The Neighborhood First Policy is a key component of India's foreign policy, emphasizing the strategic and diplomatic importance of strengthening ties with neighboring countries.

Overview of the Neighborhood First Policy

1. Objective
   • The policy aims to prioritize and enhance India’s relationships with its neighboring countries in South Asia. It focuses on fostering strong, cooperative, and mutually beneficial relationships in the region.
2. Key Principles
   • Diplomatic Engagement: Regular high-level engagements and dialogues with neighboring countries.
   • Economic Cooperation: Promoting trade, investment, and economic development in the region.
   • Security Collaboration: Working together on regional security issues and counter-terrorism.
   • Cultural and People-to-People Ties: Enhancing cultural exchanges and people-to-people connections.

Recent Developments

• Invitation to Neighboring Leaders: When Narendra Modi took oath as Prime Minister for his third term, he invited leaders from several neighboring countries—Sri Lanka, Mauritius, Maldives, Bangladesh, Nepal, Bhutan, and Seychelles—to his inauguration ceremony. This gesture underscored the importance India places on its neighborhood and signaled a commitment to strengthening bilateral ties.

The Neighborhood First Policy has seen several successful initiatives and collaborations under various domains, including economic cooperation, infrastructure development, humanitarian assistance, energy, and health.

1. SAARC Initiatives

• SAARC Satellite
  • Purpose: Launched in 2017, the SAARC Satellite aims to provide communication, broadcasting, and meteorological services to member countries. It enhances regional connectivity and information sharing.
• SAARC Development Fund (SDF)
  • Purpose: Established to provide financial assistance for regional projects. It focuses on areas such as education, health, and agriculture to support development within the SAARC region.

2. Economic Cooperation and Trade

• Bilateral Trade Agreements
  • Objective: India has negotiated bilateral trade agreements with countries like Bhutan, Nepal, Sri Lanka, and Bangladesh to enhance trade relations and economic collaboration.
• Border Haats
  • Purpose: Local markets set up along the borders with Bangladesh to boost trade and support local economies. These markets facilitate trade in goods between border communities.

3. Infrastructure Development

• India-Bangladesh Friendship Pipeline
  • Purpose: This pipeline supplies high-speed diesel (HSD) from India to Bangladesh, enhancing energy security and infrastructure collaboration.
• BBIN Motor Vehicles Agreement
  • Objective: Facilitates road connectivity between Bangladesh, Bhutan, India, and Nepal, promoting easier transportation and trade across borders.
• Kaladan Multimodal Transit Transport Project
  • Purpose: Improves connectivity between India and Myanmar through a combination of sea, river, and road transport, enhancing regional trade routes.
• India-Myanmar-Thailand Trilateral Highway
  • Objective: Enhances road connectivity between India, Myanmar, and Thailand, promoting trade and economic integration in Southeast Asia.
• Rail Links
  • Purpose: Revives old rail links and establishes new ones with Bangladesh and Nepal to boost connectivity and economic ties.

4. Humanitarian Assistance and Disaster Relief (HADR)

• Operation Maitri
  • Purpose: A humanitarian operation in Nepal after the 2015 earthquake, providing relief supplies and support to affected communities.
• Cyclone Relief
  • Objective: Providing assistance to neighboring countries, such as Bangladesh, affected by natural disasters like Cyclone Fani.

5. Energy Cooperation

• Hydropower Projects
  • Collaboration: Working with Bhutan and Nepal to develop hydropower projects that contribute to regional energy security and economic development.
• Cross-Border Electricity Trade
  • Objective: Agreements for the trade of electricity with Bangladesh, Bhutan, and Nepal to enhance regional power grid integration and energy availability.

6. Health Cooperation

• COVID-19 Assistance
  • Initiative: The Vaccine Maitri initiative provided medical supplies and vaccines to neighboring countries during the COVID-19 pandemic, demonstrating India's commitment to regional health security.
• SAARC COVID-19 Emergency Fund
  • Purpose: Contributed to the SAARC COVID-19 Emergency Fund to support the region's response to the pandemic and improve healthcare infrastructure.

Key Initiatives and Achievements under India’s Neighborhood First Policy

Energy Cooperation

India-Nepal Energy Cooperation

• Electricity Supply and Trade
  • Power Exchange Agreement: Facilitates electricity trade between India and Nepal.
  • Dhalkebar-Muzaffarpur Transmission Line: Transfers up to 600 MW of electricity, enhancing energy security and stability in Nepal.
• Hydropower Projects
  • Arun III Hydropower Project: Aims to generate 900 MW, with significant exports to India.
  • Upper Karnali Hydropower Project: Expected to produce 900 MW, developed by the GMR Group.

India-Bhutan Energy Cooperation

• Hydropower Projects
  • Tala Hydroelectric Project: A 1,020 MW project that exports power to India.
  • Chukha Hydroelectric Project: A 336 MW project contributing to Bhutan’s economy through power exports.
  • Punatsangchhu-I and II Projects: Ongoing projects with capacities of 1,200 MW and 1,020 MW, respectively.
• Electricity Trade
  • Long-Term Power Purchase Agreements: Ensures stable revenue for Bhutan and a reliable energy supply for India.

India-Bangladesh Energy Cooperation

• Cross-Border Electricity Supply
  • Bheramara-Baharampur Transmission Line: Exports around 1,160 MW of electricity to Bangladesh.
  • Tripura-Bangladesh Power Supply: Supplies 160 MW of power from Tripura to Bangladesh.

India-Myanmar Energy Cooperation

• Hydropower and Renewable Energy Projects
  • Tamanthi and Shwezaye Hydropower Projects: Focus on generating renewable energy.
  • Solar Energy Projects: Exploration of solar energy development opportunities in Myanmar.

India-Sri Lanka Energy Cooperation

• Renewable Energy Initiatives
  • Solar and Wind Projects: Collaboration on renewable energy projects.
  • Trincomalee Oil Tank Farm: Modernizing and developing the oil tank farm to enhance storage and security.

Infrastructure and Connectivity Projects

India-Nepal

• Integrated Check Posts (ICPs): Facilitate smooth trade and movement.
• Motihari-Amlekhgunj Petroleum Pipeline: First cross-border petroleum pipeline in South Asia.

India-Bangladesh

• Maitree Express and Bandhan Express: Enhance rail connectivity.
• Agartala-Akhaura Rail Link: Connects Agartala with Akhaura, boosting trade and people-to-people contact.

India-Myanmar

• India-Myanmar-Thailand Trilateral Highway: Enhances connectivity between the three countries.
• Kaladan Multi-Modal Transit Transport Project: Connects Kolkata with Sittwe port in Myanmar.

Economic Assistance and Development Aid

Bhutan

• Economic Assistance: Significant aid for developmental projects and infrastructure.

Sri Lanka

• Housing Projects: Funded housing for Tamil refugees.
• Emergency Aid: Provided during natural disasters and economic crises.

Maldives

• Greater Male Connectivity Project: Building bridges and causeways.
• COVID-19 Assistance: Supplied medical supplies and vaccines.

Security Cooperation

Bangladesh

• Counter-Terrorism Cooperation: Joint efforts to combat cross-border terrorism.
• Coastal Security: Maritime security collaboration.

Myanmar

• Joint Operations: Targeted insurgent groups along the border.

Humanitarian Assistance

COVID-19 Pandemic Assistance

• Vaccine Diplomacy: Vaccine Maitri Initiative provided millions of doses.
• Medical Supplies: Essential supplies to neighboring countries.

Disaster Relief and Emergency Assistance

• Nepal (2015 Earthquake): Operation Maitri provided extensive aid.
• Sri Lanka: Relief during floods and cyclones.
• Maldives (2014 Water Crisis): Supplied potable water and desalination plants.
• Bangladesh (Cyclone Amphan): Provided relief and rehabilitation support.

Development Assistance and Capacity Building

• Bhutan: Hydropower projects aiding economic and energy development.
• Myanmar: Development projects including roads and schools.
• Afghanistan: Infrastructure projects and educational scholarships.

Cultural and People-to-People Initiatives

Nepal

• Scholarships and Educational Exchanges: Scholarships for Nepalese students.
• Bharat-Nepal Maitri Bus Service: Promotes tourism and connectivity.

Sri Lanka

• Tourism Promotion: Facilitating Buddhist pilgrimages.
• Educational Grants: Scholarships and training programs.

The Neighborhood First Policy plays a pivotal role in India’s foreign policy by fostering close cooperation with neighboring countries. This approach is significant for several strategic, economic, and diplomatic reasons:

1. Countering Chinese Influence in the Indian Ocean Region

• Strategic Balance: By strengthening ties with neighboring countries, India can create a counterbalance to China's growing presence in the Indian Ocean. Close regional alliances can help mitigate China's influence and secure India’s strategic interests in the region.

2. Support in Multilateral Forums

• Global South Representation: Strong relations with neighboring countries enhance India’s leadership role in representing the Global South in international forums. This solidarity helps India advocate for the interests of developing nations and fosters cooperation on global issues such as climate change, trade, and development.

3. Ensuring Territorial Integrity and Tackling Separatist Threats

• Regional Security: Effective cooperation with neighboring countries helps address security challenges and separatist threats, particularly in sensitive border areas. A stable neighborhood contributes to maintaining India's territorial integrity and internal security.

4. Increasing Maritime Security

• Transnational Security: Enhanced maritime security cooperation with neighboring countries allows India to tackle transnational security threats, such as piracy, smuggling, and illegal fishing. This improves overall maritime security in the Indian Ocean and surrounding waters.

5. Addressing Energy Security

• Energy Imports: Close ties with neighbors are crucial for securing energy supplies, especially through sea routes. Collaborative energy projects, such as cross-border pipelines and electricity trade agreements, help ensure a stable and secure energy supply for India.

6. Bridging Development Deficits

• Northeastern Development: Strengthening relations with neighboring countries aids in addressing development deficits in India’s northeastern states. By improving connectivity and trade, these initiatives contribute to regional development and help narrow disparities within India.

7. Leveraging Soft Power Diplomacy

• Cultural and Historical Ties: India’s deep cultural and historical connections with its neighbors enhance its soft power. Strong people-to-people ties, cultural exchanges, and diplomatic engagements solidify India’s influence in the region and promote mutual understanding.

The Neighborhood First Policy is instrumental in shaping India's foreign relations, but it faces several challenges that can impact its effectiveness and implementation.

1. Geopolitical Tensions

• Border Disputes: Long-standing border disputes, such as those with Pakistan and China, can strain diplomatic relations and complicate cooperation. These disputes often lead to tensions and mistrust, making it challenging to pursue collaborative initiatives.
• Political Disagreements: Differences in political systems, governance, and national interests can create friction between India and its neighbors. Political instability or changes in leadership within neighboring countries can also affect the continuity and effectiveness of bilateral engagements.

2. Implementation Issues

• Logistical Challenges: Cross-border projects often face logistical hurdles, including infrastructure constraints, transportation issues, and the complexities of coordinating with multiple stakeholders. These challenges can delay or impede project implementation.
• Bureaucratic Hurdles: Administrative and bureaucratic processes in both India and neighboring countries can slow down decision-making and project execution. These issues can affect the timely and efficient realization of cooperative initiatives.

3. Economic Differences

• Development Disparities: Significant economic differences between India and its neighboring countries can affect the balance and impact of cooperation. For example, the economic needs and capacities of less developed neighbors may differ greatly from India’s, which can lead to uneven benefits and expectations.
• Trade Imbalances: Economic cooperation might lead to trade imbalances where one country benefits more than the other. Addressing these imbalances requires careful negotiation and adjustment to ensure mutual gains.

Additional Challenges

• Regional Rivalries: Competing regional interests and rivalries can affect the implementation of cooperative projects. For instance, rivalries between neighboring countries might spill over into bilateral relations with India, complicating diplomatic efforts.
• Security Concerns: Regional security concerns, such as terrorism and insurgency, can disrupt cooperative projects and hinder effective collaboration. Ensuring security while pursuing joint initiatives is a continuous challenge.
• Public Perception: Domestic perceptions and political opinions in neighboring countries can influence the success of the policy. Negative public sentiment or opposition to cooperation with India can affect bilateral relations and project outcomes.

Conclusion

While the Neighborhood First Policy aims to strengthen India’s relationships with its neighboring countries, addressing these challenges is crucial for its success. Effective management of geopolitical tensions, overcoming implementation issues, and navigating economic disparities are essential for achieving the policy’s objectives and fostering a stable and prosperous regional environment. Engaging in diplomatic dialogue, enhancing cross-border infrastructure, and fostering mutual understanding can help mitigate these challenges and promote effective cooperation.

Biocovers are a fascinating and innovative approach to managing methane emissions from landfills.

What are Biocovers?

Biocovers are a sustainable technology used to control methane emissions from landfills. They are designed to reduce greenhouse gases, primarily methane (CH₄), by converting them into less harmful carbon dioxide (CO₂). This process helps mitigate the environmental impact of landfills.

Key Features

• Sustainable Technology: Utilizes waste materials, making it an eco-friendly option.
• Methane Reduction: Functions as a biological filter to capture and convert methane into carbon dioxide.
• Coverage: Typically spread over the entire landfill area to maximize effectiveness.

Components of Biocovers

1. Gas Dispersion Layer:
   • Purpose: Allows landfill gas (LFG) to migrate upwards through the cover.
   • Materials: Usually made from gravel, broken glass, or coarse sand.
   • Function: Ensures that gas can move through the cover and reach the oxidation layer efficiently.
2. Oxidation Layer:
   • Purpose: Provides a habitat for methanotrophic bacteria that convert methane into carbon dioxide.
   • Materials: Composed of mature compost, soil with organic amendments, or wood chips.
   • Function: The heart of the biocover system, where the actual biological conversion of methane occurs.

How it Works

• Methane Capture: Landfill gas is captured by the gas dispersion layer.
• Biological Conversion: Methane then passes through the oxidation layer, where it is oxidized by methanotrophic bacteria. This bacteria thrives in the organic materials and converts methane into carbon dioxide and water.
• Emission Reduction: The result is a significant reduction in methane emissions, which is a potent greenhouse gas.

Benefits

• Greenhouse Gas Reduction: Effectively lowers methane emissions, contributing to climate change mitigation.
• Resource Utilization: Utilizes waste materials, which helps manage and recycle landfill byproducts.
• Cost-Effective: Can be a cost-effective solution compared to other methane management technologies.

Application in Estonia

Given Estonia's commitment to sustainable practices and efficient waste management, biocovers could serve as an effective model for methane control in the country. The use of local materials and innovative technology aligns well with Estonia’s environmental goals and could help improve landfill management practices.

Why in the News? The Reserve Bank of India (RBI) has updated the Priority Sector Lending (PSL) norms to enhance credit flow in economically disadvantaged districts where average loan sizes are low. This revision aims to encourage more small loans in areas that traditionally have lower access to credit.

Key Changes in PSL Guidelines

1. Incentive Framework:
   • Objective: To boost lending in districts with lower credit availability.
   • Mechanism: Starting from FY25, fresh priority sector loans issued in districts with low credit flow (defined as less than Rs 9,000 per person) will receive more weight in PSL calculations—specifically, 125% of their value.
2. Disincentive Framework:
   • Objective: To reduce the emphasis on lending in districts with already high loan availability.
   • Mechanism: In districts where loan availability exceeds Rs 42,000 per person, loans will be assigned a weight of 90% for PSL purposes.
3. Other Districts:
   • Districts not falling into the categories of low credit availability or high loan sizes will maintain the current PSL weight of 100%.
4. MSME Loans:
   • Classification: All bank loans to Micro, Small, and Medium Enterprises (MSMEs) will now qualify for PSL classification, broadening the scope for what constitutes priority sector lending.

Objectives of the Revised Norms

• Enhance Credit Distribution: By incentivizing loans in under-served districts and applying disincentives in areas with ample credit, the RBI aims to achieve a more balanced distribution of credit.
• Support Economic Development: Targeting economically disadvantaged regions helps to stimulate local economic growth and support small-scale enterprises.
• Encourage Financial Inclusion: By focusing on smaller loans in less-served areas, the RBI seeks to improve financial inclusion and support broader economic development.

About PSL

Priority Sector Lending (PSL) is a framework designed to ensure that critical sectors of the economy receive adequate credit.

Objective of PSL

1. Support Vulnerable Groups: To provide access to credit for underprivileged and economically disadvantaged sections of society.
2. Promote Key Sectors: To channelize a portion of bank credit into sectors deemed essential for economic development, which may not receive sufficient credit through conventional banking channels.

Background and History

• Formalization (1972): PSL was established to direct credit flow towards sectors that, despite being creditworthy, struggled to secure financing from formal financial institutions.
• Gadgil Committee (1969): Recommended an Area Approach, leading to the implementation of the 'Lead Bank Scheme' to prioritize credit in underdeveloped regions.
• Ghosh Committee (1982): Revised the categories for priority sectors to better align with changing economic needs and priorities.

Key Sectors Under PSL

Typically, PSL covers sectors such as:

1. Agriculture: Includes credit for farming activities, agro-processing, and rural infrastructure.
2. Small-scale Industries (SSI): Funding for small and medium-sized enterprises that contribute significantly to employment and economic activity.
3. Education: Loans for educational institutions and individuals for educational purposes.
4. Housing: Credit for construction and purchase of homes, especially for low-income groups.
5. Health: Funding for healthcare facilities and services.

Impact

• Economic Inclusion: Helps bridge the gap between formal banking services and marginalized or economically weaker sections.
• Regional Development: Directs credit to underdeveloped areas, supporting balanced regional growth.
• Sectoral Growth: Ensures that critical sectors like agriculture and small industries receive necessary funding to spur growth and development.

Overall, PSL plays a crucial role in fostering equitable growth by ensuring that essential sectors and vulnerable populations have access to necessary financial resources.

Positive Impact of Priority Sector Lending (PSL) on the Indian Economy

1. Financial Inclusion:
   • Broadening Reach: PSL norms mandate that credit be extended to underbanked populations, including small and marginal farmers (SMFs), women, and weaker sections. This inclusion helps integrate these groups into the formal financial system, promoting broader economic participation and stability.
2. Support to Agriculture:
   • Growth in Agricultural Credit: From 2000 to 2020, agricultural credit in India grew at a compound annual growth rate (CAGR) of 19.81%. The requirement for commercial banks to allocate 18% of their lending to agriculture has been pivotal in this increase, supporting farmers with the necessary funds to enhance productivity and stability in the sector.
3. Promotion of MSMEs:
   • Job Creation and Local Economic Boost: PSL facilitates access to credit for micro, small, and medium enterprises (MSMEs), which are crucial for job creation and local economic development. By easing credit flow to these enterprises, PSL supports entrepreneurship and stimulates economic growth in various regions.
4. Income Augmentation:
   • Enhanced Earnings: Case studies, such as those from Andhra Pradesh, have demonstrated that beneficiaries of PSL often experience increased income levels. Access to credit helps in improving livelihoods and reducing poverty.

Issues with PSL

1. Non-Performing Assets (NPAs):
   • Negative Impact on Banks: The PSL requirements can lead to a higher incidence of NPAs. Studies have indicated that PSL might be associated with increased NPA generation, impacting the financial health of banks and leading to higher loan write-offs.
2. Increased Costs:
   • Administrative and Transactional Burdens: Compliance with PSL norms often involves higher administrative and transactional costs for banks. These increased costs can strain bank resources and affect their profitability.
3. Other Challenges:
   • Low Bank Profitability and Government Interference: PSL can lead to lower profitability for banks due to the mandatory nature of lending and the associated risk of NPAs. Additionally, increased government intervention in credit allocation might affect operational efficiency and decision-making autonomy of banks.

Way Forward

1. Strengthen Microfinance Institutions (MFIs) and Promote Small Finance Banks:
   • Enhanced Outreach: MFIs have the potential to extend credit more effectively in rural and semi-urban areas through their established distribution networks and "last mile connectivity" models. Supporting MFIs and encouraging the formation of small finance banks can help bridge the credit gap in underserved regions.
2. Use of Technology:
   • Digital Solutions: Leveraging technology, such as mobile banking apps for loan approvals, can streamline the credit delivery process, reduce costs, and improve access to PSL, particularly in remote and rural areas. Technology can enhance efficiency and reduce transaction costs.
3. Develop Robust Credit Infrastructure and Risk Assessment Tools:
   • Improved Evaluation: Creating a strong credit infrastructure and sophisticated risk assessment tools can help better evaluate borrower creditworthiness and minimize the occurrence of NPAs. Enhanced credit evaluation mechanisms will support more informed lending decisions and reduce financial risks associated with PSL.

By addressing these issues and implementing the suggested strategies, the effectiveness of PSL can be enhanced, leading to more sustainable benefits for the Indian economy and its diverse sectors.