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INDIA-PAK THAW? Not so fast

by K.S. Tomar

Contrary to expectations, while taking a ‘political decision’ not to lift a ban on the import of sugar and cotton from India despite severe economic crisis, Pakistan government has re-emphasized the notion of ‘Kashmir Phobia’ which reigns supreme in the minds of army generals and politicians in Islamabad, thereby ignoring woes of people and seriousness of economic depression which has hit this nation hard.

Pakistan government took a U-turn in importing cotton and 500,000 metric tons of sugar from India, dragging Kashmir into the imbroglio, which may bear on the UAE efforts to start a peace process between the two neighbors.

Pakistan decided to suspend bilateral trade with India in August 2019 after the abrogation of Article 370 and 35A. However, one factor was also the 200% tariff imposed by India on Pakistani imports earlier while revoking Pakistan’s Most Favored Nation status after the Pulwama terrorist attack, which was abetted and supported by the army of that country.

A cursory look shows that India’s exports to Pakistan dropped nearly 60% to USD 816.62 million and its imports fell by 97% to USD 13.97 million in 2019-20. Over the years, nicknamed as “Little Sparta’’ by US generals like former Defence  Secretary Jim Mattis, UAE is without any military power but immense ambition as peace broker as witnessed during last year’s Abraham accord between Israel and Arab states.  UAE’s latest project is audacious as it pertains to  India and Pakistan’s negotiations, which led to the unexpected Feb 25 announcement by DGMOs of India and Pakistan to respect the 2003 ceasefire agreement. As per indications, General Qamar Javed Bajwa, Pakistan’s Army Chief, has taken charge of the peace initiative with India, which seems to be meaningful as the army pulls the levers in the elected government there. Pakistan Prime Minister Imran Khan is dubbed as ‘puppet’ of the army and Bajwa’s extended term will run to November 2022. Hence he may be deemed to be India’s main interlocutor in the peace process.

It was General Bajwa who took the lead in statements emerging from Islamabad that arch rivals India and Pakistan should  “bury the past” and move towards cooperation, an overture came after the joint announcement on ceasefire. Bajwa cleverly put the burden on India to create a “conducive environment”, bringing in Washington to play an effective role in ending regional hostilities.  He mentioned intentionally that Pakistan’s powerful army has ruled the country for nearly half of its 73-year existence.

UAE foreign minister Sheikh Abdullah bin Zayed’s quick visit to India after the ceasefire confirmed the peace broker’s role being played by  a country friendly with both India and Pakistan.

Analysts believe that as India and Pakistan are starting afresh after a long time, they should inject liveliness and vitality to the previous Confidence Building Measures (CBMs), which include 2005-initiated cross-LoC movement of civilians and cross-LoC trade started in 2008.

As negotiator, UAE is still expecting to facilitate an exchange of ambassadors between New Delhi and Islamabad, which may later lead to restoration of trade links between the two countries.

India and Pakistan’s current faceoff  is the world’s most dangerous as it was triggered two years ago when 40 Indian soldiers were killed in a suicide bomb attack in Kashmir, claimed by a Pakistan-based terrorist group, and actively supported by Pakistan.

Writer is a senior journalist and national columnist based in Delhi.

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China top India trade partner even as ties sour

New Delhi: China regained its position as India’s top trade partner in 2020, as New Delhi’s reliance on imported machines outweighed its efforts to curb commerce with Beijing after a bloody border conflict, the media reported.

Two-way trade between the longstanding economic and strategic rivals stood at $77.7 billion last year, according to provisional data from India’s commerce ministry.

Although that was lower than the previous year’s $85.5 billion total, it was enough to make China the largest commercial partner displacing the U.S. — bilateral trade with whom came in at $75.9 billion amid muted demand for goods in the middle of a pandemic, reports Bloomberg.

While Prime Minister Narendra Modi banned hundreds of Chinese apps, slowed approvals for investments from the neighbor and called for self-reliance after a deadly clash along their disputed Himalayan border, India continues to rely heavily on Chinese-made heavy machinery, telecom equipment and home appliances. As a result, the bilateral trade gap with China was at almost $40 billion in 2020, making it India’s largest.

Total imports from China at $58.7 billion were more than India’s combined purchases from the U.S. and the U.A.E, which are its second- and third-largest trade partners, respectively. Heavy machinery imports accounted for 51% of India’s purchases from its neighbor.

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Moody’s downgrades India’s sovereign rating, outlook as negative

New Delhi: Global credit ratings agency Moody’s Investors Services has downgraded India’s sovereign ratings as it sees challenges piled up on the country’s policymaking institutions to mitigate the risks of a sustained period of relatively low growth.

Besides, Moody’s said the Covid-19 pandemic amplifies vulnerabilities in India’s credit profile such as slower growth relative to the country’s potential, rising debt and further weakening of debt affordability and persistent stress in parts of the financial system.

Consequently, Moody’s downgraded India’s foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2.

It also downgraded India’s local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2.

Furthermore, it kept the outlook as negative. Currently, the sovereign rating assigned to India is Baa2 with a negative outlook.

The ratings agency also lowered India’s long-term foreign-currency bond and bank deposit ceilings to “Baa2 and Baa3, from Baa1 and Baa2”, respectively.

“The short-term foreign-currency bond ceiling remains unchanged at Prime-2, and the short-term foreign-currency bank deposit ceiling was lowered to Prime-3 from Prime-2. The long- term local currency bond and bank deposit ceilings were lowered to A2 from A1,” Moody’s said.

The ratings downgrade assumes significance since it will hamper the government’s borrowing foreign program and make the country less attractive for investment purposes.

According to Moody’s, India faces a prolonged period of slower growth relative to the country’s potential, rising debt, further weakening of debt affordability and persistent stress in parts of the financial system, all of which the country’s policymaking institutions will be challenged to mitigate and contain.

“The decision to downgrade India’s ratings reflects Moody’s view that the country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” Moody’s said.

“The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody’s currently projects,” it added.

Moody’s had upgraded India’s ratings to Baa2 in November 2017 which was based on the expectation that effective implementation of key reforms would strengthen the sovereign’s credit profile through a gradual but persistent improvement in economic, institutional and fiscal strength.

“Since then, implementation of these reforms has been relatively weak and has not resulted in material credit improvements, indicating limited policy effectiveness,” the investors’ services said.

“While today’s action is taken in the context of the coronavirus pandemic, it was not driven by the impact of the pandemic. Rather, the pandemic amplifies vulnerabilities in India’s credit profile that were present and building prior to the shock, and which motivated the assignment of a negative outlook last year.”

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