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01 Jul, 2020

13 Min Read

Proxy war-New Cold War

GS-I : World History Cold war

Proxy war-New Cold War

Part of: GS-I- Contemporary World History (PT-MAINS-PERSONALITY TEST)

China is soon to become the largest economy in the world. It’s growth is based on technology, innovation and trade, which sought to balance U.S. military superiority, and has fueled the strategic rivalry between the two countries.

The rising tensions between the US and China have prompted many experts to warn of a new Cold War akin to the Cold War between the US and USSR.

In 2017, the US National Security Strategy called China as “a revisionist power” seeking “to erode American security and prosperity” and “shape a world antithetical to U.S. values and interests”. Also, China has been proactive in undermining the US hegemony on multiple fronts.

COVID-19 pandemic has further aggravated the deterioration of ties between the two countries. Thus, this new Cold War between China and the United States is a major geopolitical risk of the 21st century.

Events Signalling a New Cold War

  • China has come out with alternative governance mechanisms to the U.S.-dominated International Monetary Fund, World Bank and World Trade Organization with its all-encompassing Belt and Road Initiative and institutions like the Asia infrastructure investment bank, contingency reserve agreement (CRA) of New Development Bank.
  • For several decades, China’s breakneck development under the relatively enlightened authoritarianism of Deng Xiaoping and his successors was seen positively in the United States. However, under Xi Jinping, China has evolved from a soft to a hard authoritarian. There is now a president-for-life with a budding personality cult.
  • In order to contain rising China’s assertiveness, the US under its ‘pivot to Asia policy’ has launched a quad initiative, Indo pacific narrative. Most recently, the US proposed to expand G7 to G-11 without including China in it.
  • China’s incremental “salami slicing” tactics in the South China Sea, first by land reclamation and then constructing artificial islands for extending extra-territorial claim, has seen sharp criticism from the US and its allies. It is similar to the way dominance over the Caribbean enabled the United States to strategically control the Atlantic Ocean and thus, affect the balance of forces in the two world wars and a cold war.
  • From Trade war to tensions over 5G telecommunications to currency wars, the US-China confrontation is on multiple economic fronts. Further, the donor-recipient relationship between the US and developing countries has weakened with China’s pledge of $ 2 billion amid the COVID-19 pandemic, thereby starting a new phase of donation diplomacy.
  • Moreover, China perceives US support for Taiwan as an interference in its internal matters.

Differences Over Previous Cold War

There are several key differences between the previous Cold War between the US & Soviet Union and the Cold War between the US and China.

  • No Ideological conflict: Cold War between the US and Soviet Union was a battle between two opposing ideologies viz. capitalism vs communism, whereas there is no such ideological conflict between US and China.
  • No proxy conflicts: Previous Cold War was full of proxy conflicts between the US and the Soviet Union like in the Cuban missile crisis in 1962, the Soviet afghan war 1979-89, etc. However, till now there are no proxy wars between the U.S. and China.
  • Multi-polar world: Today, the world is also not bipolar anymore. There are countries like Russia, India and Japan, which act as swing states,as they have a choice whether or not to align with the US or China.
  • Economic interdependence: Unlike the US and Soviet Union, the economies of the US and China are closely integrated through investments and markets in a hyper-globalized world.

Role of India

India is a rising global power and citing its importance both the US and China sought to attract India in its camp. Foreign policy experts in the US argue India Is a Natural US Ally in the New Cold War. On the other hand, Chinese Ambassador in India has suggested writing “together a new chapter” with “a shared future for mankind”. In this context:

  • India can promote new multilateralism under the aegis of Vasudhaiva Kutumbakam- which relies on restructuring both the economic order and societal behaviour for equitable sustainable development.
  • India must take up intensified diplomacy with global powers so that Asian Century can be defined in terms of peaceful co-existence and global interest.
  • Apart from it, India Should acknowledge that national security now relies on technological superiority in artificial intelligence (AI), cyber and space, and not expensive capital equipment. Thus, India should become self sufficient in the domain of critical technologies.


As India joins the UN Security Council (non-permanent seat) and chairs the BRICS Summit and hosts the G-20 in 2022, the development will bring an opportunity for India to assume a leadership role and propose a new globalisation model based on humanity, fairness and equality has wide support in a more equal world rather than a world divided by Cold War.

Source: Web

India and Bhutan - Kholongchhu Hydropower Project

GS-II : International Relations South Asia

India and Bhutan - Kholongchhu Hydropower Project

Part of: GS-II- India and South Asia (PT-MAINS-PERSONALITY TEST)

Recently, India and Bhutan have signed concession agreement on the 600 MW Kholongchhu Hydropower Project.

  • It will be the first-ever Joint Venture (JV) project between India and Bhutan.
  • The JV partners are Satluj Jal Vidyut Nigam (SJVN), and the Druk Green Power Corporation (DGPC) from India and Bhutan respectively.


  • Description:
    • The Kholongchhu project is one of four additional projects agreed upon in 2008, as a part of India’s commitment to helping Bhutan to create a total of 10,000 MW of installed capacity by 2020.
    • The 600 MW run-of-the-river project is located on the lower course of the Kholongchhu river in eastern Bhutan’s Trashiyangtse district.
    • The project is expected to be completed in the second half of 2025.
    • The project will be constructed as a 50:50 joint venture.
  • Significance:
    • Concession Period: The Government of India will provide, as a grant, the equity share of the Bhutanese DGPC in the JV Company. Once the project is commissioned, the JV partners will run it for 30 years, called the concession period, after which the full ownership will transfer to the Bhutan government, which will receive power from the project as royalty.
    • Bilateral Cooperation: The tapping of hydropower in Bhutan would pave a way for successful bilateral cooperation and mutual engagement between India and Bhutan.
    • Strategic Interest: Being a member of BIMSTEC, Bhutan holds geostrategic importance for India. The shared sense of support and help in terms of such development projects between the two countries can help India in executing its Act East-Look East Policy.
    • Energy Trade: The project would act as a milestone in the generation of energy and related trade. The project would aid in a clean and stabilising power source for India and also contribute to its renewable energy targets.
    • Employment Opportunities: Commencement of construction activities of the project will create economic and employment opportunities in Bhutan. India needs to focus on the youth of Bhutan, as it is the youth only, which would take the people-to-people contact forward in the future.
    • Economic Growth: The plant would drive economic growth and hence socio-economic development would be facilitated in Bhutan.
  • Concerns:
    • Power Tariffs: The project which started in 2014 was on halt since December 2016 over India’s new power tariff guidelines on Cross Border Trade of Electricity - CBTE, until the government amended its guidelines after negotiations with the Bhutan government. Power tariff revision which includes the increase in the operations and maintenance charges may become a bone of contention.
    • Risk of the JV-model: Another issue is regarding the risk of the JV-model for the project as Bhutan had expressed concern over a greater financial risk due to project delays.
      • The delays had an impact on Bhutan’s growth, as well as its exports and revenues. For example, the World Bank has attributed the decline in the country’s growth rate directly to delays in hydropower construction and the dip in electricity generation.
      • However, India has maintained that it prefers the more commercial model as it not only shares the risk, but also makes Indian PSUs show greater accountability on time and cost, as they become investors rather than contractors.

India Bhutan Hydropower Projects

  • So far, the Government of India has constructed three Hydroelectric Projects (HEPs) in Bhutan totalling 1416 MW (336 MW Chukha HEP, 60 MW Kurichhu HEP and 1020 MW Tala HEP), which are operational and exporting surplus power to India.
  • India has recently completed a 720 MW Mangdechhu HydroElectric Power Project and both sides are in process of expediting the completion of other ongoing projects including the 1200MW Punatsangchhu-1 & 1020MW Punatsangchhu-2.

Way Forward

  • Both India and Bhutan have emphasised the importance of “hydro-power development” as one of the most important areas of mutually beneficial bilateral cooperation.
  • Kholongchhu is a continuation of bilateral cooperation which epitomises the core of the friendship for the greater good.
  • However, the delay in the implementation of the project has led to cost escalation and missed opportunities in terms of immediate benefits to the community. Therefore, all the details of a project should be thoroughly worked out before the construction commences.

Source: IE

Self Reliance- Atma Nirbhar Abhiyan

GS-III : Economic Issues Self reliance

Self Reliance- Atma Nirbhar Abhiyan


In an effective response to an unprecedented emergency (Covid-19 pandemic) that disrupted most channels of national and international trade, Indian Prime Minister, under Atma Nirbhar Abhiyan, gave a clarion call for the country to become self-reliant.

India in the pre-1991 era also strived for achieving self-reliance and import substitution. While it resulted in a diversified economic base for heavy industries such as Steel, coal, petroleum refinery etc, India fell behind the curve on quality, technology and productivity.

Economists attribute these shortcomings to the then industrial and trade policies, particularly industrial licensing, physical barriers to import of goods, high tariffs and imperative economic policies.

Though the Indian Prime Minister clarified that the current idea of self-reliance is not about a return to import substitution or autarkic isolationism, but rather aimed at a quantum jump to the economic potential of the country by strengthening infrastructure, using modern technologies, enriching human resources, and creating robust supply chains.

In order to achieve this goal policy making needs to address underlying issues and leverage economic opportunities.

Underlying Issues in Becoming Self Reliant

  • Market Distortion: India opened itself to the global market in 1991 through its LPG (liberalisation, privatisation and globalisation) reforms, but remained hesitant in giving the market model full freedom.
    • This may be reflected in market-distorting subsidies and other restrictive policies, especially in Agriculture.
  • Weak Manufacturing: India is far behind from its target of achieving a manufacturing sector contribution of 25% of the GDP.
    • Currently, the Make In India initiative hasn’t reached its intended goal and manufacturing is only at about 17% of GDP.
  • Dependence on China: India is dependent on China for imports related to electronics, solar equipment, pharmaceutical (Active pharmaceutical ingredients) and Capital goods. Without developing domestic capacity for manufacturing in these areas, breaking away from dependence on China would not be easy.
  • Federal Issue: Information asymmetry with respect to Central and State governments can act as a roadblock to ease of doing business. This is particularly important in sectors like manufacturing, healthcare and agriculture.

Available Opportunities

  • Global Manufacturing Shifting Away from China: Mostly all multinational companies are more concerned about the concentration risk of businesses in China than ever before. So, the trend toward moving to source away from China will continue. India can attract these investments and become the next global manufacturing hub.
  • Ageing Global Population: Considering demographics, most developed nations lack the workforce to produce all that they need in their own countries. India’s demographic dividend may adequately bridge the requirement for a young human resource for the world.
  • Huge Domestic Demand: India is blessed with a vast array of natural resources, a huge demographic advantage, a large farming community, a dynamic industrial setup ( sectors like Automobiles and Information technology) and a set of entrepreneurial path-breakers. In this context, India has almost all the input as well as output (demand and supply) factors, those are needed for becoming self-reliant and stimulating demand.

Way Forward

Given the underlying issues and opportunities, it is vital to become competitive in pursuance of self reliance.

  • Promoting Local: Being vocal for “local” is a key complement of Atma-Nirbhar Bharat Abhiyan. In this context, people must internalise the concept of valuing local products and artefacts and promoting them. Only after this the dream of transforming “Local” India into a “Glocal” India will be possible.
  • Favourable Policy: In general, competition enhances innovation and efficiency. However, crony capitalism weakens local competitiveness and often diverts resources away from more efficient and technologically innovative companies. Thus, policies should enhance domestic competition and eschew crony capitalism.
  • Support Control of Critical Value Chains: India cannot become self-reliant until it has control over domestic and global supply chains. Thus, there is a need to ensure greater control over certain parts of the global value chain to protect strategic interests, especially in healthcare, agriculture and defence.
  • Strengthen Public Procurement: Some steps like compulsory e-tendering and the creation of the Government Electronic Marketplace have already created a more level playing field for suppliers. These processes should be strengthened further by quickening the cycle time for completion of the “quote to cash” cycle of public procurement.
  • Focusing on Comparative Advantage: India can focus on one area where it can differentiate and attract global and domestic investors and be a leader. The next big thing for India can be 3D (additive) manufacturing, and robotics & automation. As these technologies are the confluence of manufacturing and IT, India’s leading edge on IT, provides a platform to become a leader in this space globally.

Source: FE

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