International Relations: September 2024 Current Affairs | Current Affairs: Daily, Weekly & Monthly - CLAT PDF Download

India’s Hesitancy in Joining RCEP

Why in News?

Recently, the World Bank's latest report, "India Development Update: India's Trade Opportunities in a Changing Global Context," has urged India to reconsider its stance on joining the Regional Comprehensive Economic Partnership (RCEP). However, an Indian think tank dismissed this recommendation, claiming it is founded on flawed assumptions and outdated projections.

World Bank's Analysis of India Opting out of the RCEP

• Income Gains: The World Bank study indicates that if India rejoins RCEP, its income could rise by USD 60 billion annually, whereas opting out could result in a loss of USD 6 billion. These benefits are expected across various sectors, including raw materials, light and advanced manufacturing, and services.
• Export Growth: Joining RCEP could lead to a projected 17% increase in exports, particularly in services such as computing, finance, and marketing.
• Denial of Economic Gains: The absence of India in RCEP would allow the bloc to contribute USD 186 billion to the global economy, with member GDPs increasing by 0.2%. Major beneficiaries would be China (USD 85 billion), Japan (USD 48 billion), and South Korea (USD 23 billion). Consequently, India would miss substantial economic benefits associated with RCEP.
• Trade Diversion Risks: By remaining outside RCEP, India risks trade diversion, as member countries might shift their supply chains and enhance competition among themselves, potentially undermining India’s exports to RCEP nations.
• Potential New Members: Countries like Bangladesh and Sri Lanka have expressed interest in joining RCEP, indicating that India cannot entirely evade the bloc's influence, particularly as it has a Free Trade Agreement (FTA) with Sri Lanka.

World Bank's Evaluation of India's Export Strategy and Trade Policy

• Need for Export Diversification: India’s percentage of goods trade relative to GDP has been declining, and its involvement in Global Value Chains (GVCs) has diminished. Greater diversification can be achieved by expanding into labor-intensive sectors, including textiles, apparel, leather, and footwear. India's share in global exports of Apparel, Leather, Textiles, and Footwear (ALTF) peaked at 4.5% in 2013 before dropping to 3.5% in 2022.
• Increased GVC Participation: By integrating into GVCs, India can broaden its production range, enhance competitiveness through access to advanced technologies and global markets, and attract Foreign Direct Investment (FDI) from multinationals looking to operate in India.
• Balancing Liberalisation and Protectionism: India’s trade policy reflects a mix of liberalizing and protectionist approaches. Initiatives like the National Logistics Policy 2022 aim to reduce logistics costs and improve trade facilitation. However, there has also been a rise in protectionist measures, such as increased tariffs and non-tariff barriers that limit trade openness.
• Trade Agreements: Recent Free Trade Agreements (FTAs) with countries like the UAE and Australia show a shift towards preferential trade agreements, but India has refrained from joining large trade blocs like RCEP, despite the potential advantages.
• Reevaluating India’s Tariffs and Industrial Policies: India has emerged as a net exporter of mobile phones, with increasing exports and decreasing imports due to policies like the National Electronics Policy 2019 and the Production Linked Incentives (PLI) scheme 2020. However, recent hikes in import tariffs on crucial intermediary inputs, raising average tariffs from 4% to 18% between 2018 and 2021, threaten the sector’s competitiveness.
• Opportunities for India: Growing perceptions of geopolitical risks have led companies to diversify their sourcing strategies, presenting opportunities for India, which boasts an abundant workforce and a burgeoning manufacturing base.

Why is India Hesitant to Reconsider Joining RCEP?

• Flawed Assumptions in World Bank's Suggestion: The World Bank's projection of USD 60 billion income gains by 2030 does not account for the potential increase in imports that could lead to trade imbalances.
• Trade Deficits Among RCEP Members: Since RCEP's implementation, trade deficits between ASEAN and China have surged from USD 81.7 billion in 2020 to USD 135.6 billion in 2023. Japan's trade deficit with China rose from USD 22.5 billion to USD 41.3 billion, and South Korea may also face a trade deficit with China for the first time in 2024.
• Overdependence on China-Centric Supply Chains: The increasing trade deficits highlight a reliance on China-centric supply chains, which poses significant risks, especially highlighted during disruptions like the Covid-19 pandemic.
• Unfair Competition: By opting out of RCEP, India retains the flexibility to pursue other trade agreements that do not disproportionately favor China or jeopardize its economic interests. India's trade deficit with China increased significantly in the fiscal year 2023-24.
• Alternative Trade Agreements: India has established several functional trade agreements with 13 out of 15 RCEP members, excluding New Zealand and China.
• "China Plus One" Strategy: India's decision to refrain from joining RCEP aligns with the global "China Plus One" strategy aimed at reducing dependence on China.

Way Forward

• Bilateral Free Trade Agreements (FTAs): India should expedite negotiations for a comprehensive FTA with new partners such as the United Kingdom and the European Union.
• Trade Agreements with Gulf Countries and Africa: Active negotiation and expansion of trade agreements with Gulf Cooperation Council (GCC) nations and African countries should be prioritized, focusing on energy, infrastructure, and digital cooperation.
• Strengthening Existing Regional Groupings: India should continue to promote regional trade integration within SAARC and bolster initiatives like BIMSTEC, which connects South and Southeast Asia.
• Indo-Pacific Economic Framework (IPEF): Active participation in IPEF will complement India's "Act East Policy" and enhance regional cooperation in trade, supply chain resilience, clean energy, and a fair economy.
• Self-Reliant India: The government should boost domestic manufacturing capabilities and exports, supported by initiatives like Make in India 2.0 and Production Linked Incentive (PLI) schemes.

India-UAE Relations

Why in news?

Recently, India and the United Arab Emirates (UAE) engaged in bilateral discussions aimed at strengthening their Comprehensive Strategic Partnership. The Crown Prince of Abu Dhabi was welcomed by India's Prime Minister at Hyderabad House in New Delhi, where both nations signed multiple agreements to enhance energy cooperation.

What are the Key Agreements Signed During the Visit?

• Civil Nuclear Cooperation: India and UAE established a Memorandum of Understanding (MoU) for civil nuclear collaboration. This agreement involves the Nuclear Power Corporation of India Limited (NPCIL) and Emirates Nuclear Energy Company (ENEC) for the operation and maintenance of the Barakah Nuclear Power Plant, which is located in Al Dhafra, Abu Dhabi, and is the Arab world's first nuclear power facility.
• Energy:
  • LNG Supply: An MoU was signed for a long-term supply of Liquefied Natural Gas (LNG) between the UAE and India.
  • Strategic Petroleum Reserve (SPR): An MoU was concluded with India Strategic Petroleum Reserve Limited (ISPRL) to secure petroleum supplies. SPRs are crucial stockpiles of crude oil that countries maintain to ensure a reliable oil supply during geopolitical tensions or supply disruptions.
• Food Parks: An MoU was signed to develop food parks in India, specifically in Gujarat and Madhya Pradesh, under the I2U2 initiative.

Why is the UAE Important for India?

• Strategic Political Partnership: The enhancement of India-UAE relations to a 'comprehensive strategic partnership' signifies a deepening political and strategic alignment between the two nations.
• Bilateral Trade: The UAE stands as India’s third-largest trading partner. The Comprehensive Economic Partnership Agreement (CEPA), signed in 2022, has propelled trade to grow from USD 72.9 billion (April 2021-Mar 2022) to USD 84.5 billion (April 2022-Mar 2023), marking a 16% year-on-year increase.
• Foreign Direct Investment (FDI): The UAE has emerged as the fourth largest investor in India during FY23, with investments surging over three-fold to USD 3.35 billion from USD 1.03 billion in 2021-22.
• Energy Security: The UAE is a vital oil supplier to India, playing a key role in ensuring India's energy security.
• Finance: The introduction of India's RuPay card and Unified Payments Interface (UPI) in the UAE demonstrates increasing financial collaboration. Both countries have agreed on a Local Currency Settlement (LCS) system to facilitate transactions in Indian Rupee and AED (United Arab Emirates Dirham).
• Space Exploration: An MoU was signed between ISRO and UAE Space Agency (UAESA) for cooperation in peaceful space exploration.
• Defence and Security Cooperation: India and UAE have bolstered their defence collaboration, focusing on counter-terrorism, intelligence sharing, and joint military exercises, such as Exercise Desert Cyclone. The UAE has shown interest in acquiring Indian defence products like BrahMos missiles and Tejas fighter jets.
• Multilateral Engagements: The formation of the I2U2 grouping (India-Israel-UAE-US) and UAE's involvement in the India-Middle East-Europe Economic Corridor (IMEC) highlight the strategic and economic importance of the UAE in global multilateral engagements.
• Regional Stability: The UAE's role in the Abraham Accords and its normalization of diplomatic relations with Israel emphasize its significance in promoting regional peace and stability, which is crucial for India due to its reliance on Gulf nations for energy imports.
• Cultural and Diaspora Links: The substantial Indian diaspora in the UAE, numbering around 3.5 million, strengthens ties between the two nations. Initiatives like the inauguration of the first Hindu temple in Abu Dhabi reflect shared values of tolerance and coexistence.
• Cooperation During Covid-19: During the Covid-19 pandemic, both countries supported each other with medical supplies, equipment, and vaccines, reinforcing their partnership and commitment to mutual assistance in crises.

What are the Challenges in India-UAE Relations?

• Limited Diversification of Trade Categories: Despite overall trade growth, there is a lack of diversification into new sectors, with trade largely concentrated in a few categories such as gems and jewellery, petroleum, and smartphones.
• Rising Import Costs: Imports from the UAE surged by 19% year-on-year to USD 53,231 million in FY23, which, combined with high dependency on certain categories, affects India's trade balance.
• Non-Tariff Barriers: Indian exports encounter challenges, such as mandatory Halal certification, which restricts market access for processed foods in the UAE.
• Human Rights Concerns: Issues related to the Kafala system, which significantly impacts the rights of migrant workers, pose challenges in bilateral relations.
• Diplomatic Balancing Act: Navigating regional conflicts, such as the Israel-Hamas war and tensions involving Iran, complicates India's diplomatic relations with the UAE.
• Financial Support to Pakistan: The UAE's financial assistance to Pakistan raises concerns about its potential misuse for anti-India initiatives, creating tension in diplomatic relations.

Way Forward

• Promote Trade Diversification: Focus on developing new sectors such as technology, renewable energy, and pharmaceuticals to create a more balanced trade relationship.
• Strengthen Economic Ties: Seek joint ventures and partnerships that can enhance economic collaboration and alleviate the effects of rising import costs.
• Enhance Dialogue on Human Rights: Engage in discussions with UAE authorities to address human rights concerns and advocate for reforms that improve migrant workers' rights.
• Focus on Areas of Common Interests: Proactive diplomacy should be employed to align on mutual interests and prevent geopolitical tensions from adversely affecting bilateral relations.

Prime Minister's Visits to Singapore and Brunei Darussalam

Why in news?

Recently, the Prime Minister of India's visits to Brunei Darussalam and Singapore have marked significant advancements in India's diplomatic and strategic engagements in Southeast Asia.

What were the Key Outcomes of PM’s Visit to Brunei Darussalam?

• The Prime Minister explored the iconic Omar Ali Saifuddien Mosque in Bandar Seri Begawan, a renowned symbol of Brunei's Islamic heritage, named after the 28th Sultan of Brunei.
• India expressed gratitude for Brunei's support in hosting ISRO’s Telemetry Tracking and Telecommand (TTC) Station, discussing further cooperation under the renewed MoU.
• Both countries emphasized the significance of peacefully resolving disputes in the South China Sea, adhering to international law, particularly UNCLOS 1982.
• They agreed to strengthen collaboration in multilateral forums, including ASEAN-India Dialogue Relations, East Asia Summit, and the United Nations.
• Leaders highlighted the urgent need to tackle climate change, with India backing Brunei's initiatives, including the ASEAN Centre for Climate Change.
• India previously reduced its oil imports from Brunei in favor of Russian supplies, but discussions on long-term cooperation in liquefied natural gas (LNG) are now underway.

What were the Key Outcomes of PM’s Visit to Singapore?

• Semiconductor Ecosystem Partnership: An MoU was signed to create a robust semiconductor supply chain, marking a new area of bilateral cooperation with geo-strategic importance due to the global reliance on semiconductor technology.
• Comprehensive Strategic Partnership: India and Singapore agreed to enhance their bilateral relationship to a 'Comprehensive Strategic Partnership,' expanding cooperation across various sectors.
• Cooperation in Sustainability: Both nations plan to work together on projects involving green hydrogen and ammonia, developing a supportive framework for these initiatives.
• Food Security: India has agreed to exempt exports of non-Basmati white rice to address Singapore's food security concerns.
• Digital Technologies: An MoU on digital technologies was signed to deepen collaboration in areas like data, AI, and cybersecurity, with plans to establish a Cyber Policy Dialogue and renew the MoU on Cybersecurity Cooperation.
• Fintech Cooperation: Recognition of India's UPI and Singapore's PayNow TradeTrust initiative for facilitating paperless transactions and enhancing trade efficiency.
• Cultural Linkages: Announcement of the Thiruvalluvar Cultural Centre's inauguration in Singapore, celebrating the legacy of Tamil saint Thiruvalluvar, while strengthening cultural and people-to-people ties, acknowledging the contributions of the Indian community in Singapore.

How are India’s Relations with Brunei Darussalam and Singapore?

Brunei Darussalam:

• Political Relations:Diplomatic ties between India and Brunei were established in 1984, with both nations sharing cultural linkages and membership in organizations like the United Nations, Commonwealth, and ASEAN.
• Support from Leadership: The Sultan of Brunei, Sultan Haji Hassanal Bolkiah, advocates for close India-Brunei relations and has supported India's 'Look East' and 'Act East' policies.
• Commercial Relations: India's primary exports to Brunei include automobiles, transport equipment, rice, and spices, while India imports approximately USD 500-600 million worth of crude oil annually from Brunei.
• Indian Community: The Indian diaspora in Brunei dates back to the 1930s, with many involved in sectors like oil & gas, construction, and retail.

Singapore:

• Historical Connect: India and Singapore share deep historical ties in commerce and culture, dating back over a millennium, with modern relations initiated by Stamford Raffles in 1819.
• Trade and Economic Cooperation: Singapore ranks as India's 6th largest trade partner, contributing significantly to India's overall trade share.
• Investments: Since 2018-19, Singapore has emerged as the largest contributor of FDI into India, particularly in sectors like Services, Computer Software, Telecommunications, and Pharmaceuticals.
• Fintech Developments: The UPI-Pay Now linkage signifies a landmark cross-border fintech development, with Singapore being the first country to implement this cross-border P2P payment facility.
• Science and Technology Cooperation: India has launched several Singaporean satellites, including Singapore's first indigenous micro-satellite in 2011.
• Multilateral Cooperation: Both nations are part of multilateral groups like the International Solar Alliance and the Indian Ocean Rim Association (IORA).
• Cultural Demographics: Ethnic Indians constitute about 9.1% of Singapore's population, and Tamil is one of the four official languages.

Way Forward

• India aims to enhance digital connectivity with Southeast Asia to boost collaboration in e-commerce and fintech, leveraging its IT strengths to establish itself as a regional technology hub.
• Focus on diversifying supply chains to minimize reliance on China and promote regional value chains for greater economic resilience.
• Strengthening maritime security cooperation to combat common threats such as maritime piracy, illegal fishing, and maritime terrorism.
• Consideration of developing a Maritime Southeast Asia–India Economic Corridor to counter China's Belt and Road Initiative, enhancing connectivity and cooperation in the region.

Forum on China-Africa Cooperation Summit

Why in news?

Recently, China hosted the Forum on China-Africa Cooperation (FOCAC) summit in Beijing, which was attended by representatives from 53 African nations. This event highlighted China's changing strategy in response to economic challenges and its ongoing efforts to reinforce its partnership with Africa.

What is the Forum on China-Africa Cooperation?

• Origins: Established in 2000, FOCAC aims to formalize the strategic partnership between China and African countries. The summit is held every three years, alternating between China and an African member state.
• Participants: FOCAC includes 53 African nations, with the notable exception of Eswatini, which maintains diplomatic ties with Taiwan, contradicting China's "One China" Policy. The African Union Commission, responsible for promoting cooperation and economic integration among its member nations, is also part of FOCAC.

Highlights of 2024 Summit:

• Theme: The summit's theme is “Joining Hands to Advance Modernization and Build a High-Level China-Africa Community with a Shared Future.”
• Key Issues Addressed: The summit focuses on critical aspects such as governance, industrialization, agricultural improvement, and the advancement of China’s Belt and Road Initiative (BRI) projects.
• Funding Commitment: China has pledged around USD 51 billion to support African nations, facilitating 30 infrastructure projects across the continent.
• Strategic Documents: The summit resulted in the adoption of the Beijing Declaration and the FOCAC-Beijing Action Plan (2025-27), which emphasizes the deepening of the partnership between China and Africa.

Deepening India-Brazil Relations

Why in news?

The strategic partnership between India and Brazil has significantly strengthened and diversified over time, encompassing various sectors such as defence, space, security, technology, and interpersonal relationships. Recently, both countries, which are major players in global sugar production, have resolved their trade dispute regarding sugar subsidies at the World Trade Organization (WTO). This resolution aligns with their increasing collaboration in ethanol technology and addresses global sugar surplus challenges affecting market prices.

What are the Major Areas of Cooperation Between India and Brazil?

• Institutional Level Engagements:
  • India and Brazil maintain a multifaceted relationship both bilaterally and through multilateral platforms such as BRICS, IBSA, G4, G20, BASIC, the International Solar Alliance (ISA), WTO, UNESCO, and WIPO.
  • Bilateral engagements include:
    • Strategic Dialogue: Led by National Security Advisors (NSA) to address significant regional and global issues.
    • India-Brazil Business Leaders Forum: Focused on enhancing trade, investment, and economic cooperation.
    • Trade Monitoring Mechanism (TMM): Designed to track and resolve bilateral trade issues.
    • Economic and Financial Dialogue: Covers investment, trade, and monetary policy cooperation.
    • Joint Defence Commission: Facilitates defence collaboration through joint exercises, equipment procurement, and intelligence sharing.
    • Joint Committee on Science & Technology: Promotes research, development, and knowledge exchange.

• Trade and Investment:

  • In 2021, India emerged as Brazil's largest trading partner, with bilateral trade soaring from USD 7.05 billion in 2020 to USD 11.53 billion, further climbing to USD 15.2 billion in 2022.
  • In 2023, India's exports to Brazil reached USD 6.9 billion, while imports totaled USD 4.7 billion.
  • Key Indian exports include agrochemicals, synthetic yarns, and auto components, whereas imports consist of crude oil, gold, vegetable oil, sugar, and bulk minerals.
  • Investments span various sectors such as automobiles, IT, mining, energy, biofuels, and footwear.
  • India signed a Preferential Trade Agreement (PTA) with MERCOSUR (comprising Brazil, Argentina, Uruguay, and Paraguay) in 2004.
• Defence & Security Cooperation:
  • In 2003, India and Brazil formalized their defence cooperation through an agreement.
  • Joint Defence Committee (JDC) meetings have been established to institutionalize this partnership.
  • A strategic dialogue initiated in 2006, led by India's NSA, addresses regional and global concerns.
  • In January 2020, an MoU on Cyber Security was signed between CERT-In and its Brazilian counterpart during the Brazilian President's visit.
• Cooperation in Science and Technology:
  • India and Brazil's collaboration in space began with a 2004 agreement focusing on data sharing and satellite tracking.
  • The Brazilian Minister visited India in 2021 to observe the launch of the Amazonia-1 satellite.
  • Ayurveda and Yoga are incorporated into Brazil’s health policy, with an MoU on Traditional Medicine and Homeopathy signed in January 2020.
• Energy Security:
  • An MoU was signed in January 2020 between Indian Oil Corporation and Brazil’s CNPEM to set up a research institution in India focused on bioenergy.
  • During the G20 summit in India in 2023, both nations, along with the US, launched the Global Biofuel Alliance (GBA) to enhance biofuel production and demand.
• Ethanol Blending Programme:
  • Brazil has led in ethanol production since 1975, providing technological support to India for technology transfer and boosting biofuel production.
  • Brazil achieves a 27% ethanol blending rate in gasoline, with 84% of its vehicles equipped with flexible-fuel engines.
  • As of July 2024, India has achieved a 15.83% ethanol blending rate in petrol, aiming for 20% by the 2025-26 supply year.

What are the Challenges in India-Brazil Relations?

• Trade Deficit and Competitions:
  • India has faced a persistent trade deficit due to Brazil's strength in agricultural exports and India's dependence on imports of commodities like soybeans and sugar.
  • Protectionist measures such as tariffs and subsidies have been implemented by both countries, causing trade tensions and impeding bilateral trade growth.
• Diverging Interests in International Forums:
  • India and Brazil have differing priorities regarding climate change and in multilateral institutions.
  • India emphasizes reducing emissions intensity and pursuing economic development, whereas Brazil focuses on reducing Amazon deforestation.
  • These diverging interests also manifest in organizations such as the WTO.
• Limited People-to-People Contact:
  • Interactions between the people of India and Brazil, including business, cultural, and educational exchanges, are relatively few.
• Role of China:
  • Concerns arise regarding China being Brazil's largest trading partner, potentially influencing the dynamics of India-Brazil relations.

Way Forward

• Economic Cooperation:
  • India and Brazil should aim to diversify their trade portfolio to include value-added products, services, and technology.
  • Creating a favorable investment climate and promoting bilateral trade through agreements and joint ventures is essential.
  • Investments in infrastructure projects such as transportation and logistics can enhance trade and connectivity.
• People-to-People Exchanges:
  • Enhancing cultural diplomacy and student exchange programs can foster trust and understanding between the two nations.
  • Promoting tourism can also enhance people-to-people contacts and yield economic benefits.
• Strategic Cooperation:
  • India and Brazil should bolster their defence collaboration through joint exercises and technology sharing.
  • Cooperation in global forums should be strengthened to advance mutual interests.
• Technology and Innovation:
  • Collaboration in research and development related to renewable energy, biotechnology, and IT can drive innovation and economic growth.
  • Investing in skill development and training will enhance workforce competitiveness in both countries.

OPEC+ Plans Production Cuts

Why in news?

The recent declaration by the Organization of the Petroleum Exporting Countries (OPEC)+ to reduce oil production has sparked worries about its impact on global oil markets and India’s energy security. With India's fuel consumption projected to rise from approximately 4.8 million barrels per day in 2024 to 6.6 million barrels per day by 2028, these production cuts could force Indian refiners to seek more crude oil from the Americas, altering global oil trade dynamics.

Why is OPEC+ Planning to Cut Oil Production?

• Market Stabilisation: OPEC+ aims to stabilize and elevate oil prices by reducing production levels, addressing fluctuations in demand and oversupply. This move is intended to enhance revenue for oil-producing nations amidst economic uncertainties and geopolitical strife.
• Response to Non-OPEC Supply Increases: The International Energy Agency (IEA) projects a considerable rise in crude oil supply from non-OPEC+ countries, especially from the US, Canada, Brazil, and Guyana. This influx threatens OPEC's market share, prompting the group to implement cuts to sustain price stability.
• Respond to Geopolitical Tensions: Escalating geopolitical tensions, including conflicts in the Middle East and sanctions on Russian crude exports, have disrupted oil supply and affected prices. OPEC+ intends to manage these issues through coordinated output reductions.
• Long-term Strategy: The organization seeks to ensure sustainable production levels and avert market crashes that can occur when supply outstrips demand. Managing output is a strategy aimed at fostering a more predictable and stable market environment.

What are the Implications of OPEC+ Oil Production Cuts?

• Global Oil Prices: A reduction in OPEC+ output is likely to cause a rise in global oil prices, leading to higher costs for importing nations and potentially impacting inflation rates and economic growth.
• Implications for India:
  • Shift in Supply Dynamics: With OPEC+ cutting production, India may increasingly turn to non-OPEC+ countries like the US, Canada, Brazil, and Guyana for crude oil imports. This shift could diversify India's import sources, thereby reducing dependency on West Asian crude oil, which has already dropped from 2.6 mb/d in 2022 to 2 mb/d in 2023.
  • Potential for Price Volatility: While diversifying suppliers can enhance energy security, greater reliance on non-OPEC sources may expose India to price fluctuations in these markets, potentially increasing import costs and affecting the trade balance. India is the world’s third-largest crude oil consumer, with an import dependency exceeding 85%.
  • Economic Growth: Rising oil prices could pressure the Indian economy, particularly sectors heavily reliant on oil, leading to increased transportation costs and inflation, which may disrupt overall economic stability.

What are the Projected Trends in India's Liquid Fuels Consumption and Capacity Expansion?

• Growing Fuel Consumption: India's consumption of liquid fuels is expected to rise significantly, increasing from 5.3 mb/d in 2023 to 6.6 mb/d by 2028, representing a 26% growth over five years. This increase is driven by factors such as population growth, GDP expansion, and rising GDP per capita. The EIA estimates that annual liquid fuels consumption growth will average between 4% and 5% until 2037.
• Capacity Expansion: Between 2011 and 2023, India increased its refining capacity by 1.3 mb/d and is planning further expansions to meet the growing domestic fuel demand. By 2028, 11 new crude oil capacity projects are anticipated, including the 1.2 mb/d Ratnagiri mega project.

What are the Major Challenges in India's Energy Sector?

• Energy Security and Import Dependency and Geopolitics: India imports over 75% of its oil needs, a figure projected to exceed 90% by 2040. This increasing reliance on volatile international markets poses significant risks. Geopolitical disruptions, such as the Russia-Ukraine conflict and sanctions against Russia, have intensified these challenges. In FY24, Russian crude made up nearly 36% of India's oil imports.
• Domestic Production Decline: India's crude oil production has been in decline since 2011-12 due to inadequate investment in exploration and aging oil fields. Production fell from 32.2 million tonnes in 2019-20 to 29.2 million tonnes in 2022-23, according to government data.
• Infrastructure Bottlenecks: Limited pipeline infrastructure and storage facilities obstruct the efficient transportation and distribution of crude oil within India. Other issues include land acquisition challenges, disinvestment, increased demand, lack of management expertise, regulatory delays, climate change impacts, and under-investment.
• Rising Import Bill: India's economy is vulnerable to global oil price changes, resulting in escalating import bills that threaten fiscal stability. The net oil import bill is forecasted to reach USD 101-104 billion in FY25, up from USD 96.1 billion in FY24, potentially impacting the economy by widening the current account deficit (CAD) and increasing fiscal deficits if not managed properly.

Way Forward

• Strengthening Bilateral Relations: India should concentrate on strengthening its bilateral relations with oil-producing nations in the Americas to secure stable and advantageous supply agreements.
• Investment in Domestic Refinery Capacity: Continued investment in refining capacity is crucial. With plans for up to 11 new projects by 2028, prioritizing these developments is essential to enhance self-sufficiency and meet rising demand.
• Strategic Reserves: Establishing strategic petroleum reserves can provide a buffer against supply disruptions and price shocks, ensuring energy security during volatile market conditions.
• Diversification of Energy Sources: India should explore alternative energy sources, including renewables, to reduce overall dependence on fossil fuels and bolster energy resilience.
• Monitoring Global Trends: Keeping a vigilant eye on global oil market trends and OPEC+ decisions will enable India to proactively adjust its energy strategy to ensure sustainable growth and stability in the energy sector.

Progress on India's Remittance Cost Proposal

Why in News?

India’s proposal to lower the costs of cross-border remittances, presented at the World Trade Organization’s (WTO) 13th Ministerial Conference 2024 in Abu Dhabi, has garnered support from countries like Morocco and Vietnam.However, it has also faced resistance from some WTO members, underscoring the ongoing challenges in achieving global consensus on this issue.

Costs of Cross-Border Remittances:

1. Overview

• Remittance costs are the fees that you pay when sending money to another country. These fees can differ depending on how much money you send and the method you choose to use.
• According to the International Monetary Fund (IMF), the average cost of remittances worldwide is 6.25% of the total amount sent.
• For smaller amounts, specifically those under USD 200, the average fees are around 10%, and they can reach as high as 15-20% in some regions.

2. Global Targets:

• In 2016, the G20 set a goal to reduce remittance fees to below 3% and to completely remove any corridors where fees exceed 5% by the year 2030. This is part of the Sustainable Development Goal (SDG) 10.c.
• In 2021, the G20 reaffirmed their commitment to this goal through the G20 Roadmap for Enhancing Cross-Border Payments, which aims to bring the average cost of remittances down to less than 3%.

What is India's Proposal About Costs of Cross-Border Remittances?

• 1. Origins:
  • The WTO was created by the Marrakesh Agreement in 1994 and officially started on January 1, 1995.
  • It replaced the General Agreement on Tariffs and Trade (GATT).
• 2. Members:
  • Currently, the WTO has 166 members.
  • India has been a member since 1995 and was part of GATT since 1948.
• 3. Secretariat:
  • The WTO Secretariat is located in Geneva, Switzerland.
  • It helps the organization carry out its work but does not make decisions.
  • The Secretariat is led by the Director-General.
• 4. Key WTO Principles:
  • Most-Favoured-Nation (MFN): This principle means that if one member gets good trading terms, all other members should get the same benefits.
  • National Treatment: This requires that foreign products, services, and intellectual property are treated the same as domestic ones.
• 5. WTO Ministerial Conference:
  • This is the main decision-making body of the WTO, meeting every two years.
  • All members participate in discussions and decisions about multilateral trade agreements.
• 6. Important Agreements:
  • General Agreement on Trade in Services (GATS)
  • Trade-Related Aspects of Intellectual Property Rights (TRIPS)
  • Trade-Related Investment Measures (TRIMS)
  • Agreement on Sanitary and Phytosanitary Measures (SPS)
  • Agreement on Agriculture (AoA)

Way Forward

1. Increase Awareness: 

• The Deputy Director-General of the WTO has highlighted the importance of reaching out to more people to gain wider support for lowering the costs of sending money across borders.

2. International Collaboration: 

• Working together with groups like the International Labour Organization (ILO) and the World Bank is crucial for success.

3. Foster Digital Interoperability: 

• It is important to improve the compatibility of different digital money transfer platforms to make cross-border transactions easier and smoother.

4. Promote Regulatory Harmonization: 

• Encouraging countries to align their regulations can help lower barriers and make sending money across borders more efficient.

Conclusion

India's push to reduce cross-border remittance costs at the WTO represents a significant effort to address the high fees associated with international money transfers. By aiming to lower the global average cost from the current 6.25% to the 3% target set by the SDGs, India seeks to enhance financial efficiency and support its substantial diaspora. Despite gaining support from several nations, India faces resistance from others concerned about their financial institutions' revenue. The successful implementation of this proposal could lead to numerous benefits, including increased remittance inflows, lower costs for Indian expatriates, and improved economic conditions for domestic markets. Moving forward, it is crucial for India to foster international collaboration, promote digital solutions, and work towards regulatory harmonization to achieve these objectives and strengthen the global financial system.

International Cooperation on Green Hydrogen

Why in News?

Prime Minister envisions India as global Green Hydrogen hub at 2nd International Conference on Green Hydrogen. Reflecting on National Green Hydrogen Mission launched in 2023, PM outlined India’s goals to make it a global hub for production, utilization and export of Green Hydrogen (GH2).Prime Minister envisions India as global Green Hydrogen hub at 2nd International Conference on Green Hydrogen. Reflecting on National Green Hydrogen Mission launched in 2023, PM outlined India’s goals to make it a global hub for production, utilization and export of Green Hydrogen (GH2).

How India can become a global hub for GH2?

• Production: India aims to produce 5 Million Metric Tons (MMT) of Green Hydrogen (GH2) and will need an investment of $100 billion. 
• Funding: Utilize Public-Private Partnerships (PPPs) to attract private investment and expertise for financing GH2 projects. 
• Partnerships: Work together with global leaders to gain technical skills and knowledge transfer.
• Innovation: Keep investing in Research and Development (R&D) to improve the efficiency of electrolyzers and fuel cell technologies.
• Utilization: GH2can be used instead of fossil fuel-based materials in various industries such as:
  • Petroleum refining
  • Fertilizer production
  • Steel manufacturing
• Mobility Sector: Hydrogen-powered long-distance vehicles and ships can help reduce carbon emissions in transport.
• Export Potential: By 2030, there is expected to be a global demand of over 100 MMT for GH2 and its by-products like Green Ammonia. 
•  India could potentially export around 10 MMT of GH2 or Green Ammonia each year. 

Challenges faced in GH2 Production:

• High costs of technology make it hard to deploy GH2 on a large scale.
• There are technical and logistical issues when transporting hydrogen over long distances.
• The lack of a regulatory framework for GH2 can slow down growth and investment.

About Green Hydrogen 

• GH2 refers to hydrogen made through a process called electrolysis. This process uses electricity to split water molecules (H2O) into hydrogen and oxygen. 
•  The electricity used in electrolysis comes from renewable sources such as solar, wind, and hydro power. 
•  Another method to produce GH2 is through biomass. This involves a process called gasification, where organic materials are converted into hydrogen. 
• There are various applications for GH2:
  • Fuel Cell Electric Vehicles
  • Aviation and Maritime
  • Industry:
    • Fertilizer Production
    • Refinery Operations
    • Steel Manufacturing
  • Transport: 
    • Road Transport
    • Rail Transport
    • Shipping
    • Power Generation

Turkmenistan-Afghanistan-Pakistan-India Pipeline

Why in News?

Tapi Pipeline stands for Turkmenistan-Afghanistan-Pakistan-India, also known as the Trans-Afghanistan Pipeline. It is a natural gas pipeline developed by the Galkynysh – TAPI Pipeline Company Limited with the involvement of the Asian Development Bank. This pipeline passes through Herat, Kandahar, Quetta, and Multan and runs along the Kandahar–Herat Highway. In August 2023, there were reports that the TAPI gas pipeline project may resume in 2023. This came after the four participating countries agreed to form a new consortium to oversee the project.

What is the Tapi Pipeline?

• The Trans-Afghanistan Pipeline is also called the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline.
• It is a natural gas pipeline project that has support from the Asian Development Bank.
• On December 13, Turkmenistan started a $10 billion construction project to lessen its reliance on selling gas to Russia and China.
• The pipeline begins near Mary in Turkmenistan, close to the large Galkynysh gas field, which will provide the gas for the 1,814-kilometer pipeline.
• Originally, the pipeline was expected to be finished by December 2019, but it has experienced delays.
•  These delays are due to tensions between India and Pakistan and the unstable situation with the Taliban in Afghanistan.

TAPI Pipeline Route

• Total distance: 1,735 km (1,084 miles)
• Galkynysh is the second-largest gas field in the world, located in Turkmenistan.
• The gas field can be reached via the Kandahar-Herat Highway in western Afghanistan.
• The route continues through Quetta and Multan in Pakistan.
• The journey ends in Fazilka, India.

Distribution

• Afghanistan: 5 billion cubic meters - (14%)
• Pakistan: 14 billion cubic meters - (42%)
• India: 14 billion cubic meters - (42%)

Overview of Tapi Gas Pipeline:

• Location: Turkmenistan, Afghanistan, Pakistan, India
• Start Location: Galkynysh gas field, Turkmenistan
• Maximum Discharge: 33 billion cubic meters per year (1.2 trillion cubic feet per year)
• Route: Herat – Kandahar – Quetta – Multan
• Type: Natural Gas
• General Direction: North-South
• Length: 1,814 km (1,127 miles)
• End Location: Fazilka, India

Background of TAPI Pipeline

• The TAPI Pipeline is being built by the TAPI Pipeline Company (TPCL), which includes a group of companies: Turkmengaz, Afghan Gas, Interstate Gas Service, Gas Authority of India, and Indian Oil.
• In 2010, the four countries involved signed an Inter-Government Agreement (IGA) and Gas Pipeline Framework Agreements (GPFA) to support the development of the pipeline.
• The total length of the TAPI pipeline will be 1,814 kilometres. The first section of 214 kilometres will go from Turkmenistan to Afghanistan.
• In Afghanistan, the pipeline will cover about 774 kilometres along the highways of Kandahar and Herat.
• When the pipeline reaches Pakistan, it will run for 826 kilometres and end near the Indo-Pakistan border in Fazilka, Punjab, India.
• The pipeline's diameter will be 1,420 mm and it will operate at a pressure of 10,000 kPa.
• It is designed to carry 33 billion cubic meters (bcm) of gas and is expected to last for 30 years.
• Construction of the TAPI pipeline started in the Mary region of Turkmenistan.
• In March 2017, Interstate Gas Systems (ISGSL) began Front-End Engineering Design (FEED) work for the pipeline section in Pakistan.
• Construction in Pakistan is set to start in 2018.
• The company has begun the process of selecting an Engineering, Procurement, and Construction (EPC) contractor for that section of the pipeline.

Tapi Pipeline Current Status 

• For the past thirty years, Afghanistan has postponed the completion of the Turkmenistan-Afghanistan-Pakistan-India Pipeline, commonly called the Trans-Afghanistan Pipeline.
• Although the main gas pipeline project, known as TAPI, has been described as "in progress" for three decades, it remains unfinished.
• Leaders from Afghanistan, Pakistan, Turkmenistan, and India had discussions about TAPI in the years 2010, 2015, and 2018.
• The latest meeting regarding TAPI took place in 2018, during which several other initiatives were also launched, such as electricity projects, a railway, and fibre optics.
• It was widely expected that TAPI would be launched in 2020, but construction has not yet started, despite commitments of financial support from the Asian Development Bank.
• The TAPI project, which was projected to cost USD 10 billion in 2018, aims to transport 33 billion cubic meters of Turkmen gas to energy-needy South Asia over a span of 30 years through a pipeline that stretches 1,800 kilometers across Afghanistan.

Funding and Finance of the TAPI Pipeline Project

• Turkmenistan should lessen its dependence on gas exports to Russia and China. 
• Afghanistan – Has improved ties with Pakistan, along with income from rent. 
• Pakistan – Has better relationships with India and Afghanistan, securing 25% of its energy needs at competitive prices, as well as rent and tax fees from India. 

Impact of TAPI Pipeline

• Energy Security: The TAPI Pipeline will improve energy security for Afghanistan, Pakistan, and India by offering a steady supply of natural gas.
• Economic Growth: Access to natural gas from the TAPI Pipeline is expected to boost economic growth in the involved countries, encouraging industrial development and creating job opportunities.
• Regional Cooperation: This project promotes cooperation among Turkmenistan, Afghanistan, Pakistan, and India, enhancing their diplomatic and economic relationships.
• Revenue Generation: The fees collected from transit and royalties from the pipeline's operation will help increase the income of the participating countries, potentially benefiting their economies.
• Infrastructure Development: Building and maintaining the pipeline will lead to improvements in infrastructure, including roads and other facilities along its path.
• Environmental Impact: Using natural gas, which is cleaner than fuels like coal, can help lower carbon emissions and support environmental sustainability.
• Technological Collaboration: The project will require sharing technology and expertise among the participating countries and their international partners.
• Geopolitical Influence: The TAPI Pipeline may affect geopolitical relations, impacting how countries in the region interact with each other.
• Enhanced Access to Energy: The pipeline will provide better access to energy resources, especially in areas that have limited energy options or rely heavily on other sources.
• Long-Term Benefits: The TAPI Pipeline is expected to deliver long-term advantages related to energy diversity, economic stability, and regional integration.

Major Companies & Contractors Involved in Tapi Pipeline Project

• Penspen, an engineering and project management firm based in the UK, was chosen by the Asian Development Bank to carry out a technical feasibility study for the project.
• Penspen looked into the project's route, cost, and other infrastructure details.
• The main environmental and social protection aspects of the study were subcontracted by Penspen to Royal HaskoningDHV, a company located in the Netherlands.
• Turkmengas awarded a $40 million contract to Global Pipe Company, which is a partnership between Erndtebruecker Eisenwerk and Saudi Steel from Germany.
•  In January 2017, TPCL engaged ILF Beratende Ingenieure to offer front-end engineering and design services for the project.

Conclusion

• Countries like India, Pakistan, and Afghanistan face serious energy shortages.
• These nations urgently need energy resources to improve their struggling economies.
• To achieve peace and development, it is essential for these countries to work together and take strong steps against terrorism.
• The natural gas reserves in these countries have the potential to transform the lives of their citizens if utilized effectively.
• This situation can benefit all involved countries, creating a win-win outcome.
• It is important for these nations to quickly explore and tap into this valuable resource.

First Legally Binding International AI Treaty

Why in News?

First-ever international legally binding treaty on Artificial Intelligence (AI) signed by countries like US, UK. It aims to mitigate the threats that AI may pose to human rights, democracy and the rule of law. The treaty, called the Framework Convention on Artificial Intelligence, Human Rights, Democracy and Rule of Law, was drawn up by the Council of Europe.It is separate from the EU AI Act, enforced last month, by having a mandate to ensure that activities within AI lifecycle systems are consistent with Human Rights, Democracy and the Rule of Law.

Major provisions

• Risk-based approach: Systems can be banned if the risks they present do not align with human rights.
• Coverage: This applies to both the public and private sectors across different regions.
• Global diversity: It supports a variety of legal systems, allowing parties to manage the private sector either directly through the convention or via other compatible measures. 
• Exemption: This does not cover issues related to national security, defense, and research and development activities. 

Impact of AI in Human rights, Democracy, and Rule of Law

• Human Lives: The ability to predict how people will act can lead to creating stereotypes and biased views. This also raises concerns about privacy, especially with the use of biometric tools.
• Democracy: The use of biometric surveillance can interfere with open discussions and debates in society and politics, which are essential parts of a healthy democracy.
• Rule of Law: When advanced AI systems are more accessible to wealthy individuals, it can lead to increased control by those who create these technologies. This situation can impact equality before the law, making it harder for everyone to be treated equally.