News Analysis

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Editorial:Reinventing Non-alignment – India can play a constructive role in evolving a multipolar and just world order

Mains (GS-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.)

Introduction:

• In the 1990s, after the disintegration of the Soviet Union, commentators such as Francis Fukuyama were quick in announcing the “end of history” and labelling ideology as unimportant and irrelevant in the conduct of global politics.
• The supposedly unipolar world that came into being after the Cold War, with the US acting as the global policeman and leader in all institutions, facilitated the march of capitalism on a global scale.
• Non-conventional security threats challenged the established conceptions of security, war and modernity. (e.g. 9/11 attack)

How the west started fading out?

• The 2008 global financial meltdown exposed the realities of the neoliberal world order. Most institutions of lending crumbled before the inevitable logic of capitalism — the cycle of boom and bust.
• The western world soon came to understand the importance of sharing responsibility and adjusting to the new global realities such as the economic rise of China and India.
• G-20 nations replaced the elite G-8 of rich countries in deciding the economic course of the world, though within a neoliberal framework.
• The rise of China as the workshop of the world has turned many western powers insecure. It has led to a trade war between China and the US.

How India dealt with the similar situation?

• India faced a similar situation at the time of Independence. Then, India refused to join the Cold War camps and opted for a non-aligned foreign policy that championed the cause of the colonised regions and the newly-decolonised parts of the world.

How Indian foreign policy dealing with the situation?

• the Indian government’s foreign policy priorities have tilted towards the US and the neoliberal framework. Tying Indian interests to the coat-tails of America will be disastrous.
• The US is trying to drag India into its conflict with China to protect US interests in the Asia-Pacific region. The trade deals done to please the US have resulted in the loss of livelihood, agricultural land and hard-won labour rights of Indian working classes.

What is the necessity of the world? What should India do?

• What the world needs today is an international order based on the principles of mutual respect, concern and cooperation and public participation.
• The world needs to come together to build public health and education infrastructure.
• India must reject both the unipolarity of the 1990s and the bipolarity of the current system dominated by the US and China.
• India should live up to its independent non-aligned credentials and play a constructive role in evolving a more inclusive, multipolar and just world order.
• India should use its UNSC chair to represent nations hitherto unrepresented or underrepresented at the high table and continue the tradition of speaking for the marginalised. (Unfortunately, the course of Indian foreign policy in the last few years does not correspond with this broad, inclusive worldview based on solidarity.)

Conclusion:

• India should strive to make the world more inclusive, just and sensitive to the environment.
• India pursuing an independent foreign policy is not only essential for the country or the South Asian region, it can have a bearing on deprived populations of the world.

Context:The government plans to extend the deadline for Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs beyond October 31 in case the targeted loan sanction amount of Rs 3 lakh crore is not achieved

Prelims (Economy)

What is Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs?

• Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
• The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
• The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020. (now govt. can extend)
• The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
• It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.
• The main objective is to provide an incentive to Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.

Mains (GS-III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.)

How the scheme is helpful?

• The scheme aims to mitigate the distress caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
• By supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.
• The scheme is expected to provide credit to the sector at a low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.

Explained: How key policy actions led to rise in income levels during a pandemic-hit global economy

Prelims (Economy)

Introduction: The pandemic and the subsequent lockdown may have had a devastating impact on people’s livelihoods and incomes globally, but there has also been a paradoxical rise in household wealth in India, according to the findings in Credit Suisse Group AG’s 2020 Global Wealth Report.

Global trends that run counter to the generally established norms:

• A major distortion is that stocks and bonds have moved in tandem during much of the last six months, which does not typically happen.
  • Explanation – The record quantitative easing from central banks. As a result of this unprecedented action by the US Fed and other western central banks, and the force of these monetary interventions, all asset classes are surging. These central bank emergency responses included cutting interest rates to zero and undertaking to buy unlimited amounts of bonds, which has translated into all assets — stocks, bonds and even alternatives — moving up in tandem.
• Almost always, when one rises, the other tends to fall. So, generally in an economic downturn, while gold typically surges as investors flock to a safe haven investment, copper prices slide as manufacturing and construction slows down. But the Covid-19 pandemic has triggered a surge in both gold and copper that are moving up in tandem.
  • Explanation – there are two overlapping triggers. The trigger for gold is predictable: fears of a prolonged downturn as the virus continues to spread and uncertainties over the impending global recovery is forcing investors to flock to the yellow metal as they seek out a safe haven. But, unlike during a typical downturn, when copper prices dip as manufacturing and construction slow, the upturn in copper’s trajectory has one key driver — China.
• Despite the devastation of jobs and employment prospects, savings have gone up across geographies.
  • Explanation – The surge in wealth of the richest Americans is being driven by the sharp bounceback of the US stock market, primarily driven by the unprecedented action by the Fed. Investors have been buying equities, with Big Tech companies and those linked to healthcare — Big Pharma and hospital stocks — among the major beneficiaries. Most of the global rich own stocks in their own companies and others, thereby benefiting from the surge in market valuations.

The important concept behind this trend:

• Wealth acts as a form of self-insurance that households can draw upon when times are hard. Initially, the impact of the pandemic was felt mainly via the sharp worldwide decline in equity prices.