Editorial 1: A three-nation visit as a foray into summit diplomacy
Context
The Prime Minister’s recent visit to Nigeria, Brazil, and Guyana offers an understanding of India’s current foreign policy priorities.
Introduction
Prime Minister Narendra Modi’s visit to Nigeria, Brazil, and Guyana (November 16-21, 2024) was exceptionally well designed to achieve multiple objectives. It was India’s latest foray into summit diplomacy covering three different geographic regions — Africa, Latin America, and the Caribbean — and encompassed an extensive interaction on bilateral, regional and global issues.
- While the Prime Minister’s primary purpose was:
- To represent India at the nineteenth summit of the Group of 20 (G-20), in Brazil
- His spending ample time in the two other countries enhanced the impact of this trans-continental journey.
- A close look at how the visit unfolded, and its outcome, is an index to understanding India’s current foreign policy priorities.
Nigeria, the first leg
- Halt at Abuja: a full-scale state visit: The halt at Abuja, Nigeria, was not a pit stop. It was a full-scale state visit to Africa’s most populous nation and the fourth-largest economy.
- Nigeria’s growing international influence: This West African nation’s international heft has been increasing, as evidenced by:
- Its presence at the G-20 summit last year at India’s invitation.
- The BRICS’ invitation to join it as a partner state.
- Nigeria’s recent chairship of the Economic Community of West African States (ECOWAS).
- Natural partnership between India and Nigeria: As two large democracies and multi-religious, multi-ethnic, and multi-linguistic societies devoted to ‘unity in diversity’, India and Nigeria are natural partners.
Signals of appreciation from Nigerian leadership
- The Nigerian leadership gave ample signals to convey its appreciation of India’s expanding economic and political influence and its robust Africa policy:
- The formal gifting of the keys of the city of Abuja to Mr. Modi.
- The ceremonial welcome at the State House complete with a 21-gun salute.
- The conferment of a top national award.
- The award citation referred to Mr. Modi’s leadership and stellar contribution to fostering India-Nigeria ties and noted that India has been positioned as a global powerhouse under his transformative governance.
- Nigeria’s role as a beneficiary of India’s development assistance.
- Nigeria, an important beneficiary of India’s development assistance and human-resource development-related programmes, has been keen to advance the ‘strategic partnership’.
Expanding bilateral cooperation
- India seemed ready and willing to expand bilateral cooperation, and the dialogue at Abuja confirmed the two leaders’ assessment that much potential existed for expanding cooperation in:
- Trade
- Investment
- Education
- Energy
- Health
- Culture
- People-to-people ties
- New areas such as agriculture, urban transportation, renewable energy, and digital transformation were identified.
- Joint commitment against terrorism and extremism: Besides, they renewed their commitment to joint combat against terrorism, extremism, and radicalisation.
- Memoranda of understanding (MoUs): Despite closeness at the political level, only three memoranda of understanding (MoU) were signed due probably to bureaucratic delays on the host side.
- A positive step for India-Nigeria relations: Overall, the visit was a clear plus for the India-Nigeria friendship.
G-20, the centrepiece in Brazil
- The summit of G-20: The nineteenth summit of G-20, comprising 19 powerful economies and two regional organisations, was hosted in Rio de Janeiro (November 18–19).
- It took forward the people-centric decisions adopted at the New Delhi summit by mainstreaming key perspectives of the Global South into the G-20 decision-making.
- Rio Declaration and Brazilian presidency priorities: The Rio Declaration highlighted the three priorities defined by the Brazilian presidency:
- Social inclusion
- Sustainable development
- Reform of global governance institutions
Key Developments at the Summit
- Global Alliance against Hunger and Poverty: It was launched to serve as a platform for “mobilizing finance and knowledge sharing” on a wide scale.
- Sustainable Development: The G-20 reiterated its previous positions but failed to make headway on climate finance.
- Multilateral development banks Reform: The new achievement was the adoption of the road map for “Better, Bigger and more Effective Multilateral Development Banks”, with the group calling for its early implementation.
- United Nations and WTO Reform: There was nothing new in the G-20’s pronouncements on the United Nations and World Trade Organization (WTO) reform.
- Focus on Economic Development and Climate Change: As conflicts rage in Europe and West Asia, leaders sought peaceful resolution and focused attention on the significant issues of economic development and climate change.
- While experts debated what the G-20 summit achieved, many expressed the view that it was time for the group to concentrate on implementing its decisions.
Interactions and Diplomacy at the Summit
- The Rio summit provided many opportunities for leaders to interact in the plenary hall and on the sidelines.
- Mr. Modi met several leaders, notably from the United States, Europe, and the Global South countries.
- The Indian External Affairs Minister S. Jaishankar met his Chinese counterpart Wang Yi to devise the next stage of the India-China rapprochement.
Guyana, as the wrap up
- On the third leg, Mr. Modi travelled to Guyana, a nation of fewer than one million people in the Caribbean region.
- Guyana's importance came into focus:
- 40% of the population is of Indian origin.
- A robust bilateral cooperation programme exists.
- Guyana has energy resources and is an important player in regional affairs.
Expanding cooperation across diverse sectors
- Decisions were announced to expand cooperation in diverse sectors such as:
- Energy
- Defence
- Urban development
- Digital collaboration
- Education
- Food security
- 10 MoUs were signed.
India-caribbean community summit in georgetown
- India and the Caribbean Community held their second summit in Georgetown, Guyana.
- This enabled Mr. Modi to interact with about a dozen leaders of this successful regional body.
Seven pillars to deepen cooperation
- Mr. Modi proposed seven pillars to deepen cooperation, covering:
- Capacity building
- Agriculture and food security
- Renewable energy and climate change
- Innovation, technology, and trade
- Cricket and culture
- Ocean economy
- Medicine and health
- He told them that the commonality in these pillars was that they were all based on "your priorities and needs".
Conclusion
In sum, the Prime Minister’s visit packed a lot within six days. It contributed to enhancing India’s global standing and Mr. Modi’s image and popularity abroad. Guyana’s President Irfaan Ali hailed him as “a champion among leaders” who has “led incredibly”. Through the expeditious implementation of the decisions announced, New Delhi could optimise the outcomes of this bold essay in diplomacy.
Editorial 2: States and the challenge before the Finance Commission
Context
There needs to be a progressive resource allocation methodology for performing States such as Tamil Nadu.
Introduction
The Government of Tamil Nadu recently hosted the Sixteenth Finance Commission, which was chaired by Arvind Panagariya. With its distinguished experts from various fields, the Commission is uniquely positioned to address the critical fiscal challenges facing India and rectifying the skewness in the relationship between the States and the Union.
Opportunities from global changes
- The decisions taken by this Finance Commission will not only shape the fiscal fate of the nation for the next five years but will also influence India’s economic trajectory in the decades to come.
- The Sixteenth Finance Commission’s work coincides with significant shifts in global economic trends.
- Concepts such as “friendshoring” and “reshoring” are reshaping international trade and investment patterns.
- These trends present a unique opportunity for India and Tamil Nadu.
- The critical challenge for the Finance Commission lies in striking a balance between equitable redistribution and incentivising growth in high-performing States such as Tamil Nadu.
Evolution of Finance Commission’s approach since 1951
- Since 1951, when the first Finance Commission was formed, each Finance Commission has adapted its own approach towards the fiscal challenges of its time.
- Every Commission has sought to achieve an equitable redistribution of resources by:
- Increasing the share of States under vertical devolution.
- Channelling funds to less-developed States through horizontal devolution.
Gaps between declared objectives and outcomes
- There have been clear gaps between their declared objectives and outcomes; therein lies our case for a new and fair system of distribution of resources.
- For instance, while the Fifteenth Finance Commission awarded the vertical share of the divisible pool to the States as 41%, the effective devolution to States in the first four years of the award period amounted to only 33.16% of the Union’s gross tax revenue.
- The unprecedented levying of cess and surcharges by the Union is the fundamental reason for this effective decline in devolution.
Hike States’ share, incentivise performers
- The States, which are near to people, bear substantial developmental expenditures, and, hence, their share should be further increased substantially.
- The financial strain on the States has been particularly severe due to:
- Increases in counterpart funding for centrally sponsored schemes on one side.
- Inadequate devolution on the other side.
- Hence, a fair and equitable share for States would be 50% devolution of the gross central taxes, allowing States greater fiscal autonomy in funding and implementing locally relevant schemes.
Horizontal devolution: challenges and opportunities
- On horizontal devolution, it is evident that the redistribution policy followed for the first four and a half decades in the country has yielded limited results in driving real growth.
- Hence, the fundamental question would be this:
- Should the focus be on a smaller national pie with a larger share for less-developed States or a larger national pie with equitable distribution that provides greater absolute resources for all?
- The answer is difficult, yet a more balanced approach would ensure:
- A larger national economic pie, allowing for reasonable shares for less-developed States and adequate resources for progressive States to continue their upward trajectory.
- This would clearly necessitate a progressive resource allocation methodology for the performing States so as to allow them to fulfill their potential to be India’s growth engines.
Unique challenges in progressive States
- Amidst this, it is also important to note that progressive States such as Tamil Nadu also face unique challenges in:
- Demography and urbanisation.
- Demographic challenges and aging population: With a median age higher than the national average, the State’s capacity to generate consumption-based tax revenue is declining, even as the costs of supporting an aging population are rising.
- It is imperative to ensure that such States do not fall into the “middle-income trap”, where growth stagnates and they “grow old before becoming rich”.
- Urbanisation challenges in fast-growing States: The challenges due to urbanisation in fast-growing States merit adequate addressal.
- A State like Tamil Nadu is witnessing the fastest rate of urbanisation in the country, due to which it will have a 57.30% urban population in 2031, against the expected national average of 37.90%.
- The resources for fulfilling the infrastructure needs of urbanisation should be earmarked to ensure the long-term sustainability of our growth.
Conclusion
We should keep in mind that the mandate of the Commission goes beyond fiscal arithmetic. It is about envisioning a future where every State contributes to and benefits from the nation’s progress. Whether it is fostering manufacturing, addressing urbanisation challenges, or ensuring climate resilience, the Commission’s decisions will impact millions of lives and determine the trajectory of the country’s destiny, to take its place among the world’s leading economies.