The G20 Foreign Ministers’ Meeting And Prospects

The Foreign Ministers’ meeting at the G20 will commence on March 2^nd 2023 at New Delhi. We know that Secretary of State Anthony Blinken from the US, Foreign Minister Qin Gang of China, and Foreign Minister Sergei Lavrov of Russia are definitely coming.

All the Foreign Ministers of the G20 countries as well as those from special invited guests - Bangladesh, Egypt, Mauritius, Netherlands, Nigeria, Oman, Singapore, Spain and the UAE are also expected.

 Anthony Blinken will also participate in a scheduled QUAD Security Dialogue meeting as well as the 8th Raisina Dialogue meeting to be attended by many other countries including QUAD partner Australia represented by Foreign Minister Penny Wong.

In the latter, all four QUAD  foreign ministers are expected together  to address a panel for the first time. However, it is uncertain, even now, whether the Japanese Foreign Minister Yoshimasa Hayashi will attend the G20 and the QUAD meetings because the Japanese DIET is in session. Japanese deputy  Foreign Minister Shigeo Yamada is likely to be despatched in Hayashi’s place according to media reports.

What this suggests about Japanese enthusiasm for the India hosted G20 and QUAD meetings diplomatically, despite close relations between Prime Minister Narendra Modi and the late Prime Minister Shinzo Abe as well as present Japanese Prime Minister Fumio Kishida, is at present a bit of a mystery.

It also raises questions, should Hayashi not attend, on the momentum of Indo-Japanese military cooperation in the light of Chinese aggression. Japan has recently met with China for security discussions for the first time in four years. China is concerned about Japanese pacifist policy changes and an ongoing military build-up. Japan has earlier announced in December 2022 its decision to collaborate with a pair of European nations, for the first time, namely the UK and Italy, for the development of a new fighter jet to enter service in the Japanese Airforce by the mid 2030s, that will, amongst other things, use Artificial Intelligence.

The Russian Foreign Minister, the veteran Sergei Lavrov, will attend the Foreign Ministers’ Meet at the G20 in New Delhi. The production of T 90 tanks, Sukhoi 30 MKI fighter jets, AK-203 assault rifles and other weapon systems and collaborations with Russia are in full compliance with India’s ‘Make in India’ policy thrust. India’s extensive cooperation with Russia is ongoing on multipole fronts.

The Finance Ministers’ Meeting ended without a joint statement, making do with a ‘Chairman’s outcome statement’ as India is not willing to condemn or censure Russia for the Russo-Ukraine War, and the same thing is likely to happen at the end of the Foreign Ministers’ meeting on March 3^rd.

Chinese Foreign Minister Qin Gang will mark his first visit to India after taking over from long standing former foreign minister Wang Yi. Though bilateral business between the two countries, particularly by way of Indian imports from China, have grown substantially, other areas of cooperation are frozen because of the deadlock over the tensions on the LaC since 2020.

 China would like to compartmentalise the disagreements on the LaC despite the skirmishes that have broken out and the major troop deployments and infrastructure build up on both sides. India however has made it clear to former Foreign Minister Wang Yi that it cannot be business as usual till the LaC tensions are resolved.

However, both China and India have been neutral to supportive of Russia despite considerable Western pressure. China has taken the initiative, possibly underlining its position as the No. 2 power in the world.

It has recently advanced a peace proposal to end the war in Ukraine that has evinced interest in both Moscow and Kiev, (with  Volodymir Zelenskyy proposing to go to China to meet President Xi Jinping on the proposals), but not so far, in Washington.

America sees the Chinese peace proposal as tilted in favour of Russia, presumably the ceding of considerable Ukrainian territory to Russia, even as the war has entered its second year as of February 24^th 2023.

That the QUAD meeting will follow soon after the Foreign Ministers’ Meeting in New Delhi is probably another irritant from China’s point of view, but not enough for it to stay away. China’s full participation in the G20 Foreign Ministers’ Meeting is a very positive gesture for an increasingly multilateral world. It is also a desire on its part not to be isolated and viewed as an absolute ally of Russia in a new Cold War 2.0.

The Ukraine-Russian War, it is clear, will cast a shadow over the entire G20 Summit deliberations in India. In session after session under India’s chairmanship the matter will crop up, even as India will try to make progress on consensus areas. These include Climate and Clean Energy, reform of the multilateral lending agencies, greater responsiveness to the needs of the large number of countries in the so-called Global South. India has repeatedly indicated its willingness to mediate and assist in the resolving of the Russo-Ukranian War if called upon to do so.

The G20 members together represent some 85% of global GDP, over 75% of the global trade, and 66% of the world population. In theory, they should collectively be a force for change in the world and the elimination of conflicts. But if they stay a house divided that is not possible.

The member countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, The UK, and the USA. It is remarkable however that many countries outside the G20 and some within it, the developing world, have refused to take sides in the Russo-Ukranian War.

It is unlikely therefore whether India will permit the Ukranian Foreign Minister Dmitry Kueba to address the gathering via a video link. The West of course, could well be pushing for it.

There could increasingly be Western media commentary suggesting that the Indian Chairmanship of the G20 is failing because of its stance on Russia. Pressure has come with the recent visits of American Treasury Secretary Janet Yellen who went on to visit Kiev as well in the wake of the Biden visit, and German Chancellor Olaf Schultz who tried to shift India’s diplomatic stance in favour of the West as well.

However, there is a growing admiration and support for India’s principled neutrality from many of the countries not captured ideologically by the Western camp. They are more focussed on the strong likelihood of India attaining the status of the third largest major economy in the world by 2027-2028. This is within this decade itself, as Columbia Professor Arvind Panagariya recently put it.

For Foreign Minister Subramanyam Jaishankar and Prime Minister Narendra Modi, this G20 Chairmanship will be a tight-rope walk through which good relations will have to be maintained with both the West and Russia. This via a consensus-based approach with multiple countries, both in the G20 and beyond. Recent humanitarian work done in Turkey will go some distance in blunting criticism for ‘Hindu Nationalist India’ from Turkey and the OIC.

In an increasingly multipolar world, troubled by high oil prices, food shortages, inflation, low growth, high debt, it is important to proceed on the basis of common ground rather than harp on differences. This may not satisfy on all parameters, but would deliver pragmatic, workable outcomes. India’s endeavour during this Foreign Ministers’ Meeting and indeed throughout this year, will be focussed on such practicalities.

(1,235 words)

February 28^th, 2023

For: Firstpost/News18.com

Gautam Mukherjee

 

Great Budget For Capital Expenditure And Railways, Not Bad For Direct Taxes

Finance Minister Nirmala Sitharaman began her speech by calling this budget the first one in Amritkaal. The reference, and indeed the implicit branding, is towards the next 25 years, during which India is expected to change for the better beyond recognition.  India will become an $20 trillion economy over the period, with a reasonable per capita income as well.

A symbol in a budget initiative illustrates the point. India is going to give a big thrust to the R&D for laboratory grown diamonds which are otherwise indistinguishable from natural diamonds, except for massive cost advantages. In fact, many customers are sold these laboratory made diamonds abroad at the full price of equivalently sized natural diamonds. At present heaps of them are willy-nilly imported for processing in India, before being largely reexported. So, to grow them ourselves, will be a great boon. This is one new initiative that certainly went down very well in Surat.

For long there has been a school of thought that called for a doing away with  the thicket of exemptions in direct taxes. Last year, in response to this, the government offered a dual option. The old scheme with its various tax savings schemes, and another, with a lower taxation rate but no exemptions.

Unfortunately, there were few takers for the new scheme, because one could pay less taxes by using the various exemptions in the old scheme. This year, presumably to revive the new scheme, the Finance Minister Nirmala Sitharaman has sweetened it. This has been done to reduce, if not do away with the beneficial arbitrage aspects of the old scheme versus the new. The detailed calculations will have to be done, but if the new scheme is the more attractive now, it kills two birds with one stone. There will be less complicated tax calculations involved in using the exemptions, and actually lower tax liabilities just by going in for the new scheme. This works as long as the tax rates are not raised again in subsequent years.

On the face of it, the salaried middle class is very pleased.  The Finance Minister even reduced the surcharge on the highest slab to attract more of the well-heeled users.

Likewise, the stock market, that went up steadily during the minister’s speech, and stayed up after it ended. It got nothing, but at least there were no nasty surprises.

Cigarettes taxes have gone up 16%, but taxes on apparel, somewhat inexplicably, have also gone up.

The first half hour of the Finance Minister’s speech was concerned with the poorest of the poor, with a flurry of incentives and outreach efforts. There is an effort to encourage women in the rural workforce to increase their social security. Digitisation in agriculture, crop improvement initiatives with public- private cooperation, were spoken of. Millet production and popularisation is to receive a thrust. Fisheries and animal husbandry were also favoured, alongside more schemes for tribal people, particularly the most backward and vulnerable amongst them. The government will promote greater R&D in agriculture. Mangroves and wet lands are to be nurtured. Storage facilities are to be greatly enhanced for agriculture. However, there was no mention of the Blue Water Economy.

There is a careful consideration of the green economy to reduce India’s carbon footprint, in context of its its problematic dependence on fuel imports. Alternative fertilizers will be promoted, 10,000 bio-input resource centres will be developed.

There was a special mention of R&D for the pharmaceutical sector also.

There will be more nursing colleges, as many as 157 new ones. Digital and physical libraries for children. Mechanical cleaning of sewers and desludging- an absolute requirement for any civilised country.

Hydrogen production as an alternative clean fuel got an allocation of Rs. 19,700 crores. This is not a large sum as yet, but this initiative has great potential in a country that imports 80% of its petroleum. Unlike the thrust for electric vehicles alongside, which leaves a problem of a mountain of very large, and hard to dispose of spent lithium batteries. Hydrogen as a fuel can be indigenously developed, the green version is actually not too expensive to produce, and it does not have any residual waste problems.

There are moves towards youth empowerment. It is mentioned as one of the seven leading principles of Amritkaal, called the Saptarishis. There will be projects in coding, Artificial Intelligence, Robotics, 3 D printing introduced.

There is to be enhanced health infrastructure, and a mission for the elimination of Sickle Cell Anaemia.

There is to be a revamped Teacher’s Training Programme.

The entire budget is seeded with new ideas, even as old initiatives like the earlier Yojanas are strengthened. However, mention of some critical areas such as major defence manufacturing were not spoken of at all.

The boldest step in Budget 2023 is the enhancement of the capital expenditure budget to Rs. 10 lakh crores from Rs. 7.5 lakh crore. This represents 3.3 % of GDP, and is aimed at a faster development of infrastructure. The Indian Railways will receive a separate Rs. 2.40 lakh crores which will not only help modernise and grow the railways with new tracks, but turn it into a net revenue earner for the government,. This railway budget is nine times higher than the outlay in 2013-14.

Both these commendable allocations should go a long way towards reducing Indian logistic costs, a bugbear for international competitiveness in a season when we are trying hard to attract foreign manufacturers to relocate from China. The aim is to reduce logistics costs from the present 14%, to 9%.

There was no mention of the PLI schemes either in the minister’s speech. An exciting idea, not much elaborated on, is the thrust towards manufacturing one product per district of the country, largely expected to give a boost to handicrafts production and local employment. We shall have to see how the implementation turns out. Data storage centres too were highlighted.

Identifying the PAN card  for more than a direct tax identification device may turn out interesting for the millions who actually do not have one, particularly in the rural tax-exempt areas.

Tourism in India is always on the anvil for boosting, and this budget was no exception. Whether the development of as many as 50 new sites will be done with enough panache to attract new domestic and foreign tourists, remains to be seen.

However, religious tourism into Varanasi has proved very successful. More people went to Kashi than they did to Goa over the last year. Therefore Ayodhya should be a block-buster once the Ram Temple is built along with all the spanking new infrastructure there all around the city.

For an election year budget, even the last one before the general elections next year, it maintained its business as usual sangfroid while pointing out that tax collections were up and the economy was doing well. It was, as if,  the Modi government does not need to go in for populism even though the cost of living has gone up significantly with all everyday household products up by between Rs. 10 and Rs. 20. Compared to the rest of the world this is not a lot, but its nothing to be happy about. It remains to be seen how these price rises will affect the voting in nine assembly elections this year for a start.

(1,222 words)

February 1^st, 2023

For: Firstpost/News18.com

Gautam Mukherjee