Topic 1 : Why the west endures
Introduction: The military stalemate in Ukraine, the widening war in the Middle East, and the Chinese assertiveness in Asia would suggest that the US-led West is on the back foot around the world. The intensifying political polarisation in the US and the prospect of the return of Donald Trump as the President in the 2024 elections reinforces the sense of a West in terminal decline.
The two views in the East regarding the decline of the west
- One view holds that West is in the state of terminal decline.
- For them, it is about the long-awaited end to four centuries of Western dominance.
- The endless self-flagellation in the West about its collective failures and a sense of panic about the rise of the rest reinforce the sense of a new dawn in global order.
- India is not immune to this infectious exuberance.
- Others dismiss the talk of Western decline.
- India, in particular, whose relations with the West have never been as good as they are today, has no reason to wish for its decline.
- Nor would Delhi want China to replace the US as the dominant power in Asia.
- Delhi today sees the West as a critical partner in propelling India’s rise and securing itself against some major national security challenges.
- However, the question of decline must be addressed in objective terms.
The debate on the decline of the west
- The debate on the decline and fall of the West has been around for more than a century.
- Yet west has survived as an idea, while international communism, pan-Asianism, pan-Arabism, pan-Islamism, and third-worldism — have all exhausted themselves and faded away.
- The West has survived frequent and often intense crises of capitalism and endured the loss of colonial empires.
- It fought back geopolitical challenges to its hegemony from Nazi Germany, Imperial Japan, and the Soviet Union.
- It is now locked in a new confrontation with China.
- And the odds are tilting in favour of the West.
- Until very recently, it was widely assumed that China would overtake the US as the world’s largest economy, prise Europe out of American dominance and emerge as the dominant power in Asia.
Is China capable of replacing west led global order?
- Some of those dreams that China will overtake USA and end the US led world order have crashed against reality.
- The slowdown in growth and demographic decline suggest China is unlikely to overtake the US economy any time soon, if ever.
- Yet, it is possible to argue that the Sino-Russian alliance unveiled by Presidents Xi Jinping and Vladimir Putin presents a formidable challenge to Western primacy.
- Yet, both Russia and China are eager for an accommodation with the West.
- Despite his tough rhetoric against the “collective West”, Putin needs a deal with the US to secure a new European compact in which Moscow can play a major role.
- President Xi, whose soaring imagination about a post-Western order in Asia was making waves a few years ago, is now promising President Joe Biden that he is not seeking to overthrow the US-led order but seeking a dignified coexistence.
There is presence of hawks and doves in Russia and China against the west
- In both Russia and China, there is a long lineage of political forces that seek Westernisation and integration with the US-led order.
- They have had to battle the Russian “Slavophiles” and Chinese nationalists who seek to define their national path in non-Western if not anti-Western terms.
- The Westernisers in Russia and China might be on the defensive now but have not disappeared from the political scene.
- For both Putin and Xi, the question is not about fighting a forever war with the West, negotiating favourable terms of accommodation.
- Meanwhile, their aggressive actions in Europe and Asia are compelling their neighbours to move closer to the US and enhance the power of the West.
- For many in Europe and Asia, America, the distant power, is very welcome in the effort to limit the power of the regional hegemons.
How other players are challenging west in other geopolitical theatres?
- Iran may be rocking the US-led order in the region, but it is not strong enough to promote an alternative.
- Many Arab regimes see Iran and its proxies like Hamas as a bigger threat to their existence than Israel.
- For many Arab states, the distant America remains a valuable and the only balancer against Tehran.
- It was assumed that China-led BRICS and SCO will challenge west.
- Well, Argentina has just declined to join the forum — the invitation was extended at the BRICS summit in South Africa last year.
- Earlier, Indonesia had said it was not ready to join the forum when the expansion was being discussed.
- In any case, the deepening contradictions between India and China have cast a shadow over the BRICS and other non-Western institutions like the SCO, where both Delhi and Beijing are members.
- The contradictions within the rest are deep and must always be factored in assessing the real and serious tensions between the West and the rest.
- A visible sign of decline of west points out towards the decline in the economic might of G7 as a group vis-à-vis the rest of the world (specially with East Asia).
- Much of that decline, though, has come from Europe.
- The US retains nearly 24 per cent of the global GDP.
- The relative economic decline of Europe vis-a-vis the US and China and its security vulnerability vis-a-vis Russia will only help consolidate the West under American leadership.
Despite the talk of decline west is the attraction point for talents across world
- Although the rise of the rest is real, the West continues to lead in the production of new scientific knowledge and technological innovation.
- Resilient economic and political institutions cushion Western societies from internal turbulence and external challenges.
- Western academia, think tanks, arts and culture continue to exercise powerful influence worldwide.
- The broader attraction of Western societies is reflected in the fact that millions of people worldwide, including from India, are eager to find a way into Europe and North America, either legally or illegally.
- No amount of political posturing by their elites is going to diminish the Western pull for Indian professionals, Chinese computer geeks, Russian dissidents, and talented people from everywhere in the world.
India should decline the temptation of taking an ideological position against the west
- Despite the unprecedented warmth between India and the West at the current juncture, many in the Indian political class, including those on the left and the right, are tempted to buy into the narrative of a rising East and a declining West.
- Resentments — old and new, major and minor against the West — rush to the surface at the smallest of real and perceived provocations.
- But Delhi, which is determined to move India up the global power hierarchy, has little time for deluding itself into ideological crusades against the West.
- India has been there and done that (and paid a price) in the second half of the 20th century.
- Two decades of productive engagement in the 21st century has given India the political confidence and the negotiating skills to advance its strategic partnership with the West despite frequent disagreements.
Conclusion: Theories of China overtaking the US as the world’s largest economy, prising Europe out of American dominance and emerging as the dominant power in Asia have been proved wrong.
Topic 2 : Staying in the lane
Introduction: Notwithstanding the sharp monthly fluctuations, the Union government’s tax collections continue to grow at a fairly robust pace.
Components of Union Budget
1. Revenue Budget:
- Revenue Receipts: This includes the income the government expects to receive, primarily through taxes (direct and indirect) like income tax, GST, corporate tax, excise duty, etc. Additionally, non-tax revenues like interest payments, profits, fees from services, and penalties contribute to this section.
- Revenue Expenditure: This covers the government's day-to-day expenses on running the country, including salaries for government employees, pensions, interest payments on existing loans, subsidies, grants, and other welfare programs.
2. Capital Budget:
- Capital Receipts: This includes funds the government receives for creating assets like infrastructure, buildings, machinery, or investments in public sector enterprises. Loans from various sources like the public, Indian states, foreign countries, and the Reserve Bank of India form a significant portion of these receipts.
- Capital Expenditure: This covers the government's spending on creating or acquiring assets, investing in infrastructure projects, or repayment of borrowings. Building roads, bridges, railways, airports, and energy projects fall under capital expenditure.
What does data say about Revenue Account?
- Data released recently by the Controller General of Accounts shows that in the first eight months of the ongoing financial year, April-November, the Centre’s gross tax revenues grew at a healthy pace of 14.7 per cent.
- This is higher than the growth factored in for the full year in the Union budget.
- While, on the other hand, government spending is also marginally higher than its budget projections, at the current juncture, based on these trends, most analysts do not expect the government to breach its fiscal deficit target for the year.
Direct Taxes
- On the revenue side, direct tax collections continue to grow at a fairly brisk pace.
- At the end of November, collections were up almost 25 per cent, with healthy growth in both corporate and personal income tax collections.
Indirect taxes
- Indirect tax collections have been subdued, in part, due to lower excise duty collections.
- Alongside, data released on Monday shows that GST collections grew at the slowest pace in three months in December, though it is possible that collections in the previous months did receive a boost due to the festive season.
- So far this year, GST collections have averaged Rs 1.66 lakh crore per month, up from roughly Rs 1.5 lakh crore over the same period in 2023.
Non-tax revenue
- The non-tax collections have been healthy, shored up by the higher than budgeted transfer from the RBI, disinvestment proceeds continue to disappoint.
- As against a target of Rs 61,000 crore, collections have so far touched only Rs 10,051 crore.
- Based on these trends, there are expectations that direct tax collections will comfortably surpass the budget targets, and possibly offset the lower-than-expected excise duty collections and disinvestment proceeds.
Data released on Expenditure Account
- On the expenditure side, the pace of central government capex has slowed down in the last few months, even as, for the year so far, it is up roughly 31 per cent.
- With elections approaching, and the model code of conduct likely to be imposed in the next quarter, there is a likelihood of the government not meeting its capex target for the year.
Conclusion: There is also a concern that slower nominal GDP growth — the economy grew at 8.6 percent in the first half of the year, as against the budget estimate of 10.5 percent — could imply a marginally higher fiscal deficit ratio. However, in absolute terms, for now, a breach of the deficit target does not seem to be on the cards.