Daily Mains Newsletter for UPSC 24 Dec 2021

Daily Mains Newsletter For UPSC
| RaghukulCS

24 Dec 2021 - Friday

Index

Table of Contents

India – Central Asia Relations

Introduction

  • India has increased its outreach to Central Asia and leaders of the 5 Central Asian nations (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) have been invited to the 2022 Republic Day Celebrations. Recently, India also hosted the ministerial-level meeting of the Foreign Ministers of these 5 countries.

What is the extent of the Central Asian Region? 

  • Central Asia Region stretches from the Caspian Sea in the west to China in the east, and from Afghanistan in the south to Russia in the north
  • It includes five countries namely Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan which are collectively referred to as the Central Asian Republics (CARs).

How did the India-Central Asia relations evolve over time? 

  • India has had a long history of cultural and commercial relations with Central Asia, facilitated by its geographical proximity to India and the passage of the Silk Route through them.
  • Buddhism was central to this connection in ancient times.
  • Many rulers of medieval India had their roots in Central Asia, including the Mughals.  
  • The present Central Asian Countries came into existence after the disintegration of the USSR in 1991.
  • India was one of the first countries to establish diplomatic relationships with the CARs in 1991-92; however, there was a lack of rigor in the ties in the 1990s.
  • The situation began to improve in the 2000s and has gained pace since then.

What is the importance of the Central Asian region for India? 

  • Central Asia’s location at the heart of Eurasia, its geographical proximity, and historic linkages, make the region highly relevant to India’s strategic interests.  
  • Mineral and Energy Security: Central Asia is rich in energy resources, including, oil, coal, and natural gas. Kazakhstan is the largest producer of uranium.
  • Security: Terrorism, drug trafficking, and radicalization have been a matter of concern for India and Central Asian countries alike.
  • Geopolitical significance: Unstable Central Asia has the potential to affect Russia and China, which have border connectivity to these countries. 
  • Trade and Investment: The Central Asian countries provide trade and investment opportunities in multiple sectors like IT, Pharmaceuticals, Tourism, etc. 
  • This bolsters the importance of improving India-Central Asia relations.  

What are the initiatives undertaken to boost India-Central Asia relations?  

  • International North-South Transport Corridor (INSTC): 
  • India, Iran, and Russia in 2000 launched INSTC to develop a new trade route that would help in cutting the costs and time in moving cargo between Russia and India.  
  • It is a 7,200-kilometre multi-modal project with thousands of kilometers of all-weather highways.
  • Many countries have now come on board which includingAfghanistan, Azerbaijan, Central Asia, and several European countries. 
  • Chabahar port initiative: 
  • In 2003, India and Iran announced the development of the Chabahar port. This was launched to serve as an alternate route to Central Asia.  
  • Ashgabat Agreement: 
  • The pact was signed in 2011 by Uzbekistan, Turkmenistan, Iran, Oman, and Qatar and aimed at developing the shortest trade route between the Central Asian republics and Iranian and Omani ports.
  • India joined the Ashgabat agreement in 2018 to diversify its connectivity options with Central Asia. 
  • Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline: 
  • It was launched to transport natural gas from Turkmenistan to India with transit through Afghanistan and Pakistan.
  • However, it has been stalled since 2006 due to a lack of support from Pakistan

Technological and Human resources 

  • Indian Technical and Economic Cooperation (ITEC): 
  • India launched the ITEC program to provide assistance to the CARs countries in the area of IT, Management, journalism, diplomacy, entrepreneurship, and banking
  • Connect Central Asia policy:
  • It was launched in 2012 and aimed to enhance India’s political, economic, historical, and cultural connections with Central Asia. 

Defense 

  • Strategic Partnership Agreements (SPA): India signed the SPA with three of the five CARs—Kazakhstan, Tajikistan, and Uzbekistan—to stimulate defense cooperation and deepen trade relations. 
  • Multilateral and bilateral forums/organizations: 
  • Initiatives like Shanghai Cooperation Organisation (SCO) and Conference on Interaction and Confidence-Building Measures in India (CICA) have helped India to maintain regular channels of communication with the CARs. 

What are the factors hindering India-Central Asia relations from reaching their true potential? 

  • Landlocked region
  • Connectivity issues
  • Chinese presence in the region
  • Taliban’s presence in Afghanistan
  • India’s Foreign policy focus on Big Powers
  • Trade and commercial bonds are weak

What measures can be undertaken to enhance India-Central Asia relations? 

  • India can undertake steps to enhance connectivity through the air and digital modes
  • Although China has the largest regional presence in Central Asia, India’s outreach may provide an alternative to CARs. Also, India’s commitment to “principles of transparency, local priorities, and respect for sovereignty and territorial integrity” makes it a preferred alternative to China in the long run.
  • Leveraging India’s Soft power: Emphasis should be laid on maintaining cultural and people to people contacts
  • The Connect Central Asia Policy must be implemented speedily with high-level visits, strategic partnerships, comprehensive economic engagement, partnership in the development of energy and natural resources to ensure India’s strategic interests. 
  • India must improve trade in both goods and services. Cooperation can be enhanced in areas such as FDI, technology, Human resources
  • Increased access to India’s huge markets would undoubtedly be highly beneficial for Central Asian countries that are constantly on the lookout to boost their struggling economies. 

Conclusion 

There is certainly a long way to go before India could be designated as one of the most consequential actors in Central Asia. However, the recent initiatives show it is on the right track. India must ensure that the current momentum is maintained.

Need of Insurance for Bank Deposits

What is the issue?

  • India needs to move to a risk-adjusted premium model so investors are more aware of the risks.

What is Revamped Deposit Insurance Scheme?

  • The revamped deposit insurance scheme was upgraded through the Deposit Insurance and Credit Guarantee Corporation (DICGC) Amendment Bill, 2021.
  • It guarantees to compensate depositors up to a limit of Rs. 5 lakhs within a period of 90 days from when a bank fails.

Why should we raise the value of the deposits that will be insured?

  • Rs. 1 lakh limit was set in the 1990s.
  • Considering the inflation rate this has become extremely inadequate.
  • Compared to international standards our insurance limit is much lower than several comparable economies like South Korea and Brazil and also way below U.K. and U.S.A.
  • Though we cannot compare figures across countries in isolation due to differences in purchasing power we still have a lower amount of deposit insurance than other countries.
  • So, by raising the limit to Rs. 5 lakhs, we are going in the right direction.

Why do we need insurance for bank deposits?

  • – Discussion on deposit insurance began in India after a number of bank failures.  Attempts were made to stabilize the banking system.
  • In the 1930s, the U.S. set up deposit insurance. India set deposit insurance up in the 1960s to deal with bank failures.
  • So, each time your banks fail in large numbers, the central bank does something about deposit insurance.
  • Confidence Building Measures.
  • Cost of Delayed Payment – Investors are not able to figure out good banks and bad banks. They generally invest in banks where returns are high.
  •  But no one has lost money in any scheduled commercial bank in India.
  • There may be a liquidity risk but no credit risk because the government always comes in and rescues banks. It means there is 100% insurance.
  • However, there may be a delay in case of bad banks and that can be pretty costly. The sooner we get there, the better it is.
  • So, we need risk-based deposit insurance premiums, which are simply absent in India.

Can Private insurers provide confidence during a crisis?

  • It comes into play when panic sets in, like in 2008.
  • Everybody was panicking and wanted their money back, fueling a self-fulfilling crisis.
  • In that scenario, private insurance might not work because people might think that the private insurer will become bankrupt.
  • This is where the might of the government comes in because the government has the ability to be the lender of last resort.
  • We saw in the 2008 crisis that the U.S., which is generally seen as a more market-driven financial system, had to be eventually bailed out by the government.

What should RBI do beyond insurance for bank deposits?

  • The DICGC is basically owned by the RBI.
  • So, when it comes to bank failures, it is the RBI and not the DICGC that is playing a major role.
  • In the U.S.A the Federal Deposit Insurance Corporation also plays a role in the resolution of troubled banks
  • The Federal Reserve doesn’t play an active role in the resolution process other than lending to the troubled institution.
  • Regulators are always a few steps behind the banks. They are still playing the catch-up game in figuring out the true level of risk that banks have.
  • RBI should disclose risk information and take quick action before a bank fails. For this, you need to have a good model to figure out which bank is under stress.
  • Depositor’s discipline has to go hand in hand with improvement in risk management system across the board.

Ethics | Paper – IV | Thermology

Esprit de corps:

  • The common spirit of comradeship exists among the members of a group and inspires enthusiasm, devotion, and strong regard for the honor of the group.
  • An example of esprit de corps is a group marching to bring awareness to a current issue.
  • For example, a military unit.

Fidelity:

  • It is defined as faithfulness to obligations, duties, or observances; exact correspondence with fact or with a given quality, condition, or event; accuracy in reporting detail; adherence to truth.
  • When a worker is unfailingly loyal to a company, this is an example of fidelity.
  • When a man and a wife are faithful to each other and do not have extramarital relations, this is an example of fidelity.
  • An unfaithful public servant tarnishes the image of the entire system.

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