India has completed agreements for civil nuclear cooperation with 11 countries so far, including the U.S., Russia, Australia, Canada and South Korea, but the upcoming agreement with Japan could be the most significant.
Japan is the only country to have been the victim of a nuclear attack, and its decision to sign an agreement with India, a country that has not signed the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), would be a first.
Reservations in Japan against nuclear energy have hardened after the Fukushima accident. Tokyo’s support to the deal so far is therefore an indication of the importance it accords to relations with India.
For India, the civil nuclear agreement with Japan is especially important for the message of trust it would convey to Nuclear Suppliers Group members in a year the country hopes to have its admission accepted.
Japan’s support at the NSG has been particularly marked. In fact, India and Japan share many multilateral platforms, including membership of the G-4 group that is knocking at the UN Security Council’s door for reform.
Beyond symbolic reasons, Japanese nuclear energy technology and safety parameters are widely considered to be cutting-edge, and many critical parts needed for Indian reactors are made by Japanese manufacturers. These will not be available to India until the agreement is done.
Although India has even considered trying to manufacture them locally, there won’t be alternatives to Japan for several years. Even the U.S. civil nuclear deal, that is yet to be actualised, is contingent on the deal with Japan, given that the current discussions for six reactors in Andhra Pradesh are with Westinghouse, which is owned by the Japanese company Toshiba.
It may appear baffling why the deal has taken so long to negotiate. The main sticking point has been India’s refusal to sign the NPT, as it considers the treaty unfair to the developing world.
This is why New Delhi is keen on ensuring that in the haste to seal the deal by the time Prime Minister Narendra Modi visits Japan this winter, it doesn’t give in to pressure to adhere to anything more than its own self-declared moratorium on testing.
The Japanese insistence on a “nullification” clause that the agreement would cease as soon as India tests, will be judged with this balance in mind. Particularly post-Fukushima, Japanese manufacturers will also be expected to be more generous with India on the liability issue, given their own experience with the enormous cost of cleaning up. As always, and even more so than with the India-U.S. agreement, the devil will be in the detail of the final draft.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.