MAINS Current Affairs includes Policy Predictability for India’s Viksit Bharat Vision & Stable India-China ties will help build ‘multi-polar Asia’: EAM

GOVERNANCE

1. Policy Predictability for India’s Viksit Bharat Vision

Context: As India aspires to become a developed nation (Viksit Bharat) by 2047, recent discussions on economic growth have highlighted the importance of policy predictability, stable taxation, transparent regulations, and efficient trade facilitation for attracting long-term domestic and foreign investments.

A predictable policy environment is increasingly seen as a critical pillar for sustaining high economic growth, improving investor confidence, integrating with global value chains, and achieving India’s long-term development goals.

Policy Predictability: What is it and Why is it important?

• Policy predictability is a governance system where laws, taxes, regulations and administrative decisions are clear, consistent, transparent, and stable.
• It allows companies to assess risks accurately, make long-term investment decisions and integrate into global value chains.
• India wants to be a developed country by 2047and that means maintaining 8-9 per cent annual GDP growth.
  • This would imply an increase in the investment rate from about 30% of GDP to nearly 40%.
• For this domestic savings alone are not enough. The country needs to attract Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI)and expand exports.
• But investors want both market potential and policy certainty. Uncertainty raises the cost of doing business, and effectively discourages long-term investments.

Key Issues and Challenges

1. Tax Uncertainty

• Frequent disputes and varying interpretations of tax laws have affected investor confidence.
• Long-drawn litigation creates uncertainty and increases compliance costs.

Examples

• Vodafone retrospective tax dispute
• Tiger Global capital gains tax dispute

These cases have highlighted concerns regarding tax certainty and policy stability.

 High Taxation for Foreign Portfolio Investors (FPIs)

• India’s tax rates on Foreign Portfolio Investors (15–24%) are relatively higher than several competing emerging economies.
• Higher tax burdens reduce India’s attractiveness for global capital flows.

Delayed Dispute Resolution

Lengthy litigation:

• Locks up financial resources.
• Increases legal costs.
• Delays investment decisions.
• Weakens ease of doing business.

Efficient dispute resolution remains a major requirement.

2. Customs and Regulatory Uncertainty

• Differences in customs interpretation often lead to inconsistent regulatory outcomes.

Example

Different advance rulings issued to Volvo and VinFast regarding the classification of imported EV components as:

• Completely Knocked Down (CKD),
• Semi-Knocked Down (SKD), or
• Completely Built Unit (CBU)

illustrate inconsistencies in customs administration.

The absence of transparent and publicly available advance rulings further increases regulatory uncertainty.

3. Trade Facilitation and Digital Integration Challenges

Importers currently interact separately with multiple government agencies such as:

• Customs;
• Directorate General of Foreign Trade (DGFT);
• Goods and Services Tax (GST) authorities;
• Banks; and
• Border Regulatory Agencies.

This leads to:

• Multiple registrations;
• Repeated documentation;
• Delayed customs clearance; and
• Increased compliance burden.

Delays in importing raw materials and machinery increase working capital requirements and reduce export competitiveness.

4. Limited Risk-Based Customs Administration

India’s customs administration still relies considerably on physical inspections.

Major challenges include:

• Cargo clearance delays;
• High transaction costs;
• Limited scanning infrastructure;
• Inadequate testing facilities; and
• Limited use of data analytics.

Globally, advanced customs systems increasingly rely on risk-based inspections, allowing trusted traders to receive faster clearance while focusing enforcement efforts on high-risk consignments.

Recent Efforts and Initiatives

• The Government has carried out a number of reforms in the area of predictability and trade facilitation:
  • National Single Window System (NSWS)to make business approvals easier with digital integration.
  • Faceless Assessmentunder Customs to improve transparency.
  • Expansion of Authorised Economic Operator (AEO)programme for trusted traders.
  • PM Gati Shakti National Master Planto improve logistics efficiency.
  • Budget announcements on interconnected digital approval systems, Customs Integrated System, greater use of non-intrusive cargo scanning, and longer validity of advance rulings.
  • Focus on Ease of Doing Business,digitisation and export competitiveness with initiatives like Make in India and National Logistics Policy.
• These steps are in line with the government’s larger objective of creating a transparent and tech-enabled regulatory eco-system.

Way Forward: Institutionalising Policy Stability

• India should move beyond periodic reforms and institutionalise a stable, transparent and predictable policy framework to sustain high growth and attract long-term investments.
• A stable and predictable tax regime should be maintained by avoiding retrospective taxation and reducing ambiguity in the interpretation of tax laws. Faster resolution of tax disputes, filling vacancies in appellate bodies and strengthening administrative capacity will reduce litigation and improve investor confidence.
• The National Single Window System (NSWS) should evolve into a truly integrated platform based on the “submit once” principle, enabling seamless data sharing among Customs, DGFT, GST, Corporate Affairs and banks, thereby reducing duplication and compliance burdens.
• To eliminate customs-related uncertainty, the government should publish clear and uniform regulatory guidelines on the classification of Completely Knocked Down (CKD), Semi-Knocked Down (SKD) and Completely Built Unit (CBU) imports, including well-defined criteria for multi-port and split consignments.
• India should also expand risk-based customs administration by deploying AI-driven risk assessment engines, modern cargo scanners and non-intrusive inspection technologies to expedite clearance for compliant traders while focusing enforcement on high-risk consignments.
• Transparency can be further strengthened by issuing time-bound advance rulings, publishing all rulings along with reasons for any deviations, and establishing clear precedents to ensure consistency in regulatory decision-making.
• Finally, the government should publish service delivery standards and performance metrics for regulatory approvals, assessments and appeals. Such measures will improve accountability, reduce administrative delays and create a more predictable business environment, thereby supporting higher investment, export competitiveness and the realization of Viksit Bharat@2047.

Conclusion

Policy predictability is a fundamental requirement for achieving the vision of Viksit Bharat@2047. Stable taxation, transparent regulations, efficient customs administration and seamless trade facilitation create an environment in which businesses can invest confidently, innovate and expand.

By institutionalising policy certainty, strengthening dispute resolution, leveraging digital governance and simplifying regulatory processes, India can significantly enhance investor confidence, attract greater domestic and foreign investment, integrate more effectively into global value chains and sustain the high economic growth necessary to emerge as a developed nation by 2047.

INTERNATIONAL

2. Stable India-China ties will help build ‘multi-polar Asia’: EAM

Context: India’s External Affairs Minister (EAM) held discussions with his Chinese counterpart on the normalisation of bilateral relations and stated that stable India–China relations are essential for building a “multi-polar Asia” and a “multi-polar world.”

• The statement came alongside the Quad Foreign Ministers’ Meeting (Australia, India, Japan and the United States) held on the sidelines of the 59th ASEAN Foreign Ministers’ Meeting in the Philippines, reaffirming support for a Free, Open and Inclusive Indo-Pacific.
• The developments indicate India’s dual approach of engaging China through dialogue while strengthening strategic partnerships in the Indo-Pacific.

Major Highlights

• External Affairs Minister emphasised that stable India–China relations are crucial for promoting a multi-polar Asia and a multi-polar world.
• The Quad Foreign Ministers reiterated their commitment to:
  • A Free, Open and Inclusive Indo-Pacific;
  • Rule-based international order;
  • Freedom of navigation and overflight;
  • Respect for sovereignty and international law.
• The engagement reflects India’s strategy of maintaining dialogue with China while simultaneously strengthening partnerships with like-minded countries.

India–China Relations: An Overview

• India and China are two ancient civilizations and major emerging economies sharing a long history of cultural, economic and political interactions.
• In 2025, both countries celebrated 75 years of diplomatic relations, marking an important milestone in bilateral engagement.

Despite persistent strategic differences, the relationship remains significant due to:

• Shared borders;
• Economic interdependence;
• Regional influence;
• Global governance issues; and
• Cooperation in multilateral forums.
• Historical Tensions:
  • The relations have been strained since the 1962 Sino-Indian war,and further deteriorated by recent clashes and mistrust.
  • In 2020, the clash between both armies in Galwan Valley further strained the relationship.
  • India restricted Chinese investments, banned Chinese apps, and halted flights to China.
• Trade Relations: In 2025, bilateral trade between China and India reached a record high of $155.6 billion, registering a year-on-year growth of over 12%. Despite tensions, economic ties continue to grow.
• Ongoing Mechanisms: Despite tensions, mechanisms like the Special Representatives (SR) and Working Mechanism for Consultation and Coordination (WMCC) have been in place to address the boundary issue.
• Recent Developments:
  • 2024 Disengagement: India and China announced successful disengagement in eastern Ladakh.
  • October 2024 Meeting: PM Modi and President Xi Jinping emphasized “mutual trust, mutual respect, and mutual sensitivity.”
  • In 2025 both Nations resumed direct flights and the Indian PM also visited China for the SCO summit.

Panchsheel Agreement 

• In 1954, India recognised Tibet as part of China, and both countries signed the Panchsheel Agreement.
• The Panchsheel Agreementstated the five principles as:
  • Mutual respect for each other’s territorial integrity and sovereignty.
  • Mutual non-aggression.
  • Mutual non-interference in each other’s internal affairs.
  • Equality and cooperation for mutual benefit.
  • Peaceful co-existence.
• It was designed to promote trade and friendly relations, forming the basis of the bilateral ties.
  • With this, India assumed that it had settled its northern border.
• In 2025the Chinese President underscored that Panchsheel must be cherished and promoted by the two countries.
  • It came as India and China reset their ties and PM Modi visited China after seven years.

Areas of Concern

• Ongoing Border Tensions:
  • The unresolved border dispute spans over 2,000 miles, marked by frequent clashes that have strained the relationship.
• Military Standoff and Infrastructure Build-up: Large-scale troop deployment, rapid infrastructure construction, and militarisation along the LAC by both sides have increased the risk of escalation.
• China–Pakistan Nexus: Deepening strategic cooperation between China and Pakistan, especially under the China–Pakistan Economic Corridor (part of the Belt and Road Initiative) which passes through the Indian territory of Pakistan-occupied Kashmir.
• Trade Imbalance: India faces a significant trade deficit with China, with heavy dependence on Chinese imports in sectors such as electronics, APIs (pharmaceuticals), telecom equipment, and solar panels.
• China’s growing presence in the Indian Ocean Region: Sri Lanka: China’s presence at Hambantota Port and investments in an oil refinery raise concerns in India.
  • Nepal: China’s investments in infrastructure (e.g., Pokhara airport) challenge India’s strategic position.
  • Bangladesh: China’s growing influence, including loan agreements, threatens India’s regional influence.
  • Myanmar:China’s deepening ties with Myanmar, including the China-Myanmar Economic Corridor, strengthen its presence in India’s backyard.

India’s Efforts to Address these concerns

• Strengthening Military Preparedness:Enhanced troop deployment and infrastructure along the LAC, induction of advanced weapons systems, and improved surveillance in border areas like Ladakh and Arunachal Pradesh.
• Strategic Partnerships in Indo-Pacific: Active participation in the Quadrilateral Security Dialogue (Quad) and deeper defence cooperation with the US, Japan, Australia, and France.
• Technology & Cyber Security Safeguards: Exclusion of high-risk vendors in telecom infrastructure and promotion of trusted, indigenous digital ecosystems.
• Maritime Security: India has prioritized maritime security, expanding its naval capabilities and strengthening defense ties with the U.S. and Japan.
• Joining Infrastructure Projects: India joined infrastructure projects such as the Global Infrastructure Facility and India-Middle East-Europe Economic Corridor to strengthen its economic expansion.
• Trade Relations:India seeks to reduce reliance on Chinese goods, especially in electronics and renewable energy.

Way Ahead

• India should continue to maintain constant vigilance along the Line of Actual Control (LAC) and strengthen surveillance in the Indian Ocean Region, while closely monitoring geopolitical, technological and security developments that could affect national interests.
• At the same time, regular diplomatic dialogue through mechanisms such as the Special Representatives (SR) and the Working Mechanism for Consultation and Coordination (WMCC) should be sustained to build mutual trust, manage differences peacefully and prevent escalation.
• India must continue to adopt a balanced strategy that combines firmness on sovereignty, territorial integrity and national security with calibrated diplomacy and strategic autonomy. This includes strengthening partnerships through platforms like the Quad, while also engaging China on areas of mutual interest such as trade, climate change and global governance.
• Economic resilience should be enhanced by reducing dependence on critical imports, diversifying supply chains and promoting domestic manufacturing under initiatives such as Make in India and Atmanirbhar Bharat.
• Ultimately, sustained dialogue, confidence-building measures and responsible management of differences will be essential to better align India’s and China’s approaches to the evolving Asian security architecture, while contributing to the vision of a multi-polar Asia and a multi-polar world.

Conclusion

India–China relations remain one of the most consequential bilateral relationships in Asia, shaped by both cooperation and competition. While unresolved boundary disputes, strategic mistrust and geopolitical rivalries continue to pose significant challenges, recent efforts toward diplomatic normalisation indicate a willingness to stabilise ties.

As highlighted by the External Affairs Minister, stable India–China relations can contribute to the emergence of a “multi-polar Asia” and a “multi-polar world.” Achieving this objective will require sustained dialogue, mutual respect, adherence to existing confidence-building mechanisms and a balanced approach that safeguards India’s core interests while expanding cooperation where possible. Such an approach is vital for ensuring regional peace, strengthening the rules-based international order and advancing India’s long-term strategic and developmental objectives.

Download Pdf | Study Material | Downloads | Daily Quiz  | FREE Youtube Videos