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 INDEX
Editorial
• War is Approaching, Face the Battle.......................................................................03

SECTION - 1: Articles
• India-Switzerland Bilateral Relation ......................................................................04
• India and United Nations .......................................................................................12
• Fiji Suspended from Commonwealth......................................................................25
• Hindi Article ( “EÞ ‡¹É IÉäjÉ E É ‡´ÉE ÉºÉ ¦ÉÉ® iÉÒªÉ +lÉÇ´ªÉ´ÉºlÉÉ E É ¨ÉÖJªÉ +ÉvÉÉ®” ) .............38

SECTION - 2: Hot Topics

India’s Per Capita GHG Emissions...............................................................................51

SECTION - 3: Current Relevant Facts......................................................................61

SECTION -4: Sports ................................................................................................65
SECTION -5: Awards...............................................................................................69

SECTION - 6: Mains Special

• Foreign Relations Of India.......................................................................................74
• International Organizations...................................................................................120
• Hot Economic Issues..............................................................................................137

Copyright © 2009 | WWW.UPSCPORTAL.COM 2

War is Approaching, Face the Battle...

Now final war for IAS mains is approaching and you are very near to it. Some
candidates are fully prepared and some are confident but there are also some
candidates, who are loosing the confidence in themselves. But all of you should
keep one thing in mind very clearly, that the battle is open and no-one is
victorious or loser, without actually facing the it. So my advice is that all of you
must synchronize all your abilities, power, knowledge, time and everything.
All of you know that good strategy is indispensable to win the war, so make
your own strategy. all of you must have “your own” personal strategy.

We are trying our best to provide you the materials for mains in very concise
way. In this 6th and maiden volume, you will find “International Relation and
Organization”, and Economy under the mains special column. We have
covered all the important topics in the style by which you can understand
them within few minutes. Read them carefully. Along with this, there is articles
on “India and United Nations-Significant Contributions for Peace and
Development”, “India-Switzerland Bilateral Relation-Social Security Agreement
to Enhance Cooperation”, “ Fiji Suspended from Commonwealth- Failed to
Opening Talks on a Return to Democracy”. Also an article on “EÞ ‡¹É IÉäjÉ E É
‡´ÉE ÉºÉ ¦ÉÉ® iÉÒªÉ +lÉÇ´ªÉ´ÉºlÉÉ E É ¨ÉÖJªÉ +ÉvÉÉ®” in Hindi.

These are others topics as well, which may be asked in the IAS mains
examination 2009. “India’s Per Capita GHG Emissions” is covered in Hot Topic
and as always Personality, Awards and Sports sections have been covered
under the regular column, Current Affairs.

Our best wishes to all of you to win the final war.

Editor: R. K. Pandey
and
UPSCPORTAL Team

Copyright © 2009 | WWW.UPSCPORTAL.COM 3

 Section -1 (Article : India-Switzerland Bilateral Relation)

India-Switzerland Bilateral Relation

Social Security Agreement to Enhance Cooperation
By: R. K. Pandey
India and Switzerland signed a Social Security There are over 11,000 Indians in Switzerland and
Agreement on September 03, 2009 in New Delhi, there are over 800 Swiss nationals working in In-
in presence of the Vice-President of the Swiss Con- dia. There is potential for greater movement of
federation and Minister of Economic Affairs, Ms. workers between the two countries in future. This
Doris Leuthard. The Agreement was signed by bilateral Social Security Agreement will enhance
Shri. K. Mohandas, Secre- trade and investment between the
tary of Overseas Indian two countries. India has signed
Affairs Ministry and Mr. similar agreements with Belgium,
Philippe Welti, Ambassa- France and Germany in the recent
dor of the Swiss Confed- past.
eration in India. On the
occasion, Shri. Mohandas Friendship between India
said that this is an impor-
and Switzerland
tant agreement, which
will further boost the
The emergence of friendship be-
friendly relationship be-
tween India and Switzerland for-
tween the two countries.
mally started with the Treaty of
Friendship and Establishment of
This Social Security
1948 and was strengthened in various fields such
Agreement will enhance cooperation on social se-
as development, economy, and culture. The ex-
curity between the two countries. It will facili-
changes between the two countries have since
tate the movement of professionals between the
then increased. The two nations had a first com-
two countries. The detached workers sent by Swit-
mercial contact in 1851 when Salomon and Johann
zerland-based companies to their Indian subsid-
Georg Volkart simultaneously founded their com-
iaries, or those sent by Indian companies to their
pany Volkart Brothers in Bombay and Winterthur.
branches in Switzerland will be exempt from so-
They reacted to the increasing demand in Europe
cial security contribution in the host country for
for products from the Indian subcontinent and of
a period of 72 months. While working abroad,
European products in India. The two pioneers and
these employees will only be subject to the social
adventurers reached high prominence with their
security regulations of their home country. The
company in India.
Agreement provides that an employed or self-
employed person, other than detached workers
Furthermore, Mahatma Gandhi came to Switzer-
shall be subject only to the legislation of the host
land in 1931 after having attended the Round
country. The Agreement provides for refund of
Table Conference in London. He spent five days
the contributions at the time of relocation. In so
in Switzerland to meet his friend Romain Rolland.
far as Switzerland is concerned, the person will
Swiss development cooperation with India started
be refunded the contributions in accordance with
50 years ago. The first project of the Swiss Agency
the Swiss legislation. In so far as India is concerned,
for Development and Cooperation (SDC) was ini-
the person will be paid the withdrawal benefit or
tiated in 1963 in Kerala with the purpose to con-
the pension in Switzerland or a third country, as
tribute towards the improvement of livestock in
the case may be, in accordance with the Indian
the State, mainly for dairy production. The suc-
legislation at the time of relocation. The Agree-
cessful result was an eight-fold increase in milk
ment will come into effect after the fulfillment of
the national requirements.

Copyright © 2009 | WWW.UPSCPORTAL.COM 4

 Section -1 (Article : India-Switzerland Bilateral Relation)
production over 35 years in the region. From
Kerala, SDC India geographically extended its ac-
tivities to other regions and domains of coopera-
tion, including to green technologies at present.
Swiss agency for development and Cooperation:
The Swiss agency for development and Coopera-
tion (SDC) works in India with a central focus on
poverty reduction. Geographically its cooperation
programme has been concentrated on semi-arid
regions of the central Deccan plateau (Karnataka,
Andhra Pradesh, Maharashtra) as well as on
Kerala, Rajasthan, Orissa, Sikkim and Gujarat.
SDC's programmes have contributed to people's
empowerment and poverty reduction by focus-
ing on three productivity enhancing themes: re-
tention and sustainable use of water, rural energy
and housing, rural finance and employment cre-
ation. In addition, SDC has supported Indian
organisations in the fight for inclusion and social
justice and in the promotion of the decentralisation
process.
Considering the fast growing importance of India
as a global actor, the availability in the country of
financial and human resources to address the chal-
lenge of poverty and sustainable development, as
well as the importance to build on more than 45
years of development cooperation with India, SDC
in 2006 decided to engage into a new type of col-
laboration with India.
The new Programme involves a shift from tradi-
tional/classical development cooperation, towards
a collaboration based on common interests and
shared investments, with the ultimate aim of re-
ducing poverty. A key feature of this Programme
is the exchange of know how and technologies
between Switzerland and India and the promo-
tion of South-South cooperation.
Historical and Political Ties: Switzerland and In-
dia are in many respects close to each other. Swiss
people, mainly artists and intellectuals, have since
long been attracted to the historic and cultural
Copyright © 2009 | WWW.UPSCPORTAL.COM
splendour and the puzzling diversity, including the
philosophical and religious one, of the subconti-
nent. Thus, the Swiss psychoanalyst Carl Gustav
Jung, who during his trip to India in 1938, which
he described thoroughly in his work, was
honoured with three doctorates from Allahabad,
Benaras and Calcutta universities. Or take the
sculptor, painter and art historian Alice Boner
(1889-1981) from Zurich, who spent not less than
45 years at the banks of the Ganga, in Benaras,
and who was awarded the "Padmabhushan" in
1974 by the Indian President for her outstanding
scholarly work on Indian art, especially sculpture
and architecture. As to the well known Swiss
travel writer Ella Maillard, she spent the years of
the World War II in the ashram of Ramana
Maharishi, south of Madras, and reflected her
unique experience in the novel "Ti Puss".
The strong relationship between Switzerland and
India has been continually strengthened by In-
dian and Swiss dignitaries who believed in the po-
tential of sharing ideas and concrete projects to-
gether. Therefore, it is not surprising that the first
ever friendship treaty signed by independent In-
dia was with Switzerland, signed by India's first
Prime Minister Jawaharlal Nehru on 14th August
1948.
Ever since, the two countries have maintained a
cordial friendship, kept alive by regular
visits, economic and cultural activities. Mr. Nehru
admired Switzerland as a model democratic state
and sent his daughter Indira to a girl's boarding
school in Bex, VD. Many members of the Indian
leadership have been to Switzerland at one time
or another and have helped to create a positive
image of Switzerland in India.
Switzerland and India have since long been en-
joying mutually beneficial trade and economic ties
but these relations got a new impetus in the be-
ginning of the 1990s, when India's economy be-
gan opening up to the world market. Both sides
have some core competencies, which our politi-
cal leaders and business communities have always
strived to put together, resulting in increased trade
5
Section -1 (Article : India-Switzerland Bilateral Relation)
and investment flows between the two countries.
The bilateral relations between India and Swit-
zerland have grown closer over time. On 1st April
1947, Switzerland opened a Trade Mission in In-
dia, which in 1948 was converted into a Mission
and in 1957 into an Embassy. The present Swiss
Ambassador to India is H.E. Mr. Philippe Welti.
He is also accredited to Nepal and Bhutan. There
is a Consulate General in Mumbai, which is cur-
rently headed by Mr. Peter Specker. Three Hon-
orary Consuls are promoting relations between
India and Switzerland in Kolkata, Bangalore and
Chennai.
India opened a mission in Switzerland in 1948,
which was elevated to an embassy in 1954. Since
1957 there has been a residing Ambassador in
Bern. India maintains a General Consulate in
Geneva and is represented by an Honorary Con-
sul in Zurich.
Economic Relations: Switzerland and India con-
tinue to be natural partners constantly working
together to strengthen their relationship in vari-
ous fields. In the recent years, economic relations
between the two countries have been hoisted to a
higher level of importance. This is reflected in the
pace at which our total bilateral trade has increased
from Swiss Francs 1.16 billion in 2002 to Swiss
Francs 2.62 billion in 2006, reflecting an increase
of 125 per cent in four years. This positive trend
in the last years is set to continue: In the first
eleven months of 2007, Swiss exports to India have
gone up by 30 per cent whilst Indian exports to
Switzerland have increased by 25 per cent, as com-
pared to the same period of the previous year.
In terms of foreign direct investments, Switzer-
land has remained amongst the top 10 foreign in-
vestors in India. About 150 Swiss companies have
formed joint ventures or subsidiaries, and many
more have representatives or agents in India. The
Swiss technology-driven companies, including
small and medium businesses, play a major role in
the trade and investment flows to India. As more
and more Indian companies are now venturing
abroad, Switzerland is offering many attractive
advantages as a business and investment location,
Copyright © 2009 | WWW.UPSCPORTAL.COM
especially for those Indian companies which
would like to cover their European business ac-
tivities from within Switzerland.
Our two countries have indeed a lot to offer to
each other and to gain in developing cooperation
in high-tech and knowledge-based industries. In
fact, both sides are already trying to bring more
vibrancy to the relationship by adopting focused
approaches, and initiatives have already been
taken in sectors such as biotechnology, textile
machinery and railways.
The Swiss Business Hub India (SBHI) which is part
of Osec Business Network Switzerland and which
is located in the Consulate General in Mumbai and
the Swiss Embassy in New Delhi offers a wide
range of services to assist small and medium-sized
enterprises (SMEs) from Switzerland and
Liechtenstein in their efforts to penetrate the In-
dian market.
The Swiss-Indian Chamber of Commerce (SICC)
is a key actor in promoting Swiss-Indian bilateral
trade and investment. SICC is a bi-national, non-
profit association with over 320 Swiss and Indian
members. It has offices in Zurich, Delhi, Banga-
lore, Mumbai and Chennai. The Chamber provides
members in Switzerland and India access to first-
hand information and expertise thanks to the res-
ervoir of know-how offered by its board and ex-
tensive partner network in both countries.
Recent years have also seen exchange of high-level
visits, and intensification of the dialogue between
the two governments to ensure that together they
can explore new ways and means to further
strengthen the trade and investment ties. Nota-
bly, India has been identified as a country of high
importance in the framework of Switzerland's
Foreign Economic Strategy. The EFTA countries
(Iceland, Liechtenstein, Norway and Switzerland)
and India will soon launch negotiations for a
broad-based agreement on trade and investment.
The Indo-Swiss joint economic commission meet-
ing that used to be held every four years will now
be held every year.
6
 Section -1 (Article : India-Switzerland Bilateral Relation)
The instruments mentioned above and our bilat-
eral agreements on the Double Taxation Avoid-
ance, Promotion and Protection of Investments
and an MOU on Intellectual Property Rights, will
ensure that an increasing number of Swiss and
Indian companies will find a shared interest in
doing business together. The future looks very
bright, and both sides are continuing their efforts
to deepen and widen the bilateral trade and eco-
nomic ties.
Cultural Connections
Pro Helvetia - the Swiss Arts Council: Pro
Helvetia New Delhi initiates, supports and pre-
sents projects that reflect the multicultural char-
acter of Switzerland and India. Pro Helvetia aims
to provide opportunities to art practitioners for
mutual enrichment and exchange in arts and cul-
ture. It supports Swiss artists seeking dialogue with
Indian artists in an effort to forge closer ties. The
focus is on quality and originality, on mutuality
and respect, to ensure that both sides benefit from
the exchange.
The liaison office in New Delhi is the Swiss Arts
Council's first office in Asia. Its aim is to coordi-
nate Pro Helvetia's activities in the South Asia
region starting with India. It supports artistic and
cultural collaboration between India and Switzer-
land, and also promotes Swiss ideas and arts prac-
tices among Indian audiences.Contemporary mu-
sic, theatre, design, dance, literature, photogra-
phy and new media are the areas of focus.
Bollywood in Switzerland: The love story be-
tween Switzerland and the Indian film industry
dates way back to the mid-sixties, when Rajkapoor
placed his cameras on Swiss soil for "Sangam", also
"Evening in Paris" followed by more recent hits
like "Chandni", "Darr", "Dilwale Dulhaniya Le
Jayaenge". Switzerland as a country offers white
winters, colourful springs, sunny summers and
golden autumn. Switzerland permits to shoot in
public places, there is almost zero crime, and gen-
erous and helping people all around which gives
a peaceful, hassle-free mindset to work. The first
Copyright © 2009 | WWW.UPSCPORTAL.COM
"Swiss Filmfare Award 2001" was announced by
the Consulate General of Switzerland where the
Swiss Hollywood celebrity Ms. Ursula Andress
presented the award to Mr. Yash Chopra. In the
following year, the "Swiss Filmfare Award 2002"
was presented to Shah Rukh Khan, this time by
Geraldine Chaplin, who grew up in Switzerland.
Development Cooperation
The international community is impressed by its
economic and nuclear strength, while others em-
phasize the dark facets of this country and con-
demn the poverty and discrimination endured by
many of its citizens, in particular minorities and
untouchables (Dalits). Further sizeable challenges
facing the government and people of India are a
low job-creation rate, poor-quality public services
and lack of access to them, as well as discrimina-
tion against women.
Figures reveal that India has the largest number
of poor people in the world. Even today, 350 mil-
lion Indians live on less than 1 USD a day, 47% of
children suffer from malnutrition and in some
States, such as Punjab, the proportion of women
to men is a mere 793/1000.
This has been the background to Swiss develop-
ment cooperation in India since 1961, aimed at
helping to reduce poverty and contribute to sus-
tainable, just rural development. In addition to the
SDC, the State Secretariat for Economic Affairs
(SECO) as well as around 60 Swiss non-govern-
mental organizations (some of them with SDC
support) are active in India.
In 2006, the SDC started shifting the emphasis of
its development cooperation programme with In-
dia towards a new type of collaboration known as
a Partnership Program. This new program, which
is much more modest in financial terms than the
current program, has different procedures and
thematic priorities, will become operational in
2010. Between 2007 and 2009, the programme will
be making the transition from the traditional co-
operation program, in effect since 1961, to the new
Partnership Program.
7
Section -1 (Article : India-Switzerland Bilateral Relation)
Bilateral Agreements
» The Treaty of Friendship and Establishment of
14th August 1948, which came into force on 5th
May 1948.
» Indo Swiss Agreement on Technical and Scien-
tific Co-operation signed on 27th September 1966.
» The Exchange of Letters on 20th February 1989
between Switzerland and India concerning assis-
tance in criminal matters, which came into force
on 20th February 1989.
» The Agreement for the Avoidance of Double
Taxation between the Swiss Confederation and the
Republic of India with respect to income taxes,
which came into force on 29th December 1994.
» The Agreement on Indo-Swiss Collaboration
in Biotechnology for 5 years was signed on 13th
September 1999.
» The Agreement for the Promotion and Protec-
tion of Investments between the Swiss Confed-
eration and the Republic of India, which came into
force on 16th February 2000.
» Indo-Swiss Agreement relating to Co-operation
in Air Services signed on 2nd May 2001.
» The Agreement on Co-operation in the fields
of Science and Technology between the Swiss Fed-
eral Council and the Government of the Republic
of India signed on 10th November 2003.
» The Grant Agreement between the State Sec-
retariat for Economic Affairs and the International
Competence Center for Organic Agriculture in
India signed on 3rd February 2005.
» A Memorandum of Understanding between the
Ministry of Commerce and Industry of India and
the Federal Department of Economic Affairs of
Switzerland on intellectual property signed on 7th
August 2007.
Copyright © 2009 | WWW.UPSCPORTAL.COM
2009-Year of Science and Education of Swit-
zerland in India: After successfully completing
the celebration of 60 years of the
Friendship Treaty between India and Switzerland
in 2008, the celebration of this great friendship is
being carried forwards in the year 2009, under the
theme of Science and Education.The first bi-
lateral treaty in the field of science and technol-
ogy-the Indo-Swiss Agreement on Technical and
Scientific Cooperation was signed in 1966. This
was followed by a number of other bi-lateral
treaties in this field. The appointment of a
Counsellor for Science and Technology at the
Embassy and an Executive Director, swissnex,
for India, emphasized the commitment towards
strengthening ties between both countries and
especially in the field of S&T. The year 2009 has
been commenced with various projects, planned
and finalized, under the theme of science and edu-
cation with the objective of expanding the hori-
zons of synergies between both countries.
Switzerland : Fact Sheet
Background: The Swiss Confederation was
founded in 1291 as a defensive alliance among
three cantons. In succeeding years, other locali-
ties joined the original three. The Swiss Confed-
eration secured its independence from the Holy
Roman Empire in 1499. Switzerland’s sovreignty
and neutrality have long been honored by the
major European powers, and the country was not
involved in either of the two World Wars. The
political and economic integration of Europe over
the past half century, as well as Switzerland’s role
in many UN and international organizations, has
strengthened Switzerland’s ties with its neighbors.
However, the country did not officially become a
UN member until 2002. Switzerland remains ac-
tive in many UN and international organizations,
but retains a strong commitment to neutrality.
8
Section -1 (Article : India-Switzerland Bilateral Relation)

» Location : Central Europe, east of France, north of Italy

» Geographic coordinates: 47 00 N, 8 00 E
» Area : total: 41,290sqkm
» Land : 39,770 sq km
» Water : 1,520 sq km
» Natural resources : hydropower potential, timber, salt
» Population : 7,489,370 (July 2005 est.)
» Age structure : 0-14 years: 16.6% (male 643,497/female 597,565) 15-64
» Years : 68% (male 2,570,544/female 2,522,365) 65
» Years and Over : 15.4% (male 472,769/female 682,630) (2005 est.)
» Population Growth Rate : 0.49% (2005 est.)
» Ethnic Groups : German 65%, French 18%, Italian 10%, Romansch 1%, other 6%
» Religions : Roman Catholic 41.8%, Protestant 35.3%, Orthodox 1.8%, other Christian 0.4%,
Musim 4.3%, other 1%, unspecified 4.3%, none 11.1% (2000 census)
» Literacy : definition: age 15 and over can read and write
» Total Population : 99% (1980 est.)
» Capital : Bern
» Independence : 1 August 1291 (founding of the Swiss Confederation)
» National Holiday : Founding of the Swiss Confederation, 1 August (1291)

Economy Overview : Switzerland is a peaceful, prosperous, and stable modern market economy with
unemployment, a highly skilled labor force, and a per capita GDP larger than that of the big Western
European economies. The Swiss in recent years have brought their economic practices largely into
conformity with the EU’s to enhance their international competitiveness. Switzerland remains a safe
haven for investors, because it has maintained a degree of bank secrecy and has kept up the franc’s long-
term external value. Reflecting the anemic economic conditions of Europe, GDP growth dropped in
2001 to about 0.8%, to 0.2% in 2002, and to -0.3% in 2003, with a small rise to 1.8% in 2004. Even so,
unemployment has remained at less than half the EU average.

GDP (PPP Basis) : $251.9 billion (2004 est.)

GDP - Real Growth Rate : 1.8% (2004 est.)
GDP - Per Capita : Purchasing power parity - $33,800 (2004 est.)

GDP - Composition -
By Sector:
» Agriculture: 1.5%
» Industry: 34%
» Services: 64.5% (2003 est.)

Copyright © 2009 | WWW.UPSCPORTAL.COM 9

Section -1 (Article : India-Switzerland Bilateral Relation)

» Inflation Rate : 0.9% (2004 est.)

» Industrial Production Growth Rate : 4.7% (2004 est.)
» Exports - Commodities : Machinery, Chemicals, Metals, Watches, Agricultural Products
» Exports - Partners : Germany 20.2%, US 10.5%, France 8.7%, Italy
8.3%, UK 5.1%, Spain 4% (2004)
» Imports - Commodities : machinery, chemicals, vehicles, metals; agricultural products, textiles
» Import - Partners : Germany 32.8%, Italy 11.3%, France 9.9%, US
5.2%, Netherlands 5%, Austria 4.3% (2004)

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 Section -1 (Article : India and United Nations )
India and United Nations
Significant Contributions for Peace and Development
Author is an Expert of Economic and political Issues and working as a Freelance Editor
As a founder member of the
United Nations, India has
been a firm supporter of the
Purposes and Principles of
the United Nations, and has
made significant contribu-
tions to the furtherance and implementation of
these noble aims, and to the evolution and func-
tioning of its various specialized programmes. It
stood at the forefront during the UN's tumultu-
ous years of struggle against colonialism and apart-
heid, its struggle towards global disarmament and
the ending of the arms race, and towards the cre-
ation of a more equitable international economic
order. At the very first session of the UN, India
had raised its voice against colonialism and apart-
heid, two issues which have been among the most
significant of the UN's successes in the last half
century. India exulted in the UN's triumph, and
saw in the UN's victory, a vindication of the policy
relentlessly pursued by it from its initial days at
the world forum.
At the beginning of the 21st century, new chal-
lenges are before us. Freed from the shackles of
the Cold War, the UN stands poised to grapple
with the changes which the world has witnessed
over the years. Today's challenges, be they politi-
cal, economic, social, environmental or demo-
graphic, are global, impinging on the affairs of all
States and making the interdependence of peoples
so much greater. If this demands a greater depen-
dence on the UN as the only democratic, univer-
sal forum for the community of nations, it also
demands a strengthening of the UN itself and its
revitalization. The ongoing reform process is pri-
marily aimed towards these ends. A revitalized
and strengthened United Nations and a more rep-
resentative Security Council will enable this
unique organisation to face the challenges of the
21st century more effectively.
As the United Nations strives to find solutions to
these issues, India pledges to work, with abiding
Copyright © 2009 | WWW.UPSCPORTAL.COM
By Avadhesh Pandey
faith and hope, towards UN's success, and to as-
sume greater responsibilities that the world com-
munity expects from it.
Indian Contribution: India
is one of the largest contribu-
tors to the core resources of
UNDP and a significant con-
tributor to those of UNFPA
and UNICEF. India is also a major contributor to
the core resources of and the World Food
Programme. India's contribution to these funds is
higher than that of many OECD countries. We
hope that the developed countries will also in-
crease their contributions to untied and apolitical
resources for development.India has contributed
US $ 100,000 to the UNCTAD Trust Fund for the
least Developed countries. It has also been con-
tributing US $ 50,000 per annum to the ITC Glo-
bal Trust Fund since its inception in 1996. It also
makes substantial voluntary contributions to
UNEP, Habitat, UN Drug Control Programme,
UNRWA, UNIFEM UN Volunteers etc.
UN Peacekeeping: over and over again, India has
risked the lives of its soldiers in peacekeeping ef-
forts of the United Nations, not for any strategic
gain, but in the service of an ideal. India's ideal
was, and remains, strengthening the world body,
and international peace and security.
Indian troops have taken part in some of the most
difficult operations, and have suffered casualties
in the service of the UN. Professional excellence
of the Indian troops has won universal admira-
tion. India has taken part in the UN peacekeeping
operations in four continents. Its most significant
contribution has been to peace and stability in
Africa and Asia. It has demonstrated its unique
capacity of sustaining large troops commitments
over prolonged periods. Presently, India is ranked
as one of the largest troop contributors to the UN.
India has also offered one brigade of troops to the
12
 Section -1 (Article : India and United Nations )
UN Standby Arrangements. Over 55,000 Indian
Military and Police personnel have served under
the UN flag in 35 UN peace keeping operations in
all the continents of the globe.
India provided a paramedical unit to facilitate
withdrawal of the sick at wounded in Korea. Af-
ter the ceasefire, India became the Chairman of
the Neutral Nations Repatriation Commission.
One brigade group of the Indian Army partici-
pated in the operation in Korea, authorized by the
UN General Assembly through Uniting for Peace
resolution. Indian troops provided guards for the
prisoners of war.
India also contributed to peace in the Middle East.
The United Nations Emergency Force (UNEF) was
created in 1956 following cessation of hostilities
between Egypt and Israel. India provided an in-
fantry battalion, which accounted for the bulk of
the UN force. Over 11 years, from 1956 to 1967,
more than 12,000 Indian troops took part in UNEF.
Pursuant to the Geneva Accord, an International
Control Commission (ICC) for Indo-China was set
up in 1954. India was the Chairman of the Com-
mission, which implemented the ceasefire agree-
ment between Vietnam, Laos, Cambodia and
France. India provided one infantry battalion and
supporting staff until the ICC was wound up in
1970.
The UN faced one of its worst crises when war
between the government and the secessionist
forces broke out in Congo. The UN operation in
the Congo, ONUC, was unique in many ways.
The operation involved heavy casualties. It was
also the first time that the UN undertook an op-
eration in an intra -State, rather than an inter-
State conflict. The operation upheld the national
unity and territorial integrity of the Congo. The
Indian contingent lost 39 men in action in the
Congo. The performance of the Indian troops was
distinguished by their discipline, self-restraint and
humanitarian concern.
Indian Army provided a Force Commander and
observers for the Observer Mission in Yemen in
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1963-64 (UNYOM). India also participated in the
UN operation in Cyprus (UNFICYP). India pro-
vided three Force Commanders to UNFICYP,
Gen. K.S. Thimmaya, Lt. Gen. P.S. Gyani and
Lt. Gen. Dewan Prem Chand.
The UN set up a Military Observer Group to moni-
tor the situation on Iran-Iraq border. India pro-
vided military observers during the period 1988-
90.
Following the end of the Gulf War, the UN estab-
lished the UN Iraq-Kuwait Observer Mission
(UNIKOM). Indian observers continue to partici-
pate in the operation.
UN operation in Namibia is considered one of the
success stories of the United Nations. Lt. Gen.
Prem Chand of India was the Force Commander.
Indian military observers in Namibia were respon-
sible for the smooth withdrawal of foreign troops,
elections and subsequent handing over of the au-
thority to the government.
UN established the ONUMOZ to restore peace and
conduct elections in Mozambique. India provided
a large contingent of staff officers, military ob-
servers, independent headquarters company, and
engineering and logistics company. The opera-
tion has ended successfully.
In recent times, one of the biggest peace keeping
operations which was completed successfully was
the UN operation in Cambodia. India provided
an infantry battalion, military observers and a field
ambulance unit.
India has also regularly sent military observers to
various UN operations. This includes ONUCA
(Central America) in 1990-92, ONUSAL (El Sal-
vador) in 1991 and UNOMIL (Liberia) in 1994.
The UN Operation in Somalia is considered one
of the most difficult and challenging operations
the UN has ever attempted. Indian naval ships
and personnel were involved in patrolling duties
off the Somali coast, in humanitarian assistance
13
Section -1 (Article : India and United Nations )
on shore, and also in the transportation of men
and material for the United Nations. The
UNOSOM II operation involved peace enforce-
ment under Chapter VII. The objective was hu-
manitarian relief. The Indian contingent success-
fully combined the often conflicting roles of co-
ercive disarmament and humanitarian relief to the
civilian population. With stand-alone capacity,
the Indian brigade had operational responsibili-
ties for one-third of Somalia viz. 1,73,000 sq. km
area of responsibility, the largest ever held by any
contingent. In spite of such a large areas of op-
erations, there were minimum civilian casualties
in the area of responsibility of the Indian contin-
gent.
The Indian contingent dug a large number of wells,
constructed schools and mosques, and ran mobile
dispensaries and relief camps, which provided
veterinary care, and medical and humanitarian
relief to a large number of Somalis and their live-
stock. In spite of suffering casualties the Indian
contingent exercised utmost restraint in firing in
self defence. It also organized and carried out re-
habilitation and resettlement of thousands of refu-
gees and helped to repatriate them to their homes.
The Indian contingent played a vital role in re-
viving the political process by organizing recon-
ciliation meetings. The last remaining units of the
Indian contingent were repatriated from Somalia
on board Indian naval ships from Kismayo port.
India demonstrated its capacity to provide an in-
tegrated force, comprising land and naval forces
as well as air support.
India provided a contingent comprising one in-
fantry battalion and support elements to the UN
assistance mission in Rwanda to help ensure se-
curity for the refugees, and to create conditions
for free and fair elections. After successful comple-
tion of the assignment, the Indian contingent was
repatriated in April 1996.
The Indian army has participated in the succes-
sive phases of the UN mission in Angola since
1989. The Indian contingent comprised one in-
fantry battalion group, one engineer company,
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staff officers and military observers. The contin-
gent has made a sizeable contribution towards
construction of quartering camps. The Indian
contingent was also involved in rebuilding bridges
over the Conga, Rio Quisaju, Rio Mugige and Rio
N'hia Rivers. One high risk task was the demining
of the main arterial road connecting Lobito and
Huambo and repairing a 60 mile stretch of the
road. The Indian contingent has also built a 3,300
feet airstrip at Londuimbali. The Deputy Force
Commander was an Indian army officer. India also
participated in the UN Observer Mission in Angola
(MONUA), which succeeded UNAVEM III.
The Chief Military Observer of the UN Observer
Mission in Sierra Leone (UNOMSIL) was also an
Indian army officer. India provided a medical unit
and civilian police personnel to UNOMSIL.
After the upgradation of the UN Mission in Sierra
Leone in November-December 1999, India pro-
vided two infantry battalion groups, a quick reac-
tion company, a field engineering company, a level
III medical facility, a special forces company, an
artillery battery, transport and attack helicopters
and the backbone of the force headquarters in
Freetown. Maj. Gen. V.K.Jetley was the first UN
Force Commander in Sierra Leone.
India has also provided an infantry battalion to
the UN Interim Force in Lebanon (UNIFIL). The
Force Commander of UNIFIL is Maj.Gen. L.M.
Tewari.
India is also currently participating in the UN
Mission in Ethiopia and Eritrea (UNMEE) with
an infantry battalion, a Force Reserve Company
and a Field Engineer Construction Company.
Recent peacekeeping operations have tended to
be multi-dimensional, and include police moni-
tors and election observers. India has contributed
police personnel and election observers to the UN
peacekeeping operations in Cambodia,
Mozambique and Angola. India provided 123
police personnel to UN mission in Haiti (Phase
II). India has also provided police monitors for
14
Section -1 (Article : India and United Nations )
the UN International Police Task Force in Bosnia
and Herzegovina, Sierra Leone (UNOMSIL),
Western Sahara (MINURSO) and Kosovo
(UNMIK). In addition, two companies of CRPF
have deployed in UNMIK as Special Police units.
The Police Commissioner of MINURSO is an In-
dian Police Officer, Mr. O.P. Rathor.
India sent Lt. Gen. Satish Nambiar, as the Force
Commander of UNPROFOR in former Yugosla-
via in 1992-93.
India has also provided senior staff to assist the
UN Secretary-General at the UN Headquarters.
Major Gen. I. J. Rikhye served as Military Advi-
sor to the UN Secretary General from 1960 to 1969.
India also hosted a UN Regional Training Work-
shop for Peacekeeping Operations in New Delhi
during January 20-26, 1996 in which 17 countries
of the Asia-Pacific region participated. Mr. Kofi
Annan, the then Under Secretary General for
Peacekeeping visited India in this connection.
India also held an International Seminar on UN
Peacekeeping in March 1999 in which over 70
countries participated. The United Services In-
stitution (USI) of India hosted another seminar in
New Delhi in September 2000 in collaboration
with the Swedish National Defence College. A
Centre for UN Peacekeeping (CUNPK) was set up
under the aegis of USI in New Delhi in 2000. UN
Secretary General Kofi Annan visited the Centre
in March 2001 during his visit to India.
India has considerable experience in demining
activities and has made significant contributions
to the de-mining work in various missions in
Rwanda, Mozambique, Somalia, Angola and Cam-
bodia. Experienced Indian Army Engineers have
been employed for training of selected personnel
from the host countries to execute mine clearance
programmes as also to generate awareness of the
problem among the local people. Indian Army
has also undertaken mine clearance projects in
support of repatriation and rehabilitation
programmes of the UNHCR.
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India has also provided opportunities for training
to military officers from different countries. In-
dia has, at present, army training teams in six coun-
tries: Seychelles, Laos, Mauritius, Botswana, Zam-
bia and Bhutan. India has also offered diverse
courses to service personnel at various military
training institutions across the country. This in-
cludes officers from Bangladesh, Bhutan, France,
Germany, Japan, Jordan, Kazakastan, Kenya, Ko-
rea, Laos, Malaysia, Maldives, Mauritius,
Myanmar, Namibia, Nepal, Nigeria, Oman, Saudi
Arabia, Singapore, South Africa, Sri Lanka, Sudan,
Tanzania, Thailand, UAE, UK, USA, Vietnam,
Zambia and Zimbabwe. Cadets from countries
such as Maldives, Palestine, Bhutan, Nepal, Sri
Lanka and also many African States receive pre-
commission training at the National Defence
Academy, Khadakvasla and the Indian Military
Academy, Dehradun.
Over 100 Indian soldiers and officers have sacri-
ficed their lives while serving in UN peacekeep-
ing operations.
Disarmament: Since independence, India has con-
sistently pursued the objective of global disarma-
ment based on the principles of universality, non-
discrimination and effective compliance. Given the
horrific destructive capacity of nuclear weapons,
India has always believed that a world free of
nuclear weapons would enhance both global se-
curity and India's own national security. Thus
India has always advocated that the highest pri-
ority be given to nuclear disarmament as a first
step towards general and complete disarmament.
As early as 1948, India called for limiting the use
of atomic energy for peaceful purposes only, and
the elimination of atomic weapons from national
armaments. India was the first country to call to
an end to all nuclear testing in 1954. This was fol-
lowed up in subsequent decades by many other
initiatives, for example, on the Partial Test Ban
Treaty, and the call for international negotiations
on nuclear non-proliferation. In 1978, India pro-
posed negotiations for an international conven-
tion that would prohibit the use or threat of use
15
Section -1 (Article : India and United Nations )
of nuclear weapons. This was followed by another
initiative in 1982 calling for a "nuclear freeze" -
i.e. prohibition on the production of fissile mate-
rial for weapons, on production of nuclear weap-
ons, and related delivery systems. At the special
sessions of the United Nations General Assembly
on disarmament, India put forward a number of
serious proposals including the 1988 Comprehen-
sive Plan for total elimination of weapons of mass
destruction in a phased manner. It was a matter
of regret that the proposals made by India along
with several other countries did not receive a posi-
tive response and instead, a limited and distorted
non-proliferation agenda, meant above all to per-
petuate nuclear weapons was shaped.
India was compelled by considerations of national
security to establish and adopt a policy of keeping
its nuclear option open while it continued to work
for global nuclear disarmament. India's nuclear
capability was demonstrated in 1974. India exer-
cised an unparalleled restraint in not weaponising
its nuclear capability. It is relevant to recall, that
during this period, when we voluntarily and to-
tally desisted from testing, over 35,000 nuclear
weapons were developed through a series of tests
by states possessing nuclear weapons. This has
happened even as Article VI of the Non-Prolif-
eration Treaty committed the Nuclear Weapons
States, party to the NPT, to take steps in good faith
for nuclear disarmament. India was obliged to
stand apart on the CTBT in 1996 after having been
actively engaged in the negotiations for two and a
half years precisely because the issues of non-pro-
liferation, global disarmament and India's concerns
about her security and strategic autonomy were
ignored.
India's continued commitment to nuclear disar-
mament and non-proliferation is clear from the
voluntary measures announced by India after un-
dertaking a limited series of underground nuclear
tests last year. India remains committed to con-
verting its voluntary moratorium into a de jure
obligation accordance with our long held positions
disarmament, and in response to the desire of the
international community that the CTBT should
Copyright © 2009 | WWW.UPSCPORTAL.COM
come into effect in September 1999. India has
declared that it will maintain minimum credible
nuclear deterrent and will not engage in an arms
race. India has declared a no-first-use doctrine.
We are willing to strengthen this commitment
by undertaking bilateral agreements as well as by
engaging in discussions for a global no-first-use
agreement. India believes that a global no-first-
use agreement would be the first step towards the
delegitimization of nuclear weapons. India remains
the only state possessing nuclear weapons to un-
ambiguously call for a Nuclear Weapons Conven-
tion to ban and eliminate nuclear weapons just as
the Biological Weapons Convention (BWC) and
the Chemical Weapons Convention (CWC) have
banned the other two categories of weapons of
destruction.
Nuclear Disarmament and Nonproliferation: In
1996, India, along with the members of the Group
of 21 countries, put forward proposal, submitted
to the Conference on Disarmament (CD), of a
Programme of Action calling for a phased elimi-
nation of nuclear weapons (1996-2020). India has
unambiguously indicated its commitment the es-
tablishment of an ad hoc committee in the Con-
ference on Disarmament in Geneva to negotiate
global nuclear disarmament. India is also the only
state with nuclear weapons, which responded
positively to certain aspects of the 8-Nation ini-
tiative on disarmament, entitled "Towards a
Nuclear Weapon Free World", put forward in June
1998 by Brazil, Egypt, Ireland, Mexico, New
Zealand, South Africa and Sweden.
At the NAM Summit in Durban, at India's initia-
tive, NAM agreed that an international confer-
ence be held, preferably in 1999, with the objec-
tive of arriving at an agreement, before the end of
this millennium, on a phased programme for the
complete elimination of all nuclear weapons. The
call for the elimination of nuclear weapons was
reiterated once again by Prime Minister in his
address to the UN General Assembly in 1998.
India remains committed to cooperating with like
minded states to attain this goal. India also intro-
duced a resolution in the 53rd General Assembly
16
Section -1 (Article : India and United Nations )
calling for reducing nuclear danger by de-alerting
nuclear weapons.
India is fully committed to the goal of curbing
nuclear proliferation in all its aspects. It was at
India's initiative that the item "non-proliferation
of nuclear weapons" was included in the agenda
of the UN in 1964. In 1965, India along with other
like-minded countries submitted a joint memo-
randum towards achieving a solution to the prob-
lem of proliferation; it included the conclusion of
an international nuclear non-proliferation treaty.
However, the NPT as it emerged from these ne-
gotiations, was flawed and discriminatory, seek-
ing to create a permanent division between the
nuclear ‘haves' and 'have-nots'. India believes that
the indefinite and unconditional extension of the
NPT in May 1995 has only served to legitimize
nuclear arsenals of the NPT states possessing
nuclear weapons into perpetuity, thus posing a
major obstacle to the goal of global nuclear disar-
mament. The NPT Preparatory Commission
(PrepCom) meetings held in 1997 and 1998 have
also clearly demonstrated the reluctance on the
part of the states possessing nuclear weapons to
take steps towards a speedy process of global
nuclear disarmament.
India has developed wide-ranging expertise in
nuclear technology and ensured through a strin-
gent and effective system of export controls that
there is no proliferation of these technologies for
weapons purposes. India's record in this matter
is, in fact, better than some of the NPT signato-
ries. At the same time, we are against ad hoc re-
gimes or cartels which restrict high technology
in an arbitrary, unequal and patently discrimina-
tory manner. They need to be universalised, made
transparent and equitable.
Comprehensive Nuclear Test Ban Treaty: India's
commitment to a comprehensive ban on nuclear
testing dates back to 1954 when Jawaharlal Nehru
called for a "standstill agreement" whereby test-
ing of all nuclear weapons was to be immediately
suspended, pending an agreement on their com-
plete prohibition. It was again at India's initiative
Copyright © 2009 | WWW.UPSCPORTAL.COM
that the item "Suspension of Nuclear and Thermo-
Nuclear Tests" was included in the agenda of the
UN in 1959.
During the course of the negotiations in the Con-
ference on Disarmament (CD) in Geneva on the
CTBT, India put forward a number of proposals
consistent with the mandate adopted by the CD
in 1994. These proposals were aimed at ensuring
that the CTBT would be truly comprehensive and
would be part of the step-by-step process of elimi-
nating all nuclear weapons. However, these pro-
posals were regrettably ignored and instead, Ar-
ticle XIV on Entry into Force requiring India to
join the treaty before it became operational was
adopted in violation of basic treaty law. India was
thus forced to declare its opposition to the CTBT
as it emerged.
After concluding a series of tests on May 13, 1998,
India immediately announced a voluntary mora-
torium on further underground nuclear test ex-
plosions. In announcing this moratorium, India
accepted the core obligation of a test ban and also
addressed the general wish of the international
community. India also announced its willingness
to move towards a de jure formalization of the
voluntary undertaking. India is now engaged in
discussions with key interlocutors on a range of
issues, including the CTBT. India is prepared to
bring these discussions to a successful conclusion.
For the successful conclusion of talks, creation of
a positive environment by India's interlocutors is
a necessary ingredient. India expects that other
countries, as indicated in Article XIV of the CTBT,
will adhere to this Treaty without conditions.
Fissile Material Cut-Off Treaty (FMCT): India
supports the ban on production of fissile material
for nuclear weapons purposes. This demand has
been articulated by India in the UN through con-
crete proposals like the Action Plan which it pre-
sented in 1988. India also co-sponsored a UN Gen-
eral Assembly resolution (48/75 L) in 1993, which
called for an early commencement of negotiations
for the prohibition of the production of fissile
material for nuclear weapons or other nuclear ex-
17
Section -1 (Article : India and United Nations )
plosive devices. India has joined the consensus in
the Conference on Disarmament on establishing
an ad hoc committee to negotiate a FMCT. India
believes that this is an integral part of the nuclear
disarmament process. It would also go a long way
in arresting problems of illegal transfers of nuclear
material. India supports efforts for negotiations on
a universal, non-discriminatory and verifiable fis-
sile material cut-off treaty that would prohibit the
future production of fissile material for weapons
purposes but would permit such production for
civilian uses.
Negative Security Assurances (NSAs) and
Nuclear Weapon Free Zones (NWFZs): India has
always maintained that NSAs provide illusory ben-
efits, and that the real security assurance is com-
plete elimination of nuclear weapons, and also that
in the interim, if NSAs are to be given, they should
be provided through an international, comprehen-
sive, legally-binding and irreversible agreement.
Similarly, consideration of security assurances in
the narrow strait-jacket of Nuclear Weapon Free
Zones (NWFZS) cannot do justice to the wide
variety of concerns that emanate from the global
nature of the threat posed by nuclear weapons.
As a responsible state possessing nuclear weap-
ons, India has stated that it does not intend to use
nuclear weapons to commit aggression or for
mounting threats against any country. India re-
spects the sovereign choice exercised by states not
possessing nuclear weapons in establishing
NWFZs on the basis of agreements freely arrived
at among the states of the region concerned. At
the fifth session of the ASEAN Regional Forum
in Manila, India stated that it fully respects the
status of the Nuclear Weapon Free Zone in South
East Asia and is ready to convert this commitment
into a legal obligation. India will remain respon-
sive to the expressed need for commitments to
other nuclear weapon free zones as well.
Chemical Weapons Convention (CWC): Con-
vention has India is an original signatory to the
Chemical Weapons Convention, having signed it
on 14 January 1993, and was among the first 65
countries to have ratified the Treaty. The univer-
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sal and non-discriminatory character of the CWC
are primarily responsible for the large number of
signatories and the equally large numbers of rati-
fications. The implementation of the CWC in-
volves a combination of voluntary declarations and
mandatory verification arrangements aimed at en-
suring compliance in a transparent and universal
manner. A National Authority (NA) has been set
up to oversee implementation of the Convention
in India. As the first Chairperson of the Executive
Council of the Organization for Chemical Weap-
ons (OPCW), India guided the deliberations of the
organization during its crucial first year. Imple-
mentation of all obligations assumed by India to
the Convention and related activities have pro-
ceeded satisfactorily. India believes that the pro-
visions of the Convention require to be imple-
mented in a non-discriminatory manner. National
implementing legislations containing provisions
which undermine the Convention hold out the
prospect of leading to matching responses by other
-states parties thereby leading to an unnecessary
dilution of the spirit and the confidence reposed
in the CWC by a great majority of countries party
to the CWC. Similarly, the existence of technol-
ogy denial regimes such as the Australia Group
remains an aberration when seen against the large
number of ratifications the enjoyed so far.
Biological and Toxin Weapons Convention
(BTWC): India ratified the Biological Weapons
Convention in 1974. India has participated in all
four Review Conferences of the Biological and
Toxin Weapons Convention (BTWC) and in the
meetings of the Group of Governmental Experts.
India is currently participating in the negotiations
of the Ad hoc Group of the States Parties of the
BTWC with the aim to strengthen the conven-
tion by a protocol, including possible verification
measures. India maintains that these measures
should be non-discriminatory and avoid any nega-
tive impact on scientific research, international
cooperation and industrial development.
Anti-Personnel Landmines (APLS): India is fully
committed to the eventual elimination of anti-
personnel landmines and achievement of the ob-
jective of a nondiscriminatory and universal ban
18
Section -1 (Article : India and United Nations )
on APLS. A beginning can be made with a ban on
export and transfer of APLS, that would enjoy an
international consensus, and by addressing hu-
manitarian. concerns and legitimate defence re-
quirements of states. India is sensitive to the hu-
manitarian aspects of the landmine crisis and the
need for a strong international response. Aware
that APLs have been used indiscriminately in con-
flicts not of an international nature, India has
called for a ban on their use in all internal con-
flicts. India follows a conscious policy of not ex-
porting APLS. India has also been contributing to
UN demining efforts since the Congo peacekeep-
ing operations in 1963. An officer of the Indian
Army is presently deployed with the UN Mine
Action Centre in Bosnia. India is presently in the
process of ratifying amended Protocol II of the
1980 Inhumane Weapons Convention (CCW),
which deals with anti-personnel landmines. In-
dia stands ready to negotiate a ban on the export
and transfer of landmines in the Conference on
Disarmament.
Transparency in Conventional Weapons Trans-
fers and Small Arms: India is committed to
strengthening the norm of transparency in con-
ventional armaments in general, and greater par-
ticipation in the UN Register of Conventional
Arms in particular. India has reported to the Reg-
ister annually since 1994. The issue of prolifera-
tion of, and illicit trafficking in, small arms has
moved up the agenda of the international com-
munity on disarmament issues. India is acutely
aware of this problem and intends to participate
actively in international search for effective solu-
tions, including a proposed international confer-
ence to discuss the issue of illicit trafficking in
small arms in all its aspects.
Environment: India is among the top 12 mega
centres of the world in terms of its genetic diver-
sity. It has a wide range of geoclimatic conditions
and a rich and varied flora and fauna, as well as a
long standing tradition of environmental sensi-
bility and concern that goes to the very roots of
its millennia-old culture. Harmony with nature
has been an integral part of the ethos of Indian
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society.The then Prime Minister of India, Mrs.
Indira Gandhi, was the sole foreign head of state
or government to participate in the United Na-
tions Conference on Human Environment held in
Stockholm in June 1972, at a time when interna-
tional concern over environmental issues was yet
to fully crystallise. At that session she emphasised
that the environmental concerns cannot be viewed
in isolation from developmental imperatives.
India considers environmental and developmen-
tal issues to be closely intertwined. It fully sup-
ports international cooperation in the field of the
environment so as to effectively deal with global
environmental problems. It is committed to a glo-
bal partnership that simultaneously seeks to pro-
tect the environment while addressing the devel-
opment requirements and aspirations of the de-
veloping countries.
India has consistently played an important role in
the evolution of an international consensus to
tackle major global environmental issues. It was
an active participant in the process leading up to
and culminating in the convening of the United
Nations Conference on Environment and Devel-
opment in Rio de Janeiro in June, 1992. The Rio
Conference affirmed the importance of sustainable
development, which encompasses both develop-
ment and environmental protection. Agenda 21,
adopted by the Rio meet, provides a blueprint on
how to make development socially, economically
sustainable. Despite constraints, India has initiated
several activities and programmes in the context
of Agenda 21, which are consistent with its na-
tional goals and objectives. India is a party to nu-
merous multilateral environmental conventions
which contribute to the protection of the envi-
ronment and to sustainable development. These
include the Framework Convention on Climate
Change, the Convention on Biological Diversity,
the Vienna Convention on the Protection of the
Ozone Layer, the Montreal Protocol on Substances
that Deplete the Ozone Layer, the Ramsar Con-
vention on Wetlands of International importance,
the Basel Convention on the Transboundary Move-
ment of Hazardous Wastes, the Convention on
19
Section -1 (Article : India and United Nations )
Combating Desertification, and the Convention
on the International Trade in Endangered Species
of Wild Flora and2 Fauna. India is also an active
member of the Commission on Sustainable De-
velopment that was set up after the Rio Confer-
ence to monitor the implementation of Agenda
21.
India is among the leading countries in the van-
guard of efforts directed at environmental protec-
tion. It has in position an elaborate framework of
environmental legislation for the conservation of
forests, preservation of wildlife and the control of
water, air and soil pollution. It has a network of
protected areas converting 84 national parks and
447 wildlife sanctuaries. India has also introduced
the Eco-Mark label for environment-friendly
products, requires the undertaking of Environ-
ment Impact Assessment before commencing
major industrial projects, has in 2position func-
tioning Environmental Tribunals as well as an ef-
fective system of Environmental Audit.
At the Special Session of the UN General Assem-
bly held in June 1997 to review the progress made
five years after the Rio meet, India expressed its
disappointment over the lack of fulfillment at the
international level of commitments voluntarily
undertaken by the industrialised countries at Rio.
On its part, India reiterated its commitment to
the global partnership established at Rio de
Janeiro.
Human Rights: In India the concept of human
rights emphasizing pivotal position of individual
citizen stretches back to the first millennia. Hu-
man rights have been an inherent component of
various philosophies that have flourished in In-
dia. The leaders of the Indian National Movement
stressed the primacy of human rights in the fu-
ture constitutional set-up. The Indian Constitu-
tion, as a result, stands as one of the most compre-
hensive and self-contained documents on human
rights.
India took active part in drafting of the Universal
Declaration on Human Rights. Dr (Mrs). Hansa
Mehta, a Gandhian political activist and social
Copyright © 2009 | WWW.UPSCPORTAL.COM
worker who led the Indian delegation, had made
important contributions in drafting of the Decla-
ration, especially highlighting the need for reflect-
ing gender equality. India is fully committed to
the rights proclaimed in the Universal Declara-
tion. India is a signatory to the six core human
rights covenants, and also the two Optional Pro-
tocols to the Convention of the Rights of the Child.
India has been advocating a holistic and integrated
approach that gives equal emphasis to all human
rights, based on their inter-dependence, inter-re-
latedness, indivisibility and universality, and re-
inforces the inter-relationship between democ-
racy, development, human rights and international
cooperation for development.
India had played an active role as member of the
Commission on Human Rights (CHR) since its
creation in 1947. India was elected in 2006 as a
member of the newly established Human Rights
Council (HRC), which replaced the CHR, by se-
curing the highest number of votes among the
contested seats. India was re-elected again as a
member in 2007 by securing the highest votes by
polling 185 votes out of 190 votes cast. India at-
taches great importance to the Human Rights
Council and is committed to make the Council a
strong, effective and efficient body capable of pro-
moting and protecting human rights and funda-
mental freedoms for all.
The National Commission for Human Rights
(NHRC), established in India in 1993, serves as an
independent and autonomous body for protection
of human rights in the country. The Commis-
sion is now very much part of the life of the na-
tion and, increasingly, of consequence to the qual-
ity of its governance. Awareness of the rights guar-
anteed by the Constitution, and included in the
international instruments to which India is a State
party, has increased dramatically in the country.
The enactment by the Indian Parliament in Au-
gust, 2005 of a Rural Employment Guarantee Act,
providing for 100 days of assured employment in
a year to every rural household, is a step in the
20
Section -1 (Article : India and United Nations )
direction of ensuring justiciability of economic and
social rights. The Right to Information Act passed
by the Indian Parliament in 2005 is a testimony
to India’s commitment for providing access to in-
formation to the citizens.
India is fully committed to the implementation of
the Beijing Platform for Action. India adopted a
rights-based approach to promoting equality of
women and evolved a multifaceted strategy aimed
at their empowerment through awareness-raising,
political participation, economic independence,
education, health, and legal standards. The ob-
jective is to enable women to overcome disadvan-
tages that they face and to enable them to play an
effective and equal role in society. Among the
most important of these measures include reser-
vation of one-third seats in local and village-level
bodies, and formulation of National Policy for the
Empowerment of Women in 2001, provision for
immediate and emergency relief to women in situ-
ations of domestic violence, amendment to the
Hindu Succession Act to give daughters and wid-
ows equal right in ancestral property including
agricultural land, dowry prohibition and preven-
tion of immoral trafficking.
India adopted a National Charter for Children in
2003 to reiterate its commitment to the cause of
the child in order to see that no child remains
hungry, illiterate or sick. The right to free and
compulsory education for all children, in the age
group of 6 to 14 years, has been made a funda-
mental right in 2002 by an amendment to the
Constitution. India has a proactive stand on the
issue of child protection and in creating a protec-
tive environment for children. Towards this end,
India has undertaken several initiatives, notably a
National Commission for Protection of Child’s
Rights has been set up in February 2007 to pro-
vide speedy trial of offence against children or of
violation of child’s rights, thus ensuring effective
implementation of laws and programmes relating
to children. Eradication of child labour in all oc-
cupations and industries is one of the most im-
portant priorities of the Government of India. The
National Human Rights Commission and the civil
Copyright © 2009 | WWW.UPSCPORTAL.COM
society, including non-Governmental
organisations, have been supplementing
Government’s efforts in eradication of child labour
in the country.
The rights of vulnerable groups have received spe-
cial mention in India ever since independence and
the Constitution itself contains extensive provi-
sions for the promotion and protection of the
rights of all minorities, including some special
groups of people unique to Indian society known
as Scheduled Castes and Scheduled Tribes. These
measures have been further strengthened through
a recent amendment of the Constitution granting
the Scheduled Tribes local self-government and a
high degree of autonomy in the management of
their day-to-day affairs, control over natural re-
sources, and other development activities in the
areas where they live. Independent institutions
such as National Commission for the Scheduled
Castes and Scheduled Tribes and National Com-
mission for Minorities are effectively promoting
and protecting the rights of these vulnerable
groups. Further, National Minorities Develop-
ment and Financial Corporation and National
Backward Classes Finance and Development Cor-
poration (NBCFDC) have been set up to promote
economic and development activities of minori-
ties and Other Backward Classes.
India became seventh country to ratify the UN
Convention on the Rights of Persons with Dis-
abilities. India had participated actively in the
deliberations of the Ad Hoc Committee of the UN
General Assembly on finalisation of a Convention
on the Rights of the Persons with Disabilities. The
enactment in India of the Persons with Disabili-
ties (Equal Opportunities, Protection of Rights and
Full Participation) Act in 1995 marked a signifi-
cant step towards providing equal opportunities
for people with disabilities and their full partici-
pation in the nation building. The Government
had also set up National Trust for Welfare of Per-
sons with Autism, Cerebral Palsy, Mental Retar-
dation and Multiple Disabilities in 2001 and a
National Handicapped Finance and Development
Corporation in 1997 to promote economic devel-
21
Section -1 (Article : India and United Nations )
opment activities, including self-employment
programmes, for the benefit of persons with dis-
abilities.
Struggle Against Colonialism: The purposes of
the UN Charter include promoting and encour-
aging respect for human rights and for fundamen-
tal freedoms for all without distinction as to race,
sex, language, or religion. This was by no means
an easy quest. In 1945, when the UN Charter was
signed, more than 750 million people lived in colo-
nies. A half century later, the number is only about
1.3 million. India was in the forefront of the
struggle against colonialism, apartheid and racial
discrimination - a struggle that has transformed
the lives of millions of people in Africa and Asia.
The Charter provisions on Non-Self Governing
Territories were given a new thrust when the UN
adopted the landmark 1960 Declaration on the
Granting of Independence to Colonial Countries
and Peoples. India was a co-sponsor of the Decla-
ration. The Declaration solemnly proclaimed the
necessity of bringing to a speedy and unconditional
end, colonialism in all its forms and manifesta-
tions.
The following year, the Special Committee on the
Implementation of the Declaration on
Decolonization was established to study, investi-
gate and recommend action to bring an end to
colonialism. India was elected the first Chairman
of the Decolonization Committee. As a member
of the Committee of 24, as it came to be called,
India has ceaselessly struggled for an end to colo-
nialism. India also took up the decolonization is-
sue in the Trusteeship Committee, the Special
Committee on Non-self Governing Territories and
the Fourth Committee.
India supported numerous resolutions in the UN
fora on decolonization. India has also raised the
issue in NAM and Commonwealth fora. For com-
ing generations, colonialism may be a part of his-
tory: new challenges of tomorrow have to be faced.
However, it was the struggle against colonialism,
successfully waged in solidarity by the Afro-Asian
Copyright © 2009 | WWW.UPSCPORTAL.COM
countries, that has brought them to a stage where
they can set the goals of economic and social de-
velopment for their societies.
UN Needs Reform
The UN needs reform. On that everyone agrees.
But there is sharp disagreement on what kind of
reform is needed and for what purpose. Again and
again over the years, the UN has been reformed –
on average once every eight years. But the pace
has now quickened and reform projects seem al-
most a constant part of the landscape. Founda-
tions, think tanks and blue ribbon commissions
regularly call for institutional renovation at the
UN. Secretary Generals frequently re-organize
departments and set up new coordinating com-
mittees. NGOs gather to press their reform causes.
Diplomats negotiate. And from Washington come
somber warnings that the UN must "reform or die."
But after the fireworks, the same problems per-
sist – because the shortcomings of the UN are pri-
marily rooted in the dysfunctional global order
and the conflict-prone state system, not in the
UN's institutional arrangements.
Few reformers are willing to admit that the UN's
complex and inefficient machinery results from
deep political disagreements among its members
and between other contending forces in the glo-
bal system. Yet the United States, military super-
power and transnational corporate headquarters,
clearly wants a weak UN with an impossibly small
budget and scarcely any voice in economic mat-
ters. Many other nations, to the contrary, want a
stronger UN and more effective multilateral policy
making. Whose "reform" is to prevail? And how
will any newly-devised UN institutions be paid
for?
UN Reform debates have revealed deep divides
between states and among NGOs and other re-
form advocates. While some seek to strengthen
the UN and improve accountability and efficiency,
there are those who seek reform only on their
terms. The US consistently pushes its own agenda
for change and aims to weaken the UN. Various
22
Section -1 (Article : India and United Nations )

areas of UN Reform, include the Security council, Financing of the UN is an additional source for
The Economic and Social Council(ECOSOC), The debate. As a solution to the constant financial
General Assembly, The Human Rights Council, shortages faced by the organization, many experts
The Peacebuilding Commission, Management have suggested Alternative Financing schemes
Reform, Responsibility to Protect, , and the cre- such as Global Taxes to improve the UN financial
ation of a UN Standing Force. situation and make the organization less depen-
dent on government contributios.
The Millennium+5 reforms, proposed by the Sec-
retary General Kofi Annan in March 2005, were
neither ambitious nor far-reaching. Designed to
please (or at least not to displease) the superpower,
they substantially ignored the most urgent issues
– the UN's financial woes, the unilateralism of the
superpower, the absence of real disarmament, and
the shaky and unjust global economic order. For a
time, it seemed that these modest if flawed re-
forms might nevertheless be adopted. But as the
summit approached, negotiations faltered, due
largely to last-minute, far-reaching demands from
Washington. In the end, the world leaders ap- (IMP) Get UPSCPORTAL , Jobs, Re-
proved an embarrassingly weak document, filled sults, Notification Alerts on Email.
mostly with empty platitudes. It remains to be
seen how the UN will weather this contentious Step-1: Fill Your Email address in form be-
and divisive reform process, and what avenues low. you will get a confirmation email within
remain open for a stronger and more effective 10 min.
multilateral system.
Step-2: Varify your email by clicking on the
Over the years, there have been numerous initia- link in the email. (check Inbox and Spam fold-
tives to reform the UN. These range from sum- ers)
mits of heads of state, to panels of experts, to the
reform efforts by UN Secretary Generals. GPF fol- Step-3: Done! Now you will regular Alerts
lows and critically analyses the actions of these on your email.
UN reform initiatives and monitors subsequent
progress.

NGOs and businesses are new actors within the

United Nations, an organization originally re-
served for states. NGOs are increasingly active in
policy making at the United Nations, though the
relationship between the two remains contentious
at times. Although of increasing importance,
NGOs do not have a formal role at the UN and
have suffered disappointing setbacks due to their
limited access. Transnational corporations on the
other hand have a more controversial relationship
with the UN, as UN and business are gaining a
bigger role, putting the integrity of the UN at
stake.

Copyright © 2009 | WWW.UPSCPORTAL.COM 23

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 Section -1 (Article : Fiji Suspended from Commonwealth)
Fiji Suspended from Commonwealth
Failed to Opening Talks on a Return to Democracy
Author is an Expert of Various Competitive Examinations
The Commonwealth has suspended Fiji after the
Pacific Island nation failed to meet a deadline for
opening talks on a return to de-
mocracy on September 01,
2009.Commonwealth Secretary
General Kamalesh Sharma said it
was with 'deep regret' and 'sor-
row' that the organisation had to
fully suspend Fiji from the
grouping of 53 nations, mostly
former British colonies. Fiji had
already been suspended from Commonwealth
meetings. The tougher sanction means that the
country is not eligible for Commonwealth aid and
will be barred from the Commonwealth Games.
In April, Fiji's president reappointed coup leader
Frank Bainimarama as interim prime minister, less
than two days after a court ruled his 2006 coup
illegal. President Ratu Josefa Iloilo had previously
annulled the 1997 constitution and sacked the
entire judiciary. Bainimarama, who had promised
an election this year, has now ruled it out until
2014. Commonwealth ministers said on July 31
that Fiji would be fully suspended on September 1
unless Fiji's rulers committed to re-activating a
forum set up for political parties to discuss a re-
turn to democracy. They said the dialogue should
lead to a credible election no later than October
2010.
Secretary General Sharma said that, although
Bainimarama had sent him a letter re-affirming
his commitment to the principles of the Common-
wealth, his response did not meet the
Commonwealth's conditions. According to him,
it is hoped that Fiji would take the necessary steps
to restore its full participation in the Common-
wealth. The Pacific Islands Forum suspended Fiji
from the 16-nation grouping in May.
In a statement, the Commonwealth said it had de-
Copyright © 2009 | WWW.UPSCPORTAL.COM
By Sangeeta Gupta
manded that Fiji commit, by 1 September, to re-
joining negotiations with the opposition and to
holding credible elections by
October 2010. Mr Sharma said
that although Cmdr
Bainimarama had reaffirmed
"his commitment to the prin-
ciples of the Commonwealth",
he had not met the terms of the
1 September deadline. He said
Fiji's suspension was therefore
"a step the Commonwealth is now obliged to take,
and one that it takes in sorrow". Fiji has already
been suspended from the regional Pacific Islands
Forum, and some European Union aid to the coun-
try has been put on hold.
Fiji has had a chequered relationship with the
Commonwealth. It was expelled in 1987 after two
military coups, but was readmitted 10 years later
when democracy was restored. It was also sus-
pended in 2000 for 18 months. The only other
country to be fully suspended in the
Commonwealth's history is Nigeria, during the
rule of Gen Sani Abacha in 1995. Nigeria returned
to the Commonwealth after democratic rule was
restored. Pakistan was twice suspended from coun-
cil meetings, and Zimbabwe was on course to be
suspended when President Robert Mugabe pre-
empted the move by walking out himself.
Account of Fiji
Fiji is an island nation in the South Pacific Ocean
east of Vanuatu, west of Tonga and south of
Tuvalu. The country occupies an archipelago of
about 322 islands, of which 106 are permanently
inhabited, and 522 islets. The two major islands,
Viti Levu and Vanua Levu, account for 87% of
the population. Fiji's main island is known as Viti
Levu and it is from this that the name "Fiji" is
25
 Section -1 (Article : Fiji Suspended from Commonwealth)
derived, through the pronunciation of their island
neighbours in Tonga. Pottery excavated from
Fijian towns shows that Fiji was settled before or
around 3500–1000 BC, although the question of
Pacific migration still lingers. It is believed that
the Lapita people or the ancestors of the
Polynesians settled the islands first but not much
is known of what became of them after the
Melanesians arrived; they may have had some in-
fluence on the new culture, and archaeological evi-
dence shows that they would have then moved
on to Tonga, Samoa and Hawai.
The first settlements in Fiji were started by voy-
aging traders and settlers from the west about 3500
years ago. Lapita pottery shards have been found
at numerous excavations around the country. As-
pects of Fijian culture are similar to Melanesian
culture to the western Pacific but have stronger
connection to the older Polynesian cultures such
as those of Samoa and Tonga. Trade between these
three nations long before European contact is quite
obvious with Canoes made from native Fijian trees
found in Tonga and Tongan words being part of
the language of the Lau group of islands. Pots made
in Fiji have been found in Samoa and even the
Marquesas Islands. Across 1000 kilometres from
east to west, Fiji has been a nation of many lan-
guages. Fiji's history was one of settlement but
also of mobility.
Over the centuries, a unique Fijian culture devel-
oped. Constant warfare and cannibalism between
warring tribes was quite rampant and very much
part of everyday life. Fijians today regard those
times as "na gauna ni tevoro" (time of the devil).
The ferocity of the cannibal lifestyle deterred
European sailors from going near Fijian waters,
giving Fiji the name Cannibal Isles, in turn Fiji
was unknown to the rest of the outside world.
The Dutch explorer Abel Tasman visited Fiji in
1643 while looking for the Great Southern Conti-
nent. Europeans settled on the islands perma-
nently beginning in the nineteenth century. The
first European settlers to Fiji were Beachcombers,
missionaries, whalers and those engaged in the
Copyright © 2009 | WWW.UPSCPORTAL.COM
then booming sandalwood and beche-de-mer
trade.
Ratu Seru Epenisa Cakobau was a Fijian chief and
warlord from the island of Bau, off the eastern
coast of Viti Levu, who united part of Fiji's war-
ring tribes under his leadership. He then styled
himself as King of Fiji or Tui Viti and then to
Vunivalu or Protector after the Cession of Fiji to
Great Britain. The British subjugated the islands
as a colony in 1874, and the British brought over
Indian contract labourers to work on the sugar
plantations as the then Governor and also the first
governor of Fiji, Arthur Charles Hamilton-Gor-
don, adopted a policy disallowing the use of na-
tive labour and no interference in their culture
and way of life.
The British granted Fiji independence in 1970.
Democratic rule was interrupted by two military
coups in 1987 because the government was per-
ceived as dominated by the Indo-Fijian (Indian)
community. The second 1987 coup saw the Brit-
ish monarchy and the governor general replaced
by a non-executive President, and the country
changed the long form of its name from Domin-
ion of Fiji to Republic of Fiji (and to Republic of
the Fiji Islands in 1997). The coups and accompa-
nying civil unrest contributed to heavy Indian
emigration; the population loss resulted in eco-
nomic difficulties but ensured that Melanesians
became the majority.
In 1990, the new Constitution institutionalised the
ethnic Fijian domination of the political system.
The group against racial discrimination (GARD)
was formed to oppose the unilaterally imposed
constitution and to restore the 1970 constitution.
Sitiveni Rabuka, the Lieutenant Colonel who car-
ried out the 1987 coup became Prime minister in
1992, following elections held under the new con-
stitution. Three years later, Rabuka established the
Constitutional Review Commission, which in 1997
led to a new Constitution, which was supported
by most leaders of the indigenous Fijian and Indo-
Fijian communities. Fiji is re-admitted to the Com-
monwealth of Nations.
26
 Section -1 (Article : Fiji Suspended from Commonwealth)
The new millennium brought along another coup,
instigated by George Speight, that effectively
toppled the government of Mahendra Chaudhry,
who became Prime Minister following the 1997
constitution. Commodore Frank Bainimarama as-
sumed executive power after the resignation, pos-
sibly forced, of President Mara. Fiji was rocked
by two mutinies at Suva's Queen Elizabeth Bar-
racks, later in 2000 when rebel soldiers went on
the rampage. The High court ordered the rein-
statement of the constitution, and in September
2001, a general election was held to restore de-
mocracy, which was won by interim Prime Min-
ister Laisenia Qarase's Soqosoqo Duavata ni
Lewenivanua party.
In 2005, amid much controversy, the Qarase gov-
ernment proposed a Reconciliation and Unity
Commission, with power to recommend compen-
sation for victims of the 2000 coup, and amnesty
for its perpetrators. However, the military strongly
opposed this bill, especially the army's com-
mander, Frank Bainimarama. He agreed with de-
tractors who said that it was a sham to grant am-
nesty to supporters of the present government
who played roles in the coup. His attack on the
legislation, which continued unremittingly
throughout May and into June and July, further
strained his already tense relationship with the
government. In late November 2006 and early
December 2006, Bainimarama was instrumental
in the 2006 Fijian coup. Bainimarama handed
down a list of demands to Qarase after a bill was
put forward to parliament, part of which would
have offered pardons to participants in the 2000
coup attempt. He gave Qarase an ultimatum date
of 4 December to accede to these demands or to
resign from his post. Qarase adamantly refused to
either concede or resign and on 5 December Presi-
dent, Ratu Josefa Iloilo, was said to have signed a
legal order dissolving Parliament after meeting
with Bainimarama.
In April 2009, the Fiji court of appeal ruled that
the 2006 coup had been illegal. This began the
2009 Fijian constitutional crisis. President Iloilo
Copyright © 2009 | WWW.UPSCPORTAL.COM
abrogated the constitution, removed all office
holders under the Constitution including all judges
and the Governor of the Central Bank. He then
reappointed Bainimarama as Prime Minister un-
der his "New Order" and imposed a "Public Emer-
gency Regulation" limiting internal travel and al-
lowing press censorship.
For a country of its size, Fiji has large armed forces,
and has been a major contributor to UN peace-
keeping missions in various parts of the world. In
addition, a significant number of former military
personnel have served in the lucrative security
sector in Iraq following the 2003 US-led invasion.
Political Condition
Politics of Fiji normally take place in the frame-
work of a parliamentary representative democratic
republic, whereby the Prime Minister of Fiji is
the head of government, the President the head
of state, and of a multi-party system. Executive
power is exercised by the government. Legisla-
tive power is vested in both the government and
the parliament of Fiji. The judiciary is indepen-
dent of the executive and the legislature.Since
independence there have been four coups in Fiji,
two in 1987, one in 2000 and one in late 2006.
The military has been either ruling directly, or
heavily influencing governments since 1987.
2006 Military Takeover: Citing corruption in the
government, Commodore Josaia Voreqe(Frank)
Bainimarama, Commander of the Republic of Fiji
Military Forces, staged a military takeover on De-
cember 5, 2006 against the Prime Minister that
he himself had installed after the 2000 coup. There
had been two military coups in 1987 and one in
2000. The commodore took over the powers of
the presidency and dissolved the parliament, pav-
ing the way for the military to continue the take
over. The coup was the culmination of weeks of
speculation following conflict between the elected
Prime Minister, Laisenia Qarase, and Commodore
Bainimarama. Bainimarama had repeatedly issued
demands and deadlines to the Prime Minister. At
27
 Section -1 (Article : Fiji Suspended from Commonwealth)

particular issue was previously pending legisla-

tion to pardon those involved in the 2000 coup.
Bainimarama named Jona Senilagakali caretaker
Prime Minister. The next week Bainimarama said
he would ask the Great Council of Chiefs to re-
store executive powers to President, Ratu Josefa
Iloilo.
On January 4, 2007, the military announced that
it was restoring executive power to President
Iloilo, who made a broadcast endorsing the ac-
tions of the military. The next day, Iloilo named
Bainimarama as the interim Prime Minister, in-
dicating that the Military was still effectively in
control.
On April 10, 2009 President Iloilo suspended the
constitution of Fiji, dismissed the Court of Appeal
and, in his own words, "appointed himself as the
Head of the State of Fiji under a new legal order".
As President, Iloilo had been Head of State prior
to his abrogation of the Constitution, but that po-
sition had been determined by the Constitution
itself. The "new legal order" did not depend on
the Constitution, thus requiring a "reappointment"
of the Head of State. "You will agree with me that
this is the best way forward for our beloved Fiji",
he said. Bainimarama was re-appointed as Interim
Prime Minister; he, in turn, re-instated his previ-
ous Cabinet.

In the wake of the take over, reports have emerged
of intimidation of some of those critical of the
interim regime. It is alleged that two individuals
have died in military custody since December
2006. These deaths have been investigated and
suspects charged but not yet brought to court.
On April 9, 2009 the Court of Appeal overturned
the High Court decision that Bainimarama's take-
over of Qarase's government was legal, and de-
clared the Interim Government illegal.
Bainimarama agreed to step down as Interim PM
immediately, along with his government, and
President Iloilo was to appoint "a distinguished
person independent of the parties to this litiga-
tion as caretaker Prime Minister, to direct the is-
suance of writs for an election ..."
On July 13, 2009, Fiji became the first nation ever
to be expelled from the Pacific Islands Forum, for
its failure to hold democratic elections by that date.
On September 1, 2009, Fiji became only the sec-
ond country to be suspended from the Common-
wealth of Nations. The action was taken because
Commodore Frank Bainimarama refused to hold
elections by 2010, elections that the Common-
wealth of Nations had demanded after the 2006
coup. He states a need for more time to end a vot-
ing system he claims favors ethnic Fijians. Critics
claim that he has suspended the constitution and
was responsible for human rights violations by
arresting and detaining opponents.

Fiji’s Commonweath History

» 1987 - Fiji endures two military coups, declares a republic; the Commonwealth expels
Fiji

» 1997 - Fiji readmitted to the Commonwealth after it introduces a non-discriminatory

constitution

» May 2000- Parliament stormed, PM Mahendra Chaudhry and cabinet taken hostage.
Businessman George Speight proclaims himself acting PM

» June 2000 - Commonwealth suspends Fiji

» Dec 2001 - Fiji readmitted to the Commonwealth

Copyright © 2009 | WWW.UPSCPORTAL.COM 28

 Section -1 (Article : Fiji Suspended from Commonwealth)
Economy
Fiji, endowed with forest, miniral, and fish re
sources, is one of the more developed of the Pa-
cific island economies, though still with a large
subsistence sector. Natural resources include tim-
ber, fish, gold, copper, offshore oil potential, hy-
dropower. Fiji experienced a period of rapid
growth in the 1960s and 1970s but stagnated in
the 1980s. The coup of 1987 caused further con-
traction. Economic liberalization in the years fol-
lowing the coup created a boom in the garment
industry and a steady growth rate despite grow-
ing uncertainty of land tenure in the sugar indus-
try. The expiration of leases for sugar cane farm-
ers (along with reduced farm and factory effi-
ciency) has led to a decline in sugar production
despite a subsidized price. Subsidies for sugar have
been provided by the EU and Fiji has been the
second largest beneficiary after Mauritius.
Urbanization and expansion in the service sector
have contributed to recent GDP growth. Sugar
exports and a rapidly growing tourist industry —
with 430,800 tourists in 2003 and increasing in
the subsequent years — are the major sources of
foreign exchange. Fiji is highly dependent on tour-
ism for revenue. Sugar processing makes up one-
third of industrial activity. Long-term problems
include low investment and uncertain property
rights. The political turmoil in Fiji has had a se-
vere impact on the economy, which shrank by
2.8% in 2000 and grew by only 1% in 2001. The
tourism sector recovered quickly, however, with
visitor arrivals reaching pre-coup levels again dur-
ing 2002, which has since resulted in a modest
economic recovery. This recovery continued into
2003 and 2004 but grew by 1.7% in 2005 and grew
by 2.0% in 2006. Although inflation is low, the
policy indicator rate of the Reserve Bank of Fiji
was raised by 1% to 3.25% in February 2006 due
to fears of excessive consumption financed by debt.
Lower interest rates have so far not produced
greater investment for exports. However, there has
been a housing boom from declining commercial
mortgage rates. The tallest building in Fiji is the
fourteen-storey Reserve Bank of Fiji building in
Copyright © 2009 | WWW.UPSCPORTAL.COM
Suva, which was inaugurated in 1984. The Suva
central commercial centre, which opened in No-
vember 2005, was planned to outrank the Reserve
Bank building at seventeen stories, but last-minute
design changes made sure that the Reserve Bank
building remains the tallest.
Trade with Fiji has been criticized due to the
country's military dictatorship. In 2008, Fiji's in-
terim Prime Minister and coup leader Frank
Bainimarama announced election delays and that
it would pull out of the Pacific Islands Forum in
Niue, where Bainimarama would have met with
Australian Prime Minister Kevin Rudd and New
Zealand Prime Minister Helen Clark.
A Chronology of Key Events
1643 - Dutch explorer Abel Tasman is the first
European to visit the islands.
1830s - Western Christian missionaries begin to
arrive.
1840s-50s - Christian convert chief Cakobau gains
control of most of western Fiji, while another
Christian convert, Ma'afu from Tonga, controls the
east.
1868 - Cakobau sells Suva - the current capital of
Fiji - to an Australian company.
1871 - European settlers at Levuka island orga-
nize a national government and name Cakobau
king of Fiji following local disorder.
British Rule
1874 - Fiji becomes a British crown colony at the
request of Cakobau and other chiefs.
1875-76 - Measles epidemic wipes out one-third
of the Fijian population; British forces and Fijian
chiefs suppress rebellion.
1879-1916 - More than 60,000 indentured
labourers brought in from the Indian subconti-
29
 Section -1 (Article : Fiji Suspended from Commonwealth)
nent to work on sugar plantations.
1904 - Legislative Council, consisting of elected
Europeans and nominated Fijians, set up to advise
the British governor.
1916 - British colonial government in India stops
the recruitment of indentured labourers.
1920 - All labour indenture agreements in Fiji end.
Fijians Get the Vote
1963 - Women and Fijians enfranchised; predomi-
nantly Fijian Alliance Party (AP) set up.
1970 - Fiji becomes independent with Ratu Sir
Kamisese Mara of the AP as prime minister.
1985 - Timoci Bavadra sets up the Fiji Labour
Party with trade union support.
Supremacist Coups
1987 April - Indian-dominated coalition led by
Bavadra wins general election, ending 17 years of
rule by the AP and Prime Minister Mara.
1987 May - Lieutenant-Colonel Sitiveni Rabuka
seizes power in bloodless coup with the aim of
making indigenous Fijians politically dominant.
1987 October - Rabuka stages a second coup, pro-
claims Fiji a republic and appoints Governor-Gen-
eral Ratu Sir Penaia Ganilau president; Ganilau in
turn appoints Ratu Mara prime minister; Fiji ex-
pelled from Commonwealth; Britain, the United
States, Australia and New Zealand suspend aid.
1989 - Thousands of ethnic Indians flee Fiji.
1990 - New constitution enshrining political
dominance for indigenous Fijians introduced.
1992 - Rabuka, of the Fijian Political Party (FPP),
becomes prime minister following general elec-
tion.
Copyright © 2009 | WWW.UPSCPORTAL.COM
1994 - Great Council of Chiefs appoints Ratu Sir
Kamisese Mara president in January following the
death of Ganilau in the previous month; Rabuka
and the FPP win general election.
1997 - Fiji re-admitted to the Commonwealth af-
ter it introduces a non-discriminatory constitu-
tion.
1999 - Mahendra Chaudhry, an ethnic Indian,
becomes prime minister after the Fiji Labour Party
emerges from the general election with enough
seats to rule on its own.
Prime Minister Held Hostage
2000 May - Bankrupt businessman George Speight
and retired major Ilisoni Ligairi storm parliament,
aiming to make indigenous Fijians the dominant
political force. They take Prime Minister
Mahendra Chaudhry and his cabinet hostage.
Speight proclaims himself acting premier. Presi-
dent Mara sacks the Chaudhry government on the
orders of Fiji's Great Council of Chiefs.
2000 June - Commonwealth suspends Fiji.
2000 July - Chaudhry and other hostages released;
Great Council of Chiefs appoints Ratu Josefa Iloilo
- a former father-in-law of Speight's brother -
president
2000 July - Speight and 369 of his supporters ar-
rested.
2000 November - Eight soldiers are killed in a
failed army mutiny.
2001 August - Elections to restore democracy;
George Speight becomes MP in a new government.
2001 September - Indigenous Prime Minister
Laisenia Qarase sworn in, but doesn't offer cabi-
net posts to opposition Labour Party, in defiance
of constitution.
30
 Section -1 (Article : Fiji Suspended from Commonwealth)
2001 December - George Speight expelled from
parliament for failing to attend sessions.
2001 December - Fiji readmitted to the Common-
wealth.
2002 February - George Speight sentenced to
death for treason. President Iloilo commutes his
sentence to life imprisonment.
2002 November - Government announces radi-
cal privatisation plan designed to stave off collapse
of vital sugar industry threatened by withdrawal
of EU subsidies.
2003 July - Supreme Court rules that Laisenia
Qarase must include ethnic-Indian members of the
opposition Labour Party in his cabinet.
2004 April - Former leader Ratu Sir Kamisese
Mara, considered to be independent Fiji's found-
ing father, dies aged 83.
2004 August - Vice President Ratu Jope Seniloli
found guilty of treason over his involvement in
May 2000 coup attempt. He serves a few months
of a four-year sentence.
2004 November - Labour Party declines cabinet
seats in favour of opposition role. Fijian soldiers
leave for peacekeeping duties in Iraq.
2005 July - Military chief warns that he will re-
move government if proposed amnesty for those
involved in 2000 coup goes ahead.
2006 March - Great Council of Chiefs elects in-
cumbent President Iloilo to a second, five-year
term.
2006 May - Former PM Sitiveni Rabuka is charged
with orchestrating a failed army mutiny in No-
vember 2000.
Ruling party leader and incumbent PM Laesenia
Qarase narrowly wins elections and is sworn in
for a second term.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Fact Sheet
» Full name: Republic of the Fiji Islands
» Population: 844,000 (UN, 2008)
» Capital: Suva
» Area: 18,376 sq km (7,095 sq miles)
» Major languages: English, Fijian, Hindi
» Major religions: Christianity, Hinduism,
Islam
» LIfe expectancy: 67 years (men), 71 years
(women) (UN)
» Monetary unit: 1 Fijian dollar = 100 cents
» Main exports: Sugar, clothing, gold, pro
cessed fish, timber
» GNI per capita: US $3,800 (World Bank,
2007)
Military Coup
2006 October - November - Tensions rise be-
tween PM Laesenia Qarase and military chief
Frank Bainimarama, who threatens to oust the
government after it tries, and fails, to replace him.
Qarase goes into hiding as the crisis escalates.
2006 December - Frank Bainimarama says in a
televised address he has taken executive powers
and dismissed PM Laisenia Qarase. Common-
wealth suspends Fiji because of the coup.
2007 January - Bainimarama restores executive
powers to President Iloilo and takes on the role of
interim prime minister.
2007 February - Bainimarama announces plans
to hold elections in 2010.
2007 April - Bainimarama sacks the Great Coun-
cil of Chiefs and suspends all future meetings, af-
31
 Section -1 (Article : Fiji Suspended from Commonwealth)
ter the chiefs refuse to endorse his government
and his nomination for vice president.
2007 June - State of emergency lifted but reim-
posed in September. Lifted again in October.
2007 November - Bainimarama says police have
foiled a plot to assassinate him.
2008 February - Bainimarama appoints himself
as chairman of the Great Council of Chiefs (GCC),
a body he suspended after it failed to back his De-
cember 2006 coup.
2008 July - Bainimarama postpones elections
promised for early 2009, on the grounds that elec-
toral reforms could not be completed in time.
2008 August - South Pacific leaders warn Fiji that
it faces suspension from their regional grouping if
it fails to show progress towards holding elections.
2009 January - Pacific leaders demand Fiji hold
elections by the end of the year.
2009 April - Appeal Court rules the military re-
gime was illegally appointed after the 2006 coup
and says a caretaker prime minister should be ap-
pointed to call elections to restore democracy.
President Iloilo repeals the constitution, appoints
himself head of state, sets a 2014 election dead-
line and sacks all the judges. He then reappoints
Bainimarama as interim prime minister.
Country Profile
The 800-plus volcanic and coral islands that make
up the Pacific nation of Fiji enjoy a tropical cli-
mate and are a prime destination for
tourists.However, since 1987 racial and political
tensions have been an intermittent source of in-
stability and international isolation. In 1987 a coup
by indigenous Fijians overthrew the elected, In-
dian-dominated coalition. This triggered a series
of adverse events, including the introduction - and
subsequent withdrawal - of a constitution enshrin-
ing indigenous Fijian political supremacy.
Copyright © 2009 | WWW.UPSCPORTAL.COM
A further coup in 2000, led by businessman George
Speight, saw the country's first ethnic Indian
prime minister, his cabinet and several MPs held
hostage for several weeks.These events caused
great harm to the economy - the tourism indus-
try in particular - and Fiji's international reputa-
tion.
Rancour over the 2000 coup persisted, with bitter
divisions over plans to amnesty those behind it.
The proposals underlay tensions which culminated
in a bloodless military takeover in 2006 - Fiji's
fourth coup in 20 years. Fiji's population, which
resides mostly on the two main islands of Viti Levu
and Vanua Levu, is divided almost equally between
indigenous Fijians and Indo-Fijians, the descen-
dents of indentured labourers brought from In-
dia.
Mixing between the two groups is minimal, and
informal segregation runs deep at almost every
level of society. There are also very small non-
Indo-Fijian, non-Fijian minority communities,
such as Chinese and Rotumans.
Although the former British colony relies heavily
on the sugar and tourism industries for its foreign
exchange, its economy is diverse. Gold, silver and
limestone are mined, and there is a strong ser-
vices sector and some light manufacturing.
Nonetheless, Fiji has been hampered by persis-
tent trade and budget deficits, making it one of
the world's largest per capita recipients of aid.
Interim Prime Minister: Commodore Josaia
Voreqe (Frank) Bainimarama
Fiji's military chief Commodore Frank
Bainimarama seized power in the December 2006
coup and first became interim prime minister in
January 2007. He accused deposed prime minister
Laisenia Qarase of corruption and of discriminat-
ing against Fiji's ethnic Indian minority. Mr
Qarase, who had secured a second term in May
2006, had angered the opposition and the mili-
tary with his controversial proposal to pardon or
amnesty some of those behind the 2000 national-
32
 Section -1 (Article : Fiji Suspended from Commonwealth)
ist coup.
Commodore Bainimarama promised to restore de-
mocracy through elections, but said the constitu-
tion would have to be revised first, as in his view
it enshrined racial divisions.
He maintains that his aim is to create a fairer,
multi-racial society, but he has excluded political
opponents from discussions on the constitutional
reforms.
A move by Fiji's Appeal Court in April 2009 to
declare the military government illegal prompted
the president, Ratu Josefa Iloilo, to suspend the
constitution and reappoint Commodore
Bainimarama as interim prime minister for a fur-
ther five years, leaving the military chief's grip
on power apparently stronger than ever. Commo-
dore Bainimarama insists that he enjoys broad
popular support for his elections reform plan, but
the events of April 2009 have made Fiji even more
of a diplomatic outcast than before.
President: Ratu Josefa Iloilo
President Ratu Josefa Iloilo was appointed in the
aftermath of the May 2000 coup and was re-
elected president by the Great Council of Chiefs
in March 2006. In the December 2006 coup, Mr
Iloilo lost his executive powers to military chief
Commodore Frank Bainimarama, who dissolved
parliament and declared a state of emergency.
Commodore Bainimarama reinstated Mr Iloilo as
president in January 2007.
Mr Iloilo endorsed the December 2006 coup, say-
ing general elections would be held once the po-
litical and economic conditions were suitable.
When the Court of Appeal declared the military
government illegal in April 2009, Mr Iloilo re-
sponded by assuming governing power, suspend-
ing the constitution and dismissing the judiciary.
He then reappointed Commodore Bainimarama
as interim prime minister and said that elections
would not be held until 2014. He is seen as a close
ally of the military chief, but denied that he was
acting at the behest of Commodore Bainimarama.
Now in his late eighties, he is said to be in poor
health.
Copyright © 2009 | WWW.UPSCPORTAL.COM
The Commonwealth
The Commonwealth is a voluntary association of
53 countries that support each other and work
together towards shared goals in democracy and
development. The world’s largest and smallest,
richest and poorest countries make up the Com-
monwealth and are home to two billion citizens
of all faiths and ethnicities – over half of whom
are 25 or under. Member countries span six conti-
nents and oceans from Africa (18) to Asia (8), the
Americas (2), the Caribbean (12), Europe (3) and
the South Pacific (10).
The Commonwealth, with roots as far back as the
1870s, believes that the best democracies are
achieved through partnerships – of governments,
business, and civil society. This unique associa-
tion was reconstituted in 1949 when Common-
wealth Prime Ministers met and adopted what has
become known as the ‘London Declaration’ where
it was agreed all member countries would be
“freely and equally associated.”
Since then membership has continued to grow.
The most recent members are the predominantly
Francophone Cameroon and Mozambique, which
was the first country to join with no historical or
administrative association with another Common-
wealth country.
Beyond the ties of history, language and institu-
tions, it is the association’s values which unite its
members: democracy, freedom, peace, the rule of
law and opportunity for all. These values were
agreed and set down by all Commonwealth Heads
of Government at two of their biennial meetings
(known as CHOGMs) in Singapore in 1971 and
reaffirmed twenty years later in Harare.
At government level, the values are protected by
the Commonwealth Ministerial Action Group
(CMAG), a rotating group of nine Foreign Minis-
ters, which assesses the nature of any infringe-
ment and recommends measures for collective
action from member countries. It has the author-
ity to suspend or even recommend to Heads of
Government that a member country be expelled.
33
 Section -1 (Article : Fiji Suspended from Commonwealth)
When member countries have been suspended the
Commonwealth continues to do everything pos-
sible to bring them back into the fold. While
CMAG represents one aspect of the
Commonwealth’s commitment to democratic
principles, many more discreet interventions are
made through ‘good offices’ work, where specially
appointed representatives conduct quiet diplo-
macy as part of efforts to prevent or resolve con-
flicts and build dialogue and democratic structures.
As well as Heads of Government, ministers re-
sponsible for education, environment, civil soci-
ety, finance, foreign affairs, gender affairs, health
law, tourism and youth also meet regularly. This
ensures that Commonwealth policies and
programmes represent views of the members and
gives governments a better understanding of each
other’s goals in an increasingly globalised world.
There are three intergovernmental organisations
in the association: the Commonwealth Secretariat
(which executes plans agreed by Commonwealth
Heads of Government through technical assis-
tance, advice and policy development); the Com-
monwealth Foundation (which helps civil soci-
ety organisations promote democracy, develop-
ment and cultural understanding) and the Com-
monwealth of Learning (which encourages the
development and sharing of open learning and
distance education). Her Majesty Queen Elizabeth
II is Head of the Commonwealth and Kamalesh
Sharma, current Secretary-General of the Com-
monwealth, is the principal global advocate for
the Commonwealth and Chief Executive of the
Secretariat.
Citizen-to-citizen links are as important to the
Commonwealth as the contacts between member
governments. The Commonwealth’s worldwide
network of around 90 professional and advocacy
organisations, most of which bear its name, con-
tinues to grow with a third of these based outside
the UK. They work at local, national, regional or
international levels and play crucial roles in policy,
political or social aspects of Commonwealth life.
One such organisation is the Commonwealth
Games Federation, which manages the four-yearly
multi-sport event.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Commonwealth countries work together in a spirit
of co-operation, partnership and understanding.
This openness and flexibility are integral to the
Commonwealth's effectiveness. Emphasis on
equality has helped it play leading roles in
decolonisation, combating racism and advancing
sustainable development in poor countries.
This support network of countries and
organisations is involved in a diverse range of
work, from helping trade negotiations, building
the small business sector and encouraging women
entrepreneurs to supporting the quality and quan-
tity of teachers, and increasing understanding of
HIV/AIDS.
As well as working with each other, member
countries and organisations have also built alli-
ances outside the Commonwealth. Common-
wealth ideas have been taken up by the World
Bank on Small States, by the World Health Orga-
nization on the migration of doctors and nurses,
by the International Labour Organization on the
migration of teachers. Its support and expertise
have been enlisted by the European Union (EU)
and the African Union on building governance in
Africa, and by the EU and the Pacific Islands Fo-
rum on building governance in the Pacific.The
Commonwealth is part of the world that it serves,
sharing the same interests as those of its citizens:
democratic freedom and economic and social de-
velopment.
History: Though the modern Commonwealth is
just 60 years old, the idea took root in the 19th
century. In 1867, Canada became the first colony
to be transformed into a selfgoverning 'Domin-
ion', a newly constituted status that implied equal-
ity with Britain. The empire was gradually chang-
ing and Lord Rosebury, a British politician, de-
scribed it in Australia in 1884 as a "Commonwealth
of Nations".
Other parts of the empire became Dominions too:
Australia (1901), New Zealand (1907), South Af-
rica (1910) and the Irish Free State (1922). All ex-
cept the Irish Free State (that did not exist at the
time) participated as separate entities in the First
34
 Section -1 (Article : Fiji Suspended from Commonwealth)
World War and were separate signatories to the
Treaty of Versailles in 1919. Subsequently, they
became members of the League of Nations.
After the end of the First World War, the Do-
minions began seeking a new constitutional defi-
nition and reshaping their relationship with Brit-
ain. At the Imperial Conference in 1926, the prime
ministers of the participating countries adopted
the Balfour Report which defined the Dominions
as autonomous communities within the British
Empire, equal in status, in no way subordinate to
one another in any aspect of their domestic or
external affairs, though united by common alle-
giance to the Crown, and freely associated as mem-
bers of the British Commonwealth of Nations.
This definition was incorporated into British law
in 1931 as the Statute of Westminster. It was
adopted immediately in Canada, the Irish Free
State, Newfoundland (which joined Canada in
1949) and South Africa. Australia and New
Zealand followed. India, Britain's largest colony
at the time, became a Dominion at independence
in 1947 and remained so until January 1950, when
the Indian Republic was born.
CFTC: The Commonwealth Fund for Technical
Co-operation (CFTC) is the principal means by
which the Commonwealth delivers development
assistance to member countries.Many Common-
wealth developing countries face human resource
and knowledge constraints limiting their capac-
ity for sustainable development, poverty reduc-
tion and achievement of the Millennium Devel-
opment Goals. To address these constraints, the
CFTC provides capacity-building and institutional
strengthening assistance to developing member
countries, especially small states and least devel-
oped members. Assistance is provided through
professionals who share their skills and experience
to maximise the development potential of mem-
ber states and to build the capacity of the key na-
tional and regional institutions. The CFTC also
supports and develops training programmes at
centres of excellence throughout the Common-
wealth to build capacity in priority development
areas of need.
Copyright © 2009 | WWW.UPSCPORTAL.COM
CFTC programmes are mostly demand-led, with
an emphasis on South–South cooperation. The
Fund’s work programme fits within the frame-
work of the Commonwealth Secretariat’s current
4-year Strategic Plan and is developed in consul-
tation with the national Primary Contact Points
as well as the Divisional Points of Contact.
The CFTC’s work programme focuses on:
» Trade capacity-building, including capacity to
negotiate with multilateral agencies such as the
WTO and the EU;
» Public-sector reform and governance;
» Economic and financial management;
» Assistance related to negotiations with multina-
tional companies to attract foreign direct invest-
ment in the mineral and petroleum sectors;
» Enterprise and private-sector development;
» Supporting institutional capacity-building in a
wide range of areas including for the promotion
of democracy, the rule of law and human rights;
» Gender mainstreaming and equality;
» Health and education;
» Niche areas including delimitation of maritime
boundaries and environmentally sustainable de-
velopment and youth development; and techni-
cal support at the regional and pan-Common-
wealth levels for policy development and advo-
cacy of Commonwealth interests.
Secretary-General
Mr. Kamalesh Sharma, an Indian diplomat, be-
came Commonwealth Secretary-General on 1
April 2008. He was appointed to the post by Com-
monwealth Heads of Government at their meet-
ing in Kampala, Uganda, in November 2007. Mr.
Sharma previously served as India’s High Com-
missioner to the United Kingdom, where he was
closely involved in Commonwealth activities. In
that capacity, since 2004 he has served as a mem-
ber of the Board of Governors of the Common-
wealth Secretariat and the Commonwealth Foun-
dation.
35
 Section -1 (Article : Fiji Suspended from Commonwealth)

Role of the Secretary-General: The Secretary-
General is responsible for representing the Com-
monwealth publicly; and for the management and
good governance of the Commonwealth Secre-
tariat which sets out the Secretariat’s main goals
and programmes.
Promoting and protecting the Commonwealth’s
values is a core responsibility. The Secretary-Gen-
eral does so through regular high level contact
with Commonwealth governments and civil so-
ciety leaders, as well as through the media and
public engagements. The Secretary-General also
uses a low-key, personal and discreet ‘good offices’
approach in certain sensitive situations around the
Commonwealth, and occasionally appoints Spe-
cial Envoys.
At a meeting of Commonwealth Prime Ministers
in London, 1965, a memorandum on the functions
of the Secretariat was agreed, which includes de-
tails on the role of the Secretary-General. The
Secretary-General therefore reports to Heads of
Government through individual meetings and also
collectively at the biennial Commonwealth Heads
of Government Meeting (CHOGM). The Secre-
tary-General is also held accountable through the
Commonwealth’s Board of Governors which
meets regularly in London on behalf of member
governments at senior diplomatic level.
The process by which Heads of Government se-
lect a new Secretary-General is unique. Candidates
are nominated by governments in the months
leading up to a CHOGM where the post becomes
vacant. A Restricted Session is held during the
CHOGM, open only to Heads of Government and
other Heads of Delegation with ministerial sta-
tus. The Chair leads in determining which candi-
date has the greatest support amongst the 53 lead-
ers, and may conduct one or more secret “straw
poll” ballots to assist that process. Once a clearly
supported candidate becomes apparent, the gov-
ernments whose candidates are unsuccessful with-
draw from the contest in order to achieve unani-
mous support by Heads for one candidate.
It was agreed at the 1993 Commonwealth Heads
of Government Meeting (CHOGM) held in Cyprus
that Secretaries-General would serve a maximum
of two 4-year terms. Kamalesh Sharma (India) is
the fifth Commonwealth Secretary-General. His
predecessors were: Arnold Smith of Canada (1965-
1975), Shridath ‘Sonny’ Ramphal of Guyana (1975-
1990), Emeka Anyaoku of Nigeria (1990 - 2000)
and Don McKinnon of New Zealand (2000-2008).

Mmasekgoa Masire-Mwamba (Botswana) and

Ransford Smith (Jamaica) – the two current
Deputy Secretaries-General – support the Secre-
tary-General in the management and executive
direction of the Secretariat. These three senior
managers collectively comprise the Management
Committee, and between them have supervisory
responsibility for all divisions and other business
units in the Secretariat. The Secretary-General
directly supervises the Communications and Pub-
lic Affairs Division, Strategic Planning and Evalu-
ation Division and the Secretary-General’s
Office.A meeting between the Secretary-General
and the Head of the Commonwealth, Queen Eliza-
beth II, usually takes place twice a year.

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 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
India’s Per Capita GHG Emissions
India-Specific Studies on GHG Emissions Profile Released
India’s per capita emission of Greenhouse Gases
(GHG) will continue to be low until the year 2030-
31. In fact, it is estimated that India’s per capita
emissions in the year 2031 will be lower than the
per capita global emission of GHG in the year 2005.
These significant findings
were contained in a Report
“India’s GHG Emissions Pro-
file: Results of Five Climate
Modelling Studies” released
on September 02, 2009 by
the Deputy Chairman of the
Planning Commission Shri
Montek Singh Ahluwalia.
The Minister of Environ-
ment & Forests Shri Jairam
Ramesh presided over the
function. The Chairman of
Unique Identity Authority
of India, Shri Nandan Nilekani was also present
on the occasion.
As per the estimates of the five different studies,
India’s per capita GHG emissions in 2030-31 would
be between 2.77 tonnes and 5.00 tonnes of CO2e
(Carbon Dioxide equivalent). Four of the five stud-
ies estimated that even in 2031, India’s per capita
GHG emissions would stay under 4 tonnes of CO2e
which is lower than the global per capita emis-
sions of 4.22 tonnes of CO2e in 2005. This would
mean that even two decades from now, India’s
per capita GHG emissions would be well below
the global average of 25 years earlier.
In absolute terms, estimates of India’s GHG emis-
sions in 2031 vary from 4.0 billion tones to 7.3
billion tones of CO2e, with four of the five stud-
ies estimating that even two decades from now,
India’s GHG emissions will remain under 6 bil-
lion tones. The key drivers of the range of these
estimates are the assumptions on GDP growth
Copyright © 2009 | WWW.UPSCPORTAL.COM
rates, penetration of clean energy, energy effi-
ciency improvements etc.
All the five studies show evidence of a substantial
and continuous improvement in India’s energy ef-
ficiency of GDP. India’s en-
ergy use efficiency has been
steadily improving over the
years which is reflected in
the decline of its energy in-
tensity of GDP from 0.30
kgoe (kilogram of oil equiva-
lent) per $ of GDP in 1980 to
0.16 kgoe per $ GDP in PPP
(purchasing power parity)
terms. This is comparable to
Germany and only Japan,
UK, Brazil and Denmark
have lower energy intensities
in the world. An Enhanced Energy Efficiency Mis-
sion has recently been approved in principle un-
der the National Action Plan on Climate Change.
Of the five studies on GHG emissions profile in
India, three were conducted by the National
Council of Applied Economic Research (NCAER)-
Jadavpur University, The Energy Research Insti-
tute (TERI) and the Integrated Research and Ac-
tion for Development (IRADe) with the support
of the Ministry of Environment & Forests. Two
other studies by TERI and Mckinsey and Com-
pany were conducted with support from other
agencies. These studies were taken up with a view
to develop a fact based perspective on climate
change in India that clearly reflects the realities
of its economic growth, the policy and regulatory
structures and the vulnerabilities of climate
change. The Ministry of Environment & Forests
functioned as the facilitator, bringing together the
five studies undertaken independently, enabling
51
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
a thorough review process and publishing the re-
sults with a view to generate a meaningful and
informed dialogue on the subject of Climate
Change.
Greenhouse Gases
Greenhouse gases naturally blanket the Earth and
keep it about 33 degrees Celsius warmer than it
would be without these gases in the atmosphere.
This is called the Greenhouse Effect. Over the
past century, the Earth has increased in tempera-
ture by about .5 degrees Celsius and many scien-
tists believe this is because of an increase in con-
centration of the main greenhouse gases: carbon
dioxide, methane, nitrous oxide, and fluorocar-
bons. People are now calling this climate change
over the past century the beginning of Global
Warming. Fears are that if people keep produc-
ing such gases at increasing rates, the results will
be negative in nature, such as more severe floods
and droughts, increasing prevalence of insects, sea
levels rising, and Earth's precipitation may be re-
distributed. These changes to the environment
will most likely cause negative effects on society,
such as lower health and decreasing economic
development. However, some scientists argue that
the global warming we are experiencing now is a
natural phenomenon, and is part of Earth's natu-
ral cycle. Presently, nobody can prove if either
theory is correct, but one thing is certain; the
world has been emitting greenhouse gases at ex-
tremely high rates and has shown only small signs
of reducing emissions until the last few years.
After the 1997 Kyoto Protocol, the world has fi-
nally taken the first step in reducing emissions.
Greenhouse Effect
The greenhouse effect is the heating of the Earth
due to the presence of greenhouse gases. It is
named this way because of a similar effect pro-
duced by the glass panes of a greenhouse. Shorter-
wavelength solar radiation from the sun passes
through Earth's atmosphere, then is absorbed by
the surface of the Earth, causing it to warm. Part
Copyright © 2009 | WWW.UPSCPORTAL.COM
of the absorbed energy is then reradiated back to
the atmosphere as long wave infrared radiation.
Little of this long wave radiation escapes back into
space; the radiation cannot pass through the
greenhouse gases in the atmosphere. The green-
house gases selectively transmit the infrared
waves, trapping some and allowing some to pass
through into space. The greenhouse gases absorb
these waves and reemits the waves downward,
causing the lower atmosphere to warm.
Government’s Stance
India is a signatory to the Kyoto Protocol and falls
under the non-Annexe I countries, or developing
countries group. This implies that India does not
have any binding commitments to reduce the level
of its carbon emissions. Recognizing that devel-
oped countries are principally responsible for the
current high levels of GHG emissions in the at-
mosphere as a result of more than 150 years of
industrial activity, the Protocol places a heavier
burden on developed nations under the principle
of “common but differentiated responsibilities.”
This said India is currently one of fastest growing
emitters of green house gasses (GHG) with a 65%
increase in emissions between 1990-2005 and pro-
jected increase of another 70% by 2020. Added to
that India is presently the fifth largest GHG emit-
ter (absolute terms) and contributes 5% of global
emissions.
The Government of India has committed itself to
vastly improving the country’s human develop-
ment indices by 2031-2032. In order to do so, the
country must average economic growth of at least
8 percent per annum for the next twenty-five
years. According to a report released by the Plan-
ning Commission of India, if India is to sustain an
8 percent level of growth, then it will need to in-
crease its primary energy supply by at least 3 or 4
times and its electricity supply by a factor of 5 to
7 by 2031-2032. Likewise, power generation ca-
pacity will have to increase from 120,000 MW to
780,000 MW.
In addition The Government of India has under-
taken to completely meet India’s growing elec-
52
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
tricity needs by 2012 so that shortage of energy
supply does not impair the growth and develop-
ment needs of our booming economy and indus-
try, as well as to electrify all villages in India un-
der a time bound programme. As currently renew-
able and alternate energy sources are not main-
stream sources, the government aims to achieve
its goal through major investment in thermal and
hydro- electric power (50,000 MW Hydro and
1,00,000 MW Thermal projects have been
planned).
The energy sector is already the biggest contribu-
tor to GHG emissions in India and the above de-
mands, while being a legitimate and necessary to
improve the quality of life of vast sectors of the
Indian public and ensure economic and social de-
velopment, will lead to an inevitable increase in
GHG emissions in coming years. This is especially
as the majority of the energy needs will be met
through fossil fuel based sources and coal in par-
ticular.
Given this rapid growth in emission rates and the
magnitude of likely future emissions The United
States of America and other countries from the
West are pressurizing rapidly developing coun-
tries like India and China to accept binding emis-
sion reduction targets. They claim that these coun-
tries will soon overtake the developed world in
carbon emissions and hence should also shoulder
the burden of reducing these emissions. They want
India and China to take on such commitments in
the post-Kyoto regime.
The Indian position on this issue has been quite
rigid and consistent. The Government of India has
long argued that while climate change is a press-
ing global problem that needs to be solved, for
developing countries like India, the prime goal is
that of development and securing a good standard
of living for the large number of poor and vulner-
able peoples. In the words of the Prime Minister’s
Special Envoy on Climate Change, Shyam Saran,
“Developing Countries have the responsibility to
engage in sustainable development but their emis-
sion reductions will be the result of sustainable
Copyright © 2009 | WWW.UPSCPORTAL.COM
development, not the other way round.
The arguments India uses to support this position
are centered around the principles of common but
differentiated responsibilities (as is with the
UNFCCC) and equity. These arguments can be cat-
egorized under three broad heads as Historical Re-
sponsibility, Per-capita emissions, Technology
transfer
Historic Responsibility
GHG stay in the atmosphere for long durations of
time after they are emitted. According to the IPCC
“about 50% of a CO2 increase will be removed
from the atmosphere within 30 years, and a fur-
ther 30% will be removed within a few centuries.
The remaining 20% may stay in the atmosphere
for many thousands of years.” Other estimates
claim that, “If all recoverable fossil fuels were
burnt up using today’s technologies, after 1,000
years the air would still hold around a third to a
half of the CO2 emissions.” The bottom line is that
GHG emitted today will cause problems not just
today but possibly hundreds or even thousands of
years from now.
Given this, the Indian Government argues that
India has played a insignificant role in bringing
about the present problem, which they say, is
caused by emissions of the developed countries
during their process of industrialization. This claim
is backed up by statistics. As can be seen from the
following figure between 1850 and 2000 India
contributed only 2% of the cumulative, energy
related CO2 emissions, while the United States of
America contributed 30% and the European Union
27%. Thus, India feels that the burden of solving
the problem should also rest with these developed
countries of the West.
Per-capita Emissions
One major point of difference between the devel-
oped nations and India is over how to measure
GHG emissions. The United States of America
talks in terms of absolute emissions, while India
53
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
says emissions should be measured on a per-capita
basis. The reasoning behind this argument is given
in the adjoining box.
When viewed from the perspective of per-capita
emissions, India’s case seems to become stronger.
Though it might be the fifth largest emitter of
greenhouse gasses, according to a WWF report,
India’s per capita emissions of GHG were just 1.8
tonnes compared 24 tonnes per capita by the
United States. If we look at carbon dioxide levels
this is even less. In 2005 India’s per capita CO2
emissions were 1.1 tonnes which, as can be seen
from the following diagram is significantly lower
than the global average and much lower than that
of the United States which is close to 20 tonnes
CO2 per-capita. The per capita emissions argu-
ment is extremely compelling when viewed from
the development perspective. The developing
countries argue that their per emissions are due
to their efforts to develop and thus as the process
continues with more production of goods and ser-
vices and more and more people get access to elec-
tricity, heating, modern transport etc., the per
capita emissions will go up corresponding to the
increase in living standards. Developed countries
on the other hand have already achieved very high
levels of both development and quality of life.
Thus, the fact that developed countries have
higher per capita emissions is an indication that
their emissions are now due to increased produc-
tion and consumption of luxuries and not due to
legitimate development needs as is the case of
developing countries.
Given this, India believes that international cli-
mate change agreements should set targets for con-
vergence of per capita emissions between devel-
oped and developing countries and not ask devel-
oping countries to forgo development by impos-
ing emission reduction targets on them. This
would be a more equitable arrangement.
There, however, is one serious drawback with this
line of reasoning. While India calls for per capita
measurement of emissions globally, internally it
does not analyse where the emissions are coming
Copyright © 2009 | WWW.UPSCPORTAL.COM
from with regard to different socio-economic
groups. Greenpeace released a report called “Is
India Hiding Behind the Poor” on 12 November
2007 that highlights this issue. According to the
study, “The richest consumer classes produce 4.5
times more CO2 than the poorest class, and al-
most 3 times more than the average.” The report
further states, “…the richest income class in this
study, earning more than 30,000 rupees a month,
produce slightly less than the global average CO2
emissions of 5 tonnes, this amount already exceeds
the sustainable global average CO2 emissions of
2.5 tonnes per capita that needs to be reached to
limit global warming below 2 degrees centigrade.”
Though using per capita emissions is a fair and
equitable yardstick, especially given the urgent de-
velopment need of many poor countries, this prin-
ciple needs to be applied both internally and ex-
ternally. The Indian Government should there-
fore take measures to control wasteful, non-de-
velopment related emissions.
Government Policies
This does not mean that the Indian Government
is not doing anything about climate change. India
is a signatory to both the UNFCCC and the Kyoto
protocol and takes active part in multi-lateral ne-
gotiations on climate change. An example is India’s
membership of the Asia-Pacific Partnership for
Clean Development and Climate 2005. Under this
partnership Foreign, Environment and Energy
Ministers from partner countries agreed to co-
operate on development and transfer of technol-
ogy, which enables reduction of greenhouse gas
emissions. Ministers agreed to a Charter, Commu-
nique and Work Plan that outline a “private-pub-
lic task forcess to address climate change, energy
security and air pollution.” In addition, India has
submitted its first National Communication on
Climate Change (NATCOM I) and is currently
working on NATCOM II.
With regards to policies, India has in place many
environmental laws, which attempt to reduce pol-
lution and environmental damage, even though
not all were framed specifically to tackle climate
54
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
change. Some of these policies/regulations are
mentioned in the adjoining box. In India, a major
concern is securing compliance to these policies.
Some key policies are:
Remote Village Electrification Programme
(RVE) 2001: Electrify all the remote villages and
remote hamlets through non-conventional energy
sources such as solar energy, small hydro-power,
biomass, wind energy, hybrid systems, etc. The
Programme aims at bringing the benefits of elec-
tricity to people living in the most backward and
deprived regions of the country.
Energy Conservation Act 2001: The Indian Par-
liament passed The Energy Conservation Act 2001,
in September 2001. This Act requires large en-
ergy consumers to adhere to energy consumption
norms; new buildings to follow the Energy Con-
servation Building Code; and appliances to meet
energy performance standards and to display en-
ergy consumption labels. The Act also created the
Bureau of Energy Efficiency to implement the
provisions of the Act.
Integrated Energy Policy 2006: Released in Au-
gust 2006 it addresses all aspects of energy, in-
cluding energy security, access and availability,
affordability and pricing, efficiency and the envi-
ronment.
In relation to renewable energy, the policy pro-
posed:
» The phase-out of capital subsidies by the end of
the 10th Plan linked to creation of renewable grid
power capacity;
» Requiring power regulators to seek alternative
incentive structures that encourage utilities to in-
tegrate wind, small hydro, cogeneration and so
on into their systems, and the linking of all such
incentives to energy generated as opposed to ca-
pacity created;
» Requiring power regulators to mandate feed-in
laws for renewable energy, where appropriate, as
provided under the Electricity Act 2003.
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Labelling Programme for Appliances 2006: A
star rating based labeling programme has been in-
troduced for four commonly used consumer goods
that indicate their energy efficiency. The goods
covered as of now are; fluorescent tube-lights, air
conditioners, refrigerators, distribution transform-
ers. Introduced and managed by the Bureau of
Energy Efficiency (BEE) these ratings are meant
to be a guide to consumers so they make an in-
formed decision. The ratings are backed by an
aggressive media campaign that aims at increas-
ing awareness by informing customers of the cost
benefits of energy efficient appliances.
Energy Conservation Building Code (ECBC)
2007: The ECBC was developed in 2006 and is-
sued May 2007. It is not mandatory the first three
years, and will become so in 2010, to allow the
necessary implementation capacity to be devel-
oped. The code will be mandatory for all new
buildings (commercial buildings or complexes)
with a connected load of 500kW or more, or a
contract demand of 600 kVA or greater. It will
also apply to buildings with a conditioned floor
space of 1 000m2 or greater.
The code sets minimum requirements for build-
ing envelope components, lighting, HVAC, elec-
trical system, water heating and pumping systems.
There would be three ways of being compliant
with the ECBC. First, through a prescriptive ap-
proach, i.e. all minimum standards for separate
components must be met. Second, the envelope
and lighting system would be assessed through a
systems performance criteria, while other com-
ponents would have to meet the minimum re-
quirements. Third, setting the whole building tar-
get energy use and trading off between systems
(Energy cost budget method).
State and municipal governments must implement
the code, while state governments are allowed to
modify the code if necessary to account for local
climatic conditions. In February 2008 an ECBC
tip sheet and Technology atlas were distributed
to developers, architects, engineers and other
building energy efficiency professionals.
55
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
Solar Power Generation Based Incentive 2008:
In January 2008, the federal minister responsible
for renewable energy announced that the Indian
government would provide a subsidy for solar
power plants to help develop renewable energy
infrastructure. The incentives, for a period of 10
years, will be over and above any financial assis-
tance provided by the states.
Generation based incentives for wind power
2008: In July 2008, the Ministry of New and Re-
newable Energy (MNRE) launched a new genera-
tion-based incentive scheme for wind power pro-
duction. The scheme is designed to promote in-
vestment in new and large independent wind
power producers, to fulfil a target of securing 10
500 MW of new wind power capacity by 2012.
Energy Conservation Awards: The Ministry of
Power instituted National Energy Conservation
Awards, coordinated by the Bureau of Energy Ef-
ficiency, to recognize industrial units that have
made special efforts to reduce energy consump-
tion. In the first five years, the participating in-
dustrial units collectively saved 2397 million units
of electrical energy; 9067 kilo litre of furnace oil;
2.76 Mt of coal and 11,585 million cubic metre of
gas per year, resulting in substantial reduction in
greenhouse gas emissions.
National Action Plan on Climate Change: On
30 June 2008, India released its first National Ac-
tion Plan on Climate Change (NAPCC) outlining
existing and future policies and programmes di-
rected at climate change mitigation and adapta-
tion. The plan outlines eight “National Missions”
running up to 2017, and ministries are directed to
submit detailed implementation plans to the Prime
Minister’s Council on Climate Change by Decem-
ber 2008. Several target energy use, promoting
energy efficiency and renewable energy, as well
as improved research capacity on climate change
issues. Other missions target water efficiency, ag-
riculture, forestation, and ecosystem conservation.
Copyright © 2009 | WWW.UPSCPORTAL.COM
India’s National Action Plan
on Climate Change
This plan outlines eight “national missions are
following:
1. National Solar Mission
2. National Mission for Enhanced Energy Effi-
ciency
3. National Mission on Sustainable Habitat
4. National Water Mission
5. National Mission for Sustaining the Himalayan
Ecosystem
6. National Mission for a Green India
7. National Mission fro Sustainable Agriculture
8. National Mission on Strategic Knowledge for
Climate Change
National Solar Mission: Great importance has
been given to the National Solar Mission in the
NAPCC. This is justified by the fact that India is
ideally situated in the equatorial Sun Belt receiv-
ing abundant solar radiation the year around. The
average solar insolation incident over India is about
5.5 kWh/m2 per day, which means that just 1%
of India’s land can meet the country’s entire elec-
tricity requirement till 2030. The stated objective
of the mission is to increase the share of solar en-
ergy and other renewable and non-fossil based
energy sources in the total energy mix of the coun-
try. This includes nuclear energy as a non-fossil
option.The mission also calls for the launch of a
research and development (R&D) programme that,
with the help of international cooperation, would
look into creating more cost-effective, sustainable
and convenient solar power systems.
The NAPCC sets the solar mission a target of de-
livering 80% coverage for all low temperature
(<150° C) applications of solar energy in urban
areas, industries and commercial establishments,
and a target of 60% coverage for medium tem-
perature (150° C to 250° C) applications. The dead-
line for achieving this is the duration of the 11th
56
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
and 12th five-year plans, through to 2017. In ad-
dition, rural applications are to be pursued through
public-private partnership.
The NAPCC also sets the target of 1000 MW/an-
num of photovoltaic production from integrated
facilities by 2017 as well as 1000 MW of Concen-
trating Solar Power generation capacity.
These efforts are to be backed by R&D to ensure
that India develops commercial and near commer-
cial solar technologies. The ultimate aim is to de-
velop a solar industry that is competitive against
fossil fuel options within the next 20-25 years.
National Mission for Enhanced Energy Effi-
ciency: This Mission is basically targeted at in-
dustry, which, according to the NAPCC, accounts
for 42% of the country’s total commercial energy
use (2004-2005) and 31 % of total CO2 emissions
(1994).
The Government of India already had a number
of initiatives to promote energy efficiency in place
before the NAPCC such as the star labelling sys-
tem and energy conservation building code and
had also passed the Energy Conservation Act of
2001. In addition to these, the NAPCC calls for:
· Mandating specific energy consumption de-
creases in large energy consuming industries and
creating a framework to certify excess energy sav-
ings along with market based, mechanisms to trade
these savings. This is aimed at enhancing cost ef-
fectiveness of improvements in energy efficiency
in energy-intensive sectors.
» Innovative measures to make energy efficient
appliances/products in certain sectors more
affordable.
» Creation of mechanisms to help finance demand
side management programmes by capturing fu-
ture energy savings and enabling public-private-
partnerships for this.
» Developing fiscal measures to promote energy
efficiency such as tax incentives for including dif-
Copyright © 2009 | WWW.UPSCPORTAL.COM
ferential taxation on energy efficient certified ap-
pliances.
National Mission on Sustainable Habitat: The
aim of the Mission is to make habitats more sus-
tainable through a threefold approach that in-
cludes -
» Improvements in energy efficiency of buildings
in residential and commercial sector
» Management of Municipal Solid Waste (MSW)
» Promote urban public transport
The NAPCC claims that use of energy efficient
options could have achieve 30% electricity sav-
ings in new residential buildings and 40% in new
commercial buildings. For existing buildings the
corresponding savings are 20% and 30% respec-
tively.
The authors call for a wide and diverse range of
policy instruments to overcome the barriers to
adoption of energy efficient options in residential
and commercial sectors, highlight the need for
more a more competitive market for energy effi-
cient products and advocate an involving all stake-
holders. In addition, they once again stress on the
need for technology transfer from developed coun-
tries.
With regards to MSW, the Plan suggests some
policy reforms such as common regional disposal
facilities for smaller towns and villages in a par-
ticular region, and integrated system for collec-
tion, transport, transfer, treatment and disposal
facilities.
Finally, with regards to urban public transport,
the NAPCC endorses mass transit such as buses,
railways and mass rapid transit systems and the
use of CNG, ethanol blending in gasoline and bio-
diesel. Hydrogen is something that is mentioned
for the future. In addition, the Plan proposes the
promotion of costal shipping and inland water-
ways, increasing attractiveness of railways, intro-
ducing appropriate transport pricing measures to
influence purchase and use of vehicles in respect
of fuel efficiency and fuel choice, tightening regu-
57
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)
latory standards in fuel-economy of
automobiles.As with the other Missions, the Plan
emphasises the need for R&D for all the compo-
nents of the Sustainable Habitat Mission.
National Water Mission: According to the
NAPCC, out of the 4000 billion m3 of precipita-
tion that India receives annually, only 1000 bil-
lion m3 is available for use, which comes to approx.
1000 m3 per capita per annum. Further, by 2050
it states that India is likely to be water scarce. The
National Water Mission thus aims at conserving
water, minimising wastage and ensuring more
equitable distribution through integrated water
resource management. It also aims to optimize
water use efficiency by 20% by developing a
framework of regulatory mechanisms having dif-
ferential entitlements and pricing.
In addition, the Water Mission calls for strategies
to tackle variability in rainfall and river flows such
as enhancing surface and underground water stor-
age, rainwater harvesting and more efficient irri-
gation systems like sprinklers or drip irrigation.
National Mission for Sustaining the Himalayan
Ecosystem: The NAPCC recognises the Hima-
layan ecosystem as vital to preserving the ecologi-
cal security of the country. It consists of forests;
perennial rivers which are a source of drinking
water, irrigation, and hydropower; rich
biodiversity; and is a major tourist attraction. All
these are in danger from climate change through
increases in temperature, changes in precipitation
patterns, drought and glacier melt.
The Plan calls for empowering local communities
especially Panchayats to play a greater role in man-
aging ecological resources. It also reaffirms the fol-
lowing measures mentioned in the National En-
vironment Policy, 2006.
» Adopting appropriate land-use planning and wa-
ter-shed management practices for sustainable de-
velopment of mountain ecosystems
» Adopting best practices for infrastructure con-
struction in mountain regions to avoid or mini-
Copyright © 2009 | WWW.UPSCPORTAL.COM
mize damage to sensitive ecosystems and despoil-
ing of landscapes
» Encouraging cultivation of traditional varieties
of crops and horticulture by promoting organic
farming, enabling farmers to realise a price pre-
mium
» Promoting sustainable tourism based on best
practices and multi-stakeholder partnerships to
enable local communities to gain better livelihoods
» Taking measures to regulate tourist inflows into
mountain regions to ensure that the carrying ca-
pacity of the mountain ecosystem is not breached
» Developing protection strategies for certain
mountain scopes with unique “incomparable val-
ues”
National Mission for a Green India: This Mis-
sion aims at enhancing ecosystem services such as
carbon sinks. It builds on the Prime Minister’s
Green India campaign for afforestation of 6 mil-
lion hectares and the national target of increasing
land area under forest cover from 23% to 33%. It
is to be implemented on degraded forest land
through Joint Forest Management Committees set
up under State Departments of Forests. These
Committees will promote direct action by com-
munities.
The Green India programme suggests:
» Training on silvicultural practices for fast-grow-
ing and climate-hardy tree species
» Reducing fragmentation of forests by provision
of corridors for species migration, both fauna and
flora
» Enhancing public and private investments for
raising plantations for enhancing the cover and
the density of forests
» Revitalizing and upscaling community-based ini-
tiatives such as Joint Forest Management and Van
58
 Section -2 (Hot Topics : India’s Per Capita GHG Emissions)

Panchayat committees for forest management
» Formulation of forest fire management strate-
gies
In-situ and ex-situ conservation of genetic re-
sources, especially of threatened flora and fauna
ance; development of GIS and remote sensing
methodologies; mapping vulnerable regions and
disease hotspots; and developing and implement-
ing region-specific, vulnerability based contin-
gency plans.

» Creation of biodiversity registers (at national,
district, and local levels) for documenting genetic
diversity and the associated traditional knowledge
» Effective implementation of the Protected Area
System under the Wildlife Conservation Act and
National Biodiversity Conservation Act 2001
National Mission for Sustainable Agriculture:
The aim is to make Indian agriculture more resil-
ient to climate change by identifying new variet-
ies of crops, especially thermal resistant ones and
alternative cropping patterns. This is to be sup-
ported by integration of traditional knowledge and
practical systems, information technology and bio-
technology, as well as new credit and insurance
mechanisms.
In particular the Mission focuses on rain-fed
agricultural zones and suggests:
» Development of drought and pest resistant crop
varieties
Finally, it suggests greater access to information
and use of biotechnology.
National Mission on Strategic Knowledge for
Climate Change: This Mission will strive to work
with the global community in research and tech-
nology development and collaboration through a
variety of mechanisms and, in addition, will also
have its own research agenda supported by a net-
work of dedicated climate change related institu-
tions and universities and a Climate Research
Fund. The Mission will also encourage private sec-
tor initiatives for developing innovative technolo-
gies for adaptation and mitigation.
The Mission includes:
» Research in key substantive domains of climate
science to improve understanding of key phenom-
ena and processes
» Global and regional climate modelling to im-
prove the quality and accuracy of climate change
projections for India

» Improving methods to conserve soil and water » Strengthening of observational networks and
Stakeholder consultations, training workshops and data gathering and assimilation to increase access
demonstration exercises for farming communities, and availability to relevant data
for agro-climatic information sharing and dissemi-
nation » Creation of essential research infrastructure, such
as high performance computing
» Financial support to enable farmers to invest in
and adopt relevant technologies to overcome cli-
matic related stresses

In addition, the Mission makes suggestions for

safeguarding farmers against increased risk due
to climate change. These suggestions include,
strengthening agricultural and weather insurance;
creation of web-enabled, regional language based
services for facilitation of weather-based insur-

Copyright © 2009 | WWW.UPSCPORTAL.COM 59

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 Section -3 (Current Affairs : Current Relevant Facts)
Current Affairs
Current Relevant Facts
The ministerial meeting of the World
Trade Organisation (WTO) in New
Delhi has broken the impasse and the
Doha trade talks will resume in
Geneva on September 14. Even as the
2010 deadline remains a stretch, trade ministers re-
affirmed the need for development oriented
talks.WTO members' chief negotiators will meet in
Geneva from September 14, in the run-up to the Pitts-
burgh G20 summit, to grapple with outstanding is-
sues in the talks, now in their eighth year, with the
aim of completing the round by 2010.
Political leaders have called repeatedly in recent
months to conclude the Doha round, launched in
2001 to help developing countries grow by opening
trade, to help pull the world out of the economic
crisis and fight protectionism.
The Delhi meeting did not look at any of the specific
issues that remain open, such as a safeguard to help
farmers in poor countries cope with a flood of im-
ports, or proposals to eliminate duties entirely in some
industrial sectors.That will be up to the negotiators,
but India expressed confidence that such issues could
be resolved around the negotiating table if countries
were willing.The talks will resume on the basis of
the draft negotiating texts issued in December 2008.
That should provide comfort to WTO members from
Brazil to the European Union who had feared that
the United States wanted to unpick what has already
been agreed over the past seven years, jeopardizing
the emerging deal.Ministers also reiterated that the
talks had to be multilateral, since any deal must be
signed off by all 153 WTO members.
South African Government has en-
dorsed the call for celebrating former
President and anti-Apartheid hero
Nelson Mandela's birthday on 18th
July as global Mandela Day.
Cabinet called on all South Africans, civil society
organisations and the citizens of the world to sup-
port the Mandela Day initiative by doing good work
in their communities. The campaign led by the Nelson
Copyright © 2009 | WWW.UPSCPORTAL.COM
Mandela Foundation seeks to encourage all of hu-
manity to spend 67 minutes of their time doing some-
thing that would make a difference in their commu-
nities.
A series of events, co-ordinated by 46664 and the
Nelson Mandela Foundation, will be organised on
the occasion of Mandela's 91st birthday this year in
South Africa and around the world, especially New
York.
The untimely death of Subhas
Chakraborty, 68, West Bengal’s Min-
ister for Transport, Sports and Youth
Affairs, in Kolkata on August 3 has
caused a genuine void in the State’s
Left circles. A maverick Communist
in every sense being unorthodox and independent-
minded both in his utterances and his activities.
His livewire contacts with the people at large was
used by the party leadership in different ways—in
mass mobilisation as well as during elections in var-
ied forms—but the same leadership did not allow
him to rise in the party organisation while far infe-
rior elements with barely any talent registered mete-
oric rise within a brief span of time. Till his death he
was denied entry into the party’s Central Committee
whereas only because of his mentor Jyoti Basu’s vocal
intervention was he made a member of the State Sec-
retariat practically at the fag and of his life.
» SD Tendulkar, the former chairman of Prime
Minister’s economic advisory council has prepared
a report, according to which India has 38 per cent
population below poverty line (BPL). At present,
Planning commission of India’s 2006 figure is only
28.5 per cent of the population is under BPL.
If Tendulkar’s report is accepted officially by the
government and the Planning commission, there shall
be an addition of about 11 crore population in the
exiting number of people living BPL. In India, since
1972, poverty is being calculated in terms of calo-
ries. 2100 calories for Urban and 2400 calories for
rural areas are the yardsticks to measure poverty in
India.
61
 Section -3 (Current Affairs : Current Relevant Facts)
Tendulkar has used different methodology for this
survey and took education, health, sanitation, nutri-
tion and household income etc into account while
calculating poverty, the definition of which has al-
ways been a point of difference amongst economists
and experts. Many experts, economists and rights
activists believe, and they give some convincing ar-
guments also to support their views that poverty
measurement formula in India is not satisfactory, there
are actually more people below BPL.
Efforts have been made earlier also by the govern-
ment in order to find a broader consensus on the
definition of poverty. One NC Saxena committee was
formed by government in June this year, which sug-
gested that 50 per cent people are under BPL. In
2007, Arjun Sengupta, associated with National com-
mission for enterprises in unorganised sector, said
that 77 per cent of Indians are in BPL.
Only a couple of years ago, NSSO, the national sam-
pling government organisation, has thrown a figure
in the public domain that about 70 per cent of popu-
lations in India don’t even spend 20Rs/- a day on
them. Whereas in this country itself, there are people
who gifts 700 crores plane to his wife on birthday.
The number of HNI in India is increasing with gal-
loping speed and it has crossed one lakh figure till
date.
Fall out on proposed National Food Security Act-
The Union government is to come out with a his-
toric bill on food security in the next session of Par-
liament. The proposed legislation is historic in the
sense that it would guarantee availability of at least
25 Kg of grains to one BPL families per month @ 3
Rs/-. The proposed legislation would incur an addi-
tional 9500 crore rupees on the subsidy of the grains.
At present, government is incurring 37,010 crore
rupees on the subsidy of the food meant for BPL
families.
U.S. Senator Edward Kennedy, the
youngest member of a politically pow-
erful family that produced a U.S. presi-
dent, has died of brain cancer at the age
of 77 on 25 August 2009. The Demo-
Copyright © 2009 | WWW.UPSCPORTAL.COM
cratic senator has been suffering from an incurable
form of brain cancer for just over a year. He had been
missing in the U.S. Senate for much of this year due
to his illness, forcing him to work on his lifelong
signature issue, a national health care system, from
his home.
Kennedy had represented Massachusetts in the U.S.
Senate since 1962, when he was elected to the seat
previously held by his older brother, President John
F. Kennedy. During his Senate career, he was a strong
champion of liberal causes, including civil rights,
education, immigration and health care. He was a
vocal critic of both the Vietnam War and the U.S.-
led invasion in Iraq in 2003.
» Interpol has issued an international wanted notice
for the head of a Pakistan-based Islamic charity over
the 2008 Mumbai (Bombay) attacks. The wanted
man is Hafiz Saeed who heads Jamaat-ud-Dawa,
accused of being a front for the Lashkar-e-Taiba
militant group blamed by India for the attacks. Ear-
lier this month, Pakistan's Supreme Court adjourned
a hearing seeking Mr Saeed's re-arrest. Interpol has
also issued a similar Red Notice against Pakistan-
based Zaki Ur Rehman Lakhvi, who India says is
one of the masterminds of the Mumbai attacks. The
Interpol notices followed the decision of a court in
Mumbai to issue non-bailable arrest warrants against
the two men for their alleged role in the Mumbai
attacks. Many Interpol member countries view a Red
Notice as a legal basis for arrest or detention of a
suspect, but they are not required to do so.
Andhra Pradesh chief minister Y.S.
Rajasekhar Reddy was found dead on
Sept. 3 amid the wreckage of a Bell
430 helicopter that went missing one
day before crashing into a hillock and
exploding, bringing to a tragic end the life of yet an-
other charismatic Congress leader.
The charred bodies of 60-year-old Reddy, known as
YSR, and four others were traced around 8.20 in
morning on the Rudrakonda hillock in the Nallamala
forests of Kurnool district. The find capped a nearly
62
 Section -3 (Current Affairs : Current Relevant Facts)
20-hour aerial and ground search operation that had
raised hopes of survival. The helicopter lost radio
contact about half an hour after lifting off from
Hyderabad’s Begumpet airport for Chittoor, 600km
away, where YSR was to launch a people-contact
programme. The others who died were principal sec-
retary P. Subramanyam, chief security officer A.S.C.
Wesley, pilot Group Captain S.K. Bhatia and co-pi-
lot M.S. Reddy.YSR is the second serving chief min-
ister to die in an air crash. In the 1965 war, then
Gujarat chief minister Balwantrai Mehta was killed
when his civilian plane was brought down by Paki-
stani jets in the Kutch region.K. Rosaiah, the 77-
year-old finance minister, was sworn in chief minis-
ter as an interim arrangement amid demands that
YSR’s son Jaganmohan Reddy, 36, succeed his fa-
ther.
» The high court in the Indian state of Gujarat has
ordered the government to lift the ban on a contro-
versial book “Jinnah : India Partition Independence”
on Pakistan's founder Mohammed Ali Jinnah on sept
4. The book was written by Jaswant Singh, a leader
in India's Hindu nationalist main opposition party,
the BJP. The party subsequently expelled him. But
two social activists from Gujarat challenged the ban
in court. The state government said it had banned
the book for "defamatory references" to India's first
home minister.
While banning the book last month, the Gujarat gov-
ernment had said that Mr Singh's book Jinnah: In-
dia-Partition-Independence was "objectionable, mis-
leading and against public tranquillity". But the
Gujarat high court said that the government had not
"read the book" before imposing the ban. The court
said the government had not "applied its mind" to
arrive at the opinion that the book was "against na-
tional interest" and would affect public peace. The
Gujarat government is expected to issue a statement
reacting to the court decision. It is not clear whether
it will issue a fresh ban giving a different reasons.
The book examines the role of Congress party leader
and the country's first Prime Minister, Jawaharlal
Nehru, and Mr Patel in the partition of India in 1947.
Copyright © 2009 | WWW.UPSCPORTAL.COM
» For the first time since 1979 Islamic revolution,
Iran will have a woman Cabinet Minister, as Parlia-
ment on Sep 03 approved 18 out of 21 nominees
proposed by President Mahmoud Ahmadinejad for
his new Cabinet.Marzieh Vahid Dastjerdi, who will
hold the Health portfolio, will be Iran’s first woman
Minister. She is a qualified gynaecologist from Tehran
University, and has been a well-known health activ-
ist.
The Parliament also voiced its strong approval for
Mr. Ahmadinejad’s choice of Ahmad Vahidi as De-
fence Minister, with 227 out of a total of 286 law
makers backing him for the post. Earlier Interpol
distributed an arrest warrant for Mr. Vahidi over a
1994 attack on the Israeli-Argentine Mutual Asso-
ciation (AMIA), which killed 85 people. Iran has
strongly denied any involvement in the attack. Mr.
Vahidi described the Parliament’s approval for him
as a decisive slap to Israel.Parliament also approved
some of the other seemingly controversial nominees.
The Intelligence Ministry has gone to Heydar
Moslehi, a former representative of the Supreme
Leader to the paramilitary Basij militia. Massoud
Mirkazemi, who has close ties with the Islamic Revo-
lutionary Guard Corps (IRGC), has been approved
as the new Oil Minister. Parliament approved Mr.
Ahmadinejad’s trusted confidants, Manouchehr
Mottaki as Foreign Minister, while Mostafa
Mohammad Najjar, a senior figure with an IRGC
background, easily passed muster for the post of In-
terior Minister.
63
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 Section -4 (Sports)
Sports
» The Ministry of Youth Affairs and Sports has
approved grant of Rs. 110 crore to the Kerala Gov-
ernment for the conduct of the 35th National
Games on Sep 1. The grant would be utilized to-
wards upgradation of existing sports infrastruc-
ture, laying and development of playing surfaces
and procurement of sports
equipments, conduct of
National Games including
opening and closing cer-
emonies.
These games would be the
last major domestic event
before Commonwealth
Games, 2010 and would be
a curtain raiser to CWG
2010 and it would be the
basis of selecting the na-
tional teams that would
represent the country at
CWG 2010.
It may be recalled that Indian Olympic Associa-
tion (IOA) has allotted 35th National Games to
State of Kerala, which are scheduled to be held in
May 2010.
Kerala Government has initially requested Cen-
tral Government for central assistance, at least 50
per cent, of the total projected requirement of
about Rs. 600 crore for creation of sports infra-
structure and conduct of 35th National Games
2010.
Earlier in May, a Central Team, led by Joint Sec-
retary (Sports), Department of Sports and consist-
ing of representatives from Planning Commission,
Sports Authority of India (SAI) and Indian Olym-
pic Association (IOA), visited Kerala to evaluate
the proposal for conduct of 35th National Games
to be held in May 2010.
Based on interactions with the Central Team, the
Kerala Government submitted a revised proposal
Copyright © 2009 | WWW.UPSCPORTAL.COM
of Rs. 220 crore. The Central Team recommended
that since it may not be possible for the State Gov-
ernment to bear the entire cost of Rs. 220 crore
from its own resources because of resource con-
straint, Planning Commission may consider Ad-
ditional Central Allocation (ACA) of Rs. 110 crore
of the project cost of Rs. 220 crore) to the Kerala
Government for hosting 35th Na-
tional Games.
» Defending champion India beat
Syria by 5-4 in a penalty shootout
in a thrilling final match to win the
ONGC Nehru Cup football tourna-
ment held at the Ambedkar Sta-
dium in New Delhi on Aug 31. The
win came after a nail-biting finish
as no goals could be scored in the
normal time, and had to be decided
on penalty shoots, where India
missed just two shots, while Syria
missed three of the seven shots.
Goalkeeper Subroto Paul was awarded the man of
the match for his superb performance in the
match.Led by its star striker Bhaichung Bhutia,
India entered the third consecutive final of the
Nehru Cup and anticipations were high, as they
had defeated Syria in the 2007 final.
Indian team had strikers in the form of Bhutia
and Sunil Chettri, while Anthony Pereira, N.P.
Pradeep, Climax Lawrence and Steven Dias
handled midfield.Defence was well held by
Mahesh Gawli, Anwar, Gourmangi Singh and
Surkumar Singh.The tournament had been quite
difficult for the home team, as they had won two
and lost two league matches, including one against
Syria. On the other hand Syria, with a strong de-
fence, had won all their league matches.
» India moved up seven places in the FIFA
rankings to the 149th spot following their ONGC
Nehru Cup football triumph. Two wins in the
group stage against Kyrgyzstan and Sri Lanka
65
 Section -4 (Sports)
pulled India out of the dismal 156th spot. India's
win against Syria in Momday's final was not
counted since it ended in tie-breakers.
Syria, however, stayed at the 95th spot while Leba-
non, who had defeated India in the group stage,
dropped two places to the 150th spot. Second run-
ners-up Kyrgyzstan, despite losing two matches
in the tournament, stunned everybody by jump-
ing 17 places to the 143rd spot while Sri Lanka
dropped three places to the 159th spot.
Meanwhile, South American champions Brazil are
on top of the FIFA rankings followed by Euro win-
ners Spain in the second place while the Dutch
are third. Germany and world champion Italy are
joint fourth.
» Roger Federer has become the first 50-million
dollar man in tennis. The world No 1 picked up
just over 19,000 dollars in prize money following
a 6-1 6-3 7-5 first-round win over American teen-
ager Devin Britton to bring his career total to a
staggering 30.75 million pounds.Federer has won
a record 15 Grand Slams.
» India's Jwala Gutta and Valiyaveetil Diju claimed
their biggest career victory on Aug 30 when they
defeated Indonesian Hendra Aprida Gunawan and
Vita Marissa 23-21, 21-18 to win the mixed
doubles title at the Chinese Taipei Grand Prix Gold
badminton.
The World No.7 Indian pair, seeded third in the
tournament, survived a tough battle against the
Indonesians en route to their maiden Grand Prix
Gold title, also the first by any Indian combina-
tion. The semi-final was also an intensely fought
contest, where Diju and Gutta outlasted Malay-
sians Liu Ying Goh and Peng Soon Chan 21-11,
17-21, 24-22.
Gutta and Diju had lost to both pairs earlier, but
made it even this time.
The victory came as a advanced birthday gift for
Jwala, who turns 26 Sept 7. The Indian pair has
been making waves on the international scene
Copyright © 2009 | WWW.UPSCPORTAL.COM
since its come-back in early 2008, after a year's
break. Their graph has been steadily rising after
some stupendous performance. They won the
Bitburger Open and Bulgarian Open last year and
reached the final of the Indian Open Grand Prix
Gold in March.
The entered the top-10 in rankings and made it to
the quarterfinals of the World Badminton Cham-
pionship in Hyderabad earlier this month.
» India's Yuki Bhambri shrugged off an indiffer-
ent start to beat compatriot and top seed Vishnu
Vardhan 6-4, 6-3, to win his fourth International
Tennis Federation (ITF) title in the USD 10,000
event at the DLTA complex in New Delhi on Aug
29.
It was 17-year-old Yuki's third successive win in
four meetings with Vardhan and second in a fi-
nal. For Vardhan, it was his second straight loss
in the three consecutive finals at the venue.
The 22-year-old from Andhra Pradesh, in fact, led
3-0 in the first set, Yuki dropping serve in the
second game committing three double-faults. But
Yuki bounced back in style, firing three aces on
the trot to win his first game of the match.
That gave confidence to the Delhi youngster, who
broke Vardhan with a forehand winner in the sev-
enth game to even things out and then reeled off
three games to take the first set. The win will fetch
Yuki $1,300 and 17 ATP points while Vardhan
will pocket $900 and 9 ATP points.
» Chinese domination: Lin Dan and Lan Lu ruled
the roost at the World badminton championship,
clinching the men’s and women’s singles titles in
Hyderabad on Aug 16. Lin Dan won his third
straight world title defeating second-seeded fel-
low Chinese and World No. 2 Chen Jin 21-18, 21-
16 in a 46-minute men’s singles final in the BWF
World badminton championship which concluded
at the Gachibowli Indoor Stadium.
In the women’s final seventh-seeded Lan Lu of
China defeated two-time world champion and
66
 Section -4 (Sports)

fifth-seeded Xie Xingfang 23-21, 21-12 in 38 min-

utes to clinch her maiden singles title. Lan was a
bronze medallist in the last edition. In the
women’s singles final, it was the youthful exu-
berance of the seventh-seeded, Lu which prevailed
over the 28-year-old Xie. Lu went in for long ral-
lies and won most of them.
Two upsets marked the doubles competitions. In
mixed doubles, seventh-seeds Thomas Laybourn
and Kamilia Rytter Juhl ensured a grand finish to
their dream run, shocking two-time world cham-
pions and second-seeded Nova Widianto and
Liliyana Natsir of Indonesia 21-13, 21-17 to give
Denmark its first gold in the Worlds after a gap of
six years. The women’s doubles final saw Yawen
Zhang and Tingting Zhao of China getting the
better of their teammates and second-seeded Shu
Cheng and Yunlei Zhao 17-21, 21-17, 21-16.

The results (All Finals)

Men’s Singles: Lin Dan (Chn) bt Chen Jin (Chn)

21-18, 21-16.

Men’s Doubles: Cai Yun & Fu Haifeng (Chn) bt

Jung Jae Sung & Lee Yong Dae (Kor) 21-18, 16-
21, 28-26.

Women’s Singles: Lan Lu (Chn) bt Xie Xingfang

(Chn) 23-21, 21-12.

Women’s Doubles: Yawen Zhang & Tingting

Zhao (Chn) bt Shu Cheng & Yunlei Zhao (Chn)
17-21, 21-17, 21-16.

Mixed Doubles: Thomas Laybourn & Kamilia

Ryttern Juhl (Den) bt Nova Widianto & Liliyana
Natsir (Ina) 21-13, 21-17.

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Section -1 (Hindi Article : Climate Change)

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 Section -5 (Awards)
Awards
» President Pratibha Devisingh Patil has presented
the National Sports awards to 25 sportspersons at
an impressive ceremony in Rashtrapati Bhawan
in New Delhi on Aug.29. In a unique departure
from established tradition, the coveted Rajiv
Gandhi Khel Ratna award was presented to three
sportspersons - two boxers and a wrestler - for
the first time.The Rajiv Gandhi Khel Ratna Award
was presented to woman boxer M C Marykom and
Beijing bronze medalist boxer Vijender Singh, and
to wrestler Sushil Kumar.
The country's best boxer and four-time World
Champion, MC Mary Kom, got the Rajiv Gandhi
Khel Ratna after applying for it for the past three
years.
Vijender Kumar got the highest national sports
award a year after he won the bronze medal at
the Beijing Olympics, while wrester Sushil Kumar
also got the Rajiv Gandhi Khel Ratna award a year
after winning India a bronze medal at the Beijing
Olympics.
Badminton ace Saina Nehwal received the Arjuna
award for her excellent show in the last one year,
as also cricketer Gautam Gambhir.Badminton
coach Pullela Gopichand achieved the rare feat of
being the only sportsperson in the nation to have
won the Khel Ratna, the Arjuna Award and the
Padma Shree and now the Dronacharya award due
to Saina Nehwal's superb performance.
Olympic medallist Sushil’s coach Satpal and former
All England Badminton champion and Saina`s
coach Pullela Gopichand were presented the
Dronacharya Award.
The prize money for the Rajiv Gandhi Khel Ratna,
Arjuna, Dronacharya and Dhyanchand Awards
have been increased this year. Khel Ratna prize
money has been raised from Rs.500,000 to
Rs.750,000. The prize money for the Arjuna,
Dronacharya and Dhyanchand Awards has been
increased from Rs.300,000 to Rs.500,000.
The government instituted this year a new award,
Rashtriya Khel Protsahan Puruskar, to recognise
the contribution made to sports by entities other
Copyright © 2009 | WWW.UPSCPORTAL.COM
than sportspersons and coaches. Under the new
category, Railways got the award for Employment
of Sportsperson and Sports Welfare Measures.
Railway Minister Mamata Banerjee received the
award.
TATA Steel bagged two awards for Rashtriya Khel
Protsahan Puruskar. They got it for Community
Sports Identification and Nurturing of Budding
Young Talent, and Establishment and Manage-
ment of Sports Academies of Excellence.
List of Awardees
Rajiv Khel Ratna: M.C. Marykom (boxer),
Vijender Kumar (boxer) and Sushil Kumar (wres-
tling)
Arjuna Award: Mangal Singh Champia (archery),
Sinimol Paulose (athletics), Saina Nehwal (bad-
minton), L. Sarita Devi (boxing), Tania Sachdeva
(chess), Gautam Gambhir (cricket), Ignatius Tirkey
(hockey), Surinder Kaur (hockey), Pankaj Shirsat
(kabaddi), Satish Joshi (rowing), Ranjan Sodhi
(shooting), Poulami Ghatak (table tennis),
Yogeshwar Dutt (wrestling), G.L. Yadav (yacht-
ing), Parul Parmar (badminton disabled)
Dronacharya Award: Baldev Singh (hockey),
Jaidev Bisht (boxing), Satpal (wrestling) and Pullela
Gopichand (badminton)
Dhyanchand Award: Ishar Singh Deol (athlet-
ics), Satbir Singh Dahya (wrestling).
Rashtriya Khel Protsahan Puruskar
Community Sports Identification and Nurtur-
ing of Budding Young Talent: TATA Steel Ltd
Establishment and Management of Sports Acad-
emies of Excellence: TATA Steel Ltd
Employment of Sportspersons and sports wel-
fare measures: Railways Sports Promotion Board
69
 Section -5 (Awards)
» Accenture Services Limited, India (Accenture
India) has won the inaugural Asian Human Capi-
tal Award. Accenture India will receive their
award at the Singapore Human Capital Summit
on 29 September from Singapore's Minister for
Manpower, Mr Gan Kim Yong. Conferred by the
Ministry of Manpower, INSEAD and CNBC Asia
Pacific, the annual Award is the first of its kind
that recognises innovative people practices
adopted by organisations in Asia that have
achieved significant business impact.
A total of 44 entries were received from 7 coun-
tries across Asia for the prestigious Asian Human
Capital Award 2009.
» State-run steelmaker Steel Authority of India
Ltd (SAIL) announced its "SAIL HR Excellence
Awards" for seven Indian manufacturing firms
including Tata Motors and Jindal Steel. The SAIL
has instituted the award to commemorate its 50th
year of production. The companies that have been
awarded in the large scale industries category are
Tata Motors, Hindustan Petroleum Corp Ltd
(HPCL) and Moser Baer.
In the medium scale category, Jindal Steel and
Castrol won the awards, while Honeywell and
ITW Signode were named winners the small scale
category.
The jury that selected the winners included
Roongta, National Knowledge Commission Chair-
man Sam Pitroda, HDFC Ltd chairman Deepak
Parikh and T.V. Rao and Neharika Vohra of the
IIM-Ahmedabad.
» Seven Indian cricketers dominate this year's vari-
ous LG ICC Annual Awards for 2009 to be an-
nounced in Mumbai later on Sept.2.
Indian skipper Mahendra Singh Dhoni, openers
Gautam Gambhir and Virender Sehwag, off-spin-
ner Harbhajan Singh, middle-order bats V V S
Laxman and Yuvraj Singh and fast bowler Zaheer
Khan feature in the list. Dhoni, Gambhir and
Copyright © 2009 | WWW.UPSCPORTAL.COM
Harbhajan Singh have made the cut for the Crick-
eter of the Year award.
The trio has also been nominated, in the initial
list, for the Test player of the year award along
with stylish V V S Laxman.
For the coveted One-day International player of
the year, skipper Dhoni, prolific batsman Yuvraj
Singh and opener Virender Sehwag have made it
to the initial list of nominees.
Indian pacer Zaheer Khan is a strong contender
for the T20 Performer of the Year award.
Indian opener Virender Sehwag and former crick-
eter Ravi Shastri announced the names of the
nominees along with the Chief Executive of the
International Cricket Council, Haroon Lorgat.
The sixth ICC annual awards ceremony is to be
held at Johannesburg during the ICC Champions
Trophy.
There are eight individual prizes, including the
Sir Garfield Sobers Trophy for the ICC Cricketer
of the Year. The winners of seven individual
awards would be chosen on the basis of voting
done by a 25-person panel from around the world
made up of former players, media personnel and
an elite umpire and match referee.
Another 16-person group featuring former play-
ers and other experts on the women's game would
vote the nominations for the Women's Cricketer
of the Year award. The other three awards are
reserved for the Test Team of the Year, the ODI
Team of the Year and the Spirit of Cricket award.
Performances of players in the period between
August 2008 and August 2009 would be taken into
account for deciding the awards.
» Recently European Council against Torture and
Discrimination has announced the name of Sir
Vikrant Singh as the winner of Mahatma Gandhi
Award 2009 for his contribution towards educa-
70
 Section -5 (Awards)
tional field. Sir Vikrant Singh, Vice Chancellor of
University of Antarcticland has been known for
his exemplary work in the area of Higher Educa-
tion and better livelihood.
European Council Against Torture and Discrimi-
nation is an international Non Governmental
Organisation based in Hungary and patronised by
Prince Gabriel Inellas Paleologo within a Temple
Order (Supremus Militaris Templi
Hirerosolymitani Ordo) in 1986.Ambassador Dr
Lamartine Hollanda Junior was the recipient of
Mahatma Gandhi Award 2008 organised in Monte
Carlo, Monaco.
» A newspaper produced entirely by women in
rural India is among the four winners of this year`s
Literacy Prizes awarded by the United Nations
Educational, Scientific and Cultural Organization
(Unesco).Khabar Lahariya, the fortnightly news-
paper distributed to more than 20,000 readers in
Uttar Pradesh, is entirely created and marketed
by newly literate "low caste" women who are
training as journalists in Chitrakoot and Banda
districts.The King Sejong Literacy Prize was given
to this fortnightly paper, started by Nirantar — a
centre for gender and education based in New
Delhi and Uttar Pradesh.
In 1989, the Unesco`s King Sejong Literacy Prize
was instituted by South Korea. It is named after
Sejong the Great of the 14th century who created
the Korean alphabet Hangul and is remembered
for his contribution to education in the areas of
science, technology and literature. Each winner
is awarded $20,000. Nirantar has developed a
method of training women as journalists, which
involves developing their literacy skills as well as
honing their reporting abilities. This includes talk-
ing to public figures, gathering information and
sharpening their editing skills.
The coverage of Khabar Lahriya includes politics,
crime, social issues and entertainment for their
readership that spans 400 villages in both districts
of India`s most populous state.
Copyright © 2009 | WWW.UPSCPORTAL.COM
The publication began in May 2002 in Chitrakoot
and a second edition was launched in the adjoin-
ing Banda district in October 2006, according to
the NGO`s website. It is written in the local dia-
lect Bundeli for its Bundelkhandi readership.
The other prizes given by Unesco in recognition
of innovative programmes designed to teach
women, adolescents and other marginalised popu-
lations how to read and write, went to programmes
in Afghanistan, Burkina Faso and the Philippines.
The Pashai Language Development Project in Af-
ghanistan provides literacy, livelihood, public
health and nutrition education to about 1,000 eth-
nic minority Pashai men and women annually.
An honourable mention also went to a programme
in Bhutan for its holistic approach to literacy and
its success in reaching remote areas, with an em-
phasis on literacy as an integral part of the
country`s "Gross National Happiness" as well as
its focus on adults and out-of-school youth, par-
ticularly women and girls. The theme for this
year`s awards was "Literacy and Empowerment".
» Coal India Ltd has bagged the Standing Confer-
ence of Public Sector Enterprises (SCOPE) award
for “Excellence and outstanding contribution to
the public sector management” in the Institutional
category 2007-08 on Aug. 16.
CIL has bagged the Gold Trophy in the institu-
tional category. Selection of the award was based
on criteria devised and evaluated by International
Management Institute (IMI) and a panel of emi-
nent persons as jury. Former Chief Justice of In-
dia Mr P.N. Bhagwati was the Chairman of the
jury panel.
CIL employs approximately four lakh people. The
company was recently offered two exploratory
coal blocks in Mozambique through a bi-lateral
concession agreement. The company has produced
a little over 400 million tonnes of coal during the
last fiscal and is aiming to produce 430 mt in the
current fiscal.
71
 Section -5 (Awards)

» Mr SK Roongta chairman of Steel Authority of India Ltd has won the Award for Excellence and Out-
standing Contribution to the Public Sector Management in the individual category for the 2007-08 period.

Standing Conference of Public Enterprises said that Mr Roongta is the first SAIL chief to get this award for
2007-08. Other awardees include Coal India, which bagged the gold trophy in the institutional category
and Heavy Engineering Corp Ltd, which won the same trophy in the special institutional turnaround
category. Electronics Corporation of India and WAPCOS Ltd also won gold trophies in the medium and
smaller public sector enterprises categories, respectively.

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 Section -6 (Mains Special: Foreign Relations of India)
Foreign Relations of India
India's Foreign Policy
India's foreign policy
has always regarded the
concept of neighbor-
hood as one of widening
concentric circles,
around a central axis of
historical and cultural
commonalties. The
guiding principles of
India's Foreign Policy have been founded on
Panchsheel, pragmatism and pursuit of national
interest. In a period of rapid and continuing
change, foreign policy must be capable of respond-
ing optimally to new challenges and opportuni-
ties. It has to be an integral part of the larger ef-
fort of building the nation's capabilities through
economic development, strengthening social fab-
ric and well-being of the people and protecting
India's sovereignty and territorial integrity. India's
foreign policy is a forward-looking engagement
with the rest of the world, based on a rigorous,
realistic and contemporary assessment of the bi-
lateral, regional and global geo-political and eco-
nomic milieu. As many as 20 million people of
Indian origin live and work abroad and constitute
an important link with the mother country. An
important role of India's foreign policy has been
to ensure their welfare and well being within the
framework of the laws of the country where they
live.
Neighbours Countries:-
Afghanistan–India relations
Bilateral relations between the Republic of India
and the Islamic State of Afghanistan have been
traditionally strong and friendly. While the In-
dian Republic was the only South Asian country
to recognise the Soviet-backed Democratic Repub-
lic of Afghanistan in the 1980s, its relations were
diminished during the Afghan civil wars and the
rule of the Islamist Taliban in the 1990s. India
aided the overthrow of the Taliban and became
the largest regional provider of humanitarian and
reconstruction aid. Afghanistan used to border
British India's Northwest Frontier Province
(NWFP) and congress dominated, which was
Copyright © 2009 | WWW.UPSCPORTAL.COM
home to a significant Pashtun population that
participated extensively in the Indian indepen-
dence movement. Everything changed and after
1947 the NWFP became a part of Pakistan, the
Republic of India and the modern State of Af-
ghanistan maintained significant cultural and eco-
nomic links. Films and music of India are widely
popular in Afghanistan and Afghan products such
as carpets, nuts and fruit are exported to India.
For most of their independent history, both na-
tions have enjoyed traditionally friendly relations
and have cooperated over respective conflicts with
Pakistan. Since April 2007, Afghanistan is eighth
member of SAARC after India endorsed Afghan
full membership.
Civil wars and Taliban: The Republic of India
was the only South Asian nation to recognise the
Soviet-backed Democratic Republic of Afghani-
stan and the Soviet Union's military presence in
Afghan territories, and provided humanitarian aid
to the country. Following the withdrawal of the
Soviet armed forces from Afghanistan in 1989,
republic of India and the international commu-
nity supported the coalition government that took
control, but relations and contacts ended with the
outbreak of another civil war, which brought to
power the Taliban, an Islamist militia supported
by Pakistan.
The Taliban regime was recognised only by Saudi
Arabia, Turkmenistan, Pakistan and the United
Arab Emirates (UAE). The rise of Islamism in Af-
ghanistan and the proliferation of Afghan
mujahideen in the militancy in Indian-adminis-
tered Kashmir turned the Taliban and Afghani-
stan into a security threat for the Government of
India. The destruction of the Bamiyan Buddha
monuments by the Taliban led to outrage and an-
gry protests by India, the birthplace of Buddhism.
In 1999, the Indian Airlines Flight 814 hijacked
by Muslim militants landed and stayed in
Kandahar in Afghanistan and the Taliban and
Pakistan's Inter-Services Intelligence (ISI) were
suspected of supporting them. India became one
of the key supporters of the anti-Taliban North-
ern Alliance.
74
 Section -6 (Mains Special: Foreign Relations of India)
Post-2001: During the U.S.-led invasion of Af-
ghanistan in 2001, India offered intelligence and
other forms of support for the Coalition forces.
After the overthrow of the Taliban, India estab-
lished diplomatic relations with the newly-estab-
lished democratic government, provided aid and
participated in the reconstruction efforts. India has
provided USD 650-750 million in humanitarian
and economic aid, making it the largest regional
provider of aid for Afghanistan.
The Indian Army's Border Roads Organisation is
constructing a major road in the remote Afghan
province of Nimroz. India's support and collabo-
ration extends to rebuilding of air links, power
plants and investing in health and education sec-
tors as well as helping to train Afghan civil ser-
vants, diplomats and police. India also seeks the
development of supply lines of electricity, oil and
natural gas.
Both nations also developed strategic and military
cooperation against Islamic militants. Owing to
the killing of an Indian national by Taliban mili-
tants in November 2005, India deployed 200 sol-
diers of the Indo-Tibetan Border Police (ITBP) to
provide security for Indian nationals and the
projects supported by India. Afghanistan strength-
ened its ties with India in wake of persisting ten-
sions and problems with Pakistan, which was sus-
pected of continuing to shelter and support the
Taliban. India pursues a policy of close coopera-
tion in order to bolster its standing as a regional
power and contain its rival Pakistan, which it
maintains is supporting Islamic militants in Kash-
mir and other parts of India.
Three MoUs (memorandum of understanding) for
strengthening cooperation in the fields of rural
development, education and standardization be-
tween the Bureau of Indian Standards(BIS) and
Afghan National Standardization Authority were
signed between India and Afghanistan during
Hamid Karzai's visit to India during 9-13 April
2006. An agreement providing $50 million to pro-
mote bilateral businesses between India and Af-
Copyright © 2009 | WWW.UPSCPORTAL.COM
ghanistan was signed during the visit of the Af-
ghan Foreign Minister Dr. Spanta between June
29 and July 1, 2006. During the same year, India
raised its aid package to Afghanistan by $150 mil-
lion, to $750 million. India also supported
Afghanistan's bid to become a member of the
South Asian Association for Regional Cooperation
(SAARC).
On July 7, 2008 the Indian embassy in Kabul was
attacked by a suicide car bomb - the deadliest at-
tack in Kabul since the fall of the Taliban in 2001.
The bombing killed 58 people and wounded 141.
Senior Indian Army officer Brigadier Ravi Datt
Mehta was entering the embassy gates in a car
along with V. Venkateswara Rao when the at-
tack took place. Both were killed in the blast. The
Afghan government had claimed that Pakistan's
ISI was involved in the attack.
During the 15th SAARC summit in Colombo, In-
dia pledged another USD $450 million along with
$750 million already pledged for ongoing and
forthcoming projects. In August 2008, Afghan
President Hamid Karzai visited New Delhi. This
visit further strengthened bilateral relations, and
Prime Minister Singh pledged further aid for Af-
ghanistan.
Bangladesh–India relations
Both Bangladesh and India are part of what is
known as the Indian subcontinent and have had a
long common cultural, economic and political his-
tory. The cultures of the two countries are simi-
lar; in particular Bangladesh and India's states
West Bengal and Tripura are all Bengali-speak-
ing. However, since the partition of the Indian
sub-continent in 1947, India emerged as an inde-
pendent state and Bangladesh (as East Bengal, later
rename to East Pakistan in 1956) was allocated as
a part of Pakistan. Following the bloody Libera-
tion War of 1971, Bangladesh gained her inde-
pendence and established relations with India. The
political relationship between India and
75
 Section -6 (Mains Special: Foreign Relations of India)
Bangladesh has passed through cycles of hiccups.
The relationship typically becomes favorable for
Bangladesh during periods of Awami League gov-
ernment.
During the Partition of India after independence
in 1947, the Bengal region was divided into two:
East Bengal (present-day Bangladesh) and West
Bengal. East Bengal was made a part of the Is-
lamic Republic of Pakistan due to the fact that
both regions had an overwhelmingly large Mus-
lim population, more than 85%. In 1955, the gov-
ernment of Pakistan changed its name from East
Bengal to East Pakistan.
There were some confrontations between the two
regions though. Firstly, in 1948, Muhammad Ali
Jinnah declared that only Urdu would the sole of-
ficial language of the entire nation, though more
than 95% of the East Bengali population spoke
Bengali. And when protests broke out in
Bangladesh on February 21, 1952, Pakistani po-
lice fired on the protesters, killing hundreds. Sec-
ondly, East Bengal/East Pakistan was allotted only
a small amount of revenue for its development out
of the Pakistani national budget. Therefore, a sepa-
ratist movement started to grow in the isolated
province. When the main separatist party the
Awami League, headed by Sheikh Mujibur
Rahman, won 167 of 169 seats up for grabs in the
1970 elections and got the right to form the gov-
ernment, the Pakistan president under Yahya
Khan refused to recognize the election results and
arrested Sheikh Mujibur Rahman. This led to
widespread protests in East Pakistan and in 1971,
the Liberation War, followed by the declaration
(by Sheikh Mujibur Rahman on 7 March 1971) of
the independent state of Bangladesh.
India under Indira Gandhi fully supported the
cause of the Bangladeshis and its troops and equip-
ment were used to fight the Pakistani forces. The
Indian Army also gave full support to the main
Bangladeshi guerrilla force, the Mukti Bahini. Fi-
nally, on 26 March, 1971, Bangladesh emerged as
Copyright © 2009 | WWW.UPSCPORTAL.COM
an independent state. Since then, there have been
several issues of agreement as well as of dispute.
Areas of agreement:-
1. India played 0a central role in the independence
of Bangladesh. About 250,000 Indian soldiers
fought for, and 20,000 losing their lives for the
cause of an independent Bangladesh. India shel-
tered over 10 million refugees who were fleeing
the atrocities of the occupying West Pakistan
Army. India and its ally Bhutan were the first
countries to recognize Bangladesh as an indepen-
dent nation. Bangladeshis have some awareness
of their obligation and gratitude towards India.
2. Sheikh Mujibur Rahman’s first foreign visit as
Prime Minister and the Founding Father of the
newly born nation was to India and it was then
decided Indo-Bangladesh relations would be
guided by principles of democracy, socialism, non-
alignment and opposition to colonialism and rac-
ism. Indira Gandhi too visited Bangladesh in 1972
and assured that India would never interfere in
the internal affairs of the country.
3. In 1972, both the countries signed a ‘Treaty of
Friendship and Peace’. An Indo-Bangladesh Trade
Pact was also signed.
4. The mainstream party Awami League is gener-
ally considered to be friendly towards India.
Areas of contention:-
1. A major area of contention has been the con-
struction and operation of the Farakka Barrage by
India to increase water supply in the river Hoogly.
Bangladesh insists that it does not receive a fair
share of the Ganga waters during the drier sea-
sons, and gets flooded during the monsoons when
India releases excess waters.
2. There have also been disputes regarding the
transfer of Teen Bigha Corridor to Bangladesh.
Part of Bangladesh is surrounded by the Indian
state of West Bengal. On 26 June, 1992, India
76
 Section -6 (Mains Special: Foreign Relations of India)
leased three bigha land to Bangladesh to connect
this enclave with mainland Bangladesh. There is
dispute regarding the indefinite nature of the lease.
3. Indian border force's killing of people while
crossing the border has been the topic of disputes.
In August 2008, Indian Border Security Force of-
ficials said that they killed 59 smugglers and ille-
gal immigrants (34 Bangladeshis and 21 Indians)
who were trying to cross the border between In-
dia and Bangladesh during a 6 month period. On
November 16, 2008, 3 people including a women
and her child were shot dead in a Bangladeshi vil-
lage by a drunken BSF soldier before he was ap-
prehended.
4. Terrorist activities carried out by outfits based
in both countries, like Banga Sena and Harkat-ul-
Jihad-al-Islami. Recently India and Bangladesh
had agreed to jointly fight terrorism.
5. The Sharing of Ganges Waters was also a mat-
ter of dispute.
6. The unresolved issue of the status of the
Chittagonian plains of Bengal as part of CHT on
the (grounds of ethnic affiliation).
Bhutan–India relations
The bilateral relations between the Himalayan
Kingdom of Bhutan and the Republic of India have
been traditionally close. With independence in
1947, India inherited the suzerainty over Bhutan
enjoyed by the British Raj. Although modified and
modernised since, India remains influential over
Bhutan's foreign policy, defence and commerce.
For much of history, Bhutan has preserved its iso-
lation from the outside world, staying out of in-
ternational organisations and maintaining few bi-
lateral relations. Bhutan became a protectorate of
British India after signing a treaty in 1910 allow-
ing the British to "guide" its foreign affairs and
defence. Bhutan was one of the first to recognize
India's independence in 1947 and both nations
fostered close relations, their importance aug-
Copyright © 2009 | WWW.UPSCPORTAL.COM
mented by the annexation of Tibet in 1950 by the
People's Republic of China and its border disputes
with both Bhutan and India, which saw close ties
with Nepal and Bhutan to be central to its "Hima-
layan frontier" security policy. India shares a 605
kilometres (376 miles) border with Bhutan and is
its largest trading partner, accounting for 98 per-
cent of its exports and 90 percent of its imports.
1949 Treaty : On August 8, 1949 Bhutan and In-
dia signed the Treaty of Friendship, calling for
peace between the two nations and non-interfer-
ence in each other's internal affairs. However,
Bhutan agreed to let India "guide" its foreign policy
and both nations would consult each other closely
on foreign and defence affairs. The treaty also es-
tablished free trade and extradition protocols.
The occupation of Tibet by Communist China
brought both nations even closer. In 1958, the
then-Indian Prime Minister Jawaharlal Nehru vis-
ited Bhutan and reiterated India's support for
Bhutan's independence and later declared in the
Indian Parliament that any aggression against
Bhutan would be seen as aggression against India.
The period saw a major increase in India's eco-
nomic, military and development aid to Bhutan,
which had also embarked on a programme of
modernisation to bolster its security. While India
repeatedly reiterated its military support to
Bhutan, the latter expressed concerns about India's
ability to protect Bhutan against China while
fighting a two-front war involving Pakistan. De-
spite good relations, India and Bhutan did not com-
plete a detailed demarcation of their borders until
the period between 1973 and 1984. Border demar-
cation talks with India generally resolved disagree-
ments except for several small sectors, including
the middle zone between Sarpang and Geylegphug
and the eastern frontier with the Indian state of
Arunachal Pradesh.
Distancing from India: Although relations re-
mained close and friendly, the Bhutanese govern-
ment expressed a need to renegotiate parts of the
treaty to enhance Bhutan's sovereignty. Bhutan
began to slowly assert an independent attitude in
77
 Section -6 (Mains Special: Foreign Relations of India)
foreign affairs by joining the United Nations in
1971, recognising Bangladesh and signing a new
trade agreement in 1972 that provided an exemp-
tion from export duties for goods from Bhutan to
third countries. Bhutan exerted its independent
stance at the Non-Aligned Movement (NAM)
summit conference in Havana, Cuba also in 1979,
by voting with China and some Southeast Asian
countries rather than with India on the issue of
allowing Cambodia's Khmer Rouge to be seated
at the conference. Unlike in Nepal, where its 1950
treaty with India is subject of great political con-
troversy and nationalist resentment for decades,
the nature of Bhutan's relationship with India has
not been affected by concerns over the treaty pro-
visions. From 2003 to 2004, the Royal Bhutanese
Army conducted operations against anti-India in-
surgents of the United Liberation Front of Assam
(ULFA) that were operating bases in Bhutan and
using its territory to carry out attacks on Indian
soil.
2007 treaty : India renegotiated the 1949 treaty
with Bhutan and signed a new treaty of friend-
ship in 2007. The new treaty replaced the provi-
sion requiring Bhutan to take India's guidance on
foreign policy with broader sovereignty and not
require Bhutan to obtain India's permission over
arms imports. In 2008, Indian Prime Minister Dr.
Manmohan Singh visited Bhutan and expressed
strong support for Bhutan's move towards democ-
racy. India allows 16 entry and exit points for
Bhutanese trade with other countries with excep-
tion only being the PRC, and has agreed to im-
port a minimum of 5,000 megawatts of electricity
from Bhutan by 2020.
Burma–India relations
Bilateral relations between Burma (officially the
Union of Myanmar) and the Republic of India have
improved considerably since 1993, overcoming
strains over drug trafficking, the suppression of
democracy and the rule of the military junta in
Burma. Burma is situated to the south of the states
of Mizoram, Manipur, Nagaland and Arunachal
Pradesh in Northeast India. The proximity of the
Copyright © 2009 | WWW.UPSCPORTAL.COM
People's Republic of China give strategic impor-
tance to Indo-Burmese relations. The Indo-Bur-
mese border stretches over 1,600 miles.
India was one of the leading supporters of Bur-
mese independence and established diplomatic
relations after Burma's independence from Great
Britain in 1948. For many years, Indo-Burmese
relations were strong due Burma previously hav-
ing been a province of India, due to cultural links,
flourishing commerce, common interests in re-
gional affairs and the presence of a significant In-
dian community in Burma. India provided con-
siderable support when Burma struggled with re-
gional insurgencies. However, the overthrow of
the democratic government by the Military of
Burma led to strains in ties. Along with much of
the world, India condemned the suppression of
democracy and Burma ordered the expulsion of
the Burmese Indian community, increasing its
own isolation from the world. Only China main-
tained close links with Burma while India sup-
ported the pro-democracy movement.
A major breakthrough occurred in 1987 when the
then-Indian Prime Minister Rajiv Gandhi visited
Burma, but relations worsened after the military
junta's bloody repression of pro-democracy agita-
tions in 1988, which led to an influx of Burmese
refugees into India. However, since 1993 the gov-
ernments of the Indian Prime Ministers P.V.
Narasimha Rao and Atal Bihari Vajpayee changed
course and began cultivating ties with Myanmar,
as part of a wider foreign policy approach aimed
to increase India's participation and influence in
Southeast Asia and to counteract the growing in-
fluence of the People's Republic of China.
Commercial relations: India is the largest mar-
ket for Burmese exports, buying about USD 220
million worth of goods in 2000; India's exports to
Burma stood at USD 75.36 million. India is Burma’s
4th largest trading partner after Thailand, China
and Singapore, and second largest export market
after Thailand, absorbing 25 percent of its total
exports. India is also the seventh most important
source of Burma’s imports. The governments of
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 Section -6 (Mains Special: Foreign Relations of India)
India and Burma had set a target of achieving $1
billion and bilateral trade reached USD 650 mil-
lion U.S. dollars by 2006. The Indian government
has worked to extend air, land and sea routes to
strengthen trade links with Myanmar and estab-
lish a gas pipeline. While the involvement of
India's private sector has been low and growing
at a slow pace, both governments are proceeding
to enhance cooperation in agriculture, telecom-
munications, information technology, steel, oil,
natural gas, hydrocarbons and food processing. The
bilateral border trade agreement of 1994 provides
for border trade to be carried out from three des-
ignated border points, one each in Manipur,
Mizoram and Nagaland.
On February 13, 2001 India and Burma inaugu-
rated a major 160 kilometre highway, called the
Indo-Myanmar Friendship Road, built mainly by
the Indian Army's Border Roads Organisation and
aimed to provide a major strategic and commer-
cial transport route connecting North-East India
which connects South Asia with Southeast Asia.
Development of strategic ties: India's move to
forge close relations with Burma are motivated
by a desire to counter China's growing influence
as a regional leader and enhance its own influ-
ence and standing. Concerns and tensions in-
creased in India over China's extensive military
cooperation and involvement in developing ports,
naval and intelligence facilities and industries,
specifically the upgrading of a naval base in Sittwe,
a major seaport located close to the eastern Indian
city of Kolkata. India's engagement of the Bur-
mese military junta has helped ease the regime's
international isolation and lessen Burma's tradi-
tional reliance on China. Both nations sought to
cooperate to counteract drug trafficking and in-
surgent groups operating in the border areas. In-
dia and Myanmar are leading members of
BIMSTEC and the Mekong-Ganga Cooperation,
along with Vietnam, Laos, Cambodia and Thai-
land, helping India develop its influence and ties
amongst Southeast Asian nations. India was slow
and hesitant in reacting to the 2007 Burmese anti-
government protests that had drawn overwhelm-
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ing international condemnation. India also de-
clared that it had no intention of interfering in
Burma's internal affairs and that the Burmese
people would have to achieve democracy them-
selves. This low-key response has been widely
criticised both within India and abroad as weak-
ening India's credentials as a leading democratic
nation.
India–Maldives relations
Bilateral relations between the Republic of India
and the Republic of Maldives have been friendly
and close in strategic, economic and military co-
operation. India contributed to maintaining secu-
rity on the island nation and has forged an alli-
ance with respect to its strategic interests in the
Indian Ocean.
The Maldives is located south of India's
Lakshadweep Islands in the Indian Ocean and
approximately 700 kilometres from Sri Lanka.
Both nations established diplomatic relations af-
ter the independence of Maldives from British rule
in 1966. Since then, India and Maldives have de-
veloped close strategic, military, economic and
cultural relations. India has supported Maldives'
policy of keeping regional issues and struggles
away from itself, and the latter has seen friend-
ship with India as a source of aid as well as a
counter-balance to Sri Lanka, which is in proxim-
ity to the island nation and its largest trading part-
ner.
Development of bilateral relations: India and
Maldives officially and amicably decided their
maritime boundary in 1976, although a minor dip-
lomatic incident occurred in 1982 when the
brother of the President of Maldives Maumoon
Abdul Gayoom declared that the neighbouring
Minicoy Island that belonged to India were a part
of Maldives; Maldives quickly and officially de-
nied that it was laying claim to the island. India
and Maldives signed a comprehensive trade agree-
ment in 1981. Both nations are founding mem-
bers of the South Asian Association for Regional
Cooperation (SAARC), the South Asian Economic
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 Section -6 (Mains Special: Foreign Relations of India)
Union and signatories to the South Asia Free Trade
Agreement. Indian and Maldivian leaders have
maintained high-level contacts and consultations
on regional issues.
Operation Cactus: In November 1988 speedboats
carrying 80 armed militants of the People's Lib-
eration Organisation of Tamil Eelam landed in
Maldives and along with allies who had infiltrated
the country, began taking over the government.
The plot, planned in Sri Lanka by the Tamil na-
tionalist group was believed to be an attempt by a
Maldivian businessman and politician opposed to
the regime of the President of Maldives Maumoon
Abdul Gayoom to gain control while the PLOTE
sought a safe haven and base for its activities.
The militants took control of the airport in Male,
the national capital, but failed to capture the Presi-
dent of Maldives Maumoon Abdul Gayoom, who
had fled and asked for military aid from India on
November 3. The then-Indian Prime Minister
Rajiv Gandhi ordered 1,600 troops to aid the
Maldivian government. In a military operation
codenamed "Operation Cactus," Indian forces ar-
rived within 12 hours of the request for aid being
made, squashed the coup attempt and achieved
full control of the country within hours. 19
PLOTE militants were killed and 1 Indian soldier
wounded.
India's intervention was endorsed by other nations
such as the United States, Soviet Union, Great Brit-
ain and its neighbours Nepal and Bangladesh. Its
speedy and decisive victory and the restoration of
the Maldivian government brought both nations
even closer in friendship and cooperation. In wake
of internal security crises and tensions with Sri
Lanka, Maldives saw its relationship with India as
a source of future security.
Commercial relations: Since the success of Opera-
tion Cactus, the relations between India and
Maldives have expanded significantly. India has
provided extensive economic aid and has partici-
pated in bilateral programs for the development
of infrastructure, health, civil aviation, telecom-
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munications and labour resources. It established
the Indira Gandhi Memorial Hospital in Male, the
capital of Maldives, expanded telecommunications
and air links and increased scholarships for
Maldivian students. While India's exports to
Maldives during 2006 were worth Rs. 384 crores,
imports were worth less than Rs. 6 crores. The
State Bank of India has contributed more than USD
500 million to aid the economic expansion of
Maldives. India and Maldives have announced
plans to jointly work to expand fisheries and tuna
processing.
Military relations: On 7 March 2005 Defence
Attaché's Office ( DAO) was established in the
High commission of the Republic of Maldives in
India by making Lt.Colonel Abdulla Shamaal as
first defense attaché.This was the first Defence
Attaché's office set up abroad. Given, that defence
relations is a major component of the Indo-
Maldives bilateral relations and both counties have
a long record of strengthening their defense ties
through a wide range of activities, such as Mili-
tary Joint Exercises, exchange of visits of senior
officers of the Armed forces, training of large num-
ber of defense services personnel from the
Maldives at Indian defense establishments, provi-
sion of military aid, and intelligence and informa-
tion sharing, the necessity for a DAO was felt.
Hence, the DAO was instituted to further
strengthen and consolidate the already existing bi-
lateral defense relations in a mutually beneficial
manner. As a result, the DAO functions as the
primary mechanism integrated in the resident
Mission of the Republic of Maldives in New Delhi,
India to guide direct and coordinate defense ties
between the two countries.
On April 2006 Indian Navy gifted a Trinkat Class
Fast Attack Craft of 46m length to Maldives Na-
tional Defence Force's Coast Guard.
Indo-Nepalese relations
Relations between India and Nepal are close yet
fraught with difficulties stemming from geogra-
phy, economics, the problems inherent in big
80
 Section -6 (Mains Special: Foreign Relations of India)
power-small power relations, and common eth-
nic, linguistic and cultural identities that overlap
the two countries' borders. New Delhi and
Kathmandu initiated their intertwined relation-
ship with the 1950 Indo-Nepal Treaty of Peace
and Friendship? and accompanying letters that
defined security relations between the two coun-
tries, and an agreement governing both bilateral
trade and trade transiting Indian soil. The 1950
treaty and letters stated that "neither government
shall tolerate any threat to the security of the other
by a foreign aggressor" and obligated both sides
"to inform each other of any serious friction or
misunderstanding with any neighboring state
likely to cause any breach in the friendly rela-
tions subsisting between the two governments."
These accords cemented a "special relationship"
between India and Nepal that granted Nepal pref-
erential economic treatment and provided
Nepalese in India the same economic and educa-
tional opportunities as Indian citizens.
Independent Political History: In the 1950s,
Nepal welcomed close relations with India, but as
the number of Nepalese living and working in
India increased and the involvement of India in
Nepal's economy deepened in the 1960s and af-
ter, so too did Nepalese discomfort with the spe-
cial relationship. Tensions came to a head in the
mid-1970s, when Nepal pressed for substantial
amendments in its favor in the trade and transit
treaty and openly criticized India's 1975 annex-
ation of Sikkim which was considered as part of
Greater Nepal. In 1975 King Birendra Bir Bikram
Shah Dev proposed that Nepal be recognized in-
ternationally as a zone of peace; he received sup-
port from China and Pakistan. In New Delhi's
view, if the king's proposal did not contradict the
1950 treaty and was merely an extension of non-
alignment, it was unnecessary; if it was a repudia-
tion of the special relationship, it represented a
possible threat to India's security and could not
be endorsed. In 1984 Nepal repeated the proposal,
but there was no reaction from India. Nepal con-
tinually promoted the proposal in international
forums, with Chinese support; by 1990 it had won
the support of 112 countries.
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In 1978 India agreed to separate trade and transit
treaties, satisfying a long-term Nepalese demand.
In 1988, when the two treaties were up for re-
newal, Nepal's refusal to accommodate India's
wishes on the transit treaty caused India to call
for a single trade and transit treaty. Thereafter,
Nepal took a hard-line position that led to a seri-
ous crisis in India-Nepal relations. After two ex-
tensions, the two treaties expired on March 23,
1989, resulting in a virtual Indian economic block-
ade of Nepal that lasted until late April 1990. Al-
though economic issues were a major factor in the
two countries' confrontation, Indian dissatisfac-
tion with Nepal's 1988 acquisition of Chinese
weaponry played an important role. New Delhi
perceived the arms purchase as an indication of
Kathmandu's intent to build a military relation-
ship with Beijing, in violation of the 1950 treaty
and letters exchanged in 1959 and 1965, which
included Nepal in India's security zone and pre-
cluded arms purchases without India's approval.
India linked security with economic relations and
insisted on reviewing India-Nepal relations as a
whole. Nepal had to back down after worsening
economic conditions led to a change in Nepal's
political system, in which the king was forced to
institute a parliamentary democracy. The new
government sought quick restoration of amicable
relations with India.
The special security relationship between New
Delhi and Kathmandu was reestablished during
the June 1990 New Delhi meeting of Nepal's prime
minister Krishna Prasad Bhattarai and Indian
prime minister V.P. Singh. During the December
1991 visit to India by Nepalese prime minister
Girija Prasad Koirala, the two countries signed
new, separate trade and transit treaties and other
economic agreements designed to accord Nepal
additional economic benefits.
Indian-Nepali relations appeared to be undergo-
ing still more reassessment when Nepal's prime
minister Man Mohan Adhikary visited New Delhi
in April 1995 and insisted on a major review of
the 1950 peace and friendship treaty. In the face
of benign statements by his Indian hosts relating
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 Section -6 (Mains Special: Foreign Relations of India)
to the treaty, Adhikary sought greater economic
independence for his landlocked nation while si-
multaneously striving to improve ties with China.
In 2005, after King Gyanendra took over, Nepalese
relations with India soured. However, after the
restoration of democracy, in 2008, Prachanda, the
Prime Minister of Nepal, visited India, in Septem-
ber 2008. He spoke about a new dawn, in the bi-
lateral relations, between the two countries. He
said, "I am going back to Nepal as a satisfied per-
son. I will tell Nepali citizens back home that a
new era has dawned. Time has come to effect a
revolutionary change in bilateral relations. On
behalf of the new government, I assure you that
we are committed to make a fresh start." He met
Indian Prime minister, Manmohan Singh, and
Foreign Minister, Pranab Mukherjee. He asked
India to help Nepal frame a new constitution, and
to invest in Nepal's infrastructure, and its tourism
industry.
In 2008, Indo-Nepali ties got a further boost with
an agreement to resume water talks after a 4 year
hiatus. The Nepalese Water Resources Secretary
Shanker Prasad Koirala said the Nepal-India Joint
Committee on Water Resources meet decided to
start the reconstruction of breached Kosi embank-
ment after the water level goes down. During the
Nepal PM's visit to New Delhi in September the
two Prime Ministers expressed satisfaction at the
age-old close, cordial and extensive relationships
between their states and expressed their support
and cooperation to further consolidate the rela-
tionship.
The two issued a 22-point statement highlighting
the need to review, adjust and update the 1950
Treaty of Peace and Friendship, amongst other
agreements. India would also provide a credit line
of up to 150 crore rupees to Nepal to ensure unin-
terrupted supplies of petroleum products, as well
as lift bans on the export of rice, wheat, maize,
sugar and sucrose for quantities agreed to with
Nepal. India would also provide 20 crore as im-
mediate flood relief.
In return, Nepal will take measures for the "pro-
motion of investor friendly, enabling business en-
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vironment to encourage Indian...investments in
Nepal."
Furthermore, a three-tier mechanism at the level
of ministerial, secretary and technical levels will
be built to push forward discussions on the devel-
opment of water resources between the two sides.
Politically, India acknowledged a willingness to
promote efforts towards peace in Nepal. Indian
External affairs minister Pranab Mukherjee prom-
ised the Nepali Prime Minister Prachanda that he
would "extend all possible help for peace and de-
velopment."
In 2008, the Bollywood film Chandni Chowk to
China was banned in Nepal, because of a scene
suggesting the Gautama Buddha was born in In-
dia. Some protesters called for commercial boy-
cott of all Indian films.
Indo-Pakistan relations
Indo-Pakistani relations are grounded in the po-
litical, geographic, cultural, and economic links
between the Islamic Republic of Pakistan and the
Republic of India, two of the largest and fastest-
developing countries in South Asia. The two coun-
tries share much of their common geographic lo-
cation, and religious demographics (most notably
Islam, Hinduism, Sikhism, Buddhism); yet diplo-
matic relations between the two are defined by
numerous military conflicts and territorial dis-
putes.
Much of South Asia came under direct control of
Great Britain in the late 18th century. The Brit-
ish Raj over the Indian subcontinent lasted for
almost two centuries. 95% of the people living in
South Asia practised either Islam or Hinduism. The
Muslim League, headed by Jinnah, proposed the
Two Nation Theory in the early 20th century.
According to the theory, Muslims and others
shared little in common, and British India should
be divided into two separate countries, one for the
Muslims and the other for the Hindu majority,
which he feared would suppress the Muslim mi-
nority. The campaign gained momentum in early
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 Section -6 (Mains Special: Foreign Relations of India)
1940s and by the end of World War II, British
India's partition looked inevitable. The Partition
of India in 1947 created two large countries inde-
pendent from Britain: Pakistan as two wings in
the East and West, separated by India in the
middle. Soon after Independence, India and Paki-
stan established diplomatic relations. Subsequent
years were marked by bitter periodic conflict, and
the nations went to war four times. The war in
1971 ended in defeat and another partition of Pa-
kistan. The eastern wing split off as a new coun-
try named Bangladesh, while the western wing
continued as Pakistan.
There was some improvement in relations since
the mid-2000s. But relations soured again after the
2007 Samjhauta Express bombings by extremists
from India, and the 2008 Mumbai Terrorist At-
tacks by a group of Pakistani men, and now mu-
tual suspicion governs the relationship again.
Seeds of conflict: Millions of Muslims and Hin-
dus were killed in communal riots following the
partition of the British Empire. Millions of Mus-
lims living in India and Hindus and Sikhs living in
Pakistan emigrated in one of the most colossal
transfers of population in the modern age. Both
countries accused each other of not providing ad-
equate security to the minorities emigrating
through their territory. This served to increase
tensions between the newly-born countries.
According to the British plan for the partition of
British India, all the 680 princely states were al-
lowed to decide which of the two countries to
join. With the exception of a few, most of the
Muslim-majority princely-states acceded to Paki-
stan while most of the Hindu-majority princely
states joined India. However, the decisions of some
of the princely-states would shape the Pakistan-
India relationship considerably, in the years to
come.
Junagadh Dispute: Junagadh was a state on the
southwestern end of Gujarat, with the principali-
ties of The Indian point of view was that since
Junagadh was a state with a predominantly Hindu
Copyright © 2009 | WWW.UPSCPORTAL.COM
population it should be a part of India. Addition-
ally, since the state was encircled by Indian terri-
tory it should have been a part of India. Indian
politicians also stated that by giving Pakistan a
predominantly Hindu region to govern, the basis
of the two nation theory was contradicted.
The Pakistani point of view was that since
Junagadh had a ruler and governing body who
chose to accede to Pakistan, they should be al-
lowed to do so. Junagadh, having a coastline, could
have maintained maritime links with Pakistan.
Additionally, Pakistani politicians stated that the
two nation theory did not necessarily mean a clear
division of land and absolute transfer of popula-
tions as the sheer magnitude of such a proceeding
would wreak havoc upon millions.
Neither of the ten states were able to resolve this
issue amicably and it only added fuel to an already
charged environment.
Sardar Patel, India's then Defence Minister, felt
that if Junagadh was permitted to go to Pakistan,
it would create communal unrest across Gujarat.
The government of India gave Pakistan time to
void the accession and hold a plebiscite in
Junagadh to pre empt any violence in Gujarat.
Samaldas Gandhi formed a government-in-exile,
the Arzi Hukumat of the people of Junagadh. Patel
ordered the annexation of Junagadh's three prin-
cipalities. Junagadh, facing financial collapse, first
invited the Arzi Hukumat, and later the Govern-
ment of India to accept the reins of power.
Kashmir Dispute: Kashmir was a princely state,
ruled by a Hindu, Hari Singh. The Maharaja of
Kashmir was equally hesitant to join either In-
dia – , because he knew his Muslim subjects would
not like to join a Hindu-based and Hindu-major-
ity nation – , or Pakistan – which as a Hindu he
was personally averse to. Pakistan coveted the
Himalayan kingdom, while Indian leader Ma-
hatma Gandhi and Indian PM Jawaharlal Nehru
hoped that the kingdom would join India. Hari
Singh signed a Standstill Agreement (preserving
status quo) with Pakistan, but did not make his
decision by August 15, 1947.
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 Section -6 (Mains Special: Foreign Relations of India)
Rumours spread in Pakistan that Hari Singh was
trying to accede Kashmir to India. Alarmed by this
threat, a team of Pakistani forces were dispatched
into Kashmir, fearing an Indian invasion of the
region. Backed by Pakistani paramilitary forces,
Pakistani Pashtun tribal warlords invaded Kash-
mir in September 1947. Kashmir's security forces
were too weak and ill-equipped to fight against
Pakistan. Troubled by the deteriorating political
pressure that was being applied to Hari Singh and
his governance, the Maharaja asked for India's
help. However, the Constitution of India barred
the Indian Armed Forces' intervention since Kash-
mir did not come under India's jurisdiction. Des-
perate to get India's help and get Kashmir back in
his own control, the Maharaja acceded Kashmir
to India (which was against the will of the major-
ity of Kashmiris), and signed the Instrument of
Accession. By this time the raiders were close to
the capital, Srinagar. On October 27, 1947, the
Indian Air Force airlifted Indian troops into
Srinagar and made an intervention. The Indian
troops managed to seize parts of Kashmir which
included Jammu, Srinagar and the Kashmir valley
itself, but the strong and intense fighting, flagged
with the onset of winter, made much of the state
impassable.
After weeks of intense fighting between Pakistan
and India, Pakistani leaders and the Indian Prime
Minister Nehru declared a ceasefire and sought
U.N. arbitration with the promise of a plebiscite.
Sardar Patel had argued against both, describing
Kashmir as a bilateral dispute and its accession as
justified by international law. In 1957, north-west-
ern Kashmir was fully integrated into Pakistan,
becoming Azad Kashmir (Pakistan-administered
Kashmir), while the other portion was acceded to
Indian control, and the state of Jammu and Kash-
mir (Indian-administered Kashmir) was created.
In 1962, China occupied Aksai Chin, the north-
eastern region bordering Ladakh. In 1984, India
launched Operation Meghdoot and captured more
than 80% of the Siachen Glacier.
Pakistan maintains Kashmiris' rights to self-de-
termination through a plebiscite in accordance
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with an earlier Indian statement and a UN resolu-
tion. Pakistan also points to India's failure of not
understanding its own political logic and apply-
ing it to Kashmir, by taking their opinion on the
case of the accession of Junagadh as an example
(that the Hindu majority state should have gone
to India even though it had a Muslim ruler), that
Kashmir should also rightfully and legally have
become a part of Pakistan since majoirity of the
people were Muslim, even though they had a
Hindu ruler. Pakistan also states that at the very
least, the promised plebiscite should be allowed
to decide the fate of the Kashmiri people.
India on the other hand asserts that the Maharaja's
decision, which was the norm for every other
princely state at the time of independence, and
subsequent elections, for over 40 years, on Kash-
mir has made it an integral part of India. This opin-
ion has often become controversial, as Pakistan
asserts that the decision of the ruler of Junagadh
also adhered to Pakistan. Due to all such political
differences, this dispute has also been the subject
of wars between the two countries in 1947 and
1965, and a limited conflict in 1999. The state/
province remains divided between the two coun-
tries by the Line of Control (LoC), which demar-
cates the ceasefire line agreed upon in the 1947
conflict.
Other Territorial Disputes
Pakistan is locked in other territorial disputes with
India such as the Siachen Glacier and Kori Creek.
Pakistan is also currently having dialogue with
India regarding the Baglihar Dam being built over
the River Chenab in Jammu and Kashmir.
Bengal refugee crisis: In 1949, India recorded
close to 1 million Hindu refugees, who flooded
into West Bengal and other states from East Paki-
stan, owing to communal violence, intimidation
and repression from authorities. The plight of the
refugees outraged Hindus and Indian nationalists,
and the refugee population drained the resources
of Indian states, which were unable to absorb
them. While not ruling out war, Prime Minister
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 Section -6 (Mains Special: Foreign Relations of India)
Nehru and Sardar Patel invited Liaquat Ali Khan
for talks in Delhi. Although many Indians termed
this appeasement, Nehru signed a pact with
Liaquat Ali Khan that pledged both nations to the
protection of minorities and creation of minority
commissions. Although opposed to the principle,
Patel decided to back this Pact for the sake of
peace, and played a critical role in garnering sup-
port from West Bengal and across India, and en-
forcing the provisions of the Pact. Khan and Nehru
also signed a trade agreement, and committed to
resolving bilateral disputes through peaceful
means. Steadily, hundreds of thousands of Hin-
dus returned to East Pakistan, but the thaw in
relations did not last long, primarily owing to the
Kashmir dispute.
Bangladesh Liberation War: Pakistan, since inde-
pendence, was geo-politically divided into two
major regions, West Pakistan and East Pakistan.
East Pakistan was occupied mostly by Bengali
people. In December 1971, following a political
crisis in East Pakistan, the situation soon spiralled
out of control in East Pakistan and India inter-
vened in favour of the rebelling Bengali populace.
The conflict, a brief but bloody war, resulted in
an independence of East Pakistan. In the war, the
Pakistani army swiftly fell to India, forcing the
independence of East Pakistan, which separated
and became Bangladesh. The Pakistani military,
being a thousand miles from its base and sur-
rounded by enemies, was forced to give in.
Simla Agreement: Since the 1971 war, Pakistan
and India have made only slow progress towards
the normalisation of relations. In July 1972, In-
dian Prime Minister Indira Gandhi and Pakistani
President Zulfikar Ali Bhutto met in the Indian
hill station of Simla. They signed the Simla Agree-
ment, by which India would return all Pakistani
personnel (over 90,000) and captured territory in
the west, and the two countries would "settle their
differences by peaceful means through bilateral
negotiations." Diplomatic and trade relations were
also re-established in 1976.
Afghanistan crisis: After the 1979 Soviet war in
Afghanistan, new strains appeared in Indo-Paki-
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stani relations. Pakistan actively supported the
Afghan resistance against the Soviet Union, which
was a close ally of India, which brought opposing
political opinions. The Taliban regime in Afghani-
stan was strongly supported by Pakistan - one of
the few countries to do so - before the September
11 attacks and the start of the era of global terror-
ism. India, on the other hand, firmly opposed
Taliban and criticised Pakistan for supporting it.
Hatred for the Taliban grew amongst Hindu ul-
tra-nationalists in India after they enforced laws
on Afghan Hindus to "wear label".
In the following eight years, India voiced increas-
ing concern over Pakistani arms purchases, U.S.
military aid to Pakistan, and a clandestine
Pakistan's nuclear weapons programme. In an ef-
fort to curtail tensions, the two countries formed
a joint commission to examine disputes. In De-
cember 1988, Prime Ministers Benazir Bhutto and
Rajiv Gandhi concluded a pact not to attack each
other's nuclear facilities. Agreements on cultural
exchanges and civil aviation were also initiated.
In 1997, high-level Indo-Pakistan talks resumed
after a three-year pause. The Prime Ministers of
Pakistan and India met twice and the foreign sec-
retaries conducted three rounds of talks. In June
1997, the foreign secretaries identified eight "out-
standing issues" around which continuing talks
would be focused. The dispute over the status of
Kashmir, (referred by India as Jammu and Kash-
mir), an issue since Independence, remains the
major stumbling block in their dialogue. India
maintains that the entire former princely state is
an integral part of the Indian union, while Paki-
stan insists that UN resolutions calling for self-
determination of the people of the state/province
must be taken into account. It however refuses to
abide by the previous part of the resolution, which
calls for it to vacate all territories occupied.
In September 1997, the talks broke down over the
structure of how to deal with the issues of Kash-
mir, and peace and security. Pakistan advocated
that the issues be treated by separate working
groups. India responded that the two issues be
taken up along with six others on a simultaneous
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 Section -6 (Mains Special: Foreign Relations of India)
basis. In May 1998 India, and then Pakistan, con-
ducted nuclear tests.
Samjhauta Express bombings & 2008 Mumbai
attacks : The 2007 Samjhauta Express bombings
was a terrorist attack targeted on the Samjhauta
Express train on the 18th of February.The 2008
Mumbai attacks by ten terrorists killed over 173
and wounded 308. India blamed the Lashkar-e-
Taiba, a Pakistan-based Welfare group, for plan-
ning and executing the attacks. Islamabad resisted
the claims and demanded evidence. India provided
evidence in the form of interrogations,
weapons,candy wrappers, Pakistani Brand Milk
Packets, and telephone sets . Indian officials de-
manded Pakistan extradite suspects for trial. They
also said that, given the sophistication of the at-
tacks, the perpetrators "must have had the sup-
port of some official agencies in Pakistan".
Terrorist acts in Jammu and Kashmir: Kashmiris
Attacks on Jammu & Kashmir State Assembly:
A car bomb exploded near the Jammu and Kash-
mir State Assembly on October 1, 2001, killing 27
people on an attack that was blamed on Kashmiri
separatists. It was one of the most prominent at-
tacks against India apart from on the Indian Par-
liament in December 2001. The dead bodies of the
terrorists and the data recovered from them re-
vealed that Pakistan was solely responsible for the
activity.
Developments since 2004: Violent activities in
the region declined in 2004. There are two main
reasons for this: warming of relations between
New Delhi and Islamabad which consequently
lead to a ceasefire between the two countries in
2003 and the fencing of the LOC being carried
out by the Indian Army. Moreover, coming un-
der intense international pressure, Islamabad was
compelled to take actions against the militant's
training camps on its territory. In 2004, the two
countries also agreed upon decreasing the num-
ber of troops present in the region. Under pres-
sure, Kashmiri militant organisations have made
an offer for talks and negotiations with New Delhi,
which India has welcomed.
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India's Border Security Force blamed the Pakistani
military for providing cover-fire for the terrorists
whenever they infiltrated into Indian territory
from Pakistan. Pakistan has in turn has also blamed
India for providing support for terrorist groups
inside Pakistan such as the MQM
In 2005, Pakistan's information minister, Sheikh
Rashid, was alleged to have run a terrorist train-
ing camp in 1990 in N.W. Frontier, Pakistan. The
Pakistani government dismissed the charges
against its minister as an attempt to hamper the
ongoing peace process between the two
neighbours.
Both India and Pakistan have launched several
mutual confidence-building measures (CBMs) to
ease tensions between the two. These include
more high-level talks, easing visa restrictions, re-
starting of cricket matches between the two. The
new bus service between Srinagar and
Muzaffarabad has also helped bring the two sides
closer. Pakistan and India have also decided to co-
operate on economic fronts.
A major clash between Indian Security Forces and
militants occurred when a group of insurgents
tried to infiltrate into the Indian-administered
Kashmir from Pakistan in July 2005. The same
month, also saw Kashmiri militant attack on
Ayodhya and Srinagar. However, these develop-
ments had little impact on the peace process. Some
improvements in the relations are seen with the
re-opening of a series of transportation networks
near the India-Pakistan border, with the most
important being bus routes and railway lines.
An Indian man held in Pakistani prisons since 1975
as an accused spy walked across the border to free-
dom March 3, 2008, an unconditional release that
Pakistan said was meant to reduce the deep-rooted
enmity between the countries.
Re-evaluation: The insurgents who initially
started their movement as a pro-Kashmiri inde-
pendence movement, have gone through a lot of
change in their ideology. Most of the insurgents
portray their struggle as a religious one.
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 Section -6 (Mains Special: Foreign Relations of India)
Indian analysts allege that by supporting these in-
surgents, Pakistan is trying to wage a proxy war
against India while Pakistan claims that it regards
most of these insurgent groups as "freedom fight-
ers" rather than terrorists
Internationally known to be the most deadly the-
atre of conflict, nearly 10 million people, includ-
ing Muslims, Hindus, and Buddhists, have been
fighting a daily battle for survival. The cross-bor-
der firing between India and Pakistan, and the
terrorist attacks combined have taken its toll on
the Kashmiris, who have suffered poor living stan-
dards and an erosion of human rights.
Kargil crisis: Attempts to restart dialogue between
the two nations were given a major boost by the
February 1999 meeting of both Prime Ministers
in Lahore and their signing of three agreements.
These efforts have since been stalled by the intru-
sion of Pakistani forces into Indian territory near
Kargil in Jammu and Kashmir in May 1999. This
resulted in intense fighting between Indian and
Pakistani forces, known as the Kargil conflict.
Backed by the Indian Air Force, the Indian Army
successfully regained Kargil. A subsequent mili-
tary coup in Pakistan that overturned the demo-
cratically elected Nawaz Sharif government in
October of the same year also proved a setback to
relations.
In 2001, a summit was called in Agra; Pakistani
President Pervez Musharraf turned up to meet
Indian Prime Minister Atal Behari Vajpayee. The
talks fell through.
On June 20, 2004, with a new government in place
in India, both countries agreed to extend a nuclear
testing ban and to set up a hotline between their
foreign secretaries aimed at preventing misunder-
standings that might lead to a nuclear war.
India has granted Pakistan unilateral "most
favoured nation" trade status under WTO guide-
lines, but Pakistan is yet to reciprocate. As of early
2005, both countries are committed to a process
of dialogue to solve all outstanding issues. Baglihar
Dam issue was a new issue raised by Pakistan in
2005.
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India – Sri Lanka Relations
Bilateral relations between the Democratic Social-
ist Republic of Sri Lanka and the Republic of In-
dia have been generally friendly, but were con-
troversially affected by the Sri Lankan civil war
and by the failure of Indian intervention during
the war. India is the only neighbour of Sri Lanka,
separated by the Palk Strait; both nations occupy
a strategic position in South Asia and have sought
to build a common security umbrella in the In-
dian Ocean.
The two largest ethnic groups of Sri Lanka are
Sinhala and Tamil. Sinhalese descend from North
India, and Tamils are the majority ethnic group
in the Indian state of Tamil Nadu.
Development of bilateral relations: India and Sri
Lanka established diplomatic relations when the
latter gained its independence in 1948. Both na-
tions proceeded to establish extensive cultural,
commercial, strategic and defence ties to estab-
lish a common sphere of influence in the region,
adopting non-alignment to control Western and
Soviet influence. The close relationship between
the then-Indian Prime Minister Indira Gandhi and
then-Sri Lankan Prime Minister Sirimavo
Bandaranaike led to the development of strong
bilateral relations. In 1971, Indian armed forces
helped squash a Communist rebellion against the
Sri Lankan government.
Indian intervention in the Sri Lankan civil war:
In the 1980s, private entities and elements in the
state government of Tamil Nadu were believed to
be encouraging the funding and training for the
Liberation Tigers of Tamil Eelam, a separatist in-
surgent force. In 1987, faced with growing anger
amongst its own Tamils, and a flood of refugees,
India intervened directly in the conflict for the
first time after the Sri Lankan government at-
tempted to regain control of the northern Jaffna
region by means of an economic blockade and
military assaults, India supplied food and medi-
cine by air and sea. After subsequent negotiations,
87
 Section -6 (Mains Special: Foreign Relations of India)
India and Sri Lanka entered into an agreement.
The peace accord assigned a certain degree of re-
gional autonomy in the Tamil areas with Eelam
People's Revolutionary Liberation Front (EPRLF)
controlling the regional council and called for the
Tamil militant groups to lay down their arms.
Further India was to send a peacekeeping force,
named the IPKF to Sri Lanka to enforce the disar-
mament and to watch over the regional council.
Even though the accord was signed between the
governments of Sri Lanka and India, with the
Tamil Tigers and other Tamil militant groups not
having a role in the signing of the accord, most
Tamil militant groups accepted this agreement, the
LTTE rejected the accord because they opposed
the candidate, who belonged to another militant
group named Eelam Peoples Revolutionary Lib-
eration Front (EPRLF), for chief administrative
officer of the merged Northern and Eastern prov-
inces. Instead the LTTE named three other can-
didates for the position. The candidates proposed
by the LTTE were rejected by India. The LTTE
subsequently refused to hand over their weapons
to the IPKF.
The result was that the LTTE now found itself
engaged in military conflict with the Indian Army,
and launched their first attack on an Indian army
rations truck on October 8, killing five Indian para-
commandos who were on board by strapping
burning tires around their necks. The government
of India then decided that the IPKF should dis-
arm the LTTE by force, and the Indian Army
launched number of assaults on the LTTE, includ-
ing a month-long campaign dubbed Operation
Pawan to win control of the Jaffna peninsula from
the LTTE. When the IPKF engaged the LTTE, the
then president of Sri Lanka, Ranasinghe
Premadasa, began supporting LTTE and funded
LTTE with arms.
During the warfare with the ltte IPKF was also
alleged for human rights violation against the ci-
vilians. Notably, IPKF was alleged to have perpe-
trated Jaffna teaching hospital massacre which was
the killing of over 70 civilians including patients,
doctors and nurses. The ruthlessness of this cam-
paign, and the Indian army's subsequent anti-
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LTTE operations made it extremely unpopular
amongst many Tamils in Sri Lanka. The conflict
between the LTTE and the Indian Army left over
1,000 Indian soldiers dead.
The Indo-Sri Lankan Accord, which had been un-
popular amongst Sri Lankans for giving India a
major influence, now became a source of nation-
alist anger and resentment as the IPKF was drawn
fully into the conflict. Sri Lankans protested the
presence of the IPKF, and the newly-elected Sri
Lankan president Ranasinghe Premadasa de-
manded its withdrawal, which was completed by
March 1990. on May 21, 1992, Rajiv Gandhi was
assassinated and the LTTE was alleged to be the
perpetrator. As a result India declared the LTTE
to be a terrorist outfit in 1992. Bilateral relations
improved in the 1990s and India supported the
peace process but has resisted calls to get involved
again. India has also been wary of and criticised
the extensive military involvement of Pakistan in
the conflict, accusing the latter of supplying le-
thal weaponry and encouraging Sri Lanka to pur-
sue military action rather than peaceful negotia-
tions to end the civil war.
Commercial ties: India and Sri Lanka are mem-
ber nations of several regional and multilateral
organisations such as the South Asian Association
for Regional Cooperation (SAARC), South Asia
Co-operative Environment Programme, South
Asian Economic Union and BIMSTEC, working
to enhance cultural and commercial ties. Since a
bilateral free trade agreement was signed and came
into effect in 2000, Indo-Sri Lankan trade rose
128% by 2004 and quadrupled by 2006, reaching
USD 2.6 billion. Between 2000 and 2004, India's
exports to Sri Lanka in the last four years increased
by 113%, from USD 618 million to $1,319 million
while Sri Lankan exports to India increased by
342%, from $44 million to USD $194 million. In-
dian exports account for 14% of Sri Lanka’s global
imports. India is also the fifth largest export des-
tination for Sri Lankan goods, accounting for 3.6%
of its exports. Both nations are also signatories of
the South Asia Free Trade Agreement (SAFTA).
Negotiations are also underway to expand the free
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 Section -6 (Mains Special: Foreign Relations of India)
trade agreement to forge stronger commercial re-
lations and increase corporate investment and ven-
tures in various industries.
India's National Thermal Power Corp (NTPC) is
also scheduled to build a 500 MW thermal power
plant in Sampoor (Sampur). The NTPC claims that
the this plan will take the Indo-Srilankan rela-
tionship to new level.
Fishermen Issue: There have been several inci-
dents of firing on Indian fishermen fishing in Palk
Bay.Indian Government has always taken up the
issue of safety of Indian fishermen on a priority
basis with the Government of Sri Lanka. Presently
there is no bona fide Indian fisherman in the Sri
Lankan custody. A Joint Working Group (JWG)
has been constituted to deal with the issues re-
lated to Indian fishermen straying in Sri Lankan
territorial waters, work out modalities for preven-
tion of use of force against them and the early
release of confiscated boats and explore possibili-
ties of working towards bilateral arrangements for
licensed fishing. The JWG last met in Jan 2006.
Development Cooperation: India is active in a
number of areas of development activity in Sri
Lanka. About one-sixth of the total development
credit granted by GOI is made available to Sri
Lanka.
Lines of credit: In the recent past three lines of
credit were extended to Sri Lanka: US$ 100 mil-
lion for capital goods, consumer durables,
consultancy services and food items, US$ 31 mil-
lion for supply of 300,000 MT of wheat and US$
150 million for purchase of petroleum products.
All of these lines of credit have been fully uti-
lized. Another line of credit of US$ 100 million is
now being made available for rehabilitation of the
Colombo-Matara railway.
A number of development projects are imple-
mented under ‘Aid to Sri Lanka’ funds. In 2006-
07, the budget for ‘Aid to Sri Lanka’ was Rs 28.2
Crs.
Small Development Projects: A MoU on Coop-
eration in Small Development Projects has been
signed. Projects for providing fishing equipments
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to the fishermen in the East of Sri Lanka and solar
energy aided computer education in 25 rural
schools in Eastern Sri Lanka are under consider-
ation.
Health Projects: We have supplied medical equip-
ments to hospitals at Hambantota and Point Pedro,
supplied 4 state of the art ambulances to the Cen-
tral Province, implemented a cataract eye surgery
programme for 1500 people in the Central Prov-
ince and implemented a project of renovation of
OT at Dickoya hospital and supplying equipment
to it.
The projects under consideration are: Construc-
tion of a 150-bed hospital at Dickoya, upgradation
of the hospital at Trincomalee and a US$ 7.5 mil-
lion grant for setting up a Cancer Hospital in Co-
lombo. Upgradation of the educational infrastruc-
ture of the schools in the Central province includ-
ing teachers’ training, setting up of 10 computer
labs, setting up of 20 e-libraries (Nenasalas), Ma-
hatma Gandhi scholarship scheme for +2 students
and setting up of a vocational training centre in
Puttalam. India also contributes to the Ceylon
Workers Education Trust that gives scholarships
to the children of estate workers.
Training: A training programme for 465 Sri
Lankan Police officers has been commenced in Dec
2005. Another 400 Sri Lankan Police personnel
are being trained for the course of ‘Maintenance
of Public Order’.
Relation with Other Countries:-
China -Indian relations
China-India relations, refer to the ties and rela-
tions between China and India. The economic and
diplomatic importance of People's Republic of
China (PRC) and the Republic of India, which are
the two most populous states in the world, as
emerging economies, has in recent years increased
the significance of their bilateral relationship.
They are emerging not only as world powers but
are forecast to rival the US in the coming decades
in economic and military might. Historical rela-
89
 Section -6 (Mains Special: Foreign Relations of India)
tions between Beijing and New Delhi can most
accurately be described as being controversial at
best. Their relationship has undergone times of
both war and peace. It has been characterized by
both border disputes, resulting in military con-
flict, and by economic cooperation. Both coun-
tries, despite their belligerent mutual histories,
have in recent years attempted to reignite diplo-
matic, military and economic ties.
Geographical overview: China and India are sepa-
rated by the formidable geographical obstacles of
the Tibetan Plateau and the Himalayan mountain
chain, with Tibet serving as a buffer region be-
tween the two. China and India today share a
border along the Himalayas and Nepal and Bhutan,
two states lying along the Himalaya range, and
acting as buffer states. In addition, the disputed
Kashmir province (jointly claimed by India and
Pakistan) borders both the PRC and India. As Pa-
kistan has tense relations with India, Kashmir's
state of unrest serves as a natural ally to the PRC.
Two territories are currently disputed between the
People's Republic of China and India: Aksai Chin
and Arunachal Pradesh. Arunachal Pradesh is lo-
cated near the far east of India, while Aksai Chin
is located near the northwest corner of India, at
the junction of India, Pakistan, and the PRC. How-
ever, all sides in the dispute have agreed to re-
spect the Line of Actual Control and this border
dispute is not widely seen as a major flashpoint.
Jawaharlal Nehru based his vision of "resurgent
Asia" on friendship between the two largest states
of Asia; his vision of an internationalist foreign
policy governed by the ethics of the Panchsheel,
which he initially believed was shared by China,
came to grief when it became clear that the two
countries had a conflict of interest in Tibet, which
had traditionally served as a geographical and po-
litical buffer zone, and where India believed it had
inherited special privileges from the British Raj.
However, the initial focus of the leaders of both
the nations was not the foreign policy, but the
internal development of their respective states.
When they did concentrate on the foreign poli-
cies, their concern wasn’t one another, but rather
the United States of America and the Union of
Copyright © 2009 | WWW.UPSCPORTAL.COM
Soviet Socialist Republics and the alliance systems
which dominated by the two superpowers.
On October 1, 1949 the People’s Liberation Army
defeated the Kuomintang (Nationalist Party) of
China in a civil war and established the People's
Republic of China. On August 15, 1947, India be-
came an independent dominion under British
Commonwealth and became a federal, democratic
republic after its constitution came into effect on
January 26, 1950. Mao Zedong, the Commander
of the Liberation Army and the Chairman of the
Communist Party of China viewed Tibet as an
integral part of the Chinese State. Mao was deter-
mined to bring Tibet under direct administrative
and military control of People’s Republic of China
and saw Indian concern over Tibet as a manifes-
tation of the Indian Government in the internal
affairs of the People’s Republic of China. The PRC
sought to reassert control over Tibet and to end
Lamaism (Tibetan Buddhism) and feudalism,
which it did by force of arms in 1950. To avoid
antagonizing the People's Republic of China,
Nehru informed Chinese leaders that India had
neither political nor territorial ambitions, nor did
it seek special privileges in Tibet, but that tradi-
tional trading rights must continue. With Indian
support, Tibetan delegates signed an agreement
in May 1951 recognizing PRC sovereignty but
guaranteeing that the existing political and social
system of Tibet would continue. Direct negotia-
tions between India and the PRC commenced in
an atmosphere improved by India's mediation ef-
forts in ending the Korean War (1950-1953).
Meanwhile, India was the 16th state to establish
diplomatic relations with the People's Republic
of China, and did so on April 1, 1950.
In April 1954, India and the PRC signed an eight-
year agreement on Tibet that set forth the basis of
their relationship in the form of the Five Prin-
ciples of Peaceful Coexistence (or Panch Shila).
Although critics called the Panch Shila naive,
Nehru calculated that in the absence of either the
wherewithal or a policy for defense of the Hima-
layan region, India's best guarantee of security was
90
 Section -6 (Mains Special: Foreign Relations of India)
to establish a psychological buffer zone in place
of the lost physical buffer of Tibet. Thus the catch
phrase of India's diplomacy with China in the
1950s was Hindi-Chini bhai-bhai, which means,
in Hindi, "Indians and Chinese are brothers". Up
until 1959, despite border skirmishes and discrep-
ancies between Indian and Chinese maps, Chinese
leaders amicably had assured India that there was
no territorial controversy on the border though
there is some evidence that India avoided bring-
ing up the border issue in high level meetings.
In 1954, India published new maps that included
the Aksai Chin region within the boundaries of
India (maps published at the time of India's inde-
pendence did not clearly indicate whether the
region was in India or Tibet). When an Indian
reconnaissance party discovered a completed Chi-
nese road running through the Aksai Chin region
of the Ladakh District of Jammu and Kashmir,
border clashes and Indian protests became more
frequent and serious. In January 1959, PRC pre-
mier Zhou Enlai wrote to Nehru, rejecting Nehru's
contention that the border was based on treaty
and custom and pointing out that no government
in China had accepted as legal the McMahon Line,
which in the 1914 Simla Convention defined the
eastern section of the border between India and
Tibet. The Dalai Lama, spiritual and temporal head
of the Tibetan people, sought sanctuary in
Dharmsala, Himachal Pradesh, in March 1959, and
thousands of Tibetan refugees settled in north-
western India, particularly in Himachal Pradesh.
The People's Republic of China accused India of
expansionism and imperialism in Tibet and
throughout the Himalayan region. China claimed
104,000 km² of territory over which India's maps
showed clear sovereignty, and demanded "rectifi-
cation" of the entire border.
Zhou proposed that China relinquish its claim to
most of India's northeast in exchange for India's
abandonment of its claim to Aksai Chin. The In-
dian government, constrained by domestic public
opinion, rejected the idea of a settlement based
on uncompensated loss of territory as being hu-
miliating and unequal.
China-India War: Border disputes resulted in a
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short border war between the People's Republic
of China and India in 20 October 1962. The PRC
pushed the unprepared and inadequately led In-
dian forces to within forty-eight kilometres of the
Assam plains in the northeast and occupied stra-
tegic points in Ladakh, until the PRC declared a
unilateral cease-fire on 21 November and with-
drew twenty kilometers behind its contended line
of control.
At the time of Sino-Indian border conflict, a se-
vere political split was taking place in the Com-
munist Party of India. One section was accused
by the Indian government as being pro-PRC, and
a large number of political leaders were jailed.
Subsequently, CPI split with the leftist section
forming the Communist Party of India (Marxist)
in 1964. CPI(M) held some contacts with the Com-
munist Party of China in the initial period after
the split, but did not fully embrace the political
line of Mao Zedong.
Relations between the PRC and India deteriorated
during the rest of the 1960s and the early 1970s as
Sino-Pakistani relations improved and Sino-Soviet
relations worsened. The PRC backed Pakistan in
its 1965 war with India. Between 1967 and 1971,
an all-weather road was built across territory
claimed by India, linking PRC's Xinjiang Uyghur
Autonomous Region with Pakistan; India could
do no more than protest. The PRC continued an
active propaganda campaign against India and sup-
plied ideological, financial, and other assistance
to dissident groups, especially to tribes in north-
eastern India. The PRC accused India of assisting
the Khampa rebels in Tibet. Diplomatic contact
between the two governments was minimal al-
though not formally severed. The flow of cultural
and other exchanges that had marked the 1950s
ceased entirely. The flourishing wool, fur and spice
trade between Lhasa and India through the
Nathula Pass, an offshoot of the ancient Silk Road
in the then Indian protectorate of Sikkim was also
severed. However, the biweekly postal network
through this pass was kept alive, which exists till
today.
In late 1967, there were two skirmishes between
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 Section -6 (Mains Special: Foreign Relations of India)
Indian and Chinese forces in Sikkim. The first one
was dubbed the "Nathu La incident", and the other
the "Chola incident". Prior to these incidents had
been the Naxalbari uprising in India by the Com-
munist Naxalites and Maoists.
In 1967 a peasant uprising broke out in Naxalbari,
led by pro-Maoist elements. A pronunciation by
Mao titled "Spring Thunder over India" gave full
moral support for the uprising. The support for
the revolt marked the end for the relations be-
tween CPC and CPI(M). Naxalbari-inspired com-
munists organized armed revolts in several parts
of India, and in 1969 they formed the Communist
Party of India (Marxist-Leninist). However, as the
naxalite movement disintegrated in various splits,
the PRC withdrew its political support and turned
non-committal towards the various Indian groups.
On 11 September 1967, troops of the Indian
Army's 18th Rajput Regiment were protecting an
Engineering Company that was fencing the North
Shoulder of Nathula, when Chinese troops opened
fire on them. This escalated over the next five days
to an exchange of heavy artillery and mortar fire
between the Indians and the Chinese. 62 Indian
soldiers, from the 18th Rajput, the 2nd Grena-
diers and the Artillery regiments were killed.
Major Harbhajan Singh of the Rajput Regiment
was awarded a MVC (posthumous) and Naib
Subedar Pandey a VrC (posthumous) for their gal-
lant actions. The extent of Chinese casualties in
this incident is not known.
In the second, on 1 October 1967, a group of In-
dian Gurkha Rifles soldiers (from the 7th Battal-
ion of the 11th Regiment) noticed Chinese troops
surrounding a sentry post near a boulder at the
Chola outpost in Sikkim. After a heated argument
over the control of the boulder, a Chinese soldier
bayoneted a Gurkha rifleman, triggering the start
of a close-quarters knife and fire-fight, which then
escalated to a mortar and HMG duel. The Chinese
troops signaled a ceasefire after three hours of
fighting, but later scaled Point 15450 to establish
themselves there. The Gurkhas outflanked them
the next day to regain Point 15450 and the Chi-
nese retreated across the LAC. 21 Indian soldiers
were killed in this action. The Indian government
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awarded Vir Chakras to Rifleman Limbu (post-
humous) and battalion commander Major K.B.
Joshi for their gallant actions. The extent of Chi-
nese casualties in this skirmish is also not known.
In August 1971, India signed its Treaty of Peace,
Friendship, and Cooperation with the Soviet
Union, and the United States and the PRC sided
with Pakistan in its December 1971 war with In-
dia. By this time, the PRC had just replaced the
Republic of China in the UN where its represen-
tatives denounced India as being a "tool of Soviet
expansionism."
India and the PRC renewed efforts to improve re-
lations after the Soviet Union invaded Afghani-
stan in December 1979. The PRC modified its pro-
Pakistan stand on Kashmir and appeared willing
to remain silent on India's absorption of Sikkim
and its special advisory relationship with Bhutan.
The PRC's leaders agreed to discuss the boundary
issue, India's priority, as the first step to a broad-
ening of relations. The two countries hosted each
others' news agencies, and Mount Kailash and
Mansarowar Lake in Tibet, the mythological home
of the Hindu pantheon, were opened to annual
pilgrimages from India.
In 1981 PRC minister of foreign affairs Huang Hua
was invited to India, where he made complimen-
tary remarks about India's role in South Asia. PRC
premier Zhao Ziyang concurrently toured Paki-
stan, Nepal, and Bangladesh.
In 1980, Indian Prime Minister Indira Gandhi ap-
proved a plan to upgrade the deployment of forces
around the Line of Actual Control to avoid uni-
lateral redefinitions of the line. India also increased
funds for infrastructural development in these
areas.
In 1984, squads of Indian soldiers began actively
patrolling the Sumdorong Chu Valley in
Arunachal Pradesh (formerly NEFA), which is
north of the McMahon Line as drawn on the Simla
Treaty map but south of the ridge which Indian
claims is meant to delineate the McMahon Line.
The Sumdorong Chu valley "seemed to lie to the
north of the McMahon line; but is south of the
highest ridge in the area, and the McMahon line
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 Section -6 (Mains Special: Foreign Relations of India)
is meant to follow the highest points" according
to the Indian claims, while the Chinese did not
recognize the McMahon Line as legitimate and
were not prepared to accept an Indian claim line
even further north than that. The Indian team
left the area before the winter. In the winter of
1986, the Chinese deployed their troops to the
Sumdorong Chu before the Indian team could ar-
rive in the summer and built a Helipad at
Wandung. Surprised by the Chinese occupation,
India's then Chief of Army Staff, General
K.Sundarji, airlifted a brigade to the region.
Chinese troops could not move any further into
the valley and were forced to move sideways along
the Thag La ridge, away from the valley. By 1987,
Beijing's reaction was similar to that in 1962 and
this prompted many Western diplomats to pre-
dict war. However, Indian foreign minister N.D.
Tiwari and Prime Minister Rajiv Gandhi travelled
to Beijing over the following months to negotiate
a mutual de-escalation.
After the Huang visit, India and the PRC held
eight rounds of border negotiations between De-
cember 1981 and November 1987. These talks ini-
tially raised hopes that progress could be made on
the border issue. However, in 1985 the PRC stiff-
ened its position on the border and insisted on
mutual concessions without defining the exact
terms of its "package proposal" or where the ac-
tual line of control lay. In 1986 and 1987, the ne-
gotiations achieved nothing, given the charges
exchanged between the two countries of military
encroachment in the Sumdorung Chu Valley of
the Tawang tract on the eastern sector of the bor-
der. China's construction of a military post and
helicopter pad in the area in 1986 and India's grant
of statehood to Arunachal Pradesh (formerly the
North-East Frontier Agency) in February 1987
caused both sides to deploy new troops to the area,
raising tensions and fears of a new border war.
The PRC relayed warnings that it would "teach
India a lesson" if it did not cease "nibbling" at Chi-
nese territory. By the summer of 1987, however,
both sides had backed away from conflict and de-
nied that military clashes had taken place.
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A warming trend in relations was facilitated by
Rajiv Gandhi's visit to China in December 1988.
The two sides issued a joint communiqué that
stressed the need to restore friendly relations on
the basis of the Panch Shila and noted the impor-
tance of the first visit by an Indian prime minister
to China since Nehru's 1954 visit. India and the
People's Republic of China agreed to broaden bi-
lateral ties in various areas, working to achieve a
"fair and reasonable settlement while seeking a
mutually acceptable solution" to the border dis-
pute. The communiqué also expressed China's con-
cern about agitation by Tibetan separatists in In-
dia and reiterated China's position that Tibet was
an integral part of China and that anti-China po-
litical activities by expatriate Tibetans was not to
be tolerated. Rajiv Gandhi signed bilateral agree-
ments on science and technology cooperation, on
civil aviation to establish direct air links, and on
cultural exchanges. The two sides also agreed to
hold annual diplomatic consultations between for-
eign ministers, and to set up a joint ministerial
committee on economic and scientific coopera-
tion and a joint working group on the boundary
issue. The latter group was to be led by the Indian
foreign secretary and the Chinese vice minister of
foreign affairs.
As the mid-1990s approached, slow but steady im-
provement in relations with China was visible.
Top-level dialogue continued with the December
1991 visit of PRC premier Li Peng to India and
the May 1992 visit to China of Indian president
R. Venkataraman. Six rounds of talks of the In-
dian-Chinese Joint Working Group on the Bor-
der Issue were held between December 1988 and
June 1993. Progress was also made in reducing
tensions on the border via confidence-building
measures, including mutual troop reductions,
regular meetings of local military commanders,
and advance notification of military exercises.
Border trade resumed in July 1992 after a hiatus
of more than thirty years, consulates reopened in
Bombay (Mumbai) and Shanghai in December
1992, and, in June 1993, the two sides agreed to
open an additional border trading post. During
Sharad Pawar's July 1992 visit to Beijing, the first
ever by an Indian minister of defence, the two
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 Section -6 (Mains Special: Foreign Relations of India)
defense establishments agreed to develop aca-
demic, military, scientific, and technological ex-
changes and to schedule an Indian port call by a
Chinese naval vessel.
Substantial movement in relations continued in
1993. The sixth-round joint working group talks
were held in June in New Delhi but resulted in
only minor developments. However, as the year
progressed the long-standing border dispute was
eased as a result of bilateral pledges to reduce troop
levels and to respect the cease-fire line along the
India-China border. Prime Minister Narasimha
Rao and Premier Li Peng signed the border agree-
ment and three other agreements (on cross-bor-
der trade, and on increased cooperation on the
environment and in radio and television broad-
casting) during the former's visit to Beijing in Sep-
tember.
A senior-level Chinese military delegation made
a six-day goodwill visit to India in December 1993
aimed at "fostering confidence-building measures
between the defense forces of the two countries."
The visit, however, came at a time when press
reports revealed that, as a result of improved rela-
tions between the PRC and Burma, China was
exporting greater amounts of military matériel to
Burma's army, navy, and air force and sending an
increasing number of technicians to Burma. Of
concern to Indian security officials was the pres-
ence of Chinese radar technicians in Burma's Coco
Islands, which border India's Union Territory of
the Andaman and Nicobar Islands. Nevertheless,
movement continued in 1994 on troop reductions
along the Himalayan frontier. Moreover, in Janu-
ary 1994 Beijing announced that it not only fa-
vored a negotiated solution on Kashmir, but also
opposed any form of independence for the region.
Talks were held in New Delhi in February 1994
aimed at confirming established "confidence-
building measures" and discussing clarification of
the "line of actual control", reduction of armed
forces along the line, and prior information about
forthcoming military exercises. China's hope for
settlement of the boundary issue was reiterated.
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The 1993 Chinese military visit to India was re-
ciprocated by Indian army chief of staff General
B. C. Joshi. During talks in Beijing in July 1994,
the two sides agreed that border problems should
be resolved peacefully through "mutual under-
standing and concessions." The border issue was
raised in September 1994 when PRC minister of
national defense Chi Haotian visited New Delhi
for extensive talks with high-level Indian trade
and defense officials. Further talks in New Delhi
in March 1995 by the India-China Expert Group
led to an agreement to set up two additional points
of contact along the 4,000 km border to facilitate
meetings between military personnel. The two
sides also were reported as "seriously engaged" in
defining the McMahon Line and the line of actual
control vis-à-vis military exercises and prevention
of air intrusion. Talks in Beijing in July 1995 aimed
at better border security and combating cross-bor-
der crimes and in New Delhi in August 1995 on
additional troop withdrawals from the border
made further progress in reducing tensions.
Possibly indicative of the further relaxation of
India-China relations, at least there was little no-
tice taken in Beijing, was the April 1995 announce-
ment, after a year of consultation, of the opening
of the Taipei Economic and Cultural Center in
New Delhi. The center serves as the representa-
tive office of the Republic of China (Taiwan) and
is the counterpart of the India-Taipei Association
in Taiwan; both institutions have the goal of im-
proving relations between the two sides, which
have been strained since New Delhi's recognition
of Beijing in 1950.
Sino-Indian relations hit a low point in 1998 fol-
lowing India's nuclear tests in May. Indian De-
fense Minister George Fernandes declared that
"China is India's number one threat", hinting that
India developed nuclear weapons in defense
against China's nuclear arsenal. In 1998, China was
one of the strongest international critics of India's
nuclear tests and entry into the nuclear club. Re-
lations between India and China stayed strained
until the end of the decade.
With Indian President K. R. Narayanan's visit to
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 Section -6 (Mains Special: Foreign Relations of India)
China, 2000 marked a gradual re-engagement of
Indian and Chinese diplomacy. In a major embar-
rassment for China, the 17th Karmapa, Urgyen
Trinley Dorje, who was proclaimed by China,
made a dramatic escape from Tibet to the Rumtek
Monastery in Sikkim. Chinese officials were in a
quandary on this issue as any protest to India on
the issue would mean an explicit endorsement on
India's governance of Sikkim, which the Chinese
still hadn't recognised. In 2002, Chinese Premier
Zhu Rongji reciprocated by visiting India, with a
focus on economic issues. 2003 ushered in a
marked improvement in Sino-Indian relations fol-
lowing Indian Prime Minister Atal Bihari
Vajpayee's landmark June 2003 visit to China.
China officially recognized Indian sovereignty
over Sikkim as the two nations moved toward re-
solving their border disputes.
2004 also witnessed a gradual improvement in the
international area when the two countries pro-
posed opening up the Nathula and Jelepla Passes
in Sikkim which would be mutually beneficial to
both countries. 2004 was a milestone in Sino-In-
dian bilateral trade, surpassing the $10 billion mark
for the first time. In April 2005, Chinese Premier
Wen Jiabao visited Bangalore to push for increased
Sino-Indian cooperation in high-tech industries.
In a speech, Wen stated "Cooperation is just like
two pagodas (temples), one hardware and one soft-
ware. Combined, we can take the leadership po-
sition in the world." Wen stated that the twenty-
first century will be "the Asian century of the IT
industry." The high-level visit was also expected
to produce several agreements to deepen politi-
cal, cultural and economic ties between the two
nations. Regarding the issue of India gaining a
permanent seat on the UN Security Council, on
his visit, Wen Jiabao initially seemed to support
the idea, but had returned to a neutral position on
the subject by the time he returned to China. In
the South Asian Association for Regional Coop-
eration (SAARC) Summit (2005) China was
granted an observer status. While other countries
in the region are ready to consider China for per-
manent membership in the SAARC, India seems
reluctant.
A very important dimension of the evolving Sino-
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Indian relationship is based on the energy require-
ments of their industrial expansion and their readi-
ness to proactively secure them by investing in
the oilfields abroad - in Africa, the Middle East
and Central Asia. On the one hand, these ven-
tures entail competition (which has been evident
in oil biddings for various international projects
recently). But on the other hand, a degree of co-
operation too is visible, as they are increasingly
confronting bigger players in the global oil mar-
ket. This cooperation was sealed in Beijing on Janu-
ary 12, 2006 during the visit of Petroleum and
Natural Gas Minister Mani Shankar Aiyar, who
signed an agreement which envisages ONGC
Videsh Ltd (OVL) and the China National Petro-
leum Corporation (CNPC) placing joint bids for
promising projects elsewhere. This may have im-
portant consequences for their international rela-
tions.
On July 6, 2006, China and India re-opened
Nathula, an ancient trade route which was part of
the Silk Road. Nathula is a pass through the
Himalayas and it was closed 44 years prior to 2006
when the Sino-Indian War broke out in 1962. The
initial agreement for the re-opening of the trade
route was reached in 2003, and a final agreement
was formalized on June 18th, 2006. Officials say
that the re-opening of border trade will help ease
the economic isolation of the region. In Novem-
ber 2006, China and India had a verbal spat over
claim of the north-east Indian state of Arunachal
Pradesh. India claimed that China was occupying
38,000 square kilometres of its territory in Kash-
mir, while China claimed the whole of Arunachal
Pradesh as its own. In May 2007, China denied
the application for visa from an Indian Adminis-
trative Service officer in Arunachal Pradesh. Ac-
cording to China, since Arunachal Pradesh is a
territory of China, he would not need a visa to
visit his own country. Later in December 2007,
China appeared to have reversed its policy by
granting a visa to Marpe Sora, an Arunachal born
professor in computer science. In January 2008,
Prime Minister Manmohan Singh visited China
and met with President Hu Jintao and Premier
Wen Jiabao and had bilateral discussions related
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 Section -6 (Mains Special: Foreign Relations of India)
to trade, commerce, defense, military, and vari-
ous other issues. In July 2008, at the 34th G8 sum-
mit in Japan, Hu Jintao and Manmohan Singh had
a friendly meeting. In the wake of the 2008
Sichuan earthquake, India offered aid to help the
earthquake victims.
Until 2008 the British Government's position re-
mained the same as had been since the Simla Ac-
cord of 1913: that China held suzerainty over Ti-
bet but not sovereignty. Britain revised this view
on 29 October 2008, when it recognised Chinese
sovereignty over Tibet by issuing a statement on
its website. The Economist stated that although
the British Foreign Office's website does not use
the word sovereignty, officials at the Foreign Of-
fice said "it means that, as far as Britain is con-
cerned, 'Tibet is part of China. Full stop.'" This
change in Britain's position affects India's claim
to its North Eastern territories which rely on the
same Simla agreement that Britain's prior posi-
tion on Tibet's sovereignty was based upon.
Alleged 2009 naval stand-off: On January 15,
Chinese sources reported that two Chinese de-
stroyers and an anti-submarine helicopter engaged
in a half an hour naval stand off against an Indian
submarine. The report said that Chinese destroy-
ers forced an Indian submarine to surface off So-
malia waters after it tried to test Chinese sonar
systems for weaknesses. The Indian vessel then
apparently left without further confrontation.
However, the report was later confirmed as an
inaccurate one by both sides.
India–Japan relations
Throughout history, Indo-Japanese relations have
always been strong. For centuries, India and Ja-
pan have engaged in cultural exchanges, prima-
rily as a result of Buddhism which spread from
India to Japan. During the Indian Independence
Movement, the Japanese Imperial Army helped
Netaji Subhash Chandra Bose's Indian National
Army in battles against British forces. Diplomatic,
trade, economic, and technical relations between
India and Japan were well established since the
1950s. India's iron ore helped Japan's recovery
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from World War II devastation, and following
Japanese Prime Minister Nobusuke Kishi's visit to
India in 1957, Japan started providing yen loans
to India in 1958, as the first yen loan aid extended
by Japanese government. Relations between the
two nations were constrained, however, by Cold
War politics. Japan, as a result of World War II
reconstruction, was a U.S. ally, while India pur-
sued a non-aligned foreign policy. Since the 1980s,
however, efforts were made to strengthen bilat-
eral ties. India’s ‘Look East’ policy posited Japan
as a key partner. Since 1986, Japan has become
India's largest aid donor, and remains so.
Relations between the two nations reached a brief
low in 1998 as a result of India's nuclear program.
After India's nuclear tests in 1998, Japan suspended
all political exchanges with India. The long-es-
tablish economic assistance was also stopped for
three years. Relations improved exponentially fol-
lowing this period, as bilateral relations between
the two nations improved once again.
Economic: In August 2000, Japanese Prime Min-
ister Mori visited India. At this meeting, Japan and
India agreed to establish "Japan-India Global Part-
nership in the 21st Century." Indian Prime Min-
ister Vajpayee visited Japan in December, 2001,
where both Prime Ministers issued "Japan-India
Joint Declaration", consisting of high-level dia-
logue, economic cooperation, and military and
anti-terrorism cooperation. In April, 2005, Japa-
nese Prime Minister Koizumi visited India and
signed Joint Statement "Japan-India Partnership
in the New Asian Era: Strategic Orientation of
Japan-India Global Partnership" with Indian
Prime Minister Manmohan Singh.
Japan is currently India’s third largest source of
foreign direct investment; Japanese companies
have made cumulative investments of around $2.6
billion in India since 1991. The 2007 annual sur-
vey conducted by the Japan Bank for International
Cooperation ranked India as the most promising
overseas investment destination for Japanese com-
panies over the long term. In recent years, Japan
has assisted India in infrastructure development
projects such as the Delhi Metro Rail Project. Both
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 Section -6 (Mains Special: Foreign Relations of India)
sides are also discussing the Delhi-Mumbai Indus-
trial Corridor Project and Dedicated Freight Cor-
ridor Projects on the Mumbai-Delhi and the
Delhi-Howrah routes.
In October 2008, Japan signed an agreement with
India under which it would provide the latter a
low-interest loan worth US$4.5 billion to con-
struct a railway project between Delhi and
Mumbai. This is the single largest overseas project
being financed by Japan and reflected growing
economic partnership between the two. India is
also one of the only three countries in the world
with whom Japan has security pact, the other two
being Australia and the United States. As of March
2006, Japan was the third largest investor in India
with an estimated total investment of US$2.12
billion.
Military: India and Japan also have close military
ties. They have shared interests in maintaining the
security of sea-lanes in the Asia-Pacific and In-
dian Ocean, and in cooperation for fighting inter-
national crime, terrorism, piracy and proliferation
of weapons of mass destruction. The two nations
have frequently held joint military exercises and
cooperate on technology.
Cultural: Japan and India maintain strong cultural
connections. The two nations announced 2007 as
Japan-India Friendship Year, and held cultural
events in both India and Japan.
Recently, Japan has also supported the reconstruc-
tion of the ancient Nalanda University, and has
agreed to provide financial assistance, and recently
approached the Indian government with a pro-
posal.
Brazil–India relations
Brazil and India are large continental sized coun-
tries with social diversity, democratic govern-
ments, a multiethnic society, and a large popula-
tion base. Both possess advanced technologies. The
two countries share similar perceptions on issues
of interest to developing countries and have co-
operated in the multilateral level on issues such
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as international trade and development, environ-
ment, reform of the UN and the UNSC expansion.
India’s links with Brazil go back five centuries.
Portugal’s Pedro Alvares Cabral is officially
recognised as the first European to “discover” Bra-
zil in 1500. Cabral was sent to India by the King
of Portugal soon after the return of Vasco da Gama
from his pioneering journey. Cabral is reported to
have been blown-off course on his way to India.
Brazil became an important Portuguese colony and
stop-over in the long journey to Goa. This Portu-
guese connection led to the exchange of several
agricultural crops between India and Brazil in the
colonial days. Indian cattle was also imported to
Brazil. Most of the cattle in Brazil is of Indian ori-
gin.
Diplomatic relations between India and Brazil
were established in 1948. The Indian Embassy
opened in Rio de Janeiro on May 3, 1948, moving
to Brasília on August 1, 1971.
Cultural relations: There is enormous interest in
Brazil on India's culture, religion, performing arts
and philosophy. A number of cultural events in-
cluding performances by famous Kuchipudi dance
group, "Raja and Radha Reddy" were organized in
the major cities of Brazil ahead of the Prime Min-
ister Manmohan Singh's visit to Brasília from 11-
14 September 2006. Earlier, a very successful Fes-
tival of India was organised during the visit of
President K.R. Narayanan to Brazil in May 1998.
There are numerous organisations teaching yoga
and they invite yoga teachers from India for in-
structions and learning. ISKCON, Satya Sai Baba,
Maharshi Mahesh Yogi, Bhakti Vedanta Founda-
tion and other Indian spiritual gurus and
organisations have their chapters in Brazil. The
University of Londrina has a good specialization
course on India in its Department of Afro-Asian
Studies. Mahatma Gandhi is highly regarded in
the country and the government has sought to
teach his philosophy of non-violence to the po-
lice to improve its track record. A statue of Ma-
hatma Gandhi is located in a prominent square in
Rio de Janeiro. A group called the Filhos de Gandhi
(Sons of Gandhi) participates regularly in the car-
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 Section -6 (Mains Special: Foreign Relations of India)
nival in Salvador. Private Brazilian organizations
occasionally invite Indian cultural troupes.
Economic relations: In recent years, relations be-
tween Brazil and India have grown considerably
and co-operation between the two countries has
been extended to such diverse areas as science and
technology, pharmaceuticals and space. The two-
way trade in 2007 nearly tripled to US$ 3.12 bil-
lion from US$ 1.2 billion in 2004.
Global software giant, Wipro Technologies, also
set up a business process outsourcing centre in
Curitiba to provide shared services to AmBev, the
largest brewery in Latin America. AmBev's zonal
vice president, Renato Nahas Batista, said "We are
honoured to be a part of Wipro's expansion plans
in Brazil and Latin America." AmBev's portfolio
includes leading brands like Brahma, Becks, Stella
and Antarctica.
Current issues
UNSC reform: Both countries want the participa
ion of developing countries in the UNSC perma-
nent membership since the underlying philoso-
phy for both of them are: UNSC should be more
democratic, legitimate and representative - the G4
is a novel grouping for this realization.
South-South cooperation: Brazil and India are
deeply committed to IBSA initiatives and attach
utmost importance to this trilateral cooperation
between the three large, multi-ethnic, multi-ra-
cial and multi-religious developing countries,
which are bound by the common principle of plu-
ralism and democracy.
The first ever IBSA Summit was held in Brasília
in September 2006, followed by the Second IBSA
Summit held in Pretoria in October 2007, with
the third one to be held in Delhi in October 2008.
Four IBSA Trilateral Commission meetings were
already held till 2007 since the first one was held
in 2004 and had covered many areas such as sci-
ence, technology, education, agriculture, energy,
culture, health, social issues, public administra-
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tion and revenue administration. The target of US
$10 billion in trade was already achieved by 2007.
Both countries view this as a tool of transforma-
tion diplomacy to bring economic growth, sus-
tainable development, poverty reduction and re-
gional prosperity in the vast regions of Latin
America, Africa and Asia. The IBSA Fund for Al-
leviation of Poverty and Hunger has already pro-
vided funds for capacity building in East Timor
and for the fight against HIV/AIDS in Burundi
and has won the South-South Partnership Award
at the 2006 UN Day event held in New York City
on 19 December 2006.
India – United States relations
Despite being one of the pioneers and founding
members of the Non-Aligned Movement, India
developed a closer relationship with the Soviet
Union during the Cold War. India's strategic and
military relations with Moscow and strong socialist
policies had an adverse impact on its relations with
the United States. After the collapse of the Soviet
Union, India began to review its foreign policy in
a unipolar world following which, it took steps to
develop closer ties with the European Union and
the United States. Today, India and the U.S. share
an extensive cultural, strategic, military and eco-
nomic relationship.
During the tenure of the Clinton and Bush ad-
ministration, relations between India and the
United States blossomed primarily over common
concerns regarding growing Islamic extremism,
energy security and climate change.
According to some foreign policy experts, there
was a slight downturn in India-U.S. relations fol-
lowing the appointment of Barack Obama as the
U.S. President in 2009. This was primarily due to
Obama administration's desire to increase relations
with China, and Barack Obama's protectionist
views on dealing with the economic crisis. How-
ever, the leaders of the two countries have repeat-
edly dismissed these concerns.
The historic relationship between India and the
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 Section -6 (Mains Special: Foreign Relations of India)
United states was very strong. One event is the
visit of Swami Vivekananda who introduced Yoga
and Vedanta to America. Vivekananda was the
first known Hindu Sage to come to the West,
where he introduced Eastern thought at the
World's Parliament of Religions, in connection
with the World's Fair in Chicago, in 1893. Here,
his first lecture, which started with this line "Sis-
ters and Brothers of America," made the audience
clap for two minutes just to the address, for prior
to this seminal speech, the audience was always
used to this opening address: "Ladies and Gentle-
men". It was this speech that catapulted him to
fame by his wide audiences in Chicago and then
later everywhere else in America, including far-
flung places such as Memphis, Boston, San Fran-
cisco, New York, Los Angeles, and St. Louis.
After Indian independence until the end of the
cold war, the relationship between the two na-
tions has often been thorny. Dwight Eisenhower
was the first US President to visit India in 1959.
He was so supportive of India that the New York
times remarked "It did not seem to matter much
whether Nehru had actually requested or been
given a guarantee that the US would help India to
meet further Chinese communist aggression.
What mattered was the obvious strengthening of
Indian-American friendship to a point where no
such guarantee was necessary."
During John F. Kennedy's period as President, he
saw India as a strategic partner against the rise of
communist China. He said "Chinese Communists
have been moving ahead the last 10 years. India
has been making some progress, but if India does
not succeed with her 450 million people, if she
can't make freedom work, then people around the
world are going to determine, particularly in the
underdeveloped world, that the only way they can
develop their resources is through the Commu-
nist system."
From 1961 to 1963 there was a promise to help
set up a large steel mill in Bokaro that was with-
drawn by the U.S. The 1965 and 1971 Indo-Paki-
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stani wars did not help their relations. During the
Cold War, the US asked for Pakistan's help be-
cause India was seen to lean towards the Soviet
Union. Later, when India would not agree to sup-
port the anti-Soviet operation in Afghanistan, it
was left with few allies. Not until 1997 was there
any effort to improve relations with the United
States.
Soon after Atal Bihari Vajpayee became Indian
Prime Minister, he authorized a nuclear weapons
test in Pokhran, which got the immediate atten-
tion of the US. The Clinton administration and
Vajpayee exchanged representatives to help build
relations. In March 2000, President Bill Clinton
visited India. He had bilateral and economic dis-
cussions with Prime Minster Atal Bihari Vajpayee.
Over the course of improved diplomatic relations
with the Bush administration, India has agreed to
allow close international monitoring of its nuclear
weapons development while refusing to give up
its current nuclear arsenal. India and the US have
also greatly enhanced their economic ties.
During the 9/11 terrorist attacks on the U.S., Presi-
dent George W. Bush chose India as the country
to control and police the Indian Ocean sea-lanes
from the Suez to Singapore. The tsunami that oc-
curred in December 2004 saw the U.S. and Indian
navies to work together in search and rescue op-
erations and to reconstruct the damaged lives and
land. An Open Skies Agreement was made in April
2005. This helped enhance trade, tourism, and
business by the increased number of flights. Air
India purchased 68 US Boeing aircraft, which cost
$8 billion.
Former U.S. Secretary of Defense Donald
Rumsfeld and U.S. Secretary of State Condoleezza
Rice have made recent visits to India as well. Af-
ter Hurricane Katrina, India donated $5 million
to the American Red Cross and sent 2 plane loads
of relief supplies and materials to help. And on 1
March 2006, President Bush made another diplo-
matic visit to expand relations between India and
the United States.
Military relations: The U.S.-India defense rela-
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 Section -6 (Mains Special: Foreign Relations of India)
tionship derives from a common belief in free-
dom, democracy, and the rule of law, and seeks to
advance shared security interests. These interests
include maintaining security and stability, defeat-
ing terrorism and violent religious extremism, pre-
venting the spread of weapons of mass destruc-
tion and associated materials, data, and technolo-
gies and protecting the free flow of commerce via
land, air and sea lanes.
In recent years India has conducted joint military
exercises with the U.S. in the Indian Ocean. De-
spite this the Indian government sees the sole U.S.
base in the Indian Ocean, Diego Garcia, and the
permanent presence of the U.S. military there, as
a potential escalation point in a future war, espe-
cially because of the current U.S. operations in
Iraq and Afghanistan.
Recognizing India as a key to strategic U.S. inter-
ests, the United States has sought to strengthen
its relationship with India. The two countries are
the world's largest democracies, both committed
to political freedom protected by representative
government. India is also moving gradually toward
greater economic freedom. The U.S. and India
have a common interest in the free flow of com-
merce and resources, including through the vital
sea lanes of the Indian Ocean. They also share an
interest in fighting terrorism and in creating a stra-
tegically stable Asia.
There were some differences, however, including
over India's nuclear weapons programs and the
pace of India's economic reforms. In the past, these
concerns may have dominated U.S. thinking about
India, but today the U.S. views India as a growing
world power with which it shares common stra-
tegic interests. A strong partnership between the
two countries will continue to address differences
and shape a dynamic and collaborative future.
In late September 2001, President Bush lifted sanc-
tions imposed under the terms of the 1994 Nuclear
Proliferation Prevention Act following India's
nuclear tests in May 1998. The nonproliferation
dialogue initiated after the 1998 nuclear tests has
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bridged many of the gaps in understanding be-
tween the countries. In a meeting between Presi-
dent Bush and Prime Minister Vajpayee in No-
vember 2001, the two leaders expressed a strong
interest in transforming the U.S.-India bilateral
relationship. High-level meetings and concrete
cooperation between the two countries increased
during 2002 and 2003. In January 2004, the U.S.
and India launched the Next Steps in Strategic
Partnership (NSSP), which was both a milestone
in the transformation of the bilateral relationship
and a blueprint for its further progress.
In July 2005, President Bush hosted Prime Minis-
ter Singh in Washington, DC. The two leaders an-
nounced the successful completion of the NSSP,
as well as other agreements which further enhance
cooperation in the areas of civil nuclear, civil space,
and high-technology commerce. Other initiatives
announced at this meeting include: an U.S.-India
Economic Dialogue, Fight Against HIV/AIDS,
Disaster Relief, Technology Cooperation, Democ-
racy Initiative, an Agriculture Knowledge Initia-
tive, a Trade Policy Forum, Energy Dialogue and
CEO Forum. President Bush made a reciprocal visit
to India in March 2006, during which the progress
of these initiatives were reviewed, and new ini-
tiatives were launched.
In December 2006, Congress passed the historic
Henry J. Hyde United States-India Peaceful
Atomic Cooperation Act, which allows direct ci-
vilian nuclear commerce with India for the first
time in 30 years. U.S. policy had opposed nuclear
cooperation with India because the country had
developed nuclear weapons in contravention of
international conventions and never signed the
Nuclear Non-Proliferation Treaty. The legislation
clears the way for India to buy U.S. nuclear reac-
tors and fuel for civilian use. In July 2007, the
United States and India reached a historic mile-
stone in their strategic partnership by completing
negotiations on the bilateral agreement for peace-
ful nuclear cooperation, also known as the "123
agreement." This agreement, signed by Secretary
of State Rice and External Affairs Minister
Mukherjee on October 10, 2008, governs civil
100
 Section -6 (Mains Special: Foreign Relations of India)
nuclear trade between the two countries and opens
the door for American and Indian firms to par-
ticipate in each other's civil nuclear energy sec-
tor. The U.S. and India seek to elevate the strate-
gic partnership further to include cooperation in
counter-terrorism, defense cooperation, educa-
tion, and joint democracy promotion.
Economic relations: The United States is also one
of India's largest direct investors. From the year
1991 to 2004, the stock of FDI inflow has increased
from USD $11.3 million to $344.4 million, total-
ing $4.13 billion. This is a compound rate increase
of 57.5% annually. Indian direct investments
abroad were started in 1992. Indian corporations
and registered partnership firms are allowed to
invest in businesses up to 100% of their net worth.
India's largest outgoing investments are manufac-
turing, which account for 54.8% of the country's
foreign investments. The second largest are non-
financial services (software development), which
accounts for 35.4% of investments.
Trade relations: The United States is India's larg-
est trading partner. In 2007, the United States
exported $17.24 billion worth goods to India and
imported $24.02 billion worth of Indian goods.
Major items exported by India to the U.S. include
Information Technology Services, textiles, ma-
chinery, ITeS, gems and diamonds, chemicals, iron
and steel products, coffee, tea, and other edible
food products. Major American items imported by
India include aircraft, fertilizers, computer hard-
ware, scrap metal and medical equipment.
The United States is also India's largest investment
partner, with American direct investment of $9
billion accounting for 9% of total foreign invest-
ment into India. Americans have made notable
foreign investment in India's power generation,
telecommunications, ports, roads, petroleum ex-
ploration/processing, and mining industries.
In July 2005, President George W. Bush and In-
dian Prime Minister Dr. Manmohan Singh cre-
ated a new program called the Trade Policy Fo-
rum. It is run by a representative from each na-
tion. The United States Trade Representative is
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Rob Portman and the Indian Commerce Secre-
tary is Minister of Commerce Kamal Nath. The
goal of the program is to increase bilateral trade
which is a two-way trade deal and the flow of
investments.
There are five main sub-divisions of the Trade
Policy Forum which include: Agricultural Trade
group- This group has three main objectives:
agreeing on terms that will allow India to export
mangoes to the United States, permitting India's
APEDA (Agricultural and Process Food Products
Export Development Authority) to certify Indian
products to the standards of the USDA, and ex-
ecuting regulation procedures for approving ed-
ible wax on fruit. Tariff and Non-Tariff Barriers
group- Goals of the group include: agreeing that
insecticides that are manufactures by United States
companies can be sold throughout India. India had
agreed to cut special regulations on trading car-
bonated drinks, many medicinal drugs, and low-
ering regulations on many imports that are not of
agricultural nature. Both nations have agreed to
discuss improved facets on the trade of Indian
regulation requirements, jewelry, computer parts,
motorcycles, fertilizer, and those tariffs that af-
fect the American process of exporting boric acid.
The two nations have discussed matters such as
those who wish to break into the accounting mar-
ket, Indian companies gaining licenses for the tele-
communications industry, and setting polices by
the interaction of companies from both countries
regarding new policies related to Indian media and
broadcasting. This group has strived to exchange
valuable information on recognizing different pro-
fessional services offered by the two countries,
discussing the movement and positioning of people
in developing industries and assigning jobs to those
people, continuation of talks in how India's citi-
zens can gain access into the market for financial
servicing, and discussing the limitation of equi-
ties.
The two countries have had talks about the re-
striction of investments in industries such as fi-
nancial services, insurance, and retail. Also, to take
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Section -6 (Mains Special: Foreign Relations of India)
advantage of any initiatives in joint investments
such as agricultural processing and the transpor-
tation industries. Both countries have decided to
promote small business initiatives in both coun-
tries by allowing trade between them.
The majority of exports from the United States to
India include: aviation equipment, engineering
materials and machinery, instruments used in
optical and medical sectors, fertilizers, and stones
and metals.
Below are the percentages of traded items India
to US increased by 21.12% to $6.94 billion.
1. Diamonds & precious stones (25%)
2. Textiles (29.01%)
3. Iron & Steel (5.81%)
4. Organic chemicals (4.3%)
5. Machinery (4.6%)
6. Electrical Machinery (4.28%)
Major items of export from U.S. to India: For
the year 2006, figures are available up to the
month of April. Merchandise exports from US
to India increased by 20.09.26% to US $2.95
billion. Select major items with their percent-
age shares are given below:
1. Engineering goods & machinery (including elec-
trical) (31.2%)
2. Precious stones & metals (8.01%)
3. Organic chemicals (4.98%)
4. Optical instruments & equipment (7.33%)
5. Aviation & aircraft ( 16.8%)
Ties Under Obama Administration
Despite much gains in Indo-American relations
during the tenure of the Bush administration, In-
dia was not one of the Asian countries U.S. Secre-
tary of State Hillary Clinton visited in February
2009. The Foreign Policy magazine reported that
even though Foreign Policy Staff of the previous
administration had recommended India as a "key
stop" during any such official tour of Asia, Hillary
Clinton will not be making a visit to New Delhi.
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The exclusion of India from the Asian tour was
regarded as a "mistake" by some analysts. India
was not even mentioned once in the Obama
administration's official foreign policy agenda. The
Forbes magazine alerted U.S. President Barack
Obama on the need to prevent United States' new-
found alliance with India from erosion.
The initial approach of the Obama administration
towards ties with India raised concerns of a down-
turn in Indo-American relations. In an editorial,
the National Interest suggested that the Obama
administration could possibly damage "the foun-
dations underlying the geostrategic partnership"
between India and the United States. Another
editorial published by the Taipei Times high-
lighted the importance of India-U.S. relations and
urged Barack Obama to give "India the attention
it deserves".Terming India to be United States' "in-
dispensable ally", the Christian Science Monitor
argued that the Obama administration needs
India's cooperation on several issues, including
climate change, Afghanistan war and energy se-
curity and therefore, Obama cannot risk putting
ties with India on "back-burner".
In an attempt to bolster relations between the two
countries, U.S. Secretary of State Hillary Clinton
will be making a visit to India in the second half
of July 2009. Calling India a "key partner" of the
United States, Clinton said that the United States
wants India "to succeed as an anchor for regional
and global security". She also mentioned four plat-
forms for building future U.S.-India relationship
— "global security, human development, eco-
nomic activity, science and technology".
Foreign policy issues: According to some analysts,
India-U.S. relations have strained over Obama
administration's approach in handling the Taliban
insurgency in Afghanistan and Pakistan. India's
National Security Adviser, M.K. Narayanan, criti-
cized the Obama administration for linking the
Kashmir dispute to the instability in Pakistan and
Afghanistan and said that by doing so, President
Obama was "barking up the wrong tree".The For-
eign Policy too criticized Obama's approach to-
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 Section -6 (Mains Special: Foreign Relations of India)
wards South Asia saying that "India can be a part
of the solution rather than part of the problem"
in South Asia and suggested India to take a more
proactive role in rebuilding Afghanistan irrespec-
tive of the attitude of the Obama administration.
In a clear indication of growing rift between In-
dia and the U.S., the former decided not to accept
a U.S. invitation to attend a conference on Af-
ghanistan. Bloomberg reported that since 2008
Mumbai attacks, the public mood in India has been
to pressure Pakistan more aggressively to take ac-
tions against the culprits behind the terrorist at-
tack and this might reflect on the upcoming gen-
eral elections in May 2009. Consequently, the
Obama administration may find itself at odds with
India's rigid stance against terrorism.
Robert Blake, assistant secretary of United States'
Bureau of South and Central Asian Affairs, dis-
missed any concerns over a rift with India regard-
ing United States' AfPak policy. Calling India and
the United States "natural allies",Blake said that
the United States cannot afford to meet the stra-
tegic priorities in Pakistan and Afghanistan at "the
expense of India".
Economic relations:India strongly criticized
Obama administration's decision to limit H-1B
visas and India's External Affairs Minister, Pranab
Mukherjee, said that his country would argue
against U.S. "protectionism" at various interna-
tional forums. The Vishwa Hindu Parishad, a close
aide of India's main opposition party the BJP, said
that if the United States continues with its anti-
outsourcing policies, then India will "have to take
steps to hurt American companies in India." India's
Commerce Minister, Kamal Nath, said that India
may move against Obama's outsourcing policies
at the World Trade Organization. However, the
outsourcing advisory head of KPMG said that In-
dia had no reason to worry since Obama's state-
ments were directed against "outsourcing being
carried out by manufacturing companies" and not
outsourcing of IT-related services.
In May 2009, U.S. President Barack Obama reit-
erated his anti-outsourcing views and criticized
the current U.S. tax policy "that says you should
Copyright © 2009 | WWW.UPSCPORTAL.COM
pay lower taxes if you create a job in Bangalore,
India, than if you create one in Buffalo, New York."
However, during the U.S.-India Business Council
meet in June 2009, U.S. Secretary of State Hillary
Clinton advocated for stronger economic ties be-
tween India and the United States. She also re-
buked protectionist policies saying that "[United
States] will not use the global financial crisis as an
excuse to fall back on protectionism. We hope
India will work with us to create a more open,
equitable set of opportunities for trade between
our nations."
In June 2009, United States provided diplomatic
help in successfully pushing through a US$2.9 bil-
lion loan sponsored by the Asian Development
Bank, despite considerable opposition from the
People's Republic of China.
Strategic and military relations:In March 2009, the
Obama administration cleared the US$2.1 billion
sale of eight P-8 Poseidons to India, the largest
military deal between the two countries.
India expressed its concerns that Obama
administration's non-military aid to Pakistan will
not be used for counter-insurgency, but for build-
ing up its military against India. However, Robert
Blake, assistant secretary of Bureau of South and
Central Asian Affairs, said that the Pakistani Gov-
ernment was increasingly focused at fighting the
Taliban insurgency and expressed hope that the
people of India would "support and agree with
what we are trying to do".
Concerns were raised in India that the Obama ad-
ministration was delaying the full implementa-
tion of the Indo-U.S. Nuclear Deal. The Obama
administration has also strongly advocated for the
strengthening of the Comprehensive Test Ban
Treaty and has pressurized India to sign the agree-
ment. India's special envoy, Shyam Saran,
"warned" the United States that India would con-
tinue to oppose any such treaty as it was "discrimi-
natory". In June 2009, U.S. Secretary of State
Hillary Clinton said that the Obama administra-
tion was "fully committed" to the Indo-U.S. civil
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 Section -6 (Mains Special: Foreign Relations of India)
nuclear agreement.
U.S. Chairman of the Joint Chiefs of Staff Mike
Mullen encouraged stronger military ties between
India and the United States and said that "India
has emerged as an increasingly important strate-
gic partner [of the U.S.]".
Cold War era: India played a key role in estab-
lishing the Non-Aligned Movement in 1961.
Though India pursued close relations with both
US and USSR, it decided not to join any major
power bloc and refrained from joining military
alliances. India, however began establishing close
military relationship with the Soviet Union.
After the Sino-Indian War and the Indo-Pakistani
War of 1965, India made considerable changes to
its foreign policy. It developed a close relation-
ship with the Soviet Union and started receiving
massive military equipment and financial assis-
tance from the USSR. This had an adverse effect
on the Indo-US relationship. The United States
saw Pakistan as a counter-weight to pro-Soviet
India and started giving the former military assis-
tance. This created an atmosphere of suspicion
between India and US. The US-India relationship
suffered a considerable setback during the Soviet
invasion of Afghanistan when India openly sup-
ported the Soviet Union. Relations between India
and the United States came to an all-time low
during the early 1970s. Despite reports of atroci-
ties in East Pakistan, and being told, most notably
in the Blood telegram, of genocidal activities be-
ing perpetrated by Pakistani forces, U.S. Secre-
tary of State Henry Kissinger and U.S. President
Richard Nixon did nothing to discourage then Pa-
kistani President Yahya Khan and the Pakistan
Army. Kissinger was particularly concerned about
Soviet expansion into South Asia as a result of a
treaty of friendship that had recently been signed
between India and the Soviet Union, and sought
to demonstrate to the People's Republic of China
the value of a tacit alliance with the United States.
During the Indo-Pakistani War of 1971, Indian
Armed Forces, along with the Mukti Bahini, suc-
ceeded in liberating East Pakistan which soon
Copyright © 2009 | WWW.UPSCPORTAL.COM
declared independence. Richard Nixon, then US
President, feared that an Indian invasion of West
Pakistan would mean total Soviet domination of
the region, and that it would seriously undermine
the global position of the United States and the
regional position of America's new tacit ally,
China. In order to demonstrate to China the bona
fides of the United States as an ally, and in direct
violation of the US Congress-imposed sanctions
on Pakistan, Nixon sent military supplies to Paki-
stan, routing them through Jordan and Iran, while
also encouraging China to increase its arms sup-
plies to Pakistan.
When Pakistan's defeat in the eastern sector
seemed certain, Nixon sent the USS Enterprise to
the Bay of Bengal, a move deemed by the Indians
as a nuclear threat. The Enterprise arrived on sta-
tion on December 11, 1971. On 6 December and
13 December, the Soviet Navy dispatched two
groups of ships, armed with nuclear missiles, from
Vladivostok; they trailed U.S. Task Force 74 into
the Indian Ocean from 18 December 1971 until 7
January 1972. The Soviets also sent a nuclear sub-
marine to ward off the threat posed by USS En-
terprise in the Indian Ocean.
Though American efforts had no effect in turning
the tide of the war, the incident involving USS
Enterprise is viewed as the trigger for India's sub-
sequent nuclear program. American policy to-
wards the end of the war was dictated primarily
by a need to restrict the escalation of war on the
western sector to prevent the 'dismemberment'
of West Pakistan. Years after the war, many
American writers criticized the White House poli-
cies during the war as being badly flawed and ill-
serving the interests of the United States. India
carried out nuclear tests a few years later result-
ing in sanctions being imposed by United States,
further drifting the two countries apart. In recent
years, Kissinger came under fire for comments
made during the Indo-Pakistan War in which he
described Indians as "bastards." Kissinger has since
expressed his regret over the comments .
Post Cold War Era:Since the end of the Cold War,
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 Section -6 (Mains Special: Foreign Relations of India)
India-US relations have improved dramatically.
This has largely been fostered by the fact that the
US and India are both democracies and have a large
and growing trade relationship. During the Gulf
War, the economy of India went through an ex-
tremely difficult phase. The Government of India
liberalized the Indian economy. After the break
up of the Soviet Union, India started looking for
new allies and tried improving diplomatic rela-
tions with the members of the NATO particularly
the United States, Canada, France and Germany.
In 1992, India established formal diplomatic rela-
tions with Israel.
In the mid-1990s, India tried to attract world at-
tention towards the Pakistan backed terrorism in
Kashmir. The Kargil War resulted in a major dip-
lomatic victory for India. The United States and
European Union recognized the fact that Paki-
stani military had illegally infiltrated into Indian
territory and pressurized Pakistan to withdraw
from Kargil. Several anti-India terrorist groups
based in Pakistan were labelled as terrorist groups
by the United States and European Union.
Pokhran tests: In 1998, India tested nuclear weap-
ons which resulted in several U.S., Japanese and
European sanctions on India. India's then defence
minister, George Fernandes, said that India's
nuclear program was necessary as it provided a
deterrence to some potential nuclear threat. Most
of the sanctions imposed on India were removed
by 2001. India has categorically stated that it will
never use weapons first but will defend if attacked.
In fact Pakistan is the first country that India in-
forms if any nuclear tests are on the agenda.
The economic sanctions imposed by the United
States in response to India's nuclear tests in May
1998 appeared, at least initially, to seriously dam-
age Indo-American relations. President Bill
Clinton imposed wide-ranging sanctions pursu-
ant to the 1994 Nuclear Proliferation Prevention
Act. U.S. sanctions on Indian entities involved in
the nuclear industry and opposition to interna-
tional financial institution loans for non-humani-
Copyright © 2009 | WWW.UPSCPORTAL.COM
tarian assistance projects in India. The United
States encouraged India to sign the Comprehen-
sive Test Ban Treaty (CTBT) immediately and
without condition. The U.S. also called for re-
straint in missile and nuclear testing and deploy-
ment by both India and Pakistan. The non-prolif-
eration dialogue initiated after the 1998 nuclear
tests has bridged many of the gaps in understand-
ing between the countries.
Post-September 11 attack: After the September
11, 2001 attacks, Indian intelligence agencies pro-
vided the U.S. with significant information on Al-
Qaeda and related groups' activities in Pakistan
and Afghanistan. India's extensive contribution to
the War on Terrorism has helped India's diplo-
matic relations with several countries. Over the
past few years, India has held numerous joint mili-
tary exercises with U.S. and European nations that
have resulted in a strengthened U.S.-India and
E.U.-India bilateral relationship. India's bilateral
trade with Europe and U.S. has more than doubled
in the last five years.
However, India has yet to sign the CTBT, or the
Nuclear Non-Proliferation Treaty, claiming the
discriminatory nature of the treaty that allows the
five declared nuclear countries of the world to
keep their nuclear arsenal and develop it using
computer simulation testing. Prior to its nuclear
testing, India had pressed for a comprehensive
destruction of nuclear weapons by all countries of
the world in a time-bound frame. This was not
acceptable to the US and other countries. Pres-
ently, India has declared its policy of "no-first use
of nuclear weapons" and the maintenance of a
"credible nuclear deterrence". The US, under
President George W. Bush has also lifted most of
its sanctions on India and has resumed military
co-operation. Relations with US have consider-
ably improved in the recent years, with the two
countries taking part in joint naval exercises off
the coast of India and joint air exercises both in
India as well as in the United States.
India has been pushing for reforms in the UN and
WTO with mixed results. India's candidature for
a permanent seat at the UN Security Council is
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 Section -6 (Mains Special: Foreign Relations of India)
currently backed by several countries including
United Kingdom, France, Germany, Japan, Bra-
zil, African Union nations and recently People's
Republic of China. In 2005, the United States
signed a nuclear co-operation agreement with
India even though the latter is not a part of the
NPT. The US argued that India's strong nuclear
non-proliferation record made it an exception and
persuaded other NSG members to sign similar deals
with India.
On March 2, 2006 India and the US signed the
Indo-U.S. Nuclear Pact on co-operation in civil-
ian nuclear field. This was signed during the four
days state visit of US president George Bush in
India. On its part, India would separate its civil-
ian and military nuclear programs, and the civil-
ian programs would be brought under the safe-
guards of International Atomic Energy Agency
(IAEA). The United States would sell India the
reactor technologies and the nuclear fuel for set-
ting up and upgrading its civilian nuclear program.
The U.S. Congress needs to ratify this pact since
U.S. federal law prohibits the trading of nuclear
technologies and materials outside the framework
of the Nuclear Suppliers Group (NSG).
Indo-US Strategic Partnership
Indo-US relations got strategic content way back
in early sixties. The rise of China worried the
policymakers in Washington. Chinese annexation
of Tibet, its role in Korean war and other such
acts convinced Washington about the expansion-
ist designs of the Chinese. As the relations between
India and China deteriorated during late fifties,
the Americans found a golden opportunity to take
advantage of this situation to promote India as a
counterweight to China But any unidimensional
alliance is bound to be short-lived and this alli-
ance was no exception to this general rule. As
China ceased to be a headache for the American
policymakers by the late sixties, this unidimen-
sional alliance disappeared into thin air.
The end of the Cold War necessitated as well as
facilitated the infusion of strategic content to Indo-
US relations–this time multidimensional.In the
Copyright © 2009 | WWW.UPSCPORTAL.COM
post Cold War era, the strategic objectives of In-
dia and the US converges on a number of issues
and not just one–as well as the case earlier. These
issues include, inter alia, containment of terror-
ism, promotion of democracy, counter prolifera-
tion, freedom of navigation in the Indian Ocean,
Asian balance of power, etc.
One of the very interesting feature of Indo-US
relations of recent times is the changes on the
terms of engagement between the two countries
on the issue of nuclear proliferation.While ear-
lier, in the US strategic thinking on nuclear pro-
liferation, India figured mainly because of Ameri-
can concern about latter’s nuclear and missile
programmes, in the twenty-first century,however,
American strategic thinking on the issue of nuclear
proliferation has undergone radical
reorientation.Now, the Americans are increasingly
realising the futility of insisting on a rollback of
India’s nuclear programme. They, rather, want to
leverage India’s growing power and influence in
favour of their broader nonproliferation and
counter proliferation objectives.
As promotion of democracy around the world is
one of the most important foreign policy objec-
tive of the USA, India- as the largest democracy
of the world-can hardly be ignored by the US.This
is the reason, cooperation in promotion of democ-
racy in the world has become one of the most
important facets of Indo-US relations in recent
times.India is a founding member of the ‘Com-
munity of Democracies’ – a prominent endeavour
of the US on promotion of democracy.
However,India rejected the suggestion of the US
about setting up a Centre for Asian Democracy.
Agriculture is another important area of coopera-
tion between India and the USA in present
times.Considering the fact that both the nations
at present have a vast pool of human resources
adept at knowledge economy, it is only natural
that the most optimal course such partnership can
aim at is harnessing these human resources by
concentrating on development and dissemination
of agricultural knowledge through research, edu-
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 Section -6 (Mains Special: Foreign Relations of India)
cation and training etc.An initiative to forge such
a partnership is the 'India-US Knowledge Initia-
tive on Agriculture' (KIA)
European Union
India was one of the first countries to develop re-
lations with the Union, signing bilateral agree-
ments in 1973, when the United Kingdom joined.
The most recent cooperation agreement was
signed in 1994 and an action plan was signed in
2005. As of April 2007 the Commission is pursu-
ing a free trade agreement with India.
The Union is India's largest trading partner, ac-
counting for 20% of Indian trade. However, India
accounts for only 1.8% of the EU's trade and at-
tracts only 0.3% of European Foreign Direct In-
vestment, although still provides India's largest
source. During 2005 EU-India trade grew by
20.3%.
There was controversy in 2006 when the Indian
Mittal Steel Company sought to take-over the Lux-
embourg based steel company, Arcelor. The ap-
proach met with opposition from France and Lux-
embourg but was passed by the Commission who
stated that were judging it on competition grounds
only.
The European Union (EU) and India agreed on
September 29,2008 at the EU-India summit in
Marseille, France's largest commercial port, to
expand their cooperation in the fields of nuclear
energy and environmental protection and deepen
their strategic partnership. French President
Nicolas Sarkozy, the EU's rotating president, said
at a joint press conference at the summit that "EU
welcomes India, as a large country, to engage in
developing nuclear energy, adding that this clean
energy will be helpful for the world to deal with
the global climate change." Sarkozy also said the
EU and Indian Prime Minister Manmohan pledged
to accelerate talks on a free trade deal and expected
to finish the deal by 2009. The Indian prime min-
ister was also cautiously optimistic about coop-
eration on nuclear energy. "Tomorrow we have a
Copyright © 2009 | WWW.UPSCPORTAL.COM
bilateral summit with France. This matter will
come up and I hope some good results will emerge
out of that meeting," Singh said when asked about
the issue. Singh said that he was "very satisfied"
with the results of the summit. He added that EU
and India have "common values" and the two
economies are complementary to each other. Eu-
ropean Commission President Jose Manuel
Barroso, also speaking at Monday's press confer-
ence, expounded the joint action plan on adjust-
ments of EU's strategic partnership with India,
saying the two sides will strengthen cooperation
on world peace and safety, sustainable develop-
ment, cooperation in science and technology and
cultural exchanges.
Reviewing the two sides' efforts in developing the
bilateral strategic partnership, the joint action plan
reckoned that in politics, dialogue and coopera-
tion have enhanced through regular summits and
exchanges of visits and that in economy, mutual
investments have increased dramatically in recent
years, dialogue in macro economic policies and fi-
nancial services has established and cooperation
in energy, science and technology and environ-
ment has been launched. Under the joint action
plan, EU and Indian would enhance consultation
and dialogue on human rights within the UN
framework, strengthen cooperation in world
peacekeeping mission, fight against terror and non-
proliferation of arms, promote cooperation and
exchange in developing civil nuclear energy and
strike a free trade deal as soon as possible. France,
which relies heavily on nuclear power and is a
major exporter of nuclear technology, is expected
to sign a deal that would allow it to provide nuclear
fuel to India.
Trade between India and the 27-nation EU has
more than doubled from 25.6 billion euros ($36.7
billion) in 2000 to 55.6 billion euros last year, with
further expansion to be seen. "We have agreed to
achieve an annual bilateral trade turnover of 100
billion euros within the next five years," Singh told
reporters. A joint statement issued at the end of
the summit said the EU and India would work to
reach an agreement on climate change by the end
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 Section -6 (Mains Special: Foreign Relations of India)
of 2009.
India–United Kingdom relations
Indian–British relations are foreign relations be-
tween the United Kingdom and India. India has a
high commission in London and two consulates-
general in Birmingham and Edinburgh. The
United Kingdom has a high commission in New
Delhi and three deputy high commissions in
Mumbai, Chennai and Kolkata. Both countries are
full members of the Commonwealth of Nations.
Since 1947, relations between the two countries
have been mostly friendly and there are many
areas in which both India and the UK seek stron-
ger ties for mutual benefit. There are also strong
cultural and social ties between the two nations.
In India, English is one of the official languages,
and Cricket is among the most popular sports. In
the UK Indian Cuisine is hugely popular. Britain
imports most of its tea from India, and there are a
number of words of Indian origin in the English
language. The UK has an ethnic Indian popula-
tion of over 1 million.
Republic of India (since 1950): India remained
in the Commonwealth of Nations after become a
Republic, but diversified its foreign relations be-
yond the former British Empire. In particular,
India became a major force within the Non-
Aligned Movement, which initially sought to
avoid taking sides during the Cold War. This con-
trasted with Britain's position as a founding mem-
ber of NATO, and key ally of the United States.
However, relations between the two countries
have generally been cordial. Due mainly to post
independence immigration, there are now over a
million people of Indian descent in the United
Kingdom.
Economy: India is the second largest foreign in-
vestor in the UK after the USA, and the UK is also
a significant investor in India. There are many bi-
lateral trade agreements between the two nations
designed to strengthen ties. For example, in 2005,
the Joint Economic and Trade Committee (JETCO)
was inaugurated in New Delhi aimed at boosting
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two-way bilateral investments.
Defense: Cooperation is undertaken under the De-
fence Consultative Group (DCG) formed in 1995.
India and the UK cooperate in a number of ways.
Joint Indo-UK exercises (a ten-day exercise Em-
erald Mercury was held in India in March 2005,
the first of its kind between the two countries,
which marked the biggest land deployment of
British military personnel in India), research and
technology and defence equipment collaboration.
Britain supports India’s case for permanent mem-
bership of the United Nations Security Council as
well as bilateral cooperation in civilian nuclear
technology. The UK and India also cooperate on
security and terrorism issues.
Political: Politically, relations between India and
the UK occur mostly through the multilateral
organisations of which both are members, such as
the Commonwealth of Nations, the World Trade
Organisation and the Asian Development Bank.
Britain was the first G8 nation to suggest that In-
dia, along with China, Brazil, Mexico and South
Africa, be allowed to attend summits with the G8.
Britain recently donated £825 million in aid to
India for the development of India's Healthcare
System and Educational System.
The President of India Sarvepalli Radhakrishnan
paid a state visit to the United Kingdom in June
1963. The President of India Ramaswamy
Venkataraman paid a state visit to the United
Kingdom in October 1990. HM Queen Elizabeth
II of the United Kingdom paid state visits to India
in November 1963, and in April 1990.
India–Russia relations
India-Russian relations refers to the bilateral re-
lations between the Republic of India and the Rus-
sian Federation. During the Cold War, India and
the Soviet Union enjoyed a strong strategic, mili-
tary, economic and diplomatic relationship. After
the collapse of the USSR, India improved its rela-
tions with the West but it continued its close re-
lations with Russia. India is the second largest
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 Section -6 (Mains Special: Foreign Relations of India)
market for Russian arms industry. In 2004, more
than 70% on Indian Military's hardware came
from Russia, making Russia the chief supplier of
arms. India has an embassy in Moscow and 2 Con-
sulates-General (in Saint Petersburg and
Vladivostok). Russia has an embassy in New Delhi
and 3 Consulates-General (in Chennai, Kolkata,
Mumbai). Since 2000 and the visit of Vladimir
Putin in India there have been an Indo-Russian
Strategic Partnership.
Soviet Union and India:A cordial relationship with
India that began in the 1950s represented the most
successful of the Soviet attempts to foster closer
relations with Third World countries. The rela-
tionship began with a visit by Indian prime min-
ister Jawaharlal Nehru to the Soviet Union in June
1955 and Khrushchev's return trip to India in the
fall of 1955. While in India, Khrushchev an-
nounced that the Soviet Union supported Indian
sovereignty over the disputed territory of the
Kashmir region and over Portuguese coastal en-
claves.
The Soviet relationship with India rankled the
Chinese and contributed to Sino-Soviet enmity
during the Khrushchev period. The Soviet Union
declared its neutrality during the 1959 border dis-
pute and the Indo-China war of 1962, although
the Chinese strongly objected. The Soviet Union
gave India substantial economic and military as-
sistance during the Khrushchev period, and by
1960 India had received more Soviet assistance
than China had. This disparity became another
point of contention in Sino-Soviet relations. In
1962 the Soviet Union agreed to transfer technol-
ogy to coproduce the MiG-21 jet fighter in India,
which the Soviet Union had earlier denied to
China.
In 1965 the Soviet Union served successfully as
peace broker between India and Pakistan after an
Indian-Pakistani border war. The Soviet chairman
of the Council of Ministers, Aleksei N. Kosygin,
met with representatives of India and Pakistan and
helped them negotiate an end to the military con-
flict over Kashmir.
In 1971 the former East Pakistan region initiated
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an effort to secede from its political union with
West Pakistan. India supported the secession and,
as a guarantee against possible Chinese entrance
into the conflict on the side of West Pakistan,
signed a treaty of friendship and cooperation with
the Soviet Union in August 1971. In December,
India entered the conflict and ensured the vic-
tory of the secessionists and the establishment of
the new state of Bangladesh.
Relations between the Soviet Union and India did
not suffer much during the rightist Janata Party's
coalition government in the late 1970s, although
India did move to establish better economic and
military relations with Western countries. To
counter these efforts by India to diversify its rela-
tions, the Soviet Union proffered additional weap-
onry and economic assistance.
During the 1980s, despite the 1984 assassination
by Sikh extremists of Prime Minister Indira
Gandhi, the mainstay of cordial Indian-Soviet re-
lations, India maintained a close relationship with
the Soviet Union. Indicating the high priority of
relations with the Soviet Union in Indian foreign
policy, the new Indian prime minister, Rajiv
Gandhi, visited the Soviet Union on his first state
visit abroad in May 1985 and signed two long-
term economic agreements with the Soviet Union.
In turn, Gorbachev's first visit to a Third World
state was his meeting with Gandhi in New Delhi
in late 1986. Gorbachev unsuccessfully urged
Gandhi to help the Soviet Union set up an Asian
collective security system. Gorbachev's advocacy
of this proposal, which had also been made by
Brezhnev, was an indication of continuing Soviet
interest in using close relations with India as a
means of containing China. With the improve-
ment of Sino-Soviet relations in the late 1980s,
containing China had less of a priority, but close
relations with India remained important as an
example of Gorbachev's new Third World policy.
Military relations:Defence relations between In-
dia and the Russian Federation have a historical
perspective. Russia has been an important supplier
of defence goods for several decades. Today, the
cooperation is not limited to a buyer-seller rela-
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 Section -6 (Mains Special: Foreign Relations of India)
tionship but includes joint research and develop-
ment, training, service to service contacts, includ-
ing joint exercises. The last joint naval exercises
took place in April 2007 in the Sea of Japan and
joint airborne exercises were held in September
2007 in Russia.
There is an Inter-Governmental commission on
military-technical cooperation co-chaired by the
two Defence Ministers. The Seventh session of this
Inter-Governmental Commission was held in Oc-
tober 2007 in Moscow. During the visit, an Agree-
ment on joint development and production of pro-
spective multi role fighters was signed between
the two countries.
India and Russia have several major joint mili-
tary programs such as those mentioned below:
» BrahMos cruise missile program
» INS Vikramaditya aircraft carrier program
» 5th generation fighter jet program
» Sukhoi Su-30MKI program (230+ to be built by
» Hindustan Aeronautics)
» Ilyushin/HAL Tactical Transport Aircraft
Additionally, India has purchased/leased several
military hardware from Russia:
» T-90S Bhishma program. (1000+ to be built
in India)
» Akula-II nuclear submarine (2 to be leased)
» Tu-22M3 bombers (4 ordered)
» US$900 million upgrade of MiG-29
» Mil Mi-17 (80 ordered)
Ilyushin Il-76 Candid (6 ordered to fit Israeli
Phalcon radar)
Russia's MiG-35 is competing in the Indian MRCA
Competition and is considered to be the front-run-
ner for the winning bid, given India's already,
largely Russian-built air force. The Farkhor Air
Base in Tajikistan is currently jointly operated by
India and Russia.
Economic relations:Bilateral trade turnover is
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modest and stood at US $ 3 bn in 2006-07, out of
which Indian Exports to Russia were valued at US
$ 908 mn. Main Indian exports to Russia are phar-
maceuticals; tea, coffee & spices; apparel & cloth-
ing; edible preparations; and engineering goods.
Main Indian imports from Russia are iron and steel;
fertilizers; non-ferrous metals; paper products;
coal, coke & briquettes; cereals; and rubber. Indo-
Russian trade is expected to reach US$10 billion
by 2010.
The India-Russia Inter-Governmental Commis-
sion on Trade, Economic, Scientific, Technologi-
cal and Cultural Cooperation (IRIGC) has had 13
sessions so far and is co-chaired by the External
Affairs Minister from the Indian side and a Deputy
Prime Minister from the Russian side. There are
six Joint Working Groups [WG] under the IRIGC,
namely, WG on Trade and Economy [trade and
financial matters], WG on Energy [oil and gas,
thermal and hydel power, non-conventional en-
ergy], WG on Metallurgy and Mining [steel, non-
ferrous metal, coal], WG on Science & Technol-
ogy; WG on Communication and Information
Technology; and WG on Culture and Tourism. The
13th of the IRIGC was held in Moscow on 12
October 2007.
The two countries have set-up India-Russia Fo-
rum on Trade and Investment at the level of the
two Commerce Ministers to promote trade, in-
vestment and economic cooperation. The first
Forum was held in New Delhi on 12-13 February
2007 which was attended by the Minister of Com-
merce and Industry and the Russian Minister of
Economic Development and Trade, apart from a
large number of business representatives from both
sides. The Minister of Commerce & Industry, Shri
Kamal Nath participated in the 11th Saint Peters-
burg International Economic Forum on 9-10 June
2007.
In February 2006, India and Russia also set-up a
Joint Study Group to examine ways to increase
trade to US $ 10 bn by 2010 and to study feasibil-
ity of a Comprehensive Economic Cooperation
Agreement (CECA). The Group finalized its re-
port after its fourth meeting in Moscow in July
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 Section -6 (Mains Special: Foreign Relations of India)
2007. It has been agreed that a Joint Task Force
would monitor the implementation of the recom-
mendation made in the Joint Stdy Group Report,
including considering CECA.
Cooperation in the Energy sector: Energy sector
is an important area in Indo-Russian bilateral re-
lations. In 2001, ONGC-Videsh Limited acquired
20% stake in the Sakhalin-I oil and gas project in
the Russian Federation, and has invested about
US $ 1.7 billion in the project. The Russian com-
pany Gazprom and Gas Authority of India Ltd.
have collaborated in joint development of a block
in the Bay of Bengal. Kudankulam Nuclear Power
Project with two units of 1000 MW each is a good
example of Indo-Russian nuclear energy coopera-
tion. Both sides have expressed interest in expand-
ing cooperation in the energy sector.
In December 2008, Russia and India signed an
agreement to build civilian nuclear reactors in
India during a visit by the Russian president to
New Delhi.
Space Cooperation:Space is another key sector of
cooperation between the two countries. During
President Vladimir Putin’s visit to India in De-
cember 2004, two space-related bilateral agree-
ments were signed viz. Inter-Governmental um-
brella Agreement on cooperation in the outer
space for peaceful purposes and the Inter Space
Agency Agreement on cooperation in the Russian
satellite navigation system “GLONASS”. Subse-
quently a number of follow-up agreements on
GLONASS have been signed. In November 2007,
the two countries have signed an agreement on
joint lunar exploration. These space cooperation
programmes are under implementation.
Science and Technology:The ongoing cooperation
in the field of science & technology, under the
Integrated Long-Term Programme of cooperation
(ILTP) is the largest cooperation programme in
this sphere for both India and Russia. ILTP is co-
ordinated by the Department of Science and Tech-
nology from the Indian side and by the Russian
Academy of Sciences and Russian Ministry of In-
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dustry & Science and Technology from the Rus-
sian side. Development of SARAS Duet aircraft,
semiconductor products, super computers, poly-
vaccines, laser science and technology, seismol-
ogy, high-purity materials, software & IT and
Ayurveda have been some of the priority areas of
co-operation under the ILTP. Under this
programme, eight joint Indo- Russian centers have
been established to focus on joint research and de-
velopment work. Two other Joint Centres on Non-
ferrous Metals and Accelerators and Lasers are be-
ing set up in India. A Joint Technology Centre
based in Moscow to bring cutting edge technolo-
gies to the market is also under processing. An
ILTP Joint Council met in Moscow on 11-12 Oc-
tober 2007 to review cooperation and give it fur-
ther direction. In August 2007, an MoU was signed
between Department of Science and Technology
and Russian Foundation of Basic Research, Mos-
cow to pursue scientific cooperation.
North-South Transport corridor: The “North-
South” Transport Corridor Agreement [INSTC] has
been ratified by all the three original signatory
states, viz. India, Iran and Russia, and has come
into force since 16 May, 2002. This route is ex-
pected to reduce the cost of movement of goods
between India and Russia and beyond. The 3rd
Coordination Council Meeting of the INSTC was
held in October 2005 in New Delhi and the 4th
meeting was held in Aktau, Kazakhstan in Octo-
ber 2007 to discuss further streamlining the op-
eration of the corridor.
Cooperation in the sphere of Culture: India-Rus-
sia relations in the field of culture are historical.
Five Chairs relating to Indology have been estab-
lished in Moscow, Saint Petersburg, Kazan and
Vladivostok. Days of Russian Culture were held
in India in November 2003, in Delhi, Kolkata and
Mumbai. “Days of Indian Culture” in Russia were
organized from September- October 2005 in Rus-
sia. 130th birth anniversary of Nikolai Roerich and
100th birth anniversary of Svyatoslav Roerich
were celebrated in India in October 2004. Chief
Minister of National Capital Territory of Delhi led
a delegation for participating in the event “Days
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 Section -6 (Mains Special: Foreign Relations of India)
of Delhi in Moscow” from 28 May-1 June 2006.
The “Year of Russia in India” is being held in 2008.
It will be followed by the “Year of India in Rus-
sia” in 2009. There is a Hindi Department, in the
University of Moscow.
Terrorism:On international terrorism, India and
Russia agree that there is no justification for ter-
rorism, and this must be fought against, without
compromise and wherever it exists. Russia has
supported the Indian draft at the UN on Compre-
hensive Convention on International Terrorism
(CCIT). The two sides signed a MoU on coopera-
tion in combating terrorism in December 2002. A
Joint Working Group on Combating International
Terrorism meets from time to time and its fourth
meeting was held in Delhi on 24 October 2006.
India–Israel relations
Despite formation of the State of Israel in 1948,
India's strong historic ties with the Arab world
prevented it establishing diplomatic ties with Is-
rael. However, the collapse of the Soviet Union
(with whom India maintained strong relations)
and increasing concerns over the rise of Islamic
extremism in the Indian subcontinent convinced
India to change its position towards Israel. On
January 29, 1992, full diplomatic ties between the
two were established and since then the bilateral
relations have grown exceedingly.
During the tenure of the Hindu nationalist
Bhartiya Janata Party (BJP), relations between
India and Israel blossomed. The relations have
continued to grow ever since the Indian National
Congress (INC) came to power in 2004. By 2008,
bilateral trade between India and Israel exceeded
US$4 billion and Israel was India's second-largest
military supplier after Russia. It was expected that
Israel would overtake Russia as the largest arms
supplier to India, which it did in 2009.
As of 2008, India has bought more than US$5 bil-
lion worth of Israeli equipment since 2002. In ad-
dition, Israel is training Indian military units and
discussing an arrangement to give Indian comman-
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dos instruction in counter-terrorist tactics and
urban warfare. There is also growing space coop-
eration between the two. In February 2008, the
Indian Space Research Organization (ISRO)
launched an Israeli spy satellite to monitor the
activities of Iran. Given India's strong relations
with both the Arab world and Israel, it has been
indicated that India can play a constructive role
in the Israeli–Palestinian peace process.
India gained independence from the British Em-
pire in 1947, a year before the State of Israel was
founded. Officially, India was opposed to the cre-
ation of Israel for a philosophical reason, it did
not like the concept of creation of nations based
on religion. This was to keep India and Pakistan
in one country. Due to its opposition for creation
of Pakistan based on Islam, it opposed the cre-
ation of Israel as a nation for Jews. Before Israel
was created, a number of countries sent their rep-
resentatives and the representative from India was
a Muslim. Though Gandhi had a good relation-
ship with Jews, he opposed the creation of Israel
as he was against the creation of countries based
on religion]. India did not have any official rela-
tions with Israel until 1991 due to its problem with
Palestine. Despite this, its military had an excel-
lent relationship with Israel. People like Moshe
Dayan have had interaction with India despite the
lack of diplomatic relationship between the two
countries. Israel has provided India with crucial
information during multiple wars that India faced.
India's first Prime Minister, Jawahar Lal Nehru
supported the creation of Israel.
Muslims in India were largely pro-Arab and the
Congress-led Indian government did not want to
publicly take a pro-Israel stance. India recognized
Israel as a nation in 1950. Another factor which
affected India-Israel diplomatic relationship was
the Kashmir dispute. During the First Kashmir
War, India referred the Kashmir issue to the
United Nations Security Council. Had India es-
tablished diplomatic relations with Israel, it was
thought in Indian power circles, that the Arab
nations would favor Pakistan's claim over India's
to Kashmir. In private though, Indian political
leaders have expressed their support for Israel. In
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 Section -6 (Mains Special: Foreign Relations of India)
a statement in 1954, Nehru said he would not "be
a party to a resolution which stated that the cre-
ation of Israel was a violation of international law".
He also wrote a letter to Frances Gunther express-
ing his support for the general Jewish behavior in
Palestine. Various Hindu organizations, led by the
Sangh Parivar, openly supported the Jewish cause
and the creation of Israel. The opposition to the
establishment of diplomatic relations with Israel
during the 1960s and 1970s arose from the Con-
gress Party's desire to appease the Muslims in In-
dia.
In 1986, the members of the Organisation of the
Islamic Conference (OIC) issued a joint declara-
tion supporting Pakistan's claim over Kashmir.
Relations between India and the OIC became tense
in 2001 when the latter criticised India for taking
insufficient action to stop the alleged human rights
violations against Muslims in the disputed Indian
occupied territory of Jammu and Kashmir. India
dismissed these allegations as baseless and Paki-
stani propaganda. India responded to the anti-In-
dia position taken by the OIC by re-evaluating its
Middle East policy.
Intelligence and military: India and Israel have
increased cooperation in military and intelligence
ventures since the establishment of diplomatic
relations. While India and Israel were officially
"rivals" during the Cold War, the fall of the Soviet
Union and the rise of Islamic terrorism in both
countries have generated a solid strategic alliance.
India recently launched a military satellite for Is-
rael through its Indian Space Research Organiza-
tion.
During the Kargil War, Israel provided India with
military hardware, including laser-guided bombs
and unmanned aerial vehicles to help it to flush
out the Pakistani infiltrators in Kargil. This rela-
tionship soon developed into a major defense part-
nership between India and Israel.
In 1997, Israel's President Ezer Weizman became
the first head of the Jewish state to visit India. He
met with Indian President Shankar Dayal Sharma,
Vice President K.R. Narayanan and Prime Minis-
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ter H.D. Deve Gowda. Weizman negotiated the
first weapons deal between the two nations, in-
volving the purchase of Barak-1 vertically-
launched surface-to-air (SAM) missiles from Is-
rael. The Barak-1 has the ability to intercept anti-
ship cruise missiles such as the Harpoon. The pur-
chase of the Barak-1 missiles from Israel by India
was a tactical necessity since Pakistan had pur-
chased P3-C II Orion maritime strike aircraft and
27 Harpoon sea-skimming anti-ship missiles from
the United States. In what would be end of an
era, Israel became India's biggest military supplier
in 2009, supplying equipment worth more than 1
Billion Dollars each year. Israel replaced Russia in
the process as biggest supplier, which tradition-
ally had been India's top supplier.
Strategic Naval Cooperation: In naval terms Israel
sees great strategic value in an alliance with the
Indian Navy, given India's dominance of South
Asian waters. It would be advantageous to the Is-
raeli Navy to establish a logistical infrastructure
in the Indian Ocean with the cooperation of the
Indian Navy, since the Mediterranean has a domi-
nant Arab and European presence that is hostile
to the Israeli navy in varying degrees. In 2000,
Israeli submarines reportedly conducted test
launches of cruise missiles capable of carrying
nuclear warheads in the waters of the Indian
Ocean, off the Sri Lanka coast.
Air Force contracts: In 1996 India purchased 32
Searcher" Unmanned Aerial Vehicles, Electronic
Support Measure sensors and an Air Combat Ma-
noeuvering Instrumentation simulator system
from Israel. Since then Israel Aircraft Industries
(IAI) has serviced several large contracts with the
Indian Air Force including the upgrading of the
IAF's Russian-made MiG-21 ground attack aircraft
and there have been further sales of unmanned
aerial vehicles as well as laser-guided bombs.
Intelligence: A Rediff story in 2003 revealed that
the Indian external intelligence agency R&AW
had clandestine links with the Mossad, Israel's
external intelligence agency. When R&AW was
founded in 1968 by Rameshwar Nath Kao, he was
advised by the then Indian Prime Minister Indira
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 Section -6 (Mains Special: Foreign Relations of India)
Gandhi to cultivate links with Mossad. This was
suggested as a countermeasure to military links
between that of a hostile Pakistan and China, as
well as with North Korea. Israel was also con-
cerned that Pakistani army officers were training
Libyans and Iranians in handling Chinese and
North Korean military equipment. Though India
planned to bomb Kahuta, as in Operation Opera,
where Israel destroyed an Iraqi nuclear reactor,
the plan was later dropped.
The Pakistanis eventually started to suspect in-
telligence relations between India and Israel re-
sulting in a threat to Pakistani security. When
young Israeli tourists began visiting the Kashmir
valley in the early nineties, Pakistan suspected
they were disguised Israeli army officers there to
help Indian security forces with counter-terror-
ism operations. Pakistani intelligence inspired a
series of terrorist attacks on the unsuspecting Is-
raeli tourists with one slain and another kid-
napped. Intense pressure from the Kashmiri Mus-
lim diaspora in the United States led to their re-
lease.
Phalcon AEW&C radar systems: In March 2004,
Israel and India signed a US$1.1 billion deal ac-
cording to which IAI would deliver the Indian
Air Force three Phalcon AEW&C radar systems.
India signed a separate deal with the Ilyushin
Corporation of Russia for the of supply three Il-
76 A-50 heavy air-lifters, which were to be used
as platforms for these radar systems, for an addi-
tional US $500 million.
On 12 January 2009, the Indian Air Force received
its first aircraft, which was flown to the IAF Agra
base where it will be stationed. First AWACS air-
craft will be inducted to No 50 sq based in Agra in
end May 2009. According to the revised delivery
schedule, second and third ones now expected in
November/December 2009 and May/June 2010.
Order for another 3 in process, reports suggest that
deal was inked in Nov 08. IAF is keen on building
up its Phalcon AWACS fleet to a strength to six.
AWACS will enable the IAF to carry out tactical
surveillance over a radius of 400 kilometers and
collect surface target information deep inside Pa-
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kistan even as the aircraft operates within Indian
airspace.
Barak missile deal: Israel Aerospace Industries Ltd
has signed a $2.5 billion deal with India to de-
velop an anti-aircraft system and missiles for the
country, in the biggest defense contract in the
history of Israel at the time. IAI CEO Yitzhak
Nissan recently visited India to finalize the agree-
ment with heads of the defense establishment and
the country's president. The Indian government
has already approved the project, in the frame-
work of which the IAI will develop for the In-
dian Navy and Air Force the Barak-8 missile that
is capable of protecting sea vessels and ground fa-
cilities from aircraft and cruise missiles. The mis-
sile has a range of over 70 kilometres. The missile
will replace the current obsolete Russian system
used by India.
On November 10 2008, Indian military officials
are expected to visit Israel to discuss joint weap-
ons development projects, additional sales of Is-
raeli equipment to the Indian military, and
counter-terrorism strategies. The new round of
talks are seen as a significant expansion in the In-
dian-Israeli strategic partnership. In 2008, Israel
surpassed Russia as the largest arms supplier to
India
MR-SAM deal: The deal, signed in February, in-
volves development and production of a land-
based version of the Barak 8 missile systems. The
sea-based version is already in advanced develop-
ment stages.
The missile will be capable of intercepting enemy
aircraft and missiles within a 70-kilometer range.
DRDO-IAI joint venture will develop and equip
Indian Air Force (IAF) with 18 combat manage-
ment systems with 435 MRSAMs. Missiles will
replace obsolete PECHORA missile systems. In
December 2008, DRDO chief M Natarajan in-
formed Cabinet Committee on Security (CCS) that
the nation’s air defence was under threat: IAF had
reported that 17 out of 60 firing units of
PECHORA had already been phased out.
Science and technology:India is building closer ties
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 Section -6 (Mains Special: Foreign Relations of India)
with Israel in the areas of nanotechnology, infor-
mation technology, alternative fuels, agriculture,
animal husbandry and space research.
Israel's Minister for Science and Technology,
Eliezer Moodi Sandberg, said in 2003 that Israel
was keen on strengthening science and technol-
ogy ties with India considering that the latter had
a rich base of scientists and technologists and the
two countries could benefit by synergising their
activities.
Various activities under Indo-Israel Cooperation
in Science & Technology continued during the
1999 – 2000 year, including 22 joint research
projects. Work on six projects was completed by
2002. Twelve scientists from both countries vis-
ited the laboratories of their collaborators and two
exploratory visits from India were also supported
with three young Indian scientists deputed to Is-
rael on short term exchange visits.
The Indo-Israel Joint Symposium on Human Ge-
nome was held in Jerusalem in 1998 with 6 In-
dian scientists working in the area. Subsequently,
as a follow up to the symposium, a call for joint
research proposals on Human Genome was issued
in July 1999 for which 11 proposals were received.
Out of these, 6 research projects have been rec-
ommended for implementation. Another Indo-
Israel status seminar on human Genome Research
was organized in India on December 2000.
In 2003, the two countries proposed to double the
investment under the ongoing science and tech-
nology collaboration to $1 million with $0.5 mil-
lion from each country in the next biennial pe-
riod starting October 2004.
The Indo-Israel Joint Committee of scientists was
constituted with the DST (Department of Science
and Technology)and India as Co-chairmen with
representatives from various research organiza-
tions in India and the Ministry of Information
Technology as members. The 4th Meeting of the
joint committee was held in the first week of No-
vember 1999 in Jerusalem, attended by a 3 mem-
ber Indian delegation. In 2004, the Ministry of
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Science and Technology in India signed an MoU
with Israel for jointly funding industrial R&D
projects.
In an agreement signed on May 30, 2005, India
and Israel pledged to set up a fund to encourage
investment and joint industrial ventures. Accord-
ing to the Press Trust of India, there are five pri-
ority areas for enhanced collaboration:
nanotechnology, biotechnology, water manage-
ment, alternative energy, and space and aeronau-
tics. India and Israel will each start by contribut-
ing US$1 million to provide risk-free grants to
entrepreneurs in the two countries.
In 2008, Israel and India finalised a three-year plan
to introduce crops such as olives, dates and grapes
to be introduced and cultivated in the states of
Rajasthan and Maharashtra, to create an agricul-
tural market that meets Western demand for prod-
ucts like olive oil. In addition to the hope that
this plan would boost yield and stave off famine,
officials presented the project as symbolic.
Spy satellites:Israel's Minister for Science and
Technology has expressed interest in collaborat-
ing with the Indian Space Research Organization
(ISRO) towards utilizing satellites for better man-
agement of land and other resources. Israel has
also expressed interest in participating in ISRO's
Chandrayaan mission of sending an unmanned
craft to the moon. A Memorandum of Understand-
ing, signed by ISRO and Israel's space agency, pro-
vides for cooperation in multiple areas of space
science and technology
TecSAR: In a significant move, Israel chose India
to launch its satellites. The latest Israeli spy satel-
lite, TecSAR, was launched by India on 22 Janu-
ary, 2008. The Indian PSLV launch-vehicle was
chosen instead of its own home grown Shavit
rocket. This was due to the cost of the PSLV be-
ing no more than $15 million (as it is a more ma-
tured system), compared to the Shavit which is
close to $20 million. Besides the cost and matu-
rity factors, the Shavit had other several critical
drawbacks. The most important was the constraint
on possible satellite orbits. Any launch from Is-
115
 Section -6 (Mains Special: Foreign Relations of India)
raeli territory must be directed westwards, to-
wards the sea, in order to prevent the launcher's
first stages (or the satellite itself, in case of a mal-
function) from falling on populated areas or on
foreign (hostile) territory. A westward launch, that
is, against the direction of the Earth's rotation,
seriously restricts the weight of the satellite that
the launch vehicle can carry. In the past, Israel
also experienced several failures - the most recent
example being the attempted Ofeq-6 launch in
March 2004. In such cases, security links and the
operational experience of a more capable partner
can allow alternative, more reliable launching
when needed.
RISAT-2: In March 2009, India acquired access
to Israeli advanced spy satellite, RISAT-2. The sat-
ellite has the capability to take high resolution
images at night and can carry out reconnaissance
operations even through a dense cloud cover. Most
Indian satellites currently in operation lack these
capabilities. The decision to purchase the satellite
was taken in the wake of the 2008 Mumbai at-
tacks. The 300 kilogram RISAT-2 was successfully
launched by India's PSLV rocket in April 2009.
A spokesman of the Indian Space Research Orga-
nization said that RISAT-2 is an Indian satellite
built with assistance from Israel. India is also de-
veloping its own, indigenous version of RISAT-2,
capable of taking images through clouds and at
night. It will be launched in late 2009.
Tourism: India is a big destination for Israeli tour-
ists. They usually visit the states of Goa, and
Himachal Pradesh. Similarly, Israel is a destina-
tion for religious tourism for the 15,000 Indian
Jews.
Ariel Sharon's visit to India: In 2003 Ariel Sharon
was the first Israeli Prime Minister to visit India.
He was welcomed by the center-right wing
Bharatiya Janata Party led National Democratic
Alliance coalition government of India. Several
newspapers expressed positive views on his visit,
and Indian Prime Minister Atal Behari Vajpayee
voiced confidence that Sharon's visit would pave
the way for further consolidating bilateral ties and
said there was no dilution of the country's stand
Copyright © 2009 | WWW.UPSCPORTAL.COM
on the Palestinian issue.
Muslim response: Sharon's visit was condemned
by some, especially in leftist and Muslim circles.
Hundreds of supporters of India's various pro-Is-
lamic communist parties rallied in New Delhi,
denouncing the visit. Muslims accused Sharon of
being a "terrorist and a war criminal". Nearly 100
Muslims were arrested.
Students of the Aligarh Muslim University joined
the protests of Sharon's visit, denounced him as a
"terrorist," and demanded that India sever all ties
with Israel and increase ties with Palestine.
Newspapers like The Times of India and Outlook
expressed "concern" over "India's changing priori-
ties", accusing India of "turning away" from the
cause of supporting the Palestinians and other "op-
pressed peoples".Urdu-language newspapers such
as Slasat launched a campaign against Sharon, ac-
cusing Israel of "aggressive and fascistic inclina-
tions".
Positive response: Sharon was welcomed by many
in India, including some politicians. The Hindi-
language daily Navbharat Times condemned pro-
tests made against him and wrote that none of
Sharon's controversies can justify demonstrations
planned in protest of his visit by some Indian op-
position parties "because he is coming as the prime
minister of Israel, which is an important friend of
India". Articles in The Indian Express agreed with
this view, noting that the issue of India's relations
with Israel "instantly polarises hard-nosed prag-
matists from dewy-eyed idealists", which is "re-
grettable, for cementing geo-political and trade
links with Israel need in no way weaken New
Delhi's traditional insistence that Palestinians be
granted control of their territories".
The various Jewish communities in India expressed
satisfaction at Sharon's visit, though some regret-
ted that Sharon could not visit them in person,
and some Indian Jews opined that it would have
been better if a previous head of state from Israel
had visited India. Sharon's visit sparked an inter
Most of Sharon's activities in India went unhin-
116
 Section -6 (Mains Special: Foreign Relations of India)
dered and were largely productive towards ce-
menting the India-Israel alliance. The central topic
of the dialogues between the Indians and the Is-
raeli delegation was the mutual problem of Islamic
fundamentalism and Islamic terrorism in both
countries, and how India and Israel can join forces
to defeat this enemy. Israeli deputy minister Josef
Lapid said that both India and Israel face "threats
from fanatic Muslims and terrorism". While de-
livering a lecture on 'The Global War Against
Terror -- Israel and India' organised by the Indian
Council of World Affairs (ICWA) in Delhi, he
stressed that Israel has developed an excellent
military and defense system to combat terrorism
and the technology would be very beneficial to
India. Since India had been experiencing terror-
ism more than western Countries, its leaders un-
derstood him better than others.
Sharon expressed satisfaction over the outcome
of the talks with Indian leaders, saying that the
landmark visit would result in upgradation of bi-
lateral relations to new heights. Indian Prime
Minister Atal Bihari Vajpayee also expressed sat-
isfaction, saying that the visit would increase ties
between India and Israel. Sharon also invited
Vajpayee to visit Israel. Sharon himself spoke posi-
tively of the importance of his hosts. Sharon him-
self said that Israelis "regard India to be one of the
most important countries in the world,", and
Vajpayee was sure that Sharon's visit would bring
the two states closer together. Sharon said that
terrorism was a menace that required an interna-
tional response.
2007 Jewish-Hindu leadership summit:The
world's first Jewish-Hindu interfaith leadership
summit,spearheaded by Hindu organizations in In-
dia and Jewish organizations in Israel, as well as
the American Jewish Committee, was held in New
Delhi on February 2007.
Visits of Indian politicians to Israel: In 2000
Jaswant Singh became the first Indian foreign
minister to visit Israel. Following the visit, the two
countries set up a joint anti-terror commission.
The foreign ministers of the two countries say
intensified cooperation will range from areas such
Copyright © 2009 | WWW.UPSCPORTAL.COM
as counter terrorism to information technology.
In early 2006 Indian government ministers Sharad
Pawar, Kapil Sibal and Kamal Nath visited Israel.
Gujarat Chief Minister Narendra Modi has also
visited Israel.
Issue of Kashmir:Owing to Israel's turbulently
volatile relationship with Pakistan, Israel ardently
supports India's Territorial integrity on the Kash-
mir controversy and says the Disputed territory
belongs to them.
Bnei Menashe controversy:The Bnei Menashe are
a group of more than 8,000 people from India's
remote North-Eastern border states of Manipur
and Mizoram who claim descent from one of the
Lost Tribes of Israel. Ethnically and linguistically,
they are Tibeto-Burmans and belong to the Mizo,
Kuki and Chin peoples (the terms are virtually in-
terchangeable). Prior to their conversion by Brit-
ish missionaries in the 19th century, they were
animists.
On March 31, 2005 Sephardi Rabbi Shlomo Amar,
one of Israel's two chief rabbis, accepted the Bnei
Menashe's claim because of their exemplary de-
votion to Judaism. His decision was significant be-
cause it paved the way for all of the Bnei Menashe
to enter Israel under Israel's Law of Return.In the
past two decades, some 1,300 Bnei Menashe have
moved to Israel.
In June 2003 Israeli Interior Minister Avraham
Poraz halted Bnei Menashe immigration to Israel
following charges by Ofir Pines-Paz (Minister of
Science and Technology, 2006) that the Bnei
Menashe "are being cynically exploited for politi-
cal purposes." Arutz Sheva quoted Rabbi Eliyahu
Birnbaum, a rabbinical judge dealing with the
conversion of Bnei Menashe, as saying that the
Knesset Absorption Committee's decision was one
of "ignorance, racism, and unjustifiable hate."
Rabbi Eliyahu Birnbaum says that community
members who move to Israel in fact suffer finan-
cially because their move is motivated by a desire
to return to the Holy Land and not material gain.
Michael Freund has suggested that the Bnei
117
 Section -6 (Mains Special: Foreign Relations of India)

Menashe could help with Israel's demographic problem saying "I believe that groups like the Bnei Menashe
constitute a large, untapped demographic reservoir for Israel and the Jewish people."

With the March 2005 decision by Rabbi Amar, the immigration issue seemed to have been rendered moot.
The Bnei Menashe's Orthodox conversion would in the future be conducted in India, and they would be
recognized as wholly Jewish prior to their arrival in Israel. However, this solution was short-lived because
the government of India, under pressure from Mizo-Kuki churches and Fundamentalist Christian preach-
ers, objected formally to the conversion of its citizens. This ignited a furious controversy in Mizoram,
culminating in top-rating television debates. The opposition mainly came from fundamentalist Christian
preachers such as Chuauthuama of the Aizawl Theological College, and Biaksiama from Aizawl's Christian
Research Centre.

On November 9, 2005 the Israeli government halted all conversions of the Bnei Menashe in India, saying
it was straining relations between the two countries. Indian officials reportedly expressed concern about
the conversions and indicated mass conversions are considered illegal in India. Concern may have been
triggered after a task force from the Rabbinic Court travelled to India in September 2005 to complete the
conversion process for 218 Bnei Menashe.

The decision by the Israeli government led to criticism from supporters of the Bnei Menashe who say
Israeli officials failed to explain to the Indian government that the rabbis were not proselytising, but rather
formalizing the conversions of Bnei Menashe who had already accepted Judaism.

The Indian government's complaint was also criticized by some Hindu groups in India, who claim that the
Indian government takes Christian complaints more seriously than theirs, and that Hindus have com-
plained for years about Christian proselytizing without government response.

In July 2006 Israeli Immigration Absorption Minister Zeev Boim said that the 218 Bnei Menashe who were
formally converted in 2005 by the Chief Rabbinate "would be allowed to come here, but first the govern-
ment must decide what its policy will be towards those who have yet to (formally) convert" . In response
Michael Freund said that Boim may devise a policy concerning the Bnei Menashe remaining in India, but
must allow the converted Bnei Menashe to immigrate to Israel without bureaucratic delays .Freund says
that he has engaged "a prominent lawyer" and is prepared to take the minister to the Supreme Court if he
does immediately facilitate the arrival of the Bnei Menashe.

The Bnei Menashe have not suffered anti-Semitism in India, but over 1300 have migrated to Israel as they
regard the country as their homeland and decided to emigrate "on Zionist considerations."

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Section -6 (Mains Special: International Organizations)
International Organizations
World Trade Organization
The WTO was born out of the General Agreement
on Tariffs and Trade (GATT), which was estab-
lished in 1947. A series of trade negotiations,
GATT rounds began at the end of
World War II and were aimed at
reducing tariffs for the facilitation
of global trade on goods. The ra-
tionale for GATT was based on
the Most Favored Nation (MFN)
clause, which, when assigned to
one country by another, gives the
selected country privileged trad-
ing rights. As such, GATT aimed
to help all countries obtain MFN-
like status so that no single coun-
try would be at a trading advan-
tage over others.
The WTO replaced GATT as the world's global
trading body in 1995, and the current set of gov-
erning rules stems from the Uruguay Round of
GATT negotiations, which took place through-
out 1986-1994. GATT trading regulations estab-
lished between 1947 and 1994 (and in particular
those negotiated during the Uruguay Round) re-
main the primary rule book for multilateral trade
in goods. Specific sectors such as agriculture have
been addressed, as well as issues dealing with anti-
dumping.
The Uruguay Round also laid the foundations for
regulating trade in services. The General Agree-
ment on Trade in Services (GATS) is the guide-
line directing multilateral trade in services. Intel-
lectual property rights were also addressed in the
establishment of regulations protecting the trade
and investment of ideas, concepts, designs, pat-
ents, and so forth.
The purpose of the WTO is to ensure that global
trade commences smoothly, freely and predict-
ably. The WTO creates and embodies the legal
ground rules for global trade among member na-
tions and thus offers a system for international
commerce. The WTO aims to create economic
Copyright © 2009 | WWW.UPSCPORTAL.COM
peace and stability in the world through a multi-
lateral system based on consenting member states
(currently there are slightly more
than 140 members) that have rati-
fied the rules of the WTO in their
individual countries as well. This
means that WTO rules become a part
of a country's domestic legal system.
The rules, therefore, apply to local
companies and nationals in the con-
duct of business in the international
arena. If a company decides to invest
in a foreign country, by, for example,
setting up an office in that country,
the rules of the WTO (and hence, a
country's local laws) will govern how
that can be done. Theoretically, if a country is a
member to the WTO, its local laws cannot con-
tradict WTO rules and regulations, which cur-
rently govern approximately 97% of all world
trade.
How It Functions?
Decisions are made by consensus, though a ma-
jority vote may also rule (this is very rare). Based
in Geneva, Switzerland, the Ministerial Commit-
tee, which holds meetings at least every two years,
makes the top decisions. There is also a General
Council, a Goods Council, Services Council, and
an Intellectual Property Rights Council, which all
report to the General Council. Finally, there are a
number of working groups and committees.
If a trade dispute occurs, the WTO works to re-
solve it. If, for example, a country erects a trade
barrier in the form of a customs duty against a
particular country or a particular good, the WTO
may issue trade sanctions against the violating
country. The WTO will also work to resolve the
conflict through negotiations.
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 Section -6 (Mains Special: International Organizations)
Free Trade at What Cost?
The anti-WTO protests we have seen around the
world are a response to the consequences of es-
tablishing a multilateral trading system. Critics say
that the after-effects of WTO policies are undemo-
cratic because of the lack of transparency during
negotiations. Opponents also argue that since the
WTO functions as a global authority on trade and
reserves the right to review a country's domestic
trade policies, national sovereignty is compro-
mised. For example, regulations that a country
may wish to establish to protect its industry, work-
ers or environment could be considered barriers
to the WTO's aim to facilitate free trade. A coun-
try may have to sacrifice its own interests to avoid
violating WTO agreements. Thus, a country be-
comes limited in its choices. Moreover, brutal re-
gimes that are pernicious to their own countries
may inadvertently be receiving concealed support
from foreign governments who continue, in the
name of free trade, to do business with these re-
gimes. Unfavorable governments in favor of big
business therefore remain in power at the cost of
a representative government.
One high profile WTO controversy has to do with
intellectual property rights and a government's
duty to its citizens versus a global authority. One
well known example is HIV/AIDS treatments and
the cost of patented medicines. Poor, very needy
countries, such as those in South America and sub-
Saharan Africa, simply cannot afford to buy these
patented drugs. If they were to buy or manufac-
ture these same drugs under an affordable generic
label, which would save thousands of lives, these
countries would, as members of the WTO, be in
violation of intellectual property rights (TRIPS)
agreements and subject to possible trade sanctions.
Analysis
Free trade fosters investment into other countries,
which can help boost the economy and eventu-
ally the standard of living of all countries involved.
Copyright © 2009 | WWW.UPSCPORTAL.COM
As most investment comes from the developed and
economically powerful into the developing and
less influential economies, there is, however, a
tendency for the system to give the investor an
advantage. Regulations that facilitate the invest-
ment process are in the investor's interest because
these regulations help foreign investors maintain
an edge over local competition. Controversy over
what is the best course of action in the creation of
a global economic system - one that fosters free
trade and free choice - will persist.
International Monetary Fund
The International Monetary Fund (IMF) is an in-
ternational organization that provides financial as-
sistance and advice to member countries. This ar-
ticle will discuss the main functions of the orga-
nization, which has become an enduring institu-
tion integral to the creation of financial markets
worldwide and to the growth of developing coun-
tries.
The IMF was born at the end of World War II,
out of the Bretton Woods Conference in 1945. The
Fund was created out of a need to prevent eco-
nomic crises like the great depression. With its
sister organization, the World Bank, the IMF is
the largest public lender of funds in the world. It
is a specialized agency of the United Nations and
is run by its 184 member states. Membership is
open to any country that conducts foreign policy
and accepts the statutes of the Fund.
Functions and Duties: The IMF is responsible for
the creation and maintenance of the international
monetary system, the system by which interna-
tional payments among countries take place. It
thus strives to provide a systematic mechanism
for foreign exchange transactions in order to fos-
ter investment and promote balanced global eco-
nomic trade.
To achieve these goals, the IMF focuses and ad-
vises on the macroeconomic policies of a country,
which affect its exchange rate and its government's
budget, money and credit management. The IMF
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 Section -6 (Mains Special: International Organizations)
will also appraise a country's financial sector and
its regulatory policies, as well as structural poli-
cies within the macroeconomy that relate to the
labor market and employment. In addition, as a
fund, it may offer financial assistance to nations
in need of correcting balance of payments discrep-
ancies. The IMF is thus entrusted with nurturing
economic growth and maintaining high levels of
employment within countries.
The IMF gets its money from quota subscriptions
paid by member states. The size of each quota is
determined by how much each government can
pay according to the size of its economy. The quota
in turn determines the weight each country has
within the IMF - and hence its voting rights - as
well as how much financing it can receive from
the IMF.
Twenty-five percent of each country's quota is
paid in the form of special drawing rights (SDRs),
which are a claim on the freely usable currencies
of IMF members. Before SDRs, the Bretton Woods
system had been based on a fixed exchange rate,
and it was feared that there would not be enough
reserves to finance global economic growth.
Therefore, in 1968, the IMF created the SDRs,
which is a kind of international reserve asset. It
was created to supplement the international re-
serves of the time, which were gold and the U.S.
dollar. The SDR is not a currency; it is a unit of
account by which member states can exchange
with one another in order to settle international
accounts. The SDR can also be used in exchange
for other freely-traded currencies of IMF mem-
bers. A country may do this when it has a deficit
and needs more foreign currency to pay its inter-
national obligations.
The SDR's value lies in the fact that member states
commit to honor their obligations to use and ac-
cept SDRs. Each member country is assigned a
certain amount of SDRs based on how much the
country contributes to the Fund (which is based
on the size of the country's economy). However,
the need for SDRs lessened when major econo-
mies dropped the fixed exchange rate and opted
Copyright © 2009 | WWW.UPSCPORTAL.COM
for floating rates instead. The IMF does all of its
accounting in SDRs, and commercial banks accept
SDR denominated accounts. The value of the SDR
is adjusted daily against a basket of currencies,
which currently includes the U.S. dollar, the Japa-
nese yen, the euro, and the British pound.
The larger the country, the larger its contribution;
thus the U.S. contributes about 18% of total quo-
tas while the Seychelles Islands contribute a mod-
est 0.004%. If called upon by the IMF, a country
can pay the rest of its quota in its local currency.
The IMF may also borrow funds, if necessary,
under two separate agreements with member
countries. In total, it has SDR 212 billion (USD
290 billion) in quotas and SDR 34 billion (USD 46
billion) available to borrow.
IMF Benefits
The IMF offers its assistance in the form of sur-
veillance, which it conducts on a yearly basis for
individual countries, regions and the global
economy as a whole. However, a country may ask
for financial assistance if it finds itself in an eco-
nomic crisis, whether caused by a sudden shock
to its economy or poor macroeconomic planning.
A financial crisis will result in severe devaluation
of the country's currency or a major depletion of
the nation's foreign reserves. In return for the
IMF's help, a country is usually required to em-
bark on an IMF-monitored economic reform pro-
gram, otherwise known as Structural Adjustment
Policies (SAPs).
There are three more widely implemented facili-
ties by which the IMF can lend its money. A stand-
by agreement offers financing of a short-term bal-
ance of payments, usually between 12 to 18
months. The extended fund facility (EFF) is a
medium-term arrangement by which countries
can borrow a certain amount of money, typically
over a three to four-year period. The EFF aims to
address structural problems within the
macroeconomy that are causing chronic balance
of payment inequities. The structural problems are
addressed through financial and tax sector reform
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 Section -6 (Mains Special: International Organizations)
and the privatization of public enterprises. The
third main facility offered by the IMF is known
as the poverty reduction and growth facility
(PRGF). As the name implies, it aims to reduce
poverty in the poorest of member countries while
laying the foundations for economic development.
Loans are administered with especially low inter-
est rates.
The IMF also offers technical assistance to transi-
tional economies, such as the former Soviet Re-
publics, in the changeover from centrally planned
to market run economies. The IMF also offers
emergency funds to collapsed economies, as it did
for Korea during the 1997 financial crisis in Asia.
The funds were injected into Korea's foreign re-
serves in order to boost the local currency, thereby
helping the country avoid a damaging devalua-
tion. Emergency funds can also be loaned to coun-
tries that have faced economic crisis as a result of
a natural disaster.
All facilities of the IMF aim to create sustainable
development within a country and try to create
policies that will be accepted by the local popula-
tions. However, the IMF is not an aid agency, so
all loans are given on the condition that the coun-
try implement the SAPs and make it a priority to
pay back what it has borrowed. Currently, all
countries that are under IMF programs are devel-
oping, transitional and emerging market countries
(countries that have faced financial crisis).
Because the IMF lends its money with "strings at-
tached" in the form of its SAPs, many people and
organizations are vehemently opposed to the
Fund's activities. Opposition groups claim that
structural adjustment is an undemocratic and in-
humane means of loaning funds to countries fac-
ing economic failure. Debtor countries to the IMF
are often faced with having to put financial con-
cerns ahead of social ones. Thus, by being required
to open up their economies to foreign investment,
to privatize public enterprises, and to cut govern-
ment spending, these countries suffer an inability
to properly fund their education and health pro-
grams. Moreover, foreign corporations often ex-
Copyright © 2009 | WWW.UPSCPORTAL.COM
ploit the situation by taking advantage of local
cheap labor while showing no regard for the en-
vironment. The oppositional groups say that lo-
cally cultivated programs, with a more grassroots
approach towards development, would provide
greater relief to these economies. Critics of the
IMF say that, as it stands now, the IMF is only
deepening the rift between the wealthy and the
poor nations of the world.
Indeed, it seems that many countries cannot end
the spiral of debt and devaluation. Mexico, which
sparked the infamous "debt crisis" of 1982 when
it announced it was on the verge of defaulting on
all its debts in the wake of low international oil
prices and high interest rates in the international
financial markets, has yet to show its ability to
end its need for the IMF and its structural adjust-
ment policies. Is it because these policies have not
been able to address the root of the problem? Could
more grassroots solutions be the answer? These
questions are not easy. There are, however, some
cases where the IMF goes in and exits once it has
helped solve problems. Egypt is an example of a
country that embarked upon an IMF structural
adjustment program and was able to finish with
it.
Providing assistance with development is an ever-
evolving and dynamic endeavor. While the inter-
national system aims to create a balanced global
economy, it should strive to address local needs
and solutions. On the other hand, we cannot ig-
nore the benefits that can be achieved by learn-
ing from others.
World Bank
The World Bank Group (WBG) was established
in 1944 to rebuild post-World War II Europe un-
der the International Bank for Reconstruction and
Development (IBRD). Today, the World Bank
functions as an international organization that
fights poverty by offering developmental assis-
tance to middle-income and low-income coun-
tries. By giving loans and offering advice and train-
ing in both the private and public sectors, the
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 Section -6 (Mains Special: International Organizations)
World Bank aims to eliminate poverty by helping
people help themselves. Under the World Bank
Group, there are complimentary institutions
which aid in its goals to provide assistance.
Membership
There are 184 member countries that are share-
holders in the IBRD, which is the primary arm of
the WBG. To become a member, however, a coun-
try must first join the IMF. The size of the Bank's
shareholders, like that of the IMF's shareholders,
depends on the size of a country's economy. Thus,
the cost of a subscription to the Bank is a factor of
the quota paid to the IMF. There is an obligatory
subscription fee, which is equivalent to 88.29%
of the quota that a country has to pay to the Fund.
In addition, a country is obligated to buy 195 Bank
shares (USD 120,635 per share, reflecting a capi-
tal increase made in 1988). Of these 195 shares,
0.60% must be paid in cash in U.S. dollars while
5.40% can be paid in a country's local currency,
in U.S. dollars, or in non-negotiable non-interest
bearing notes. The balance of the 195 shares is
left as "callable capital", meaning the Bank reserves
the right to ask for the monetary value of these
shares when and if necessary. A country can sub-
scribe a further 250 shares, which do not require
payment at the time of membership but are left
as "callable capital".
The president of the Bank comes from the largest
shareholder, which is the United States, and mem-
bers are represented by a Board of Governors.
Throughout the year, however, powers are del-
egated to a board of 24 Executive Directors (ED).
The five largest shareholders - the U.S., U.K.,
France, Germany and Japan - each have an indi-
vidual ED, and the additional 19 EDs represent
the rest of the member states as groups of con-
stituencies. Of these 19, however, China, Russia
and Saudi Arabia have opted to be single country
constituencies, which means that they each have
one representative within the 19 EDs. This deci-
sion is based on the fact that these countries have
large, influential economies, which requires that
their interests be voiced individually rather than
diluted within a group. The World Bank gets its
Copyright © 2009 | WWW.UPSCPORTAL.COM
funding from rich countries as well as from the
issuance of bonds on the world's capital markets.
The IBRD offers assistance to middle income and
poor but credit worthy countries, and it also works
as an umbrella for more specialized bodies under
the Bank. The IBRD was the original arm of the
Bank which was responsible for the reconstruc-
tion of post-war Europe. Before gaining member-
ship in the WBG's affiliates (the International Fi-
nance Corporation, the Multilateral Investment
Guarantee Agency and the International Center
For Settlement of Investment Disputes), a coun-
try must be a member of the IBRD.
The International Development Association offers
loans to the world's poorest countries. These loans
come in the form of "credits", and are essentially
interest-free. They offer a 10-year grace period
and hold a maturity of 35 years to 40 years.
The International Finance Corporation (IFC)
works to promote private sector investments by
both foreign and local investors. It provides ad-
vice to investors and businesses, and it offers nor-
malized financial market information through its
publications, which can be used to compare across
markets. The IFC also acts as an investor in capi-
tal markets and will help governments privatize
inefficient public enterprises.
The Multilateral Investment Guarantee Agency
(MIGA) supports direct foreign investment into a
country by offering security against the invest-
ment in the event of political turmoil. These guar-
antees come in the form of political risk insur-
ance, meaning that MIGA offers insurance against
the political risk that an investment in a develop-
ing country may bear.
Finally, the International Center for Settlement
of Investment Dispute facilitates and works to-
wards a settlement in the event of a dispute be-
tween a foreign investor and a local country.
As mentioned earlier, the main function of the
WBG is to eliminate poverty and to provide assis-
tance to the poor by offering loans, policy advice
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 Section -6 (Mains Special: International Organizations)
and technical assistance. As such, the countries
receiving aid are learning new ways to function.
Over time, however, it has been realized that
sometimes as a nation develops, it requires more
aid to work its way through the development pro-
cess. This has resulted in some countries accumu-
lating so much debt and debt service that pay-
ments become impossible to meet. Many of the
poorest countries can receive accelerated debt re-
lief through the Heavily Indebted Poor Countries
scheme, which reduces debt and debt service pay-
ments while encouraging social expenditure.
Another issue on which the Bank has recently
been focusing has presented itself as an endanger-
ment to a country's livelihood: support programs
for HIV/AIDS. The WBG has also been focusing
on reducing the risk of projects by means of bet-
ter appraisal and supervision mechanisms as well
as a multidimensional approach to overall devel-
opment. (This includes not only lending but also
support for legal reform, educational programs,
environmental safety, anti-corruption measures
and other types of social development.)
The Bank encourages all of its clients, which num-
ber over 100, to implement policies that promote
sustainable growth, health, education, social de-
velopment programs focusing on governance and
poverty reduction mechanisms, the environment,
private business and macroeconomic reform.
Opposition to the Bank
While the WBG strives to create a poverty-free
world, there are groups that are passionately op-
posed to the international patron. The opponents
believe that, due to the fundamental structure of
the Bank, the already existing imbalance between
the world's rich and poor is only exacerbated. The
system allows the largest shareholders to domi-
nate the vote, resulting in WBG policies being
decided by the rich but implemented by the poor.
This can result in policies that are not in the best
interests of the developing country in question,
whose political, social and economic policies will
often have to be molded around WBG resolutions.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Moreover, even though the Bank provides train-
ing, assistance, information and other means that
may lead to sustainable development, opponents
have observed that developing countries often
have to put health, education and other social pro-
grams on hold in order to pay back their loans.
Opposition groups have protested by boycotting
World Bank bonds. These are the bonds that the
WBG sells on global capital markets to raise money
for some of its activities. These opposition groups
also call for an end to all practices that require a
country to implement structural adjustment pro-
grams - including privatization and government
austerity measures - an end to debt owed by the
poorest of the poor, and an end to environmen-
tally damaging projects such as mining or the
building of dams.
Analysis
It is not surprising that there is a clash of opinion
over how aid is given. Indeed, those that offer as-
sistance are going to want to have a say in how
the loans are used and what kind of economic
policies are fostered in a country's developmental
process. Many developing and poor nations, how-
ever, are stuck in a quagmire of debt and impov-
erishment, no matter how much assistance they
receive. Given this, it may need to remember that
the process of aid is also a developing state, in
which both the giver and the receiver should be
helping each other reach a poverty-free world.
Asian Development Bank: The Asian Develop-
ment Bank (ADB) is a regional development bank
established in 1966 to promote economic and so-
cial development in Asian and Pacific countries
through loans and technical assistance. It is a mul-
tilateral development financial institution owned
by 67 members, 48 from the region and 19 from
other parts of the globe. ADB's vision is a region
free of poverty. Its mission is to help its develop-
ing member countries reduce poverty and improve
the quality of life of their citizens.
The work of the Asian Development Bank (ADB)
is aimed at improving the welfare of the people in
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 Section -6 (Mains Special: International Organizations)
Asia and the Pacific, particularly the 1.9 billion
who live on less than $2 a day. Despite many suc-
cess stories, Asia and the Pacific remains home to
two thirds of the world's poor.
The bank was conceived with the vision of creat-
ing a financial institution that would be "Asian in
character" to foster growth and cooperation in a
region that back then was one of the world's poor-
est. ADB raises funds through bond issues on the
world's capital markets, while also utilizing its
members' contributions and earnings from lend-
ing. These sources account for almost three quar-
ters of its lending operations.
Although recent economic growth in many mem-
ber countries have led to a change in emphasis to
some degree, throughout most of its history the
bank has operated on a project basis, specifically
in the areas of infrastructure investment, agricul-
tural development and loans to basic industries in
member countries. Although by definition the
bank is a lender to governments and government
entities, it also provides direct assistance to pri-
vate enterprises and has also participated as a li-
quidity enhancer and best practice enabler in the
private sectors of regional member countries.
The primary human capital asset of the bank is its
staff of professionals, encompassing academic and/
or practical experts in the areas of agriculture, civil
engineering, economics, environment, health,
public policy and finance. Professional staff are
drawn from its member countries and given vari-
ous incentives to relocate to Manila.
It is conceivable that once all of Asia-Pacific
reaches a certain level of living standard the bank
will be wound down or reconfigured to operate as
a commercial enterprise.
Policy-making Body & Members: The highest
policy-making body of the bank is the Board of
Governors composed of one representative from
each member state. The Board of Governors, in
turn, elect among themselves the 12 members of
the Board of Directors and their deputy. Eight of
the 12 members come from regional (Asia-Pacific)
Copyright © 2009 | WWW.UPSCPORTAL.COM
members while the others come from non-re-
gional members.
The Board of Governors also elect the bank's Presi-
dent who is the chairperson of the Board of Di-
rectors and manages ADB. The president has a
term of office lasting five years, and may be re-
elected. Traditionally, and because Japan is one of
the largest shareholders of the bank, the Presi-
dent has always been Japanese. The current Presi-
dent is Haruhiko Kuroda.
The headquarters of the bank is at 6 ADB Av-
enue, Mandaluyong city, Metro Manila, Philip-
pines, and it has representative offices around the
world. The bank employs approximately 2,400
people, coming from 55 of its 67 member coun-
tries, and with more than half of the staff being
Filipino. ADB has 67 members (as of 2 February
2007).
The year after a member's name indicates the year
of membership. The largest share holders of the
ADB are Japan and USA, each holding 15.57% of
the shares. At the time a country ceases to be a
member, the Bank shall arrange for the repurchase
of such country's shares by the Bank as a part of
the settlement of accounts with such country in
accordance with the provisions of paragraphs 3
and 4 of this Article.
Republic of China(Taiwan) initially joined as
"China" as a founding member representing the
whole of China. However, its share of Bank capi-
tal was based on the size of Taiwan's capital, un-
like the World Bank and IMF where the govern-
ment in Taiwan had had a share representing the
whole of China prior to the People's Republic of
China joining and taking the Republic of China's
seat. In 1986, a compromise was effected when
the People's Republic of China joined the institu-
tion. The ROC was allowed to retain its member-
ship, but under the name of Taipei,China — a
name it protests. Uniquely, this allows both sides
of the Taiwan Straits to be represented at the in-
stitution.
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 Section -6 (Mains Special: International Organizations)
ADB projects and Technical Assistance:-
ADB's annual project lending amounts to about
US$7 billion per year with typical lending per
project being in the $100 million range.
» Afghan Diaspora Project
» Funding Utah state university led projects to
bring labor skills in Thailand
» Earthquake and Tsunami Emergency Support
Project in Indonesia
» Greater Mekong Subregional Program
» ROC Ping Hu Offshore Oil and Gas Develop-
ment
» Strategic Private Sector Partnerships for Urban
Poverty Reduction in the Philippines
» Trans-Afghanistan gas pipeline feasibility assess-
ment
Loan of $1.2 billion to bail it out of an impending
economic crisis in Pakistan and on going funding
for the countries growing energy needs, specifi-
cally Hydro-power projects
Micro finance support for private enterprises, in
conjunction with governments, including Paki-
stan and India.
In 2009, the bank endorsed a 2.9-billion-dollar
funding strategy for proposed projects in India.
The projects in this strategy were only indicative
and still needed to be further approved by the
bank's Board of Directors; however, PRC Foreign
Ministry spokesman Qin Gang claimed, "The Asian
Development Bank, regardless of the major con-
cerns of China, approved the India Country Part-
nership strategy which involves the territorial
dispute between China and India. China expresses
its strong dissatisfaction over this... The bank's
move not only seriously tarnishes its own name,
but also undermines the interests of its members.
Association of Southeast
Asian Nations
The Association of Southeast Asian Nations, com-
monly abbreviated ASEAN is a geo-political and
Copyright © 2009 | WWW.UPSCPORTAL.COM
economic organisation of 10 countries located in
southeast Asia, which was formed on 8 August
1967 by Indonesia, Malaysia, the Philippines,
Singapore and Thailand. Since then, membership
has expanded to include Brunei, Burma
(Myanmar), Cambodia, Laos, and Vietnam. Its
aims include the acceleration of economic growth,
social progress, cultural development among its
members, the protection of the peace and stabil-
ity of the region, and to provide opportunities for
member countries to discuss differences peace-
fully.
In 2005, the bloc spanned over an area of 4.46
million km2 with a combined GDP of about USD
$896.5 billion/$2,728 billion growing at an aver-
age rate of around 5.6% per annum. Nominal GDP
had grown to USD $1.4 trillion in 2008.
Establishment
ASEAN was preceded by an organisation called
the Association of Southeast Asia, commonly
called ASA, an alliance consisting of the Philip-
pines, Malaysia, and Thailand that was formed in
1961. The bloc itself, however, was established
on 8 August 1967, when foreign ministers of five
countries – Indonesia, Malaysia, the Philippines,
Singapore, and Thailand – met at the Thai Depart-
ment of Foreign Affairs building in Bangkok and
signed the ASEAN Declaration, more commonly
known as the Bangkok declaration.
The motivations for the birth of ASEAN were the
desire for a stable external environment (so that
its members’ governing elite could concentrate on
nation building), the common fear of communism,
reduced faith in or mistrust of external powers in
the 1960s, as well as the aspiration for national
economic development; not to mention
Indonesia’s ambition to become a regional hege-
mon through regional cooperation and the hope
on the part of Malaysia and Singapore to constrain
Indonesia and bring it into a more cooperative
framework. Unlike the European Union, ASEAN
was designed to serve nationalism.
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 Section -6 (Mains Special: International Organizations)
In 1976, the Melanesian state of Papua New
Guinea was accorded observer status. Through-
out the 1970s, the organization embarked on a
program of economic cooperation, following the
Bali Summit of 1976. This floundered in the mid-
1980s and was only revived around 1991 due to a
Thai proposal for a regional free trade area. The
bloc then grew when Brunei Darussalam became
the sixth member after it joined on 8 January 1984,
barely a week after the country became indepen-
dent on 1 January.
On 21 July 1994, Vietnam became the seventh
member. Laos and Burma (Myanmar) joined two
years later in 23 July 1997. Cambodia was to have
joined together with Laos and Myanmar, but was
deferred due to the country's internal political
struggle. The country later joined on 24 April
1997, following the stabilisation of its government.
During the 1990s, the bloc experienced an increase
in both membership as well as in the drive for
further integration. In 1990, Malaysia proposed
the creation of an East Asia Economic Caucus com-
posing the then-members of ASEAN as well as
the People's Republic of China, Japan, and South
Korea, with the intention of counterbalancing the
growing influence of the United States in the Asia-
Pacific Economic Cooperation (APEC) as well as
in the Asian region as a whole. This proposal, how-
ever, failed since it faced heavy opposition from
Japan and the United States. Despite this failure,
member states continued to work for further in-
tegration. In 1992, the Common Effective Prefer-
ential Tariff (CEPT) scheme was signed as a sched-
ule for phasing tariffs and as a goal to increase the
region’s competitive advantage as a production
base geared for the world market. This law would
act as the framework for the ASEAN Free Trade
Area. After the East Asian Financial Crisis of 1997,
a revival of the Malaysian proposal was established
in Chiang Mai, known as the Chiang Mai Initia-
tive, which calls for better integration between
the economies of ASEAN as well as the ASEAN
Plus Three countries (China, Japan, and South
Korea).
Aside from improving each member state's econo-
mies, the bloc also focused on peace and stability
Copyright © 2009 | WWW.UPSCPORTAL.COM
in the region. On 15 December 1995, the South-
east Asian Nuclear-Weapon-Free Zone Treaty was
signed with the intention of turning Southeast
Asia into a Nuclear-Weapon-Free Zone. The
treaty took effect on 28 March 1997 after all but
one of the member states have ratified it. It be-
came fully effective on 21 June 2001, after the
Philippines ratified it, effectively banning all
nuclear weapons in the region.
At the turn of the 21st century, issues shifted to
involve a more environmental prospective. The
organization started to discuss environmental
agreements. These included the signing of the
ASEAN Agreement on Transboundary Haze Pol-
lution in 2002 as an attempt to control haze pol-
lution in Southeast Asia. Unfortunately, this was
unsuccessful due to the outbreaks of the 2005
Malaysian haze and the 2006 Southeast Asian haze.
Other environmental treaties introduced by the
organization include the Cebu Declaration on East
Asian Energy Security, the ASEAN-Wildlife En-
forcement Network in 2005, and the Asia-Pacific
Partnership on Clean Development and Climate,
both of which are responses to Global Warming
and the negative effects of climate change.
Through the Bali Concord II in 2003, ASEAN has
subscribed to the notion of democratic peace,
which means all member countries believe demo-
cratic processes will promote regional peace and
stability. Also, the non-democratic members all
agreed that it was something all member states
should aspire to.
The leaders of each country, particularly Mahathir
Mohamad of Malaysia, also felt the need to fur-
ther integrate the region. Beginning in 1997, the
bloc began creating organisations within its frame-
work with the intention of achieving this goal.
ASEAN Plus Three was the first of these and was
created to improve existing ties with the People's
Republic of China, Japan, and South Korea. This
was followed by the even larger East Asia Sum-
mit, which included these countries as well as
India, Australia, and New Zealand. This new
grouping acted as a prerequisite for the planned
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 Section -6 (Mains Special: International Organizations)
East Asia Community, which was supposedly pat-
terned after the now-defunct European Commu-
nity. The ASEAN Eminent Persons Group was
created to study the possible successes and fail-
ures of this policy as well as the possibility of draft-
ing an ASEAN Charter.
In 2006, ASEAN was given observer status at the
United Nations General Assembly. As a response,
the organisation awarded the status of "dialogue
partner" to the United Nations. Furthermore, on
23 July that year, José Ramos-Horta, then Prime
Minister of East Timor, signed a formal request
for membership and expected the accession pro-
cess to last at least five years before the then-ob-
server state became a full member.
In 2007, ASEAN celebrated its 40th anniversary
since its inception, and 30 years of diplomatic re-
lations with the United States. On 26 August 2007,
ASEAN stated that it aims to complete all its free
trade agreements with China, Japan, South Ko-
rea, India, Australia and New Zealand by 2013, in
line with the establishment of the ASEAN Eco-
nomic Community by 2015. In November 2007
the ASEAN members signed the ASEAN Charter,
a constitution governing relations among the
ASEAN members and establishing ASEAN itself
as an international legal entity. During the same
year, the Cebu Declaration on East Asian Energy
Security in Cebu on 15 January 2007, by ASEAN
and the other members of the EAS (Australia,
People's Republic of China, India, Japan, New
Zealand, South Korea), which promotes energy
security by finding energy alternatives to conven-
tional fuels.
On February 27, 2009 a Free Trade Agreement
with the ASEAN regional block of 10 countries
and New Zealand and its close partner Australia
was signed, it is estimated that this FTA would
boost aggregate GDP across the 12 countries by
more than US$48 billion over the period 2000-
2020.
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ASEAN Charter
On 15 December 2008 the members of ASEAN
met in the Indonesian capital of Jakarta to launch
a charter, signed in November 2007, with the aim
of moving closer to "an EU-style community".The
charter turns ASEAN into a legal entity and aims
to create a single free-trade area for the region
encompassing 500 million people. President of
Indonesia Susilo Bambang Yudhoyono stated that
"This is a momentous development when ASEAN
is consolidating, integrating and transforming it-
self into a community. It is achieved while ASEAN
seeks a more vigorous role in Asian and global af-
fairs at a time when the international system is
experiencing a seismic shift," he added, referring
to climate change and economic upheaval. South-
east Asia is no longer the bitterly divided, war-
torn region it was in the 1960s and 1970s."
The charter's aims included:
» "Respect for the independence, sovereignty and
territorial integrity of member states".
» "Peaceful settlement of disputes".
» "Non-interference in member states internal
affairs".
» "Right to live without external interference".
However, the ongoing global financial crisis was
stated as being a threat to the goals envisioned by
the charter, and also set forth the idea of a pro-
posed human rights body to be discussed at a fu-
ture summit in February 2009. This proposition
caused controversy, as the body would not have
the power to impose sanctions or punish coun-
tries who violate citizens' rights and would there-
fore be limited in effectiveness.
Policies
Apart from consultations and consensus, ASEAN’s
agenda-setting and decision-making processes can
be usefully understood in terms of the so-called
Track I and Track II. Track I refers to the practice
of diplomacy among government channels. The
participants stand as representatives of their re-
129
 Section -6 (Mains Special: International Organizations)
spective states and reflect the official positions of
their governments during negotiations and discus-
sions. All official decisions are made in Track I.
Track II on the other hand refers to diplomatic
activities that are unofficial and includes partici-
pants from both government and non-government
institutions such as the academic, economic com-
munities and NGOs. This track enables govern-
ments to discuss controversial issues and test new
ideas without making official statements or bind-
ing commitments, and, if necessary, backtrack on
positions.
Although Track II dialogues are sometimes cited
as examples of the involvement of civil society in
regional decision-making process by governments
and other second track actors, NGOs have rarely
got access to this track, meanwhile participants
from the academic community are a dozen think-
tanks. However, these think-tanks are, in most
cases, very much linked to their respective gov-
ernments, and dependent on government fund-
ing for their academic and policy-relevant activi-
ties. Their recommendations, especially in eco-
nomic integration, are often closer to ASEAN’s
decisions than the rest of civil society’s positions.
The track that acts as a forum for civil society in
Southeast Asia is called Track III, which is essen-
tially people-to-people diplomacy undertaken
mainly by CSOs. Track III networks claim to rep-
resent communities and people who are largely
marginalised from political power centers and
unable to achieve positive change without out-
side assistance. This track tries to influence gov-
ernment policies indirectly by lobbying, generat-
ing pressure through the media. Third-track ac-
tors also organise and/or attend meetings as well
as conferences to get access to Track I officials.
While Track II meetings and interactions with
Track I actors have increased and intensified,
rarely has the rest of civil society had the oppor-
tunity to interface with Track II. Those with Track
I have been even rarer. In other words, the par-
ticipation of the big majority of CSOs has been
excluded from ASEAN’s agenda-setting and deci-
sion-making.
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Looking at the three tracks, it is clear that until
now, ASEAN has been run by government offi-
cials who, as far as ASEAN matters are concerned,
are accountable only to their governments and not
the people.
ASEAN Summit
The organization holds meetings, known as the
ASEAN Summit, where heads of government of
each member meet to discuss and resolve regional
issues, as well as to conduct other meetings with
other countries outside of the bloc with the in-
tention of promoting external relations.
The ASEAN Leaders' Formal Summit was first held
in Bali, Indonesia in 1976. Its third meeting was
held in Manila in 1987 and during this meeting, it
was decided that the leaders would meet every
five years. Consequently, the fourth meeting was
held in Singapore in 1992 where the leaders again
agreed to meet more frequently, deciding to hold
the summit every three years. In 2001, it was de-
cided to meet annually to address urgent issues
affecting the region. Member nations were as-
signed to be the summit host in alphabetical or-
der except in the case of Myanmar which dropped
its 2006 hosting rights in 2004 due to pressure from
the United States and the European Union.
By December 2008, the ASEAN Charter came into
force and with it, the ASEAN Summit will be held
twice in a year.
East Asia Summit
The East Asia Summit (EAS) is a forum held an-
nually by leaders of 16 countries in the East Asian
region. EAS meetings are held after annual ASEAN
leaders’ meetings. The first summit was held in
Kuala Lumpur on December 14, 2005.The con-
cept of an East Asia Grouping has significant his-
tory going back to an idea first promoted in 1991
by then Malaysian Prime Minister Mahathir bin
Mohamad for an East Asia Economic Caucus.
The final report in 2002 of the East Asian Study
Group, established by the ASEAN Plus Three
countries, was based on an EAS involving ASEAN
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 Section -6 (Mains Special: International Organizations)
Plus Three, therefore not involving Australia, New
Zealand or India The EAS as proposed was to be
an ASEAN led development, with the summit to
be linked to ASEAN summit meetings however
the issue was to which countries beyond those in
ASEAN the EAS was to be extended to.
The decision to hold the EAS was reached during
the 2004 ASEAN Plus Three summit and the ini-
tial 16 members determined at the ASEAN Plus
Three Ministerial Meeting held in Laos at the end
of July 2005.
Credit for advancing the forum during the 2004
ASEAN Plus Three summit has been attributed
to Malaysia.
First EAS: Prior to the first meeting there was
significant discussion as to which countries should
be represented .At the time there were difficul-
ties in the relationship between the "Plus Three"
members (ie Japan, China and South Korea) of
ASEAN Plus Three ,and the perception that India
and to a lesser extent Australia and New Zealand
were present to balance the growing China power
all meant the first meeting's achievements were
limited. Russia expressed early interest in EAS
membership and attended the first EAS as an ob-
server at the invitation of 2005 EAS host Malay-
sia.
Second EAS: The next EAS was to be held on De-
cember 13, 2006 in Metro Cebu, Philippines. Af-
ter the confidence building of the inaugural EAS
the 2006 EAS will help to define the future role
of the EAS, its relationship with ASEAN Plus
Three and the involvement of Russia in EAS. How-
ever in the face of Tropical Typhoon Utor the sum-
mit was post-poned until January 2007. It was re-
scheduled for January 15, 2007, approximately a
month after the original scheduled date.The out-
comes are summarised in the Chairman's State-
ment of the Second East Asia Summit. The EAS
members signed the Cebu Declaration on East
Asian Energy Security, a declaration on energy
security and biofuels containing statement for
members to prepare, non-binding, targets.
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The reality appears however that movement to-
wards such a relationship is a long way-off. Lee
Kuan Yew has compared the relationship between
South-East Asia and India with that of the Euro-
pean Community and Turkey, and has suggested
that a free-trade area involving South-East Asia
and India is 30 to 50 years away.
The members of EAS agreed to study the Japa-
nese proposed Comprehensive Economic Partner-
ship in East Asia (CEPEA). The Track Two report
on CEPEA is due to be completed in mid-2008
and at the Third EAS it was agreed this would be
considered at the Fourth EAS.
Third EAS: The issues of Myanmar (Burma), fol-
lowing the 2007 Burmese anti-government
protests,and climate change were expected to be
discussed at the Third EAS.
Myanmar successfully blocked formal discussion
of its internal affairs.
The summit did issue the Singapore Declaration
on Climate Change, Energy and the Environment.
The Summit also agreed to the establishment of
the Economic Research Institute for ASEAN and
East Asia and to receive the final report on the
Comprehensive Economic Partnership in East Asia
at the Fourth EAS.
The outcomes are summarised in the Chairman's
Statement of the 3rd East Asia Summit Singapore,
21 November 2007.
Fourth EAS: The Summit was significantly de-
layed and its location changed a number of times
due to internal tensions in Thailand, the host na-
tion. In the lead up to the Summit there were also
several fatal border clashes between Thailand and
Cambodia. The Summit however is said to be used
as an opportunity for discussions on the sidelines
between the respective nation's leaders.
It was also announced that India would be repre-
sented at the Summit by its Commerce and In-
dustry Minister Kamal Nath not its Prime Minis-
ter.
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 Section -6 (Mains Special: International Organizations)
The Summit was then cancelled following pro-
testers takin over the summit's venue on the day
of the Summit.
The relationship with ASEAN
Plus Three
The relationship between the EAS on the one hand
and ASEAN Plus Three on the other is still not
clear. As discussed above, some countries are more
supportive of the narrower ASEAN Plus Three
grouping whereas others support the broader,
more inclusive EAS. ASEAN Plus Three, which
has been meeting since December 1997 has a his-
tory, including the Chiang Mai initiative which
appears to have led to the development of the
Asian Currency Unit. This may be significant for
those advocating a broader role for EAS in the
future.
The tension between the groupings extends to the
respective members' intentions towards future
Free Trade Agreements with China and South
Korea focused on ASEAN Plus Three and Japan
on the broader EAS members.
The 1997 Asian financial crisis had demonstrated
the need for regional groupings and initiatives. It
was during this time ASEAN Plus Three had com-
menced and it was also during this time that the
East Asian caucus was being discussed.
The EAS is just one regional grouping and some
members down play its significance, the former
Australian Prime Minister John Howard has stated
that the EAS was secondary as a regional summit
to Asia-Pacific Economic Cooperation (APEC)
which has on his view a premier role. Not all
members of the EAS, notably India, are members
of APEC. However as the EAS meetings are sched-
uled with the ASEAN Plus Three meetings (they
both follow the annual ASEAN meetings) and all
members of ASEAN Plus Three are members of
EAS the ability of the two forums to remain rel-
evant given the existence of the other remains in
question. China has stated its preference for both
EAS and ASEAN Plus Three to exist side-by-side.
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The relationship between APEC, ASEAN Plus
Three and the EAS remained unresolved heading
into the 2007 APEC meeting. Following the meet-
ing the then Malaysian Prime Minister Abdullah
Badawi described ASEAN Plus Three as the pri-
mary vehicle and implied APEC was the lesser of
the three. At the same time a Malaysian commen-
tator writing in a Singaporean newspaper de-
scribed concentric circles for the three with
ASEAN Plus Three at the centre and APEC at the
outer, also suggested the Nikai Initiative, with its
regional OECD like plans, might overtaking the
remaining role for APEC.
Regional Forum
The ASEAN Regional Forum (ARF) is a formal,
official, multilateral dialogue in Asia Pacific re-
gion. As of July 2007, it is consisted of 27 partici-
pants. ARF objectives are to foster dialogue and
consultation, and promote confidence-building
and preventive diplomacy in the region. The ARF
met for the first time in 1994. The current par-
ticipants in the ARF are as follows: all the ASEAN
members, Australia, Bangladesh, Canada, the
People's Republic of China, the European Union,
India, Japan, North Korea, South Korea, Mongolia,
New Zealand, Pakistan, Papua New Guinea, Rus-
sia, Timor-Leste, United States and Sri Lanka. The
Republic of China (also known as Taiwan) has been
excluded since the establishment of the ARF, and
issues regarding the Taiwan Strait is neither dis-
cussed at the ARF meetings nor stated in the ARF
Chairman's Statements.
Economic Community
ASEAN has emphasised regional cooperation in
the “three pillars” of security, sociocultural and
economic integration. The regional grouping has
made the most progress in economic integration,
aiming to create an ASEAN Economic Commu-
nity (AEC) by 2015. The AEC would have a com-
bined population of over 560 million and total
trade exceeding US$ 1,400 billion.
132
 Section -6 (Mains Special: International Organizations)
Free Trade Area: The foundation of the AEC is
the ASEAN Free Trade Area (AFTA), a common
external preferential tariff scheme to promote the
free flow of goods within ASEAN. The ASEAN
Free Trade Area (AFTA) is an agreement by the
member nations of ASEAN concerning local
manufacturing in all ASEAN countries. The AFTA
agreement was signed on 28 January 1992 in
Singapore. When the AFTA agreement was origi-
nally signed, ASEAN had six members, namely,
Brunei, Indonesia, Malaysia, the Philippines,
Singapore and Thailand. Vietnam joined in 1995,
Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's
obligations, but they are officially considered part
of the AFTA as they were required to sign the
agreement upon entry into ASEAN, and were
given longer time frames in which to meet AFTA's
tariff reduction obligations.
Comprehensive Investment Area:-
The ASEAN Comprehensive Investment Area
(ACIA) will encourage the free flow of invest-
ment within ASEAN. The main principles of
the ACIA are as follows:
» All industries are to be opened up for invest-
ment, ith exclusions to be phased out according
to schedules
» National treatment is granted immediately to
ASEAN investors with few exclusions
» Elimination of investment impediments
» Streamlining of investment process and proce-
dures
» Enhancing transparency
» Undertaking investment facilitation measures
Full realisation of the ACIA with the removal of
temporary exclusion lists in manufacturing agri-
culture, fisheries, forestry and mining is sched-
uled by 2010 for most ASEAN members and by
2015 for the CLMV (Cambodia, Lao PDR,
Myanmar, and Vietnam) countries.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Trade in Services: An ASEAN Framework Agree-
ment on Trade in Services was adopted at the
ASEAN Summit in Bangkok in December 1995.
Under AFAS, ASEAN Member States enter into
successive rounds of negotiations to liberalise trade
in services with the aim of submitting increasingly
higher levels of commitments. The negotiations
result in commitments that are set forth in sched-
ules of specific commitments annexed to the
Framework Agreement. These schedules are of-
ten referred to as packages of services commit-
ments. At present, ASEAN has concluded seven
packages of commitments under AFAS.
Single Aviation Market: The ASEAN Single Avia-
tion Market (SAM), proposed by the ASEAN Air
Transport Working Group, supported by the
ASEAN Senior Transport Officials Meeting, and
endorsed by the ASEAN Transport Ministers, will
introduce an open-sky arrangement to the region
by 2015. The ASEAN SAM will be expected to
fully liberalise air travel between its member
states, allowing ASEAN to directly benefit from
the growth in air travel around the world, and
also freeing up tourism, trade, investment and ser-
vices flows between member states. Beginning 1
December 2008, restrictions on the third and
fourth freedoms of the air between capital cities
of member states for air passengers services will
be removed, while from 1 January 2009, there will
be full liberalisation of air freight services in the
region, while By 1 January 2011, there will be
liberalisation of fifth freedom traffic rights be-
tween all capital cities.
Free Trade Agreements With Other Countries:
ASEAN has concluded free trade agreements with
China, Korea, Japan, Australia and New Zealand.
In addition, it is currently negotiating free trade
agreement with India (conclusion expected in
April 2009) and with the European Union. Tai-
wan has also expressed interest in an agreement
with ASEAN but needs to overcome diplomatic
objections from China.
133
 Section -6 (Mains Special: International Organizations)

Cultural activities: The organisation hosts cul- other in the form of training and research facili-
tural activities in an attempt to further integrate ties, cooperate more effectively in joint efforts that
the region. These include sports and educational are supportive of, and complementary to national
activities as well as writing awards. Examples of development plans of member states, maintain
these include the ASEAN University Network, close and beneficial cooperation with existing in-
the ASEAN Center for Biodiversity, the ASEAN ternational and regional organizations, and coop-
Outstanding Scientist and Technologist Award, erate in projects that can be dealt with most pro-
and the Singapore-sponsored ASEAN Scholarship. ductively on a sub-regional basis and which make
best use of available synergies. BIMSTEC was ini-
Bay of Bengal Initiative for tiated with the goal to combine the 'Look West'
MultiSectoral Technical and Economic policy of Thailand and ASEAN with the 'Look East'
Cooperation policy of India and South Asia. So it could be ex-
plained that BIMSTEC is a link between ASEAN
and SARRC. Seven members of BIMSTEC covers
Bay of Bengal Initiative for MultiSectoral Tech-
13 Priority Sectors led by member countries in a
nical and Economic Cooperation (BIMSTEC) is an
voluntary manner namely, Trade & Investment,
international organisation involving a group of
Technology, Energy, Transport & Communica-
countries in South Asia and South East Asia. The
tion, Tourism, Fisheries, Agriculture, Cultural
member countries of this group are: Bangladesh,
Cooperation, Environment and Disaster Manage-
India, Myanmar, Sri Lanka, Thailand, Bhutan and
ment, Public Health, People-to-People Contact,
Nepal.
Poverty Alleviation and Counter-Terrorism and
Transnational Crimes.
On 6 June 1997, a new sub-regional grouping was
formed in Bangkok and given the name BIST-EC
What make BIMSTEC different from other orga-
(Bangladesh, India, Sri Lanka, and Thailand Eco-
nization would be that BIMSTEC represent one
nomic Cooperation). Myanmar attended the in-
of the most diverse regions of the world, be it,
augural June Meeting as an observer and joined
way of life, religion, language, culture, etc.
the organization as a full member at a Special Min-
BIMSTEC clearly separates issues of development
isterial Meeting held in Bangkok on 22 Decem-
into 13 Priority Sectors besides focusing only on
ber 1997, upon which the name of the grouping
economic cooperation which make BIMSTEC cov-
was changed to BIMST-EC. Nepal was granted
ers all aspects regarding the word 'developing'.
observer status by the second Ministerial Meet-
BIMSTEC provides a unique link between South
ing in Dhaka in December 1998. Subsequently,
Asia and Southeast Asia bringing together 1.3 bil-
full membership has been granted to Nepal and
lion people - 21 percent of the world population,
Bhutan in 2004. In the first Summit on 31 July
a combined GDP of US$750 billion, and a consid-
2004, leaders of the group agreed that the name
erable amount of complementarities. A study
of the grouping should be known as BIMSTEC or
shows the potential of US$ 43 to 59 billion trade
the Bay of Bengal Initiative for Multi-Sectoral
creation under BIMSTEC FTA.
Technical and Economic Cooperation.
Regarding economic aspect, BIMSTEC has Trade
According to the Bangkok Declaration on the Es-
Negotiating Committee (BIMTEC TNC). The 16th
tablishment of BIST-EC, the aims and purposes
TNC meeting was held during 17-21 March 2008
of BIST-EC/BIMST-EC are to create an enabling
in India. The 17th TNC meeting was held during
environment for rapid economic development, ac-
15-17 October 2008 in Colombo, Sri Lanka. TNC
celerate social progress in the sub-region, promote
Meeting is now working on the List of Goods re-
active collaboration and mutual assistance on mat-
garding the Framework Agreement that has been
ters of common interest, provide assistance to each
signed in 2004. So far, BIMSTEC has been work-

Copyright © 2009 | WWW.UPSCPORTAL.COM 134

 Section -6 (Mains Special: International Organizations)

ing on the FTA and looking forward to finalise our agreement soon.

BIMSTEC Priority Sectors

BIMSTEC has thirteen priority sectors cover all areas of cooperation. Six priority sectors of coopera-
tion were identified at the 2nd Ministerial Meeting in Dhaka on 19 November 1998. They include the
followings:
1. Trade and Investment, led by Bangladesh
2. Transport and Communication, led by India
3. Energy, led by Myanmar
4. Tourism, led by India
5. Technology, led by Sri Lanka
6. Fisheries, led by Thailand

After the 8th Ministerial Meeting in Dhaka on 18-19 December 2005, a number of new areas of coopera-
tion emerged. The number of priority sectors of cooperation increased from 6 to 13. The 7 new sectors
were discussed in the 1st BIMSTEC Summit and there has been various activities to enhance those co-
operations ever since.

The sectors are as follows:-

7. Agriculture, led by Myanmar
8. Public Health, led by Thailand
9. Poverty Alleviation, led by Nepal
10. Counter-Terrorism and Transnational Crime, led by India
11. Environment and Natural Disaster Management, led by India
12. Culture, led by Bhutan
13. People to People contact, led by Thailand

Chairmanship

BIMSTEC uses the alphabetical order for the Chairmanship. The Chairmanship of BIMSTEC has been
taken in rotation commencing with Bangladesh (1997 - 1999), India (2000) Myanmar (2001-2002), Sri
Lanka (2002 - 2003), Thailand (2003 – 2005), Bangladesh (2005-2006). Bhutan asked for the skip. So it's
turned to India (2006-present).

In 2009, Myanmar will host the 12th Ministerial Meeting and assume the BIMSTEC Chairmanship.

Cooperation with ADB

ADB has become BIMSTEC's development partner since 2005, to undertake a study which is designed to
help promote and improve transport infrastructure and logistic among the BIMSTEC countries. So far,
ADB has already finished the project so called BIMSTEC Transport Infrastructure and Logistic Study (BTILS).
The final report of the said study from ADB has already been conveyed to all members and being awaited
for the feedback. Other fields of cooperation will be designed later on.

Copyright © 2009 | WWW.UPSCPORTAL.COM 135

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 Section -6 (Mains Special: Hot Economic Issues)

Hot Economic Issues

The Globalization Debate

Globalization Debate Some of these changes arose as a result of the North

American Free Trade Agreement (NAFTA).
Globalization is the tendency of investment funds
NAFTA sent the jobs of U.S. autoworkers to
and businesses to move beyond domestic and na-
Mexico, a developing country, where wages are
tional markets to other markets around the globe,
significantly lower than those in the U.S. A few
allowing them to become interconnected with
years later, some of those same jobs were relo-
different markets. Proponents of globalization say
cated to third-world countries in East Asia, where
that it helps developing nations catch up to
wages are even lower. In both cases, the auto
industrialized nations much faster through in-
manufacturers expected U.S. consumers to con-
creased employment and technological advances
tinue buying those products at U.S. prices. While
and Asian economies are often highlighted as ex-
critics of globalization decry the loss of jobs that
amples of globalization's success. Critics of glo-
globalization can entail for developed countries,
balization say that it weakens national sovereignty
those who support globalization argue that the
and allows rich nations to ship domestic jobs over-
employment and technology that is brought to
seas where labor is much cheaper.
developing countries helps those populations to-
ward industrialization and the possibility of in-
The View from the Penthouse creased standards of living.

For business leaders and members of the economic The View from the Middle Ground
elite, globalization is good. Cheaper labor over-
seas enables them to build production facilities in
In the globalization battleground, outsourcing is
locations where labor and healthcare costs are low
a double-edged sword.
and then sell the finished goods in locations where
wages are high.
On the one hand, low wages in foreign countries
enable retailers to sell clothing, cars and other
Profits soar and Wall Street rewards big profit
goods at reduced rates in western nations where
gains with higher stock prices. The CEOs of glo-
shopping has become an ingrained part of the cul-
bal companies also get credit for the profits, and
ture. This allows companies to increase their profit
are rewarded with generous compensation pack-
margins.
ages, in which company stock and stock options
figure prominently. Institutional investors and
At the same time, shoppers save money when they
wealthy individuals also take home the big gains
buy these goods, causing some supporters of glo-
when stock prices increase.
balization to argue that while sending jobs over-
seas tends to lower wages, it may also lower prices
The View From the Street at the same time.

But globalization doesn't only affect CEOs and
high-net-worth individuals. Competition for jobs
stretches far beyond the immediate area in a glo-
bal marketplace. From technology call centers in
India, to automobile manufacturing plants in
China, globalization means that workers must
compete with job applicants from around the
world.
Lower-income workers also enjoy some of the
benefits of stock price appreciation. When com-
panies outsource jobs and get rewarded with ris-
ing share prices, mutual funds that hold those
shares also increase in value.

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 Section -6 (Mains Special: Hot Economic Issues)
The Effects of Globalization
The ever-increasing flow of cross-border traffic
in terms of money, information, people and tech-
nology isn't going to stop.
Some argue that it is a classic situation of the rich
get richer while the poor get poorer. While glo-
bal standards of living have risen overall as indus-
trialization takes root in third-world countries,
they have fallen in developed countries. Today,
the gap between rich and poor countries is ex-
panding as is the gap between the rich and poor
within these countries.
Homogenization of the world is another result,
with the same coffee shop on every corner and
the same big-box retailers in seemingly every city
in every country. So, while globalization does pro-
mote contact and exchange between cultures, it
also tends to make them more similar to one an-
other. At the market level, linked global financial
markets propel local issues into international prob-
lems, such as meltdowns in Southeast Asia to Rus-
sian debt defaults.
What lies ahead?
Deviation from the status quo on this issue is likely
to be minimal. The massive outsourcing of U.S.
manufacturing jobs that began decades ago con-
tinues today. White collar jobs, such as call cen-
ter workers, medical technicians and accountants
have also joined the outsource parade, leaving
many to argue that those profiting from the ar-
rangement have little incentive to change it, while
those most impacted by it are virtually powerless.
Politicians have latched onto the idea of the dis-
appearing middle class as a political issue, but none
of their income redistribution schemes are likely
to have any immediate substantial impact.
Emerging Market Economy
An emerging market economy (EME) is defined
Copyright © 2009 | WWW.UPSCPORTAL.COM
as an economy with low to middle per capita in-
come. Such countries constitute approximately
80% of the global population, and represent about
20% of the world's economies. The term was
coined in 1981 by Antoine W. Van Agtmael of
the International Finance Corporation of the
World Bank.
Although the term "emerging market" is loosely
defined, countries that fall into this category, vary-
ing from very big to very small, are usually con-
sidered emerging because of their developments
and reforms. Hence, even though China is deemed
one of the world's economic powerhouses, it is
lumped into the category alongside much smaller
economies with a great deal less resources, like
Tunisia. Both China and Tunisia belong to this
category because both have embarked on eco-
nomic development and reform programs, and
have begun to open up their markets and "emerge"
onto the global scene. EMEs are considered to be
fast-growing economies.
What an EME Looks Like
EMEs are characterized as transitional, meaning
they are in the process of moving from a closed
economy to an open market economy while build-
ing accountability within the system. Examples
include the former Soviet Union and Eastern bloc
countries. As an emerging market, a country is
embarking on an economic reform program that
will lead it to stronger and more responsible eco-
nomic performance levels, as well as transparency
and efficiency in the capital market. An EME will
also reform its exchange rate system because a
stable local currency builds confidence in an
economy, especially when foreigners are consid-
ering investing. Exchange rate reforms also reduce
the desire for local investors to send their capital
abroad (capital flight). Besides implementing re-
forms, an EME is also most likely receiving aid
and guidance from large donor countries and/or
world organizations such as the World Bank and
International Monetary Fund.
138
 Section -6 (Mains Special: Hot Economic Issues)
One key characteristic of the EME is an increase
in both local and foreign investment (portfolio and
direct). A growth in investment in a country of-
ten indicates that the country has been able to
build confidence in the local economy. Moreover,
foreign investment is a signal that the world has
begun to take notice of the emerging market, and
when international capital flows are directed to-
ward an EME, the injection of foreign currency
into the local economy adds volume to the
country's stock market and long-term investment
to the infrastructure.
For foreign investors or developed-economy busi-
nesses, an EME provides an outlet for expansion
by serving, for example, as a new place for a new
factory or for new sources of revenue. For the re-
cipient country, employment levels rise, labor and
managerial skills become more refined, and a shar-
ing and transfer of technology occurs. In the long-
run, the EME's overall production levels should
rise, increasing its gross domestic product and
eventually lessening the gap between the emerged
and emerging worlds.
Local Politics vs. Global Economy
An emerging market economy must have to weigh
local political and social factors as it attempts to
open up its economy to the world. The people of
an emerging market, who are accustomed to be-
ing protected from the outside world, can often
be distrustful of foreign investment. Emerging
economies may also often have to deal with issues
of national pride because citizens may be opposed
to having foreigners owning parts of the local
economy.
Moreover, opening up an emerging economy
means that it will also be exposed not only to new
work ethics and standards, but also to new cul-
tures. The introduction and impact of, say, fast
food and music videos to some local markets has
been a by-product of foreign investment. Over the
Copyright © 2009 | WWW.UPSCPORTAL.COM
generations, this can change the very fabric of a
society and if a population is not fully trusting of
change, it may fight back hard to stop it.
Although emerging economies may be able to look
forward to brighter opportunities and offer new
areas of investment for foreign and developed
economies, local officials in EMEs need to con-
sider the effects of an open economy on citizens.
Furthermore, investors need to determine the risks
when considering investing in an EME. The pro-
cess of emergence may be difficult, slow and of-
ten stagnant at times. And even though emerging
markets have survived global and local challenges
in the past, they had to overcome some large ob-
stacles to do so.
International Trade
International trade is the exchange of goods and
services between countries. This type of trade gives
rise to a world economy, in which prices, or sup-
ply and demand, affect and are affected by global
events. Political change in Asia, for example, could
result in an increase in the cost of labor, thereby
increasing the manufacturing costs for an Ameri-
can sneaker company based in Malaysia, which
would then result in an increase in the price that
you have to pay to buy the tennis shoes at your
local mall. A decrease in the cost of labor, on the
other hand, would result in you having to pay less
for your new shoes.
Trading globally gives consumers and countries
the opportunity to be exposed to goods and ser-
vices not available in their own countries. Almost
every kind of product can be found on the inter-
national market: food, clothes, spare parts, oil, jew-
elry, wine, stocks, currencies and water. Services
are also traded: tourism, banking, consulting and
transportation. A product that is sold to the glo-
bal market is an export, and a product that is
bought from the global market is an import. Im-
ports and exports are accounted for in a country's
current account in the balance of payments.
139
 Section -6 (Mains Special: Hot Economic Issues)
Increased Efficiency of Trading
Globally
Global trade allows wealthy countries to use their
resources - whether labor, technology or capital -
more efficiently. Because countries are endowed
with different assets and natural resources (land,
labor, capital and technology), some countries may
produce the same good more efficiently and there-
fore sell it more cheaply than other countries. If a
country cannot efficiently produce an item, it can
obtain the item by trading with another country
that can. This is known as specialization in inter-
national trade.
Let's take a simple example. Country A and Coun-
try B both produce cotton sweaters and wine.
Country A produces 10 sweaters and six bottles
of wine a year while Country B produces six sweat-
ers and 10 bottles of wine a year. Both can pro-
duce a total of 16 units. Country A, however, takes
three hours to produce the 10 sweaters and two
hours to produce the six bottles of wine (total of
five hours). Country B, on the other hand, takes
one hour to produce 10 sweaters and three hours
to produce six bottles of wine (total of four hours).
But these two countries realize that they could
produce more by focusing on those products with
which they have a comparative advantage. Coun-
try A then begins to produce only wine and Coun-
try B produces only cotton sweaters. Each coun-
try can now create a specialized output of 20 units
per year and trade equal proportions of both prod-
ucts. As such, each country now has access to 20
units of both products.
We can see then that for both countries, the op-
portunity cost of producing both products is
greater than the cost of specializing. More spe-
cifically, for each country, the opportunity cost
of producing 16 units of both sweaters and wine
is 20 units of both products (after trading). Spe-
cialization reduces their opportunity cost and
therefore maximizes their efficiency in acquiring
the goods they need. With the greater supply, the
price of each product would decrease, thus giving
an advantage to the end consumer as well.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Note that, in the example above, Country B could
produce both wine and cotton more efficiently
than Country A (less time). This is called an abso-
lute advantage, and Country B may have it be-
cause of a higher level of technology. However,
according to international trade theory, even if a
country has an absolute advantage over another,
it can still benefit from specialization.
Other Possible Benefits of Trading
Globally
International trade not only results in increased
efficiency but also allows countries to participate
in a global economy, encouraging the opportu-
nity of foreign direct investment (FDI), which is
the amount of money that individuals invest into
foreign companies and other assets. In theory,
economies can therefore grow more efficiently and
can more easily become competitive economic
participants.
For the receiving government, FDI is a means by
which foreign currency and expertise can enter
the country. These raise employment levels and,
theoretically, lead to a growth in the gross do-
mestic product. For the investor, FDI offers com-
pany expansion and growth, which means higher
revenues.
Free Trade vs. Protectionism
As with other theories, there are opposing views.
International trade has two contrasting views re-
garding the level of control placed on trade: free
trade and protectionism. Free trade is the simpler
of the two theories: a laissez-faire approach, with
no restrictions on trade. The main idea is that sup-
ply and demand factors, operating on a global scale,
will ensure that production happens efficiently.
Therefore, nothing needs to be done to protect or
promote trade and growth because market forces
will do so automatically.
In contrast, protectionism holds that regulation
of international trade is important to ensure that
markets function properly. Advocates of this
140
 Section -6 (Mains Special: Hot Economic Issues)
theory believe that market inefficiencies may
hamper the benefits of international trade and
they aim to guide the market accordingly. Pro-
tectionism exists in many different forms, but the
most common are tariffs, subsidies and quotas.
These strategies attempt to correct any inefficiency
in the international market.
National Treatment
A concept of international law that declares if
a state provides certain rights and privileges to its
own citizens, it also should provide equivalent
rights and privileges to foreigners who are cur-
rently in the country. This concept of equality can
be found in bilateral tax treaties and also
in most World Trade Organization agreements.
For example, if country A provides special tax
breaks for its fledgling pharmaceutical industry,
all pharmaceutical companies that have operations
in country A will be entitled to the tax breaks,
regardless of whether the company is domestic or
foreign.
In some situations, national treatment may not
be such a great thing. For instance, suppose that
a state has a law that allows it
to expropriate property. Under national
treatment, a foreign firm would technically still
be subject to the expropriation law.
However, depending on the country, other laws
may exists that could limit national treatment
to only the upside benefits.
Rich-Poor Divide
Despite the high growth rate of the economy, in
absolute terms India still is a low income economy,
with its per capita income at a level less than $500
per annum. Low per capita income is a pointer
towards the existing sharp divide between India’s
wealthiest and poorest sections of society. Out of
the total population, about 26 million people live
below poverty line and 35 per cent out of this
group, also classified as the poorest of the poor,
have income level of less than $1 per day. As per
Copyright © 2009 | WWW.UPSCPORTAL.COM
2001 Census, about 78 million people in the coun-
try were living without a home and more than
that number were holed up in urban slums. The
number of the poor living in the country is more
than the poor living in any other country of the
world.
Despite the above socio-economic problems plagu-
ing the Indian society, post-reforms period has
been marked by high growth rate, placing the
country among the front runners in the race for
highest growth in the world. During the past five
years, India has been second only to
China in terms of the growth rate achieved. India’s
Information Technology (IT) industry, services,
manufacturing and automobile sectors have been
booming. The urban areas, particularly the met-
ropolitan cities, have been the centres of growth.
Industrial centres have also been the hubs of eco-
nomic activity and the income levels in the coun-
try are on the rise.
During the past about a decade, the foreign sector
in the country has also been performing extremely
well and the policy of globalization has paid rich
dividends, with the foreign sector, registering over
20 per cent growth in the past several years. With-
out taking away the credit from the liberalization
policy, the resilience of the Indian economy must
also be given its due credit for outstanding achieve-
ments.
Unfortunately, the spurt in economic activity in
the country and increase in the growth rate over
the past few years has not been able to make a
discernible dent on the problem of poverty, dep-
rivation and exploitation of the downtrodden. The
divide between the rich and the poor has now
become a tangible reality. There are more Indian
billionaires in the Forbes list than ever before. But
the number of the poor and hungry is also not
decreasing. The growth centres are encircled by
the group of underprivileged people whose basic
needs are still to be met. During this era of rapid
growth, the problems of unequal and skewed dis-
tribution of economic resources and the fruits of
growth have surfaced.
141
 Section -6 (Mains Special: Hot Economic Issues)
In addition to the economic divide between the
rich and the poor, the digital divide between vari-
ous regions of the country has also become an
important issue. It has been admitted by the gov-
ernment policy makers that the growth rate in
the rural areas has been quite sluggish despite high
growth rate in the urban centres. Economic ac-
tivity in the rural areas has not been able to pick
up to match the rapid growth of the cities. The
result is that in the hope of getting better em-
ployment and growth opportunities a large num-
ber of people are migrating to the cities every year.
Rural economy is largely comprised of the agri-
culture and allied activities. The growth rate of
the agricultural sector has been between 2 to 4
per cent over the past couple of decades, while
the rest of the economy is growing at the rate of
around 8 per cent. It implies that increase in in-
comes in the rural sector has been almost one-
third of the average growth of incomes in the
country. Resultantly, the rural economy has
emerged as a poor cousin of the urban and indus-
trial sectors and the existing yawning gap has ac-
tually increased further.
The above does not imply that all is well in the
urban sector as a whole. Urban areas have their
own set of problems and inequalities resulting in
what is known as urban-urban divide. The urban
problems in India are no different. With about
300 million people living in 5,000 cities and towns,
the urban population cries for more care, invest-
ment in urban infrastructure and basic civic ameni-
ties.
About 40% of the urban population in India lives
in 60 metropolitan urban agglomerations. As per
one estimate of the government, about 65 million
urban people live in slums and squatter settlements
in these agglomerations. It is estimated that the
urban population of the country would increase
to 468 million by the year 2020. This poses a
Herculean task to the cities
in terms of improvements in civic infrastructure,
housing, basic amenities and employment oppor-
tunities.
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The current situation in most of the cities and
towns is pathetic. Mumbai, Delhi and Kolkata are
the main business and growth centres in the coun-
try. In addition cities like Bangalore and
Hyderabad are the hub centres of the IT revolu-
tion in the country. But these very cities have their
darker side as well. There is a huge population of
urban poor and slum dwellers living there. Water
supply and sanitation is a serious problem and solid
waste collection and its safe disposal is something
that requires a major national initiative.
While a person from the middle class and upper
middle class in the cities would invariably have
access to better health, educational and other fa-
cilities, the poorer sections would generally be
denied these facilities, which come at a higher cost
than they can afford. The variation in the income
levels in the cities has also created a kind of di-
chotomy in the society and the vertical split in
the society is a matter of serious concern for the
sociologists as well as the economists.
Equitable growth of the economy is the ultimate
goal and every government must strive hard to
achieve this goal. Indian Constitution, through the
Directive Principles of State Policy entrusts this
responsibility of equitable distribution of economic
resources to the government policies.
Globalization cannot snatch away the basic right
of decent living from the poor and the downtrod-
den. It is the duty and responsibility of the gov-
ernment to take immediate measures for bridging
the widening gap, which requires pragmatic poli-
cies aimed at redistributive justice on sustainable
basis.
Government of India has already launched an am-
bitious programme aimed at stimulating the eco-
nomic activity in the rural areas. Known as Bharat
Nirman, this new initiative is expected to pump
in huge sums of public expenditure in the devel-
opment of rural infrastructure of the country. Two
more flagship programmes, called Sarv Siksha
Abhiyan and “National Rural Health Mission”, are
being implemented which aim at bringing in quali-
tative as well as numerical improvement in the
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 Section -6 (Mains Special: Hot Economic Issues)
education and healthcare sectors, particularly in
the rural areas. To take care of the urban-urban
divide, another ambitious programme called
Jawaharlal Nehru National Urban Renewal Mis-
sion is being implemented in 66 major cities of
the country under which a lot of funds are being
spent to upgrade the urban infrastructure, hous-
ing and service delivery mechanism.
In addition to the above initiatives, the govern-
ment has to ensure distributive justice through
its taxation and other economic policies. Due at-
tention is required to be paid to the education sec-
tor in the rural areas so that the people living there
are able to get the best possible education to com-
pete with their urban counterparts. Healthcare
and sanitation facilities need a total upgrade in the
entire country. Special attention of the govern-
ment is required to be focused on stepping up the
economic activity in the rural areas so that the
rural incomes experience the required upsurge and
the existing gap is bridged to some extent. Divide
in the early stages of development is a global phe-
nomenon but it must not be allowed to perpetu-
ate beyond reasonable limit.
Islamic Finance
Islamic finance refers to the means by which cor-
porations in the Muslim world, including banks
and other lending institutions, raise capital in ac-
cordance with Sharia, or Islamic law. It also re-
fers to the types of investments that are permis-
sible under this form of law. A unique form of
socially responsible investment, Islam makes no
division between the spiritual and the secular,
hence its reach into the domain of financial mat-
ters. Because this sub-branch of finance is a bur-
geoning field, in this article we will offer an over-
view to serve as the basis of knowledge or for fur-
ther study.
The Big Picture
Although they have been mandated since the be-
ginnings of Islam in the seventh century, Islamic
banking and finance have been formalized gradu-
ally since the late 1960s, coincident with and in
response to tremendous oil wealth which, fueled
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renewed interest in and demand for Sharia-com-
pliant products and practice.
Central to Islamic banking and finance is an un-
derstanding of the importance of risk sharing as
part of raising capital and the avoidance of riba
(usury) and gharar (risk or uncertainty).
Islamic law views lending with interest payments
as a relationship that favors the lender, who
charges interest at the expense of the
borrower. Because Islamic law views money as a
measuring tool for value and not an 'asset' in it-
self, it requires that one should not be able to re-
ceive income from money (for example, interest
or anything that has the genus of money) alone.
Deemed riba (literally an increase or growth), such
practice is proscribed under Islamic law (haram,
which means prohibited) as it is considered usu-
rious and exploitative. By contrast, Islamic bank-
ing exists to further the socio-economic goals of
Islam.
Accordingly, Sharia-compliant finance (halal,
which means permitted) consists of profit
banking in which the financial institution shares
in the profit and loss of the enterprise that it un-
derwrites. Of equal importance is the concept of
gharar Defined as risk or uncertainty, in a finan-
cial context it refers to the sale of items whose
existence is not certain. Examples of gharar would
be forms of insurance, such as the purchase of pre-
miums to insure against something that may or
may not occur or derivatives used to hedge against
possible outcomes.
The equity financing of companies is
permissible, as long as those companies are not
engaged in restricted types of business - such as
the production of alcohol, pornography or weap-
onry - and only certain financial ratios meet speci-
fied guidelines.
Basic Financing Arrangements
Below is a brief overview of permissible financ-
ing arrangements often encountered in Islamic
finance:
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 Section -6 (Mains Special: Hot Economic Issues)
Profit-and-loss sharing contracts (mudarabah).
The Islamic bank pools investors' money and as-
sumes a share of the profits and losses. This is
agreed upon with the depositors. A group of mu-
tual funds screened for Sharia compliance has
arisen. The filter parses company balance sheets
to determine whether any sources of income to
the corporation are prohibited (for example, if the
company is holding too much debt) or if the com-
pany is engaged in prohibited lines of business. In
addition to actively managed mutual funds, pas-
sive ones exist as well based on such indexes as
the Dow Jones Islamic Market Index and the FTSE
Global Islamic Index.
Part ne rship and joint st ock ow nership
(musharakah). Three such structures are most
common:
a. Declining-Balance Shared Equity: Commonly
used to finance a home purchase, the declining
balance method calls for the bank and the
investor to purchase the home jointly, with the
institutional investor gradually transferring its
portion of the equity in the home to the indi-
vidual homeowner, whose payments constitute
the homeowner's equity.
b. Lease-to-Own: This arrangement is similar to
the declining balance one described above, except
that the financial institution puts up most, if not
all, of the money for the house and agrees on ar-
rangements with the homeowner to sell the house
to him at the end of a fixed term. A portion of
every payment goes toward the lease and the bal-
ance toward the purchase price of the home.
c. Installment (Cost-Plus) Sale (murabaha): This
is an action where an intermediary buys the home
with free and clear title to it. The intermediary
investor then agrees on a sale price with the pro-
spective buyer; this price includes some profit. The
purchase may be made outright (lump sum) or
through a series of deferred (installment) pay-
ments. This credit sale is an acceptable form of
finance and is not to be confused with an inter-
est-bearing loan.
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Leasing ('ijarah/'ijar): The sale of the right to use
an object (usufruct) for a specific time period. One
condition is that the lessor must own the leased
object for the duration of the lease. A variation
on the lease, 'ijarah wa 'iqtina provides for a lease
to be written whereby the lessor agrees to sell the
leased object at the lease's end at a predetermined
residual value. Only the lessor is bound by this
promise. The lessee, by contrast, is not obligated
to purchasing the item.
Islamic Forwards (salam and 'istisna): These are
rare forms of financing, used for certain types of
business. These are an exception to gharar. The
price for the item is prepaid and the item is deliv-
ered at a definite point in the future. Because there
is a host of conditions to be met to render such
contracts valid, the help of an Islamic legal advi-
sor is usually required.
Basic Insurance Vehicles
Traditional insurance is not permitted as a means
of risk management in Islamic law. This is because
it constitutes the purchase of something with an
uncertain outcome (form of ghirar), and because
insurers use fixed income - a form of riba - as part
of their portfolio management process to satisfy
liabilities.
A possible Sharia-compliant alternative is coop-
erative (mutual) insurance. Subscribers contrib-
ute to a pool of funds, which are invested in a
Sharia-compliant manner. Funds are withdrawn
from the pool to satisfy claims, and unclaimed
profits are distributed among policy holders. Such
a structure exists infrequently, so Muslims may
avail themselves of existing insurance vehicles if
needed or required.
Islamic finance is a centuries-old practice that is
gaining recognition throughout the world and
whose ethical nature is even drawing the interest
of non-Muslims. Given the increased wealth in
Muslim nations, expect this field to undergo an
even more rapid evolution as it continues to ad-
dress the challenges of reconciling the disparate
worlds of theology and modern portfolio theory.
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 Section -6 (Mains Special: Hot Economic Issues)
Basel I& Basel II
Basel I: A set of international banking regulations
put forth by the Basel Committee on Bank Super-
vision, which set out the minimum capital require-
ments of financial institutions with the goal of
minimizing credit risk. Banks that operate inter-
nationally are required to maintain a minimum
amount (8%) of capital based on a percent of risk-
weighted assets.
The first accord was the Basel I. It was issued in
1988 and focused mainly on credit risk by cre-
ating a bank asset classification system. This clas-
sification system grouped a bank's assets into
five risk categories:
» 0% - cash, central bank and government debt
and any OECD government debt
» 0%, 10%, 20% or 50% - public sector debt
» 20% - development bank debt, OECD bank debt,
OECD securities firm debt, non-OECD bank debt
(under one year maturity) and non-OECD public
sector debt, cash in collection
» 50% - residential mortgages
» 100% - private sector debt, non-OECD bank
debt (maturity over a year), real estate, plant and
equipment, capital instruments issued at other
banks
The bank must maintain capital (Tier 1 and Tier
2) equal to at least 8% of its risk-weighted assets.
For example, if a bank has risk-weighted assets of
$100 million, it is required to maintain capital of
at least $8 million.
Basel II: A set of banking regulations put forth
by the Basel Committee on Bank Supervision,
which regulates finance and banking internation-
ally. Basel II attempts to integrate Basel capital
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standards with national regulations, by setting the
minimum capital requirements of financial insti-
tutions with the goal of ensuring institution li-
quidity.
Basel II is the second of the Basel Committee on
Bank Supervision's recommendations, and unlike
the first accord, Basel I, where focus was mainly
on credit risk, the purpose of Basel II was to cre-
ate standards and regulations on how much capi-
tal financial institutions must have put aside. Banks
need to put aside capital to reduce the risks asso-
ciated with its investing and lending practices
Sovereign Wealth Funds
A sovereign wealth fund is simply an investment
fund managed by a government or other organi-
zation on behalf of a nation or sovereign state. The
capital that flows into sovereign wealth funds can
come from any number of sources, but the most
common are foreign currency reserves (budget and
banking surpluses) and excess profits from the sale
of natural resources and commodities. Crude oil
profits in particular have been a huge benefactor
to sovereign wealth fund assets.
On the whole, sovereign wealth funds don't have
boilerplate restrictions on what can or can't be
owned, much like with hedge funds in the United
States, but foreign stocks, bonds, derivatives and
currencies are all fair game.
Many of the big-story headlines you may have
read about SWFs relate to their efforts to buy large
stakes in financial corporations like Citigroup,
Merrill Lynch, Morgan Stanley and Blackstone
Group. But with these investments, and the at-
tempts to make others, sovereign wealth funds
have incited feelings of protectionism within the
countries where these banks and other invest-
ments are located.
Major Players
There are dozens of sovereign wealth funds in ex-
istence, and many have been around since the '80s
and '90s. The growth in assets and the intent of
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 Section -6 (Mains Special: Hot Economic Issues)
fund managers to diversify away from just hold-
ing currency reserves or gold is what sets apart
the old SWFs from the newly created ones. In the
interest of seeking higher returns and diversifica-
tion, many SWFs invest in global assets like stocks
and bonds, and they invest in multiple curren-
cies.
According to data compiled by the IMF in early
2008, the current aggregate value of SWFs are in
the neighborhood of US$2-$3 trillion, which is
already more than is held by the world's hedge
funds (US$1.7 trillion). It should be noted, how-
ever, that the use of leverage within hedge funds
gives them much more buying power than their
net asset values alone.
The top five largest SWF by assets:
1. Abu Dhabi Investment Authority (UAE) - $875
billion
2. Norway Government Pension Fund (Global) -
$380 billion
3. Government of Singapore Investment Corpo-
ration - $330 billion
4. Saudi Arabia 1 (no official fund name) - $300
billion
5. State Administration of Foreign Exchange
(China) - $300 billion
Three of the top five funds have gained their heft
thanks to exploding oil profits, with the excep-
tion of Singapore and China, which were running
high current account surpluses in the mid-2000s.
Labor Mobility
Labor mobility refers to the ease with which la-
borers are able to move around within an economy
and between different economies. It is an impor-
tant factor in the study of economics because it
looks at how labor, one of the major factors of
production, affects growth and production.
There are two primary types of labor mobility:
geographic and occupational. Geographic mobil-
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ity refers to a worker's ability to work in a par-
ticular physical location, while occupational mo-
bility refers to a worker's ability to change job
types. For example, a worker moving from the
United States to France involves the concept of
geographic mobility. An automobile mechanic
who changes jobs to become an airline pilot in-
volves the concept of occupational mobility.
Geographic Mobility Matter
From a policy-maker's perspective, geographic
mobility can have important implications on the
economy of a particular country. This is because
easing immigration requirements can do sev-
eral things:
1. Increase the supply of labor: As more workers
enter the economy, the general labor supply in-
creases. An increase in labor supply accompanied
by a static labor demand can decrease wage rates.
2. Increase unemployment: Unless employers de-
mand more workers, an increase in labor supply
could lead to a glut in labor. This means that more
workers are available than jobs.
3. Increase productivity: Not all laborers added
to the labor supply will be unskilled. An influx in
laborers can increase productivity if they bring
specialized skills to the workplace, although they
might push out existing employees who are less
productive.
Obtaining geographic mobility is not a purely eco-
nomic matter. It can also be an issue of state sov-
ereignty and government control. After all, gov-
ernments are also concerned with security, and
completely open borders mean that governments
are not sure who, or what, is coming into their
countries. While increased geographic mobility
generally has a positive impact on the economy,
it is also one of the first targets to incur the wrath
of both citizens and their
representatives. Immigration is already a hot-but-
ton topic, both in the United States and abroad.
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 Section -6 (Mains Special: Hot Economic Issues)
A reduction in geographic restrictions can be
reached in several different ways. Between coun-
tries, it is accomplished through treaties or eco-
nomic agreements. Countries can also increase the
number of worker visas available, or reduce the
requirements of receiving one. For example, coun-
tries that are part of the European Union have
fewer restrictions on the movement of labor be-
tween members, but can still place tight restric-
tions on labor movement from non-member coun-
tries.
The effectiveness of improved geographic mobil-
ity will ultimately depend on individual workers.
If economic opportunities are not available in a
different country or in a different part of one's
current country, the likelihood of an employee
wanting to make a change will be diminished.
Occupational Mobility
The ease with which employees can move from a
job in one particular industry to a job in a differ-
ent industry determines how quickly an economy
can develop. For example, if there was zero occu-
pational mobility we would still be hunter-gath-
erers, because no one would have been able to
become farmers or specialists.
An easing of occupational mobility restrictions
can do several things:
Increase the supply of labor in particular indus-
tries. Lower restrictions cause laborers to have an
easier time entering a different industry, which
can mean that the demand for labor is more readily
met.
Lower wage rates. If it is easier for laborers to enter
a particular industry, the supply of labor will in-
crease for a given demand, which lowers the wage
rate until equilibrium is reached.
Allow nascent industries to grow. If an economy
is shifting toward new industries, employees must
be available to run that industry's businesses. A
shortage of employees means that overall produc-
tivity can be negatively impacted because there
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aren't enough employees to provide the service
or work the machines used to make the product.
Occupational mobility can be restricted through
regulations. Licensing, training or education re-
quirements prevent the free flow of labor from
one industry to another. For example, restrictions
limit the supply of physicians, since specialized
training and licensing is required to work in that
particular profession. This is why physicians can
command higher wages, because the demand for
physicians coupled with a restricted supply in-
creases the equilibrium wage. This funnels un-
qualified members of the labor force into indus-
tries with fewer restrictions, keeping the wage rate
lower through a higher labor supply compared to
the amount of labor demanded.
Labor Mobility: Two Perspectives
Labor mobility affects workers on two levels: the
aggregate level and the personal level.
On a personal level, increased labor mobility gives
workers an opportunity to improve their finan-
cial situations. If workers are permitted to train
for new jobs, move locations or seek higher
wages, then they are more likely to be happy
working, which can have a positive impact on
productivity. Workers who do not feel indefinitely
relegated to low wages or jobs with few benefits
will consistently seek better positions, which also
makes it easier for new industries to attract the
most qualified applicants by offering better perks.
The aggregate level refers to the economy as a
whole. The extent to which labor forces are mo-
bile can impact how quickly an economy can adapt
to technological changes, how quickly competi-
tive advantages can be exploited and how innova-
tive industries develop. Restrictions placed on how
workers move around, either geographically or
occupationally, can slow growth by making it
more difficult for businesses to hire productive
workers. At the same time, unrestricted labor can
depress wages in certain industries and create un-
employment.
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 Section -6 (Mains Special: Hot Economic Issues)
As labor mobility improves, so do the lives of
workers around the globe. As a general rule, work-
ers are able to find better paying jobs and improve
their living situations when less control is placed
on where they can move and what occupations
they can apply for. At the same time, businesses
improve because workers receive better training
and the right employee can be hired. Economies
improve as productivity improves.
Macroeconomic Analysis
macroeconomics is the study of the behavior of
the economy as a whole. This is different from
microeconomics, which concentrates more on in-
dividuals and how they make economic decisions.
Needless to say, macro economy is very compli-
cated and there are many factors that influence
it. These factors are analyzed with various eco-
nomic indicators that tell us about the overall
health of the economy.
Macroeconomists try to forecast economic condi-
tions to help consumers, firms and governments
make better decisions.
» Consumers want to know how easy it will be to
find work, how much it will cost to buy goods
and services in the market, or how much it may
cost to borrow money.
» Businesses use macroeconomic analysis to
determine whether expanding production will be
welcomed by the market. Will consumers have
enough money to buy the products, or will the
products sit on shelves and collect dust?
» Governments turn to the macroeconomy when
budgeting spending, creating taxes, deciding on
interest rates and making policy decisions.
Macroeconomic analysis broadly focuses on three
things: national output (measured by gross domes-
tic product (GDP), unemployment and inflation.
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National Output: GDP
Output, the most important concept of macroeco-
nomics, refers to the total amount of goods and
services a country produces, commonly known as
the gross domestic product. The figure is like a
snapshot of the economy at a certain point in time.
When referring to GDP, macroeconomists tend
to use real GDP, which takes inflation into ac-
count, as opposed to nominal GDP, which reflects
only changes in prices. The nominal GDP figure
will be higher if inflation goes up from year to
year, so it is not necessarily indicative of higher
output levels, only of higher prices.
The one drawback of the GDP is that because the
information has to be collected after a specified
time period has finished, a figure for the GDP to-
day would have to be an estimate. GDP is none-
theless like a stepping stone into macroeconomic
analysis. Once a series of figures is collected over
a period of time, they can be compared, and econo-
mists and investors can begin to decipher the busi-
ness cycles, which are made up of the alternating
periods between economic recessions (slumps) and
expansions (booms) that have occurred over time.
From there we can begin to look at the reasons
why the cycles took place, which could be gov-
ernment policy, consumer behavior or interna-
tional phenomena, among other things. Of course,
these figures can be compared across economies
as well. Hence, we can determine which foreign
countries are economically strong or weak.
Based on what they learn from the past, analysts
can then begin to forecast the future state of the
economy. It is important to remember that what
determines human behavior and ultimately the
economy can never be forecasted completely.
Unemployment
The unemployment rate tells macroeconomists
how many people from the available pool of labor
(the labor force) are unable to find work.
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 Section -6 (Mains Special: Hot Economic Issues)
Macroeconomists have come to agree that when
the economy has witnessed growth from period
to period, which is indicated in the GDP growth
rate, unemployment levels tend to be low. This is
because with rising (real) GDP levels, we know
that output is higher, and, hence, more laborers
are needed to keep up with the greater levels of
production.
Inflation
The third main factor that macroeconomists look
at is the inflation rate, or the rate at which prices
rise. Inflation is primarily measured in two ways:
through the consumer price index (CPI) and the
GDP deflator. The CPI gives the current price of
a selected basket of goods and services that is up-
dated periodically. The GDP deflator is the ratio
of nominal GDP to real GDP.
If nominal GDP is higher than real GDP, we can
assume that the prices of goods and services has
been rising. Both the CPI and GDP deflator tend
to move in the same direction and differ by less
than 1%.
Demand and Disposable Income
What ultimately determines output is demand.
Demand comes from consumers (for investment
or savings - residential and business related), from
the government (spending on goods and services
of federal employees) and from imports and ex-
ports.
Demand alone, however, will not determine how
much is produced. What consumers demand is not
necessarily what they can afford to buy, so in or-
der to determine demand, a consumer's dispos-
able income must also be measured. This is the
amount of money after taxes left for spending and/
or investment.
In order to calculate disposable income, a worker's
wages must be quantified as well. Salary is a func-
tion of two main components: the minimum sal-
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ary for which employees will work and the
amount employers are willing to pay in order to
keep the worker in employment. Given that the
demand and supply go hand in hand, the salary
level will suffer in times of high unemployment,
and it will prosper when unemployment levels are
low. Demand inherently will determine supply
(production levels) and an equilibrium will be
reached; however, in order to feed demand and
supply, money is needed.
Monetary Policy
A simple example of monetary policy is the cen-
tral bank's open-market operations. When there
is a need to increase cash in the economy, the cen-
tral bank will buy government bonds (monetary
expansion). These securities allow the central bank
to inject the economy with an immediate supply
of cash. In turn, interest rates, the cost to borrow
money, will be reduced because the demand for
the bonds will increase their price and push the
interest rate down. In theory, more people and
businesses will then buy and invest. Demand for
goods and services will rise and, as a result, out-
put will increase. In order to cope with increased
levels of production, unemployment levels should
fall and wages should rise.
On the other hand, when the central bank needs
to absorb extra money in the economy, and push
inflation levels down, it will sell its T-bills. This
will result in higher interest rates (less borrow-
ing, less spending and investment) and less de-
mand, which will ultimately push down price level
(inflation) but will also result in less real output.
Fiscal Policy
The government can also increase taxes or lower
government spending in order to conduct a fiscal
contraction. What this will do is lower real out-
put because less government spending means less
disposable income for consumers. And, because
more of consumers' wages will go to taxes, de-
mand as well as output will decrease.
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 Section -6 (Mains Special: Hot Economic Issues)
A fiscal expansion by the government would mean
that taxes are decreased or government spending
is increased. Ether way, the result will be growth
in real output because the government will stir
demand with increased spending. In the mean-
time, a consumer with more disposable income
will be willing to buy more.
A government will tend to use a combination of
both monetary and fiscal options when setting
policies that deal with the macro economy.
The performance of the economy is important to
all of us. We analyze the macro economy by pri-
marily looking at national output, unemployment
and inflation. Although it is consumers who ulti-
mately determine the direction of the economy,
governments also influence it through fiscal and
monetary policy.
Deflation
In the common parlance deflation is an economic
situation of falling prices, but in economic theory
there is much more to it than just the reducing
price level.In economic terms, deflation can be
termed as a situation of declining prices, often
caused by a reduction in the supply of money or
credit. It can also be caused by the direct contrac-
tion in expenditure, including the public expen-
diture, personal spending or the investment ex-
penditure. This is opposite of inflation and often
leads to lower effective demand and increasing
unemployment rate in the economy.
According to economic theory, price level is the
result of functional relationship between demand
and supply. To put it simply, the supply being
constant, if the demand of the goods and services
increases in an economy, the prices are likely to
go up and the economy is likely to encounter a
situation of inflation. On the other hand, if the
supply increases with demand being constant, or
the supply increases more than the demand, the
prices may fall and such a situation may be re-
ferred to as ‘deflation’.
In addition to the above demand supply dynam-
Copyright © 2009 | WWW.UPSCPORTAL.COM
ics, the inflation or deflation can also be caused
by the reasons of the adequacy or lack of money
supply in the country. If the money supply is less,
it is a situation of more money chasing lesser goods
and services, leading to general rise in prices. On
the other hand, if the money supply is more than
the supply of goods and services, the situation of
fall in prices is generally experienced and is re-
ferred to as deflation.
Deflation caused by rapid growth of production
and manufacturing in the country, causing the
supply to go up is good for the economy, as with
abundant availability of all goods and services in
the economy, the prices go down, resulting in in-
crease in the real income and wealth of all the
consumers. Such a situation does not harm the
producers also, as they gain by increasing sales
volumes.
The Great Depression of 1930s was associated with
deflation and it is said that the recession coupled
with deflation leads the economies to suffer. It is
this very concern which is causing anxiety among
the economists and the policy makers. But it must
be clearly understood that deflation and depres-
sion are two different words and situations and
should not be taken as synonymous.
Effects on the Economy
Temporary fall in prices is not deflation and it is
the sustained fall for a considerably long period of
time which is a matter of serious concern. It causes
the aggregate demand to fall, as due to the falling
prices the consumers try to delay the purchases,
which in turn reduces economic activity in the
economy, thereby accentuating the spiral effect
of deflation. The result is that the existing manu-
facturing capacity of the economy becomes idle,
leading to further reduction in aggregate demand
and even more reduction in economic activity. If
the process continues without any interventions
from the government, the economies may move
in to a situation of recession.
Theoretically speaking, the situation of deflation
150
 Section -6 (Mains Special: Hot Economic Issues)
may also lead to a peculiar economic condition
known as the ‘liquidity trap’. Generally, the rate
of interest in an economy is linked to the rate of
inflation. But the situation of deflation may ne-
cessitate the interest rates to go down as low as
zero. Deflationary times and zero interest rates
reduce the economic viability of most of the
projects due to tremendously reduced demand and
the investors also tend to postpone their new
projects. This worsens the situation further.
Generally, the deflationary situation encourages
people to hold on to their money, mainly because
of the reasons like lower aggregate demand for
newly produced goods and very low interest rates
that discourage the people from keeping money
in bank deposits. This causes substantial reduc-
tion in the velocity of money i.e. reduction in the
number of transactions, dramatically reducing the
money supply in the economy, as one man’s ex-
penditure is the income of another. Reduced ve-
locity of money results in reduction of incomes.
Deflation results in fall of availability of hard cur-
rency per person. This further results in increas-
ing the purchasing power of each unit of currency,
as the average price level goes down. Increase in
purchasing power may sound beneficial to a lay-
man but actually it may cause hardship to those
people whose majority of wealth is kept in non-
liquid assets such as real estate, land and build-
ings.
It is thus evident that sustained deflation is a seri-
ous cause of worry to the policy makers, as it may
lead the economies to recession and, more seri-
ously, to a situation of depression.
Indian Scenario
In India, the rate of inflation or deflation is mea-
sured on the basis of Wholesale Price Index (WPI)
on weekly basis and then computed for the fiscal
years for the purpose of policy monitoring, ap-
praisal and decisions. WPI is an indicative and
representative index of the wholesale prices of
various commodities produced in the economy.
Copyright © 2009 | WWW.UPSCPORTAL.COM
Consumer Price Index (CPI), on the other hand,
is an index of the consumer prices that give 46 per
cent weightage to the food items, 15 per cent
weightage to the domestic facilities, 6.4 per cent
to lighting and fuel and 6.6 per cent to apparel
and shoes.
The inflation rate in India has suddenly fallen to a
level of less than half a per cent and closer to zero
in March 2009 onwards and the fears of the In-
dian economy slipping into a precarious situation
of deflation have been expressed by many. But
despite extremely lower inflation rate, the prices
of food items are still experiencing reasonably
higher increase in prices. This, while putting the
economically vulnerable sections of society in a
disadvantageous position, has also given a glim-
mer of hope to the policy makers because this
phenomenon may gradually stabilize the economy
and help it come out of the deflationary pressures
early.
The economists are in a fix and do not know
whether to call this economic situation in the
country as deflation or disinflation. While the
deflation is persistent fall in price level, disinflation
is a situation where the inflation rate goes down.
The economic theory provides separate sets of
solutions for both the situations and unless the
situation is clearly identified and diagnosed, it
would be difficult to resolve it.
Government agencies in India vehemently deny
that there is any fear of deflation in the near fu-
ture. The International Monetary Fund has pro-
jected the annual inflation rate of 1.7 per cent for
the Indian economy for 2009-10. This implies that
for some part of the year, the economy may expe-
rience a
brief spell of deflation. Whether or not to call such
a situation a deflationary situation, is a matter of
argument.
The current economic situation is that of
disinflation in India. The basis for such a belief is
that the economy has grown at the rate of 5.3 per
cent in the third quarter of the previous fiscal.
151
 Section -6 (Mains Special: Hot Economic Issues)
Citigroup has said that the deflationary patch in
India is due to high base effect and supply side
issues and is likely to be temporary and short-lived
in nature. But persistence of such a situation may
increase the problems of the economy in the
months to follow.
Many economists believe that the current situa-
tion can be termed as ‘demand deflation’. Both
production and the prices are falling down. This
would require more targeted fiscal measures, along
with stepped up direct government purchases and
increased scope of public distribution system.
The situation in India may not be as grave as that
of sustained deflation. The CPI is still positive and
at around 10 per cent; the rural demand for FMCGs
is robust and food items are in great demand. The
resilience of our economy may not allow the typi-
cal deflationary situation to emerge and the cur-
rent phase may turn out to transient and tempo-
rary. Despite the above, the situation needs to be
tackled by the Government very carefully.
Infrastructure
Like most of the developing countries, Indian
economy is also a diversified and resilient in na-
ture. Similarly, like most of the developing coun-
tries, huge sums of funds are being spent on the
development of infrastructure, both in the private
as well as in the public sectors. But, it is felt that
the infrastructure spending is shorter than what
is ideally required for achieving the required
higher growth rate. As per the estimation of the
Planning Commission of India, the total require-
ment of funds for financing the infrastructure re-
quirements during the Eleventh Five Year Plan
(2007-12) is to the tune of USD 500 billion, which
is about 2.5 times of the funds provided for this
purpose during the Tenth Five Year Plan.
Realizing that the government may not be able to
fund the huge requirement for infrastructure
projects required to be taken up for rapid growth
of the economy, the Union government and vari-
ous State governments have come up with the
Copyright © 2009 | WWW.UPSCPORTAL.COM
required Public-Private Partnership (PPP) frame-
work to facilitate the private participation in the
infrastructure sector in a big way. The govern-
ment has also asked the Infrastructure Investment
Finance Company to earmark a corpus of over 8.15
billion US dollars for this purpose. This is in addi-
tion to $320 billion to be spent by the govern-
ment for up-gradation of sea ports, railroads, high-
ways and airports over the next about 15 years.
A massive 494 billion dollar investment is pro-
posed in the Eleventh Five-Year Plan (2007-12),
which would increase the share of infrastructure
investment in this sector from 5 per cent of the
GDP at the beginning of Eleventh Plan to 9 per
cent during the Plan. This massive investment in
the infrastructure sector is envisaged through huge
doses of public spending through several flagship
national programmes, as well as through active
participation of the private sector in this gigantic
effort. To facilitate PPP in infrastructure sectors,
the government has not only introduced the model
concession agreements but also permitted in-
creased percentages of Foreign Direct Investment
(FDI) in various sectors. Major expansion of in-
frastructure in the sub-sectors like
railways, ports, civil aviation, road, power, tele-
communications and housing is planned to be
achieved during the plan period. Urban infrastruc-
ture is targeted to be strengthened through the
Jawaharlal Nehru National Urban Renewable Mis-
sion, while the general rural infrastructure is pro-
posed to be up-graded through implementation
of national programmes like Bharat Nirman, Rajiv
Gandhi Gramin Vidyutikaran Yojana, and Na-
tional Rural Health Mission etc.
Private Participation
Policy makers realise that the basic goal of inclu-
sive development laid down for the Eleventh Five
Year Plan may not be achieved if the basic infra-
structure facilities are not available in the urban
as well as rural areas of the country. In this re-
gard, the participation of the private sector is con-
sidered to be very important. Partnership with the
private sector had been continuing in the country
152
 Section -6 (Mains Special: Hot Economic Issues)
during the past several years but there was no
defined uniform policy and legal framework till
recently.
With a view to facilitate the private and foreign
investors to pump funds into Indian infrastruc-
ture projects, and to standardize the concessions
to be extended to the private investors under the
PPP, the government of India carried out special
workshops in various parts of the country. Main
objectives of these workshops were to bring out
the developmental relevance of the PPP in the
current context, assist interested in the PPP to go
ahead, understand and address the concerns of
the potential PPP investors, and international ex-
perience sharing from successful PPP models
across the world.
The government of India has set up a PPP cell in
the Ministry of Finance, Department of Economic
Affairs. It is also felt that many PPP projects may
not be economically viable but are essentially re-
quired to be executed. For such projects, Viabil-
ity Gap Funding (VGF) Scheme has been intro-
duced. This is a special facility aimed at support-
ing such infrastructure projects which are eco-
nomically and socially justifiable but are not com-
mercially viable. Under the VGF Scheme, upfront
assistance upto 20 per cent of the project cost can
be sanctioned as grant for such PPP projects.
No facilitation is complete without making insti-
tutional arrangements for financing. The govern-
ment of India has set up India Infrastructure Fi-
nance Company Ltd (IIFCL) as a wholly govern-
ment-owned company to facilitate long-term
funding of infrastructure projects. IIFCL provides
direct financing, as well as refinancing of such
projects in public, private or PPP sector.
The government has also paid special attention
towards the capacity building at the Central and
State levels. Capacity building needs include train-
ing of the key personnel, development of stan-
dard toolkits, Model Concession Agreements, de-
velopment of Project Manuals, preparation of stan-
dard bidding documents, consultancy support and
Copyright © 2009 | WWW.UPSCPORTAL.COM
project preparation manuals. This effort is also
being supported by the Asian Development Bank.
Over the past three to four years, the government
of India has worked towards creating institutional
framework to facilitate it. But at the same time,
the overall environment is very important before
the private investors commit funds into such
projects. Simplicity of government procedures,
reduction in corruption level and reduction in time
taken for decision making in government are some
of the areas of concern that may have to be ad-
dressed before the PPP picks up in the country.
Efficiency in government as well as enforcement
of market-driven tariffs are two other important
determinants of the enabling environment.
Precursor to Rapid Growth
Infrastructure development has been identified as
an effective tool for taking the economy out of
the effects of global recession. There has been stiff
increase in the proposed expenditure for infra-
structure projects particularly in the rural areas.
Hefty 31 per cent increase has been proposed in
the interim Budget 2009-10 for Bharat Nirman
programme, aimed at strengthening the rural in-
frastructure in the country. This would not only
increase the economic activity in the countryside
but would also provide the rural people with the
required infrastructure and increased employment
opportunities.
One of the ambitious ongoing infrastructure
projects is the Golden Quadrilateral Project, which
is aimed at improving the road infrastructure on
the highways/expressways connecting major cit-
ies of the country. The Project, on completion,
would connect the metropolitan cities of Delhi,
Mumbai, Bangalore, Chennai and Kolkata with
expressways. It is the largest expressway project
of the country, aimed at constructing 5,846
kilometres of six/four lane express highways at a
cost of Rs 60,000 crores. Its North South and East
West sections are nearing completion while the
work on other sections is going on.
Road infrastructure, world class telecommunica-
153
 Section -6 (Mains Special: Hot Economic Issues)
tions, availability of efficient sea ports and airports,
capacity creation in electricity generation and
strong rural and urban infrastructure were some
of the areas identified for improvement by the
policy makers. After the planning stage, it is now
the implementation stage and it is expected that
within next five to ten years, India would have all
the world class infrastructure facilities available.
In addition to creation of sustainable infrastruc-
ture in the country, the government effort would
also result in ensuring huge doses of investment
into the economy, including the rural economy,
at a time when most of the western and devel-
oped markets are reeling under the influence of
worldwide recession. Investment in this sector has
ensured that the economy grew at 7 per cent dur-
ing the previous financial year, when the world
growth rate was around one per cent. During the
current fiscal also, when the world economy is
likely to record zero growth rate, Indian economy
may still record reasonable growth rate.
Financial Sector Reforms in India
The period immediately after independence posed
a major challenge to the country. Due to centu-
ries of exploitation at the hands of foreign pow-
ers, there were very high levels of deprivation in
the economy—both social as well as economic.
To take up the Herculean task of rapid growth
with socio-economic justice, the country adopted
the system of planned economic development af-
ter independence. Due to paucity of economic
resources and limitations of availability of capital
for investment, the government also came up with
the policy of setting up public enterprises in al-
most every field.
The fiscal activism adopted by the government
resulted in large doses of public expenditures for
which not only the revenues of the government
were utilized but the government also resorted to
borrowing at concessional rates, which kept the
financial markets underdeveloped. The growth of
fiscal deficit also continued unabated year after
year. Complex structure of interest rates was a
Copyright © 2009 | WWW.UPSCPORTAL.COM
resultant outcome of this system.
Nationalisation of major commercial banks in the
late sixties and early seventies provided the gov-
ernment with virtually the complete control over
the direction of the bank credit. The emphasis was
mainly on control and regulation and the market
forces had very limited role to play.
The economic system was working to the satis-
faction of the government. The social indicators
were gradually improving and the number of
people below poverty line also declined steadily.
The only problem area had been that the growth
rate of the economy had been very low, and till
late seventies, the growth rate of the GDP was
hovering around 3.5 per cent per annum. It was
only during mid-eighties that the growth rate
touched 5 percentage points.
The situation became difficult by the eighties. Fi-
nancial system was considerably stretched and ar-
tificially directed and concessional availability of
credit with respect to certain sectors resulted in
distorting the interest rate mechanism. Lack of
professionalism and transparency in the function-
ing of the public sector banks led to increasing
burden of non-performance of their assets.
Late eighties and early nineties were characterised
by fluid economic situation in the country. War
in the Middle East had put tremendous pressure
on the dwindling foreign exchange reserves of the
country. The country witnessed the worst short-
ages of the petroleum products. High rate of in-
flation was another area of serious concern. Most
of the economic ailments had resulted due to over
regulation of the economy. The international lend-
ing and assisting agencies were ready to extend
assistance but with the condition that the coun-
try went in for structural reforms, decontrols and
deregulation, allowing increased role for the mar-
ket forces of demand and supply.
The precarious economic conditions left the coun-
try with no alternative other than acceptance of
the conditions for introducing the reforms.
154
 Section -6 (Mains Special: Hot Economic Issues)
Post Reforms
Rationalisation of the taxes has already taken place
on the basis of the recommendations of Raja
Challiah Committee Report during mid-nineties.
The government has been able to tighten its fiscal
management through the FRBMA and the con-
tinuing increase in the fiscal deficit has been con-
tained significantly. Reforms in the external sec-
tor management have yielded results in the form
of increased foreign capital inflows in terms of
Foreign Direct Investment (FDI), Foreign Insti-
tutional Investment (FII) and the exchange rate
has also represent true international value of In-
dian rupee vis-à-vis hard global currencies.
The primitive foreign exchange regulation regime
controlled by FERA has been replaced by a liber-
alized foreign exchange rate management system
introduced by FEMA. Introduction of such a mod-
ern management law was perhaps a pre-condition
for allowing FDI and FII. In 1993, the RBI issued
guidelines to allow the private sector banks to
enter the banking sector in the country, a virtual
reversal of the policy of bank nationalisation. For-
eign banks were also given more liberal entry.
The thrust of the monetary policy after the intro-
duction of the process of reforms has been able to
develop several instruments of efficient financial
management. A Liquidity Adjustment Facility
(LAF) was introduced in June 2000 to precisely
modulate short-term liquidity and signal short-
term interest rates. A lot of reliance is being placed
on indirect instruments of monetary policy.
Strengthening and upgradation of the institu-
tional, technological and physical infrastructure
in the financial markets has also improved the fi-
nancial framework in the country.
Economy and Reforms
The introduction of financial sector reforms has
provided the economy with a lot of resilience and
stability. The average annual growth rate of the
economy during the post-reform period has been
more than 6 per cent, which was unimaginable a
Copyright © 2009 | WWW.UPSCPORTAL.COM
decade before that. The economy withstood boldly
the Asian economic crisis of 1997-98. Even the
economic sanctions by the US and other devel-
oped countries after the nuclear testing did not
affect the economy to the extent apprehended.
The current global slowdown and sub-prime cri-
sis affecting the banking system all over the world
has not impacted the Indian economy to that ex-
tent.
Banking and insurance sectors are booming. While
the private and foreign banks are giving stiff but
healthy competition to the public sector banks,
resulting in overall improvements in the banking
services in the country, the insurance sector has
also witnessed transformation. The consumer is a
gainer with the availability of much better and
diversified insurance products.
The stock exchanges in the country are in the pro-
cess of adopting the best practices all over the
world. The RBI has also been able to control and
regulate effectively the operations and growth of
the Non-Banking Financial Companies (NBFCs)
in the country.
A few changes which are on the anvil pertain to
the legal provisions relating to fiscal and budget
management, public debt, deposits, insurance etc.
As per the Finance Minister, future reforms by
making legal changes also pertain to banking regu-
lations, Companies Act, Income Tax, Bankruptcy,
negotiable instruments etc.
But there are certain issues that call for more cau-
tious approach towards the financial sector reforms
in the future. The social sector indicators—like
availability of doctor per 1000 population, avail-
ability of health institutions, quality of elemen-
tary education, literacy rate, particularly among
the females—are some of the areas of serious con-
cern. Countries like China, Indonesia and even Sri
Lanka are much better than India in most of the
social sector indicators.
Despite being among the most rapidly developing
economies of the world, the literacy rate and pov-
155
 Section -6 (Mains Special: Hot Economic Issues)

erty percentage are two biggest embarrassments and the country still languishes at 128th position in the
Human Development Index of the UNDP, where it is virtually stagnating for the last about five years.
Further, the systems should also be able to check any unusual rise in prices to protect the common man
from inflation.

One of the major criticisms of the government policy has been that the reforms have lacked the human
face, as the government has been over-obsessed with the idea of achieving higher growth rate and fiscal
and monetary management, rather than addressing the needs for equitable and inclusive growth. The
reforms process has ignored the common man and the trickle down theory has actually failed to deliver.

The Planning Commission, while finalising the Eleventh Five-Year Plan has now sought to achieve the
overall objective of achieving the ‘inclusive growth’, i.e., to include all those in the process of economic
growth, who has remained excluded from the process of economic growth experienced by the country
during the past decades.

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