Aditorial 1 : Navigating a multipolar world
Introduction: The incumbent BJP is running a coalition government after a decade time. On, foreign policy fronts the coalition government has shown continuity by placing S Jaishankar as Foreign Minister. This tenure of Jaishankar will see some continuity and some shifts in foreign policy formulations.
S Jaishankar articulated India’s viewpoint on global front
- At the Bratislava Forum in June 2022, Jaishankar changed the political narrative on India, when he reminded the world that “Europe has to grow out of the mindset that Europe’s problems are the world’s problems but the world’s problems are not Europe’s problems.”
- It resonated everywhere, especially at home and in the Global South — and even in Europe, when a year later, at the Munich Security Conference, German Chancellor Olaf Scholz said that Jaishankar “had a point”.
- India’s goodwill, built over decades of being a neutral and non-aggressive power, has served the country well for the last five years, despite major geopolitical changes.
- For the next five years, however, India will need a differentiated narrative — one that is based on the country’s 8.2 per cent GDP growth, entry into global trade regimes, and the digital model.
The continuities and shifts in foreign policy
The continuities in foreign policy
1. Greater integration and cohesion in Subcontinent
- It was visible at the inauguration of the new government were India’s neighbours, Bangladesh, Bhutan, Nepal, Maldives, Sri Lanka, along with Indian Ocean partners, Mauritius and Seychelles.
- All of South Asia except Pakistan was present, indicating that greater economic integration and more geopolitical cohesion in the Subcontinent is on the agenda.
2. India will remain a voice for Global South
- There was much talk of the Global South during India’s G20 presidency in 2023, crowned by the inclusion of the African Union into the G20.
- Last November, PM Modi inaugurated the (Dakshin) Development and Knowledge Sharing Initiative Global South Centre for Excellence, conceived for knowledge-sharing for locally relevant solutions and capacity-building.
- More such events and achievements are going to be visible in future.
3. cordial relation with great powers
- India has built relationships with the great powers, especially the US.
- With the US and Russia, it has a continuing 2+2 ministerial (foreign and defence ministries) dialogue.
- India is in more multilateral groupings with the great powers than ever before — the G20, Quad, SCO, BRICS, I2U2, Indo-Pacific Economic Framework.
- New Delhi has managed its friendship with Moscow well, keeping the political engagement and oil and defence equipment imports going.
- Despite China’s stubborn refusal to withdraw its military from India’s northern border, India is still not at war with it — an example that the great powers should emulate.
- India is also close to the other five G7 countries: Japan, France, the UK, Italy, and Germany, and since 2019, has been a permanent invitee to G7 summits.
- Stepping into trade regimes with the great powers is still not a reality.
- These initiatives have in the last two years been taken by middle powers like Australia, the UAE and the four non-EU EFTA countries.
The shifts in foreign policy
1. A shift from geo-politics to geo-economics
- India’s global conversation has to transition from the political to the economic.
- Delhi has made many commitments to investors, and the biggest is that India can be a trusted +1 alternative to China.
- Expect a greater effort on the Make in India initiative and the expansion and professionalisation of supply chains and attendant infrastructure.
- Corporate India will be encouraged to increase investments in manufacturing.
- India will need to position itself as a services exporter, beyond IT services.
- Much of the Global South is rich in human capital and will be following India’s example.
- A new coalition partner in the government, the Telugu Desam Party, is completing the building of Amaravati. Its goal is to have a modern capital — one that can compete on the tech front domestically (with Bangalore and Hyderabad) and internationally.
- India’s digital public infrastructure model is already accepted and promoted in developed and developing countries.
2. More coordination among Middle powers
- The last five years have seen instability.
- Covid, the Russia-Ukraine war, the Gaza conflict and the sanctions imposed by the great powers have pushed the global system to the brink.
- The middle powers — countries with economic, regional and military heft — are beginning to be heard. Many like Australia, South Korea, Saudi Arabia, Turkey, Singapore, and Germany punch above their weight.
- The emerging middle powers have significant talent and populations.
- This is where India fits in, along with Brazil, South Africa, Mexico, and Indonesia.
- India will increase its engagement with its peer group.
Conclusion: India is an important participant in several groupings, old and new. Its goal is economic and financial progress, and just global governance. This is a reflection of the emerging multipolar world order, with neither the “exorbitant privilege” of dollar domination, nor the reserve-currency obsession of the Yuan. India is central to the on-going global shifts. By keeping itself anchored, it helps to keep the world steady.
Aditorial 2: A tax less taxing
Introduction: On Saturday, the GST council, which met for the first time since the formation of the new Union government, tweaked tax rates on some items, and took a series of steps to bring down litigation and ease compliance for taxpayers.
What is the GST Council?
- The Goods and Services Tax regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016.
- The GST Council is a joint forum of the Centre and the states.
- It was set up by the President as per Article 279A (1) of the amended Constitution.
- The members of the Council include the Union Finance Minister (chairperson), the Union Minister of State (Finance) from the Centre.
- Each state can nominate a minister in-charge of finance or taxation or any other minister as a member.
The recommendation of current GST Council
- The Council has recommended waiving the interest and penalties on demand notices under Section 73 for three financial years if tax is fully paid by March 2025, bringing down the amounts of pre-deposit required to file an appeal, and introducing monetary limits for the tax department to file appeals.
The burning issues, that demand immediate attention of GST Council
1. Issue of rate rationalisation
- In September 2021, the GST Council set up a Group of Ministers (GoM) to examine the matter.
- The committee had submitted an interim report in June 2022.
- As per reports, this issue is likely to be discussed when the Council meets next, with a “presentation on the work done so far and the unfinished agenda”.
- However, this involves maintaining a delicate balance.
- One proposal has been to merge two tax slabs.
- But the Council would also need to keep in mind the issue of revenue neutrality.
- A study by the RBI had earlier shown that while the Chief Economic Advisor’s report had pegged the revenue neutral rate at 15.3 per cent, the weighted average GST rate stood at 14.4 per cent in May 2017, and subsequently dropped to 11.6 per cent by September 2019.
2. Bring more items under GST regime
- The Council also needs to deliberate on the issue of getting items which are currently not under the GST framework, such as petroleum products, into its ambit.
- This will be challenging as both the Centre and the states get a sizeable portion of their revenues from petroleum taxes, and states levy their own taxes, exercising a degree of control.
3. Issue of compensation cess
- While originally the cess was levied for a five-year period ending on June 30, 2022, it was subsequently extended to March 31, 2026 to help repay the loans taken by the central government to compensate states for the loss in revenues during the pandemic.
- The Centre had borrowed Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22.
- However, reportedly, there are expectations that these loans could be paid off in 2025-26 itself.
- The Council would thus need to decide whether or not the cess should be discontinued thereafter.
Conclusion: Considering the criticality of these issues, they need to be deliberated extensively in the GST council. The Centre must ensure that in these deliberations the concerns of state governments, especially their revenue-related anxieties are addressed, and a consensus is evolved on the measures that need to be taken.