20.5.25 Current Affairs

20.5.2025 -Current Affairs

1. Why a Trade Boycott of Turkey and Azerbaijan may Barely Impact India

Background Context

• After the Pahalgam massacre, Turkey and Azerbaijan supported Pakistan, prompting strong reactions in India.
• This support led to:
  • Mass cancellations of Indian tour bookings to Turkey and Azerbaijan.
  • Withdrawal of tour packages by Indian operators.
  • Online calls for boycotts of both nations.
  • Suspension of MoUs with Turkish universities by institutions like IIT Bombay, IIT Roorkee, and JNU.

Turkey–Pakistan Relations

• Strong ties exist, particularly in the defence sector.
• Turkiye: Supports Pakistan on Kashmir.
• Pakistan: Supports Turkey on Cyprus.
• SIPRI data (1995–2023): Turkiye has exported artillery, armoured vehicles, tanks, and rocket launchers to Pakistan.

Azerbaijan–Turkey Alliance

• In 2020, with Turkish backing, Azerbaijan recaptured territory from Armenia.
• In 2023, Azerbaijan gained full control, though Turkey denied direct involvement.

India’s Role in the Region

• India has armed Armenia with:
  • Surface-to-air missile systems.
  • Multiple rocket launchers.
• No official arms trade between India–Azerbaijan or India–Turkey.

Trade Impact on India

• Indian trader associations have called for a boycott of both countries.
• Crude oil is the main import from Turkey and Azerbaijan:
  • Their combined share in India’s crude imports is below 1% (past six years).
  • India is a key buyer for Azerbaijan, a third-largest destination in 2023.

Machinery Imports

• Turkey also exports:
  • Machinery and mechanical appliances (incl. nuclear boilers).
• However, Turkey’s share is only ~1% of India’s total machinery imports.
• India depends more on China and Germany for such imports.

Tourism Trends

• Indian tourists were:
  • <1% of all tourists to Turkey in 2024.
  • <6% of all tourists to Azerbaijan in 2023; rose to ~10% in 2024.
• Boycott calls came at a time of increased Indian travel to both nations.

Education Ties

• Indian students in Turkey and Azerbaijan:
  • Fewer than 100 in 2017.
  • Rose to 777 by January 2024 (a 7-fold increase).

Conclusion

• Despite rising people-to-people ties, economic and strategic dependence on Turkey and Azerbaijan is minimal for India.
• Even with an official trade ban, India is unlikely to suffer significant losses.

2. The Ongoing Oil Price Tensions

Global Oil Demand Trends

• Oil demand is plateauing: The International Energy Agency (IEA) forecasts only 0.73% growth in 2025, despite falling prices.
• “Peak demand” theory (oil consumption peaking before 2030) now appears increasingly realistic.
• Contributing factors:
  • Global economic slowdown.
  • Electric vehicle boom, especially in China.
  • Climate change mitigation efforts.

OPEC+ Production Strategy

• On May 3, OPEC+ announced a production hike of 4,11,000 barrels/day (bpd) starting June.
• This is the third consecutive increase, partially undoing the 2.2 million bpd “voluntary” cuts from 2023.
• Expected full reversal of cuts by October 2025.
• Market response:
  • Brent crude price dropped ~2% to $60.23/barrel, lowest since pandemic.
  • Later stabilized to $65/barrel due to external developments (e.g., U.S.-China trade, U.S.-Iran talks).

Post-COVID Oil Market Dynamics

• K-shaped recovery post-COVID led to weak oil demand growth.
• Simultaneous entry of new producers: U.S. shale, Brazil, Guyana.
• OPEC+ responded with massive cuts:
  • Initial 5 million bpd cut.
  • Followed by 2.2 million bpd voluntary cuts.
• Yet, prices kept sliding.

Saudi Arabia’s Role

• Took the largest production cut (~3 million bpd).
• Frustrated by non-compliant OPEC+ members (Iraq, UAE, Kazakhstan, Nigeria).
• Revived “price war” strategy seen earlier in 1985-86, 1998, 2014-16, and 2020.
• Goal: Discipline overproducers by flooding market and driving down prices.

Current Challenges in Oil Market

• Saudi Arabia’s constraints:
  • Smaller financial cushion compared to previous wars.
  • Market now has many independent producers.
  • High investment already made in deep-sea oil projects.
• Sanctioned producers (Russia, Iran, Venezuela) might return to market soon.
• Weak global GDP outlook:
  • S&P forecasts: 2.2% (2025), 2.4% (2026).
  • WTO forecasts 0.2% contraction in world trade (2025).

Strategic Calculations Behind Saudi Move

• Possibly a move to maximize revenue before long-term decline.
• Anticipating:
  • End of sanctions on major producers.
  • U.S. under Trump possibly launching “Drill, Baby, Drill”.
• Political motive:
  • Coincides with President Trump’s state visit to Saudi Arabia.
  • Aims to show compliance with U.S. pressure for lower prices (inflation control).
  • $100+ billion arms deals and defence assurances may be incentives.

Impact on India

• India is the world’s third-largest crude importer.
• Spent $137 billion in 2024-25 on crude imports.
• India’s demand rose 3.2%, four times the global average.
• 25% of global demand growth in 2025 is projected to come from India.

Mixed Consequences for India

• Benefits:
  • Every $1 drop in crude saves India about $1.5 billion/year.
• Risks:
  • Oil-exporting partners weaken economically, affecting:
    • Bilateral trade.
    • Investment flows.
    • Remittances (~$50 billion/year from the Gulf).
  • Decline in petroleum product exports due to low global prices.
  • Tax revenues from the oil sector shrink.
  • Job loss risks for Indian workers in Gulf countries.

Conclusion

• The oil price battle, though low-intensity, could be more economically disruptive than military conflicts.
• For India, the situation offers short-term economic gains, but poses long-term strategic and economic challenges.
• Unless India diversifies beyond hydrocarbons, the reduced energy synergy with Gulf nations may become the “new normal.”

3. RBI’s Revised Draft Directions on RE Investments in AIFs

Background and Context

• The Reserve Bank of India (RBI) has issued revised draft directions on investments by Regulated Entities (REs) in Alternate Investment Funds (AIFs).
• The move follows RBI’s earlier regulatory steps that improved financial discipline among REs regarding AIF investments.
• SEBI (Securities and Exchange Board of India) had also released guidelines requiring specific due diligence on AIF investors and investments.

Investment Limits

• Single RE investment in any AIF scheme: Capped at 10% of the scheme’s corpus.
• Combined investment by all REs in an AIF scheme: Capped at 15% of the corpus.
• No restrictions on investments up to 5% of the AIF corpus by any RE.

Provisioning Requirement

• If:
  • An RE’s investment exceeds 5% of an AIF scheme’s corpus, and
  • That AIF scheme downstreams debt investments into a debtor company of the RE,
  • The RE must make a 100% provision for the proportionate exposure.

4. Amit Shah Launches e-Zero FIR Initiative

Launch and Purpose

• Union Home Minister Amit Shah launched the e-Zero FIR initiative on a pilot basis in Delhi.
• Introduced by the Indian Cybercrime Coordination Centre (I4C) under the Ministry of Home Affairs (MHA).
• Aim: Swift registration and investigation of high-value financial cybercrime complaints.

Automatic FIR Registration

• Cybercrime complaints with a fraud value above ₹10 lakh reported via:
  • 1930 cybercrime helpline, or
  • cybercrime.gov.in portal
• Will be automatically converted into FIRs under the new system.

Nationwide Expansion Plan

• The pilot is currently active in Delhi.
• Will be expanded nationwide soon to improve the speed and efficiency of cybercrime investigation.

Objective Behind the Initiative

• Designed to address the challenges faced by victims of financial cybercrime in recovering stolen funds.
• Part of a broader strategy to enhance cybercrime response in India.

Technological Integration

• Combines multiple digital systems:
  • I4C’s National Cybercrime Reporting Portal
  • Delhi Police’s e-FIR system
  • National Crime Record Bureau’s Crime and Criminal Tracking Network and Systems (CCTNS)

5. Key Findings from the LibTech India Report on MGNREGS (2024–25)

Increased Coverage but Decline in Delivery

• Registered households under MGNREGS increased by 8.6%:
  • From 13.80 crore (2023–24) to 14.98 crore (2024–25).
• However, person days dropped by 7.1%, indicating less employment delivered.
• Only 7% of households received the full 100 days of employment as guaranteed by the Act.

Fall in Average Person Days

• Average person days per household fell by 4.3%:
  • From 52.42 days (2023–24) to 50.18 days (2024–25).
• This reveals a mismatch between coverage and actual employment delivery.

Regional Variations in Person Days

• States with largest decline in person days:
  • Odisha: –34.8%
  • Tamil Nadu: –25.1%
  • Rajasthan: –15.9%
• States with increase in person days:
  • Maharashtra: +39.7%
  • Himachal Pradesh: +14.8%
  • Bihar: +13.3%

Budget Allocation and Wage Delays

• Key reasons for decline:
  • Inadequate budget allocation.
  • Extraordinary delays in wage payments.
• Recommended budget (PAEG for 2022–23): ₹2.64 lakh crore.
• Actual budget allocation (2024–25): ₹86,000 crore (unchanged from previous year).
• Parliamentary Standing Committee has expressed concern over insufficient funds.

Worker Deletion and Addition Trends

• Worker deletions (2022–2024): 7.8 crore.
• Worker additions in same period: 1.92 crore.
• Positive reversal in 2024–25:
  • Deletions: 99 lakh.
  • Additions: 2.22 crore.

Summary of Concerns

• While coverage is expanding, actual work delivered is declining.
• Budget constraints and payment delays undermine effectiveness.
• Regional disparities and implementation-level issues remain unaddressed.
• Raises serious questions about systemic bottlenecks in the scheme.