• Current Affairs, 23 May 2020



    India-Nepal Border issue

    Context: The inauguration of a road from Dharchula to Lipu Lekh (China border) by India’s Defence Minister over videoconferencing on May 8th 2020. This has now been followed by Nepal’s charge claiming that the stretch passes though Nepalese territory.

    Did You Know?

    • The Lipulekh Pass links Uttarakhand with China’s Tibetan Autonomous Region.
    • The pass is near the tri-junction of India, Nepal and China

    Significance of the route:

    • The conversion of the trekking route to a metalled road is a boon to both pilgrims and traders.
    • At present, the travel to Kailash Mansarovar takes around two to three weeks through Sikkim or Nepal routes.
    • Lipulekh route had a trek of 90 Km through high altitude terrain and the elderly yartris faced lot of difficulties.
    • Now, this yatra will get completed by vehicles.
    • Additionally, this road follows the traditional pilgrim route for the Kailash-Mansarovar yatra.

    The Sugauli Treaty

    • The Nepalese kingdom had stretched from the Sutlej river in the west to the Teesta river in the East.
    • However, Nepal lost the Anglo-Nepalese War and the resulting Treaty of Sugauli, 1816 limited Nepal to its present territories.
    • The Sugauli Treaty stated that Nepal ceded to British the whole of the lowlands between the Rivers Kali and Rapti.
    • The Survey of India maps since the 1870s showed the area of Lipu Lekh down to Kalapani as part of British India.
    • Both the Rana rulers of Nepal and the Nepalese Kings accepted the boundary and did not raise any objection with the government of India after India’s Independence

    What is the present controversy?

    • The present controversy has arisen since the Nepalese contest that the tributary that joins the Mahakali river at Kalapani is not the Kali river.
    • Therefore, Nepal now contends that the Kali river lies further west to the Lipu Lekh pass and claims both Kalapani & Susta belong to Nepal
    • By 2007, the Nepal-India Technical Level Joint Boundary Working Group agreed on 182 strip maps covering almost 98% of the boundary, except the two disputed areas of Kalapani and Susta. 

    Nepal’s reaction has been unusually aggressive towards India

    • Force Deployment:Nepal has deployed its armed police close to Kalapani. The timing and the manner in which it was deployed has raised concerns in New Delhi
    • India’s passive presence:The Indo-Tibetan Border Police is also located in Kalapani since it is close to the India-China border. Indian forces are not there because of Nepal.
    • New Nepalese Maps:Nepal’s actions of authorising a new map extending its territory across an area sensitive for India’s defence, has further complicated the situation
    • Political Opportunism:The controversy has given Nepal’s Prime Minister K.P. Sharma Oli an opportunity to divert attention about criticism of his own government’s shortcomings
    • China’s Politics:Nepal at the behest of China has objected to India’s initiative as China is bound to benefit by deteriorating India-Nepal relations

    Way Ahead

    • The approval of the strip maps by the respective governments (that of the Nepalese Government is still awaited),
    • The resolution of the differences of opinion over Kalapani and Susta
    • Speeding up the erection of damaged or missing border pillars.


    Compared to what was accomplished between India and Bangladesh, the India-Nepal border issues appear more easily solvable

    Connecting the dots:

    • China’s Belt and Road Initiative & India’s Neighbourhood First Policy
    • India- Bangladesh Border (maritime & land) dispute resolution





    An insufficient relief

    Context: Union government announced a relief package of Rs 20 trillion, about 10 per cent of the country’s GDP, for the economy in crisis

    Did You Know?

    • The US has committed to the largest rescue package by any country in pure dollar terms of USD 2.7 trillion at an estimated 13% of GDP.
    • Japan has announced a package equivalent to 21.1% of its GDP totalling USD 1.1 trillion
    • Sweden – stimulus equal to 12 per cent of its GDP and Australia (10.8 per cent).
    • Germany has announced a spending of around USD 815 billion, equal to 10.7 per cent of its GDP.

    Criticism of the relief package

    1. The design of this relief package seeks to focus on the supply side, with an emphasis on providing liquidity through lines of credit
      • This is with the aim of minimising the cost to the government.
      • Even in normal circumstances, the speed of adjustment of the supply-side is slow because supply responses take time
      • Also, producers would not wish to pile up inventories of unsold goods
      • Rather it should have focused on the demand side by stepping up government expenditure
    2. Difficulties in Agricultural package implementation
      • There is relief for agriculture in the form of a concessional credit line of Rs 2 trillion, but loans are neither automatic or assured
      • Agri-marketing reforms and infrastructure creation are long-term promises.
    3. There is nothing for the corporate sector in manufacturing or services.
    4. The distressed sectors such as airlines, automobiles, hotels, restaurants, and tourism have been ignored.
    5. There is very little for public health, already in a dilapidated state.
    6. Structural difficulties of MSME sector
      • The MSME sector, the backbone of the economy that provides 25% of employment, 32% of the GDP and 45% of exports.
      • For MSMEs, lenders are not always supportive in extending loans, despite government announcement of Rs 3 trillion line of credit for loans without collateral.
      • Also, buyers (central and state governments, public sector firms and the private sector) owe MSMEs as much as Rs 5 trillion.
      • MSMEs just do not have the resources to pay wages or meet fixed costs on electricity, rent or interest during the lockdown period and relief package does not address this.
    7. There is a recycling of ideas or schemes from earlier budgets
    8. There is little cohesive focus on stabilisation and revival of the economy in the short-run
    9. Insufficient Fiscal Stimulus (government spending)
      • There are 12 estimates by analysts in financial sector institutions, suggesting that the fiscal stimulus is in the range of 0.7 to 1.3% of the GDP
      • Even then the fiscal stimulus’ contribution to domestic demand will be minuscule, given that private final consumer expenditure in India is about 60 per cent of the GDP.

    Suggestion is Extra Fiscal Stimulus

    • The extra fiscal stimulus should have been Rs 7-9 trillion (3-4 per cent of the GDP)
    • This enlarged fiscal deficit cannot be financed by market borrowing, which would simply drive up interest rates and nip recovery in the bud.
    • It would have to be financed by monetising the deficit – RBI buying government T-bills & printing money
    • The concerns about inflation and downgrade by rating agencies are often exaggerated given that the entire world is going through similar phase



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