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AUGUST 4, 2017

Is India a good neighbour?

  • There is no single yardstick to measure foreign policy successes and failures but the absence of crises is broadly viewed as a sound criterion. India’s foreign policy of late has come under sharp public scrutiny — especially the direction in which it is moving.

Frosty relations

  • On the one hand, an extremely frosty relationship with Pakistan. On the other, the relationship of stability with China built over three decades has been falling apart despite increased diplomatic engagement — not only because of Chinese mistakes but also because of the absence of innovative thinking in India to deal with its biggest neighbour.
  • Broadly speaking, Indian foreign policy relied on its deep resources of wisdom and inner strength based on a percept of it being a civilisational state, that was reflected in its international conduct. To that effect, foreign policy has been driven by peace rather than security. It gave India a global persona of benign international influence.
  • There is a marked divergence from that position. Priority to security has distorted India’s image vis-à-vis its neighbours — especially when policies are pursued through the precolonial security-centric “zero-sum” or “frontier mindset” or even from a Cold War political prism. In fact, this approach has failed to stop China’s influence in India’s neighbourhood despite the “neighbourhood-first policy”.

Getting fundamentals right

  • A better option to probe future ties would be to return to the strategic fundamentals. A good example to emulate is the top-down waterfall approach espoused by Russia and China to lower tensions between them.
  • For India to emerge as a global power of any reckoning, it has to realise that a narrow tactical pursuit devoid of strategic thinking will lead to nowhere. We need to reframe our terms of relationship with China; rethink our own posture; rescue ourselves from experiencing a delusion of grandeur and instead persevere to emerge as a confident and aspiring regional power.

Restoring Parliament’s primacy

  • In India, establishing a Parliamentary Budget Office (PBO) is a due concern. A PBO is an independent and impartial body linked directly to Parliament that provides technical and objective analysis of Budgets and public finance to the House and its committees. As ‘the guardian of the public purse’, Parliament must play a greater role in budgetary governance.
  • Its core functions include Budget approval, scrutiny of its implementation, and holding the government to account. However, Parliament lacks the capability to perform such functions effectively. The result is often an arbitrary taxation policy, burgeoning fiscal deficit, and an inequitable allocation of public resources.

Greater budgetary oversight

  • Multiple indicators suggest that executive-led budgetary governance has not been successful in India. The unequal distribution of public resources is a prevalent issue. Despite high economic growth, India suffers from inexcusable income inequality, poverty, unemployment, malnourished children, preventable diseases, systemic corruption, and underinvestment in key social services such as health and education.

Role of a PBO

  • The majority of PBOs have four core functions: independent and objective economic forecasts; baseline estimate survey; analysing the executive’s Budget proposal; and providing medium- to long-term analysis. Costing is standard practice for many PBOs. Budgets generally start with an economic forecast.
  • A PBO can present either its own independent forecast or it can validate the government’s, providing an objective analysis on the official forecast.
  • A PBO can perform other tasks depending on its mandate, resources and requirements of parliamentarians or committees. These may include general economic analysis, tax analysis, long-term analysis, options for spending cuts, outlining a budgetary framework that reflects priorities of the nation, bespoke policy briefs.

Onus on parliamentarians

  • Parliamentary scrutiny of public finance is an important aspect of governmental accountability. There is a legitimate democratic need in this country to strengthen the capacity of Parliament and its members.
  • An unprecedented change has taken place in the way citizens view the government’s stewardship of taxpayer resources. This demands a consideration of global standards and best practices to promote financial and budgetary transparency.
  • Parliamentarians have a role in establishing the PBO. As representatives of the people, they can help improve Budget policies by providing inputs on public needs and priorities.
  • Similarly, a PBO can ensure that parliamentarians are well-informed to perform their budgetary and oversight functions effectively.
  • A PBO in Parliament will have a positive impact on the House’s ability to carry out budgetary oversight and fiscal decision-making.

Big Mac index

  • This is an index used to compare the price of a good across countries.
  • The law of one price states that the price of a good sold internationally should converge as entrepreneurs try to profit from any price discrepancy.
  • The purpose of the Big Mac index, which compares the price of the Big Mac burger across countries, is to establish the purchasing power parity between currencies. It has been published by the British magazine The Economist since 1986.
  • One drawback of the Big Mac index is that goods that look physically similar to each other may not necessarily be similar in their economic nature.