There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Twenty Fifth Edition we are covering the following news:
1. Shinzo Abe, Japan’s longest serving PM resigns
2. The ‘quota within quota’ Case Explained
3. Centre-State spar over GST compensation dues
4. UAE puts an end on the economic boycott of Israel
5. Indian economy contracts a massive 23.9% in Q1, worst fall in decades
6. India pulls out of Kavkaz-2020 in light of Covid-19
Japan’s Prime Minister Shinzo Abe, 66, in a sudden move resigned from his post of Prime Minister citing health concerns. This announcement comes days after wide speculations being made about his health. Reportedly, Abe suffers from ulcerative colitis, a chronic medical condition that he has lived with since he was a teenager, but has exacerbated more recently. Abe had recently became Japan’s longest-serving leader, breaking the record of spending the maximum number of days in office that was previously set by his great-uncle, Eisaku Sato, who served as Prime Minister of Japan from 1964 to 1972.
During his first term as the country’s prime minister, Abe resigned in 2007, only a year after assuming the top job. At that time, political observers had said that Abe’s sudden resignation was a combination of foreign and domestic factors, including a political stalemate in Japan over the country’s logistical support for the US invasion of Afghanistan. However, years later, observers said that in addition to these challenges, Abe’s health condition had also impacted his decision to resign and had pointed to a statement that the leader had made in 2007, admitting that he was “tired”.
Abe’s tenure will particularly be known for his aggressive economic policies known as ‘Abenomics’ that focussed on Japan’s economic revival and combined structural reform, monetary easing and fiscal expansion, with the goal to increase domestic demand. Among his foreign policy plans, Abe has been known for approaching North Korea with a firmer stance. In 2014, Abe began focussing on building ties between Japan and ASEAN, India, Australia. Some observers believe that these foreign policy moves were an attempt to offset China’s influence in the region, as well its contentious ties with South Korea over several territorial and diplomatic disputes. As an example of improving ties with India, Abe became the first Japanese prime minister to attend India’s Republic Day parade as the chief guest.
Although Abe has taken several policy decisions with regard to the building of defence and security, one of the most striking moves has been his attempts to reform and revise the Japanese Constitution’s Article 9.The revision of Article 9 of the Japanese Constitution has been one of Abe’s many goals for which he pushed hard during his tenure but was unable to achieve. More recently, Abe’ handling of the coronavirus pandemic in Japan was heavily scrutinized, particularly following a sharp rise in infections. The pandemic also impacted Japan’s ability to host the 2020 Olympics that was postponed to the summer of 2021.
Moving forward after Abe’s resignation, under the provisions of Japanese law, an acting prime minister would step in and there would be no term limit on how long the acting prime minister would stay in the role. Abe would be replaced by deputy prime minister Taro Aso, who also serves as Japan’s finance minister. Next in line would be chief cabinet secretary Yoshihide Suga.
A five-judge Constitution Bench of the Supreme Court reopened the legal debate on sub-categorisation of Scheduled Castes and Scheduled Tribes for reservations, or what is commonly referred to as “quota within quota” for SCs and STs.
While the Bench ruled in favour of giving preferential treatment to certain Scheduled Castes over others to ensure equal representation of all Scheduled Castes, it referred the issue to a larger Bench to decide. This was because in a 2005 ruling, also by a five-judge Bench, the Supreme Court had ruled that state governments had no power to create sub-categories of SCs for the purpose of reservation.
States have argued that among the Scheduled Castes, there are some that remain grossly under-represented despite reservation in comparison to other Scheduled Castes. This inequality within the Scheduled Castes is underlined in several reports, and special quotas have been framed to address it. The Constitution, while providing for special treatment of SCs and STs to achieve equality, does not specify the castes and tribes that are to be called Scheduled Castes and Scheduled Tribes. This power is left to the central executive — the President. As per Article 341, those castes notified by the President are called SCs and STs. A caste notified as SC in one state may not be a SC in another state. These vary from state to state to prevent disputes as to whether a particular caste is accorded reservation or not. The basis of special protections for SCs comes, in the first place, from the fact that all these castes suffered social inequity. Untouchability was practised against all these castes irrespective of economic, education and other such factors.
The argument is that the test or requirement of social and educational backwardness cannot be applied to Scheduled Castes and Scheduled Tribes. The special treatment is given to the SCs due to untouchability with which they suffer. In a 1976 case, State of Kerala v N M Thomas, the Supreme Court laid down that “Scheduled Castes are not castes, they are class.”
The petitioner’s argument against allowing states to change the proportion of reservation is also based on the perception that such decisions will be made to appease one vote-bank or the other. A watertight President’s list was envisaged to protect from such potential arbitrary change.
“The constitutional goal of social transformation cannot be achieved without taking into account changing social realities,” the court ruled.
The 41st GST Council meeting has added a controversial turn in the issue of GST compensation to states because the centre has asked the states to borrow money to cover the shortfall of GST revenues rather than providing the compensation to states for the same.
As per the commitment brought about by the centre in the Constitution Act 2016, Centre is liable to compensate the states for the loss of revenue arising on the account of transition to GST setup from the earlier indirect tax regime for the period of 5 years.This commitment had majorly convinced the states to agree on the GST model. To adhere to this commitment, the centre maintains a compensation fund out of the cess levied on certain sin and automobile items. The commitment for loss is calculated by the difference between the projected revenues and actual revenues from GST for a given year. The projected figure is assumed to be the growth of 14% on base year of 2015-16 in which GST was implemented.
As a matter of fact, the economy has been slowing even before the Covid pandemic and there have been continuous delays in the matter of compensation payments the year before as well. This year, the payments are due for the past 4 months (April-July) and both states and the centre are facing substantial fall in the revenues. The states have been complaining and requesting the centre to clear off the compensation dues as they don’t have enough resources to meet their bare expenses. The GST council, in the meeting, claimed that the Act of 2016 guaranteed the shortfalls of revenue arising out of only ‘ implementation of GST’, however, a major proportion the recent decrease in revenues of the states is due the halt in business activity by COVID-19 which FM termed as an “act of god” and hence, the centre is not liable for the full payment of Rs 2.35 lakh crores of shortfall and according to certain calculations, only 97,000 crores is due to the centre. For the same, it has given 2 options to the states for taking loan. First option facilitates the states to take up the loan from RBI at concessional rates through a special window and the second option is that the entire shortfall of 2,35,000 crores may be bought by states by taking loan from public. To ensure that all arrears of compensation are paid, centre will continue the Compensation cess for more years.The centre has given the states a time period of 7 days to decide upon the options. However, many states are rigorously demanding that it should be the centre who should be taking the loan and give them the payments rather than putting the burden on them and claiming that this is the worst treatment of federalism in the independent India. On the other hand, Centre is of view that they are heading towards cooperative federalism by involving states in this decision. This decision can have an adverse affect on the financial stability of states. Instead, if the central govt. borrows to cover up, they can do it at much lower cost because of higher numbers of options to them like sovereign bonds, PSUs, international organizations etc. The deferment of dues also has a negative impact on the trust building between centre and states. Moreover, the idea of continuing compensation cess for further years will affect the business of auto sector as it forms significant component of cess.
This compensation crisis clearly suggests how the shortfalls are rising every year and how the concept of GST is somewhat flawed in India and thus, it can pose similar problems in long run.
Few days after UAE signed a deal brokered by US President Donald Trump to recognize Israel as a country, it has moved another step towards strengthening bilateral ties with the country by scrapping its economic boycott and allowing trade and financial agreements between the two countries. On top of that, a historic El Al flight has been commenced between these new partners. Emergence of UAE in the league of accepting Israel as a strategic partner shows the recent change in the Geo-Politics in west Asia. Two sides can be seen in the region with pro-Islamist countries like Iran, Qatar, Pakistan and Turkey strongly condemning the move as according to them, it is weakening the Palestinian case. There are others like Egypt and Jordan which already recognize Israel and are welcoming UAE in the suit. Of all the Arab nations, Saudi Arabia has a middle stance as it has not commented on the issue.
The friction between the Arab nations and Israel goes long time back. Israel is a Jewish state formed in the area called British Mandate for Palestine when thousands of Jew people migrated in the region demanding a separate Jew state in wake of movement called Zionism and these numbers were increased after the Holocast. On the other hand, the Arab people wanted to develop a distinct national identity in the state of Palestine. In the subsequent Arab- Israel wars, the latter was able to annex most of the region and gained substantial influence over West Bank and Gaza strip, the most critical areas of the region. This led to the rise of uprising of extremists leading the cause for Palestinian state sponsored by fellow Arabic countries. Since then, the state of Israel has not been accepted by most of the Arab states. But, Egypt and Jordan had recognized the country owing to settlements after facing defeat in wars from Israel. Now, UAE has come in the picture as well, however, there was no war between the two countries.
The development points out that Israel looks forward to end frictions with more and more Arab nations by using the channel of diplomatic talks, before opting for any hard measures of war which will help it improve its stance on the global front. However, UAE’s decision doesn’t imply that it no longer supports the issue of Palestine, rather it is just that the country wishes to widen its economical and political alternatives, rather than blindly walking along the path of other Arab nations. Also, this move is extremely fruitful for the basket of India because India has good strategic relations with both Israel and UAE. Coming together of these countries will help India strengthen bilateral as well as multilateral ties with both of them.
The Indian economy contracted for the first time in a quarter since the National Statistical Office (NSO) began releasing quarterly Gross Domestic Product (GDP) growth rate from 1996. In the April-June quarter, a massive 23.9% contraction was recorded in light of the nation-wide lockdown imposed from 24th March 2020 to tackle the ongoing coronavirus pandemic. India now is amongst the worst performers in this quarter with all the G-7 countries posting better performance than India. Among major economies, China is the only nation to post a positive growth of 3.2% in this quarter.
This contraction implies that there was a 23.9% decline in economic activity in Q1 of 2020-21 in comparison with the same quarter in the previous year i.e. 2019-20. GDP at constant prices (Years 2011-12) was measured at Rs 26.90 Lakh crores in Q1 this year, as against Rs 35.35 Lakh crores in Q1 in the previous year. Considering in nominal terms, GDP fell 22.6%. However, even before the pandemic, India was facing an economic slowdown where the quarterly growth rate declined from 5.2% in Q1 to 3.1% in Q4 in 2019-20. With this decline in growth, India is now on the verge of its 5th recession post-independence. Earlier negative growth has been recorded in FY58, FY66, FY73 and FY80.
As per NSO data, apart from agriculture which had a growth rate of 3.4%, all other key sectors witnessed contraction during this quarter. While manufacturing, services and mining sector witnessed a 39.3%, 20.6% and 23.8% fall, the construction sector took the hardest hit with a 50.3% fall. With this, the construction and manufacturing sector have now posted three and four quarters of continuous contraction respectively.
The opposition was critical to these numbers and was quick enough the hit the government. Senior leader Rahul Gandhi tweeted and took a critical note on the continuous ignorance by the government despite having several signs, warnings and suggestion. Former Union Finance Minister, P Chidambaram, termed the numbers as an “economy tragedy” and said that it was a “matter of shame” for the government that did nothing much to tackle the situation. He also asked the Finance Minister Nirmala Sitharaman, to be grateful to the farmers and gods who blessed the farmers after her latest “Act of God” remark.
IMF earlier predicted a 1.9% growth for India in this financial year but revised it to a 4.5% negative growth. However, after the latest stats were released, economists now believe that a 7 or even 8% decline can be witnessed in this financial year. Despite this, Chief Economic Advisor, KV Subramanian believes that India will have a V-shaped recovery in the upcoming quarters as lockdown has been eased except for containment zones and unlocking process has now reached its 4th stage.
In a recent development, India has formally withdrawn from a military exercise in Russia, scheduled to be held in its Astrakhan region from 15th to 26th September despite earlier confirming its participation. Although India has cited logistic difficulties due to the ongoing Covid-19 pandemic as the reason for the pullback, sources close to the government believe that the major reason is its current border standoff with China in Eastern Ladakh from past few months. India is not willing to perform military drills with China and Pakistan in the current scenario. However, India and China earlier participated in the Victory Day Parade to mark the 75th anniversary of World War II in Moscow where Indian Defence Minister Rajnath Singh, was present with his Chinese counterpart.
The Russian multinational exercise named Kavkaz-2020 (Caucasus-2020) is a strategic command-post exercise that will have participation from China, Pakistan, Turkey and several other member nations of Shanghai Cooperation Organization (SCO). SCO which is an intergovernmental organization established in 2001 in China currently has 8 member states, 4 observer states and 6 dialogue partners. Earlier, India had planned to send 150 Army troops, 45 Air Force personnel and few Navy troops for the exercise. The Russian exercise is held in a four-year cycle and was last held in 2016. According to sources, close to 13000 troops are expected to participate in this exercise to impart real-time training to counter international terrorism in the Northern and Caucasus region of Russia.
After India’s withdrawal from Kavkaz-2020, speculations were being made on cancellation of Rajnath Singh’s three-day visit to Russia for a crucial meeting of the SCO defence ministers scheduled on 3rd and 4th September. However, he has left for the meeting but is expected to have no interaction with his Chinese counterpart. Indian Foreign Minister, S Jaishankar is also expected to go for the SCO foreign ministers meeting scheduled on 10th September. Hence, experts believe that India’s current foreign policy doesn’t give a clear stance. India is avoiding China at major meetings amid standoff. However, it has made massive investment under BRICS and SCO of which China is a major member.
Despite withdrawing from Kavkaz-2020, India stressed on its close and strategic ties with its major defence partner Russia. India will be hosting a bilateral naval exercise at the Andaman Islands with the Russian Navy on 4th and 5th September. At least three of India’s warships are expected to participate in this exercise. This step is being seen as a message to China that India and Russia share close defence ties despite its withdrawal from Kavkaz-2020.