Editorials - 12-02-2021

It is not contrary to international tax principles and does not discriminate particularly against U.S. firms

Last month, a United States Trade Representative (USTR) investigation report found India’s Digital Services Tax (DST) to be discriminatory. It said the tax is “inconsistent with prevailing principles of international taxation”, and burdens or restricts U.S. commerce. India has denied these charges. The bone of contention is a 2% tax that India has charged since April 2020 on revenues from digital services, applicable only to non-resident companies. In a discussion moderated bySriram Srinivasan, Suranjali Tandon and Nikhil Kapoor discuss this issue. Edited excerpts:

India introduced a 6% equalisation levy in 2016. From then to taxing a broader basket of online services in 2020, how do you view what India has done, especially in the context of the rest of the world?

Suranjali Tandon:We have to rewind to 2013, when the Base Erosion and Profit Shifting (BEPS) programme by the OECD [Organisation for Economic Co-operation and Development] was launched at the behest of the G20 countries. Under the 15 action points, action point one was to look at the tax challenges of the digital economy. By 2015, action point one still remained a work in progress.

The main problem was to find a new way of taxing digital companies that are not adequately taxed because of how the rules are designed. So, the primary concern was that companies don’t have a physical location in the markets where they operate. And use the intangibles, which are hard to value.

India, in 2016, became the first country to implement the equalisation levy, on advertising services at 6%. This was basically on payments made to a non-resident by a resident advertising on the platform. The thinking was that when a solution is reached at the global level, this would sort of be phased out.

In 2019, in a sharp departure from its original thinking, OECD put out a policy note saying that there’s an elephant in the room, which is the redistribution of taxing rights, which this action point seems to bring up again and again, and unless we address this, finding a consensus will be difficult.

Different countries took different positions. India, originally in 2018, had introduced a test for significant economic presence in the Income Tax Act, according to which, if a company had users in India, it sort of defined its economic connection with India, and therefore gives India the right to tax. While this was introduced in the Act, it did not have any value because the treaties would have to incorporate a similar provision for it to be applicable.

Fast forward to 2020, and the U.S. in the G20 meeting said even if OECD does find a consensus, there should be an option of applying some safe harbour basis, which is to say that the company can choose whether this consensus applies. This startled a lot of countries. They were apprehensive that tomorrow if a safe harbour basis were to be applied, would it serve the purpose.

And to contextualise India’s equalisation levy, this was the sort of conversation brewing at the international level. In a surprise move, the new equalisation levy, which expands the scope significantly, even to e-commerce, was introduced in 2020. And after that, the U.S. has taken a stance that it would interrogate such measures as a hindrance to its commerce and trade. And irrespective of the position that the U.S. takes on this, countries such as France, India, and 10 countries against which the investigations have been initiated, have taken a position to say that this might be perhaps an interim solution.

Nikhil Kapoor:In 2016, the Akhilesh Ranjan Committee Report had suggested that in order to create a level-playing field between online businesses and brick-and-mortar businesses, digital businesses which do not have a physical presence in India but are able to enjoy a sustainable economic presence should be paying a certain amount of tax. This was how the equalisation levy of 2016 was conceptualised.

India has always maintained that once there is a global consensus, it would cease to keep the equalisation levy in force. India has been engaged in the global discussions at the OECD level. And OECD had promised to deliver a consensus-based solution by mid-2019. That did not happen owing to the pandemic, but because of the growing needs of India to generate tax revenues, this was a sudden move that took the entire digital community by surprise.

Unlike the 2016 levy, this 2020 levy was devoid of any sort of public consultation. It was a major surprise for the digital community. And that is perhaps why the first two deadlines for paying the equalisation levy 2020 was also missed by a lot of multinationals.

Even other countries introduced DSTs akin to India’s equalisation levy. However, these have not been devoid of public consultation. For instance, the U.K. DST underwent significant public scrutiny, and the result is that it is more sound than what perhaps India’s levy is.

How different is the U.K. tax?

NK:One of the primary criticisms against India’s equalisation levy is that it is a tax on revenue as opposed to being a tax on profits. The U.K. allows companies to not pay any tax if their net operating margin is negative.

Another would be a transaction that involves three jurisdictions. Take the example of an Indian user located in the U.K., receiving services from a U.S. company. The U.K. DST contemplates that only 50% of the revenues from such a transaction would be chargeable to the U.K. DST. This makes it a better law.

Another major difference is that companies that sell their own inventories are explicitly excluded from the scope of the U.K. DST. Whereas, India’s equalisation levy covers everything under the sun.

ST:The U.K. makes a slight departure in terms of details and it’s slightly different from how India has implemented it. But the U.S. also looks at the U.K. taxes in some way as discriminatory.

The USTR report finds India’s DST problematic. But is it discriminatory?

NK:The investigation finds that India’s equalisation levy discriminates against U.S. companies in particular. The reason for it is that the tax incident by design is on non-resident companies. And because the incident of the equalisation levy is mostly on U.S. companies, which is 72%. It’s arbitrary, as per the U.S.

I don’t really find any objection to this because the law is arbitrary. But there are several grounds which are not in consonance with what could be a valid reason to call a certain act as discriminatory. For instance, the report claims that India’s approach to taxing just non-residents is quite unique, but that is not true.

The USTR report also says that the same services offered non-digitally are not taxed, and this is leading to a ring-fencing of the digital economy. The Akhilesh Ranjan Committee Report said the idea behind the equalisation levy was to create a level-playing field between the ordinary businesses that have a physical presence in a country and pay regular taxes and the ones that are operating digitally that can avoid such taxes. I cannot say that the law is very clear but to say that it’s discriminating particularly against U.S. companies would essentially be overstepping.

The report also claims is that DST taxes companies with no permanent establishment in India, contravening international tax principles. Now, the BEPS project is based on the fact that digital companies are able to enjoy sustained economic presence in other jurisdictions without being physically present. The international community is moving towards a scenario where such transactions ought to be taxed. Therefore, to say that it’s contrary to international tax principles would be overstepping a little.

The report also claims that DST taxes a company’s revenue rather than its income. This is inconsistent with international tax practice that income, not revenue, is the appropriate basis of corporate taxation. Over here also, since the issue of taxing digital companies is unique, a lot of scholars have argued that taxing revenue for digital transactions as location-specific rent is more feasible than a digital presence, because it would lead to lesser compliance costs.

ST:Why is it seen as discriminatory? One is that they say that it applies to only U.S. companies. I find there’s a problem with the argument, because if the market itself is dominated by U.S. firms, the fact that it applies to those firms may be the result of the market structure.

Is it unreasonable? Well, to the extent that clarifications were not issued, perhaps it’s unreasonable.

But other than that, the threshold that India has laid down for the equalisation levy is actually much below what the EU envisages.

The report also makes the mention of it violating the principles of international tax. If the companies that currently operate within that framework do not stand up to the measures or the principles of international tax, the introduction of a tax to plug that gap should not be looked at as a perverse move.

What could happen next? Retaliation by way of tariffs?

NK:See, this issue becomes very political in the sense that Section 301 investigations had themselves become obsolete before the Donald Trump administration came in. Now, Section 301 investigations are unilateral in nature, because the USTR is essentially deciding whether a measure is violative of the U.S.’s rights. So, there is an inherent bias as to what the findings are going to be. But I believe they would want to collaborate with India and find an amicable solution rather than imposing strict trade tariffs, which is what happened between France and the U.S.

The criticism against Section 301 investigations is that after the WTO law and the dispute settlement mechanism came into picture and the scope of the General Agreement on Trade in Services were expanded to include services as well, countries have been of the view that an international body should be looking at such disputes. And because it’s not the Trump administration now, the way Section 301 investigations are going to be used in the future is still something that remains to be seen.

How do you see a consensus on the broader issues emerging?

ST:There are a few ways forward. The position that India has taken is to remain committed to the OECD process, to influence it, and to say that there are ways to tweak this design, because it will be put out in June 2021. So, the design could be worked out better to take into consideration the interests of the developing countries. Second, the United Nations is taking some sort of leadership on this to design its own proposal, which is an automated DST which is to say that within the existing treaty framework today, we introduce a withholding on payments that are made from markets to jurisdictions. And third, which I think is a possibility, maybe to apply the DST and then allow countries to bilaterally negotiate with their respective partner countries a process of crediting this tax.

Other countries introduced DSTs akin to India’s equalisation levy. However, these, unlike India’s, have not been devoid of public consultation.

Nikhil Kapoor

India’s leaders must recommit themselves to the ideas and activism of environmentalists involved with Uttarakhand

Following flash floods at Chamoli in Uttarakhand, defence personnel are looking for missing persons in a mélange of rock, mud, water, and debris, airlifting rations to inaccessible villages, and repairing bridges and telecommunication networks. Social scientists are assessing the disaster’s impact on the region’s economy. Scientists and policy makers are debating whether climate change or unchecked development in an ecologically fragile region was primarily responsible for the disaster and the death toll. News reports of ancient temples having been swept away in the Alakananda’s raging waters are bringing back traumatic memories of the Kedarnath floods in 2013. All these developments show the profound significance attached to this region and they prompt a historian to ask two fundamental and interrelated questions: How did the Uttarakhand Himalayas emerge as adeva bhumiand how did it develop into a focus of Hindu pilgrimage?

Borderland to sacred place

A study of the archaeological record and inscriptional evidence suggests that many and varied agents and processes played important roles in gradually transforming this borderland into a sacred landscape. Artefacts found in the Himalayan foothills that are datable to the period extending from 300 BCE and 600 CE include an Ashokan rock edict, brick altars for conductingashvamedha yagnas, coin hoards, and sculptures.

The forms of these artefacts and their find-spots indicate deepening contact between communities living in the Gangetic plains and in the foothills. These very developments fostered the growth of Haridwar and Kalsi as cosmopolitan towns and as “gateways” into the Himalayas. Initially, mendicants in search of retreats, merchants eager to enlarge trading networks, adventurous princes in their quest to establish principalities, and artisans in search of employment passed through these gateway towns. Eventually, in the seventh century, a regional tradition of stone temple architecture commenced in the Uttarakhand Himalayas. The earliest shrines in this tradition were built at Palethi and Lakhamandal, just upstream from Haridwar and Kalsi, by visiting sovereigns.

Early developments

However, these two sites with royal patronage never became majortirthas. Instead, Jageshwar, situated well east of Lakhamandal and Palethi attained this stature. Between the seventh and tenth centuries, builders at Jageshwar modified local geography and ecology to encourage comparisons between it and celebrated locales such as Kashi and Devadarunavana, Shiva’s legendary deodar forest. Eventually, Jageshwar came to have 150 stone temples. These early developments at Jageshwar are relatable to the sway of the Pashupatas and other Shaiva ascetics and not to the rise of local dynasties. In fact, the influence of these ascetic groups in this period distinguishes Uttarakhand from adjoining kingdoms where aristocratic lineages were the primary power brokers.

In time, the development of a distinctive architectural tradition, increases in the priestly population, greater availability of skilled craftsmen, and the emergence of small principalities, helped further alter the status of this borderland and perceptions of it. By the twelfth century, architects, master-masons, and sculptors from lands as far away as Gujarat travelled to Uttarakhand to build temples in elaborate typologies associated with their homelands. And by the thirteenth century, larger entourages of ascetics, and occasionally rulers from distant lands began undertaking pilgrimages to established and emergingtirthasin this mountainous region. Their journeys and activities ultimately paved the way for the Char Dham Yatra.

The pilgrimage circuit

The Char Dham Yatra today consists of a pilgrimage to Badrinath, Kedarnath, Gangotri, and Yamunotri. Like many othertirthasin Uttarakhand, Badrinath and Kedarnath have long been associated with gods and sages. For instance, in theMahabharata, Badrinath is described as the site of Narayana’s discourse to Nara. Kedarnath is mentioned in theSkanda Purana, in medieval lists ofjyotirlingas, and in the names of temples built as far away as Karnataka.

Additionally, both Badrinath and Kedarnath are associated with Adi Shankara who is said to have visited them in the eighth century. Possibly his followers played a role in constructing temples at Pandukeshwar where medieval edifices built in the Dravida and Nagara modes stand side-by side. The oldest historical evidence of the establishment of a sacred centre at Badrinath comes from a charter dating to the ninth century preserved at Pandukeshwar.

Issued by a hill ruler, the charter instructs priests living at nearby villages of Joshimath and Pandukeshwar to helpbrahmacharisupstream at Badrinath. Centuries later, in 1808, when a motley troupe of Englishmen reached the Badrinath temple in disguise, they reported it as welcoming 45,000-50,000 pilgrims annually. Given its location in an avalanche-prone valley above the tree line, it is likely that the Badrinath temple has been built and rebuilt several times in its history. Like the present Badrinath temple, the temple standing at Kedarnath today, dates to the early modern period.

As sites located close to the glacial sources of the Ganga and the Yamuna, Gangotri and Yamunotri have also been given sacred associations. Historically sought out by fearless sadhus, in the more recent past they have been visited by intrepid Englishmen eager to participate in ongoing efforts to map India. In the early 20th century, the Jaipur royal family supported the construction of a temple at Gangotri. The shrines at Yamunotri today are ever newer.

Shifts, ecopressures

Demographic, political, social and economic shifts that have occurred in the past six decades have led to an increase in the number of pilgrims visiting sacred centres in Uttarakhand. After 1962, the Indian government recognised that the world’s highest and loftiest mountain range no longer served as an insurmountable wall. To safeguard against future incursions, a massive development programme along the country’s mountainous northern border was launched. Agencies such as the Border Roads Organisation, the Indo Tibetan Border Police, and the THDC India Limited (formerly Tehri Hydro Development Corporation Limited) were established. They were granted sizeable budgets, and charged with the construction of roads, tunnels, bridges, cantonments, hospitals, dams, and telecommunication pylons.

Over time, these efforts stimulated the region’s economy, nurtured new settlements, and introduced infrastructure that facilitated pilgrimage to select sacred centres. The foundations laid by the agencies intensified after 2000 when owing to regional demands for greater political autonomy, Uttarakhand was carved out of sprawling Uttar Pradesh. Recognising religious tourism as an important source of income for a landlocked State mostly covered by snowcapped peaks and dense forests, a succession of governments have created further amenities for pilgrims, widely publicised initiatives, and embarked on the construction of new dams, multi-lane highways, and railroads. As a result of these efforts, many more individuals now undertake sacred journeys, which until 60 years ago were made by only the bravest, fittest, and most determined pilgrims.

Revisiting ideas

The 2013 Kedarnath floods and the flash floods that have swept through the Alakananda Valley earlier this week suggest that ham-handed development in the name of god, or otherwise, can come at an agonising cost. Now is the time for our leaders to recommit themselves to the ideas and activism of Chandi Prasad Bhatt, Gaura Devi, Guru das Agrawal, Ravi Chopra, Sunderlal Bahuguna, Vandana Shiva, and other Gandhian environmentalists and social workers. Over the past few decades, they have mobilised local communities to protect Uttarakhand’s forests, created local employment, and questioned the wisdom of constructing large hydroelectric projects in a seismically sensitive sacred landscape. They have also reminded us that unless we change our course of action, another Himalayan miscalculation is imminent.

Nachiket Chanchani is an associate professor at the University of Michigan, Ann Arbor, U.S. and the author of ‘Mountain Temples and Temple Mountains: Architecture, Religion, and Nature in the Central Himalayas’

Uncertainties around the Iran nuclear agreement could lead to tectonic changes in the new global and regional order

Some of the remarks by Joe Biden, now the United States President, during the U.S. presidential election campaign have come to haunt him. He had, in August 2019, been a strident critic of the U.S. withdrawal from the nuclear agreement with Iran, formally the Joint Comprehensive Plan of Action (JCPOA). He had then promised that, subject to Iran’s compliance with its obligations, the U.S. would re-enter the agreement.

Iran’s Foreign Minister Mohammad Javad Zarif, in a recent Foreign Affairs article (https://fam.ag/2Nhz80U), has reminded Mr. Biden of his commitment and called on him to end the “failed policies” of the earlier administration that had made West Asia “the most militarised region in the world”. He also warned that “containment” of Iran would not work.

Israel has given the opposite message: its armed forces commander, Lt. Gen. Aviv Kochavi, in a belligerent speech on January 26, said that the nuclear agreement was “bad and must not be allowed”. He added that Israel had operational plans to take “decisive action”. Israel and the U.S.’s Gulf allies, Saudi Arabia and the United Arab Emirates, have also insisted that they be involved with the discussions with Iran on the revival of the agreement.

Regional concerns

In office, Mr. Biden has shown little urgency on the JCPOA matter. Clearly, there are some serious issues at stake here. Despite the sanctions, Iran’s regional influence remains significant, based on the backing of Shia militia in such diverse locales as Lebanon, Iraq, Yemen and Syria. The Iranian ability to mobilise militants across the region is viewed by Israel and some the Gulf Arab states as threatening their security, the latter being concerned about Iran’s influence with their Shia populations as well.

The capabilities of Iran’s precision missiles and drones are also a matter of regional anxiety. Iran has focused on the domestic development of missiles due to international sanctions on defence supplies. Iran views them as defensive assets that give it a deterrence capability. Given the advanced air and missile power available with Israel, Saudi Arabia and some other Gulf states, there is no prospect of Iran curtailing its missiles and drone programmes.

Mr. Biden in office has already revealed that despite some differences in policy content and diplomatic style, his term is likely to show more continuity than change where the U.S.’s core interests are concerned, specifically in its ties with Russia, China and Iran.

For instance, in his CBS interview on February 7, Mr. Biden said he had not spoken to the Chinese President, Xi Jinping, who “doesn’t have a democratic bone in his body”, and anticipated “extreme competition” on global economic issues. The U.S. Secretary of State, Antony J. Blinken, was tough with his counterpart in their telephonic conversation, and raised “human rights and democratic values” in the context of Xinjiang, Tibet and Hong Kong.

Biden’s policy approaches

Again, Mr. Biden is likely to reverse his predecessor Donald Trump’s personal accommodative approach towards Russia and adopt the U.S.’s traditional confrontational posture. The White House said that, in his conversation with Russian President Vladmir Putin on January 26, he made it clear that the U.S. “will act firmly in defence of our national interests in response to actions by Russia” and brought up Ukraine, the cyber attacks and the poisoning of Russian Opposition leader Alexei Navalny.

Mr. Biden’s Iran policy is likely to match Mr. Trump’s hardline approach on substantive matters, but without the bravado and crude brinkmanship of the former President. On January 29, the Pentagon spokesperson described Iran as a “malign actor” in the region, referred to Iran’s “active ballistic missiles” programmes, the fact that it is still “re-spinning centrifuges”, and highlighted the need to protect the U.S.’s regional partners from Iran’s “acts of terrorism” — these issues and the accompanying rhetoric are the same as those of the Trump administration. This approach also panders to Iran’s regional rivals who wish to see the Islamic republic emasculated and isolated. There will thus be no dramatic change in the U.S.’s approach to Iran on the nuclear question. The appointment of a Special Envoy for Iran, Robert Malley, suggests that the U.S. is looking at a long-term diplomatic engagement not just on nuclear issues but on all matters that have security implications for the U.S. and its regional partners.

To encourage this dialogue, the U.S. could offer some palliatives to Iran, such as International Monetary Fund providing funds to combat the novel coronavirus pandemic, but with no early easing of sanctions on oil sales. Iran may quickly find that it has to largely depend on its own resources to manage its interests at home and in the region. Its elections in June could thus put in place leaders who see no benefits in working cooperatively with western powers.

The international lines

Battle lines will thus remain in place in the region — Israel, Saudi Arabia and the United Arab Emirates will be in a face-off with Iran and its allies, Iraq, Syria and its Shia militia — in a prolonged war of attrition that does not resolve any issue, but continues to wreak death and destruction.

Alternatively, we could see a genuine regional effort to ease tensions and promote regional confidence, spearheaded by Qatar, working with Russia and, possibly, China. Qatar’s Foreign Minister has already proposed direct engagement with Iran. Perhaps, Saudi Arabia and the UAE, already facing heat from the Biden administration, will see the value of this approach as they had done during heightened tensions in the Gulf waters in 2019: the UAE had then discussed maritime security with Iran, while Saudi Arabia had encouraged mediation efforts by regional states.

As Mr. Biden pursues policies of an earlier era, he will find that much has changed in West Asia and the world since he was last in office. Not only is Russia now an influential player in the region, China, too, with its Belt and Road Initiative, has high stakes in regional stability. The Sino-Iran 25 years agreement, which was leaked last year, envisages their substantial and long-term cooperation in political, security, military, economic, energy and logistical connectivity areas. Its formal finalisation was deliberately postponed by both sides to see what the U.S. elections would throw up. With Mr. Biden being confrontational, they are likely to pursue this partnership more openly and robustly.

Mr. Biden will thus witness a new world order, shaped by a coalition of Russia, China and Iran, in which the U.S. is no longer the most significant role-player.

This tectonic change will define international affairs in coming decades.

Talmiz Ahmad is a former diplomat

The need of the hour is to invest in long-term crisis response mechanisms and resilience solutions

Days after a glacier burst in the Chamoli district of Uttarakhand caused flash floods, the scientific community is still struggling to understand what triggered the disaster. At the time of writing this article, the death toll was 34 with more than 170 people missing. The floods have also caused heavy damage to public and private infrastructure, including the NTPC’s Tapovan-Vishnugad hydropower project and the Rishiganga mini hydro project. The incident was reminiscent of the 2013 disaster in Uttarakhand which killed thousands.

Why is Uttarakhand vulnerable?

Uttarakhand is located in the midst of young and unstable mountains, and is subject to intense rainfall. But these natural characteristics can’t be solely responsible for devastations the State has witnessed in the past decade. For years geologists, glaciologists and climate experts have voiced their fears about an impending disaster due to climate change, rapid and indiscriminate construction activities, and the subsequent ecological destruction in the region.

The occurrence of the current glacier burst was loosely attributed to erosion, a build-up of water pressure, an avalanche of snow or rocks, landslides or an earthquake under the ice. According to the Wadia Institute of Himalayan Geology, a rock mass, weakened from years of freezing and thawing of snow, may have led to the creation of a weak zone and fractures leading to a collapse that resulted in flash floods. What has intrigued experts and the local community is that this avalanche occurred unexpectedly, out of the regular flood season.

Experts also identified large-scale human settlements and expansion of agricultural activities leading to massive deforestation, as a possible trigger. Studies have shown that widespread settlements, farming, cattle grazing and other anthropogenic activities could destroy the natural barriers that control avalanches and floods, thereby enhancing the possibilities of a glacial lake outburst flood. The Hindu Kush Himalaya Assessment Report (2019) had pointed out that one-third of the Hindu Kush Himalaya’s glaciers would melt by 2100 and potentially destabilise the river regime in Asia, even if all the countries in the region fulfilled their commitments under the Paris Agreement. It also warned that any ecologically destructive activities would lead to more intensified disasters like landslides.

Experts and activists have incessantly asked for scrutiny into the construction of hydroelectric power projects in Uttarakhand. There have also been allegations about the use of explosives in the construction of dams and other infrastructure. In 2014, an expert committee led by Dr Ravi Chopra, instituted to assess the role of dams in exacerbating floods, provided hard evidence on how haphazard construction of dams was causing irreversible damage to the region.

Some immediate steps

The need of the hour is to invest in long-term crisis response mechanisms and resilience solutions. A few immediate steps include: (i) investing in resilience planning, especially in flood prevention and rapid response; (ii) climate proofing the infrastructure such as by applying road stabilisation technologies for fragile road networks and strengthening existing structures like bridges, culverts and tunnels; (iii) strengthening embankments with adequate scientific know-how; (iv) reassessing development of hydropower and other public infrastructure; (v) investing in a robust monitoring and early warning system; (vi) establishing implementable policies and regulatory guidelines to restrict detrimental human activities, including responsible eco- and religious tourism policies; and (vii) investing in training and capacity building to educate and empower local communities to prevent and manage risks effectively.

The time for wake-up calls is long behind us. India needs to urgently rise up to the challenge by applying innovative and inclusive solutions that support nature and marginalised communities, to restore and rebuild a resilient future for Uttarakhand.

A. Nambi Appadurai is Director, Climate Resilience Program, World Resources Institute, India. Views are personal

The disengagement at the LAC is vital forthe broader relationship with China

India and China finally reaching an agreement on disengagement at Pangong Lake, which has been at the heart of the recent LAC tensions, is a promising start towards restoring peace in the border areas. Defence Minister Rajnath Singh has said both sides will cease their forward deployments on the north and south banks of the lake in a phased, coordinated, and verified manner. China’s Ministry of Defence announced an agreement “to start synchronised and organised disengagement”. Both sides have agreed to a temporary moratorium on patrolling in the disputed areas north and south of the lake. The withdrawal of armoured elements, including tanks that have been in dangerously close proximity, began on Wednesday. All frontline personnel will subsequently be withdrawn over the next two to three weeks. North of the lake, China’s troops will return to their base at Sirijap, east of Finger 8, while India’s troops will similarly return to their permanent base at Dhan Singh Thapa post, at Finger 3. India previously patrolled on foot up to Finger 8 — there is no motorable road access from India’s side to areas east of Finger 4 — while China has dominated up to Finger 4, having already built a road there and enjoying superior logistics. Starting last summer, Chinese troops had prevented India from reaching Finger 8, leading to the crisis. Now, the entire contested area, from 4 to 8, will become a buffer zone and all temporary infrastructure built after April 2020 will be withdrawn. Similarly, both sides will return to their bases south of the lake, where India will vacate the heights it occupied in an effective countermove in late August in the Kailash range, which gave India much needed leverage to negotiate as well as demonstrated its resolve to match China’s actions.

The stand-offs on the north and south banks, involving troops and artillery, remained the hardest nut to crack over nine long rounds of talks between military commanders. With this agreement, the only pending problems now are smaller, less concerning stand-offs involving fewer troops in Patrolling Points 15 and 17A in the Gogra-Hot Springs area, which will be taken up 48 hours after disengagement at Pangong Lake is completed over the next few weeks. In the Depsang plains, there is no stand-off situation or heavy deployment of troops, but a long-running dispute over the LAC and blocking of patrols that predates the current crisis and as yet remains unresolved. The success of the new disengagement plan will finally depend on whether it is implemented on the ground in letter and in spirit. The events of last year have left enormous distrust, which remains a hurdle and China’s actions on the ground have not always matched its commitments. Both sides should keep in mind what is at stake for the broader relationship between the two most populous countries, which ultimately hinges on peace on the border.

Instead of shutting out cryptocurrencies,the government must ensure smart regulation

The government’s statement about bringing in a law on cryptocurrencies is welcome, as it could put an end to the existing ambiguity over the legality of these currencies in India. The vagueness exists notwithstanding the fact that the government has, from time to time, suggested that it does not consider them to be legal tender. It has not, however, been able to channel this understandable disapproval — arising out of the fact that such currencies are highly volatile, used for illicit Internet transactions, and wholly outside the ambit of the state — into any sort of regulation. In 2018, the RBI did send a circular to banks directing them not to provide services for those trading in cryptocurrencies. But this was eventually set aside by the Supreme Court, which found the circular to be “disproportionate,” given that the central bank had consistently maintained that virtual currencies were not banned in India. Also, the RBI could not show that entities that it regulated were adversely impacted by exchanges dealing in virtual currencies. The Minister of State for Finance, Anurag Thakur, who on Tuesday confirmed in the Rajya Sabha that a Bill was in the offing, highlighted the complexity in regulation. He said, “Regulatory bodies like RBI and Sebi etc also don’t have a legal framework to directly regulate cryptocurrencies as they are neither currencies nor assets or securities or commodities issued by an identifiable user.”

This legal ambivalence has not, however, been able to prevent cryptocurrencies from having a growing clientele in India. Their attraction may only grow now, given that the most well-known of them as also the most valuable, Bitcoin, has hit new peaks in price and is gaining influential followers such as Tesla founder Elon Musk. So, what will the Bill seek to do? Those associated with this niche but growing ecosystem will be worried about this question the most. Cryptocurrency exchanges, which have sprung up, are reportedly lobbying with the government to make sure these currencies are regulated rather than banned outright. Smart regulation is preferable, as a ban on something that is based on a technology of distributed ledger cannot be implemented for all practical purposes. Even in China, where cryptocurrencies have been banned and the Internet is controlled, trading in cryptocurrencies has been low but not non-existent, as an India inter-ministerial committee found out. Despite this and the fact that most countries it studied had opted for regulation, this committee still went ahead to recommend an outright ban. Of course, it encouragingly also batted for an official digital currency as well as for the promotion of the underlying blockchain technology. The government must resist the idea of a ban and push for smart regulation.

Military rulers have contributed little to improving the lot of common people

First speeches after coups are important. When a man in uniform takes over and deposes a civilian government, he goes on television to announce the contours of his mission. He usually promises order, stability and growth — a renewal of the nation after the disorder — and elections in a bit.

Two days after the February 1 coup ousting Aung San Suu Kyi and other National League for Democracy (NLD) leaders from power in Myanmar, Senior General Min Aung Hlaing found fault with the November 2020 general elections that returned the NLD to power with an increased majority.

“After emergency provisions tasks are finished, free and fair multiparty elections will be held according to the Constitution. The winning party will be transferred state duty according to democratic standards,” he promised.

On October 12, 1999, I was in Islamabad and had the once-in-a-lifetime opportunity to report how General Pervez Musharraf ousted Prime Minister Nawaz Sharif from power in a bloodless coup.

At 2.50 a.m. on the morning of October 13, Gen. Musharraf went on State-run Pakistan Television (there were no private channels then) and announced that he had moved in as a “last resort” to prevent “any further destabilisation”. Addressing “his countrymen”, Gen. Musharraf stated, “I request you all to remain calm and support your armed forces in the re-establishment of order to pave the way for a prosperous future for Pakistan.”

The olive greens and khaki leaders always promised order and stability. In Myanmar, the Senior General seems to suggest that his actions are in accordance with the Constitution and “proper” elections will lead to the restoration of “democracy”.

Even in the pre-social media world, Gen. Musharraf took the title of ‘Chief Executive’ and not Chief Martial Law Administrator (CMLA) like his predecessors Zia-ul-Haq, Yahya Khan and Ayub Khan. He was anxious not to give the impression that he was a full-fledged military dictator. There was a fourth, albeit civilian, CMLA – Zulfiqar Ali Bhutto, who took over a Pakistan that was reeling from the loss of its eastern wing.

Like in Pakistan, coups and decades of military rule in Myanmar have been institutional. There has been little room for a cabal of officers to take over (though attempts have been made); coup leaders have survived (and thrived) only because they had institutional support from their officers and men.

The international context is key for the survival of the generals — Ayub in Pakistan was much loved by the West, especially the Americans. Zia, from being shunned, turned out to be a ‘saviour’ for the Americans after the Soviets invaded Afghanistan.

Gen. Musharraf, correctly accused of presiding over a military establishment that promoted terror groups, gave up Al-Qaeda leaders in instalments and placated an angry U.S. President George W. Bush. In contrast, the West never engaged with isolationist Burmese generals.

In the end, while first words matter, actions speak louder. Military rulers have contributed little to improving the lot of common people — in Myanmar or in Pakistan. They simply ended up perpetuating uniformed establishments.

We have received a copy of the Twenty-first annual publication of Cartoons from the Hindi Punch edited by Mr. Bargorji Nowrosji. The album contains interesting caricatures depicting important events of the year 1920 and provides impressive instruction on matters political, social, educational, and economical. Although the editor claims in the preface to be non-partisan in his views we notice that throughout the volume Non-co-operation has come in for not a little of cheap ridicule and misrepresentation. The reforms were also unduly extolled. Otherwise the caricatures show a good deal of artistic skill, humour and insight. The public feelings against the Punjab wrongs and the Khilafat are well depicted.

According to diplomatic reports from Islamabad, Pakistan is quite sore about China’s continued silence over the recent hijacking episode, since Peking has not rendered even lip sympathy in support of the Pakistani protests against the suspension of overflights by India in retaliation. Apart from a perfunctory paragraph that appeared in the People’s Daily reporting the bare news a week after the incident, China has made no noise at all against the Indian action. In its daily propaganda blasts beamed to India and Pakistan, Peking Radio has not referred even once to the hijacking of the Indian aircraft and its subsequent destruction in Lahore, or the ban imposed by India on the Pakistani overflights. If anything, the ChineseCharge d’Affairesin Delhi not only turned up when he was summoned to the External Affairs Ministry to receive the Indian version of the incident, but also agreed to pass it to Peking for the information of his Government. If this had happened a couple of years ago, he would have straightaway rejected the Indian complaint about Pakistan’s complicity and left abruptly accusing India of hijacking its own aircraft. The other Foreign Missions in New Delhi have not failed to take note of this new accent moderation in China’s diplomatic behaviour, which is also reflected by its progressive disengagement from the Indo-Pakistani controversies. While it continues to support the Pakistani demand for a plebiscite in Kashmir, China is no longer automatically endorsing all that Pakistan says against India.