13. Chabahar Port & Impact on India's Business
chances in Central Asia
Hambantotha
14. Significance of the Port
Pakistan had never allowed India to use its territory as a transit for trade with Central Asia and
Afghanistan because of which India had to sign an agreement with Iran for development of
Chabahar port to get an alternate route to Afghanistan and Central Asia bypassing Pakistan.
India shipped first consignment of wheat to Afghanistan through Chabahar in October 2017.
Chabahar port will cut the transport cost and time to Iran, Afghanistan and Central Asia by one
third in the wake of Pakistan’s denial of transit route to India.
Chabahar is India’s first major overseas port venture and is seen as a counter to China’s
development of the Gwadar port in Pakistan.
Gwadar is located 90km away from Chabahar in Baluchistan province of Pakistan. It is
developed by China to gain a direct access to Indian Ocean through Pakistan. In this way,
Chabahar is also seen as Indian initiative to counter the Chinese influence in Indian Ocean.
15. Significance of the Port
Indian agriculture is expected to benefit from Chabahar as it will facilitate Indian agriculture exports to
Afgnaistan. In fact, the first consignment of wheat was already sent to Afghanistan via Chabahar on
October 29, 2017.
India had set up a urea plant in Chabahar catering to the needs of Afghanistan, Iran and Central Asia.
Later, the companies engaging in agriculture machinery may also get benefited by the development.
Potential for growth of Indian mining sector is also evident from the fact that National Aluminium
Company (NALCO) has signed an MoU to locate an aluminium plant in Chabahar. India is also
contemplating connecting Chabahar with mineral-rich Hajigak region in Afghanistan.
As India is planning robust investment in infrastructure that includes construction of roads, railway
lines as well the further development of Chabahar port, industries like iron and steel, cements and
other infrastructure companies may get a big share in the pie.
As the infrastructure development gathers pace in the region, investment in supply chain management
and logistics industry will also gain momentum.
Last but not the least, direct connection with energy rich Central Asia will go a long way in ensuring the
energy security in India.
19. 1.Changi Naval Base, Singapore – Prime Minister Narendra Modi paved the way for signing of a significant
agreement between India and Singapore which provided Indian Navy ‘direct’ access to this naval base. This
is crucial as Indian navy ships can now not only refuel but even rearm while sailing through the South China Sea.
2.Sabang Port, Indonesia – India got the military access to a strategic port like Sabang in 2018, located right at the
entrance of one of world’s most famous choke point, Malacca Strait. This is one of the most significant
agreements, as India now holds the strategic position in the Indian ocean through which large chunk of trade and
crude oil passes on to China. Indian Naval ship INS Sumitra had visited Sabang Port recently.
3.Duqm Port, Oman – India leveraging its rising status in the Indian Ocean gained strategic military access to this port
in 2018, located on the south-eastern seaboard of Oman which protects Indian interests in the western theatre of the
Indian Ocean, especially for facilitating India’s crude imports from the Persian Gulf. Moreover, it is now an Indian
facility located right between the two important Chinese pearls (bases) Djibouti in Africa and Gwadar in
Pakistan.
4.Assumption Island, Seychelles – Overcoming the initial resistance, India is now developing this naval base in
Seychelles, first agreed in 2015. Both the countries have continued to work on the project which gives the military
access to India. This particularly signifies India’s increasing strategic presence not only in Indian ocean but also in the
African continent where China is desperately trying to penetrate through the maritime silk route.
5.Chabahar Port, Iran – Prime Minister Narendra Modi signed the contract for development of this port in 2016. This
port provides India access to Afghanistan and a precious trade route to Central Asia. In fact, India is reportedly about
to begin operations at the Iranian port soon. This will give an unprecedented boost to India’s plan to increase its co-
operation and contacts with Asian and Central Asian countries.
20.
21. Why is Petrol Getting Costlier In India?
Fuel prices are primarily dependent on two factors: price of crude oil in the international market
and the taxes levied by the central and state governments.
Since the 80% of crude requirement is imported from the international market, in addition to
the international crude price, the appreciation or depreciation of Rupee also affects the price of
petrol and diesel accordingly.
The depreciation of Rupee makes the imports expensive while the appreciation makes imports
cheaper.
The current depreciation of Rupee against Dollar and rising international crude prices are also
putting upward pressure on the prices of petrol. Other factors affecting the price of petrol are
refining cost, central taxes and state taxes.
22.
23. International Crude Price
The international crude price has increased by 7.4% in the month of May due robust demand
combined with Oil Producing and Exporting Countries (OPEC) related production cuts.
Apart from this, the turmoil in Venezuela has also affected the domestic oil production in the
country. The US sanctions on Iran had also helped in pushing the oil prices upwards. Currently,
the Brent crude is trading at around USD80 per barrel.
However, crude prices are likely to fall in coming days as OPEC and Russia are considering
increasing the output by one million barrel per day to compensate the effects of sanctions on
Iran and turmoil in Venezuela.
24.
25. The register is meant to be a list of Indian citizens living in Assam. For decades, the presence of
migrants, often called “bahiragat” or outsiders, has been a loaded issue here. Assam saw waves of
migration, first as a colonial province and then as a border state in independent India.
The first National Register of Citizens was compiled in 1951, after the Census was completed that
year. The Partition of the subcontinent and communal riots had just triggered vast population
exchanges at the border.
Since 2015, the state has been in the process of updating the 1951 register. One of the stated
aims of the exercise is to identify so-called “illegal immigrants” in the state, many of whom are
believed to have poured into Assam after the Bangladesh War of 1971.
In 1979, about eight years after the war, the state saw an anti-foreigners’ agitation. Assamese
ethnic nationalists claimed illegal immigrants had entered electoral rolls and were taking away the
right of communities defined as indigenous to determine their political future.
26. In 1985, the anti-foreigners’ agitation
led by the All Assam Students’ Union
came to an end with the signing of
the Assam Accord.
Under this accord, those who
entered the state between 1966 and
1971 would be deleted from the
electoral rolls and lose their voting
rights for 10 years, after which their
names would be restored to the rolls.
Those who entered on or after March
25, 1971, the eve of the Bangladesh
War, would be declared foreigners
and deported.
28. Indian Citizenship Bill – Amended (2019)
The Bill seeks to facilitate acquisition
of citizenship by six identified
minority communities namely Hindus,
Sikhs, Jains, Buddhists, Christians and
Parsis from Afghanistan, Pakistan and
Bangladesh who came to India before
December 31,, 2014.
Migrants from these communities
were earlier given protection against
legal action in the years 2015 & 2016
and long term visa provision was
made for them.
Citizenship will be given to them only
after due scrutiny and
recommendation of district
authorities and the State
Government.
29. The minimum residency period for citizenship is being reduced from
existing 12 years under the present law to 7 years.
The law will not be confined to the state of Assam but will also provide
relief to persecuted migrants who have come through western borders
of the country to states like Gujarat, Rajasthan, Delhi, Madhya Pradesh.
The beneficiaries of Citizenship Amendment Bill can reside in any state
of the country and the burden of those persecuted migrants will be
shared by the whole country.
30. Does NRC apply to
Rohingya ?
Risking death by sea or on foot, nearly 700,000 have fled the destruction of their homes and persecution in the northern
Rakhine province of Myanmar (Burma) for neighbouring Bangladesh since August 2017.
The United Nations described the military offensive in Rakhine, which provoked the exodus, as a "textbook example of
ethnic cleansing".
Myanmar's military says it is fighting Rohingya militants and denies targeting civilians
Since the 1970s, Rohingya have migrated across the region in significant numbers. Estimates of their numbers are often
much higher than official figures.
In the last few years, before the latest crisis, thousands of Rohingya were making perilous journeys out of Myanmar to
escape communal violence or alleged abuses by the security forces.
The latest exodus began on 25 August 2017 after Rohingya Arsa militants launched deadly attacks on more than 30 police
posts.
Rohingyas arriving in an area known as Cox's Bazaar - a district in Bangladesh - say they fled after troops, backed by local
Buddhist mobs, responded by burning their villages and attacking and killing civilians.
31.
32.
33. Article 370
Included in the Constitution on October 17, 1949, Article 370 exempts J&K from the Indian
Constitution and permits the state to draft its own Constitution. It restricts Parliament’s legislative
powers in respect of J&K (C1 , C7)
The Schedule appended to the Instrument of Accession gave Parliament the power to legislate in
respect of J&K only on Defence, External Affairs and Communications.
Raja Hari Singh had initially decided to remain independent and sign standstill agreements with India
and Pakistan, and Pakistan in fact signed it. But following an invasion from tribesmen and Army men
in plainclothes from Pakistan, he sought the help of India, which in turn sought the accession of
Kashmir to India. Hari Singh signed the Instrument of Accession on October 26, 1947 and Governor
General Lord Mountbatten accepted it on October 27, 1947.
It was India’s stated policy that wherever there was a dispute on accession, it should be settled in
accordance with the wishes of people rather than a unilateral decision of the ruler of the princely
state.
CAN IT BE DELETED ?
34. 35 A
Article 35A is a provision incorporated in the Constitution giving the Jammu and Kashmir Legislature a carte
blanche to decide who all are ‘permanent residents’ (includes people who migrated to Pakistan) of the
State and confer on them special rights and privileges in public sector jobs, acquisition of property in the
State, scholarships and other public aid and welfare. The provision mandates that no act of the legislature
coming under it can be challenged for violating the Constitution or any other law of the land.
Article 35A was incorporated into the Constitution in 1954 by an order of the then President Rajendra
Prasad on the advice of the Jawaharlal Nehru Cabinet. The controversial Constitution (Application to Jammu
and Kashmir) Order of 1954 followed the 1952 Delhi Agreement entered into between Nehru and the then
Prime Minister of Jammu and Kashmir Sheikh Abdullah, which extended Indian citizenship to the ‘State
subjects’ of Jammu and Kashmir.
IS IT VOID ?
35. Amith Shah’s Plan to delimitation in J&K
In 2002, the Farooq Abdullah government froze delimitation until 2026 by making changes in the
state’s Constitution. However, the Governor can upturn it
The Sheikh Abdullah administration carved out 30 seats for Jammu region, 43 seats for Kashmir
region and two seats for Ladakh region. At present, the Assembly has 87 elected seats with Kashmir
having 46 seats, Jammu 37 and Ladakh four.
According to the 2011 census, the total population of Jammu Division was 53,78,538 of which Dogras
are the dominant group comprising 62.55 per cent of the population. Jammu has 25.93 per cent of
the area and 42.89 per cent of the population.
Against this Kashmir Division or the intermontane valley population in 2011 was 68,88,475 with 96.40
per cent Muslims. Though it has 15.73 per cent of the state's area, it holds 54.93 per cent of the
population.
Ladakh has 2.18 per cent of the population, a mere 2,74,289 people reside there of which 46.40 per
cent are Muslims, 12.11 per cent Hindus and 39.67 per cent Buddhist.
36. Political Coercion of China in Hong-Kong
Hong Kong, a British colony until 1997, was handed over to China under the concept of 'one country, two systems,’
which accorded political and legal autonomy to the city.
Critics fear the bill will undermine the independence of Hong Kong's legal system and put Hong Kong citizens and
foreign nationals at risk by allowing suspects to be sent to mainland China for trial.
The government has made some revisions to the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters
Legislation (Amendment) Bill.
Hong Kong currently has bilateral extradition treaties with 20 countries including the UK, the US and Singapore, but the
amendments put forward by the administration are being framed as a way to enable the sending of suspected
offenders to places with which the territory has no formal extradition agreement on a case-by-case or one-off basis.
Article 4 of the Basic Law, the mini-constitution which governs post-colonial Hong Kong, promises to "safeguard the
rights and freedoms of the residents of the Hong Kong Special Administrative Region and of other persons in the Region
in accordance with law".
37. CREDIT RATING AGENCIES
These credit rating agencies came to use in the market from early 20th Century when three
rating agencies were formed which are Standard & Poor’s (S&P), Fitch and Moody’s, later on,
many more credit rating agencies came into existence.
Though there is no standard scale, credit ratings are typically expressed by letters corresponding
to the potential risk, with the highest rating represented by AAA and the lowest rating by C or
D, according to the agency. In addition to the letter grade, a credit rating might also consist of a
“forecast” that describes how a particular rating may change in the future. For example, a credit
rating with a negative outlook may indicate a future downgrade.
Along with other criteria, investors take credit ratings into account to help manage their
portfolios. A rating downgrade indicates a greater risk for the lender. Depending on the
sensitivity of the market, investors may require a higher return to protect against this risk, which
in turn raises financing costs for the borrower.
Many investors give credit ratings a lot of consideration in their investment decisions. This has
enabled credit rating agencies to play a central role in financial markets – a role that some
economists see as excessive.
38. Step – 1 – Initiate Rating Process
Step – 2 – Collect publicly available information
Step – 3 – Perform pre-analysis & request non-public information, if appropriate
Step – 4 – Prepar a detailed questionnaire
Step – 5 – Hold meetings with entity management and other Stakeholders
Step – 6 – Perform in-depth analysis
Step – 7 – Draft report
Step – 8 – Hold ratings Committee
Step – 9 – Assign ratings, write & publish commentary
Step – 10 – Conduct ongoing surveillance
39. A rating downgrade essentially means that the company's ability to service/repay that particular
financial instrument has declined which in turn hampers the company's ability to borrow further.
Lenders may hesitate lending to such companies and may not even roll-over (refinance) existing
debt.
Standard & Poor's credit rating for India stands at BBB- with stable outlook. Moody's credit
rating for India was last set at Baa2 with stable outlook. Fitch's credit rating for India was last
reported at BBB- with stable outlook. DBRS's credit rating for India is BBB with stable outlook.
In general, a credit rating is used by sovereign wealth funds, pension funds and other investors
to gauge the credit worthiness of India thus having a big impact on the country's borrowing
costs
40. India's Role at G20 Summit Osaka
The 14th G20 Summit was recently held in Osaka, Japan on 28th & 29th June 2019. The Honorable Prime Minister,
Shri Narendra Modi, attended the Summit the sixth time. He represented India’s interest on the lines of the
theme for this year – Human-centered future society.India stressed on critical issues related to:
1. Trade, Economic Growth & WTO Reforms
2. Terrorism
3. Energy Security & Financial Stability
4. Digital Economy & Artificial Intelligence
5. 5G & Data Security Concerns
6. Climate Change
7. Defense
8. Corruption & Black Money
9. Return of Economic Fugitives
10. Iran crisis
41. 20 or Group of 20 is a summit on the international financial forum that brings together nations and
central bank governors on a common global forum. G20 comprises of 19 nations and the European
Union. The member countries are - Argentina, Australia, Brazil, Canada, China, France, Germany,
India, Indonesia, Italy, Japan, Mexico, the Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey,
the United States, the United Kingdom, and the European Union.
INDIA’S ROLE
Two trilateral talks Japan – America – India (JAI)
◦ PM Modi met with President Trump and PM Abe
◦ There were discussions on – issues of Indo-Pacific region, connectivity and infrastructure development, peace
& security.
Russia – India – China (RIC)
◦ PM Modi met with President Xi from China and President Putin from Russia for an informal RIC summit
◦ The three nations discussed the following – promotion of counter-terrorism, reformed multilateralism, climate
change, and international hot-spot issues.
42. 1. Bilateral Meetings with Heads of States of Nine CountriesProductive discussions with Japanese
PM Shinzo Abe discussing defense, digital economy, infrastructure, space, and startups.
2. The much-talked-about meeting with the American President Donald Trump took place. India
iterated its stand on the situation with Iran, trade tariffs, defense, and 5G communication
network & data storage.
3. Meeting with President Joko Widodo of Indonesia discussing ways to deepen India-Indonesia
cooperation in a host of sectors
4. Meeting with Brazilian President Jair M. Bolsonaro to discuss means to improve business linkages
and overcome climate change.
5. Productive talks were held with President Recep Tayyip Erdogan of Turkey on building strong
development partnership between the two nations.
6. Meeting with the Australian Prime Minister Scott Morrison to discuss ways to expand
cooperation in a range of sectors.
7. There were talks with Crown Prince Mohammed bin Salman of Saudi Arabia to strengthen
bilateral ties between the two nations and discussing energy security.
8. Meeting with South Korean President Moon Jae-in and discuss ways to enhance trade, economic,
and people-to-people relations.
9. Interaction with German Chancellor Angela Merkel and discussed means to diversify and deepen
Indo-German ties in areas like cybersecurity and AI.
43. One Multilateral talk with the BRICS nationsLeaders of the BRICS nations – Brazil, Russia, India, China,
& South Africa met and discussed a series of global issues and concerns.
PM Modi spoke about the need to fight protectionism, tackle unilateralism at global financial
organizations like the WTO, counter-terrorism, and the need to ensure energy security.
India emerged as a central player at the G20 Osaka Summit 2019, which brings together leaders of
nations who contribute to 85 percent of the world’s GDP.
India displayed clarity in its agenda and stand on various issues while holding bilateral and
plurilateral talks with other nations.
India tried to balance between nations like Russia and America as it was a common element in JAI
and RIC.
India displayed its concern over issues faced by other developing nations.
India took a firm stand on Digital Economy & AI and proposed the 5 'I's – Inclusive, Indigenization,
Innovation, Investment in Infrastructure, and International cooperation.
44. Non Performing Assets (NPAs) and its impact on Indian
economy
The higher is the amount of non-performing assets (NPA) the weaker will be the bank’s revenue stream.
Indian Banking sector has been facing the NPA issue due to the mismanagement in the loan distribution carried by the Public
sector banks.
As the NPAs of the banks will rise, it will bring a scarcity of funds in the Indian markets. Few banks will be willing to lend if
they are not sure of the recovery of their money.
The shareholders of the banks will lose of money as banks themselves will find it tough to survive in the market.
This will lead to a crisis situation in the market.
The price of loans, interest rates will shoot up badly.Shooting of interest rates will directly impact the investors who wish to
take loans for setting up infrastructural, industrial projects etc.
It will also impact the retail consumers, who will have to shell out a higher interest rate for a loan.
All these factors hurt the overall demand in the Indian economy.
Finally, it will lead to lower growth and higher inflation because of the higher cost of capital. (PSB-8L CR , CB – 9L CR
45. The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India that
administers the insolvency proceedings and establishes a framework for insolvency resolution
processes effectively.
Incorporation of SARFAESI ACT:The Securitization and Reconstruction of Financial assets and
Enforcement of Security Interest Act 2002 empowers the banking systems to auction residential
or commercial properties (except agricultural land) to recover their loans.
Promulgation of Banking Regulation (Amendment) Ordinance: It empowers the RBI to direct
Banks to initiate insolvency resolution, wherever such need arises.
Government promulgated the Banking Regulation(Amendment) Ordinance, 2017- It was
passed to deal with stressed assets, particularly those in consortium or multiple banking
arrangements
46.
47. I already mentioned that no single authority or institution sets the exchange rates in India. India
has a floating exchange rate system where the exchange rate of the rupee with another currency
is determined by market factors such as supply and demand.
For example: If the demand for US dollars increases in the forex market, the value of the dollar
will appreciate. This is the case currently as more goods are imported to India from the US than
exported to the US from India. The local Indian traders need to pay for the imported goods in US
dollars. Thus they buy US dollar by exchanging it for the rupee which increases the demand for
USD and helps it to appreciate with respect to the rupee.
48. Prior 1990s
Prior to the period of economic liberalization in the 1990s, India followed a fixed exchange rate
system. The Indian rupee was pegged to the US dollar and a basket of other currencies.
In pegging, the value of a currency is fixed in a predetermined ratio to another more stable and
internationally used currency or to a bunch of such currencies.
Fixed exchange rate does not mean the value of the currency will not change. It means that the
value of the currency will move in tandem with the currency or currencies to which it is pegged
i.e. the ratio of the value of the currencies will be maintained.
The exchange rate will not change every day but it may be reset on particular dates known as
revaluation dates. In this economic system, the government or the RBI is the authority which
ensured the exchange rate of the rupee is fixed with respect to other currencies.
49. In 1997, the Thai baht was pegged to the US dollar at an exchange rate of 25 baht to 1 dollar.
The same year, the Asian financial crisis was experienced by 6 countries! Starting from Thailand
the crisis spread to Malaysia, Singapore, Indonesia, Philippines and South Korea. As Thailand was
facing economic problems, the baht was going down in value. People were rushing to buy US
dollars by converting their baht. In an effort to maintain the exchange rate, the Thai government
started selling its reserve of US dollars. Eventually, they ran out of dollars and the peg snapped
on 30th June 1997 and the baht was in free fall.
India too faced a situation back in 1992. RBI almost ran out of its dollar reserve and was close to
being unable to maintain the peg. It was during this period that sweeping economic reforms
were made and the floating exchange rate was gradually adopted.
50. Indian government's stance clear on the deal with Russia
despite the threat of US invoking sanctions
The Indian government may make payments for Russian arms comprising S-400 air defence
missile system in euros to a Russia-nominated bank. The currency remittance is being
considered to circumvent the risk of US sanctions for the purchase of military hardware.
Furthermore, there are two additional Russian contracts that are expected this year for the
supply of AK 203 rifles to the Indian armed forces. The weapons will be manufactured in Amethi,
while India and Russia will also ink a deal to procure Ka-226 helicopters for the Indian army,
which will be produced by HAL-Russian JV
The Indian government last year had signed the much-anticipated deal worth $5.43-billion to
buy five Russian S-400 Triumf missile shield systems at the 19th India-Russia annual bilateral
summit at the Hyderabad House.
During the recent visit of US Secretary of State Mike Pompeo, Foreign Minister S Jaishankar
made the Indian government's stance clear on the deal with Russia despite the threat of US
invoking the Countering America's Adversaries Through Sanctions Act (CAATSA).
