China Current Affairs

India, Japan ink MoU set up India-Japan Act East Forum

India and Japan have signed a memorandum of understanding (MoU) to set up India Japan Act East Forum to enhance connectivity and promote developmental projects in Northeast India.

It was one of the 15 major agreements signed between both countries during Japanese Prime Minister Shinzo Abe’s visit to India for the 12th Indo-Japan annual summit.

Key Facts

The purpose of forum is to converge India’s Act East Policy with Japan’s Free and Open Asia-Pacific strategy in the backdrop of China’s One Belt One Road initiative. It will enhance connectivity and promote developmental projects in India’s Northeast region in an efficient and effective manner. It can complement India’s connectivity initiatives in Bangladesh, Myanmar and beyond, besides BBIN (Bangladesh, Bhutan, India, Nepal) and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) Motor Vehicle Agreements.

Background

Japan has historic connection with India’s northeast and is among few countries that India has allowed a presence in eight landlocked northeastern states which are India’s gateway to ASEAN members countries. Japan has cooperated with variety of development projects in Northeast, ranging from connectivity infrastructure such as roads and electricity, water supply and sewage and environmental conservation such as forest resource management and biodiversity.

Japanese Contribution to North East

India and Japan have signed document on Japanese loan and aid for highway development in Northeast which can complement India’s connectivity initiatives in Bangladesh, Myanmar and beyond. Japan is also extending loan of Rs.2,239 crore to India for ‘North East Road Network Connectivity Improvement Project’ to improve National Highway 40 (NH-40) and construct a bypass on NH-54 in Northeast. These projects are expected to improve intra-regional and international connectivity through regional economic development.

Chinese Opposition

China has expressed dissatisfaction over proposed Japanese investments in India’s North-East states. China warned that third-party should not meddle in border disputes between India and China. It held that negotiations are still on to settle eastern section of China-India border, so it is oppoing involvement of any third party in region in whatsoever form.

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India, China unlikely to be growth poles for global economy: UNCTAD Report

According to UNCTAD’s recently released Trade and Development Report (TDR) 2017, India and China at their current levels of growth will not serve as “growth polls” for global economy in near future.

TDR is flagship report of the United Nations Conference on Trade and Development (UNCTAD) and is treated as a barometer for assessing the global economic climate.

Key Highlights of report

Global Economy: The world economy in 2017 is picking up but not lifting off.  The global growth is expected to reach 2.6%, well below pre 2008 financial crisis average of 3.2%. Unregulated finance remains at heart of present hyper-globalised world and failure to tame it and address deep-seated inequalities, generated by it threatens efforts to build inclusive economies.

The report calls for serious examination of market power, rent-seeking behaviour and winner-take-most rules of the economic game, which have generated exclusionary outcomes. It outlines global new deal to build more inclusive and caring economies by combining economic recovery with regulatory reforms and redistribution policies with high speed and requisite scale.

India and China: At current levels of growth, both Asian countries are unlikely to serve as “growth polls” for the global economy in near future.

India’s Growth: It is likely to slow down to 6.7% in 2017 from 7% in 2016. India’s growth performance depends on reforms to its banking sector to a large extent, which is burdened with large volumes of stressed and non-performing assets.

The informal sector, which still accounts for at least one-third of India’s GDP and more than four-fifths of employment, was badly affected by the government’s ‘demonetisation’. It may be further affected by rollout of  Goods and Services Tax (GST) from July 2017,

China’s Growth: It has been retained at 6.7%, same as in 2016. Gradual slowdown of China is expected to continue as it moves ahead with rebalancing its economy, towards domestic markets. China’s estimated debt-to-GDP ratio is 249%. China needs to introduce measures to contain its rising debt as domestic demand could be squeezed, with adverse consequences.

Advanced and Developing economies:  The main obstacle to robust recovery in advance countries is fiscal austerity, which remains default macroeconomic option. Capital inflows to developing countries have remain negative, albeit less so than in recent years. Unforeseen events also can knock recovering economies off balance.

UNCTAD

UNCTAD is principal organ of United Nations General Assembly (UNGA) dealing with trade, investment, and development issues. Its goals are to: “maximize the trade, investment and development opportunities of developing countries.” It organizes World Investment Forum. It publishes reports like World Investment Report, Technology and Innovation Report.

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