THE HINDU EDITORIAL- SEPTEMBER 18, 2017
- a) Reading the tea leaves
In history, defining moments like 9/11 that can be identified as markers of change are rare. More often, there are trend lines of slow-moving geopolitical changes which come together at a particular moment in time resulting in an inflexion point. Reading the tea leaves indicates that 2017 may well be the year which marked the reordering of the Asian strategic landscape.
Two trend lines
The two slow moving trend lines clearly discernible since the Cold War ended a quarter century ago are the shift of the geopolitical centre of gravity from the Euro-Atlantic to the Indo-Pacific region and the rise of China. The U.S. ‘rebalancing’ announced in 2011 was a belated recognition of these changes, driven home by the impact of the 2008 financial crisis. Most of the rivalries are being played out in the crowded geopolitical space of the Indo-Pacific, and Asian economies now account for more than half of global GDP and becoming larger in coming years. China’s rise is reflected in a more assertive China. According to President Xi Jinping’s ‘two guides’ policy announced in February, China should guide ‘the shaping of the new world order’ and safeguarding ‘international security’. Much has changed during the last quarter century when Deng Xiaoping advised China ‘to observe calmly, secure its position, hide its capability, bide its time and not claim leadership’. Today’s China is not just willing but eager to assume leadership and expects other countries to yield space. China has suggested ‘a new type of great power relations’ to the U.S. Its assertiveness in the East China Sea with Japan and in the South China Sea with its Association of Southeast Asian Nations (ASEAN) neighbours sends a signal that while multipolarity may be desirable in a global order, in Asia, China is the predominant power and must be treated as such. Even though China has been a beneficiary of the U.S.-led global order, it is impatient that it does not enjoy a position that it feels it deserves, especially in the Bretton Woods institutions. During the last five years, it has set about creating a new set of institutions (the Asian Infrastructure Investment Bank and the New Development Bank) and launched the Belt and Road Initiative (BRI) to create a new trading infrastructure that reflects China’s centrality as the largest trading nation. The BRI is also complemented by a growing Chinese naval presence in the Indian Ocean. Beginning in 2009, the PLA Navy started rotating three ship task forces through the Indian Ocean as part of the anti-piracy task force off the Somalia coast. Visits by nuclear attack submarines to littoral ports began to take place. In addition to Gwadar, China is now converting the supply facility at Djibouti into a full-fledged military base.
Accelerating the trends
Recent developments have accelerated these geopolitical trends. The first was the outcome of the U.S. elections last year. By invoking ‘America first’ repeatedly, President Donald Trump has made it clear that the U.S. considers the burden of leading the global order too onerous. American allies, particularly in the Asia-Pacific, are nervous about Mr. Trump’s harangues that they are enjoying the benefits of the U.S. security umbrella on the cheap. Recent nuclear and long-range missile tests by North Korea have added to South Korean and Japanese anxieties. Japan has been particularly rattled by the two missiles red across Hokkaido. Given the U.S. push for more sanctions that depend on China for implementation, most Japanese reluctantly admit that North Korea’s nuclear and missile capability is unlikely to be dismantled any time soon. Another significant development was the Doklam stand-off between India and China that lasted from June to August. The Chinese playbook followed the established pattern — creating a physical presence followed by sharpened rhetoric, together becoming an exercise in coercive diplomacy. This worked in pushing the nine-dash line in the South China Sea with the Philippines and Vietnam even as China built additional facilities on reclaimed land in the area. India, however, chose to block China and a few hundred soldiers on the plateau maintained their hostile postures even as Prime Minister Narendra Modi and President Xi attended the G-20 summit in July amidst heightened rhetoric recalling the 1962 war. Differences with China did not begin with Doklam. It was preceded by the stapled visa issue for Indians belonging to Arunachal Pradesh and Jammu and Kashmir, growing incidents of incursions along the disputed boundary, blocking of India’s bid to join the Nuclear Suppliers Group last year, ensuring that no language relating to Pakistan-based terrorist groups found mention in the BRICS summit in Goa and preventing the inclusion of Masood Azhar from being designated as a terrorist by the UN Security Council by exercising a veto. Since 1988, India has followed a consistent China policy based on putting aside the boundary dispute and developing other aspects of the relationship in the expectation that this would create mutual trust and enable a boundary settlement. However, the gap between India and China has grown, both in economic and military terms, and with it has emerged a more assertive China. The shared vision of an Asian century with a rising India and rising China is long past. Mr. Modi’s personal diplomacy with Mr. Xi has had little influence on changing Chinese attitudes or behaviour. After Doklam, there is finally a consensus that the old China policy does not serve our national interests and a review is long overdue.
A new strategic landscape
It is against this backdrop that Japanese Prime Minister Shinzō Abe’s visit to India took place last week. The contours of a new relationship were defined during Mr. Abe’s earlier tenure, in 2006-07, when annual summits were introduced, the relationship became a ‘Special Strategic and Global Partnership’, Japan was invited to join in the Malabar naval exercises and a Joint Declaration on Security Cooperation was concluded. Since then, significant content has been added. A singular achievement was the conclusion of the agreement for Cooperation in the Peaceful Uses of Nuclear Energy last year. Under negotiation for five years, this was a sensitive issue for Japan given the widespread anti-nuclear sentiment (though Japan enjoys the U.S. nuclear umbrella) and (misplaced) faith in the Nuclear Non-Proliferation Treaty; it would not have gone through but for Mr. Abe’s personal commitment. To deepen strategic understanding, the two sides initiated a 2+2 Dialogue involving the Foreign and Defence Ministries in 2010. A memorandum on enhancing defence and technology/security cooperation was signed and talks on acquiring the amphibious maritime surveillance ShinMaywa US-2i began in 2013. Trilateral dialogue involving both the U.S. and Japan and covering strategic issues was elevated to ministerial level in 2014. Japanese participation in the Malabar exercises, suspended because of Chinese protests, was restored in 2015. Once the agreement for the 12 US-2i aircraft is concluded with a follow-up acquisition as part of Make in India, the strategic relationship will begin to acquire critical mass. However the strategic partnership needs stronger economic ties. Today, India-Japan trade languishes at around $15 billion, a quarter of trade with China while Japan-China trade is around $300 billion. Therefore, the primary focus during the recent visit has been on economic aspects. The Mumbai-Ahmedabad high speed rail corridor is more than symbolism, in demonstrating that high-cost Japanese technology is viable in developing countries and that India has the absorption capacity to master it. Completing it in five years is a management challenge but the bigger challenge will be to transfer the know-how of best practices to other sectors of the economy. Another major initiative is the recently launched Asia-Africa Growth Corridor to build connectivity for which Japan has committed $30 billion and India $10 billion. This adds a critical dimension to the ‘global partnership’ between the two countries. However, to make this productive, India needs to change its style of implementing projects abroad, most of which have been plagued by cost and time over-runs. Ensuring effective implementation and setting up mechanisms for delivery will align Mr. Modi’s Act East policy with Mr. Abe’s Free and Open Indo-Pacific Strategy. This alignment sets the stage for the reordering of the Asian strategic landscape.
- b) Time for caution
India’s external balance sheet may have improved significantly since the infamous taper tantrum of 2013, but there are now signs that warrant more caution from policymakers. Last week, the current account deficit (CAD) widened to a four-year high of $14.3 billion in the first quarter of the current financial year, standing at 2.4% of gross domestic product, compared to 0.1% last year. The widening CAD was driven by a greater increase in merchandise imports than exports. A strong capital account surplus, however, has helped the country pay for its import bills without much trouble. Foreign investors starved of yield have been stepping up their investments in India, which remains one of the few places offering higher yields. Compared to last year, net FDI almost doubled to $7.2 billion in the first quarter, while net portfolio investment jumped about six times to $12.5 billion. The strong inflow of foreign capital has also led to a significant increase in foreign reserve holdings, thanks to the Reserve Bank of India which has been busy buying dollars to weaken the rupee. Forex reserves were at an all-time high of $400.7 billion for the week ending September 8, while the rupee has appreciated by over 6% against the dollar this year. Low global oil prices over the last two years have also helped contain a good portion of its import bills. All this might change with the impending tightening of monetary policy by the U.S. Federal Reserve and other central banks. After all, emerging Asian markets have been the biggest beneficiaries of loose monetary policy in the West, so any change in stance would most definitely affect them. Indian companies, for instance, have aggressively tapped into the market for rupee-denominated foreign debt, which can work against them if the flow of foreign capital turns volatile. The RBI has been regulating the amount and quality of such borrowings, so it may seem like things are under control for now. Further, India’s total external debt declined by 2.7% during the financial year 2016-17, standing at $471.9 billion, driven by a fall in external commercial borrowings and deposits by non-resident Indians. The World Bank, in fact, has said that India’s external dynamics remain very favourable given the size of its economy and foreign reserve holdings. But a prolonged period of unfavourable trade balance when combined with volatile international capital flows can lead to unsavoury macroeconomic situations. According to a report by India Ratings & Research earlier this year, a 10% depreciation of the rupee combined with a 50 basis point interest rate hike can severely affect most Indian borrowers. It added that as much as 65% of foreign debt exposure of Indian companies may be unhedged. As the world looks to withdraw from an era of historically low interest rates, it would be wise for India’s policymakers to be ready with an emergency plan to tackle a period of significant volatility.
Meaning: Political activity as influenced by the physical features of a country or area of the world.
Example: These developments are having a major impact on the geopolitics of the region.
Meaning: A change in the form of a word (typically the ending) to express a grammatical function or attribute such as tense, mood, person, number, case, and gender.
Example: A set of word forms differing only in respect of inflections.
Synonyms: Conjugation, Declension
Meaning: Able to be discerned; perceptible.
Example: The scandal had no discernible effect on his career.
Synonyms: Visible, Noticeable
Meaning: Coming or happening later than should have been the case.
Example: A belated apology.
Synonyms: Late, Overdue
Meaning: Competition for the same objective or for superiority in the same field.
Example: There always has been intense rivalry between the clubs.
Synonyms: Competitiveness, Competition
Meaning: Remain or stay somewhere.
Example: How long must I bide here to wait for the answer?
Meaning: Confident and forceful behaviour.
Example: She has difficulty standing up for herself, even when assertiveness may be warranted.
8) Force off
Meaning: To make someone or a group resign from a board, committee, panel, etc.
Example: They forced off the dissenters as well as the CEO.
Meaning: Relating to or situated on the shore of the sea or a lake.
Example: The littoral states of the Indian Ocean.
Meaning: Cite or appeal to (someone or something) as an authority for an action or in support of an argument.
Example: The antiquated defence of insanity is rarely invoked in England.
Synonyms: Cite, Instance
Meaning: (Of a task or responsibility) involving a great deal of effort, trouble, or difficulty.
Example: He found his duties increasingly onerous.
Synonyms: Burdensome, Heavy
Antonyms: Easy, Effortless
Meaning: A lengthy and aggressive speech.
Example: They were subjected to a ten-minute harangue by two border guards.
Synonyms: Tirade, Lecture
Meaning: Make or cause to make a rapid succession of short, sharp knocking sounds.
Example: The roof rattled with little gusts of wind.
Synonyms: Clatter, Bang
Meaning: In an unwilling and hesitant way.
Example: He reluctantly agrees to do his duty.
Meaning: Move or keep away.
Example: The women stood off at a slight distance.
Meaning: Relating to or using force or threats.
Example: Coercive measures
Meaning: Showing or feeling opposition or dislike; unfriendly.
Example: A hostile audience.
Synonyms: Antagonistic, Aggressive
Antonyms: Friendly, Mild
Meaning: The art of effective or persuasive speaking or writing, especially the exploitation of figures of speech and other compositional techniques.
Example: He is using a common figure of rhetoric, hyperbole.
Synonyms: Oratory, Diction
Meaning: Attach or secure with a staple or staples.
Example: Merrill stapled a batch of papers together.
Meaning: An invasion or attack, especially a sudden or brief one.
Example: Incursions into enemy territory.
Synonyms: Attack on, Assault on
Meaning: A disagreement or argument.
Example: A territorial dispute between the two countries.
Synonyms: Debate, Discussion
Meaning: Not having arrived, happened, or been done by the expected time.
Example: The rent was nearly three months overdue.
Synonyms: Late, Delay
Antonyms: Early, Punctual
Meaning: Lie behind or beyond; serve as a background to.
Example: The rolling hills that backdropped our camp.
Meaning: An outline representing or bounding the shape or form of something.
Example: She traced the contours of his face with her finger.
Synonyms: Outline, Shape
Meaning: Discussion aimed at reaching an agreement.
Example: A worldwide ban is currently under negotiation.
Synonyms: Conference, Debate
Meaning: Relating to, living in, or suited for both land and water.
Example: An amphibious vehicle.
Meaning: A continuation or repetition of something that has already been started or done.
Example: A follow-up study of the same interviewees after retirement.
Meaning: Capable of working successfully; feasible.
Example: The proposed investment was economically viable.
Synonyms: Workable, Feasible
Meaning: Cause continual trouble or distress to.
Example: He has been plagued by ill health.
Synonyms: Afflict, Bedevil
30) Taper tantrum
Meaning: Taper tantrum is the term used to refer to the 2013 surge in U.S. Treasury yields, which resulted from the Federal Reserve’s use of tapering to gradually reduce the amount of money it was feeding into the economy.
Meaning: An amount of something left over when requirements have been met; an excess of production or supply.
Example: Exports of food surpluses.
Synonyms: Excess, Glut
Meaning: Suffer or die or cause to suffer or die from hunger.
Example: She left her animals to starve.
Synonyms: Empty, Malnourished
Antonyms: Well fed, Full
33) Stepping up
Meaning: An increase in the amount, speed, or intensity of something.
Example: The recent stepping-up of the campaign.
Meaning: A range of investments held by a person or organization.
Example: A portfolio of insured municipal securities.
Meaning: Be about to happen.
Example: My impending departure.
Synonyms: Imminent, Close
Meaning: Exploit or draw a supply from (a resource).
Example: Clients from industry seeking to tap Edinburgh’s resources of expertise.
Synonyms: Use, Utilize
Meaning: (Typically of something regarded as good) become smaller, fewer, or less; decrease.
Example: The birth rate continued to decline.
Synonyms: Decrease, Reduce
Meaning: A reduction in the value of an asset over time, due in particular to wear and tear.
Example: Provision should be made for depreciation of fixed assets.
Synonyms: Devaluation, Drop
Meaning: (Of an investment or investor) not protected against loss by balancing or compensating contracts or transactions.
Example: The bank collapsed due to unhedged trading.
Meaning: Make determined efforts to deal with (a problem or difficult task).
Example: Police have launched an initiative to tackle rising crime.
Synonyms: Approach, Address
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