Topic 1 : Room for optimism
Introduction: Over the past few years, the world economy has faced several shocks — from the Covid-19 pandemic to the Russian invasion of Ukraine and the Israel-Hamas conflict in West Asia.
Impact of global shocks on the world economy
- These shocks have caused severe disruptions in economic activities and contributed to a surge in inflation.
- However, with the fallout from these shocks receding, the global macroeconomic scenario has improved.
- After contracting by 3.1 per cent in 2020, the world economy grew by 6 per cent in 2021 and 3.5 per cent in 2022.
- The International Monetary Fund expects growth at 3 per cent this year.
- And world consumer prices, which rose from 4.7 per cent in 2021 to 8.7 per cent in 2022, have fallen in large parts since.
Performance of Indian Economy
- The Indian economy is also faring better.
- It grew at 7.6 per cent in the second quarter, faster than most had expected.
- Forecasts by the RBI indicate that the growth momentum is likely to be sustained over the next financial year.
- According to Axis Bank research, India’s output gap as against its pre-pandemic trend is likely to have narrowed to 7 per cent till December 2023.
- Alongside, retail inflation, which had touched 7.44 per cent in July on the back of higher food prices, has fallen, touching 5.55 per cent in November.
- As per the central bank forecasts, inflation is expected to average about 4.35 per cent in the second and third quarters of the next financial year.
- The momentum in public sector capex has sustained and, in some sectors, the PLI scheme is showing healthy results.
- Investors expect political and policy continuity going into the general elections next year and seem increasingly optimistic about the economic prospects.
- After net outflows in September and October, foreign portfolio investors invested around $7.8 billion in November and December, bringing full year investments to almost $20 billion.
- Foreign direct investments, which had been falling since last year, have picked up over the past few months.
Concerns for Indian economy
- Job creation remains a challenge.
- A sizeable section of the new entrants to the labour force is not employed in the more productive sectors of the economy.
- Rural demand remains subdued.
- And despite healthy corporate and bank balance sheets, there is little indication of a broad-based pickup in the private investment cycle.
Future perspective for Indian economy
- In February, the Union budget will be tabled in Parliament.
- After that, the monetary policy committee of the RBI will hold its first meeting of the calendar year.
- Considering the recent dovish tilt by the US Federal Reserve, and with some MPC members suggesting that a less restrictive policy is called for, it is possible for the MPC to provide guidance on the trajectory of interest rates through the year.
Conclusion: The general elections will follow, a new government will be sworn in, and it will present a full budget, detailing its expenditure priorities. These will have a bearing on the country’s near-term growth prospects.
Topic 2 : Taking on the drone
Introduction: the Israel-Hamas conflicts spilled over into the Indian Ocean. Houthi militants took the benefits of this situation and expanded their operations into the Indian Ocean by targeting commercial ships out of desperation.
Some recent attacks on Commercial Ships
- In the early evening of December 23, the United Kingdom Merchant Traffic Organisation (the principal point of contact for merchant vessels and liaison with military forces in the Western Indian Ocean) reported a suspected armed drone strike on a merchant ship 200 miles off the Porbandar coast.
- The MV Chem Pluto, a Liberia-flagged chemical tanker with a crew of 20 Indians was hit by an unmanned aerial vehicle, triggering a massive fire onboard.
- Hours after the attack in the Arabian Sea, the Houthis carried out another drone strike on a Gabon-flagged crude oil tanker in the Southern Red Sea.
- Crucially, the targeted vessel has no connections to Israel, which many interpret as an indication of the militants’ growing desperation.
Global response to these attacks
- To protect regional maritime traffic, the US announced Operation Prosperity Guardian last week, with the support of allies and partners, including the UK, Bahrain, Canada, Netherlands, Norway, and Seychelles.
India’s response to these attacks
- No sooner had the drone hit been reported than New Delhi dispatched an Indian Coast Guard vessel and an Indian warship to the site of the attack.
- The Indian Navy, like other regional navies, has rarely, if ever, had to deal with drone attacks on civilian ships.
- Maritime forces in the Indian Ocean are adept at fighting pirates, but many navies, including the IN, are unaccustomed to dealing with such radical militant tactics as those employed by the Houthis.
- The Iran-backed group has been carrying out aerial drone bombings and missile attacks on civilian shipping.
- New Delhi is keen to contribute to the US-led endeavour but ostensibly wary of taking on the Houthis, who are, by all accounts, capable combatants.
- Before the Chem Pluto incident, Indian warships on anti-piracy duties in the Gulf of Aden appeared to have avoided the conflict zone in the Southern Red Sea.
- A drone attack on a commercial ship in the Arabian Sea, however, significantly alters India’s calculus.
- Indian observers are likely to see this attack as a sign that the Houthis are capable and willing to strike their enemies anywhere in the Indian Ocean.
- Many are likely to argue that the attack creates an imperative for India to join the US-led coalition.
- They may be right unless Washington’s claim — however implausible — that the attack on the MV Chem Pluto came from Iran is proven correct, in which case New Delhi may need to revisit its calculus.
Countermeasures available against drone attacks
- Anti-drone warfare is complex, and few navies have the means to combat air-and-sea-borne drones effectively and many anti-drone techniques are not known to work well in particular weather conditions.
- The only effective technologies for defence against aerial drone attacks are jamming and spoofing, but these are unavailable to merchant ships.
- Jamming, in particular, is tricky as it has the potential to interfere with friendly communication systems.
- Spoofing, too, while useful for confusing drone control systems, often leads to the target behaving erratically.
- Directed energy weapons such as laser systems and high-power microwave weapons are more effective in countering armed drones, but these technologies are expensive and out of reach for most regional navies.
Option available for India
- The only viable option for India, then, might be to join the US-led coalition.
- The IN recently became a full member of the Combined Maritime Forces and has exercised with coalition navies in the Western Indian Ocean.
- Of the five task forces the CMF operates, Combined Task Force 153 — in charge of security in the Red Sea — is likely to lead Operation Prosperity Guardian.
- As part of the coalition, the IN could help create a safe transit corridor stretching out from the Southern Red Sea to the Gulf of Aden and beyond.
Challenges in fighting Houthi rebels in the Indian Ocean
- Disagreements within the US led coalition have led France, Italy, and Spain to pull out.
- India’s naval commanders know that fighting the Houthis won’t be easy.
- The tactics of anti-drone warfare at sea are still evolving, and some methods of targeting drones are reportedly not as effective as commonly believed.
- In the past few weeks, the USS Carney has claimed to have shot down 14 armed drones in the Red Sea.
- It is yet unknown what weapons were used, but it is likely a long-range gun that was employed in combination with missiles.
- The only thing that can be said with certainty is that overcoming the Houthi challenge will require improvisation, operational coordination, and a high order of interoperability between coalition partners.
- While the IN is still in the process of acquiring counter-drone systems, India’s front-line guided missile destroyers — four of them presently deployed in the Arabian Sea — have the necessary sensors to detect aerial drones.
- Even so, actively countering armed drones will require the IN to work alongside more capable partners.
- This applies equally to other maritime forces in the region.
Conclusion: Better situational awareness and better tools to tackle drone attacks are the need of the hour. At a minimum, navies will need to change mindsets, step out of their comfort zones, and up their operational game in the littorals.