 2022 was given for the apps to make their systems compliant with the terms issued under the guidelines.

Additional legislation with respect to data protection is long overdue with the government having recently withdrawn the Personal Data Protection Bill, 2019 after a Joint Parliamentary Committee recommended a host of amendments to the bill. A new piece of legislation is expected to be introduced, incorporating the recommended amendments as early as in the winter session of the Parliament which shall be the governing law in matters relating to data protection in the country.

It can be argued that the RBI perhaps waited too long to intercept and investigate the practices followed by Digital Lending Apps and probably did not take the scope of their operations all too seriously. It is however, for the best that further delay has been avoided and affirmative action has been taken. Material efforts are now being seen to be put in order to regulate Indian and foreign backed lending companies, whose operations were indubitably putting a strain on the financial stability of a major section of population. To counter and prevent compromising of citizen data privacy, strict provisions have been issued in the latest guidelines on Digital Lending.

Conclusion 

The Indian economy being on the ascendant and India’s good relations with most nations in the South and South-East Asian region is probably a cause of concern for Beijing. The CCP has consequently adopted various means to cause disturbances in India such as creating tension on India’s border with Tibet, exerting undue influence over countries like Nepal and Bhutan which have traditional strong ties with India and by providing strategic loans under its BRI to strengthen its geopolitical and military stance by encircling India with investment in infrastructure projects in countries all around it. China is leaving no stone unturned in its no-holds barred attempt to interrupt the overall socio-economic development of India.

The underlying threat, pursuant to the illegal collection and processing of data, should not be taken lightly and a strong model to detect data breaches and efficient countering mechanisms need to be established. The downsides and negative uses of data can have alarming consequences given the tense political climate within the country. It could be used to further hateful agendas and contribute adversely to the already highly polarised society.

Furnishing unregulated debts predominantly to those in the unorganised sector is bound to have an adverse impact in the economic stability of the entire sector. Steps need to be taken to mitigate the harm already done and ensure the prevention of any further damage. Furthermore, instances like these will serve to cause severe apprehensions about emerging technologies and their potential uses, particularly in finance. It will make public trust and acceptance a difficult prospect for future government policy initiatives in adopting these technologies in banking, finance, and other sectors. The net result being a large chunk of the population may well miss out on the convenience and truly beneficial aspects of the technological advancements.

These attempts are, in all probability, just one example of how China is trying to cause major imbalances in the overall socio-economic fabric of India. Future threats need to be anticipated in the interest of the citizens and the larger interest of preservation of the sovereignty of the country. This can be done through vigilance and caution and by keeping abreast with the ever-evolving realm of technology.

Author Brief Bio: Siddharth Acharya is a practicing advocate in Supreme Court of India. Apart from legal profession he has directed acclaimed documentary films on Kashmir and CPEC. He writes extensively and frequently on Constitutional issues and judgments pronounced by Supreme Court.

References

• Directorate of Enforcement (ED) Press Release 3^rd August, 2022

https://enforcementdirectorate.gov.in/sites/default/files/latestnews/HYZO%20Loan%20APP%20PAO%20No%203.pdf

• RBI Guidelines on Digital Lending, Circular issued 2^nd September 2022

https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/GUIDELINESDIGITALLENDINGD5C35A71D8124A0E92AEB940A7D25BB3.PDF

• The Threat Posed by the Chinese Government and the Chinese Communist Party to the Economic and National Security of the United States, Christopher Wray (Director Federal Bureau of Investigation) – Hudson Institute, Video Event: China’s Attempt to Influence U.S. Institutions Washington, D.C. July 7, 2020

https://www.fbi.gov/news/speeches/the-threat-posed-by-the-chinese-government-and-the-chinese-communist-party-to-the-economic-and-national-security-of-the-united-states

• China Cyber Threat Overview and Advisories – Cybersecurity and Infrastructure Security Agency, United States of America

https://www.cisa.gov/uscert/china

• Financial Stability and National Security in an Era Of Hegemonic Rivalry: The Need To Tighten United States Securities Disclosure Requirements by Joel Slawotsky (University of Pennsylvania Journal Of Business Law, 2020)

https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1603&context=jbl

• It’s A (Debt) Trap! Managing China IMF Cooperation Across The Belt And Road – Dylan Gerstel (Researcher at Center for Strategic and International Studies)

https://csis-website-prod.s3.amazonaws.com/s3fs-public/181017_DebtTrap.pdf?MKq76lYIBpiOgyPZ9EyK2VUD7on_2rIV

• Johnston, Lauren A, Reviewing How China Lends: What Did 100 Chinese Lending Contracts Teach Us? (April 30, 2021)

Available at SSRN: https://ssrn.com/abstract=4070631 or http://dx.doi.org/10.2139/ssrn.4070631

• Balding, Christopher, Chinese Open Source Data Collection, Big Data, And Private Enterprise Work For State Intelligence and Security: The Case of Shenzhen Zhenhua (September 13, 2020).

Available at SSRN: https://ssrn.com/abstract=3691999 or http://dx.doi.org/10.2139/ssrn.3691999

• Kröger, Jacob Leon and Miceli, Milagros and Müller, Florian, How Data Can Be Used Against People: A Classification of Personal Data Misuses (December 30, 2021).

Available at SSRN: https://ssrn.com/abstract=3887097 or http://dx.doi.org/10.2139/ssrn.3887097

• RBI’s Report of the Working Group on Digital Lending including lending through Online Platforms and Mobile Apps

https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/DIGITALLENDINGF6A90CA76A9B4B3E84AA0EBD24B307F1.PDF

• “China harvests masses of data on Western targets”

https://www.washingtonpost.com/national-security/china-harvests-masses-of-data-on-western-targets-documents-show/2021/12/31/3981ce9c-538e-11ec-8927-c396fa861a71_story.html

• WHO-convened Global Study of Origins of SARS-CoV-2: 14 January-10 February 2021, Joint Report

https://www.who.int/emergencies/diseases/novel-coronavirus-2019/origins-of-the-virus

• WHO calls for further studies, data on origin of SARS-CoV-2 virus, reiterates that all hypotheses remain open

https://www.who.int/news/item/30-03-2021-who-calls-for-further-studies-data-on-origin-of-sars-cov-2-virus-reiterates-that-all-hypotheses-remain-open

• WHO Director-General’s remarks at the Member State Briefing on the report of the international team studying the origins of SARS-CoV-2

https://www.who.int/director-general/speeches/detail/who-director-general-s-remarks-at-the-member-state-briefing-on-the-report-of-the-international-team-studying-the-origins-of-sars-cov-2

• The Open Data Market and Risks to National Security:

https://www.lawfareblog.com/open-data-market-and-risks-national-security

• https://time.com/5381467/china-africa-debt-us-security/
• imf.org
• https://en.wikipedia.org/wiki/Operation_Aurora
• https://www.ft.com/content/f27a543b-7678-4130-9c05-db0492d9c240
• https://www.cnbc.com/2019/06/12/chinas-loans-causing-hidden-debt-risk-to-economies.html

 

Rami Desai: Let me begin by asking you about the civilisation state. What does it mean and what in your opinion does it really entail?

Swapan Dasgupta: Well, you see, I think India is a very unique case. The normal yardsticks by which people measure a nation state, you know commonality of either faith, language, ethnicity and things like that, somehow don’t work and it hasn’t worked in the case of India. The usual Treaty of Westphalia model is not applicable in the case of India. What makes India and what binds it together is a form of culture. Now, culture is sometimes very difficult to define. Why is it that one part of India feels attracted to another part of India? I would put it that India is not a nation state in that sense but a civilisational state, bound by a sense of oneness, bound by emotional bonding. It’s very difficult sometimes to define it. Some people have called it ‘sacred geography’, some people have called it something else, but whatever it is, I think, a civilisational state does epitomise this thing where a lot of people live together in harmony. You know, it used to be said, India is as much a nation as the equator. The reason why people didn’t quite get the hang of it is because they never thought that culture or civilisation and the commonalities of that, could actually be the basis on which a nation state can be built. India has demonstrated that.

Rami Desai: So, as it becomes more popular where people are talking about the civilisational state, what changes in society as one comes to accept this terminology?

Swapan Dasgupta: Nothing changes in society, society evolves. And in India what has happened is, the mere fact that there has been a greater degree of communication, there has been a unifying feature of the markets, etc. It appears now, that on top of the civilisational state, some other form of political unity is also coming into being. That’s a more recent phenomenon and a lot of people have attached much importance to it. What gives it salience, I believe is that in the context of twentieth and twenty-first centuries, its gives purposefulness in the way we act as a country. On top of the civilisational state, we now have a certain measure of political unity.

Rami Desai: We find America, China and  India all being called civilisational states. Are there very stark differences in the way China and the US are seen as compared to India?

Swapan Dasgupta: We of course see them. In China there is a certain measure of Han uniformity, and they have tried to achieve uniformity in terms of their language also, which is not something we do in India. Here we have different linguistic expressions. America also has this thing about the melting pot, whereby a certain measure of uniformity is tried to be imposed. It is not forcibly imposed, but it sort of works in that way. In India we don’t. We actually celebrate diversity and look at our civilisation as a mosaic, with different parts complementing each other. This is difficult to explain, but there are various features whereby India is seen as one entity, and this has always been the case. India has lacked political unity. India never had a single state, but there was a sense of ‘Bharatvarsha’, a sense of India which always existed and people in their minds, in their imagination always thought of India as a single entity. This sense has been there for a very, very long time.

Rami Desai: So, as this term becomes more popular not just in India but even abroad, do you think that it impacts foreign policy, as also the way the world looks at India and the way India looks at the world?

Swapan Dasgupta: Well, I don’t think it’s become totally popular. I think there are a lot of people who still resist the idea that Indian is a civilisational State. They try to measure India in terms of other yardsticks and often find it wanting and therefore a lot of the academic discussions on India sometimes concentrate disproportionately on the fissiparous tendencies that may or may not exist in the country and on how India is shaping up. India, firstly, is not a power which has existed on the basis of conquest. This is one of the unique features of India. There’s never been any examples of Indian conquest. Indeed, influence yes, not conquest. India had a certain influence in Southeast Asia, you know parts of Bali, Indonesia, Cambodia, present day, Cambodia, even Sri Lanka. There’s been no lot of Indian influence there. But you cannot say that India physically made that a colony. That I think is very very important. Secondly, I think the reach of India in terms of its civilisational impact and in terms of its attractiveness was because there was no single centre. In China, there is this sense of the centre — the middle kingdom. In India, there’s never been this idea of a centre, so each of these complementary parts have a certain degree of autonomy and are equal in that sense. There’s no hierarchy in these constituent parts, and that is an important thing to note. Now in terms of foreign policy, it’s been some time; it’s been a while before it has made considerable gains. Earlier, from the time of Nehru and Krishna Menon, India saw itself as a moral force in world affairs. But the problem was that preachiness was not accompanied by any measure of economic strength. There was this caricature of India with a  begging bowl, leading a hand to mouth existence, begging for sustenance. Now, that phase is well and truly over. There is today an understanding in the world that even though India may not be the topmost of the developing countries, it certainly has a unique place in the world and does not need to rely on others for its sustenance. Today, many Asian countries and some African countries look at India, not merely as a leader in terms of its ability to head organisations such as NAM and G 20, but more as an alternative centre of economic well-being. So, the civilisational state has meshed in with the idea of India as a growing economic power. And I think it’s complementary. In India, we often emphasise the soft power approach far greater than we approach the hard power. The former approach has also worked in terms of our ability to make a dent in the IT sector in terms of our brain power which we’ve actually too generously exported to the world without necessarily sometimes looking at ourselves. That is the Indian footprint we see all over the world.

Rami Desai: Coming back to India as a civilisational state framework, how do you see recent flashpoints such as the hijab controversy?

Swapan Dasgupta: Well, the question will always be asked: How does a civilisational state work with the Constitution? This is because the Constitution is based on certain rules, certain understanding of how society is to be ordered. Now, in the case of something like the hijab controversy, for example, you could say, well, it’s not really offensive in any way. It doesn’t affect people outside the Islamic world, and affects only a part of Islamic Society. It should, therefore, be left alone and the normal rules of gender equity, which should be there in a modern state, need not apply. And if we take the idea of a civilisational state to be its diversity, we can simply let the matter rest there. But we are also talking about certain common, consensual values here. When those consensual values are offended in some way, whether it happens under the framework of a Hindu or Muslim custom, or the custom of any other religion, it has to be set right. A civilisational state does not necessarily exclude the humanitarian basis, the humanness of any civilisation. In the case of the hijab controversy, it is also seen as an affront to the women concerned. It offends their self-respect, their dignity and their status in the public eye and that is why there has been a movement against it. Now obviously it’s not gone unchallenged and those who support it state that it is based on their scriptures.  I am not getting into that controversy, whether that is the case or not. All I can  say is that a civilisational state does not necessarily mean that the civilisation is frozen in antiquity, that the civilisation is not modern.

Rami Desai: So, if the Constitution often seems to become the battleground when we talk about civilisation state, do you think that there would be challenges when legislation such as the Uniform Civil Code is brought in?

Swapan Dasgupta: Well, the Uniform Civil Code is an aspiration which is written in the Constitution, but we are from actualising the same, partly because we haven’t got a draft for a common code to actually take shape. The people need to know the changes that will come about by the UCC. Till the time it is applied, until the time it is made into part of Indian law, we should have a system whereby all the other civil codes which exist are based on certain common notions of humanity and that gender equity is respected. That’s the interim stage leading to the point where you can have Common Civil Code based on our ability to extrapolate all the good features of all the different cultures and traditions which are there. But this is a very difficult task to accomplish. To start the process, we need a draft which can be discussed.

Rami Desai: Considering the fact that India is uniquely, ethnically and theologically diverse, how do we synthesise it all under a civilizational state?

Swapan Dasgupta: Well, you’re right in saying it’s ethnically diverse. Let us take the case of customary law, which is one of the biggest problems we are going to face, particularly in northeastern India. How do we weave that in? Where do we give the space for local cultures and traditions? Now that’s a big challenge. Why should local traditions and cultures be actually suppressed and made uniform, in a one size that does not necessarily fit all. So, we can have a common Civil Code, but where do we accommodate differences? Now that is both an intellectual and a legal challenge. That is why I say, it’s not something which should be taken very casually. That is why a draft is very, very important. We need a working paper first, where people can come to terms with what is acceptable and what is not. I don’t think human ingenuity is lacking, so customary law can be brought. And then there is the tradition of common law which exists in the United Kingdom, in which customary law actually fits in various ways.

Rami Desai: I think that is a point very well made because we have large tribal populations with ancient practices that we don’t quite understand.

Swapan Dasgupta: We understand it on their own terms, but we do not understand it when it comes to how it engages with the modern world.

Rami Desai: Absolutely. One of the problems that I face while studying these areas is the fact that even the academic tools that we use are outsider tools, such as anthropology or sociology and thus, this remains an intellectual challenge. But having said that, we also have been talking a lot about the freedom of temples from state control. Again, you know it’s been in the news. It’s been controversial. What are your views on that?

Swapan Dasgupta: Well, I think it’s not that complicated an issue. In India, most religious shrines are controlled by their own people. For the Gurdwaras, it is the SGPC which exercises control in terms of a 1920s enactment. You have certain self-regulating bodies for the mosques. But when it comes to temples, some have self-regulation, but the larger ones are controlled by the state-controlled bodies. Now, initially, the purpose behind it might have been to weed out some corrupt practices and other distortions which might have crept in. But I think we have gone beyond that now and a demand exists in a society that the Hindus too, must regulate their own religious practices and their religious institutions. And when that is not happening, the majority community feels discriminated against and that is a very dangerous thing to happen, for it could lead to a strong backlash. I think it is time now for the Hindu community to regulate its own temples, and for that the state can act as a facilitator. Look on it as Privatisation. How do we facilitate privatisation in a smooth and orderly manner, where the new controlling authorities are also accountable. It is more of a management challenge than anything else.

Rami Desai: But then on the other side you also have the Waqf Board controversy.

Swapan Dasgupta: Yes, some of these Waqf Boards are extremely badly managed and some are extremely corrupt also, as stated by members of the community itself. The Waqf Boards also cannot be left to their own devices. I think the Waqf Boards too need a certain degree of reform and accountability. Who are they catering to? Are they catering to the community or are they catering to a small group of people who are the management trustees? The idea behind the workforce has been defeated.

Rami Desai: Quite right. But having said that, why do you think all of these controversies are coming up now? Have people become more aware of all these issues, or has it been gradually happening?

Swapan Dasgupta: No, I think there has been a fundamental change in the way people are looking at the polity. There was a time when it was believed that the only thing which really mattered was the economy, the need to improve the living standards of people, the GDP etcetera. The importance of religion and religious institutions was consciously underplayed. It was always an important factor, but it was never formally recognised in the structures of power. So, it existed as an informal grey area. But now, such grey areas have assumed greater significance for the people and have become very important. They are part of the larger institutions of life, and social existence is based also on these things. That is the reason why the internal workings of these institutions are being examined with a more critical eye, than was hitherto the case. I think what we are seeing is that the legitimacy of religion has been acknowledged in India. While it was always there informally and we as the people of the country knew ourselves to be deeply religious, there was a mismatch between what was perceived by the people and how the same was viewed by the state and by the polity. The polity thought that religion would become less and less important in the lives of people as modernity set in. But that was an erroneous conjecture.

Rami Desai: Would you say that was true of, let’s say, the European world or the Western world?

Swapan Dasgupta: Well, that was certainly the belief in India among the elites as far as the 1980’s/90’s. Right from independence, that was the sort of elite aspiration that we will become something in the nature of a mini Europe in terms of our values if not anything else and in fact progress was assessed in terms of how much closer you’ve arrived to America or to Europe. I don’t think those assumptions are true any longer.

Rami Desai: Yes, public awareness has increased a great deal and perhaps people are reading a lot more. Or perhaps it is the social media that has created such a general awareness that India seems to have come into its own.

Swapan Dasgupta: Well, it’s a combination of social awareness and other factors, but I think economic progress has got a lot to do with it. When you develop a greater degree of self-confidence in yourself, you’re able to stand up to people and say, look, you know, I don’t need your charity. So, you don’t become victims of condescension and view yourself as people who are successful and who have abilities in their own right. I think that’s the change which has happened. This sort of self-deprecation really took place at a time when India had been drained of its wealth by foreign rulers and had lost political and economic sovereignty; it didn’t happen prior to that. But the fact that despite such onslaughts over the past millennium, we still retained some measure of ourselves and preserved our core identity, bespeaks the strength of a civilisational state. There may be areas of it which are slightly battered. But it’s there. The fundamentals are intact.

Rami Desai: Quite right. So let me come to my final question now. There’s also been a lot of discussion around reservations for the EWS, the economically weaker sections. This has now been largely accepted. Do you think this debate now trumps the kind of caste-based reservations and the idea that we had of that sort of discrimination?

Swapan Dasgupta: Well affirmative action is always a problematic issue. It’s you know what and who are you benefiting? Now in India, at one level we are talking about a casteless society, but on another level constitutionally, we’ve accepted caste as a category. The last caste census was carried out in 1941 and today, we are again harking back to it. †here has been the politicisation and the empowerment of certain castes, which has become a major factor. Castes are important politically and in other ways too. Now, reservations for  the economically weaker section is an attempt to find a way out for those who just got left out and who felt shortchanged by the entire process. It is a way of trying to coexist two different principles altogether. One is based on caste, and the other is not based on birth but your circumstances. So, we are trying to mesh two very different systems. Per se, I don’t see anything wrong with it, but I don’t think caste is likely to go away. I think we’ve revived caste in a big way. What we can hope for is that casteism goes away and maybe caste exists as a social category. But I may be being too wildly optimistic on that front because I think this is a problem. This is going to be a serious problem in terms of our future development if caste becomes more than just the social category.

Rami Desai: You just said that we’ve sort of revived it. How have we revived caste in a big way.

Swapan Dasgupta: You know caste was again thought to be something which will gradually erode. But it appears to have formalised into the Indian system. Firstly, there was reservation for the scheduled castes and tribes. This was then extended to the backward castes. Again, there’s a tussle about who could become backward and who could not. So, everybody wants a share of the reservation pie and in that context, you find the EWS coming in. They too want a share of the pie. All this has led to caste being revived in a big way. Because it’s seen as the category, it’s seen as the unit in which a certain privilege can be obtained.

Rami Desai: So, you don’t see a social shift happening?

Swapan Dasgupta: Alas, no. I think caste is going to remain, but I hope its influence is not malevolent.

Brief Bio:

Shri Swapan Dasgupta is a Former Member of Parliament, Rajya Sabha.

Ms. Rami Niranjan Desai is Distinguished Fellow, India Foundation

 

Ukraine became an independent country in 1991, following the break up of the Soviet Union. On 24 February 2022, Russian forces moved into Ukraine, to halt what Moscow perceived to be a deliberate attempt by NATO to continue with its eastward expansion, which could potentially result in Ukraine joining the grouping. That was a red line which Moscow would not allow to be crossed, and was presumably the trigger that led to Russian forces invading Ukraine. But the events leading up to the Russian attack had been brewing since the Orange Revolution of 2004. Ukraine became an area of contestation between the European Union and Russia, which in turn divided the country into two blocs: A pro-European Western Ukraine and a pro-Russia Eastern Ukraine. This tussle led initially to the Orange Revolution, then to the Euromaidan protests of 2014 and finally to the Russian invasion of 2022.

In 1954, the Russian-populated oblast of Crimea was transferred from the Russian to the Ukrainian Soviet Republic. At that time, since both were part of the Soviet Union, it mattered little, but control of Crimea, which had a 75 percent Russian ethnic majority was vital to the security interests of Russia as its Black Sea Fleet was headquartered there. Following the Euromaidan protests in 2014, Russian forces seized control of the Crimean region on 18 March 2014. In April of that year, fighting broke out between the Ukraine army and pro-Ukraine forces on one side against those supporting an independent Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR), which had been self-proclaimed in April 2014. That conflict, since then has led to thousands of people being killed and over a million being internally displaced.

The Minsk accords, first agreed in September 1914 and later revised in February 2015 as Minsk II, could have led to peace and stability but they were violated and the self-governance promised to the Donbas region did not come about. Tensions between Russia and Ukraine continued to rise, till on 22 February, Russia formally recognised the DPR and LPR and then two days later, invaded Ukraine.

Most military observers were of the view that the Russian military would bring the war to a quick closure. Russian aims were initially limited to affect a quick change in regime and install a government which was not hostile to Russian interests and which would commit Ukraine to not joining NATO. A combination of military ineptness on the part of the Russian military leadership plus the rallying of the people by President Zelensky has seen the war drag on now for over 10 months, with no signs of the conflict coming to an end any time soon. Russia has taken most of the Donbas region, and the Zaporizhzhiya and Kherson oblasts to give it control over the entire northern coastline of the Black Sea bordering Ukraine, less the city of Odessa. This has linked Crimea to the Russian mainland by the land route, passing through Donbas and Zaporizhzhiya, and has secured Russian access to the Atlantic via the Mediterranean Sea. But at the same time, a fresh set of challenges, which make conflict resolution a distant dream has been thrown up.

For Russia, it would be politically unacceptable to give back what it has gained on the battlefield. Similarly, for Ukraine, the minimum acceptable solution is a return to the status quo. How such irreconcilable positions can be addressed remains to be seen.

This book, “Russia Ukraine War: The Conflict and its Global Impact” delves a bit into history, but for the most part is focussed on the conduct of military operations. The last quarter of the book looks into the geo-political impact of the war and the economic consequences for the world which the war has caused, especially as it comes just when the world was emerging from two years of an economic slowdown caused by the Covid Pandemic.

How the war has been fought so far has been analysed with clinical professionalism, to include the planning and preparatory phase of operations, followed by the actual conduct of operations by the Russians as well as the counter offensive by Ukraine. The wealth of details brought forth in the book makes it a delight for the military professional to understand various aspects of the war-fighting that has taken place as also, where things went wrong for the Russians in terms of conduct of operations at the operational and tactical levels as also weaknesses at the military leadership level. The host of military and political lessons which the war has thrown up need to be seriously studied, for they have applications for India as well as all other militaries and governments across the world.

The last quarter of the book gives out a set of scenarios which could bring about the end game, but the book also looks into the possibility of the war degenerating into a nuclear conflict which could have horrific consequences. The Russia-China convergence has also been covered as has the NATO angle in this war. Importantly, the book looks into the global impact of the war and how this could lead to a new world order. It ends with a well-thought essay on the lessons which India could learn from the war.

The war is not over and doubtless, much of the information about the conduct of operations remain classified and not open to the public. But even so, the book remains an important source document, with a wealth of analysis on different aspects of the war as well as on its geo-political and geo-economic impact. The author, Col Ajay Singh as well as those who contributed to it deserve to be congratulated on taking out this very educative volume. Meticulously researched and impeccably presented, the book is strongly recommended for all those who have an interest in the military and in international relations as also for the lay reader.

Author Brief Bio: Maj. Gen. Dhruv C. Katoch is Editor, India Foundation Journal and Director, India Foundation

The information age has truly empowered the individual to levels which were unimaginable even at the turn of the century, barely two decades ago. Today, even individuals at the lower end of the economic spectrum carry out digital financial transactions with consummate ease, converse in social groups such as FaceBook and WhatsApp and are reasonably well informed of current happenings in their immediate neighbourhood as well as on issues which impact the country. The digital revolution has also empowered people through schemes such as the ‘Jan Dhan Yojana,’ which has led to financial inclusion for millions of households who earlier had no access to banking facilities.^[1] “Ayushman Bharat,” a flagship scheme of Government of India that was launched in 2017, is focussed on providing Universal Health Coverage (UHC) to the masses, with a commitment to “leave no one behind.”^[2] Similarly, India’s Covid vaccine programme is based on digital technology, through the digital platform, ‘CO-WIN’. This user-friendly mobile app for recording vaccine data is working as a beneficiary management platform having various modules.^[3]

The benefits of digitisation are immense especially in the field of governance. However, just as the smart phone and the internet have empowered the individual, the ubiquitous nature of information technology has also thrown up a range of opportunities for their misuse through disinformation, distortion of the truth, false flag operations, spoofing, spam mail, and the like, to create divisions and turmoil within society. The Information Environment (IE) is truly global in nature, with information flows cutting across physical and artificial boundaries and impacting all segments of society. This is both enabling as well as has potential for misuse. The wide range and diversity of actors in the global IE has great aggregate influence, much akin to that of a state and more often, even far in excess of what the modern state exercises. Non-state actors have also made their presence felt and seek to create influence in furtherance of their objectives. Towards this end, influencers are used, who unwittingly or otherwise lend their name to a social cause or movement, sometimes unknowing of the real intent of the provocateurs and at others, because of monetary inducement or being ideologically aligned to the cause. Non-state actors also use the media and exploit advances made in information communication technology to undermine governments and exert influence in furtherance of their aims.^[4]

An example of the above is the efforts made by interested groups to undermine the BJP led NDA government ever since it won the Lok Sabha elections in 2014. A concerted campaign was launched by motivated groups in the months following the 2014 elections to showcase India as an intolerant nation. Here, an attempt was made to create religious discord by highlighting certain isolated incidences of vandalism that had taken places in churches as deliberate targeted attacks, when in fact they were nothing more than cases of petty theft, the likes of which were routine and had taken place in earlier years too. When viewed holistically with data analysis over the past ten years, there was no upward spiral of such cases, as alleged.^[5] Such incidents had also happened with Hindu places of worship but that fact was glossed over. By the time the truth finally came out, India’s image stood tarnished, with even the then US President, Mr Barack Obama, who had come to India as the Chief Guest for the 2015 Republic Day Parade, making remarks on ‘religious intolerance’ and repeating the same on his return to Washington. The vicious attacks against India were motivated and designed to pressure India on its foreign policy and domestic policy options, with religious intolerance being used as a tool to make India conform to Western dictates.

The subsequent years saw protests on various issues, fanned by interested groups exploiting the social, audio-visual and print media. The year 2016 witnessed a series of agitations by student groups, who shouted slogans in support of a terrorist who was convicted for his role in the attack on India’s Parliament in 2001 and who was executed in 2013! The agitating students, supported by left wing and islamist groups, raised slogans seeking the break up of India and calling the act of execution of the convicted terrorist an act of murder. Similar agitations continued on various pretexts over the next two years. Then in 2019 there were huge protests against the Citizens Amendment Act (CAA) which brought parts of the nation’s capital to a standstill, peaking in February 2020, to tarnish the nation’s image when US President Donald Trump was visiting India.^[6] And in September 2020, massive protests broke out against the three farm laws passed by Parliament, which peaked during the Republic Day celebrations in 2021. In all these protests there was a hidden agenda of undermining the elected Indian government, India’s democratic framework as well as India’s composite cultural ethos. Information was weaponised and used to draw crowds to disrupt normal life. This remains part of the agenda of external forces to exacerbate internal issues and fault lines. In this, segments of the opposition parties within India lend a helping hand in their bid to get back to power. In the end, it is the people of India who suffer.

The desire to shape opinions remains the key motivator for organising mass movements against the elected government. This suits the agenda of foreign powers who view India’s rise as a potential threat to their economic interests. It is therefore incumbent on the state to preempt hostile agendas by anticipating what disruptors might do and taking preventive action well in time. This can be done by shaping public perceptions through a long-term vision and with strategic patience.

A potential flashpoint is the current controversy created by the Muslim clergy wherein they seek an alteration to the rules with respect to wearing of school uniforms, so as to allow Muslim girls to wear the hijab. This is a clever ploy by the Muslim clergy to keep Muslim women under subjugation, by invoking their right to study and also invoking their constitutional right to religious freedom. The narrative being spun is that Muslim girls are being denied their right to wear the hijab. This is patently false as there are no restrictions on Muslim women to wear any dress they choose. The restriction is only in the classrooms where the children have to abide by the school dress code. Comparisons with a Sikh male child who wears a turban in class are frivolous as the hijab is not mandated by the Quran to be worn by women and is also not an essential religious practise. The larger danger in interfering with school dress code rules is that if the hijab is permitted, then the Muslim girl child will lose her right of choice, as the clergy will use the power of religious coercion to force her to wear the hijab as a necessary condition to be accepted in their society. This is retrograde and a push back to medievalism.

Another social media favourite of certain groups of people is targeting Diwali and other Hindu festivals. The former always comes up for attack on grounds of pollution, with claims that firecrackers pollute the air. What they fail to address is the poor air quality throughout the year, which has nothing to do with Diwali. Throughout the year, the air quality index (AQI) levels in Delhi and the NCR remain in the poor to very poor category. Diwali is celebrated only on one day and is not a contributory factor to the year long pollution, though the AQI levels do rise for a day after Diwali. Attacks on Diwali are thus motivated and designed to create communal friction. The pollution causing factors which should be addressed are construction activities and vehicular traffic which account for most of the pollution throughout the year. As a long-term measure, an efficient bus service within Delhi and the NCR can reduce the use of private vehicles by about 50 to 75 percent. For that, perhaps an additional five thousand buses need to be added to the existing fleet. This preferably should be run by the private sector and not the government. A long-term ban on new residential construction would also be useful on two counts. One, it would mitigate to a great extent, the particle pollutants that escape into the air. Two, it would halt the unchecked population growth in the NCR through migration, which is creating a severe strain on the existing infrastructure. Population control has also to be a part of the larger picture to control pollution levels as human beings are the only polluters in the planet. Suitable narratives which are gender neutral and religion and caste neutral need to be propagated to get wide acceptance from all segments of society and to change behaviour patterns. A proactive stance in shaping perceptions will go a long way in reducing friction and in addressing societal fault lines to prevent internal and external hostile forces from creating disruptions in society. This assumes importance as the spotlight will be on India for the coming year, when it takes on the Presidency of the G20 this December.

Author Brief Bio: Major General Dhruv C Katoch is Director, India Foundation and Editor, India Foundation Journal

References:

^[1] https://pmjdy.gov.in

^[2] https://nha.gov.in/PM-JAY

^[3] https://www.pib.gov.in/PressReleasePage.aspx?PRID=1679181

^[4] https://smallwarsjournal.com/jrnl/art/making-sense-information-environment

^[5] https://indianexpress.com/article/india/india-others/false-church-attack-claims-to-humiliate-bjp-govt-says-vhp/

^[6] https://timesofindia.indiatimes.com/india/us-president-donald-trump-in-delhi-key-points/articleshow/74296423.cms

Introduction

India is readying to commence its year-long presidency of the influential Group of Twenty (G20) nations on 1 December 2022, and public interest in all matters relating to the multilateral economic governance institution has begun to grow. What is this group, how did it gain prominence, and why is India’s presidency in 2022-23 so important?

The G20 is the premier global forum for dialogue and cooperation on global economic and financial issues. It is over two decades old and holds the attention of experts and students alike for its intricate interaction between the geo-economics and geopolitics of the contemporary world. It is a unique grouping in which developing and developed countries come together with equal status. Understanding its mission, past trajectory, institutional mechanisms, work methods, and the multiplicity of challenges it addresses, is critical today and requires a serious examination.

What is and what is not the G20, therefore, is relevant. The G20 is “not a treaty-based multilateral organisation capable of taking legally binding decisions, much less implementing them,” says Stewart M. Patrick, Director of the International Institutions and Global Governance programmes at the Council on Foreign Relations, New York. “It is a consultative forum that allows the world’s most important advanced and emerging economies to harmonise their approaches, when so inclined, to the world’s biggest challenges.”^[i] The G20 today represents 85% of global GDP, 75% of international trade, and 2/3^rd of the world’s population.”^[ii]

This essay traces the emergence and evolution of G20 as a global forum of vital importance; explains how it works through its two principal tracks and hundreds of meetings of ministers, officials, and non-governmental experts as well as the annual Leaders’ summits, and finally, decodes the context, implications, priorities, and challenges for the forthcoming Indian presidency.

Creation and Evolution

The G20, at the summit level, came into being after the western financial and sub-prime crisis of 2008 when the advanced economies led by the Group of 7 (G7) had to be bailed out of a potential bankruptcy by the developing countries, particularly India and China. That gave these two emerging economies and some other key developing countries (Indonesia, Turkey, Mexico, Argentina, Brazil, South Korea, and Saudi Arabia) a seat each in the decision-making councils on global economy and finance so far dominated by the advanced economies. It reflected the shift of a chunk of economic power and influence from the west and the north to the east and the south. It was an admission that developed countries by themselves were unable to resolve the global economic problems, and desperately needed the cooperation of countries such as India, China, Russia and Brazil among others, for this vital task.

Before the G20, there were the G7 and the G77

The G7 was established in June 1976, although its origin is traced to an informal meeting of four finance ministers viz. US, France, West Germany, and the UK, held in March 1973 amid the oil crisis. Canada, Japan, and Italy were added thereafter. Later, the G7 admitted Russia, thus transforming itself into the G8 in 1997. However, after Russia was expelled in March 2014 in the wake of its annexation of Crimea, the G7 resumed its original composition. It continues to be powerful and united, and its latest summit was hosted by Germany in June 2022.

Preceding the G7 was the forum of developing countries – G77 – established in June 1964. It has 134 members now but retains its old name. It is known as ‘G77 and China’ when it holds meetings jointly with China. It is much less influential today than it was during the Cold War. A smaller grouping of developing countries – G15 – comprising select developing countries from Asia, Africa, and Latin America was set up in September 1989. The aim was to foster cooperation in trade, investment, and technology within the South and provide inputs to G7 and the WTO. Later, its membership rose to 18, but the name remained unchanged. Regular summits were held during the 1990s and subsequently. The last summit was held in 2012.

The G20’s origins were in the Asian-turned-global financial crisis of 1997–1999, which the G7 was unable to resolve by itself.  Paul Martin, the Canadian finance minister, and Larry Summers, the US treasury secretary, convened a meeting of select finance ministers and governors of the central banks in December 1999. The G20 functioned at that level for nearly a decade. When the financial crisis struck the US in 2008 and quickly turned global, G20 was elevated to the summit level, with the presidents and prime ministers holding regular bi-annual and later annual confabulations with the single goal of preventing another global financial crisis. But like most well-meaning initiatives, it began to expand its scope, including the areas of development. The crisis in Syria led to a migration crisis in Europe, making the shift to this issue inevitable, which was included in the G20 economic agenda.

The engagement of the highest political leaders legitimised the progressive expansion of the G20 agenda beyond finance, fiscal and monetary policies. The grouping now represents a ‘whole of the government’ approach. This was on display when the COVID-19 pandemic hit the world in early 2020, threatening lives and health security, livelihoods, and economic stability and growth. The G20, more than the UN, was tasked with finding solutions to the economic and health problems during Saudi Arabia’s G20 presidency year.

The composition of G20 is varied. For instance, different segments of the G20 should be carefully noted, as below.

• All G7 countries are its members: the US, Japan, Germany, France, the UK, Italy, and Canada.
• All BRICS members are included in it: Brazil, Russia, India, China, and South Africa.
• All the P-5 (Permanent Five) members of the UN Security Council are in G20: the US, the UK, France, Russia, and China.
• The members of the new MITKA group have also been included: Mexico, Indonesia, South Korea, Turkey, and Australia.
• Two countries not covered by any of the above groups, namely Saudi Arabia and Argentina, are also members of G20.
• The original plan was to include Nigeria, but it was dropped. Instead, the European Union (EU) was included.
• Besides the 20 members, the IMF and World Bank, Financial Stability Board, the UN, ILO, WTO, and WHO attend the G20 meetings. Spain is a permanent guest and so are the African Union (AU), the Association of Southeast Asian Nations (ASEAN), and the New Partnership for Africa’s Development (NEPAD). In addition, the country holding the presidency has the privilege of inviting guests of its own. Singapore and the Netherlands are almost always invited.

How it works

The G20 has two clear goals before it: i) to promote financial stability and economic growth, and ii) to make globalisation work for the benefit of all by devising consensus in policymaking on a wide spectrum of government issues. “Both directly reflect the intense connectivity that defines the 21st-century world.”^[iii]

Official Fora

This grouping has a rotating presidency and does not have a permanent secretariat. That role is played by the country which holds the presidency. It is assisted by the Troika, comprising the past, present, and future presidency countries, much like the Rotary Club. As a legacy of the era when the G7 ruled the roost, OECD continues to provide considerable intellectual and policy advisory support to the presidency, keeping the influence of the G7 intact.

The G20 works on the Finance Track and the Sherpa Track. The first deals with economic, financial, and monetary issues through regular meetings of the finance ministers and governors of the central banks. It has eight workstreams: Global Macroeconomic Policies, Infrastructure Financing, International Financial Architecture, Sustainable Finance, Financial Inclusion, Health Finance, International Taxation, and Financial Sector Reforms.

The rest is handled by the Sherpas. Each country has a ‘sherpa’ who is the main interlocutor and coordinator of the G20 leadership. They prepare the ground and ensure the harmonisation of numerous Ministerial Meetings and Working Groups. The Sherpa Track has 12 workstreams: Anti-corruption, Agriculture, Culture, Development, Digital Economy, Employment, Environment and Climate, Education, Energy Transition, Health, Trade and Investment, and Tourism.

Engagement Groups

Beyond the governments, the G20 benefits from wide-ranging discussions and studies undertaken by 10 Engagement Groups of the private sector, civil society, and independent bodies. These are: Business 20, Civil 20, Labour 20, Parliament 20, Science 20, Supreme Audit Institutions 20, Think 20, Urban 20, Women 20, and Youth 20. Each sub-forum has its meetings and its summits, resulting in a crowded and busy annual agenda for the host country and other members.

Of these engagement groups, the two most important are the Think 20 and the Business 20.

Think 20 (T20) is a network of think tanks from G20 countries that provide intellectual support to G20 leaders through research-based policy recommendations. It is often called the “ideas bank”^[iv] of the G20 process. The first T20 summit was held during Mexico’s G20 presidency in 2012 and has since become a constant feature in the G20 process. Members of the T20 are leading think tanks from across the globe. Hence, the T20 ‘thinks’ for the G20, and provides constructive evidence-based solutions to various global challenges.

Akin to the G20 leaders’ format, engagement groups also follow the Sherpa system. In the case of the T20, think tanks and research institutions from G20 states are nominated as Sherpas. The Chair-Sherpa is a leading think-tank from the G20 host state and acts as the nodal point of coordination for the T20.  Some countries like Indonesia appoint a single think tank sherpa, but others like Japan, appoint more than 10 sherpas for their presidency year.

Every year sees two priority areas: one, which is a continuous G20 agenda, and the other which is identified by the G20 president country’s chosen agenda. For example, Indonesia’s G20 presidency focussed on three priorities: 1) Global Health Architecture, 2) Digital Transformation, and 3) Sustainable Energy Transition,^[v] and the same was reflected in the T20 agenda as well.^[vi] Through task forces, each focus area is further explored in a cross-disciplinary manner.

The main outcome of T20 is the communique, a vision document that is released by the chair at the T20 summit. The T20 communique lists proposals and recommendations for G20 leaders to consider during the summit. Some of these salient proposals eventually make their way into the G20 Leaders’ communique.

Business 20 (B20) is an exclusive G20 engagement group created for greater interaction with the global business community. As the corporate face of the G20 framework, the B20 strives to accommodate business interests within the broader global economic agenda. The B20, therefore, is a dialogue platform for leaders of business and industry to present, share and suggest policy options to the G20 leadership.

The B20 was the first engagement group founded within the G20, and its first meeting was held during the presidency of South Korea in 2010.^[vii] However, the concept of B20 was formally introduced during France’s G20 presidency in 2011.

The B20’s usual focus includes international trade reforms, financial regulation, monetary system, global financial architecture, energy efficiency, sustainable investment, and digitalisation. For each focus area, a task force is constituted comprising industry leaders. The B20 network comprises business and trade organisations. Each G20 country is represented by trade organisations/associations that are nominated as Sherpas by their respective governments. While the apex chamber is usually appointed as the business sherpa, sometimes other chambers are too are given this designation. For instance, during the Turkish presidency in 2015, seven business chambers were assigned the work of the B20 Sherpa and focused on Small and Medium Enterprises and entrepreneurship.

From Bill Gates to Jack Ma, the B20 has witnessed the participation of prominent corporate leaders in the past, and their attendance speaks volumes. From India, business magnates such as Anil Ambani of Reliance Industries, Adi Godrej of Godrej Industries, Sunil Mittal of Bharti Enterprises, and others have been part of various B20 task forces/meetings in the past. Apart from the corporate world, policymakers, scholars from academia, and think tanks are also invited to participate in the B20 forum. The World Economic Forum and the International Chambers of Commerce are usual invitees and participate in the B20 network.

Besides the official engagement groups, there are unofficial engagement groups like the Young Entrepreneurs Alliance, the Girls20, and the Interfaith Dialogue.

The most important document that emerges from the presidency country each year is the ‘Leaders’ Declaration’, issued at the conclusion of each summit. It is backed by and is based on joint statements that are issued by the Ministerial and other meetings. The G20’s formal work through an expanding agenda is significant.  Equally important is the opportunity the annual summit affords to the top leaders of member countries to meet, interact, and build personal relationships and “recast bilateral ties.”^[viii]

Trajectory so far

The journey of the G20 may be classified into three periods: i) 1999–2008, ii) 2008–2019, and iii) 2019–2022.

1998-2008:

The first decade comprised regular meetings of the finance ministers and governors of the central banks. The agenda for their discussions extended progressively, to include financing for terrorism in the wake of the war in Afghanistan. A major focus was the reform of IMF which resulted from the decision to give the emerging economies a proportionately bigger share in the vote of its executive board.

2008-2019:

The second decade began with the global financial crisis raging in the West, which necessitated the G20’s elevation to the summit level. The first Leaders’ summit was held in November 2008. From 2009 to 2010, two summits a year were held. Then the grouping followed the practice to hold an annual summit until 2019. The UK, Canada, South Korea, Russia, China, Argentina, and others got the opportunity to host the summit. The G20 thus became an integral part of international economic governance. A few presidencies left a longer-term impact such as those of South Korea for pushing the cause of South-South cooperation, and Germany for advancing the ‘Compact with Africa’.

2019-2022:

The third period began with the Covid-19 era. Two summits were convened by Saudi Arabia in 2022 to address the unprecedented challenges created by the pandemic. The Debt Service Suspension Initiative (DSSI) proved a major achievement. Three summits were held in 2021 under the Italian presidency to tackle the continuing problems of Covid-19, the US-NATO handover of Afghanistan to the Taliban in August 2021, and the normal Leaders’ summit.

The Indonesian presidency of 2022 with its mission of ‘Recover Together, Recover Stronger’ had barely begun when the Russia-Ukraine conflict flared up in February 2022, resulting in new geopolitical tensions. If there was a hope of keeping geopolitics away from the G20 agenda, that was disbanded as positions hardened, and complexities rose. President Joko Widodo attempted to play a mediatory role, securing limited success and assurances from the leaders of Russia and China to attend the summit in Bali in October 2022. The Russian annexation of four regions of Ukraine in September 2022, however, raised serious question marks over the prospects of the Bali summit.

Scholars interpret the nature and degree of success of the G20 summits in different ways. V. Srinivas, a senior Indian official who studies the G20, says that G20 has usually been upbeat.  “In the past, G20 has witnessed several major successes in multilateralism, and there is optimism that renewed multilateralism efforts can succeed.”^[ix]

John Kirton of the University of Toronto’s G20 Centre has studied the past work of the G20 and suggests that the grouping be judged by six criteria comprising i) domestic political management, ii) deliberation for the collective conclusion, ii) principled and normative direction-setting, iv) collective commitments, v) compliance with commitments, and vi) institutional development of global governance. His macro verdict over two decades of the G20: “Charting G20 performance on these dimensions at each of its 16 summits shows the G20’s comprehensive rise to an impressive performance at Hamburg in 2017, then a substantial decline, and a revival at Rome in 2021.”^[x]

Spelling out three key economic priorities for G20 in mid-2022, Kristalina Georgieva, managing director of IMF, highlighted the need for reduction in inflation, tightening of fiscal policy, and imparting of a fresh impetus for global cooperation – “led by the G20.”^[xi] Today, the economic challenges facing the world are as pressing as they were in 2008 which led to the G20’s elevation to the highest political level. Worrisome for the hosts of the G20 summits this year and the next i.e., Indonesia and India, is the deteriorating state of geopolitics, casting a dark shadow on this largely economic forum.

India’s Presidency

India’s presidency of the G20 comes at a critical time, both for India and the G20 countries. Due to last for a year from 1 December 2022, it coincides with the 75^th year of India’s Independence. The G20 summit will be a major milestone for the country’s democracy and diplomacy, bestowing a key leadership role on India on the world stage. But the stage is strewn with thorns on both the economic and geopolitical fronts. The Bali summit, followed by the Delhi summit, will demonstrate if the world – and the two host countries – can tackle the immediate issues of war and conflict as well as focus attention on the need for financial stability, peace, and sustainable development.

Handling it with finesse and balance is particularly important as the G20 has an unprecedented opportunity: it will be led by four developing countries in a row, starting with Indonesia in 2022, India in 2023, and Brazil and South Africa in 2024 and 2025 respectively. It is a chance to show whether the G20, a forum of the North and the South, can do justice to the needs and expectations of both the developed and developing countries as well as those outside the G20 family, in an equitable measure.

India will host the 18^th summit of G20 in New Delhi on 9 and 10 September 2023. Nine country guests have already been invited: Bangladesh, Egypt, Mauritius, Netherlands, Nigeria, Oman, Singapore, Spain, and the UAE. In addition, the International Solar Alliance (ISA), the Coalition for Disaster Resilient Infrastructure (CDRI), and the Asian Development Bank (ADB) are invited as Guest-International Organisations (IOs)

India is expected to host over 215 events at 55 different locations across the country. At most of these meetings, the G20 world will be represented by 42 delegations of ministers and officials. The summit in September 2023 will bring nearly 12,000 international delegates, media, security, and associated personnel to Delhi.

The summit’s theme and priorities may be announced formally in December 2022. But the following media statement made by the Ministry of External Affairs on 13 September reflects the present official thinking:

Whilst our G20 priorities are in the process of being firmed up, ongoing conversations inter alia revolve around inclusive, equitable and sustainable growth; LiFE (Lifestyle For Environment); women’s empowerment; digital public infrastructure and tech-enabled development in areas ranging from health, agriculture and education to commerce, skill-mapping, culture and tourism; climate financing; circular economy; global food security; energy security; green hydrogen; disaster risk reduction and resilience; developmental cooperation; fight against economic crime; and multilateral reforms.^[xii]

While speaking at the UN General Assembly on 25 September, External Affairs Minister S. Jaishankar observed, “As we begin the G-20 presidency this December, we are sensitive to the challenges faced by developing countries. India will work with other G-20 members to address serious issues of debt, economic growth, food and energy security, and particularly, of the environment. The reform of the governance of multilateral financial institutions will continue to be one of our core priorities.”^[xiii]

India’s presidency will be stamped by its past contribution to the deliberations and decisions of the G20. India’s leaders – finance ministers, Reserve Bank governors, former Prime Minister Dr. Manmohan Singh, and Prime Minister Narendra Modi – have been proactive and influential in shaping the outcomes of the meetings and summits in the previous years. India has used the G20 forum to address its concerns on terrorism financing well. PM Modi addressed all the summits from 2014–21 and articulated the country’s concerns on black money and tax avoidance; countering international terrorism; effective measures against fugitive economic offenders; the need to maximize digital technology for social benefit; and the imperative to make available ample climate finance for developing countries.^[xiv]

Guided by a mix of motivations – to promote its national interest, leave a mark on the G20, maintain the forum’s primacy as an effective instrument of global governance, and insulate it from rising geopolitical tensions, India has four choices:

• First, it can be content with a unique branding opportunity offered by the presidency i.e., to project India’s success as a democracy that delivers on development.
• Second, as part of a four-country chain (Indonesia, India, Brazil, and South Africa) that holds the presidency during 2021–25, India can consolidate their synergy and solidarity to advance the interests of the Global South.
• Third, the three IBSA countries (India, Brazil, and South Africa) will chair the forum from 1 December 2022 to 30 November 2025, thereby giving this trinity, somewhat somnolent at present, a chance to promote the interests of democracies moving on the development path and fulfill the G20 promises made by the advanced economies to developing countries.
• Four, as the chair of the G20, India can (and should) take a broader view of its global responsibilities and attempt to coordinate and synthesize diverging perspectives of different constituencies within the G20 family and beyond.

A sober and balanced view suggests that these four choices are not mutually exclusive. “It is possible to weld them together to create a holistic and comprehensive approach for the Indian presidency.”^[xv] India’s performance and ability to lead the G20 will be judged, above all, on this specific score.

Finally, India must invest in the G20 by putting more of its best resources into it, so that developing countries and advanced economies stand at the same level, making equal contributions. As Dr. Raghuram Rajan, former governor of the Reserve Bank of India, told Gateway House in 2015, “We must, across the emerging world, realise that some of the reasons why global governance seems to be sort of against us are because we are not putting enough resources into this… It makes a big difference who has the pen. Because what you write is very different [from what industrial country markets do].”^[xvi]

Author Brief Bio:

*Amb. Rajiv Bhatia is a Distinguished Fellow at Gateway House, the author of three books, and a former ambassador who writes regularly on multilateral governance.

*Manjeet Kripalani is the Co-founder and Executive Director of Gateway House.

 

References:

^[i] Stewart M. Patrick, ‘The G20 Was Made for Moments Like This’, Council on Foreign Relations, 25 October 2021. https://www.cfr.org/blog/g20-was-made-moments

^[ii] ‘India @2023, G20 Presidency’, PowerPoint presentation by Harsh Vardhan Shringla, India’s Chief Coordinator for G20 at a business conference in Mumbai, 5 September 2022.

^[iii] James McBride and Anshu Siripurapu, ‘The Group of Twenty’, Council on Foreign Relations, 15 November 2021. https://www.cfr.org/backgrounder/group-twenty

^[iv] See, Multiple Authors (2012). Think-20 Meeting: Report to Sherpas. URL. www.g20.utoronto.ca/t20/2012-FINAL_Think-20_Report_to_Sherpas.pdf

^[v] Issue Priorities (2022). G20 Indonesia 2022. URL https://www.g20.org/g20-presidency-of-indonesia/#priorities

^[vi] Indonesia had 9 T20 task forces roughly covering sustainable investment, digital connectivity, energy transition, food security and sustainable agriculture, inequality and human capital, global health security, global SDG financing, infrastructure resilience, international finance, and economic recovery.

^[vii] For details see Rajiv Bhatia, “The G20’s virtual year” in India in the G20: Rule-taker to Rule-maker (Manjeet Kripalani ed.), Routledge.

^[viii] James McBride and Anshu Siripurapu, ‘The Group of Twenty’, Council on Foreign Relations, 15 November 2021. https://www.cfr.org/backgrounder/group-twenty

^[ix] V. Srinivas, Talk on G20@2023: The Road Map to Indian Presidency, New Delhi. ICWA, 2 August 2022. P. 10.

^[x] John Kirton, ‘The G20’s Growing Governance, 2008–2022’,

http://www.g20.utoronto.ca/biblio/Kirton_G20_Governance_UPH_220224.pdf

^[xi] Kristalina Georgieva, ‘Facing A Darkening Economic Outlook: How The G20 Can Respond’, IMF Blog, 13 July 2022. https://www.imf.org/en/Blogs/Articles/2022/07/13/blog-how-g20-can-respond

^[xii] ‘India’s forthcoming G20 Presidency’, 13 September 2022, Ministry of External Affairs. https://mea.gov.in/press-releases.htm?dtl/35700/Indias_forthcoming_G20_Presidency

^[xiii] ‘India’s Statement delivered by the External Affairs Minister, Dr. S. Jaishankar at the General Debate of the 77th session of the UN General Assembly’, Ministry of External Affairs. 25 September 2022. https://www.mea.gov.in/Speeches-Statements.htm?dtl/35757/Indias_Statement_delivered_by_the_External_Affairs_Minister_Dr_S_Jaishankar_at_the_General_Debate_of_the_77th_session_of_the_UN_General_Assembly

^[xiv] For details, see: V. Srinivas, Talk on G20@2023: The Road Map to Indian Presidency. Pp. 13–17.

^[xv] Rajiv Bhatia, ‘The G20 and New Delhi’s choices’, The Hindu, 25 August 2022.

^[xvi] ‘T20 Mumbai Keynote by Dr. Raghuram Rajan’, 19 October 2015. https://www.gatewayhouse.in/raghuram-rajans-t20-mumbai-keynote/

Background

Created in the aftermath of the devastating World War II, it is important to underline that the United Nations and its Security Council as well as the Breton Woods institutions and the G7 reflect the world order which prevailed immediately after the World War II as well as the new power balance created by its victors. The G 20 is a reflection of an emerging order, which brings the G7 together with other major economies as equal partners. It also includes the P5 with other major emerging economies.

Conceived as an international mechanism for governance of the global economy, the G20, which includes all the major economies, has evolved over time into one of the most powerful economic and financial groupings. At present, it comprises 85% of global GDP, 75% of international trade and two/thirds of the global population. It represents the world’s key body for handling global economic and developmental issues.

Held under a rotational Presidency on an annual basis since 2011, the G20’s initial focus was on broad macro-economic policy. Formally known as the “Summit on Financial Markets and the World Economy”, the G20 has made continuous efforts until the pandemic toward achieving robust global economic growth. It re-doubled its efforts after the pandemic. More recently, the G20 focus shifted to include a wide range of global issues including climate change and energy, health, counter-terrorism and migration.

What is the composition of the G20? It comprises 19 countries (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK and USA) and the European Union (EU). It has become a relevant and influential global grouping. The regular participation of international and regional organisations such as the African Union, NEPAD and ASEAN as invitees in the G20 process makes it both inclusive and representative.

The G20’s initial focus was on financial and socio-economic issues. Since it was raised to the level of Heads of State and Government, the G20 has evolved to address every contemporary issue and challenge. There are 20 Working Groups between the Sherpa and Finance Tracks and 10 Engagement Groups, which bring together the civil societies, think tanks and other key stakeholders of the member countries.

Existing G20 Tracks

The G20 currently comprises several tracks including:

-‘Finance Track’, with 8 work streams (Global Macroeconomic Policies, Infrastructure Financing, International Financial Architecture, Sustainable Finance, Financial Inclusion, Health Finance, International Taxation, Financial Sector Reforms).

-‘Sherpa Track’, with 12 work streams (Anti-corruption, Agriculture, Culture, Development, Digital Economy, Employment, Environment and Climate, Education, Energy Transition, Health, Trade and Investment, Tourism). Shri Amitabh Kant is the Indian Prime Minister’s Sherpa for this period.

-‘10 Engagement Groups’ of private sector/civil society/independent bodies (Business 20, Civil 20, Labour 20, Parliament 20, Science 20, Supreme Audit Institutions 20, Think 20, Urban 20, Women 20 and Youth 20).

India’s Presidency

India has been a member of the G20 since its inception in 1999. As an important member of the grouping, India ensured that its perspective on issues of vital national importance did not go unheard in the global financial narrative. India will be assuming chairmanship of the G20 for one year from 01 December 22.

India’s Presidency comes at a watershed moment coinciding with a period of flux, internationally. The global community is facing multiple challenges, politically and economically. The Russia-Ukraine conflict has vitiated relation between Russia and the industrialised Western countries, most of which are members of the G20. The conflict and the resulting unilateral sanctions imposed by the West has upset the post pandemic global recovery, sharply impacted oil and gas prices as well as food availability. As always, the impact is felt most sharply by the most vulnerable, the developing countries and LDC’s.

India would, in the true spirit of Vasudhaiva Kutumbakam (the world is one family), seek to find pragmatic global solutions for the well-being of all. India’s vision for the global development agenda is shaped by the rapid transformation of its economy and society launched by the Prime Minister, particularly green and digital transformations. The after-effects of the pandemic are also of importance, as it underlined the importance of resilient healthcare and global co-operation.

PM Modi has transformed India’s foreign policy to focus on the ‘global common good’. Through its G20 leadership, India hopes to extend this principle towards finding sustainable solutions to some of the key global challenges emerging out of the interconnectedness of the world, such as climate change, new and emerging technologies, food and energy security, etc. As the incumbent G20 President, India will set the agenda, identify the themes and focus areas, conduct discussions and deliver the outcome documents. India will identify, highlight, develop and strengthen international support for priorities of vital importance in diverse social and economic sectors, ranging from energy, agriculture, trade, digital economy, health and environment to employment, tourism, anti-corruption and women’s empowerment, including in focus areas that impact the most vulnerable and disadvantaged.

India is currently part of the G20 Troika (current, previous and incoming G20 Presidencies) comprising Indonesia, Italy and India. From December 22, during India’s Presidency, Indonesia and Brazil along with India would form the Troika. This would be the first time when the Troika would consist of three developing countries and emerging economies. It is hoped that as a result there would be a shift in the balance of power within the G20. It is time for emerging economies to have a greater share in decision making at this grouping.

India will host the G20 Leaders’ Summit at the level of Heads of State / Government on 9^th and 10^th September 2023, in New Delhi. Under its Presidency, India is expected to host over 200 G20 meetings across India, commencing from December 2022. India is preparing to hold up to 190G20 meetings on a pan-India basis. In our effort to organise an Impeccable and Uniquely ‘Indian’ G20, we strive to take this mega event closer to the lives of the people of India making it ‘People’s G20’.

Establishment of G20 Secretariat

A G20 Secretariat has been established with Cabinet approval. Former Foreign Secretary Harsh V. Shringla has been appointed as India’s chief G20 Coordinator at Secretary Level. His tenure commenced on 1^st May 22 till 31^st December 23. The G20 Secretariat will be responsible for implementation of overall policy decisions and arrangements needed for steering India’s Presidency.[i]

The Secretariat will be responsible for smooth transition from the previous Presidency, preparations and conduct of all G20 meetings during the year, consultation and coordination with stakeholders and finally handing over to the next Presidency in December 2023. The Secretariat will also enable capacity building, including knowledge and expertise, for supporting India’s leadership on and contribution to global issues in multilateral forums in the years ahead.

The Secretariat will handle work relating to knowledge, technical, media, security and logistical aspects of the Presidency. The Cabinet Secretariat said in a statement: “It will be manned by officers and staff from the Ministry of External Affairs, Ministry of Finance, and other relevant line Ministries/Departments and domain knowledge experts. The Secretariat will be functional till February 2024”.

The India Trade Promotion Organisation (ITPO) has almost completed re-development of Pragati Maidan for setting up of a world class Integrated Exhibition-cum-Convention Centre (IECC) at a cost of Rs 2254 crore. It is the venue of the Summit.[ii] The Government has commenced the process of recruitment to the Secretariat. In a tweet citing a tweet by Ministry of External Affairs Spokesperson Arindam Bagchi confirming that recruitment had started, Prime Minister tweeted: “This is an exciting opportunity…”[iii]

 In accordance with past tradition, the Presidency usually invites some ‘Guest’ countries and International Organisations (IOs) to its G20 meetings and Summit. MEA has announced that as President, India will invite Bangladesh, Egypt, Mauritius, Netherlands, Nigeria, Oman, Singapore, Spain and UAE as ‘Guests’. Bangladesh is the only South Asian neighbour invited as ‘Guest’ to the Summit.

Further, in addition to regular International Organisations (UN, IMF, World Bank, WHO, WTO, ILO, FSB and OECD) and Chairs of Regional Organisations (AU, AUDA-NEPAD and ASEAN), India, as G20 Presidency, will be inviting as ‘Guest IO’s’ the ISA (International Solar Alliance), the CDRI (Coalition for Disaster Resilient Infrastructure) and the ADB (Asian Development Bank).

Priorities of the Presidency

What would be the priorities of the Indian Presidency? According to MEA: “Ongoing conversations…revolve around inclusive, equitable and sustainable growth; LiFE (Lifestyle For Environment); women’s empowerment; digital public infrastructure and tech-enabled development in areas ranging from health, agriculture and education to commerce, skill-mapping, culture and tourism; climate financing; circular economy; global food security; energy security; green hydrogen; disaster risk reduction and resilience; developmental cooperation; fight against economic crime; and multilateral reforms.”[iv]

Among its key priorities are climate, digital and health. The Presidency provides an opportunity to showcase India’s leadership inter-alia in climate action and climate commitments. Prime Minister Modi has pointed out that India’s dedication to climate commitments is clear. India has achieved the target of 40% energy capacity from non-fossil sources, nine years before the deadline. At the COP26 Summit last year, Mr Modi announced the ‘Panchamrit’ or five major areas of climate action commitments by India, including creating a net zero economy by 2070. Access to climate finance and technology would be critical in facilitating these ambitious goals particularly for developing countries.

Prime Minister emphasised the importance of behavioural change for catalysing climate action and highlighted the need for collective action by the global community as part of a movement called LIFE – Lifestyle for Environment.  These are most relevant for the G20 today. On digital, India hopes that our start-up sector and our proven capabilities to create tech models that balance the need for global integration and priorities at a national level can be internationalised. Digital India would go global. A new tech order must combine cross-border flows of technology and investment with development and growth aspirations.

On health, India has demonstrated new and innovative approaches to tackle complex challenges including Covid 19. India’s efforts to track the COVID pandemic’s spread relied on the success of the Aarogya Setu digital platform. India’s successful vaccination campaign which saw 2 billion vaccines administered across our populace, was underpinned by the Co-WIN digital platform. Under India’s Presidency, efforts would be made with other G20 partners to create mechanisms that strengthen the capacity of developing countries to tackle health crises like the Covid19 pandemic.

The Indian Sherpa

The Sherpa plays a crucial role in ensuring that the priorities of the Indian Presidency under P M Modi are supported by G20 member states. India’s G20 Sherpa, Amitabh Kant, is an officer of the Indian Administrative Service (IAS), who headed the NITI Aayog for last month six years before his selection as Sherpa by PM. He is supported by the G20 Secretariat.

Kant led an official Indian delegation to the third G20 Sherpa meeting of Indonesia’s G20 Presidency, held in Yogyakarta from 26^th to 29^th September 2022. (The first Sherpa meeting under the Indonesian Presidency was held in December 2021 and the second in July 2022). At the meeting, according to MEA: “Amitabh Kant reaffirmed India’s commitment and active support to Indonesian Presidency’s efforts…He emphasised the need for G20 to bring enhanced global focus on and strengthen international cooperation and efforts in key priority areas such as sustainable growth, accelerated progress on SDGs, addressing climate change including through Lifestyle for Environment (LiFE), tech-enabled development and digital public infrastructure, multilateral reforms and women’s empowerment”.[v]

Significantly, Kant also highlighted Prime Minister Modi’s recent statement on 16 September: “Today’s era is not of war… diplomacy and dialogues are things that touch the world”. On the sidelines of the G20 Sherpa meeting, Kant held bilateral interactions with his visiting Sherpa counterparts from Brazil, France, Germany, Japan, Russia, Saudi Arabia, South Korea, Spain, UK and USA. According to informed sources, the Indian delegation led by Kant through its constructive interventions was able to infuse greater positivity and optimism in G20 deliberations, in preparation for the Indian Presidency.

Challenges Identified by the Sherpa

On 5^th September 22, on Twitter, Kant provided a unique insight into PM Modi’s vision for the Indian Presidency. He gave a broad-brush perspective on the core issues of importance noting: “India believes that the G20 countries must close ranks and work together. While the agenda and priorities for the Presidency are still evolving, India is committed to focussing on issues of critical importance to the world[vi].

The world is facing huge challenges due to post pandemic blues, debt distress, food and energy security and the triple planetary crisis of climate change, biodiversity loss and pollution, along with instability and conflict that are impacting people globally.

The global development agenda is facing monumental challenges at present. The pandemic came on the eve of “Decade of Action” and has disrupted decades of developmental progress globally on many fronts. These effects are compounded by the additional effects of ongoing conflict in Europe. India believes that a conversation on economic growth with sustainability is the need of the hour. The G20 should lead the discussion on how countries can work together to ensure return to economic growth, but one which is rooted in sustainability and sustainable lifestyle.

The concept of LiFE was introduced by PM Modi during the 26^th UN Climate Change Conference of Parties (COP 26) in Glasgow 21. India hopes to highlight LiFE as a critical focus area for discussion and action during our Presidency. India believes that digital technology and digital public platforms are key to deepening engagements of government with citizens. Our belief is that digital identity, content-based framework and payments are key building blocks for a digital future. Digital solutions to traditional problems have transformed and elevated the lives of people across the world. During India’s Presidency, we would like to help take this discussion forward.

We aim to deliver outcomes in areas of critical intent such as integrating the climate and development agenda, accelerating progress towards achieving the 2030 agenda, furthering development cooperation, supporting small and marginal farmers, enhancing food security and nutrition, addressing global skill gaps, promotion of blue economy and coastal sustainability, digital health solutions, green hydrogen and tech-enable learning.

India also hopes to bring into the G20 discussions a focussed conversation on Disaster Risk Reduction (DRR). The average annual loss from disasters globally is approximately USD 218 billion. We believe that a working group on DRR would help the global efforts in reducing the loss of life and livelihood. India believes that the G20 countries must come together to deliver on matters of crucial importance to the world and not let the Russia-Ukraine crisis dominate the broader agenda. The G20 should show the necessary leadership and flexibility to accommodate differences among its members to effectively deliver outcomes”.

While concluding, Kant stated: “The G20, in India, will comprise around 200 events to be held across all the States and Union Territories. The intention is to execute them to perfection and send back every guest as a brand ambassador of India. Our aim is to create a uniquely Indian experience, which is spiritually invigorating and mentally rejuvenating. India’s achievements—both nationally and internationally—have earned us goodwill. India’s stature is extremely tall in the hearts of people. The G 20 will elevate it to even greater heights”.[vii]

Ukraine-Russia Conflict as a possible Spoiler

India has thus so far meticulously prepared for the Presidency. While the focus will be on sustainable economic growth, there are many challenges ahead with the Ukraine-Russia conflict being a possible spoiler. This is despite PM Modi’s determination not to let it become the spoiler.

The G20 Presidency coincides with the domination of a neo-conservative US approach with regard to Russia. Of concern is also a negative narrative on India emanating from some sections of the Western media as well as politicians, the most recent being the Greens German Foreign Minister. This could be due to resentment at India’s rise and India’s independent stand on Ukraine-Russia. Calls for a negotiated end to the conflict have gone unheeded by the West who seems determined to bring down President Putin. More unfortunate, Russia’s recent reverses seem to have whetted the appetite of NATO to reduce Russia to a subordinate status.

The West seems to be in no mood to listen to Kissinger who at 99, in a recent article, had invaluable advice to offer to the West: “The question will now be how to end that war. At its end a place has to be found for Ukraine and a place has to be found for Russia — if we don’t want Russia to become an outpost of China in Europe.”[viii]

The war has entered a crucial stage and the Russian armed forces have been forced to retreat from some strategic areas it had conquered. President Putin has ordered a partial mobilisation. For the first time, ordinary Russians are feeling the impact of the war.  A businessman in Moscow describes a growing sense of vulnerability by quoting from Kipling’s ‘Jungle Book’, which is a favourite of President Putin as follows: “When a leader of the pack has missed his kill, he is called the Dead Wolf as long as he lives, which is not long”.[ix]

President Putin’s dilemma of whether to consolidate gains which are being reversed by expanding the range of weapons (which is implicitly acknowledging the possibility of using tactical nuclear weapons) is bringing the international community closer to a major conflict than any other time since the Cuban Missile Crisis.

The contradictions in US position on Ukraine has been high-lighted as follows: “First, that of enabling Ukraine to mount a robust defence – a humanitarian intervention; second, and emphasised in repeated bulletins from President Joe Biden’s administration, the intent to “cripple” Russia, not only in the current conflict but in any future (unspecified) military adventurism. This, far from offering protection to Ukraine, guarantees that the war will drag on, with ever greater levels of death and destruction. It has also led to both Russia and the US on hair-trigger launch policy, raising the spectre of two equally catastrophic “next steps”: a grievously wounded Russia lashing out – as Russian Foreign Minister Sergey Lavrov has threatened as much – or, accidental or inadvertent nuclear action by, for instance, computer error”. For now, one hopes that Benjamin Abelow’s last word is not prophetic: “False narratives lead to bad outcomes.”[x]

Several Western writers and thinkers have a similar perspective. They regret the insistence of the West to dominate the world even when economic power has shifted to Asia. Jeffrey Sachs says: “We are at the 60th anniversary of the Cuban missile crisis, which I’ve studied all my life and I’ve written about, having written a book about the aftermath. We are driving to the precipice, and we are filled with our enthusiasm as we do so. And it’s just unaccountably dangerous and wrongheaded, the whole approach of U.S. foreign policy. And it’s bipartisan”.[xi]

 As incumbent President of the G 20, P M Modi has spoken several times to both President Putin and President Zelensky and most recently to President Zelensky. India is ready to support all efforts at de-escalation. India insists that the global order should be anchored in the principles of the UN Charter, international law and respect for sovereignty and territorial integrity of all States. There can be no doubt that the direction of this conflict may cast a long shadow on India’s Presidency.

Concluding Reflections

In the post-pandemic period, this will be undoubtedly the most important multilateral event being organised outside the UN.  India had hosted NAM and CHOGM Summits in 1983 and International Solar Alliance Summit in 2018. These meetings, though important, did not include all P5 and major countries. The G 20 Presidency will be at the beginning of Amritkaal, the next 25 years after the 75^th anniversary of India’s independence, which makes it both futuristic and inclusive. India is also Chair of SCO (Shanghai Cooperation Organization) from September 2022 to September 2023 and President of the UN Security Council for the month of December 2022.

As the world’s largest democracy, the third largest economy of the world in PPP terms and 2^nd most populous country of the world, India will make a meaningful contribution in the G 20 to support faster, sustainable and inclusive growth. The G 20 Presidency would place India on the global stage, and provide an opportunity for India to place its priorities and narratives on the global agenda.[xii] It would also provide a unique opportunity to showcase India’s progress and developments as well as its rich culture heritage and diversity.

India hopes it can contribute to a speedy end to the Ukraine Russia conflict during its Presidency. India’s hopes for its G 20 Presidency can be summed up in this verse from the Rig Veda:

“May the stream of my life flow into the river of righteousness.

Loose the bonds of sin that bind me.

Let not the thread of my song be cut while I sing;

And let not my work end before its fulfillment”.[xiii]

 

Author Brief Bio: Amb. Bhaswati Mukherjee is a career foreign service officer. She is one of the most experienced diplomats on Indo-EU relations. In a distinguished career of over 38 years, she has been the Indian Ambassador to The Netherlands as well as India’s Permanent Representative to UNESCO in Paris.

References:

[i] “Harsh V Shringla is G20 chief coordinator”, The Economic Times, Retrieved October 21, 2022, from https://economictimes.indiatimes.com/news/india/harsh-v-shringla-is-g20-chief-coordinator/articleshow/90752084.cms

[ii] Mishra, Asit Ranjan. “Cabinet Approves Setting up of G20 Secretariat Ahead of India’s Presidency.” Business Standard News. Business-Standard, February 15, 2022. https://www.business-standard.com/article/economy-policy/cabinet-approves-setting-up-of-g20-secretariat-ahead-of-india-s-presidency-122021501426_1.html#:~:text=Last%20Updated%20at%20February%2015%2C%202022%2019%3A55%20IST.

[iii] “PM Shares Recruitment Opportunities at G20 Secretariat under India’s Presidency.” Press Information Bureau. Accessed October 21, 2022. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1863453#:~:text=PM%20shares%20recruitment,an%20exciting%20opportunity%E2%80%A6%E2%80%9D.

[iv] “India’s Forthcoming G20 Presidency” Accessed October 21, 2022. https://mea.gov.in/press-releases.htm?dtl/35700/Indias_forthcoming_G20_Presidency

[v] “MEA: Statements: Press Releases.” Ministry of External Affairs, Government of India. Accessed October 21, 2022. https://mea.gov.in/press-releases.htm?dtl%2F35773%2FIndia%2Bparticipates%2Bat%2Bthe%2Bthird%2BG20%2BSherpa%2Bmeeting%2Bin%2BYogyakarta%2BIndonesia.

[vi] Kant, Amitabh. “India Taking over Presidency of G20 This Year. What It Means.” The Week. The Week, September 5, 2022. https://www.theweek.in/columns/amitabh-kant/2022/09/05/india-taking-over-presidency-of-g20-this-year-what-it-means.html.

[vii] Amitabh Kant Twitter, Accessed October 21, 2022. https://twitter.com/amitabhk87/status/1577537738811372032?s=48&t=Zb2g6mn-Zmm01_tIaWooBw

[viii] Ferguson, Niall. “Henry Kissinger at 99: How to Avoid Another World War.” The Sunday Times Magazine | The Sunday Times. The Sunday Times, June 12, 2022. https://www.thetimes.co.uk/article/henry-kissinger-at-99-how-to-avoid-another-world-war-lwt6q5vbq.

[ix] “What next? A Special Report on the World Economy | OCT 8th 2022.” The Economist. The Economist Newspaper. Accessed October 21, 2022. https://www.economist.com/weeklyedition/2022-10-08. p-22

[x] Speedie, David C. “Did the West ‘Bring War’ to Ukraine?” Asia Times. Asia Times, September 3, 2022. https://asiatimes.com/2022/09/did-the-west-bring-war-to-ukraine/.

[xi] Jeffrey D. Sachs. “The West’s False Narrative about Russia and China.” Jeffrey D. Sachs. Jeffrey D. Sachs, September 16, 2022. https://www.jeffsachs.org/newspaper-articles/h29g9k7l7fymxp39yhzwxc5f72ancr.

[xii] “India’s G20 Presidency Aims to Strengthen Global Support for Diverse Social &amp; Eco Sectors.” The Economic Times. Accessed October 21, 2022. https://economictimes.indiatimes.com/news/india/indias-g20-presidency-aims-to-strengthen-global-support-for-diverse-social-eco-sectors/articleshow/93506804.cms.

[xiii] Rig Veda 11.28. 1-9

 

 

1. The global context of climate and energy

The latest reports from the United Nations Intergovernmental Panel on Climate Change (IPCC-2022)^[1][2] leave no doubt for the global community that climate change is widespread, rapid, and intensifying[3]. The UN Secretary-General António Guterres said the IPCC Report was nothing less than “a code red for humanity. The alarm bells are deafening, and the evidence is irrefutable.”[4]

Economic shocks, disruptions in supply chains, fiscal and monetary responses triggered by the COVID-19 pandemic, and disrupted production and trade in food and energy markets due to the war in Ukraine have further aggravated the climate crisis. The renewed search for energy security and the higher energy prices of oil and gas is leading to a reversion to carbon-intensive fuels that risk reversing the gains made in the last decade on energy transition. Higher food and energy prices and higher debt distress are also sliding the world’s poor back into extreme poverty[5]. These interlinked stresses on poor and emerging economies are making it even more difficult for governments to enhance energy access, transition, and security. Simultaneously, the availability of public funds to improve their people and communities’ adaptation and resilience to climate and extreme weather events is getting scarer.

This article presents a suite of proposals for the incoming G20 Presidency of India to guide an ambitious global response on climate and energy transition during these interlinked global stresses on economies, communities, and people.

2. G20’s impact on global climate efforts

All countries of the G20 grouping generate 80% of the world’s GDP, conduct 75% of world trade, and make up 60% of the global population[6]. G20 countries cause 76% of global greenhouse gas emissions[7]. Driving global economies towards a net-zero pathway will require deep cuts (~50%) in emissions throughout the G20 by 2030. Climate mitigation and adaptation actions undertaken by G20 countries will determine whether the next generations of humans will have a habitable planet or not.

At COP 26 in Glasgow in Nov 2021, the G20 countries[8] announced national long-term decarbonization pledges. Many G-20 governments have also implemented national policies and regulations to turn these pledges into actions in the last year. However, the BNEF’s G-20 Zero-Carbon Policy Scoreboard 2022 analyzed that while G-20 governments made ambitious pledges in 2021, none have implemented sufficient policies to plausibly achieve deep decarbonization, though some are closer than others.[9] This leaves an important and urgent role for all G20 countries to lead by example and implement policies and regulations to drive the mitigation and adaptation measures for effective global climate change response.

The current G20 Presidency, Indonesia[10], and the previous Italian Presidency[11] have made substantial efforts to move the energy transition[12] and climate agendas under the Sherpa Track. The agreements on enhancing climate action struck under the G20, like the directional shift of “Climate Action by ALL” in the declaration of the 2014 G-20 Summit[13] in Australia, have also found their way into and guided inter-governmental negotiations on critical geopolitical issues under the UNFCCC COP in Paris in 2015[14]. Given the emissions profile of G20 countries and the impact of the actions undertaken on the global economy, the agreements struck on climate and energy transition agendas under the G20 processes have a significant bearing on the worldwide response to climate change and energy transition.

3. India’s leadership on global climate and energy transition issues

    a). Climate and energy transition pledges

At Glasgow COP in 2021, the Hon’ble Prime Minister of India presented five nectar elements, ‘Panchamrit’[15], to deal with the climate challenge. These included:

I) Take non-fossil energy capacity to 500 GW by 2030.

II) Meet 50 per cent of its energy requirements from renewable energy by 2030.

III) Reduce the projected carbon emissions by one billion from now till 2030.

IV) By 2030, reduce the carbon intensity of its economy by more than 45 per cent.

V) By the year 2070, achieve the target of Net Zero.

In line with the PM’s statement in Glasgow, the Indian Union Cabinet, on 3rd Aug 2022, approved India’s Updated Nationally Determined Contribution[16]. This update to India’s existing NDC translates the ‘Panchamrit’ announced at COP 26 into enhanced climate targets. The update is also a step towards achieving India’s long-term goal of reaching net zero by 2070.[17]

    b). Recognition of ongoing domestic climate and energy transition actions

The IEA report, “India 2020- Energy Policy Review[18]” congratulated,[19]  the Indian government on its outstanding achievements in extending citizens’ access to electricity, affordable, efficient lighting, and clean cooking in record time through historic schemes like SAUBHAGYA[20], UJALA[21] and UJJWALA[22]. The Report recognized efforts by the Indian Govt to pursue energy market reforms and facilitating the swift deployment of renewable technologies. The Report also highlighted the strong growth of renewables in India, which now account for almost 23% of the country’s total installed capacity. The review also found that energy efficiency improvements in India avoided 15% of additional energy demand, oil and gas import, air pollution, and 300 million tonnes of CO2 emissions between 2000 and 2018.

India was the most attractive emerging market for clean power investment in 2021[23]. India has also consistently ranked among the top ten emerging markets covered by Climatescope[24], BNEF’s flagship report analyzing market attractiveness for energy transition investment. All these efforts and the climate mitigation and energy transition impacts solidify India’s credibility to lay out an ambitious G20 agenda on these issues.

    c) International climate leadership

Building on her domestic action and credibility, India has emerged as a global leader on climate and energy transition action. Under the leadership of the Hon’ble PM of India, the Government of India has also launched two global climate change response initiatives.

          I). International Solar Alliance:

The International Solar Alliance (ISA)[25], launched at the UNFCCC COP in Paris in 2015, aims to address issues related to climate mitigation by managing energy access, security, and transition with solar projects. The ISA now has 110 member countries with nine active programmes[26] promoting 10 GW of off-grid and grid-connected solar projects in developing countries to promote energy access and transition. The ISA has an ambitious global agenda to help mobilize USD one trillion in solar investments for enhancing energy security, access, and transition.

          II). Coalition for Disaster Resilient Infrastructure

On the adaptation and resilience front, the Government of India has launched the Coalition for Disaster Resilient Infrastructure (CDRI)[27]. The CDRI brings together nations, multilateral agencies and public and private partners to address issues of infrastructure resilience more systematically and comprehensively.

Both these global initiatives strive for a new model of South-South cooperation and exchange of experience and knowledge of new development paradigms as developing nations mitigate and adapt to climate change while addressing their development imperatives, like poverty alleviation, food security, and economic growth. India has also played a leadership role in various UN Summits related to climate and energy, like the India and Sweden co-leading Industry Transition track[28],  and has committed to progressively enhance climate action in various plurilateral and bilateral agreements with major countries and economic blocks like India-US[29], and India-EU climate agreements[30].

4. India’s G20 Presidency

Following the 75th year of her independence, India will host G20 in 2023. It would be a historic opportunity for India to advance her national interest and showcase her prowess as a global leader. Overall, India’s G20 theme could be centred around combining the elements of self-reliance and economic growth in a sustainable and climate-responsive manner. India’s Presidency could usher in a new model of global cooperation, “Atmanirbharta/self-reliance in a globalized world for sustainable development”. India could also position this new framework that would serve not just the G20 members but for the benefit of all developing countries.

With the troika of Indonesia (2022), India (2023), and Brazil (2024), the three developing countries, the Indian G20 Presidency offers a unique moment to strengthen the issues that matter more to developing countries in the global response to climate and energy transition. The author notes that there would be a continuation and path dependency of the various ministerial and working groups related to the environment, climate, energy, and sustainable financing of 2021[31] and 2022[32] G20 Presidencies. Still, each Presidency has the flexibility to guide the discussions and set the agenda.

The author proposes below a suite of concrete proposals which could be launched during India’s Presidency to strengthen India’s climate leadership through decisive domestic action and to initiate new global actions for enhancing global energy access, security and transition.

     a). Energy and climate agenda setting for the Presidency

In a recent article, India’s G20 Sherpa has outlined India’s priorities as it concerns the environment, climate, and energy and, “The concept of LiFE,[33] Prime Minister Narendra Modi introduced during the 26^th United Nations Climate Change Conference of Parties (COP26) in Glasgow, 2021. A global initiative ‘Lifestyle for the Environment-LiFE Movement’ was launched on World Environment Day[34]. India hopes to highlight LiFE as a critical focus area for discussion and action during our Presidency.”^[35][36]

India has championed the cause of developing countries in UN climate negotiations. India has been an avid supporter of the principle of “common but differentiated responsibilities”, asking developed countries to pay for climate finance and undertake a large share of mitigation actions. While the underlying historical context of climate change hasn’t changed, the contemporary geopolitical rivalries among major powers have sharpened considerably. The US-China (the two largest global emitters of greenhouse gases) dialogue on climate is stalled due to the Taiwan issue[37]. Europeans and other developed countries are shunning Russian oil and gas[38] in response to the Ukraine-Russia war and are securing carbon-intensive fuels, including restarting coal plants, to maintain energy security. Additionally, with deep aid cuts in G20 OECD countries, support for energy access and climate finance risks are being sidelined.

In this fast-changing geopolitical context, the Indian Presidency may consider shifting gears from the “power of the principle” to the “principle of power”. India could forge a new framework for driving climate action and energy transition while addressing energy security concerns of her own and other G20 countries. For developing countries, India could broker a broader deal that facilitates technological and financial support for countries to drive the energy transition and energy access agendas in times when nations are preoccupied with energy security concerns.

    b). Initiatives for Enhancing Energy Security and Transition

For agenda-setting purposes, the Presidency should reinforce principles of equity, justness, and citizen centrality to the global discourse on energy transition. It is imperative to ground the discussion on energy transition in the developmental imperatives of developing countries.

The Presidency could shape the energy security agenda so that countries broaden the energy transition discussion from the current exclusive focus on the transition away from coal to a comprehensive discussion on the shift away from all fossil fuels in a systematic and time-bound manner to cleaner energy fuels. Cooperative arrangements for enhancing investments in large-scale battery and pumped hydro storage, green hydrogen fuels and green ammonia, and cross-border trade in green electricity could also be forged to strengthen energy security and energy transition concerns simultaneously.

The Presidency could work with MDBs, DFI and Rating agencies to propose a new framework for measuring energy transition efforts for rating countries and public and private institutions raising funds from global markets. This would bring a broader perspective on the comprehensive energy transition efforts of governments and institutions rather than the current focus on coal transition or penalizing countries and companies for their coal or high-carbon energy assets and not recognizing the overall energy transition efforts of these sovereign and private actors.

Global energy transition could be expedited through a robust global push for pumped hydro storage and utility-scale battery storage technologies. With the increasing shares of green energy sources, cross-border green electricity trading has also become more relevant for the energy transition[39].

                   I). Coalition for scaling-up storage technologies

The UN Secretary-General has also called[40] for a global coalition on battery storage to fast-track innovation and deployment — a Coalition led and driven by Governments, bringing together tech companies, manufacturers, and financiers. The Presidency can bring together a Coalition of like-minded governments, tech companies, manufacturers, and financiers to scale up the battery and pumped storage technologies and projects. The Energy Storage Partnership^[41] initiative at the World Bank can be a supportive institution to build and strengthen such a global coalition.

                  II). Regional interconnections and green electricity trading

By trading energy from the sun, wind, and water across borders, countries can deliver more than enough clean energy to meet the needs of everyone on earth. This trading is already beginning to happen through discrete bilateral and regional arrangements. But to meet the sheer scale of the challenge, these efforts need to be combined and supplemented to create a more interconnected global grid. To realize the One Sun, One World One Grid vision, Hon’ble PM Modi and Hon’ble PM Johnson launched the One Sun One World One Grid-Green Grids Initiative[42] at COP 26 in Glasgow. More than 80 countries endorsed the One Sun Declaration[43] for the launch of the initiative. [44] The Ministry of New and Renewable Energy, the Government of India, with the support of the ISA[45] and the World Bank Group, has commissioned a technical study to assess the techno-commercial viability of global vision and explore 2-3 pilot projects to the East and the West of India for green electricity trading[46].

Connecting the United Arab Emirates (UAE) to the West coast of India[47] through undersea high-voltage direct current (HVDC) cables and transferring green energy produced by solar in both countries could be the first such game-changing energy transition project for realizing the global network of interconnected grid vision[48]. The UAE will host UN Climate Change COP 28 in 2023[49]. It is noted that India has invited the UAE to become part of its G20 Presidency as a guest country[50]. This provides the Indian Presidency with a unique opportunity to partner with UAE and launches regional electricity interconnection projects. India power and infra majors like Sterlite Power[51], Adani Infra and others, along with UAE investments, can play a leading role in such a regional project. The proposed initiative can be anchored under the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE.[52]

    c). Initiative for Enhancing Global Energy Access

As per the Tracking SDG 7 Report of 2022, the recent progress in universal access to electricity was mixed[53]. There were still 733 million people without access to electricity in 2020[54]. Among people without access to electricity, 77 per cent—about 568 million people—lived in Sub-Saharan Africa in 2020. Meeting the 2030 target requires increasing the number of new connections to 100 million a year.[55]

In the past few years, the Indian Government has made full electrification of its people possible through “Saubhagya” and other central and state-level initiatives. Lessons learned through these policy measures, including using off-grid solar solutions, can be instructive as the Presidency supports the energy access agenda for developing countries. This would be of invaluable support for the acute energy access needs of the Least Developed Countries. The partnership with ISA under the leadership of India at the G20 to help Africa would significantly impact the Region’s path to renewable energy.

A recent report by the World Bank has analyzed that solar mini-grids can provide electricity to nearly 500 million people in Africa and be the least-cost solution to close the energy access gap by 2030.[56] The Indian Presidency, through the ISA platform, could offer a new financial instrument for making substantial progress in energy access through mini-gird and off-grid solar projects. Hon’ble PM Modi announced[57] USD 1.4 billion in concessional financing for solar projects in ISA member countries. The uptake of these concessional funds has been slow due to COVID and the high-debt distress and political situations in the sub-Saharan African countries.

Under the leadership of India’s G20 Presidency, a risk guarantee and insurance facility by the ISA[58] and Multilateral Investment Guarantee Agency (MIGA)[59] of the World Bank Group can be launched in partnership with interested countries from the Africa Region to provide the necessary risk coverage for public and private investments to flow for solar projects to enhance energy access. The proposed Facility can mitigate the credit and default risks and unlock the public and private funding, including the unlocking the funds pledged in 2018 at the ISA founding ceremony. Indian solar manufacturers benefiting from the Production-linked Incentive (PLI) scheme[60] of the Government of India may also find new markets for solar products in Africa. It is noted that India also holds the ISA Presidency. Grant funding from global climate and energy foundations like Global Energy Alliance for People and Planet[61], could be secured to capitalize on the risk guarantee and insurance facility.

    d). Climate and sustainable financing agenda

For a long time, the global climate finance discussion under the UNFCCC format has been centred on the delivery of the Copenhagen promise by developed countries for collectively mobilizing USD 100 billion for supporting climate action in developing countries[62]. In the global economy, green financing has grown into hundreds of billions of dollars per year[63]. In the real economy, investors invest with financial risk and return parameters and do not pay a special premium for climate benefits. However, in the last few years, new investment frameworks are currently being operationalized to internalize climate and ESG risks into investment decisions[64].

The Indian Presidency may like to propose a new framework for climate finance by introducing a principle of climate-adjusted returns. This principle will entail discounting return expectations by specific percentage points if the investment brings climate return regarding mitigation and adaptation benefits. Or conversely, putting a financial premium on climate returns in investments’ decision-making or cheaper interest rates for climate-friendly projects. A recent proposal[65] for the provision of deeply concessional financing for climate action by MDBs, submitted at the 2022 Annual Meetings of the World Bank and International Monetary Fund by the G7 Presidency, Germany, may be worth examining in this regard. This principle would be of great value in simplifying the climate finance debate and help global efforts for scaling-up investments for addressing climate change, adaptation, and resilience activities.

For mobilizing larger pools of investments for global climate actions, the Indian Presidency can promote the use of blended finance instruments where the donor and concessional capital can be effectively utilized for mitigating risks for large-scale commercial investments from asset owners and pension funds[66]. G20 countries would consider new blended finance facilities and innovative risk mitigation instruments for scaling-up investments in large-scale battery storage and hydrogen projects in partnership with MDBs and global climate funds like the Climate Investment Funds[67] and the Green Climate Fund[68].

    e). Strengthening domestic Climate action

To meet India’s 2030 and the long-term trajectory towards a net-zero future by 2070 would require ‘whole of economy planning’ and strengthening execution capacities at all levels of the central and state governments. It is critical that other stakeholders, like the private sector, non-governmental organizations, and citizen groups, participate actively in such planning and execution processes. A robust institutional structure to guide the thinking and planning process for climate transition would provide a clear signal to public and private actors for making long-term investment decisions in critical sectors of the economy. In this regard, the Indian Presidency could also establish a comprehensive national institutional framework to guide medium to long-term policy changes for meeting net-zero targets.

In 2014, the Government re-constituted the Prime Minister’s Council on Climate Change to coordinate National Action for Assessment, Adaptation and Mitigation of Climate Change^[69]. The Council may have served its purpose and need an upgrade in its mandate. India could use the G20 Presidency period to lead by example for other G20 nations and launch a ‘Climate Transition National Mission’ and constitute a ‘Climate Transition Commission’ to drive a ‘whole of government’ thinking towards climate transition. The Mission and the Commission could be established along the lines of the Mission Karamyogi[70] and the Capacity Building Commission[71]. The Commission could have members from both govt and private sectors.

5. Sherpa Track format

Indian Presidency could explore a new format for structuring sectoral themes and meetings. Sectoral Ministerial and Working group discussions and meetings/visits can be planned to showcase the potential of the Indian industry/sectors leading strong climate and energy transition actions. Sectoral and industry champions can be identified and tasked with building these themes in close collaboration with line Ministries, corporates, and other stakeholders. Examples of such champions could be assigning Mr Anand Mahindra for EV mobility; Mr. K V Kamath for Sustainable Finance; Mr. Gautam Adani for Renewable Energy, and others.

Substantive support, including staff secondments, from WB, IMF and other IOs like IEA, IRENA and ISA can be mobilized to support the Presidency and G20 working groups. Active participation of Indian institutions to substantively contribute to agenda discussions need to be encouraged.

6. Conclusion

The G20 Presidency offers India a unique and historic opportunity to display her transformation developmental experience and growth opportunities for a climate-responsive and sustainable world. The Presidency could drive the climate and energy transition agenda by instituting bold domestic and global initiatives that are concrete and bring real change on the ground.

Author Brief Bio:  Jagjeet Singh Sareen is a Senior Policy Officer at the World Bank. He served as the Assistant Director-General of the International Solar Alliance on secondment from the World Bank. He is also an esteemed member of the India Foundation Journal Editorial Board. The opinions expressed in this article are those of the author and do not reflect the views of the World Bank and International Solar Alliance.

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Abstract:

The annual G20 Presidency of India comes in a year, which despite all the difficulties thrown by 2022, only promises to be worse. The IMF has noted that “2023 will feel like a recession”. The slowdown will be broad based, with countries accounting for a third of the global economy expected to contract this year or next^[i].

The Covid pandemic for more than two years erasing health and education gains of more than a decade, the subsequent Chinese lockdown creating a global supply chain shock to manufacturing, the Russia—Ukraine war and the consequent fossil fuel led global energy crisis and the consequent evaporation of stamina to tackle the global climate agenda, add up to a long spell of bad news for this decade.

The reasons why the world is facing utmost challenge in tackling these overlapping crises is the failure of the multilateral order. Hardly any multilateral institution (MI) has escaped unscathed. At an institutional level this is the biggest casualty of this decade. That these institutions, created post the Second World War to nurture global opinion and therefore policies on a series of topics that concern the welfare of the world population, rising above often narrow national considerations have been rent asunder means the global order has to be built anew, in a climate of intense distrust among the nations.

This perspective offers the insight into why the role of G20 has become paramount. In a sense, the G20 is not a typical MI. The organisation does not have a permanent secretariat. It was created in the aftermath of the Asian crisis in 1999 but recognising its versatility it graduated to become the only heads of summit forum in 2008 in the wake of the Global Financial Meltdown, capable of taking swift and enforceable decisions.

Along with 19 nations and the European Union, the G20 high table also includes almost all the key multilateral institutions. The communique of the G20 has till now, never examined the state of health of these institutions. But in an unusual departure it will do so now, as India’s finance minister Nirmala Sitharaman has pointed out recently. She has said India will prioritise the strengthening of these multilateral institutions, a call that is most appropriate at this juncture.

Introduction:

It is an amazing coincidence that beginning with Indonesia, the annual G20 Presidency will remain with the global South for four years. India, which shall assume the Presidency in December 2022, will hand it over to South Africa in 2024. Brazil comes in thereafter in 2025. The continuity provides a great opportunity to redraft the role and the leadership of the MIs by a new set of nations, mainly from the global South.

In these four years, the foremost question the G20 will have to address is how to rebuild the MIs to effectively serve the new world order. There is similar breakdown and rebuilding taking place at another level, that of defence. The global security pacts of the 20th century are being upended by new ones like the Aukus and the Quad. “The formation of AUKUS…and its impact on the geopolitical environment and security architecture in the eastern Indo-Pacific region is likely to be significant”^[ii]

The setting is therefore most appropriate to appreciate why a large-scale putsch of the order of the MIs, is in order (no pun). To understand why, a brief recital of the journey of these bodies, is necessary.

First of all, what do we mean by the universe of MI? These institutions were a response of the victorious nations to the devastation inflicted by the Second World War. They were meant to guide the gradual dismantling of the colonial world order built on empires to a new world order to be based on the voluntary comity of nations. That this transition should happen well, was the raison d’être of each MI. Yet, given that many of the nations were just infants, economically and politically, when they entered the post-colonial world, the leadership role of the MIs were largely concentrated among the leading Allied powers, led by the USA. It also created an interesting geography of the headquarters of these bodies, located exclusively in the Western European continent and the USA.

The foremost of them was the United Nations whose charter was initially signed by 50 nations including India, in 1945. Since then, the membership of the UN by countries and of its related bodies like the WHO, the UNESCO, UNICEF, FAO and UNHCR among others have exploded^[iii]. The other set of charter organisations came out of the Bretton Woods conference of 1944, led by the IMF, the World Bank, the GATT and the continent wise development finance organisations including the ADB, the EBRD and the AfDB. While the alphabet soup expanded every decade since then, the most notable addition to the list has been that of WTO (a follow up to the GATT) in 1995 and the three Asia based financial institutions, the New Development Bank in 2014, the AIIB in 2016 and the ISA in 2018. For the past seventy-seven years since 1945, these MI had run on a governance structure straddling the global commonwealth of finance, disarmament, health, education, labour, laws of the seas and of air, to even culture and more. The key roles in the UN family was based on the voting rights of the nations in the Security Council, while in the economic MI, these were often based on preferential voting rights.

But in the face of the challenges thrown up by the third decade of the twenty-first century, the MIs are failing drastically short. This is quite different from several occasions in the 20th century when nations found the remit of the various MI inadequate. Those inadequacies were addressed not by calls to develop new institutions jettisoning the old but by coopting the old and the new institutions. For instance, the establishment of internet coordination platform, ICANN in 1998 filled an emerging gap in the development of the net. But it looped back with the UN. Sometimes, the UN itself promoted a new organisation. The most famous of them all, the Intergovernmental Panel on Climate Change came up in 1988 to coordinate global response to the warming planet.

In the current decade there is instead no call to develop such feedback loops but restructure the organisations, hook, nail and sinker. Why has this happened? It is because the governing structure of these MIs have fallen prey to intense hostility among the member nations, in an era of hardened politico-economic differences. The “continued success and relevance (of the UN) would be determined by its ability to adapt to the realities of today’s world, which is starkly different from what it was at the time of its creation more than 75 years ago,” notes the BRICS Joint Statement on Strengthening and Reforming the Multilateral System, issued last year^[iv].

For instance, conventional wars like that of Russia—Ukraine have split the UN so effectively that it cannot even decide on sanctions. In other wars not occupying comparable media space like those in Yemen or Iran, the differences are almost equally stark. New flashpoints are meanwhile developing alarmingly like those in South China Sea, where only the gunpowder is missing in action.

Add to them the list of challenges like the Covid pandemic, an energy crisis brought on not by natural shortages but because of a war bereft of reasons, a global supply shock of commodities brought on by the breakdown of a globalised supply chain and a climate crisis that offers no easy solutions but inflicts an unfair cost on those who are most at risk. Nations stand ready to blame each other, for each of these crises, but most important, point fingers at the MI for perceived bias^[v]. Their inability has not escaped attention. “We therefore must modernise our multilateral institutions, making them fit for purpose and better equipped to deal with the global and cross-generational challenges we face,” notes a joint article penned by Jacinda Ardern, Cyril Ramaphosa and Pedro Sánchez, the Prime Minister of New Zealand, President of South Africa, and Prime Minister of Spain, respectively^[vi].

In the post-Second World War era, the MIs were conceived to address tough social and economic challenges but armed with a stable governance structure. In the intervening decades these organisations worked on a common belief that each of the global problems can be addressed through adequate technocratic responses. The stable Eurocentric governance structures offered a plausible assumption that this was possible.

With the breakdown of faith in the governing structure, the MIs can hardly offer any adequate response to the current global war-like situation among many members^[vii]. Those war-like postures have been sharpened into acute political hostilities among the members in the governing bodies of the MIs “The clash between China and the U.S. at the just concluded World Health Assembly in May marks the end of the multilateralism of the past 70 years”^[viii]. In such an environment hopes of dousing the multiple crisis are just not on.

It is this context which allows one to understand why Finance Minister Nirmala Sitharaman said, at a Brookings Institution event in the USA “You need new institutions, please do… From the lessons learned from how these [existing institutions] have become less effective, we need to make them more effective as well”. Her highly significant remarks were made in a conversation with economist Eswar Prasad on ‘India’s Economic Prospects and Role in the World Economy’^[ix]. These are measured remarks but that Ms Sitharaman has made them and at an institution where those shall be heard loud and clear, are themselves an indication of how deep the malaise has spread.

Role of G20:

In these recondite circumstances, where does the G20 fit in? The transformation of this group to that of a heads of state in 2008 followed a recognition, that the Global Financial Meltdown was too much of a bewildering development in the global economy. There was a recognition that unless a meeting similar to that of the G7 was held to bring the leaders of more key economies across the table, to direct coordinated action, there shall be intense pain for the global economy. The 19 countries plus the European Union at the table, brought with them up to 80 percent of the world’s economic output, two-thirds of the global population and three quarters of the international trade.

The template of commonly directed actions significantly helped the world swim out of the Meltdown. The first meeting in November at Washington DC was so successful that it became an annual template. “On that occasion, the country’s leaders coordinated the global response to the impact of the financial crisis that occurred in the US at that time and agreed to hold a follow-up meeting”^[x].

After a decade of relatively moderate pressures, the success of the model was again made clear in April 2020 when the G20 leaders assembled virtually to direct global action against the Covid pandemic.^[xi] The meeting, coordinated by Saudi Arabia as the President “asked Finance Ministers and Central Bank Governors to develop an Action Plan in response to COVID-19”. This included sharing of the latest information and country experiences on COVID-19 containment measures, their implementation and subsequent removal to minimise negative spillover and second wave effects, including the risk of secondary waves of infection. That level of coordination among the members of the UN system would have taken more than a year to come up for signature.

Compared to any other global organisations, including the UN Security Council, it is this ability of the G20 to bring the top political heads of state of the world in one room, speaking with and listening to each other, that has set it apart. It is this avatar in which the G20 will be needed to be seen again in a highly polarised world. In this context, other than the sterling role played by it with respect to the cataclysmic events of 2008, one has to examine to what extent the body has been successful and where it has failed, since then.

One of its striking successes in recent years is that in the Italian presidency in 2021 (the G20 presidency usually runs from the previous December to November), the G20 agreed to put a floor under corporation tax rates of 15 percent. Since then, all multinational companies with turnover of USD 100 billion or more have begun to recalculate their tax liabilities, globally. The body has also notched up several successes in the field of setting standards, like global telecom rules, data interoperability, financial technology, a common agreed approach to address the climate emergency, and so on. Importantly, the G20 meetings offered the world leaders an opportunity to speak with each other in person. Once the Meltdown was sufficiently addressed, the early part of the second decade allowed for tensions to be lowered across the table, on a vast range of issues.

Yet even this environment of letting off steam has not held up. The G20 meetings now face an intractable challenge. In the Indonesian Presidency, till now it is unclear whether the US, Canada and the European countries will agree to even sign a joint communique, along with Russia, in November this year. This communique is not symbolic but gives direction to the respective member countries expressing their “commitments and vision for the future, drafted from the chosen recommendations and deliverables from ministerial meetings and other work streams”. Yet, at several ministerial working groups, even the preparatory work has got largely stalled. In the G20 framework, a large number of subject areas are threshed at ministerial levels by the member countries. The working groups of country officials create draft joint declarations on labour, energy, telecommunications, health, finance and even arcane topics like culture.

The Russia-Ukraine war has cleaved the G20 into two groups. Russia is a member of the G20, Ukraine is not. But never before has any of the member nations gone to war at this scale. The US invasions of Iraq and of Afghanistan, for plenty of reasons, do not count in the same league. The European and American nations are keen to include a reference to this war, in every possible forum, condemning Russia. It follows what they are doing domestically also. For instance, in all press communiques issued by the US department of treasury, secretary Janet Yellen has made an obligatory reference to the war, where she criticises the role of Russia and commiserates with Ukraine.

While all the Asian nations of G20 are on the same page in their criticism of Russia, they are also insistent that the right place for expressing any such opinion is the declaration of the heads of state, which will follow their meeting in November this year. As a result, when officials from the G20 nations have met this year as members of working group, more than the substantive issues, their dialogue have stalled. “Indonesia…is understood to be struggling to get all countries to arrive at a consensus on outcome documents. With tensions between the West and Russia intensifying, convening all members in the same room has been a challenge too”^[xii].

The stakes involved:

Are there any competing global organisations that can offer a viable alternative? It does not seem so. Having wedged themselves into the war by supporting one of the combatants, neither the IMF, nor the World Bank and its associate organisations have shown the ability to bring all nations to a constructive dialogue. Two developments in this context are worth noting. First, there is hardly any doubt that the reconstruction efforts post the Russia-Ukraine war will be dominated by the heft of the membership of major nations across international organisations. India is hamstrung because she plays host to no major global institutions. Yet, as the fifth largest economy, she has a stake in the rules set by most of them.

Second, the weaponisation of the global financial system to target countries, most evidenced in the sanctions, price cap on sales of Russian crude and making the Swift system unavailable to transactions involving Russia and Iran, make it absolutely essential that India sits in positions of authority at the rule making bodies. As globalisation goes on retreat, participation in the multilateral organisations with strength is becoming more important for major nations.

One of the key organisations which could become a significant entity consequently is the Shanghai Cooperation Organisation (SCO). India is in an advantageous position here since it shall become the chairman of SCO in 2023. Analysts are already comparing the role of SCO with that of NATO in Europe^[xiii].

“In the short term, the West has reasserted its dominance over the international system that it built in the aftermath of World War II. But it should expect a serious longer-term challenge from an intensification of the China-led effort to build an alternative system”, Mohamed A. El-Erian has written in his Project Syndicate column^[xiv]. At stake shall also be dominant roles in organisations like the AIIB and the NDB.

At the IMF, India has already pitched for conflating the issue of Special Drawing Rights with enhanced voting rights. The dispute has led to stiff arguments among the member nations. India argues that just as nations which need more support from the IMF to recover from Covid by getting more SDR (which substitutes for scarce foreign exchange reserves for them), those nations which provide the support should also get larger voting rights.[xv]

Paradoxically, even as the MIs wilt, they shall be drawn into a vast agenda of reconstruction just as it happened post the Second World War. Estimates say that Ukraine itself shall need a global support of a massive USD 349 billion as per the World Bank, and there are going to be other centres of destruction^[xvi]. The MIs shall be asked to estimate the scale of the disasters and prepare a laundry list. As Sitharaman noted, the multilateral institutions exist but problems remain and solutions are not coming through them.

But to get the whole set up of organisations ready to take on their renewed mantle, the G20 has to provide the political leadership in the governance of each of them. It remains the only organisation which has the persuasive power to make peace and reconstruction happen.

Author Brief Bio: Subhomoy Bhattacharjee is Consulting Editor for the Business Standard Newspaper and Senior Adjunct Fellow, Research and Information System for Developing Countries (RIS), New Delhi.

References:

^[i]WEO Press Briefing Annual Meetings 2022, October 11, 2022

https://www.imf.org/en/News/Articles/2022/10/12/tr101122-weo-transcript

^[ii] AUKUS and the Eastern Indo-Pacific’s Evolving Security Architecture, GIRISH LUTHRA;

https://www.orfonline.org/research/aukus-and-the-eastern-indo-pacifics-evolving-security-architecture/

^[iii] For a list, see here https://www.ungm.org/Shared/KnowledgeCenter/Pages/VBS_UNSystem

^[iv] BRICS Joint Statement on Strengthening and Reforming the Multilateral System,June 01, 2021

https://www.mea.gov.in/bilateral-documents.htm?dtl/33888/BRICS_Joint_Statement_on_Strengthening_and_Reforming_the_Multilateral_System

^[v] Xenophobia, prejudice, and blame in pandemic times; Alexandra R White https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(22)00197-0/fulltext

^[vi] https://www.livemint.com/opinion/online-views/let-us-revitalize-multilateralism-the-future-of-the-world-is-at-stake-11633279934717.html ©2021/Project Syndicate

^[vii] 10 Conflicts to worry about in 2022: Mid-year update https://acleddata.com/10-conflicts-to-worry-about-in-2022/mid-year-update/

^[viii] Multilateralism in the new cold war; Mukul Sanwal. The Hindu

https://www.thehindu.com/opinion/op-ed/multilateralism-in-the-new-cold-war/article31734107.ece

^[ix] https://www.hindustantimes.com/business/g20-has-a-great-potential-to-work-towards-global-good-sitharaman-in-us-101665560764915.html

^[x] https://www.g20.org/about-the-g20/#about

^[xi] Communiqué—Virtual meeting of the G20 finance ministers and central bank governors
Riyadh, Saudi Arabia, April 15, 2020;

http://www.g20.utoronto.ca/2020/2020-g20-finance-0415.html

^[xii] With an eye on G20, Sitharaman steps up engagements in Washington DC, Hindustan Times, Oct 14, 2022

https://www.hindustantimes.com/india-news/with-an-eye-on-g20-sitharaman-steps-up-engagements-in-washington-dc-101665685607257.html

^[xiii] Rogue NATO: The new face of the Shanghai Cooperation Organisation; © European Council on Foreign Relations 2022

https://ecfr.eu/article/rogue-nato-the-new-face-of-the-shanghai-cooperation-organisation/

^[xiv]The Ukraine War’s Multifaceted Economic Fallout; Mar 7, 2022, Mohamed A.EL-Erian https://www.project-syndicate.org/commentary/economic-policy-response-to-ukraine-war-by-mohamed-a-el-erian-2022-03

[xv] Bhattacharjee, Subhomoy. “India May Not Get to Play a Major Role in Reconstruction of Ukraine.” Rediff. Rediff.com, March 16, 2022. https://www.rediff.com/money/report/india-may-not-get-to-play-a-major-role-in-reconstruction-of-ukraine/20220316.htm.

^[xvi] Ukraine Recovery and Reconstruction Needs Estimated $349 Billion

https://www.worldbank.org/en/news/press-release/2022/09/09/ukraine-recovery-and-reconstruction-needs-estimated-349-billion

The G20 presidency allows India to highlight a key aspect of its global rise – its role as a provider of global public goods and services. All delivered digitally.  

From December 2022, India will take over the presidency of the G20 for one year. The G20 or Group of Twenty is one of the most important groupings in the world because it includes not only most of the world’s leading economies (both developed and developing) but also makes up 80 per cent of the gross world product, measures half of the globe’s land area, two-thirds of the population, and around 75-80 per cent of international trade.

India’s presidency comes at a time of great global turmoil. The changing world order, and India’s own ambitions of rising in the global system, must today take into account not just a global warming crisis, but also an upcoming recession, and a war in Ukraine which is alarmingly bringing back fears of the use of nuclear weapons.

At a time like this, the key question is what India could achieve through its presidential term, what could it showcase that would stand out and be representative of its undisputed global contribution. This essay argues that the G20 is India’s opportunity to craft a new narrative of ‘digital democracies’ which would enable the country to showcase not only its prowess in building and deploying public goods at scale which operate, and are delivered, digitally, but it would also assist in demonstrating its commitment to offer such goods at a global, and not merely national, level.

In recent years, India’s policymaking and delivery has had a digital cornerstone. Whether it was delivering cash benefits to vulnerable populations, or instantaneous delivery of vaccine certificates, during the Covid-19 pandemic, the use of mobile phone-based digital infrastructure took centerstage. Alongside this, India’s UPI (Unified Payments Interface) and RuPay – built by India’s National Payments Corporation of India – payment cards systems which constitute a multinational financial services and payment service system has now spread to seven countries – Oman, Singapore, Bhutan, Malaysia, France, Nepal, and the United Arab Emirates (UAE). Last year, India led the world in digital financial transactions clocking 48 billion such transactions, three times China’s number, and 6.5 times that of the US, Germany, France, and Canada put together.

The Aadhaar digital identification number system, and the upcoming digital health platform, along with other initiatives like the digital locker (whose registered users have grown from 40 million before Covid to 125 million today with more than 5.6 billion documents stored) constitute an ecosystem which should be presented to the world as something other countries could successfully adopt. The successful implementation of the digital locker is the first step towards unrolling the digital health scheme which hinges upon patients being able to store their health records digitally so that they are accessible, anytime, anywhere.

The success of the underlying thought behind all these products is being recognised. For instance, the International Monetary Fund (IMF) has described India’s digital cash transfer process during the pandemic a ‘logistical marvel’. Digital technology has indeed given a fillip to delivery systems and mechanisms in India, where dealing with the labyrinthine state was always challenging for the ordinary citizen. Now, often, all it takes is a mobile phone. It has also built the case for India as the provider of global goods related to digital technologies. What kinds of goods are these?

These are two kinds of digital architectures – one owned by major corporations like in the United States which then spread their network of users around the world, and the other, a more closed system in a sense, comes from China, which also builds such architecture at scale. If the American system is dominated by large corporations, China’s systems are operated by a rather opaque authoritarian system which consistently faces investigations on issues like espionage and other allied matters.

India stands out in this because it is showing that it is able to build digital architecture at scale which does not have to fall into either of these two binaries. It can be built at scale under a democratic governance structure. This is what makes it possible for India to offer this kind of technology to other countries as suitable measures to distribute and monitor goods of governance while keeping the framework firmly democratic. At the G20 platform, India could display this prowess in a programmable manner, which means it could offer this technology as the basis for a new kind of global cooperation.

What kind of cooperation could this be? It would be between ‘digital democracies’.

The recent US government decision about licensing semiconductor manufacturing equipment to China is a very stark reminder that in an increasingly fractured world, a new network of supply chains, based once again on deep strategic reasoning, is being built.

What is happening is that a new reasoning for cooperation and collaboration is emerging where countries will build supply chains based on alliances. This kind of thing was once confined to military technology but will increasingly spread to other forms of technology sharing, because increasingly, even domestic-use technology is being weaponised. One of the examples of this came in the blocking of Russian entities from the global SWIFT financial transaction system.

Therefore, democracies will choose to band together in the sharing of cutting-edge technologies, whether civilian or military, and India is among a handful of countries which can both create mass technologies but also test them at scale. Therefore, India could legitimately hope to play a role in ensuring that a consensus is built among democracies to use and share digital public goods, many of which India could construct and bring to the table.

The ability to do so gives India a voice in the technology conversation, not merely as the site which provides tech talent, but also as the maker of products, and architecture. India is now a place where some of the biggest, and one can now legitimately say, best, digital public architecture is going to be built. A ‘digital democracy’ grouping promoted by India, the country with one of the largest sets of internet users in the world, and a place which has one of the cheapest data rates on earth, can work to build consensus on not only what kind of public utility digital infrastructure to build but also to what kind of use it should be put to, and how to prevent illegitimate use.

By championing the idea of bringing together digital democracies during its G20 presidency, India would be able to showcase its products, their impact, and their potential use in other parts of the world; all the while leading the conversation on the manner in which the global digital economy must be steered by governments to keep it away from authoritarian use. This also fits in well with India’s efforts to provide goods and services to countries that need them, as in the manner it provided vaccines around the world during the Covid pandemic. From the islands of the Pacific to countries in Africa and Latin America, where India is building deeper ties today than what it has traditionally possessed, it can offer digital goods that could be deployed effectively in many countries who might otherwise not have the technological prowess or the scale to successfully build such models.

A digital democracy framework is also a great platform for deeper India-US collaboration, especially in the light of the decoupling that the US is affecting with China, including in technology. As the world embraces 5G, issues on who has what kind of technological architecture will become a key governance question, similar to the impact that good quality roads, railways lines and airports have had. As President John F. Kennedy famously said, “American roads are not good because America is rich, but America is rich because American roads are good.”

Today, countries don’t have to be the richest to have the best public digital infrastructure. But they will be able to increase their wealth if this kind of infrastructure is widely and democratically, made available to their citizens. This is something India can take advantage of. It is a country which leapfrogged inadequacies in its physical infrastructure by building a world class information technology industry. Now it is building not only physical infrastructure that is world class but also digital infrastructure which is among the best in the world.

The G20 presidency is the platform where India comes into its own as an innovator in digital governance and places its skills and talents in this aspect as a vital part of its diplomatic goodie bag. It is a moment when India can urge a grouping based on shared values in the creation and dissemination of digital goods and services and where democracies agree on broad principles of information sharing, sovereignty safeguards, and adequate protection for privacy. This is not just an important issue for India, but is increasingly critical for every major democracy. Therefore, it might be worth considering as part of India’s G20 plans.

Author Brief Bio: Hindol Sengupta is Vice-President and Head of Research at Invest India.

The Group of Twenty (G20), an informal grouping of the world’s largest 20 economies, was formed in 1999 after the Asian financial crisis. The Grouping was created to enhance global policy coordination and give greater visibility to emerging economies, which are increasingly interconnected in the global economy. In its initial years, global economic growth and financial market regulation have been the sole focus of G20.^[i] Many argue that G20 played a vital role during the 2008 financial crisis and probably saved the world from economic depression.^[ii] It facilitated a coordinated response on fiscal stimulus, and helped improve financial regulation. It also created a supportive political environment for strong national and global actions to address the crisis.

G20 members currently account for nearly 80 per cent of the world GDP, 75 per cent of global trade, and 60 per cent of the global population.^[iii] Over the years, the G20 agenda has broadened and deepened, and the Group became the premier global forum for discussing the many pressing socio-economic and development issues. While the first decade of G20 actions were at the level of Finance Ministers and Central Bank Governors, its agenda has diversified significantly in the second decade at the leaders’ summit level. For instance, one of the most significant outcomes of its 2009 summit was the agreement to implement a framework for strong, sustainable, and balanced global growth.^[iv]

Furthermore, the G20 growth framework seeks to ensure that growth is characterised by inclusiveness and resilience, both of which are necessary for sustainable and equitable development.^[v] For instance, in 2012, under Mexican presidency, G20 introduced inclusive green growth as a cross-cutting priority on the G20 development agenda. Subsequent G20 presidencies took forward this agenda and Subsequent G20 presidencies took forward this agenda, and the members made several commitments to inclusive green growth. In 2016, for instance, the G20 committed itself to the Action Plan on the 2030 Agenda for Sustainable Development. The plan aims to contribute to global efforts to implement the 2030 Agenda, including the Sustainable Development Goals (SDGs) and the Addis Ababa Action Agenda on Financing for Development (AAAA).^[vi]

India will assume the G20 presidency on 01 December 2022. The year-long presidency would be a watershed moment for India, a country profoundly committed to multilateralism. It also provides India a significant opportunity to drive global economic cooperation and articulate policies on various pressing socio-political issues. However, India’s presidency comes at a time of intensifying geopolitical tensions and increased anti-multilateral, anti-globalisation sentiments. Consequently, the challenge before India is to help the G20 to reinvigorate failing multilateralism and strengthen global support for post-pandemic recovery and growth. This article examines how India can utilise its G20 presidency to steer global confidence in multilateralism, focusing on G20 actions on inclusive green growth.

The article proceeds as follows. First, it explores the G20 conversations on growth and recovery and its achievements in inclusive green growth, focusing on food security, climate sustainability and public health. The second section focuses on options and priorities for India’s G20 presidency towards inclusive green growth.

G20 and Inclusive Green Growth

Green Growth attempts to provide a solution to the joint objectives of economic growth and environmental sustainability. The G20 countries have increasingly recognised the importance of green growth. In the past, G20 made several commitments to creating new economic opportunities while solving environmental and resource scarcity challenges. However, the COVID-19 pandemic has caused the worst economic contraction and significantly impacted the global green growth transition. The pandemic has largely relegated climate, food security and public health. The following three subsections will discuss the G20 commitments on climate change, food security and public health as a background to explore India’s options and priorities as G20 president.

Food Security and Sustainable Agriculture: Sustainable agriculture and food security remain top priorities in the G20 agenda. The G20 members are committed to promoting sustainable agriculture, which has a significant role in achieving a wide range of SDGs, including food and nutrition security. The G20 economies are central players in the global food production and supply chain system. For example, G20 nations produce nearly 80 per cent of the world’s cereals and account for a similar percentage of world agricultural exports.^[vii] As a result, G20 policies related to agriculture and food security can also impact global food security and nutrition. Furthermore, G20 countries are also the major providers of development assistance for food security and nutrition, as well as key shareholders of multilateral development institutions that channel aid and non-concessional finance for investments in rural development.^[viii]

G20 has shown leadership in addressing food insecurity on various occasions in the past. During the 2008 food price crisis, G20 intervened and positively responded to the crisis. These interventions later resulted in the formation an Agricultural Market Information System (AMIS) and its Rapid Response Forum (RRF), a Global Agriculture and Food Security Program (GAFSP), the Global Agricultural Monitoring initiative (GEOGLAM), the Tropical Agriculture Platform (TAP), Platform for Agricultural Risk Management (PARM) and AgResults.^[ix] Food Security and Nutrition Framework (2014), Food Security Action Plan (2015) are other other significant development in this regard. The Framework provides “the basis for the G20 to take a long-term, integrated and sustainable food systems approach that will guide future action on food security and nutrition.”^[x]

The 2016 G20 Agriculture Minister’s meeting produced the Implementation Plan and the Action Plan on Food Security and Sustainable Food Systems. Likewise, the 2018 Argentina Presidency has focused on sustainable soil management and its impact on food security and human development. In 2020, the Saudi G20 Presidency initiated the G20 Riyadh Statement to Enhance Implementation of Responsible Investment in Agriculture and Food Systems (G20 Riyadh RIAFS Statement). The Statement emphasized the G20 Members’ leadership role in promoting responsible investment to improve the sustainability, inclusiveness and resilience of agriculture and food systems.^[xi] In 2021, G20 meeting culminated in the Matera Declaration on food security, nutrition and food systems, which outlines an agenda for addressing global food insecurity and putting the world back on track to end hunger within the decade.^[xii] In October 2022, the first G20 Joint Finance and Agriculture Ministers (JFAMM) meeting agreed to task international organisation namely the Food and Agricultural Organization (FAO) and World Bank in mapping global policy responses to food insecurity.

However, the Covid-19 pandemic, coupled with the Russia-Ukraine war, has deepened global food insecurity and has significantly impacted the agri-food supply chain system, particularly in developing countries. This requires G20 members to work hand in hand, make more commitments, and ensure its implementation.

Climate Sustainability: Climate change has now become one of the most significant challenges to humankind. The deteriorating global environment seriously imperils sustainable development goals. The G20 economies are responsible for nearly 75 per cent of global greenhouse gas emissions. Moreover, they are leading in the promotion of fossil fuels, as they derive 82 per cent of their total energy supply from coal, oil and gas.^[xiii] Many G20 countries are also significant producers of fossil fuels. Thus, the group members’ commitments and compliance are critical to achieving global climate commitments. Moreover, G20 has a strong economic interest in limiting global warming to 1.5°C due to climate change’s negative impact on total economic activity. Climate plays an important role in the both Finance and Sherpa track of the G20. The Finance track, which deals with “the traditional core issues of the G20, has been discussing, among others, climate finance. The Group has frequently reiterated the timely implementation of international climate agreements and commitments.

Over the last decade, the G20 has repeatedly endorsed global climate negotiations and established its own initiatives. The G20 supports the transition to more adaptable, open, and clean energy systems while acknowledging the value of collective action in addressing environmental issues and climate change. The most significant change is the augmentation of renewable energy. Nearly all G20 countries have substantially increased their renewable energy portfolio. In 2009, G20 committed to “rationalise and phase out over the medium-term inefficient fossil fuel subsidies that encourage wasteful consumption”.^[xiv] In 2020, the G20 Summit held in Toronto reconfirmed the Group’s commitment to green recovery and sustainable global growth. The primary focus of the 2011 Summit was on promoting low-carbon development strategies to optimise the potential for inclusive green growth and to ensure sustainable development.^[xv]

The 2012 Summit in Mexico established the G20 study group on climate finance to consider ways to mobilise resources and support the operationalisation of the Green Climate Fund. Commitment to phase down the production and consumption of hydrofluorocarbons, the USD 3 billion campaign for the Green Climate Fund and support for the Paris Conference’s ambition were the significant outcomes of St Petersburg (2013), Brisbane (2014) and Antalya (2015) Summits. In 2015, the G20 also called for the timely submission of Intended Nationally Determined Contributions (INDCs) and ratification of the Paris Agreement. In Guangzhou, in 2016, the G20 Sherpas agreed on a Presidential Statement on Climate Change, committing to signing the Paris Agreement and bringing it into force as soon as possible.^[xvi] The Sherpa track, which is coordinated directly by the G20 leaders, established a dedicated working group, the G20 Hamburg Climate and Energy Action Plan for Growth, on climate and energy in 2017, which became a stand-alone working group in 2018.”^[xvii] Osaka Blue Ocean Vision and the G20 Implementation Framework for Actions on Marine Plastic Litter were the other significant developments during these years.

In 2020, under Saudi presidency, G20 endorsed Circular Carbon Economy (CCE) Platform, with its 4Rs framework (Reduce, Reuse, Recycle and Remove), recognising the key importance and ambition of reducing emissions, taking into account system efficiency and national circumstances.^[xviii] In the 2021 Rome summit, in keeping with expanding agenda, the G20 shared its aspirational goal “to collectively plant one trillion trees, focusing on the most degraded ecosystems on the planet, and urged other countries to join to reach this global goal by 2030, including through climate projects, with the involvement of the private sector and civil society.”^[xix] As an extension to the Sustainable Finance Roadmap of the Rome summit, under the Indonesian presidency, G20 held an exclusive meeting on climate mitigation which discussed policy and regulatory approaches to climate finance mobilisation.

Furthermore, beyond the promises, G20 members have delivered real progress in the climate change and clean energy areas. For instance, between 2015 and 2020, the share of renewables in the G20 increased by 20 per cent, reaching 28.6 percent of its power generation in 2020 and is projected to reach 29.5% in 2021.^[xx] The energy sector’s carbon intensity decreased by 4 per cent across the G20 during the same period. Moreover, even when the US planned to withdraw from the Paris Agreement, the G-20 further sought to improve sustainable livelihoods with its clean energy and climate efforts. However, the post-Covid-19 data shows that the G20 countries are not on track to achieve their climate commitments and to accelerate the transition, they need to follow up on past commitments and take further steps.

Public Health: Global public health has received consistent attention of the G20 since its first leaders’ level summit in Washington DC, in 2008. Since then it made nearly 80 collective, politically binding, future-oriented commitments on health.^[xxi] However, health became a prominent issue on G20 agenda in the recent past only. The outbreak of Ebola crisis in 2014 and G20 response is a case in point for Group’s work on health emergencies. In 2017, under the German Presidency, the G20 Health Working Group (HWG) was founded to create a unified international agenda on improving healthcare systems.^[xxii] The Group also agreed to collectively respond to public health emergencies and tackle the challenge of antimicrobial resistance, resulting in the Global AMR Research and Development Hub.

Next year, the Argentinean Presidency introduced childhood obesity and maintained efforts to strengthen the health system and combat antimicrobial resistance (AMR).^[xxiii] The summit also reinforced the need for joint commitment by G20 countries to strengthen core capacities for prevention: detection, preparedness and response to health emergencies.^[xxiv] In 2019, the Japanese Presidency focused on issues such as the achievement of Universal Health Coverage, response to population ageing and management of health risk and health security.^[xxv] It was in Japan, for the first time G20 Health and Finance Ministers met jointly and the Group recognised the vital link between investments in public health and economic resilience.

Since the outbreak of the COVID-19 pandemic, access to vaccines, therapeutics and diagnostics has become the core of the G20 agenda. It led the global fight against the pandemic with a USD 10 trillion bailout package focused on addressing the economic and health crisis. In 2020, the Saudi Arabian presidency developed a new narrative for pandemic financing. It also proposed “Enabling Person-Centred Health Systems” focusing on value-based health care and digital health solutions as the central pillar of the health agenda.^[xxvi] Moreover, a G20 Digital Health Taskforce was created and it submitted a Report on Digital Health Implementation Approach to Pandemic Management.^[xxvii]

In 2021, under Italian leadership G20 has not only recognised the interdependency between health and wealth but also created a High-level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Responses.^[xxviii] The panel calls for a significant increase in public funding in the global health to plug major gaps in pandemic prevention and preparedness. It has also identified four pressing preparedness gaps: “infectious disease surveillance, resilience of national health systems, global capacity to supply and deliver vaccines and other medical countermeasures, and global governance.”^[xxix] G20 members also agreed to establish a Joint Finance-Health Task Force to further strengthening a crucial coordination between Finance and Health Ministries in pandemic prevention, preparedness and response. The Group also collaborated on the COVID-19 Tools Accelerator initiative and reinforced their financial support for the “Access to COVID-19 Tools.” Moreover, global health architecture was also one of the key priorities of the current Indonesian Presidency.

Challenges, Options and Priorities for Indian Presidency

According to the Ministry of External Affairs, as G20 president, India aims to strengthen global support for developing countries’ priorities around inclusive, equitable and sustainable growth. These range from LiFE (Lifestyle For Environment), global food security, energy security, women’s empowerment, tech-enabled development in health, agriculture and climate financing, and multilateral reforms.^[xxx] The year-long presidency will also focus on building a consensus within the group on actions to revitalise global economic growth in a human-centric and inclusive manner and ensure just green and digital transitions.^[xxxi] However, for India, the G20 presidency will be a significant challenge for various reasons.

The most significant challenge before the Indian presidency is the persisting Russia–Ukraine conflict. The conflict is worsening the macro-economic and supply chain and the food security crises aggravated by the pandemic. Therefore, India must devise some constructive measures to urge the West and Russia to give diplomacy its legitimate space. India could use its friendly relationships with the West and Russia and its forthcoming UNSC and SCO presidencies to bring the conflicting parties to the negotiation table.

The second challenge is addressing global food insecurity. Currently, the world is off track in accomplishing SDG goals of alleviating poverty, hunger, and malnutrition. Nations are looking into becoming more self-reliant, particularly regarding food, since COVID-19 exposes the fragility of the global food and agricultural supply chain. The World Bank reported that between 75 and 95 million additional people could be living in extreme poverty in 2022 and 255 million lost their jobs because of the Covid-19 pandemic.^[xxxii] In addition, the State of Food Security and Nutrition in the World 2022 Report estimates that the pandemic has increased chronic undernourishment by 150 million people since 2019, and between 702 and 828 million people in the world were affected by hunger in 2021 and around 670 million people may still face hunger in 2030.^[xxxiii] The pandemic has also demonstrated the need for sustainable agriculture to consider the interconnected relationships between people, animals and the environment.

As India takes up leadership of G20 in 2022, it would be most appropriate to bring food, nutrition and agriculture to the centre stage. India can add value to the endeavours of the G20 for food security and nutrition by providing leadership and encouraging global cooperation.^[xxxiv] India is the world’s largest producer of milk, millet and pulses. Also, India is now the seventh largest exporter of agricultural products globally. Moreover, India is the top food supplier to the least developed countries (LDC), with around $5.2 billion in sales. The Joint Finance and Agriculture Ministers (JFAMM) meeting in Washington recently reaffirmed the G20 commitment to addressing challenges to global food insecurity. As president, India should ensure G20 members’ compliance with these commitments. India must also set the G20 agenda that marshals the creation of robust food supply chains while managing immediate food shortages. In 2021, India became a part of the Supply Chain Resilience Initiative (SCRI) along with Japan and Australia.

Addressing the pandemic-induced global health crisis is India’s third challenge. The G20 presidency could be an opportunity to make global health governance more democratic and evidence-informed. Given the current predicament of the World Health Organization (WHO), India could push for an Intergovernmental Panel on Pandemic Risk/Preparedness similar to Intergovernmental Panel on Climate Change (IPCC) to advance scientific knowledge on pandemic risk/preparedness. Over the years, G20 Joint Finance and Health Task Force (JFHTF) has emerged as a robust global platform for discussing actions to prevent, detect, and respond to health emergencies. India should propose creating an integrated trade, health, and intellectual property approach to responding to the global health crisis under this task force.

Today India is fast emerging as a global clean energy powerhouse. India committed to net zero emissions by 2070. It has ambitious targets for 2030, installing 500 gigawatts of renewable energy capacity and reducing the emission intensity of its economy by 45 per cent. Furthermore, India is also scaling up its footprints in emerging technologies such as hydrogen, battery storage, and low-carbon steel. As G20 president, India will have multiple opportunities to share its clean energy expertise and products with the member countries. India could also play an effective role in supporting the multilateral goals of advancing research and development to produce affordable renewable energy. India has signed clean energy partnerships with G7 countries Australia, Japan, the US, and the EU. India should consider creating regional collaboration as a guiding principle of energy transitions to drive this further.

Preparing a skilled workforce is a significant concern for all the G20 nations. At the G20, India consistently supported youth’s skills and employability and agreed to tackle unemployment by sharing best practices. Furthermore, India pushed for signing a Migration and Mobility Agreement to tackle the global migration crisis. However, the post-Covid-19 data suggest that G20 nations are far from achieving their skilling and employment goals. Therefore, strengthening the skilling ecosystem and youth employability must be one of India’s core priorities.

India’s presidency also presents a golden chance to push for improving African representation in the G20 and G20’s engagements with African regional organisations. Though the G20 Compact with Africa (CwA) is ambitious, it fails to take the sustainable development agenda comprehensively and seriously. For instance, CwA misses elements such as skills development and education. With its strong skills development and capacity-building partnerships with Africa, India could address some of the shortcomings of the Compact and improve G20’s future engagement with Africa.

In short, India’s G20 presidency comes at a critical stage in world affairs, where deep-rooted fault lines emerge, and transformative solutions are needed. The catastrophic consequences of the Covid-19 pandemic and climate change are undeniable. The pandemic unprecedentedly impacted the global economy and supply chain system. Nevertheless, the global responses to the pandemic and its recovery are uneven and not inclusive. Furthermore, macroeconomic challenges in the form of rising debt, inflationary pressures, and challenges due to the Russia-Ukraine war have emerged.^[xxxv] India has a vital role in addressing these challenges as a country highly committed to multilateralism and a zealous advocate of inclusiveness and equity in the global governance system. With the above-discussed priorities, India can take the lead in moving forward with the G20 agenda of inclusive green growth and sustainable development.

Author Brief Bio: Rajeesh Kumar is an Associate Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA). He has PhD in International Organization from Jawaharlal Nehru University, New Delhi. Prior to joining MP-IDSA in 2016, he taught at Jamia Millia Islamia, New Delhi (2010-11& 2015-16) and the University of Calicut, Kerala (2007-08). His areas of research interest are International Organizations, India and Multilateralism, Global Governance, and International Humanitarian Law.

References:

^[i] ‘Communique of G- 20 Finance Ministers and Central Bank Governors’, Berlin, Germany, 15-16 December 1999, http://www.g20.utoronto.ca/1999/1999communique.pdf

^[ii]Jean-Paul Fitoussi and Joseph E. Stiglitz, The G20 and the Recovery and Beyond: An Agenda for Global Governance for the Twenty-First Century, https://policydialogue.org/files/publications/samples/The_G20_and_Recovery_and_Beyond.pdf; https://www.ecb.europa.eu/pub/conferences/shared/pdf/g20framework/Keynote_Turalay.pdf?edff74ffbc8baa7e40d93a445ead7067

^[iii] ‘About the G20’ https://www.g20.org/about-the-g20/

^[iv] See G20 Framework for Strong, Sustainable and Balanced Growth,

^[v] Colin I. Bradford and Wonhyuk Lim (ed.), Global Leadership in Transition: Making the G20 More Effective and Responsive, Washington, Brookings, 2011.

^[vi] G20 Action Plan on the 2030 Agenda for Sustainable Development, https://www.b20germany.org/fileadmin/user_upload/G20_Action_Plan_on_the_2030_Agenda_for_Sustainable_Development.pdf

^[vii] G20 and Low income developing Country Framework, https://www.oecd.org/g20/topics/development/G20-Low-Income-Developing-Countries-Framework.pdf

^[viii] Targeting G20 Investments in Agriculture to End Rural Hunger, https://www.g20-insights.org/policy_briefs/targeting-g20-investments-agriculture-end-rural-hunger/

^[ix] G20 Food Security and Nutrition Framework, https://dwgg20.org/app/uploads/2021/09/g20-food-security-and-nutrition-framework.pdf

^[x] G20 Food Security and Nutrition Framework, https://dwgg20.org/app/uploads/2021/09/g20-food-security-and-nutrition-framework.pdf

^[xi] G20 Riyadh Statement to Enhance Implementation of Responsible Investment in Agriculture and Food Systems, https://sherpag20indonesia.ekon.go.id/storage/riyadh/other-doc/17-riafs-statement.pdf

^[xii] Swati Malhotra and Rob Vos, G20 Matera Declaration calls for investing more and better in food systems to achieve Zero Hunger, https://www.ifpri.org/blog/g20-matera-declaration-calls-investing-more-and-better-food-systems-achieve-zero-hunger

^[xiii] Japan’s G20 Presidency: Innovation for Climate Action, https://www.germanwatch.org/en/16598

^[xiv] Climate sustainability, https://www.oecd.org/g20/topics/climate-sustainability-and-energy/

^[xv] Angela Solikova, G20 and the Ongoing Fight to Contain Climate Change, G20 Digest, Vol. 1, No.5, March-May 2020.

^[xvi] 2016 Second G20 Sherpa Meeting Opens in Guangzhou, http://www.g20chn.org/English/China2016/SherpaMeeting/201604/t20160408_2233.html

^[xvii] Japan’s G20 Presidency: Innovation for Climate Action, https://www.germanwatch.org/sites/default/files/Japan%27s%20G20%20Presidency_Innovation%20for%20Climate%20Action.pdf

^[xviii] ‘Leaders’ Declaration,’ G20 Riyadh Summit November 21 – 22, 2020, https://www.consilium.europa.eu/media/46883/g20-riyadh-summit-leaders-declaration_en.pdf

^[xix] ‘G20 Rome Leaders’ Declaration’,

Rome, October 31, 2021, http://www.g20.utoronto.ca/2021/211031-declaration.html

^[xx] Emissions are rising across the G20, again – warns a report, https://iesr.or.id/en/emissions-are-rising-across-the-g20-again-warns-a-report

^[xxi] ‘G20 Performance on Health’, https://www.g20-insights.org/wp-content/uploads/2020/04/g20-performance-japan-health-1586886752.pdf

^[xxii] https://www.bundesgesundheitsministerium.de/en/international/g20-health.html

^[xxiii] http://www.g20.utoronto.ca/2018/2018-10-04-health.html

^[xxiv] Declaration: G20 Meeting of Health Ministers, October 4, 2018, Mar del Plata, Argentinahttp://www.g20.utoronto.ca/2018/2018-10-04-health.html

^[xxv] https://www.japan.go.jp/g20japan/index.html

^[xxvi] G20 Health Ministers’ Declaration

Riyadh, Saudi Arabia, November 19, 2020, http://www.g20.utoronto.ca/2020/2020-g20-health-1119.html

^[xxvii] Ibid.

^[xxviii] https://www.mef.gov.it/en/ufficio-stampa/comunicati/2021/The-G20-establishes-a-High-Level-Independent-Panel-on-financing-the-Global-Commons-for-Pandemic-Preparedness-and-Response-00001/

^[xxix] https://g20.org/wp-content/uploads/2022/02/G20-FHTF-Financing-Gaps-for-PPR-WHOWB-Feb-10_Final.pdf

^[xxx] ‘India’s forthcoming G20 Presidency,’ September 13, 2022, https://www.mea.gov.in/press-releases.htm?dtl/35700/Indias_forthcoming_G20_Presidency#:~:text=Whilst%20our%20G20%20priorities%20are,ranging%20from%20health%2C%20agriculture%20and

^[xxxi] India’s G20 Presidency to focus on revival of growth, just green and digital transitions, https://www.ris.org.in/en/node/3511#:~:text=India’s%20year%2Dlong%20G20%20Presidency,achieve%20Sustainable%20Development%20Goals%20by

^[xxxii] ‘Pandemic, prices, and poverty’, https://blogs.worldbank.org/opendata/pandemic-prices-and-poverty

^[xxxiii] ‘The State of Food Security and Nutrition in the World’, https://www.fao.org/publications/sofi/2022/en/

^[xxxiv] Why Food, Agriculture and Nutrition should be at the Top of the Agenda for G20 nations? G20 Digest Vol. 1, No. 2, 2021, pp 35-38.

^[xxxv] Dirk Willem Te Velde and Prachi Agarwal, ‘Leveraging the Global Macroeconomic Environment for Recovery and Growth: Opportunities for G20 Under India’s Presidency,’ https://www.orfonline.org/research/opportunities-for-g20-under-indias-presidency/

The existence of the R-20, an inter-religious forum created as part of the G-20 some years ago reflects the evolution of that body, which gathers twenty of the world’s most significant economies, as a putative alternative United Nations Security Council, in the economic and social domains, given the basically unfair structure of the UNSC created by the winners of the Second World War and factually held hostage by the veto-wielding permanent members. Accordingly, the G-20 has taken on board the longstanding notion of inter-religious dialogue and cooperation in order to harness the world’s principal faith-based organisations in the service of its global agenda and resolutions.

The difficulty of achieving concrete and constructive outcomes through inter-religious dialogue is well known. By definition, organised creeds depend on the support of their followers and are usually diffident about the consequences of supporting extensive interactions with other religions which are seen as potential competitors when not traditional adversaries and detractors. Whether or not they encourage and sponsor conversions, religious hierarchies wish to protect their flocks from extraneous influences and this is also true amongst the various sections of what we may broadly call faith families such as Islam, Christianity and Buddhism, within which many deep and often bitter doctrinal and historical divisions endure. Many religions also have no universally accepted leadership, unlike Catholicism where the last word in principle belongs to the Pope (although the Roman community is now deeply divided by Conservatives and ‘Progressives’). Protestantism, Eastern Orthodoxy, Islam, Buddhism, Hinduism and even Judaism have multiple branches and currents so that no one can be seen as the only authoritative spokesperson for them. In certain countries, religious bodies are under the control of the State or of a political party while other nations such as France describe themselves as strictly secular, so that religions have no official role in any public issue. On that background, it is not easy to achieve a comprehensive consensus in any inter-religious assembly, outside of general statements of principle which are unlikely to carry much meaning or weight.

The last few years have brought about a general deterioration in inter-religious interactions, despite some punctual and local commendable achievements. There is a process of radicalisation and growing intolerance in certain faith traditions and they are unfortunately the ones which tend to show greater dynamism and expand outside their traditional home-grounds. On the other hand, religions which have become less dogmatic and rigid by embracing modern non-denominational humanitarian ideas at the expense of their own core beliefs and practices have lost many faithful, in some instances to the point of near extinction. Apart from leaving behind an increasing number of confirmed atheists often professing to be only interested in material issues and benefits, the decline of old religions tends to feed in reaction the rise of new sects and more or less spiritual ideologies, usually under the authority of some charismatic figures who don’t always show tolerance for any other creed. We allude here to certain Evangelical new churches in Latin America and elsewhere, to the disappearance of traditional African creeds and their replacements by variants of Christianity and Islam, to Neo-Paganism in Europe and the US, often based on a rather questionable reconstruction of long vanished beliefs (Scandinavian, Celtic or ‘Aryan’ cults) and even to some more or less openly ‘demonic’ chapels which attract people in search of the bizarre, the exotic and the erotic. The religious scene can thus appear to be increasingly heterogenous and confusing and makes it difficult to select, among the many influential faith leaders, those who can agree on a common agenda and still make it acceptable to members of their wider tradition.

One of the ills that continues to affect attempts to make religions come together or at least share certain common goals is the mutual rejection of many of their respective core beliefs. We witness everyday the effects of such disputes between Christians and Muslims, Jews and Muslims, Buddhists and Muslims, Muslims and Hindus, not to omit the hostile attitude that many Christian churches and movements display towards Hinduism which they routinely accuse of fascism, fanaticism and backwardness, in order to justify the continuation of proselytising missionary inroads into India and adjoining countries.

Following these few reflections, I will now reproduce some relevant paragraphs of the official description provided by the G-20 online for the activities and aims of the R-20.

The G20 Interfaith Forum (IF20) offers an annual platform where a network of religiously linked institutions and initiatives engage on global agendas (primarily and including the Sustainable Development Goals or SDGs)…The G20 process has evolved since it was established in 2008, with various platforms (ministerial meetings, engagement groups) that allow different sectors and communities to present ideas and recommendations to global leaders.

The G20 Interfaith Forum builds on the vital roles that religious institutions and beliefs play in world affairs, reflecting their rich diversity of institutions, ideas, and values. These include interfaith and intercultural organisations, religious leaders, scholars, development and humanitarian entities, and business and civil society actors.

Beginning in Australia in 2014, the G20 Interfaith Forum has convened annually in the G20 host country. The Forums have considered wide-ranging agendas, including economic models and systems, the environment, women, families, children, work, humanitarian aid, health, education, freedom of religion or belief, global security, governance, human rights, and the rule of law. The agenda for each Forum is framed taking into account the annual G20 priorities (outlined each year by the host government), together with topics that the various networks of religious actors recommend that the G20 leaders’ address. 

Mission

The G20 Interfaith Forum (IF20) advances global solutions by collaborating with religious thought leaders and political representatives. Global recognition is increasing for the vital roles faith and religion play in promoting peaceful and harmonious relationships within and between nations…The G20 Interfaith Forum is an annual event where such contributions can be shared, highlighted, and advanced.

The Forum features both international opinion leaders—including scholars, lawyers, and politicians—and global interfaith activists for three days of discussion and interfaith dialogue. In showcasing the broad, global impact of various faith traditions and philosophies from around the world, the Forum fills important gaps in the discussions of the G20 Summits. Social cohesion is strengthened between political representatives and religious thought leaders, and new opportunities are provided for relationship building among all participants.

 Objectives of the G20 Interfaith Forum

1. Exploring the links between economic development and religion and religious freedom through informed, scholarly discussion.
2. Facilitating constructive dialogue between societal leaders in faith, government, business, media, education and other social institutions, on how interfaith resources can enhance social, economic and cultural policies and programs for the well-being of all.
3. Fostering communication channels between the different faiths and sharing ideas, experiences, and “best practices” in building peace and harmony.
4. Identifying and affirming common values, virtues, and principles among diverse faith and philosophic traditions

A Network of Networks

The G20 Interfaith Forum has consistently sought to build and draw on an inclusive network of networks of public, religious, humanitarian, and academic institutions engaged in a variety of ways in promoting interactions of religious voices, religious studies, and religious communities with the public sector in formulating and implementing global policy initiatives. 

Working Groups

The G20 Interfaith Forum organises its work through a series of Working Groups which focus on areas of recurring relevance to G20 policy priorities. In particular, these standing Working Groups organise research, analysis, and Forum activities that relate to the United Nations Sustainable Development Goals and other matters of recurring concern. In any given year, additional task force groups may be set up to address issues of particular concern in light of the G20 host country’s priorities or in response to other critical emerging issues. The following standing Working Groups have been established (with sub-focus areas noted in several cases):

• Reducing Poverty and Inequality (includes job creation and zero hunger)
• Religion, Health, and Wellbeing (includes COVID-19 responses)
• Education (includes religious literacy)
• Gender Equality (includes equal pay issues and trafficking/slavery)
• Religion and the Environment
• Religion, Technology, Innovation, Infrastructure, and Media
• Peace, Justice and Strong Institutions (includes sacred sites, corruption, rule of law, freedom of religion or belief, peace building and diplomacy)
• Refugees, Displacement, and Migration
• Disaster Preparedness and Relief, Humanitarian Aid
• Children and Youth

In addition, an Anti-Racism Initiative has been established to examine how responding to the challenges of overt and systemic racism can be addressed across the entire spectrum of issues being addressed by the G20 Interfaith Forum.  More information on the various Working Groups is available here.

Outputs of the G20 Interfaith Forum

Each year, the G20 Interfaith Forum develops policy briefs that are designed to provide substantive input benefiting from insights of a range of religious communities designed to be of assistance to those in official policy-making roles.   In addition, each year’s Forum develops prioritised concrete recommendations for those engaged in the G20 process—recommendations that are both designed to be delivered to G20 Summit leaders, but have broader relevance to policy-making at the level of public bodies operating at the international, regional, and national levels and to those concerned with global policy issues in religious, inter-religious, and academic settings. 

We will have to wait for the outcome of the next R-20 meeting to be held in November to see if it is anymore concrete and impactful than the previous ones which did not attract much public notice. Most formally religious people tend not to show great interest in other faiths while those who are agnostic, atheistic or define themselves as ‘spiritually curious but not religious’ and pay little attention to the policies of mainstream religious organisations.

Author Brief Bio: Mr. Côme Carpentier de Gourdon is currently a Distinguished Fellow with India Foundation and is also the Convener of the Editorial Board of the WORLD AFFAIRS JOURNAL. He is an associate of the International Institute for Social and Economic Studies (IISES), Vienna, Austria. Côme Carpentier is the author of various books and several articles, essays and papers

 

References:

https://www.g20interfaith.org/historical-support/.

The concept of cultural nationalism has for quite some time been on the centre stage of global debate and academic discussion. Culture, in all its facets and dimensions, is a crucial constituent and instrument of human development. It is a state of being, a mode of thinking, a way of living, and a set of commonly shared values, belief patterns, practices and efforts. It is a complex whole comprising stock of knowledge, beliefs, customs, conduct, morals, law, and artistic, scientific and technological pursuits, humanities and social sciences. It is an individual as well as social affair. It is a totality of heritage borne by a society. It is crystallisation of material, mental, intellectual and spiritual wealth generated and preserved by the society. It contributes to discovery of meaning of life and enhances quality of life. Thus, it enriches life, enlarges fullness of life, brings delight of mind, and sharpens intellect and ushers in plenitude of peace and bliss.

Indian culture has a hoary past and a pretty ancient history with inspiring ideas and ideals. India has the fortune of possessing one of the finest cultures in the world in the form of Vedic wisdom. It is characterised by integral, holistic and spiritual view of Reality and a way of life based on that. It advocates fundamental unity of all existences, both animate and inanimate. Every existence is at bottom spiritual, pulsating with life and consciousness Everything in this cosmos has common source and sustenance. In fact, whatever existed, whatever exists and whatever shall come into existence, all are manifestations of the same Divine Being, declares the Puruṣa Sūkta of the Ṛgveda. The īśāvāsyopaniṣad of the Yajurveda states that in this mutating world every element is divine and is permeated by the Divine. It is one, unitary, self-existing principle which manifests Itself diversely, says the Nāsadīya Sūkta of the Ṛgveda. It is also experienced and expressed diversely.

It is a unique feature of Indian culture which exhorted not to have the mentality of “I versus thou”. Instead, it advocated the attitude of “I and we”. This is spiritual globalisation which is cherished and inculcated by Indian seers and sages all the times. The ‘other’ is not to be considered as external or alien or separate. The ideal to be emulated is universalisation of ‘self’, feeling oneness with the entire cosmos. In this schema of global family, there are both individual entities (piṇḍa) and their organic totality (brahmāṇḍa), in a harmonious relationship. A distinction has to be drawn between the two but they are not separable. This attitude is due to its openness and catholicity to accommodate and absorb the diversity. It has displayed a remarkable symbiosis of two sensibilities of belongingness to the whole and of being a part of the whole, of relatedness and of self-identity. It advocates a communitarian or participatory mode of living implying distinctness of its members along with solidarity with the whole enjoying an individual existence and yet partaking and sharing experiences with the whole. It is an inclusive social pluralism.

Indian culture has been holistic and integrated, catholic and symbiotic. This has provided it an inherent vitality. There are some noble ideas and ideals contained in it which are not only endearing but also liberating. That is why it has permeating influence within and outside India. This is what the Urdu poet Mohammad Iqbal has very convincing pointed out some time back in his well-known poem, “Sāre jahān se achhā Hindusatān hamārā” in which he proudly declares that,
Kucha baat hai ki hasti, mitati nahin humaari
Sadiyon rahaa hai dushman daur-e-jahaan hamaara
-Taranaa-e-Hind, 1904
(There is something momentous in Indian culture because of which it could not be wiped out in spite of the onslaughts of inimical forces for centuries together.)

Iqbal refers to the survival instinct of Indian culture which contains inherent vitality, the perennial force, the elan vitae. It has a vitalising and animating force of its own and yet it does not deny nourishment and nurture from extraneous sources as well by incorporating and absorbing them as its own. Both the variety and continuous identity are the assets of Indian culture. It is living and has vitality to live. Because of its organismic nature and character, it displays a unity-in-multiplicity and becomes conducive to self-identity and self-preservation as well as group solidarity and group-cohesion.

We have to remember that India is a nation which has essential identity with multiple diversity all intertwined. As Pandit Deen Dayal Upadhyaya has put it in his Integral Humanism, “It is essential that we think about our national identity. Without this identity there is no meaning of independence, nor can independence become the instrument of progress and happiness. As long as we are unaware of our national identity, we cannot recognise and develop all our capacities.”

Indian identity is embedded in the multi-faceted Indian culture, which has been eternal bedrock of India’s glorious past, adventurous present and bright future. In order to discern Indian identity, one has to look precisely to the diverse cultural and sub-cultural traditions, which have evolved over times, in which the Indian people have been born or nurtured and by which their general human sensibilities have been refined and shaped. This is so whether they are Indian citizens or Indian Diaspora or adopted Indians.

The Vedas constitute the pristine foundation of Indian culture. They exhort for establishment of a virtuous society (vratī samāja). They inculcate a healthy and robust attitude towards life. They have provided ideas and ideals, moral and spiritual values, beliefs and practices, and patterns of behaviour—individual and social—on the basis of deep insight into the nature of Reality, which have universal appeal and inherent vitality to survive in spite of all odds and vagaries of history and which still continues to provide life sap to its adherents and votaries. It would be certainly beneficial to the whole humanity if those sublime ideas are reiterated in their pristine purity so that the discerning human mind can evaluate and emulate them.

Pandit Deen Dayal Upadhyaya floated a seminal concept of Chiti which comprehends individual consciousness, national consciousness and cosmic consciousness. Chiti provides self-identity and autonomy to all these. It is the animating principle. Upadhyaya particularly emphasised Chiti of a nation, calling it as the soul of a nation. It is on its foundation that a nation rises and develops and becomes strong and virile. Strength and energy activating a nation is ‘Virāt’. It is like vital breaths (prāṇa). It infuses strength in every element of the nation. But it has to be channelized by Chiti. It is Chiti which awakens a nation’s Virāt. Every nation should have this vital energy for its survival and enhancement. Every nation should try to preserve, protect and augment it. This is what Swami Vivekanand and Sri Aurobindo also insisted on in their discourses.

Cultural Nationalism

Emphasising national identity and the necessity of national awakening Pandit Deen Dayal Upadhyaya was against western type of narrow nationalism. His idea of nationalism was cultural, based on the principle of dharma which is the sustaining principle of the entire cosmos. Nation is an organic whole which is to function in harmony and cooperation with the entire cosmos. He rejected the idea of regional consciousness and advocated common national consciousness widening into cosmic consciousness. Pointing out the significance of national consciousness he maintained that there should ofcourse be political independence, but it becomes meaningful only in the context of national identity and cultural independence. Under alien subjugation, a nation, like individuals becomes a prey to numerous ills when its natural instincts get disregarded or mutilated and perverted. He argued that the diseased organs are to be amputated and healthy ones are to be nourished. He averred that it was essential that we think about our own national identity. Without this identity there is no meaning of independence, nor can independence become the instrument of progress and happiness. As long as we are unaware of our national identity, we cannot recognise and develop all our potentialities.

State and Nation not the same

Pandit Deen Dayal Upadhyaya highlighted the clear distinction between state and nation and the respective roles of the two. Nation is an organic entity which comes into existence of its own. It is not created, but a nation creates institutions. Nation consists of several institutions and state is one of them. It is important but not supreme. It is to be based on Dharma. Dharma is sovereign. Dharma is depository of nation’s soul and should permeate all its institutions. Fundamental principles of dharma are eternal and universal. But they are not rigid and need to be adapted to changing times and place. He retained the merits of the present day prevalent democratic patterns shorn of their demerits. According to him democracy is preferable form of governance but it should be based on dharma. It should be dharmarājya or Rāmarājya, a dharmocracy and not theocracy.

Though the modern concept of nationalism has emerged in the given historical context of western social development, the underpinning spirit behind the Indian cultural nationalism is the universalistic and unifying dharma-centric world view and life vision sustained by the Sanatana dharma.

The concepts of Varnashrama dharma and Purushartha which were the guiding principles of the social, cultural, economic and political organisation of life in Vedic period were based on this dharma-centric vision of life. The historical experience derived from centuries of subjugated social, cultural, economic and political life of Indian people bring forth the fact that culture, as a key factor in promoting unity and solidarity among different social groups, has become only a wishful thinking. It is a social reality that majority of Indian people have historically been outside the dominant stream of Indian culture. The creative character of the Vedic culture was lost post Vedic period onwards, especially since the eclipse of Ᾱtmajñāna mārga fostered and sustained by the ancient Guru and Rishi Paramparās and the advent of the present form of Hinduism and the caste system.

The universalistic and unifying life vision of Sanatana Dharma was misinterpreted and wrongly explained in conformity with the rising requirements of the caste system based social, cultural, economic and political organisation of Indian society. The caste system with its denial of knowledge and education for the majority of Indian population over a long period of time had contributed to the cultural, social, emotional and mental division of Indian masses leading to social disintegration and cultural decay of the society. If the culture is to be the agent of social unity and solidarity the religious practices, traditions and customs that are contrary to the universalistic and sublime vision of the Indian culture and have segregated and divided people, they are to be identified and demystified grounding on the basic premises of the wisdom tradition of India.

Therefore, the objective of the present write up is to revisit and evaluate culture as means to foster unity and national integration and examine the factors that have historically disrupted and destroyed the creative transmission and progress of the Indian culture. It is also purported to explore and suggest the means by which the arrested social evolution can be resumed and cultural creativity and awakening achieved so as to bring about unity and solidarity of the people beyond caste and religion. Similarly, it is important to examine the religious and cultural onslaught of foreign powers and modern western civilisation on the Indian spirituality, religion, society, culture, economy and polity and suggest appropriate measures to counter the same and establish the rationality and spiritual science behind Indian ethos, religious faiths and practices.

Several scholars and studies have questioned the relevance of cultural nationalism in the emerging Indian social scenario characterised by the rising conflicts and violence among various castes and social groups. With vested interested they have tried to project a distorted picture of age-old Indian culture and civilisation. Of course, they have failed in their nefarious design as the unbiased mind has not acceded to their sinister move but some are still active and more vehement out of frustration. They need to be enlightened as to what “India that is Bharata” has been and will continue to be so in spite of all malicious attempts by misguided or ill-minded persons. India has a pretty ancient history with sublime ideas and all these cannot be wiped out However, while examining India’s robust cultural past and civilisational achievements, there appears to have future prospect to promote and develop cultural nationalism provided the spiritual masters, religious leaders and followers along with political leadership strive to promote cultural creativity and social change by de-fossilising the traditions and rectifying deviations and distortions in the religious faiths and practices. Indianness is based on the principles of cooperation and reciprocity regulated by the spirit of duties and obligations rather than demands and rights. Unfortunately, this base is dwindling very fast in modern times and there is an urgent need to revive, revitalise and consolidate it.

Author Brief Bio: Prof. S. R. Bhatt is Chairman, Indian Philosophy Congress; Chairman, Asian-African Philosophy Congress; National Fellow, Indian Council of Social Science Research, Government of India Former Chairman, Indian Council of Philosophical Research, and Former Professor & Head, Department of Philosophy, University of Delhi.

References:
1 http://www.asthabharati.org/Dia_Apr%20012/s.r..htm
2 https://en.wikipedia.org/wiki/Sare_Jahan_se_Accha