Mains Q & A 25 January 2023

Q1. Explain the relevance of India’s efforts to shape the strategic and military dynamics of the Indian Ocean region while discussing the strategic significance of Indian Ocean islands and the challenges they face. (250 words)

Paper & Topic: GS II International Relations

Model Answer:

Introduction:

As global power dynamics change from west to east, regional powers, especially China and India, have altered their geo-strategies and foreign relations focus to an ocean-based strategy.

The Indian Ocean Region (IOR) is becoming increasingly important to the global order in general and the Indian subcontinent in particular.

The security of India’s national interests depends on a secure IOR.

Body:

The following are the main reasons for the increasing importance of Indian Ocean islands:

Their strategic location, which is critical for building a regional naval presence, as well as their proximity to sea lines of communication (SLOCs), which makes patrolling in the region easier in both peace and war.

The presence of these big countries in the Indian Ocean region, in the form of naval bases, trade, and infrastructure development aid, legitimises their status as security providers, allowing them to exert more influence in the region.

Islands in the Indian Ocean are strategically placed near vital transit routes, giving them access to and control over key chokepoints and waterways, and so their key geographies have the potential to affect geopolitical competition.

To the west of India, the islands of Socotra (Yemen), Madagascar, Mauritius, and the Seychelles, which lie at the crossroads of Europe, Africa, and South Asia, have gained strategic importance.

While Socotra is strategically placed at the mouth of the Gulf of Aden, which connects the Suez Canal to the Indian Ocean, Madagascar, Mauritius, the Maldives, and the Seychelles have maritime zones spanning over one million square kilometres, giving them more rights in ocean waters.

Challenges:

India faces a challenge from China’s fast rising presence in the northern Indian Ocean, as well as the deployment of Chinese submarines and ships in the area.

Traditional risks include belligerent nations’ military presence and the resulting strategic rivalry, as well as terrorism, piracy, and illegal smuggling; non-traditional threats include climate change’s challenges, such as rising natural disasters and the loss of traditional livelihoods.

As a result, tight cooperation between these island nations and bigger coastal countries becomes a practical requirement, and it is important to the region’s stability.

India’s efforts are significant:

As part of strengthening its marine engagement, India has increased its cooperation with Indian Ocean littoral states and maritime neighbours.

The Navy conducts Joint Exclusive Economic Zone (EEZ) surveillance with the Maldives, Seychelles, and Mauritius, as well as Coordinated Patrols (CORPAT) with Bangladesh, Myanmar, Thailand, and Indonesia, as part of the ‘Neighbourhood First’ policy.

Search and rescue, as well as capability building, have emerged as important topics.

In addition to escorting Indian flagged vessels, other countries’ ships have also been protected.

India’s Indian Ocean policy, enshrined in “SAGAR – Security and Growth for All in the Region,” articulates the country’s vision for constructing a secure regional architecture, which includes “safeguarding mainland and islands, strengthening maritime neighbours’ capacities, and advancing peace and security” in the Indian Ocean Region.

For a country like India, the Indian Ocean’s island states have enormous strategic relevance in shaping the region’s geopolitical contours and guaranteeing maritime security and order.

The Indian islands of Andaman and Nicobar, as well as Lakshadweep, have aided the country in improving its maritime capabilities tremendously.

This allows India to keep a close eye on military and economic activity in and around the Strait of Malacca, as well as the western Pacific countries’ maritime entrance point into the Indian Ocean.

The Indian Navy has helped the islands of Mauritius, the Maldives, and the Seychelles chart ocean waters in order to secure marine security.

India has also spearheaded the Indian Ocean Naval Symposium (IONS), which aims to strengthen maritime security through naval cooperation among its 35 members, and the Indian Ocean Rim Association (IORA), which brings together 21 countries to work on security, governance, blue economy promotion, and cultural tourism.

The inclusion of the Comoros, Seychelles, Mauritius, and Madagascar in these multilateral forums demonstrates India’s attempts to foster security and development by incorporating all players, regardless of their economic or naval capabilities.

Conclusion:

India has charted the path to becoming a “influential” and “responsible” leader in the Indian Ocean region, echoing Alfred Mahan’s comments that “whoever attains control of the Indian Ocean, will dominate Asia.”

Q2. It is imperative that the best of what digital currencies have to offer be integrated into the existing financial paradigm. Explain. (250 words)

Paper & Topic: GS III Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. Science and Technology- developments and their applications and effects in everyday life.

Model Answer:

Introduction:

Cryptocurrencies are digital currencies that operate independently of a central bank and employ encryption techniques to govern the production of units of money and verify the transfer of funds.

It is built on the blockchain platform.

Anurag Thakur, the Union minister, stated that the government is willing to analyse and investigate emerging technologies, such as cryptocurrencies, in order to improve governance.

Body:

In India, cryptocurrencies are gaining popularity.

In 2018, the Reserve Bank of India (RBI) outlawed banks and companies regulated by it from providing virtual currency (VC) services.

The Indian cryptocurrency sector has been decimated since the prohibition took effect in April 2018.

This provision was declared illegal by the Supreme Court.

The central government is expected to consider a new bill titled Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which has not yet been approved.

The Bill also aims to outlaw all private cryptocurrencies in India, with few exceptions to encourage cryptocurrency’s underlying technology, such as blockchain, and its applications.

Concerns about digital currency include the following:

Cryptocurrencies are feared not only for their speculative potential, but also for their potential to destabilise sovereign currencies (the latter is an exaggerated apprehension).

This might cause market instability, and if banks start trading crypto currencies, the problem of fraud could become more prevalent.

Virtual currency is traded anonymously via the Internet and is utilised for a variety of anti-national and illegal activities, including terror financing, illicit arms and drug trafficking, and so on.

This is a serious concern to India, as there have been reports of drug trafficking utilising bitcoins on the dark web in Punjab.

The online use of this currency was without any geographical or border limits, putting the nation’s integrity and sovereignty in jeopardy.

It has the potential to drastically alter global monetary policymaking. People will trade their national currencies for the new digital coin, which will be used to buy and sell the various things that will be valued in it. This will have a negative impact on bank profits and put stress on their balance sheets.

The ability of governments and policymakers to manage inflation will be harmed. When inflation rises, central banks usually take actions to limit it by adjusting monetary rates. Because cryptocurrency will be independent of the central bank, liquidity will be a problem.

Regulation of digital currencies is urgently required:

A prohibition on something based on distributed ledger technology cannot be applied for all practical purposes, hence smart regulation is preferable.

Even in China, where cryptocurrencies are banned and the Internet is censored, cryptocurrency trade is minimal but not non-existent, according to a report by an India inter-ministerial committee. Japan, for example, has regulated the usage of bitcoin.

The SC Garg committee advocated for the creation of an official digital currency as well as the promotion of the blockchain technology that underpins it. Other cryptocurrencies, on the other hand, were not banned.

Regulation must take place at the point of exchange, where it is most easily observed.

The Supreme Court ruled that the government’s outright prohibition on virtual currency would be unfair when there are several less intrusive options.

It’s important to note that virtual currency transactions aren’t completely unregulated.

Several current laws, including the Consumer Protection Act, the Information Technology Act, the Foreign Exchange Management Act, and the PMLA, as well as tax, deposit-related, and criminal regulations, apply to virtual currencies in the same way that they do to any other economic activity.

In fact, errant persons and businesses operating in the virtual currency sphere have already been prosecuted in India under many of these laws.

The government should reject the notion of a ban and instead advocate for reasonable regulation.

Conclusion:

Instead of imposing bans, it would be more practical to launch public awareness campaigns to alert investors to specific risks and to monitor trades for fraud and scams. The fintech industry and the RBI must collaborate to develop a positive policy framework for cryptocurrencies in India.