- Building the Floor: China-USA Summit
- Freebies- a Surefire Recipe for Disaster
The summit meeting this week between U.S. President Joe Biden and Chinese President Xi Jinping in San Francisco is unlikely to resolve the significant differences that exist between the world’s two largest powers. However, it holds the promise of providing much-needed relief to the world by stabilizing a relationship that has recently been in a downward spiral, causing growing concern.
- Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.
- Important International Institutions, agencies and fora – their Structure, Mandate.
The U.S. and China have realised that building a floor when ties between major powers are at the risk of free fall, is the first step. Discuss whether the outcomes of the US-China summit on the sidelines of APEC can help build stability in their bilateral ties. (15 marks, 250 words).
Outcomes of the Meeting:
- Taking place on the sidelines of APEC, the summit resulted in two notable outcomes.
- Firstly, there were concrete agreements, such as restarting direct military-to-military dialogue and addressing the risks and safety concerns related to artificial intelligence.
- Secondly, both sides characterized the summit as establishing a foundation for the relationship, aiming to build on the goal set during their last meeting in Bali in 2022. The Bali consensus, unfortunately, was disrupted by the “spy balloon” incident.
Challenges in Maintaining the Stability of US-China relations:
- This time, there is cautious optimism that the effort to stabilize the relationship is founded on more stable ground. However, the duration of this stability remains uncertain, especially with two potentially disruptive political events on the horizon.
- In January of the following year, Taiwan is scheduled for elections, and the outcomes could escalate tensions across the strait. Regarding Taiwan, both China and the U.S. reiterated their positions, with China warning against interference, while the U.S. expressed opposition to any changes in the status quo.
- Additionally, the U.S. will enter election mode next year in preparation for the November 2024 polls, and political campaigning typically brings heightened rhetoric on China.
- A more extended concern, underscoring the limitations of this modest stabilization, revolves around a fundamental disagreement in their outlook on the future of their relationship. According to Mr. Xi, the primary question is whether they are “adversaries or partners.”
- He criticized the U.S. for framing the relationship as inherently competitive, warning that such a perspective could lead to “misinformed policy making, misguided actions, and unwanted results.”
- Mr. Xi urged the U.S. to avoid inconsistent stances, especially on issues like Taiwan and export controls. In contrast, Mr. Biden stressed that the U.S. and China are indeed in competition and highlighted the immediate challenge of managing it responsibly.
Lessons for India:
- Despite these differences, both leaders seem to recognize the importance of high-level engagement and open communication channels in preventing competition from escalating into conflict.
- This realization provides valuable lessons for the India-China relationship, particularly as the crisis along the Line of Actual Control enters its fourth winter. It underscores that engaging in dialogue is not a concession in itself.
As the U.S. and China have acknowledged, establishing a foundation when relations between major powers are at risk of free fall is the initial crucial step.
During elections, political parties traditionally inform voters about their policies and proposed programs through election manifestos. However, in the last decade and a half, the nature of these promises has shifted. Rather than focusing on policies and programs, there has been a prevalence of announcements regarding cash transfers and free schemes.
GS2- Government Policies and Interventions
Rather than focusing on policies and programs, there has been a prevalence of announcements regarding cash transfers and free schemes in recent election campaigns by political parties. Analyse the impact of this developing freebie culture and suggest measures to effectively deal with it. (15 marks, 250 words).
The Freebie Culture:
- In Madhya Pradesh, a party, in addition to waiving farmers’ loans, has introduced various other free schemes, including free electricity, gas cylinder subsidies, a monthly allowance of Rs 1500 for women, and a Rs 3000 unemployment allowance for youth.
- Similar announcements are made by various political parties in Madhya Pradesh and other states heading into elections, with a concerted effort to attract voters.
- This trend of offering freebies is expanding across many states in India. Political parties, in the lead-up to elections, regularly make announcements about freebie schemes such as free electricity, transportation, cash transfers to women, unemployment allowances for youth, and more.
The Negative Fallouts of Freebies:
Raises Question on Democracy:
The concern arises whether this trend is healthy for democracy, and questions linger about the government’s ability to finance these free schemes and the potential increase in state government debt.
Rise in the Debt of States:
- The Reserve Bank of India and the Comptroller and Auditor General of India (CAG) have raised alarms about the increasing debt of states due to these freebie schemes.
- According to the Fiscal Responsibility and Budget Management (FRBM) Act, the target debt-GSDP (gross state domestic product) ratio should not exceed 20 percent in any state. However, CAG reports indicate that in many states, this ratio far surpasses the targeted limit.
- For instance, Punjab has a debt-GSDP ratio of 48.98 percent, Rajasthan at 42.37 percent, West Bengal at 37.39 percent and Chhattisgarh at 26.47 percent.
- If the debt of state government enterprises and guarantees given by the state government are considered, the debt to GSDP ratio in Rajasthan would be 54.94 percent, in Punjab 58.21 percent, and in Andhra Pradesh 53.77 percent by 2020-21.
Hampers Development in other Sectors:
- This increasing debt not only impacts the economic rating of the country but also affects the ability of state governments to run welfare schemes.
- The excessive spending on free schemes leads to a decrease in capital expenditure on infrastructure, affecting social services, education, health, and essential services. It also hampers the development of the state by limiting investment in critical infrastructure.
If this trend persists, the country may face difficulties attracting new investments, and both government and companies may have to pay higher interest rates on foreign borrowings. Consequently, the increasing debt not only creates fiscal imbalances but also impedes the country’s overall development and industrial growth.