BIDEN'S TWO-PART STRATEGY IN WEST ASIA
Introduction
At the G-20 summit in New Delhi, President Joe Biden unveiled a U.S.-backed infrastructure project aimed at connecting India, West Asia, and Europe through various means of transportation and communication.
Simultaneously, the U.S. pursued a normalization agreement between Saudi Arabia and Israel. These developments, seemingly unrelated, shed light on Biden’s approach to West Asia, a region where the U.S. faces evolving challenges.
Two-Part Policy
- Strengthening Regional Alliances
- Biden’s strategy continues the Trump-era approach of bringing together two key U.S. allies in West Asia: the Gulf Arab states and Israel. The Abraham Accords laid the foundation for this transformation.
- A central objective is to facilitate a deal between Israel and Saudi Arabia, which would further consolidate Arab-Israeli ties, ultimately bolstering U.S. influence in the region without additional military commitments.
- Reinforcing Commitment
- Biden’s administration aims to reassure allies that the U.S. remains engaged in West Asia. The I2U2 minilateral, comprising India, Israel, the U.S., and the UAE, is part of this effort to enhance economic integration and offer solutions to global challenges.
- The India-Middle East-Europe Corridor, announced at the G-20 summit, exemplifies this approach, seeking to strengthen economic ties between India, the Gulf, Jordan, Israel, and Europe.
Changing Priorities and Challenges
- The U.S. has deprioritized West Asia in terms of security commitments due to increased focus on Eastern Europe and East Asia.
- China’s growing interest in West Asia, particularly as a major oil consumer and peacemaker, poses a challenge for the U.S. It cannot afford to completely exit the region, as China could fill the resulting vacuum.
India’s Role in the New West Asia
- India’s role in the U.S.-China competition in West Asia presents new opportunities for engagement.
- India should diversify its engagement strategies, building on its historical ties and connectivity projects like the International North-South Transport Corridor.
- Maintaining a multi-engagement approach and avoiding alignment with any single great power is crucial for India’s role in West Asia.
Challenges Ahead
- Despite the potential for a Saudi-Israeli deal, challenges persist, including the region’s increasing autonomy in foreign policies and efforts to avoid being client states.
- The U.S.’s continued view of Iran as a hostile power and the Iran-Israel rivalry remain central geopolitical issues.
- India must navigate these challenges carefully and strive to play a significant geopolitical role in West Asia without being overly influenced by external powers.
Conclusion
President Biden’s West Asia strategy comprises strengthening regional alliances and reinforcing the U.S. commitment to the region while addressing evolving challenges. India stands to benefit from these developments but should pursue a diversified and multi-engagement approach to assert its role in West Asia’s evolving geopolitical landscape.
Intorduction:
The Indian litigation system is increasingly turning towards Alternative Dispute Resolution (ADR) methods to address the delays and rising costs associated with court proceedings.
While arbitration and conciliation have been the primary focus in the past, mediation is now gaining recognition.
The recent passing of The Mediation Bill, 2023, which will become the Mediation Act, 2023, underscores the importance of mediation in India’s legal landscape.
Mandatory Pre-litigation Mediation:
- The Mediation Act, 2023, will obligate disputing parties to attempt pre-litigation mediation before approaching Indian courts, irrespective of any prior mediation agreements.
- This requirement aims to reduce frivolous claims and preserve confidentiality in dispute resolution.
- However, concerns arise about the feasibility of mediation under an obligation, potentially empowering a reluctant defendant to delay a genuine claim.
- The Act addresses these concerns by emphasizing neutrality, expertise, and efficiency in the mediation process and allowing parties to seek urgent court relief in exceptional circumstances.
Balanced Framework:
The Act aims to strike a balance that encourages parties to focus on commercial dealings rather than disputes. It promotes expertise and efficiency while ensuring that pre-litigation mediation is not weaponized.
Mediation and Arbitration Parallels:
- The Act positions mediation in a manner similar to commercial arbitration in India.
- Both forms of dispute resolution have supporting legislation with stringent timelines, confidentiality mandates, court referral obligations, default mechanisms for appointing mediators/arbitrators, and procedures for terminating mandates.
- Additionally, both ensure the enforceability of mediated settlement agreements and arbitral awards, respectively.
- The Act also establishes a Mediation Council of India, akin to the proposed Arbitration Council of India, aligning mediation and commercial arbitration.
Reducing Court Dependency:
- The Indian Parliament’s message to the business sector is clear: courts should not be the default venue for commercial dispute resolution.
- Parties are encouraged to resolve disputes amicably through mediation or commercial arbitration, with court access viewed as a last resort.
- This approach aims to reduce the burden on Indian courts.
Institutional Mediation:
- The Act emphasizes institutional mediation, introducing the concept of “mediation service providers” responsible for offering mediation services, facilities, secretarial assistance, and infrastructure for efficient mediation processes.
- These providers are comparable to arbitration institutions in India. Established arbitration institutions are expected to play a significant role in India’s mediation landscape, contributing to the country’s reputation as a global hub for various forms of commercial dispute resolution.
Conclusion
The Mediation Act, 2023, signals a shift towards mediation as a preferred method for resolving commercial disputes in India, in line with international best practices.
It aligns mediation and arbitration, emphasizes the importance of institutional mediation, and aims to alleviate the burden on the Indian court system while promoting efficiency and expertise in dispute resolution.
INDIA'S INCLUSION IN JP MORGAN'S GBI-EM INDEX: IMPLICATIONS AND CHALLENGES
Introduction:
- India’s economic rise and attractiveness as an investment destination have led to its inclusion in JP Morgan’s Government Bond Index-Emerging Markets (GBI-EM) index.
- This inclusion, set to begin in June 2024, is a result of extensive government efforts and regulatory preparations spanning nearly a decade. It involves a gradual increase in India’s index weighting, with the country expected to reach a maximum weighting of 10 percent.
- This decision will make nearly two dozen Indian government bonds, with a combined notional value of $330 billion, eligible for investment.
Expected Inflows and Significance:
- Total capital inflows into India could reach $45-50 billion over the next 12-15 months as a result of its inclusion in the GBI-EM index.
- This represents a significant increase compared to the approximately $40 billion of bond inflows India received over the last decade.
- The actual annual inflows, however, will depend on macroeconomic dynamics and the momentum of active and passive investments.
Potential Inclusion in Other Indices:
- While India’s inclusion in the GBI-EM index is a positive development, it does not automatically guarantee inclusion in other prominent global bond indices like the FTSE EM Index and the Bloomberg Barclays EM bond index.
- These indices have stricter procedural requirements and conditions, including resolving operational challenges such as custody and settlement issues, tax clarity, and Euroclear integration.
- Nevertheless, inclusion in the GBI-EM index is likely to boost India’s attractiveness to investors, potentially paving the way for inclusion in other indices.
Impact on India’s Economy:
- Reduced Vulnerability to Global Capital Fluctuations: India, as a significant importer of global capital, is susceptible to fluctuations in global capital markets and U.S. interest rates. Inclusion in global bond indices can help stabilize India’s economic and business cycles.
- Easing of Twin Deficits: Inclusion will provide an alternative source of funding, helping alleviate India’s fiscal and current account deficits. This will lower India’s risk profile, reduce the cost of funding, and enhance bond market liquidity.
- Benefit to Corporates: The entire yield curve moving lower will decrease the cost of financing for corporations over time, narrowing corporate bond spreads and fostering positive sentiment and investment flows.
- Relief for Commercial Banks: Reduced pressure on commercial banks to absorb government bonds will free up their balance sheets, enabling increased lending to the private sector.
- Infrastructure Development: Bond inclusion provides a long-term sustainable source of financing for India’s infrastructure development, critical for achieving manufacturing-led growth goals.
Challenges and Considerations:
- Macroeconomic Scenario: India’s fiscal responsibility and government finances will face increased scrutiny following its entry into the bond index. Rising crude oil prices and the need for fiscal restraint pose challenges.
- Macro Risks and External Shocks: Reliance on foreign funds for domestic deficits exposes India to macroeconomic risks, as witnessed during previous global financial crises and taper tantrum episodes.
- Volatility and Passive Flows: Inclusion links Indian debt markets to the volatility of passive flows dictated by the index provider, potentially introducing greater market volatility.
- Operational Hurdles: Addressing operational challenges such as clearing and settling Indian debt on international platforms like Euroclear, repatriating funds, and addressing tax complexities will be essential for smooth integration into global markets.
Conclusion:
India’s inclusion in JP Morgan’s GBI-EM index signifies a significant step towards becoming a global economic powerhouse and attracting substantial capital inflows.
While it presents numerous benefits, India must address macroeconomic challenges, operational hurdles, and fiscal responsibility to ensure long-term stability and sustainable economic growth.
Over time, continued reforms, improved market access, and transparency will facilitate India’s integration into global markets and foster innovation in financial products, heralding a new era of market development.
