What’s in today’s article?

• Why in the News?
• Background
• Recent Dispute Between the Two Countries
• News Summary
• Way Forward

Why in the News?

• The Government of Nepal has decided to come out with a Rs-100 currency note that depicts the country’s map with India’s territories.

Background

• In May 2020, the Government of Nepal had released an updated political map of the country, claiming Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as part of Nepal’s territory.

          Image Caption: India-Nepal Border Areas

• Both India and Nepal lay claim to Kalapani region.
• The Kalapani region derives its name from the Kali River. In Nepal, the river is known as Mahakali and it holds as much significance in Nepal as the Ganga River does in India.
• The river works as a natural border between India and Nepal.
• The source of the Kali River has been a point of dispute between India and Nepal.
• India’s Stand:
  • India states that Kalapani is in Pithoragarh, Uttarakhand where the river originates from.
• Nepal’s Stand:
  • Nepal alleges that the river originates either from Limpiyadhura or from Lipulekh and considers both the locations as part of Nepal’s Sudurpaschim province.

Historical Background

• Under the Treaty of Sagauli (1816) signed between British East India Company and Nepal, the Kali River was marked as Nepal’s western boundary with India.
• It, however, made no mention of ridgeline and the subsequent maps by the British surveyors showed the source of the Kali River at different places.
• This discrepancy has led to the boundary disputes between India and Nepal.
• Officially, Nepal brought the issue of Kalapani before India for the first time in 1998.

Recent Dispute Between the Two Countries

• Earlier in 2020, Defence Minister of India Shri Rajnath Singh had inaugurated a new link road from India to China to shorten the travel time for pilgrims to Kailash Mansarovar via Lipulekh pass.
• The road starts from Dharchula in Uttarakhand to Lipulekh pass.
• Nepal had protested strongly against this move by India and claimed that it is a breach of agreement reached between the Prime Ministers of India and Nepal in 2014 to work out on the outstanding boundary issues on Kalapani and Susta (West Champaran, Bihar).
• In response, a Constitutional Amendment Bill was passed by Nepal’s parliament to legitimize the alteration to the country’s map with the addition of Kalapani, Lipulekh and Limpiyadhura.
• The passage of the Bill and the new map led to a temporary breakdown of communication between the two countries.
• India rejected the updated map of Nepal stating that the map is not based on historical facts and evidence.
• The move was described by the Ministry of External Affairs as “artificial”, “unilateral” and “unacceptable”. India had also asked Nepal to return to dialogue.

News Summary

• The Government of Nepal has decided to come out with a Rs-100 currency note that depicts the country’s map with areas such as Lipulekh, Kalapani and Limpiyadhura which are under Indian control.
• The decision on the new currency note, was taken at a meeting of the cabinet chaired by Prime Minister Pushpa Kamal Dahal ‘Prachanda’.
• Nepal’s decision drew a sharp response from India with External Affairs Minister S Jaishankar saying that Nepal’s move will not change the situation or the reality on the ground.
• The cabinet decision will be sent to the Rastra Bank, Nepal’s central bank, which may take up to a year to get the new note printed.
• The central bank will have to come out with tenders for printing quality notes.
• This decision of the Nepal Government has not received full support from the local political stakeholders.
  • Some former diplomats and former Governors of the Nepal central bank have called it “unwise” and “provocative”.

Way Forward

• Given the historical and cultural ties that both India and Nepal share, India must not delay in resolving this matter.
• With already ongoing border dispute that India has with China in the Ladakh region, India must put an end to the dispute with Nepal by means of dialogue at the earliest.
• Since free movement of people is permitted between the two countries, Nepal holds immense strategic relevance to India. India holds around 6 to 8 million strong Nepali diaspora which is one of the largest contributors to Nepal’s economy.
• Hence, it is in the best of the interests for both the countries to resolve the boundary dispute at the political level only.

Q1. Which treaty was signed between Nepal and Tibet?

 The Treaty of Thapathali was a treaty signed between the Tibetan government of Ganden Phodrang (then a protectorate of the Qing dynasty) and the Kingdom of Nepal in Thapathali Durbar in Kathmandu, the capital of Nepal, following the Nepal-Tibet War (1855–1856).

Q2. Is Nepal a Hindu Kingdom?

Nepal is the only Hindu kingdom of the world with the constitutional monarchy and multi-party democracy.

Source: Nepal map on currency note to have Indian areas, EAM speaks out

ToI 

What’s in today’s article?

• Why in News?
• What are Labour Intensive Sectors?
• India’s Exports from Textile Sector
• India’s Exports from Gems and Jewellery Sector
• What Challenges Lie Ahead for India's Labour-Intensive Sector Exports?

Why in News?

• While India’s exports have been largely flat, the country’s exports from labour intensive sectors such as textiles, leather, gems and jewellery and marine products are seeing a sharp dip.
• India’s shipments from these four high jobs generating sectors have declined nearly 12% compared to the pre-pandemic levels five years ago (FY18).
• This is due to an overall weakness in demand from developed nations and stiff competition from Vietnam and Bangladesh.

What are Labour Intensive Sectors?

• Labour Intensive means the production activity that requires a large amount of labour to manufacture the product or services and therefore has a higher proportion of labour input than capital input.
• Most developing economies are labour-intensive as it costs less as compared to the cost of machines and drives their growth.
• From a strategic point of view, even developed economies sometimes believe in outsourcing to developing economies to benefit from lower production cost.
• Labour costs are considered variable, while capital costs are considered fixed.
  • Because labour costs can be adjusted during market downturns through layoffs or reductions in benefits, labour-intensive industries have some flexibility in controlling their expenses.
• These sectors collectively contribute to about one-third of the global trade, amounting to over $ 7 trillion.
• While India's current market share in these sectors stands at a mere 1%, India's imports of these goods are substantial, hovering around $ 100-120 billion.
• During the last financial year (FY 2023-24), when overall goods exports shrank 3%, the outbound shipments of textiles, leather, gems and jewellery and marine products saw a much steeper 9% decline.
  • This results in a $78 billion exports from these key sectors as against $86.32 billion in FY 2022-23.
  • The comparable number in FY18 and FY19 stood at $90 billion and $88.14 billion respectively, as per commerce and industry ministry data.

India’s Exports from Textile Sector

• India’s textile and garments exports: During the last seven years, these have remained flat at around $35 billion.
  • Struggling to stay afloat in tough times, small and medium-scale textile industry in India is forced to shut down or let go of artisans, weavers, and workers whose livelihoods depend on the vitality of the textile trade.
• Comparing with Other Countries:
  • According to the Federation of Indian Export Organisation (FIEO), the global trade in knitted garments expanded by 6% (over the last five years) at a time when India’s exports in the segment declined.
  • According to the Global Trade and Research Initiative (GTRI), China exported $114 billion worth of garments in 2023, followed by the EU ($94.4 billion), Vietnam ($81.6 billion), Bangladesh ($43.8 billion), and India (just $14.5 billion).
  • This shows India significantly trails behind China and the EU and is also falling behind smaller countries like Bangladesh and Vietnam.
  • Vietnam and Bangladesh have gained market share on the back of free trade agreements (FTAs) and least developed countries (LDC) status that amount to 10-15% concession on duty.
• What are the Steps Taken by the Indian Government?
  • Mega Investment Textiles Parks (MITRA): To make the industry more globally competitive, the Union government had launched the MITRA programme in 2021 to increase investment and acquire a competitive edge over global competitors.
  • Remission of Duties and Taxes on Exported Products (RoDTEP): The scheme was extended to 18 items to support the textiles sector.

India’s Exports from Gems and Jewellery Sector

• The sector, which employs nearly 50 lakh people, saw exports declining by over 20% to $32.7 billion compared to $41.54 billion in FY18.
• Last year (in October), the gems and jewellery industry was forced to ban imports of rough diamonds for two months amid declining demand from large economies such as the US and China.
• The industry is facing several global headwinds such as slow growth and tightening financial conditions, and heavy indebtedness that could weaken investment and “trigger corporate defaults”.
• However, the India-UAE FTA that came into effect in May 2022 has helped gems and jewellery exports to the UAE.
  • For example, India’s gems and jewellery exports have surged nearly 40% to $8.04 billion in FY24 compared to the previous financial year after India-UAE FTA came into effect in May 2022.
• Exports are also expected to pick up after India concludes its FTA with the UK and EU.

What Challenges Lie Ahead for India's Labour-Intensive Sector Exports?

• Exporters have warned that export goods will feel the impact of the disruptions in the Red Sea area during the ongoing financial year.
• The Red Sea shipping disruptions could add 0.7 percentage points to global core goods inflation during the first half of 2024 if the recent jump in container shipping costs persists.
• Container shipping costs are two-and-a-half to three times their early December 2023 levels, prices along routes that typically go through the Suez Canal have surged nearly five-fold.

Q.1. What is the Mega Investment Textiles Parks (MITRA) scheme?

The PM MITRA scheme is Inspired by the 5F vision of - Farm to Fibre to Factory to Fashion to Foreign. It aspires to fulfil the vision of building an Aatmanirbhar Bharat and to position India strongly on the Global textiles map.

Q.2. What is the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme?

RoDTEP Scheme is a key initiative by the Government of India aimed at refunding various embedded taxes and duties on exported products.

Source: Exports from key labour intensive sectors decline 12% compared to pre-pandemic levels