Editorial 1 : Drawing borders in the air
Introduction: The recent satellite image of China’s fifth generation stealth fighters, the J20 Mighty Dragon, parked on the main tarmac of Shigatse air base in Tibet, along with J10 Vigorous Dragon fighters at an altitude of 12,408 feet, has set off a flurry of speculation and raised concerns.
The Chinese J20 aircrafts on forward bases and its messaging to India
- The J20 is touted as the stealth counter to the US F22, with its internal carriage capability of long-range air-to-air missiles and precision-guided munitions.
- Their presence showcases the People’s Liberation Army Air Force’s (PLAAF) high-end platforms, its ability to use its high-altitude air bases for fighter operations, and its growing ability to project air power in the region to counter the Indian Air Force’s forward deployment of Sukhois and Rafales.
- It is also a political signal that the border dispute with India is no longer a territorial issue, but one of sovereign airspace.
- More regular activation of its bases in the future will see increased air activity across our borders close to disputed spaces, and more frequent air violations to test India’s response.
Chinese massive infrastructure builds up in bordering region and its implication for India
- Beijing has been building:
- Strong border infrastructure for better movement of troops and supplies.
- Increased troop presence to improve its military standing.
- Maintained its political claims through military force despite talks.
- Conceding disputed areas as buffer zones could lead to future demands for airspace restrictions.
- This would strategically limit Indian Air Force's (IAF) operations:
- Gathering intelligence
- Patrolling the area
- Transporting troops and supplies
Comparative analysis of Indian and Chinese air force
- The IAF's current mainstay fleet consists of fourth-generation fighters like-Su30s, MiG29, M2000
- This fleet is supplemented by two squadrons of 4.5 generation Rafale fighters
- This combination provides an asymmetric advantage over China
- China is actively working to neutralize this advantage
- The government is aware of the declining combat air power inventory of the IAF
- There's a concerning lack of urgency in addressing this strategic issue
- Two squadrons of Rafales are insufficient for India's security needs, considering:
- Over 7,000 km of hostile borders
- Large volume of sovereign air space to defend
- To deter China militarily, urgent fulfilment of the Multi-Role Fighter Aircraft (MRFA) gap is crucial
- Bolstering the 4.5-generation inventory is not just an IAF requirement but a national security imperative
India’s delayed air-fleet modernisation and Chinese challenge
- India’s already delayed fifth-generation multirole fighter jet, the Advanced Medium Combat Aircraft (AMCA), is expected to take a decade before it can be inducted into service.
- By then, China would have already developed its sixth-gen fighter to keep pace with the US.
- The next problem is that the upgraded MiG29, Mirage 2000 and Jaguar fleets would reach obsolescence before the AMCA squadrons become operational.
- This will deplete the high-end platform inventory of the IAF and skew the force ratio further, both in quantum and quality.
- Finally, even with the optimal bolstering of the indigenous production capacity which will take over a decade, it will be too late to arrest the further decline in India’s combat air power.
- By the time the Tejas Mk 1A, the Mk 2 and the AMCA go into full-scale production over the coming years, China would have altered the air power and military balance in the region irretrievably in its favour.
- Thus, the urgent fulfilment of the long-pending 114 medium multi-role fighter aircraft requirement is a critical national security requirement.
Way forward
- Given the large numbers, a bilateral partnership with France for additional jointly-produced Rafales in India, with an attendant long-term agreement for joint upgrades and technology transfer access on future 4.5 generation-plus variants of the platform and its weapons suite, makes strategic sense.
- It will enable a steady and stable induction from a reliable partner, ensure greater platform commonality, assure future platform and weapons upgrades, and future engine development for the AMCA.
- It will also balance the inventory, reduce dependence on Russia and prevent the reliance on a temperamental US military industry, while fostering indigenous defence production.
Conclusion: Chinese stealth fighters on a Tibetan base means that China is working hard to diminish Strategic advantage of Indian Air Force in the frontier region. Indian policy makers must take a note of that. It is a political signal from China that border disputes are here to stay. India must firm up its partnership with France for joint production of Rafales
Editorial 2 : On the upswings
Introduction: The Indian banking system has continued to register a robust performance across various metrics. As per the Reserve Bank of India’s latest financial stability report, not only have banks seen a sustained improvement in their asset quality, but their profitability has remained high, and their capital position also remains healthy.
The improvement is seen in both public and private sectors
- This improvement is being observed across both public and private sector banks.
- This has, in turn, improved their attractiveness — the Nifty Bank index is up more than 16 per cent over the past year, with PSU banks registering handsome gains.
What are NPAs?
- Non-performing assets (NPAs) are loans or advances made by banks that are overdue for more than 90 days and are not generating any income for the bank.
- This means the borrower has failed to make their interest or principal repayments on the loan.
The recent status of NPAs
- According to the report, the gross non-performing loans of the Indian banking system have declined to a 12-year low of 2.8 per cent in March, with declines observed across public, private and foreign banks.
- Sector wise data shows that bad loans have fallen across agriculture, industry, services and the personal loans category, though within industry, they remain high in gems and jewellery and construction segments, and within personal loans in the credit card segment.
Factors responsible for the decline of NPAs
- The broad decline in bad loans has been driven by a combination of write-offs and fall in fresh bad loans — the half-yearly slippages have fallen across all bank groups.
Alongside decline of NPAs other health statistics has also improved
- Alongside, banks have improved their provision coverage ratios, their net interest income has risen, and their capital position remains healthy.
- The stress tests conducted to gauge the strength of bank balance sheets do indicate that they are well placed to absorb macroeconomic shocks.
- And even in the severe stress case scenario, their capital position would remain above the minimum requirements.
- Further, banks may well see bad loans fall further to 2.5 per cent by March 2025 under usual business conditions.
The worrying signs in future loans
- However, there are some areas that require a closer look.
- Even as the asset quality of retail loans has improved — bad loans have fallen from 2.1 per cent in June 2022 to 1.2 per cent in March 2024 — in the case of private sector banks, slippages from retail loans accounted for 40 per cent of fresh addition to bad loans.
- In consumer credit, in the case of personal loans below Rs 50,000, the delinquency levels are high.
- And, a sizable section of borrowers has multiple loans.
- While the central bank has been cognisant of the risks in this segment, this requires continuous supervision.
Conclusion: In conclusion, the Indian banking system is currently experiencing a period of robust health. This is evident from the decline in non-performing assets (NPAs) to a 12-year low, improved profitability, and healthy capital positions across both public and private sectors. However, there are areas that warrant caution. While retail loan quality has improved, private sector banks are witnessing a rise in delinquencies, particularly in smaller personal loans and loans where borrowers have multiple debts.