TTBR (Topics To Be Read) 24 January 2024

Today's Topics To Be Read (TTBR)

1
Improving the world for everyone (The Tribune)
2
India-Myanmar border: Keep it porous (Indian Express)
3
One Nation, One Election panel: First, listen (Indian Express)
4
Women's political empowerment will enhance governance and
boost the economy (Mint)
5
Water resource inadequacy is a challenge India must take head on
(Mint)
6
Limits and borders: On the territorial jurisdiction of the Border
Security Force (The Hindu)
7
The larger message to New Delhi from the Red Sea (The Hindu)
8
The rise of CAT bonds (Finshots)
9
AI is not all that ‘green’ (Business Line)
10
Retail credit not a worry, but needs monitoring (Business Line)
TTBR (Topics To Be Read) 24 January 2024

Improving the world for everyone (The Tribune)

Institutions of global governance have failed to make growth more

inclusive and sustainable

SELF-APPOINTED leaders have assembled at Davos, Switzerland, over the decades to

promote boundary-less globalisation of finance and trade. “Davos is where billionaires
tell millionaires what the middle class feels,” according to Jamie Dimon, CEO of
JPMorgan Chase, the world’s largest bank in terms of market capitalisation.
In the Davos model of the global economy, the accumulation of wealth by billionaires
is expected to increase the wealth of the poorest classes also. It has not turned out
that way. On the contrary, with cumulative causation, whereby those who already
have wealth can exploit expanding opportunities to make more wealth, the gap
between those on top of the pyramid and the masses below (including the middle
classes) have widened. Poor migrants are arriving at the borders of America and
European nations, desperate for opportunities to safely live and earn a living. Anti-
immigrant populism is shaking up governments in the West. Migrants are being forced
back, with the rich pulling up drawbridges to save themselves, ending the short history
of boundary-less globalisation.
“We need to overcome what one would label the ‘Davos arrogance’. People gather
here, including representatives of the liberal elites primarily from Europe and the
United States, and say that we are the ones who know how to solve all the problems
of the world,” Kyriakos Mitsotakis, Prime Minister of Greece, said at the World
Economic Forum (WEF) summit in Davos last week. He stated that the international
arrangements and institutions after World War II, which concentrated power within
the G7 (and primarily the US), did not reflect the reality of today’s world, and this was
upsetting countries in the Global South that were emerging as global powers.
Populism in the rich West is rising from the political right; in the poorer Global South,
it is generally coming from the Left. “One needs to be very careful in this environment
where everyone is pointing a finger at populists, because some of their grievances are
TTBR (Topics To Be Read) 24 January 2024

actually very real,” Mitsotakis explains. “People feel they are being left behind by
globalisation. The wages have not really increased. Inflation is really hitting lower-
income households,” he adds.
In 2001, Goldman Sachs’ economist Jim O’Neill forecast that the economies of the
BRICS countries, outside the G7, would be the engines of global growth in the 21st
century. Western capitalists and MNCs were attracted by these potential
opportunities for profits.
However, some are not convinced by economists’ predictions, stating that their
mathematical models are incomplete. They do not include social and political forces,
which are hard to quantify, and therefore their predictions of growth are often wrong.
Nate Silver points out in The Signal and the Noise that forecasts of GDP growth by the
Survey of Professional Forecasters have been right only 50 per cent of the time — no
better than tossing a coin. Therefore, the WEF commissioned some scenarists to use
“systems-based scenario forecasting”, which considers all forces that shape the future
of countries, to forecast what lay ahead for the BRICS countries. This method of ‘whole
systems thinking’ anticipates future risks and suggests changes in policies to navigate
through them.
The scenarios for India were presented at Davos in 2005. They revealed three plausible
futures for the country by 2025. The first scenario was an analysis of the trajectory
India was on at that time: wealth was admired and it had become an aspiration for
India’s youth. The scenarists described this scenario as ‘BollyWorld’, with its
celebration of glamour. But social tensions were also building up. A Bollywood movie
is entertaining, but it eventually ends and we cannot escape reality.
The second scenario emerges from the first when the social tensions in it are not
resolved. The youth are unable to satisfy their aspirations. The government must make
ease of living easier for the masses, and not just ease of making profits for business. It
strains to make growth more inclusive. The scenarists called this scenario, with its
internal tensions, ‘Atakta Bharat’. Is this today’s India?
A third scenario emerged from the systems analysis. The WEF scenarists called it ‘Pehle
India’, in which India would emerge as a global leader of a new model of growth from
the bottom. In this scenario, leaders of change were within the system, at the bottom
and in the middle, not perched like glamorous peacocks on top. These leaders were
like fireflies: small and local. They had an inner light driving them to change the world
around them for improving the lives of families and communities.
The scenarists found that there were millions of such fireflies making a change in India.
Fireflies are not counted among the ‘unicorns’, who are the models of entrepreneurial
success that is taught in management schools. They are not admired because, in the
TTBR (Topics To Be Read) 24 January 2024

capitalist world of wealth, success is measured by the stock market, not by the
wellbeing of the poor. Fireflies provide models of inclusive, rather than extractive,
entrepreneurship. Their strength lies in their human values, not in the financial
valuations of their enterprises.
Paradigms are hard to change. The beneficiaries of an established paradigm always
resist change. They want to remain on their pedestals, to continue their gains from the
upward rush of admiration and wealth towards them in the prevalent paradigm. They
use their power to stop those who threaten it. They prevent others from accessing
resources and silence their voices. Therefore, the powerless are compelled to resort
to other means to remind the powerful that they, too, deserve respect and must be
listened to.
Prevalent theories of economics and institutions of global governance have failed to
make the world safer or growth more inclusive and sustainable. The world desperately
needs ideas from outside the intellectual and official establishment. Powerful
peacocks on their pedestals must deign to come down to earth and listen to the
masses. That is where fireflies, who are genuine social entrepreneurs, are changing
the world to make it better for everyone.
Arun Maira
Former Member, Planning Commission

India-Myanmar border: Keep it porous (Indian

Express)

Sealing border with Myanmar is no solution to complex problems of

Northeast. The answer lies in greater engagement
TTBR (Topics To Be Read) 24 January 2024

The Centre should rethink its decision to fence the country’s 1,643-km border with
Myanmar. Announcing the move last week, Union Home Minister Amit Shah said that
plans to formally end the Free Movement Regime (FMR) regime, suspended since
September 2022, are also on the government’s anvil.
The FMR, which came into effect in 2018, allowed people living along the border of
either side to travel up to 16 km into the other country without any visa.
Admittedly, the situation along the Indo-Myanmar border has deteriorated after the
Tadmadaw seized power in Yangon in February 2021. The junta has persecuted the
Kuki-Chin people and the turmoil has resulted in an influx of Myanmarese refugees in
the country’s Northeast.
The instability has sparked security concerns in Delhi. The trafficking of arms and drugs
is also worrying. But sealing borders could complicate matters in parts of the Northeast
that bear the scars of insurgencies and ethnic strife, past and present. Undermining
people-to-people relations can cause heartburn amongst tribal groups like the Kukis
in Mizoram and Manipur who share kinship ties with Myanmar’s Chin community.
Mizoram’s Chief Minister Lalduhoma — like his predecessor Zoramthanga — has
opposed the fencing and civil society groups in the state have also criticised the move.
The junta has ruled Myanmar for all but five years since 1990. Unlike Western powers,
which have made democracy the sole prism of their Myanmar policy, India has chosen
to do business with the military regime, and that also has to do with the latter’s help
in the denial of a safe haven to insurgents from the Northeast.
Myanmar has also been a part of India’s Look East Policy. The strategy to do business
with Yangon worked to a large extent till the latest military takeover three years ago.
Since February 2021, the country’s Chin province which shares a border with Mizoram
has become a major battleground in the conflict between the junta and its opposition.
Entire villages have reportedly been burnt down for failing to comply with the
Tatmadaw’s writ. In August last year, External Affairs Minister S Jaishankar told his
counterpart in Myanmar that “India’s border areas have been seriously disturbed and
any action that aggravates the situation should be avoided”. That, however, was a rare
admonition. Delhi has, by and large, failed to restrain Yangon from acting against
Indian interests. Instead, the Union Home Ministry now seems to be picking on the
junta’s victims.
Mizoram has provided a sanctuary to the refugees. In neighbouring Manipur, however,
the Biren Singh government has framed the crisis in ways that help him gloss over his
own government’s failures to stanch the state’s nearly nine-month-long ethnic strife.
Singh has accused the chiefs of the Kuki community of “illegally settling immigrants”
from Myanmar. Such hostility is part of a playbook that fails to acknowledge and
TTBR (Topics To Be Read) 24 January 2024

address the complex nature of the frontiers in the Subcontinent, many of which are a
creation of the colonial state. India’s border with Myanmar cuts through villages and
divides families in Mizoram, Nagaland and Manipur. It should remain porous.

One Nation, One Election panel: First, listen

(Indian Express)

One Nation, One Election panel will be seen as a rubber stamp unless it
gives space to Opposition, which must join the process.

The official consultation process set in motion for gauging the viability of simultaneous
elections is unfolding like a chronicle foretold. According to the Union Law Ministry,
81 per cent of the 20,000-plus responses received by the High Level Committee on
One Nation, One Election have favoured the idea. The Committee headed by a former
president, Ram Nath Kovind, issued a public notice asking for suggestions between
January 5-15. Unfortunately, given its constitution, manner of functioning and the
larger context of one-party dominance, the Kovind Committee gives the impression of
being partisan at best and a rubber stamp at worst. The blame for the lack of robust
debate on the proposal also lies with the Opposition, particularly Congress. On an issue
with far-reaching consequences, it has refused to engage.
The eight members of the Committee have either openly expressed support for
simultaneous polls — as president, Kovind did, in Parliament, in 2019 — or are seen to
be close to the government and therefore broadly in agreement with its pet projects.
Congress Leader in the Lok Sabha, Adhir Ranjan Chowdhury, refused to be a part of
the Committee arguing that it is imbalanced. The Committee’s very terms of reference
assume that One Nation, One Election is in “national interest”. But despite this, an
Opposition leader could have played an important role — by voicing concerns the
TTBR (Topics To Be Read) 24 January 2024

government may not want heard and by pushing for greater transparency in the
process. As things stand, the concerns of the Opposition and the states look scattered
and are being voiced piecemeal: Congress has called it “undemocratic”, AAP has said
it will give an “unfair advantage” to the ruling party, the DMK has labelled it
“dangerous”, and the TMC described it as “against the federal structure”.
Admittedly, a near-constant election cycle, and the short-termism this engenders,
places a great burden on the exchequer. But while these issues are important, they
cannot be used as an excuse to artificially keep governments that lose the support of
the legislature and by extension, the people, in power. Certainly, such a fundamental
change in the democratic structure and process must not be brought about without
adequate engagement with the Opposition’s concerns. The legitimacy of the electoral
system does not flow only from the Treasury Benches or the corridors of power at
Kartavya Path. It also emanates from those without executive office continuing to have
a voice. The elected Opposition, all but silenced in the last session of Parliament with
the expulsion of 146 MPs, must have a say, and not just a token one, in the
consequential matter of the design of elections.

Women's political empowerment will enhance

governance and boost the economy (Mint)

Gender equality in politics will not only ensure fair play and
accountability, but support the economy too. Women must pitch in
more as voters, poll workers, candidates and lawmaker

India’s electoral landscape is set for a transformative gender shift. A gender gap in
voter turnout still exists, although it has reduced considerably since the early years of
TTBR (Topics To Be Read) 24 January 2024

Indian democracy. Given the current trend of increasing women’s participation in

polls, projections by Soumya Kanti Ghosh and Anurag Chandra of SBI show that
women’s voter turnout would exceed that of men by 2029 and reach 55% of the total
by 2047. Five recent state elections saw well above 70% of eligible women voting.
Rural gains stood out.
Many social researchers specifically link these gains to India’s 33% reservation of seats
in local representative bodies, as well as grassroots self-help group movements. Some
attribute it to the influence of development schemes that “recognize women’s
agency.” However, a women’s rights activist rued that “despite being a significant
mass, the importance accorded to women is transactional”—i.e., a “your-vote-for-my-
scheme approach.” Other researchers have opined that women are yet to emerge as
a “distinct voting bloc for any particular party.” As for an observed spike in rural
women voters, a political economist views it through the “prism of economic
conditions”: hence, “in the post-covid era, men got back to working in bigger cities,
but a large number of women didn’t, and thus, it is the absence of men who can vote
in their homes.”
Despite Indian women’s better balanced share of the political franchise, various
institutional and structural challenges stand in their way to the electoral battlefield.
Apart from an ‘internalised patriarchy’ that restricts engagement in a full-fledged
political career, political parties often fight shy of fielding a fair share of women as
contestants. “A large section of women who do get party tickets have family political
connections,” said a study. In 2019, 41% of all women candidates and 30% of those
who got elected were ‘dynasts.’ A growing need for money and muscle in the field also
makes an electoral contest hard-going for women. In the 2019 Lok Sabha elections,
there were only 719 women contestants, 9% of the total, and 78 won, making up under
14.4% of all seat winners, a proportion that is below the South Asian average of 18.9%
(World Bank). As a 2023 UNDP report underscores, women’s political empowerment
(WPE) leads to “responsive and transparent governance, reduces risks of civil war and
political violence, and breaks down gender stereotypes.” It has economic benefits too.
A recent data-analysis over an extended time-span (from 1830) across 182 countries
has assessed that “there have been clear differences in the annual GDP per capita
growth rates between countries with low and high rate of WPE, and increased WPE
also brings in technological change and innovation and [productivity] growth,
particularly in non-Western nations, with the infusion of new and efficient ideas into
economy.” It recommends promoting WPE “more as an instrumental business case”
(Dahlum, et al, 2022). A regional study in Europe and Central Asia (ECA) estimated that
a “10%-point increase in women’s representation in parliament is likely to yield a
0.74%-point rise in GDP growth.” Studies have also shown that women-led policies
have positive implications for labour productivity, market participation,
TTBR (Topics To Be Read) 24 January 2024

entrepreneurship and reduction in gender wage gaps. A meta analysis of a global data-
set (2015-2019) said that increased WPE also contributes to the realization of
Sustainable Development Goals. Nevertheless, evidence from developing countries
has also demonstrated that a lack of financial resources and specific historical legacies,
apart from an absence of party support, could hinder the effective participation of
women in parliamentary activity (Prodip, 2021).
Looking at India, a study revealed that “women legislators perform better in their
constituencies on economic indicators than their male counterparts… are less likely to
be criminal and corrupt, more efficacious, and less vulnerable to political
opportunism” (Thushyanthan Baskaran, et al). A 2013 study found that WPE over a
period of time can augment women’s presence in the economy and labour market
(Ghani, Mani and O’Connell), while a 2020 field study in 163 villages to evaluate the
uptake of India’s rural jobs scheme where women helm local bodies found “it raised
women’s demand for work and access to financial resources.”
Globally, only 26.5% of members in single or lower parliamentary houses are women,
with an increase of just 0.4 percentage points in six years. In bicameral cases, only six
countries have 50% or more women in either house. In the US, women are 28% of all
members of its 118th Congress, the highest in its history. In Europe, proportional
representation rules, party-driven gender quotas and public campaign financing raised
this proportion to 32.7% of all seats in national parliaments across the EU in 2022. In
India, only 10.5% of all Members of Parliament in 2021 were women, while state
assembly representation stands at an average of 9%. The much awaited Women’s
Reservation Bill has come through, but it’s linkage with a seat delimitation process
makes its coming into force uncertain in the near future.
The pursuit of gender equality in politics isn’t merely for justice and fair play, but
foremost for a more stable and sustainable economy. Trends suggest that goal is
almost 130 years away (UN Women). For accountable governance, be it in India or
elsewhere, women must pitch in as voters, poll workers, candidates and lawmakers.
Writer : Archana Datta
TTBR (Topics To Be Read) 24 January 2024

Water resource inadequacy is a challenge India

must take head on (Mint)

India’s mitigation plan for climate change should accord high priority to
a basic scarcity that may impede economic growth.

The notion of a ‘triple planetary’ crisis encompassing climate change, pollution and
biodiversity loss has become outdated in the face of complexities captured by the
relatively new term ‘polycrisis.’ This modern challenge involves the intertwining of
climate change, environmental disruptions, widening social inequalities, pandemic
effects and geopolitical polarization. In the context of India’s ambitious pursuit of rapid
economic growth amid multiple crises, addressing the climate-development nexus is
imperative. The impact of climate change and the depletion of resources holds
profound implications for the country’s growth trajectory, particularly with a
burgeoning population and its escalating demands. Amid these considerations,
preserving limited natural resources, especially precious water resources, is a critical
priority.
At the recently concluded CoP-28 summit held in Dubai under the aegis of the United
Nations Framework Convention on Climate Change, countries agreed on the need to
“drive water up the climate agenda,” focusing on freshwater ecosystems, urban water
resilience and water-resilient food systems.
Highlighting the gravity of the situation, data from the World Bank underscores the
fact that water scarcity could depress growth in gross domestic product (GDP) by 6-
14% across significant regions in Africa, Asia and the Middle East. This shows the link
between climate solutions, development initiatives and water-related challenges. For
India, integrating water solutions with its climate and development strategies is of
paramount importance in navigating the multifaceted challenges posed by the current
polycrisis.
India constitutes 18% of the world’s population but has access to only 4% of its water
resources. This in itself points to an imbalanced demand-supply structure, which has
TTBR (Topics To Be Read) 24 January 2024

only grown weaker. In the 1960s, the country’s bountiful groundwater resources were
critical in driving the ‘green revolution,’ making it a self-reliant food producer. Today,
the country’s water table is rapidly falling and its aquifers are drying up faster than the
rate at which they are being recharged. Declining water tables inevitably lead to a
higher cost of pumping and irrigation water turning salty, resulting in over-abstraction
and crop-and-revenue losses for farmers, apart from long-term consequences for
water availability. Poor water quality and lack of adequate access to sanitation are also
significant causes of disease and poor health.
None of this is news anymore for India. In 2019, the central government, with the
support of the World Bank, launched Atal Bhujal Yojana, a central scheme worth
₹6,000 crore that aims to tackle India’s growing groundwater crisis. While this is a
significant achievement, it still needs to be improved for the country to achieve water
security. India can tap the climate-development nexus by conserving and using its
water resources smartly, while proactively addressing climate change. With the
country’s Indo-Gangetic plains getting drier, experts predict that by 2025, north-west
India will be subject to severe water stress. Highlighting this crisis’s economic
ramifications, the World Bank projects that certain regions may witness a staggering
11.5% reduction in GDP growth due to water scarcity by 2050.
Additionally, it needs no further elaboration that water insecurity will inevitably
impact food and livelihood security across the country. Beyond agriculture, water
scarcity will significantly affect India’s quest for sustainable development by having an
adverse impact on energy, health and infrastructure. For instance, under the current
structure of India’s power sector, water is a critical component, and a growing
economy and industrial boom will intensify water management challenges. Tried-and-
tested development pathways are not only carbon-intensive but also resource-
intensive. India is, therefore, confronted with a significant developmental challenge.
How do we overcome this to achieve resilient growth and sustainable prosperity?
The policy ecosystem should adapt to accommodate shifts in the Earth’s ecosystems.
It is time for the country to eliminate perverse subsidies, improve water use efficiency,
strengthen water governance and ensure sustainable financing for water
infrastructure through appropriate cost recovery. Financing for efficient infrastructure
is critical since, currently, large sums are being diverted towards drought relief, both
honest and rigged. In 2023 alone, the Centre released ₹7,532 crore to states affected
by heavy rains and associated natural disasters.
Better planning and sustainable use of limited water resources should become integral
to climate adaptation at all levels. In 2023, Kerala set an example by being the first
state in the country to pass a water budget to analyse its distribution and bridge gaps
between demand and supply. While localized planning and community solutions are
TTBR (Topics To Be Read) 24 January 2024

necessary, more is needed to address issues in the long-term; comprehensive planning

is vital at the level of the river basin and possible interconnections between different
basins. Top-down planning and bottom-up implementation are the way forward. In
the context of policy tools, driving water up the priority order of India’s National
Adaptation Plan is critical.
In the backdrop of extreme weather events, depleting natural resources and drying up
of fertile land, India is already in the grip of a severe water crisis that could spiral into
a social, political and economic crisis over the years. We are perhaps only a short time
away from adding water stress to the list of multiple crises facing the world today. We
must rise quickly to meet the challenges that worsening water security throws up.
Writer : Amit Kapoor

Limits and borders: On the territorial jurisdiction

of the Border Security Force (The Hindu)

Centre must consult States before making decisions that impinge on

their powers

Litigation concerning the territorial jurisdiction of the Border Security Force (BSF) in
Punjab seems to be the result of the lack of effective consultation between the central
and State governments on the issue. Punjab has filed a suit against the Union
government under Article 131 of the Constitution, challenging the decision to increase
the operational jurisdiction of the BSF from 15 km to 50 km. The border State sees the
Centre’s move as a breach of federal principles and an encroachment into the law and
order powers of the Punjab police. West Bengal has a similar view, and both States
have got resolutions passed in their Assemblies against the expansion. In this
backdrop, the Supreme Court’s decision to examine the questions that arise from the
TTBR (Topics To Be Read) 24 January 2024

expansion of the BSF’s area of operations acquires significance. In October 2021, the
Centre had issued a notification under the provisions of the BSF Act, standardising the
area over which the BSF would have jurisdiction to operate. In Punjab, West Bengal
and Assam, the distance was raised from within 15 km from the border to 50 km, while
it was reduced from 80 km to 50 km in Gujarat. For Rajasthan, it was kept unchanged
at 50 km. The Union government said in a reply in the Rajya Sabha in December 2021
that the extension of the BSF’s jurisdiction will help it discharge its border patrol duty
more effectively.
While the Union government may have valid reasons for its move, it should not be
seen as encroaching into the domain of the State governments, which have the
constitutional responsibility to maintain public order and exercise police powers. The
BSF mainly focuses on preventing trans-border crimes, especially unauthorised entry
into or exit from Indian territory. It does not have the power to investigate or
prosecute offenders, but has to hand over those arrested and the contraband seized
from them to the local police. In practice, BSF personnel usually work in close
coordination with the police and there ought to be no clash of jurisdiction. It is possible
to argue that the expanded jurisdiction merely authorises the BSF to conduct more
searches and seizures, especially in cases in which the offenders manage to enter deep
into the country’s territory. However, it goes without saying that there ought to be
strong reasons for the expansion of the jurisdiction of any central force. In this regard,
the most relevant questions among those framed by the Supreme Court are whether
the Centre’s notification encroaches upon the State government’s domain; and what
factors ought to be taken into account while determining the “local limits of areas
adjoining the borders of India”.
TTBR (Topics To Be Read) 24 January 2024

The larger message to New Delhi from the Red

Sea (The Hindu)

The Red Sea situation will fade away, but India’s new two-front
situation, as continental and maritime challenges, cannot be wished
away

The arrival of the Indo-Pacific marked India’s great break out from the unfriendly
continental theatre, hemmed in by China and Pakistan and constrained by the vagaries
of geopolitics on most of the remaining land borders. But is this ocean of opportunity,
quite literally so, steadily becoming yet another theatre of conflict, competition and
containment?
The Houthi terror attacks on MV Chem Pluto, an oil and chemical tanker, on its way to
the New Mangalore port from the Al Jubail port in Saudi Arabia, and MV Sai Baba, a
Gabon-owned, Indian-flagged crude oil tanker, with predominantly Indian crew forced
India’s External Affairs Minister S. Jaishankar to rush to Tehran to persuade the
principal Houthi sponsor to help cease the attacks. India’s military response to the Red
sea situation has also been swift: the Indian Navy deployed the guided missile
destroyers, INS Mormugao, INS Kochi and INS Kolkata in the broader region.
The Houthi attack on commercial ships in the Red Sea and the fragility of order and
stability in the Indo-Pacific, a direct result of Hamas’s attack on Israel on October 7, is
also a reminder of the rough weather ahead in the Indo-Pacific in general and India’s
maritime space in particular. For India, the Houthi challenge may soon pass, given New
Delhi’s ties with Tehran. And yet, beyond the action-reaction mode, there is a larger
question we must ponder. Does India have a maritime grand strategy that goes beyond
occasional fire-fighting, naval exercises with friendly nations and a snail-pace increase
of the budget allocation for the Indian Navy? What indeed is India’s long-term vision
for the Indo-Pacific?
New Delhi for sure has made a big, and welcome, shift in its grand strategy — from its
continental obsession to maritime theatre. This is India’s opening to the world at a
TTBR (Topics To Be Read) 24 January 2024

time when its land borders are becoming increasingly testy allowing little access for
the country to trade with and transit to the rest of the world. But, New Delhi’s
maritime turn also presents a major challenge, elements of which are becoming
increasingly apparent.
A different ‘new’ two front situation
India’s new two front challenge is not Pakistan and China posing a nutcracker situation
for India, but a combination of its continental and maritime challenges.
Having an aggressive and rising China attempting to contain India on its continental
and maritime fronts is a classic two-front situation. While India has been allowing itself
to be obsessed with the Line of Control with Pakistan in the west, defending the Line
of Actual Control with China in the north, and picking needless quarrels with its
neighbours, Beijing was quietly building its empire of influence in the eastern,
southern and western oceanic planks. For decades, Beijing (by arming Pakistan)
ensured that India is boxed in in South Asia, ignoring the China challenge. By the time
New Delhi put its unresolved conflicts with Pakistan in cold storage and shifted gears
to the China challenge on the LAC, the game had already gotten bigger.
While the People’s Liberation Army keeps up the pressure on the LAC, the People’s
Liberation Army Navy (PLAN) has been increasing its presence in the Indian Ocean
Region (IOR) at an alarming rate. Consider the following. To begin with, take note of
the stupendous growth of the Chinese Navy which is perhaps the largest in the world
today: according to one account, it has “an overall battle force of over 370 ships and
submarines, including more than 140 major surface combatants”. This number is
expected to jump to 435 ships by 2030. By way of comparison, the Indian Navy today
has 132 warships.
Numbers do not lie. Nor do China’s intentions.
Take a look at China’s push for overseas military bases. Beijing today has a military
base in Djibouti. Growing Chinese activities in Pakistan’s Gwadar and Sri Lanka’s
Hambantota should worry Indian strategists, even if they are not yet military bases. In
Myanmar, the Kyaukpyu port which China is constructing will enable PLAN to inch
closer to the Indian Navy in the Bay of Bengal — a maritime space India hereto enjoyed
unrivalled. Beijing is reportedly expanding an artificial island in Maldives and the
China-Maldives strategic partnership is bound to increase due to tensions between
Male and New Delhi. One had the visit of the anti-India Maldivian President to China
recently. China is also exploring strategic investment options in the Seychelles, and is
also building a naval base in Ream, Cambodia. The small Indian Ocean island nation of
Comoros is the latest to join China’s fan club in the Indo-Pacific.
TTBR (Topics To Be Read) 24 January 2024

The emerging picture is this: from the Horn of Africa (Djibouti) to Myanmar, Sri Lanka,
the Seychelles, the Maldives in the Indian Ocean to Gwadar in the Arabian Sea, China’s
actions will amount to a containment of India in the Indo-Pacific. Read these
developments alongside China’s expanding outreach to the global South, its port
building efforts around the world, and strengthening of relations with West Asia and
Africa.
Two things stand out. First, India’s assessment about China’s strategy to contain India
in the continental space in South Asia is not a misplaced one, but is definitely an
insufficient one. China is parallelly attempting to contain India in the larger maritime
theatre as well.
Second, Beijing’s attempt is to influence, among others, those spaces and countries
that India has historically engaged with. While the IOR was India’s traditional sphere
of influence until the Chinese came in with goodies, the far-off regions such as Africa
had historical, cultural and political links with India. In that sense, it appears to be a
zero sum game — China’s gain is India’s loss.
Utilising global attention
So what should India do? To begin with, India should use the growing global attention
on the Indo-Pacific which is easily the most consequential geopolitical construct of our
times. The good news is that the Indian Ocean is too important for the rest of the world
to let China take over. If China poses a challenge to India’s regional security and
interests in the broader IOR, it also poses a challenge to the commercial and security
interests of the United States and its allies.
Every major country is today interested in the Indo-Pacific and its future trajectory as
is India, which provides an opportunity for New Delhi to make coalitions with like-
minded countries especially at a time Beijing has little great power backing in the
maritime theatre. Second, India cannot balance against the growing Chinese power in
the Indian Ocean all by itself. India occupies a pivotal location in the Indo-Pacific
moment just as it is the heart of the Chinese attempts to create an empire of influence.
Creating, and enhancing, partnerships with like-minded countries is perhaps an
important way forward.
Even more importantly, perhaps, New Delhi must invest in a cohesive and well
thought-out Indo-Pacific strategy that goes beyond noble intentions and nobler
declarations. While Quad and Malabar are useful initiatives, they are at best a modest
response to a grand futuristic challenge that is unfolding quickly. For sure, New Delhi
already has several pieces of what could constitute the elements of a maritime grand
strategy, but they need to be put together in a purposeful and cohesive manner.
TTBR (Topics To Be Read) 24 January 2024

The Red Sea situation will fade away eventually, but India’s new two-front situation
will become more and more apparent in the years to come. In that sense, New Delhi’s
decision not to join the U.S.-led ‘Operation Prosperity Guardian’ may have been the
right choice for now, but in the longer run, its ability to meet the China challenge
without being part of collective efforts would be limited.
Happymon Jacob teaches at the Jawaharlal Nehru University, New Delhi, and is the
founder of the Council for Strategic and Defense Research

The rise of CAT bonds (Finshots)

In today’s Finshots, we explain Catastrophe bonds and why their market

has been on an overwhelming rise.

The Story
In 1992, a deadly hurricane devastated parts of the United States. Nearly $30 billion
vanished in a day — stores, jobs and lives had been lost. And entire cities had to be
rebuilt.
But it also hurt another set of entities — insurance companies!
These folks were liable to pay for a large portion of the damages. And 8 insurance
companies went bankrupt because of the unprecedented compensation
requirements.
And this got other insurance firms thinking about how such incidents could completely
devastate them. They needed to find a way to protect themselves. So in 1997, a novel
idea was born — Catastrophe bonds.
Here’s how this worked. Imagine that an insurance company has committed to
insuring property worth $100 million. But when a storm strikes you don’t know how
TTBR (Topics To Be Read) 24 January 2024

much damage it will create. It could exhaust all of the insurance company’s resources.
So it issues bonds worth $50 million to make up for this uncertainty. Yup, a bond which
people like you and me can buy. And one which pays out interest.
But unlike other bonds, CAT bonds came with one tiny difference.
Typically at the end of the tenure of the bond, you’d expect to get paid back the money
you invested. And it would be pretty much the same in the case of a CAT bond too.
Unless disaster struck — say if there was an earthquake that registered over a
predetermined level or the losses from a flood exceeded a certain monetary value. In
that case, the insurance company can use all the money it raised via the bonds to meet
the claims from the disaster. They wouldn’t have to pay a penny back to the investors
in the bonds.
But why on earth would anyone invest in such a bond, you wonder?
Well, to make up for the risk of such a scenario, CAT bonds do offer a higher interest
rate than regular bonds And investors who are also betting on this will be hoping and
praying that Mother Nature stays kind to them.
In this manner, insurance companies protect themselves. And investors make a bit of
extra money if everything goes well.
Now initially, it took some time for the markets to warm up to this idea. Between 1997
and 2005, CAT bond issuance only averaged $1.2 billion annually. But then, another
massive hurricane struck the US in 2005 — one that resulted in damages of a whopping
$62 billion in insured losses. And insurance companies realised they couldn’t sit back
and get hammered anymore. CAT bond issuances soared through the roof in the next
couple of years.
But why are we talking about them now, you ask?
Well, a couple of days ago, Bloomberg pointed out that 2023 was an exceptional year
for CAT bonds in the US. While regular bonds delivered returns of roughly 5%; hedge
funds returned 8% on average; and an index made up of these catastrophe bonds was
up by nearly 20%!
Now hold on…
We know that climate change is only getting more and more intense. We keep seeing
reports of wildfires, floods, earthquakes and a whole host of other disasters in the
news all the time. Heck, 2023 was the hottest year on record. So we’re potentially
looking at even more problems in the future.
TTBR (Topics To Be Read) 24 January 2024

And it makes sense why insurers would rush to issue a record-high of $16.4 billion
worth of CAT bonds in such an environment. They know the risks are multiplying and
they need protection now more than ever. So they’re in a hurry to cover their losses.
But the real question is — shouldn’t all this make investors more wary? Shouldn’t they
be worried about losing all their money?
Well, this wariness might have actually contributed to the high returns in 2023.
For starters, investors worried about what disasters lay in wait and they didn’t think
getting a 2-3% higher return than a regular government bond justified the risks. So last
year, they forced insurance companies to open up their purses and pay a premium of
over 10%! They knew insurance companies didn’t have too many alternatives and
ensured they squeezed the firms as much as they could. And luckily for the investors,
2023 was quite a light year for hurricanes in the US. So it didn’t trigger big payouts
either.
Also, the yields (interest payouts) on many CAT bonds are linked to what the US
Federal Reserve does with interest rates. Think of it as a ‘floating’ rate. If the central
bank hikes interest rates — which they did last year — it triggers a higher payout for
CAT bonds too.
But there’s one more thing for investors. Just because disaster strikes, it doesn’t mean
it’s all over for CAT bonds. For instance, as an earlier Bloomberg report highlighted:
Hurricane Harvey hit Texas [in 2017] and was the second costliest storm in U.S. history
— however — there were no losses for catastrophe bonds other than the initial mark-
to-market impact of the storm. … Part of the reason that investors are willing to take
on these risks is that the bonds insure for very specific events. A bond may only cover
wind damage for a Carolina Hurricane, but not flooding.
So yeah, all these specific clauses mean that at the end of the day, it’s often the
investors who’re laughing all the way to the bank while insurers are still left holding
the bag.
Will the bull run for CAT bonds continue in 2024 or will it fizzle out? We’ll have to wait
and see.
TTBR (Topics To Be Read) 24 January 2024

AI is not all that ‘green’ (Business Line)

AI is seen as a key element in green transition. But its power needs and
e-waste generation are worrying

In the just-concluded World Economic Forum’s yearly gabfest of business, political,

and other elites in the Alpine snows of Davos, Switzerland, conflict, climate change,
and AI got top billing.
In this context, it might be worthwhile to assess the green dilemma of AI as well. At
the COP28 summit in Dubai, the world’s first AI minister, Omar Sultan Al Olama, stated
that AI is the “only solution” for meeting the 1.5 degree target because it can “crunch
incredible amounts of data.”
However, he issued a warning, that AI would increase emissions because it uses a huge
amount of power. That’s a classic climate-AI conundrum, and a new doomer narrative
about AI is brewing.
Eco quandary
AI seems to play a dual role in the environment and climate. It emerges as a crucial
tool in addressing environmental challenges, developing low-emission infrastructure,
modelling climate change predictions, and guiding us towards a sustainable future,
making it a key player for environmental sustainability. AI has the potential to improve
energy efficiency, create smarter energy grids, minimise waste, and foster innovation.
Take a few examples. Google’s AI-driven strategy for data centre cooling has reduced
energy use by approximately 40 per cent, which is equivalent to removing 64,000 cars
from the road annually. Tesla’s electric cars have AI-driven autonomous driving
technologies, which boost fuel economy and cut pollution.
AI is included in GE Renewable Energy’s wind turbines to improve their efficiency.
Waste Robotics sorts and separates recyclable materials from waste streams using AI-
driven robots, increasing recycling efficiency and decreasing landfill waste.
TTBR (Topics To Be Read) 24 January 2024

The Ocean Cleanup attempts to clean up marine environments by tracking and

collecting plastic debris in the ocean using AI-powered technologies.
According to a McKinsey estimate, manufacturing with AI improvements might cut
greenhouse gas emissions by 10-20 per cent. By analysing soil data, forecasting crop
yields, and spotting pest and disease outbreaks, AI can support sustainable agricultural
practices as well.
However, AI’s impacts on the environment include possible destruction of ecosystems,
electronic waste, and carbon emissions.
In a much-cited 2019 study, researchers at the University of Massachusetts, Amherst,
conducted a life cycle assessment for training multiple popular big AI models.
It was seen that the process of training a single machine can release about 626,000
pounds of carbon dioxide, which is roughly five times the emissions of an ordinary
American car during its lifetime (including during manufacture).
This is also the equivalent of over 300 round-trip flights between New York and San
Francisco. That was the GPT-2 era, then. And, in contrast, we’re now entering the GPT-
5 era.
Technology has been developing far too quickly; its carbon footprint also does. The
amount of energy required to train and execute improved AI models increases
dramatically with the complexity of the datasets and algorithms.
Power needs
How much power would be needed for the development, training, and execution of
AI? Just to give you an idea, NVIDIA’s new AI servers would use more energy than
countries like Sweden and Argentina by 2027, with an annual consumption of around
85.4 terawatt-hours.
Then, there’s the concern about AI-generated e-waste. Recall the 2001 Steven
Spielberg movie, A.I. Artificial Intelligence. In the 22nd century setting of the movie,
David, a childlike Mecha humanoid robot, was abandoned in the woods, which were
full of scrap metal and obsolete Mecha.
Well, we don’t have to wait until the 22nd century. AI-generated e-waste is already
posing a significant environmental threat. Dangerous substances like lead, mercury,
and cadmium are found in e-waste that can contaminate soil and water supplies and
harm the environment as well as human health.
The UN Global E-waste Monitor report projects that by 2030, e-waste will reach about
75 million tonnes.
TTBR (Topics To Be Read) 24 January 2024

The impact of AI on natural ecosystems is also alarming. An excessive amount of

pesticides and fertilisers could be used as a result of the growing usage of AI in
agriculture, damaging the land and water and destroying biodiversity.
In order to “develop AI that is reliable and safe and that can... supercharge climate
action,” UN Secretary-General António Guterres issued a plea. It’s definitely not going
to be easy to solve. It’s also obvious that significant funding will be needed to make
data and electricity more environmentally friendly.
While we continue to discuss the issue further in COP29, COP30, etc., the horizon of
AI will be expended exponentially, for sure. And AI’s carbon footprint would also grow
alarmingly. AI’s green dilemma would persist.
The writer ATANU BISWAS is Professor of Statistics, Indian Statistical Institute,
Kolkata

Retail credit not a worry, but needs monitoring

(Business Line)

Lenders must differentially price their retail loans so that individuals

who display healthy savings behaviour and positive net worth get loans
at better terms than those who don’t

Recent Reserve Bank of India data shows Indian households adding financial liabilities
at a faster clip than financial assets. The credit-driven spending spree has been
propping up private consumption and GDP growth. Indian banks owe their recent
profit improvements to the retail credit boom. All this is perhaps why RBI researchers
decided to take a deep-dive to analyse if retail credit is over-heating and flowing to
the wrong kinds of borrowers, in the latest Bulletin.
TTBR (Topics To Be Read) 24 January 2024

The paper, in fact, finds that the expansion in retail loans in recent years is not
abnormal. The 16.1 per cent growth in banks’ retail books in the last 12 years is much
lower than the scorching 26.4 per cent growth in the previous 12-year block. Banks’
retail books are well-diversified. Home loans now make up less than half of retail
credit, while unsecured credit card, durable and other loans make up nearly 35 per
cent. A breakdown of trends into pre- and post-Covid periods, shows a distinct spike
in personal loans, durable and vehicle loans after the pandemic, even as home loan
growth has dipped. But as the increase in unsecured lending has gone hand-in-hand
with strict credit scoring and low delinquencies, it concludes that banks are not on a
shaky wicket in chasing the retail borrower.
While the paper suggests that all is well with retail credit, there are some loose ends.
For one, the shift in retail loans away from home loans towards personal, durable and
vehicle loans, suggests that consumers are increasingly willing to borrow not to create
assets, but to meet the gap between their current income and lifestyle aspirations.
The rise of this consumer credit culture could lead to over-stretched household
balance sheets. This needs closer monitoring, but household savings data in India is
currently reported with a year’s lag. Two, RBI actions show that it is more concerned
about NBFCs’ retail lending than banks’, but it has not attempted a deep dive into the
former. If lack of data is the issue, it should perhaps get more granular disclosures from
NBFCs and credit scoring agencies, to repeat this analysis for non-banks. The paper
makes a passing suggestion that policymakers and lenders need to use technology to
come up with more holistic measures — such as debt-service ratio and debt-to-income
ratio — to assess retail borrowers.
This is an excellent suggestion as lenders today rely on blunt instruments such as loan-
to-value, multiple of annual income and credit scores to make lending decisions. In
fact, with the recent advent of account aggregator services which enable consolidation
of an individual’s assets and liabilities at the PAN level, both lenders and retail
borrowers can be nudged to periodically access personal balance sheets. Lenders must
differentially price their retail loans so that individuals who display healthy savings
behaviour and positive net worth get loans at better terms than those who don’t.