Editorials/Opinions Analysis For UPSC 05 April 2023 

Contents:

1. China’s ‘renaming’ of areas in Arunachal Pradesh
2. Impending slowdown

China’s ‘Renaming’ of Areas in Arunachal Pradesh

Context:

India rejected China renaming places in Arunachal Pradesh. India’s Ministry of External Affairs categorically stated that “Arunachal Pradesh is, has been, and will always” be an integral part of India.

Relevance:

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

Dimensions of the Article:

1. Chinese claim over Arunachal Pradesh
2. India and Arunachal Pradesh
3. Why Arunachal Pradesh? What is China’s Interest in Arunachal Pradesh?
4. Renaming places lowers ties between India and China
5. What could be the factors behind such move?
6. Conclusion

Chinese claim over Arunachal Pradesh

• When the new Peoples Republic of China was formed in February 1912 after the abdication of the Qing emperor, the Tibetans asserted their independence.
• They forced the Chinese troops based in Lhasa to return to the mainland-via India. A year later, Tibet declared independence from China.
• In order to ensure that the unrest did not spread to India and assert their boundaries, the ruling British convened a tripartite meeting at Shimla with Tibetan and Chinese delegates to define the border.
• The meeting gave China suzerainty over most of Tibet, and the boundary defined in this treaty was later known as the McMohan line.
• The Chinese Foreign Ministry said that China’s “position on Zangnan or South Tibet, as China refers to Arunachal] region is consistent and clear. We never recognised the so-called Arunachal Pradesh.”

India and Arunachal Pradesh

• Arunachal Pradesh (called South Tibet in China) is a full-fledged state of India.
• India’s sovereignty over the area is internationally recognized and its residents have not shown any inclination to leave India.
• The majority of the international maps acknowledge the area to be an Indian Territory.
• China has some (pre-) historical claims through its ownership of Tibet, but the people and geography primarily favour India.

Why Arunachal Pradesh? What is China’s Interest In Arunachal Pradesh?

• Arunachal Pradesh known as the North East Frontier Agency (NEFA) until 1972, is the largest state in the northeast and shares international borders with to the north and northwest, Bhutan towards the west and Myanmar to the east.
• The state is like a protective shield to the northeast.
• However, China claims Arunachal Pradesh as a part of southern Tibet.
• And while China may lay claim to the entire state, its main interest lies in the district of Tawang, which is in the north-western region of Arunachal and orders Bhutan and Tibet. China’s interest in Tawang could be for tactical reasons as it provides a strategic entry into India’s northeastern region.
• Tawang is a critical point in the corridor between Tibet and Brahmaputra Valley.

Tawang monastery issue

• Besides Tawang also hosts the Tawang Ganden Namgyal Lhatse (Tawang Monastery), which is the second largest monastery of Tibetan Buddhism in the world.
• The monastery was founded by Merag Lodroe Gyamtso in the year 1680-81 to honor the wishes of the 5^th Dalai Lama.
• China claims that the monastery is evidence that the district once belonged to Tibet. They cite historical ties between the Tawang monastery and the Lhasa monastery in Tibet to support their claim over Arunachal.
• This despite the fact that the 1914 Simla convention, which included a Chinese representative on an equal footing with a Tibetan representative, gave birth to the McMahon Line separating Tibet from India in the eastern sector. It clearly defined the frontiers of the boundary between India and Tibet.

Cultural connections and China’s anxieties

• Tawang is an important center of Tibetan Buddhism. There are some tribes in the upper Arunachal region which have cultural connections to the people of Tibet. The Monpa tribal population practices Tibetan Buddhism and are also found in some areas of Tibet.
• According to some experts, China fears that the presence of these ethnic groups in Arunachal could at some stage give rise to a pro-democracy Tibetan movement against Beijing.

Political significance

• When the Dalai Lama escaped Tibet in 1959 amid China crackdown, he entered India through Tawang and stayed in the Tawang monastery for some time.

The Bhutan factor

• If Beijing were to gain control of Arunachal, it would mean that the kingdom of Bhutan would have China as its neighbour on both the western and eastern borders.

Infrastructure investments

• China has already engaged in massive construction of motorable roads to connect strategic points on Bhutan’s western side. According to reports, China wants to extend its roads from Doka La to Gamochin, which is under the guard of the Indian army. China’s efforts to move closer to the Siliguri corridor is a security threat for both India and Bhutan.
• What’s more, China is expanding its network of railway lines in the region which could give its military a huge advantage.

Strategic location of Arunachal Pradesh

• Arunachal’s strategic location Arunachal Pradesh is the closest location for India to target China with missiles. Also, Arunachal is the best location for
• India to deploy a multi-layered air defence system for possible attacks from China. Thus, control over Arunachal will give China a strategic advantage.

Water power

• We all know China has control over India’s water supply to the northeastern region. It has constructed several dams and can use water as a geo-strategic weapon against India by causing flooding or drought in the region.
• The Tsangpo river, which originates in Tibet, flows into India and is called Siang in Arunachal Pradesh before it becomes the Brahmaputra.

Renaming places lowers ties between India and China:

• China has recently attempted to rename 11 places in Arunachal Pradesh.
• The Chinese Ministry of Civil Affairs said it would “standardise” 11 place names in what China calls “South Tibet or Zangnan”, an area consistently controlled by India.
• India has summarily rejected China’s attempt to lay claim over areas of Arunachal Pradesh.
• It is China’s third list since 2017.
• It is seen as a deliberate affront to India’s territorial sovereignty.
• The Ministry of External Affairs statement, that “invented names” will not alter the reality that Arunachal Pradesh is an integral part of India, mirrors what India had said in 2021 when China “renamed” 15 places.
• Previous attempts to rename places:
  • In 2017:
    • The move to rename places in Arunachal Pradesh in 2017was seen as retaliation after the Dalai Lama’s visit to Tawang.
    • In 2017, there were six names.
  • In 2021:
    • In 2021, the move followed China’s new “Land and State Border Law”, that virtually authorised the government to reclaim territories claimed by China.
    • It was seen as a way to reassert its claim over the State as a whole.

What could be the factors behind such move?

• Indian Army Thwarted attempt by China’s PLA to transgress LAC:
  • The Indian Army rebuffed a PLA attempt to take over a post at Yangtse in the Tawang sector of the Line of Actual Control (LAC) in December 2022.
• G20 meeting in Itanagar:
  • New Delhi’s decision to hold a G20 engagement group meeting on Innovation technology in Itanagar was boycotted by the Chinese embassy had boycotted.
• Lack of meaningful dialogue:
  • The move by Chinese also reflects deteriorating ties and and the lack of meaningful dialogue for three years since the amassing of Chinese troops at the LAC in 2020 and transgressions that have led to scuffles, including the deadly encounter at Galwan.
  • Though many talk have been held and there has been disengagement at some standoff points, political relations have not been resumed.

Conclusion:

Although the Government counters China’s false narrative and a renaming of areas that are firmly within India’s boundaries, it will be hard to prepare for a future course of action if it does not probe the reasons behind China’s moves and the motivation for its persistent aggressions.

Impending slowdown

Context:

The World Bank and the Asian Development Bank (ADB) recently came up with new growth estimates.

Relevance:

GS Paper 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Dimensions of the Article:

1. Key points
2. Impact of a possible global slowdown
3. What is economic cycle and its stages?
4. What is Fiscal Policy?
5. Cyclicality of the fiscal policy
6. Basics of Reforms for Countering Economic Slowdown
7. Way Forward

Key points:

• The World Bank and the Asian Development Bank (ADB) projected that global uncertainty will affect economic growth.
• The new growth estimates underline that the Indian economy will slow in 2023-24.
• India’s growth projections:
  • According to the World Bank’s projections, India will grow at 6.3 per cent in 2022-23.
  • The ADB expects growth at 6.4 per cent.
  • The projections are close to what the Economic Survey had forecast in January.
    • It had projected a baseline growth rate of 6.5 per cent with a range of 6-6.8 per cent.
  • These growth estimates are within the given range.
  • These projections could come under pressure and growth could be close to the lower end of the range provided by the Economic Survey, if not below.
  • The estimate of World Bank of 6.9 per cent is close to India’s official estimate of 7 per cent.  
• Global economy growth projections:
  • The global economy, according to the World Bank, is expected to grow 1.8 per cent in 2023 compared to 2.8 per cent in 2022.

Impact of a possible global slowdown:

• It would thus be difficult for the Indian economy to reverse the loss of momentum witnessed in the second half of last fiscal year at a time when the global economy is slowing.
• Banking-sector stress: A possible slowdown of the global economy impact the banking sector can increase uncertainty in financial markets.
• Impact Capital flows:
  • Monetary policy will need to be tightened further to contain Inflation.
  • As a result of this, more banks and financial institutions could come under pressure, which would affect capital flows.
  • Although the current-account deficit has moderated, large outflows can increase volatility in financial markets with implications for growth.
• Decrease in crude oil production:
  • The decision by large crude oil producers to cut production suggests that importers like India cannot perhaps expect relief on this front.
• Geopolitical tensions:
  • Potential escalation in geopolitical tensions could also affect economic outcomes in more ways than one.

What is economic cycle and its stages?

• The economic cycle is the fluctuating state of an economy from periods of economic expansion and contraction. It is usually measured with the Gross Domestic Product (GDP) of a country or region. Other economic factors, such as employment rates, consumer spending, and interest rates, can also be used to determine the stage of the economic cycle.
• The economic cycle is also known as the business cycle, and it is the fluctuating state of a market-based economy. An economy is a term that describes a set of production and consumption activities that determine how resources ought to be allocated. Supply and demand pressures influence the economy through different variables, such as global economic conditions, trade balances, productivity, inflation rates, interest rates, and exchange rates. The variables, in aggregate, shape the economy and the state of the economic cycle.

Stages of Economic cycle

1. Expansion: During the expansion phase, an economy will experience strong growth, and interest rates will generally be lower but will begin to increase as the expansion matures. The overall production level increases, and inflation rates begin to rise as the expansion matures.
2. The Peak: The peak is reached when the growth of an economy reaches a plateau or maximum rate. It is usually characterized by higher inflation that needs to be corrected.
3. Recession: According to National Bureau of Economic Research (NBER) in the United States “During a recession, a significant decline in economic activity spreads across the economy and can last from a few months to more than a year”.
4. The Trough: The trough is characterized as a low point in the economy from which it can re-enter an expansionary phase.

What is Fiscal Policy?

• Fiscal policy deals with the government policy concerning changes in the taxation and expenditure overheads and components, while Monetary policy, deals with the changes in the factors and instruments that affect the supply of money in the economy and the rate of interest.
• Fiscal policy is result of several component policies or mix of policy instruments. These include, policy on taxation, subsidy, welfare expenditure, etc; investment or disinvestment strategies; and debt or surplus management.
• Fiscal policy is an important constituent of the overall economic framework of a country and is therefore intimately linked with its general economic policy strategy.’

Cyclicality of the fiscal policy

• Cyclicality of the fiscal policy simply refers to a change in direction of government expenditure and taxes based on economic conditions. These pertain to decisions by policymakers based on the fluctuations in economic growth.
• There are two types of cyclical fiscal policies – counter-cyclical and pro-cyclical.

Basics of Reforms for Countering Economic Slowdown

• Since 1991, the term ‘reforms’ has been used to mean both policy changes that remove restrictions on private sector activity in certain areas and those that increase profits in existing lines of production.
• Thus, to counter the economic slowdown, we need two-pronged strategy
  • Increase the Private sector Investment
  • Adoption of Counter cyclical fiscal policy by the Government.

Way Forward:

• In the given global economic backdrop, it is heartening that the Indian banking system is in relatively good shape.
  • Both corporate and bank balance sheets have improved over the last few years.
• Adopting measures like monetary-policy tightening, growth uncertainty, and lower spending by the government would constrain demand.
• Increase in policy rate:
  • The Reserve Bank of India (RBI) has raised the policy interest rate by 250 basis points in the current cycle so far and is expected to deliver another rate increase soon.
  • Since the inflation rate is above the RBI’s tolerance band, it is likely that the policy interest rate will remain elevated for some time, which would affect demand.
• Fiscal consolidation:
  • On the fiscal front, the government has to move forward on the consolidation path and will not be in a position to support growth in the medium term without slippage risks.
• Therefore a well calculated monetary and fiscal policy measures can strengthen macroeconomic stability.