Iran Nuclear Deal

Q: Iran nuclear deal opens new opportunities for trade and Business for India. Analyze them and also comment on the new challenges of the deal to West Asia.

A: The sanctions on Iran were lifted by the U.S led P5+1 countries following the deal in which Iran agreed to restrictions on its nuclear policy. This enables Iran to participate in the international business and trade. This opens many opportunities for India such as:

1. Opportunity to begin the construction of the strategic Chabahar port in Iran which connects India to Central Asia bypassing Pakistan.
2. Increase oil trade with Iran and regularize the payments held up from India due to international sanctions. This supports India’s energy needs and enhances energy security of India.
3. Iran-Pakistan-India pipeline can be realized which is of immense benefit not only to India but also to Iran and Pakistan.

The deal also poses several challenges in the West Asian region as the region might become unstable with geopolitical conflicts between Iran and Saudi Arabia as each try to gain supremacy in the region. Israel continues to suspect Iran of trying to acquire nuclear capability despite its compliance with the deal. Iran is also under U.S.’s list of countries sponsoring terrorism and is being monitored. The deal and subsequent lift of the sanctions are a welcome step in establishing relations with Iran and bringing the country out of its economic isolation. This must be followed with adequate confidence building measures by both Iran and P5+1 nations to avoid any conflict in the region and realize its benefits.

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Non-alignment to Multi-alignment

In the early years of independence, India chose to remain non-aligned with either of the super powers – USA and USSR –  engaged in a Cold War and fighting proxy wars in various regions of the world. This was a necessary precaution adopted by India from becoming a theater of conflict between the two powers. After the disintegration of USSR and as the world moved towards increased globalization, non-alignment does not serve any purpose. This was reflected in India’s foreign policy as India increasingly began to engage with various countries of the world politically and economically.

India established full diplomatic relations with Israel in 1992, signed a historic civil nuclear deal with USA in 2005 and sustained its strong ties with Russia over the years and renewed its engagement with Japan. The reasons for this shift are:

1. Increased interdependence among the countries of the world, following globalization.
2. Strategic and geo-political interests of the countries. Ex: Emerging threats in the Indo-Pacific, with Chinese assertion positioned India as a stabilizing influence in the region.
3. India’s need for high-quality defense equipment.
4. India’s growing energy and infrastructure needs.

The multi-alignment benefits India, as India would receive help and assistance from all quarters. For India to assert its importance as a regional and global player, India should engage in meaningful relationship with various powers. The significant benefit was the acknowledgement of India as a reliable and trustworthy nuclear power by Japan and U.S.A. This would help in persuading other nuclear establishments to support India in its nuclear energy aims.

Thus non-alignment policy which helped India grow as a stable nation should give way to multi-alignment, to strengthen India’s position as an important global player in the emerging multi-polar world.

 

 

Regional Integration aka Akhand Bharat

Indian subcontinent, the region south of the Himalayas and north of the Indian ocean, has largely been isolated from other parts of the world due to its unique geography. This led to the development of a unique cultural unity in the region. Despite this, in the last century, the subcontinent has evolved into distinct nations, each with its own independent existence and sovereignty. The cultural, economic and political ties of the region were put aside as the countries aimed to establish their independent future and grow without the influence of others.

This setup is, however, not cast in stone. In the wake of globalization, which seeks to integrate the world economies defying geographical boundaries, the countries of the subcontinent cannot remain in isolation of each other. The regional groupings like SAARC (established in 1985) assume more importance now than ever. The huge presence of India, and lack of common borders with each other might raise alarm in the smaller countries of growing Indian hegemony. India has been trying to allay these fears by having an open border policy with Bhutan and Nepal, much to the benefit of those nations.

There are several challenges to achieve full integration in the region. India – Pakistan relations are a major obstacle which impede progress in attempts like SAFTA, that aim for free and open trade in the region. Growing presence of China, mainly aided by the insecurities of smaller countries with respect to India is another challenge. India should adopt more confidence building measures to assure its neighbors that any progress in regional cooperation, on the lines of European Union, would benefit all.

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Fourteenth Finance Commission – Enhanced Devolution (Discussion)

Tags

14th finance commission, devolution, economy, fiscal federalism

Fiscal Federalism

1. Shared with the states:

Divisible Pool that is 42% of

• Tax revenues
• Net of cess, surcharge and cost of collection

2. Money that goes to state: around 62% of divisible pool via
   • Plan grants —> for centrally sponsored schemes
   • Grants by Finance commission ————-|Both around 32 to 35%
   • Tax devolution —————————————-|
3. With the increased share via Finance commission grants, states have more autonomy to use the money as they like. ~ Structural shift in transfers – conditional to unconditional
4. 14th Finance commission – unlike previous FCs, 14th FC took into account plan as well as non-plan expenditure of the states.
   • So, essentially the larger devolution also includes what was earlier some part of plan expenditure of states.
5. Central aid – Gadgil formula* will be financed by the enhanced devolution.
6. Forest cover – weightage of 6 – 7%; Forest cover – fiscal disability of state
7. Significant step-up to the local governments – from 89k crores to 3 lakh crore.