The Hindu Editorial Analysis | 24th August’19 | PDF Download

• The countdown on the U.S.-Russia Intermediate Range Nuclear Forces (INF) Treaty began last October when President Donald Trump announced that the U.S. was considering a withdrawal. On August 2, the U.S. formally quit the pact. Concluded in 1987, the agreement had obliged the two countries to eliminate all ground-based missiles of ranges between 500 km and 5,500 km, an objective achieved by 1991.
• At risk is the New START (Strategic Arms Reduction Treaty) signed in 2010 and due to lapse in February 2021. It has a provision for a five-year extension but Mr. Trump has already labelled it “a bad deal negotiated by the [Barack] Obama administration.”
• In May, Director of the Defence Intelligence Agency Lt. Gen. Robert Ashley declared that “Russia probably is not adhering to the nuclear testing moratorium in a manner consistent with the ‘zero-yield’ standard” imposed by the Comprehensive Test Ban Treaty (CTBT).
• The CTBT has not entered into force but the U.S. is a signatory and Russia has signed and ratified it. Many have interpreted Lt. Gen. Ashley’s statement as preparing the ground for a resumption of nuclear explosives testing. Taken together, these ominous pointers indicate the beginning of a new nuclear arms race.
• The decade of the 1980s saw heightened Cold War tensions. Soviet military intervention in Afghanistan in 1979 provided the U.S. an opportunity to fund a (barely) covert jihad with the help of Pakistan. President Ronald Reagan called the USSR “an evil empire” and launched his space war initiative. Soviet deployments in Europe of SS-20 missiles were matched by the U.S. with Pershing II and cruise missiles.

 Cold War talks

• In 1985, the two countries entered into arms control negotiations on three tracks

1. The first dealt with strategic weapons with ranges of over 5,500 km, leading to the START agreement in 1991 that limited both sides to 1,600 strategic delivery vehicles and 6,000 warheads.
2. A second track dealt with intermediate-range missiles, of particular concern to the Europeans, and this led to the INF Treaty in 1987.
3. A third track, Nuclear and Space Talks, was intended to address Soviet concerns regarding the U.S.’s Strategic Defence Initiative (SDI) but this did not yield any concrete outcome.

• The INF Treaty was hailed as a great disarmament pact even though no nuclear warheads were dismantled and similar range air-launched and sea-launched missiles were not constrained.
• Further, since it was a bilateral agreement, the treaty did not restrict other countries, but this hardly mattered as it was an age of bipolarity and the U.S.-USSR nuclear equation was the only one that counted. By 1991, the INF had been implemented. The USSR destroyed a total of 1,846 missiles and the U.S. did the same with 846 Pershing and cruise missiles. Associated production facilities were also closed down. In keeping with Reagan’s dictum of ‘trust but verify’, the INF Treaty was the first pact to include intensive verification measures, including on-site inspections.
• With the end of the Cold War and the break-up of the USSR in end-1991, the arms race was over. Former Soviet allies were now joining the North Atlantic Treaty Organization (NATO) and negotiating to become European Union (EU) members. The U.S. was investing in missile defence and conventional global precision strike capabilities to expand its technological lead. Importantly, some of these were blurring the nuclear-conventional divide.
• U.S. withdrawal from ABM
• In 2001, when the U.S. announced its unilateral withdrawal from the 1972 Anti Ballistic Missile Treaty (ABM Treaty), a keystone of bilateral nuclear arms control was removed.
• The INF Treaty had been under threat for some time. The U.S. had started voicing concerns about the Novator 9M729 missile tests nearly a decade ago. As Russia began production, formal allegations of violation of the INF Treaty were raised by the Obama administration in 2014. Russia denied the allegations and blamed the U.S. for deploying missile defence interceptors in Poland and Romania, using dual-purpose launchers that could be quickly reconfigured to launch Tomahawk missiles.
• Basically, Russia believes that nuclear stability began getting upset since the U.S.’s unilateral withdrawal from the ABM Treaty. As the U.S. used its technological lead to gain advantage, Russia became more dependent on its offensive nuclear arsenal and began its modernization and diversification.
• The U.S.’s 2017 National Security Strategy and the Nuclear Posture Review (NPR) the following year reflected harsher-than-before assessment of its security environment and sought a more expansive role for nuclear weapons, in a break from the policies that had been followed since the end of the Cold War. Russia was seen as a ‘disruptive power’ pushing for a re-ordering of security and economic structures in Europe and West Asia in its favour.
• China was identified for the first time as a strategic competitor that was seeking regional hegemony in the IndoPacific region in the near-term and “displacement of the U.S. to achieve global pre-eminence in the future”.
• With the geopolitical shift to the Indo-Pacific, the U.S. believes that the INF Treaty was putting it at a disadvantage compared to China which is rapidly modernizing and currently has 95% of its ballistic and cruise missile inventory in the INF range. Against this political backdrop, the demise of the agreement was a foregone conclusion.
• The 2011 New START was a successor to the START framework of 1991 and limited both sides to 700 strategic launchers and 1,550 operational warheads. It lapses in February 2021 unless extended for a five-year period.
• Mr. Trump has indicated that a decision on the agreement will be taken in January 2021, after the 2020 election. Given his dislike for it, if he is re-elected, it is clear that the New START will also meet the fate of the INF Treaty. This means that, for the first time since 1972, when the Strategic Arms Limitation Act (SALT) I concluded, strategic arsenals from the U.S. and Russia will not be constrained by any arms control agreement.
• Testing of low-yield weapons
• The 2018 NPR envisaged development of new nuclear weapons, including low-yield weapons. The Nevada test site, which has been silent since 1992, is being readied to resume testing with a six-month notice. The U.S. Senate had rejected the CTBT in 1999 but as a signatory the U.S. has observed it. In addition to pointing the finger at Russian violations, Lt. Gen. Ashley declared that “China is possibly preparing to operate its test site year-round in a development that speaks directly to China’s goals for its nuclear force”. He suggested that China cannot achieve such progress “without activities inconsistent with the CTBT”. Since the CTBT requires ratification by U.S., China, Iran, Israel and Egypt and adherence by India, Pakistan and North Korea, it is unlikely to ever enter into force. Resumption of testing by the U.S. would effectively ensure its demise.
• A new nuclear arms race could just be the beginning. Unlike the bipolar equation of the Cold War, this time it will be complicated because of multiple countries being involved. Technological changes are bringing cyber and space domains into contention. All this raises the risks of escalation and could even strain the most important achievement of nuclear arms control — the taboo against the use of nuclear weapons that has stood since 1945.

 Sentiment booster

In rolling back some measures, the government shows it listens to feedback

• For an economy that is downbeat in growth and in sentiment, the comprehensive package of measures announced by Finance Minister Nirmala Sitharaman on Friday may just be the right boost. They address growth slowdown concerns; free up funds for investment and spending by banks, housing finance companies and MSMEs; and importantly, undo some controversial proposals, in the budget and outside it, which were affecting sentiment in the markets and the corporate sector. And, importantly, these have all been done without any significant financial burden on the government. Some of the measures promote the ease of doing business and even the ease of living for ordinary citizens. The auto sector’s biggest demand — that of reduction in GST rate — may not have been conceded, but Ms. Sitharaman has given the sector enough to cheer about. The accelerated depreciation of 15% (in addition to the existing 15%) for all vehicles acquired till March 31, 2020 and the deferment of the proposed increase in registration fee for new vehicles to June 2020 are positive measures that will boost sentiment and, it is to be hoped, translate into demand. As the festive season sets in, banks will have more space to increase their lending consequent to the upfront funding of ₹70,000 crore (announced in the budget) that they will get from the government towards recapitalization. This, together with the strong push for repo rate linked loan products, is likely to benefit consumers borrowing to buy new homes, vehicles and durables.
• The rollback of the capital gains tax imposed in the budget on foreign portfolio investors, the withdrawal of angel tax on start-ups and the promise that non-compliance with corporate social responsibility (CSR) norms will be decriminalized show a government that is willing to listen to feedback from the ground. Much of the mayhem in the markets could have been avoided though if only the Finance Minister had acted earlier on the negative feedback to the FPI tax proposal. Some of the smaller steps can go a long way. Expediting delayed payments by government departments and public sector units is alone expected to release a massive ₹60,000 crore into the economy. The assurance that all pending GST refunds to MSMEs will be paid within 30 days and going forward such refunds will be made within 60 days is a great relief for the sector. This will ease the cash flows of MSMEs who often work with stretched finances. The most significant takeaway though from Ms. Sitharaman’s announcements is the fact that the government is no longer scared of the suit-boot ki sarkar jibe. She declared upfront that the government respects “wealth creators” and the measures are aimed at helping them. Will these measures put GDP growth back on the rails? Will they restore the jobs lost in the last few months? The answers to these are in the hands of the wealth creators now. The government did what it could; it is now up to India Inc to take the ball and run.

Govt. responds to downturn with steps to boost growth

• Controversial surcharge on Foreign Portfolio Investors withdrawn But increased surcharge will apply to those earning over ₹2 crore a year Violations of CSR rules will not be treated as criminal offences Govt. will front-load ₹70,000 crore of capital infusion in public banks
• The government on Friday came out on the front foot to try to boost private sector sentiments, with Finance Minister Nirmala Sitharaman announcing a slew of measures to reduce the burden on the sector, including withdrawing the controversial surcharge on Foreign Portfolio Investors (FPIs) and reiterating the Prime Minister’s statement that the government “respects all wealth creators”.
• Ms. Sitharaman told a press conference that the government would not treat corporate social responsibility violations as criminal offences, as it had earlier said.
• “In order to encourage investment in the capital market, it has been decided to withdraw the enhanced surcharge levied by the Finance (No 2) Act, 2019, on long- and short-term capital gains arising from the transfer of equity shares,” the Minister announced. “In other words, the enhanced surcharge on FPIs goes and the pre-Budget position is restored.”
• She, however, clarified that the increased surcharge announced in the Budget would still apply to high net-worth individuals earning more than ₹2 crore a year. This, she said, would be the case till India’s 75th Independence Day, when the decision would be reviewed.
• In keeping with the overall push to allay private sector concerns, the Minister also stressed that the government was in favour of penalties rather than prosecution. This would extend to violations of the CSR rules, which it had earlier said could attract a jail term of up to three years along with a fine. The decision had spooked India Inc, and the roll-back should come as a relief.
• The government also decided to front-load the ₹70,000 crore of capital infusion in public sector banks that was announced in the Budget, a move that is further aimed at increasing private investment by facilitating greater credit disbursal by the banks. According to the government, this ₹70,000 crore will lead to about ₹5 lakh crore of fresh liquidity that can be loaned out.
• In what amounts to a short-term bailout of the auto industry, Ms. Sitharaman announced that the government had rescinded its ban on the purchase of new vehicles by its departments to replace old ones. Vehicles bought till March 31, 2020, will also be eligible for an additional 15% depreciation. The proposal to enhance registration fees for new vehicles will be kept on hold till June 2020.
• The government has also significantly reined in the discretionary powers of the tax authorities. Ms. Sitharaman announced that from October 1, all notices and summons by the Income Tax Department would be generated by a centralized computer and would carry a unique code.
• Any notices not carrying these codes would be considered invalid, and all pending notices would either have to be disposed of by October 1 or reissued with the unique code.
• “I have also held meetings with the tax officials at various locations in the country and told them that our tax collection targets are realistic and that there is no need for overreach,” Ms. Sitharaman said.

Repo rate-linked loans

• The Finance Minister did not restrict her efforts to boost the economy to just the private sector. In what should be welcomed by borrowers across the board, including those looking for home and auto loans, she announced that public sector banks have decided to increase their repo rate-linked loan offerings.
• A major complaint among end-consumers has been that the Reserve Bank of India’s repo rate cuts have not been transmitted onwards by the banks. Repo rate-linked loan products will effectively take the banks out of the rate-setting process.
• What should also cheer prospective homeowners is that the government has announced an additional ₹20,000 crore of liquidity to the housing finance companies, over and above the ₹10,000 crore earlier announced.

Shallow draughts

•  India needs to remind President Trump of the real basis of its claim to J&K
• In the run-up to the meeting between Prime Minister Narendra Modi and U.S. President Donald Trump, expected on the sidelines of the G7 summit, many in South Block would have hoped that the U.S. President would not make any of his characteristically controversial statements. The two leaders have a full bilateral agenda to discuss, including defence and strategic cooperation, and will need to resolve outstanding trade issues, as well as deal with possible U.S. sanctions on India for an upcoming purchase of the Russian S-400 anti missile systems and the future of Iran sanctions for oil purchases. It is clear that India’s concerns over the U.S.-Taliban peace process will also be high on the agenda. However, Mr. Trump has made it clear, in at least three recent statements, that the situation in Jammu and Kashmir (J&K) and resultant tensions between India and Pakistan will claim much of the conversation. For starters, Mr. Trump has repeated, despite several rejections from India, that he would like to “mediate” between the two countries. He has also called the India-Pakistan conflict over Kashmir a ‘religious problem’. While Mr. Trump is free to make assertions, his views on the Kashmir dispute betray an ignorance of the nature of the conflict and the situation on the ground.
• Since 1947, the view on the Indian side has been that Partition was not on the basis of a religious divide, but an ideological one: the ‘idea of Pakistan’ vs. the ‘idea of India’. Pakistan was carved out of India because sections of Muslims believed that they could not live equitably with the majority Hindu community. India consisted of those who believed people of all religions could live together in a secular, pluralistic society; and it should be noted that more Muslims chose to live in India than in Pakistan. India’s claim over J&K, a State that included Hindus, Muslims and Buddhists, stemmed from this very premise. The government has repeatedly stressed that its decision on J&K was mandated by a desire to provide better governance and development for the people there. Mr. Trump’s assertion that the issue over Kashmir is a religious one unwittingly plays into the Pakistani narrative of a conflict that has defied such narrow definitions for more than 70 years. It is therefore necessary that the government firmly corrects Mr. Trump on the matter. While the government has decided wisely to ignore many of his quixotic comments, his assertion that Kashmir is essentially a communal problem is dangerous, and needs to be countered by New Delhi in the interest of bilateral relations, as well as the resolution of the problem itself.

Delhi scores lowest on water management

• Delhi has finished at the bottom of the Composite Water Management Index, an assessment by the Niti Aayog on how States and Union Territories manage their water.
• The assessment pans nine themes, each having an attached weight, and assesses how well States have done on criteria such as groundwater and surface water restoration, implementing major and medium irrigation projects, watershed development, participatory irrigation management, on-farm water use, rural and urban water supply, and policy and governance. These indicators were broken down into 28 objective indicators.

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