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The Indian Budget 2018: The Good, the Bad and the Ugly

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It won’t be a hyperbole to call the preparation of the Indian Budget the world’s toughest tightrope balancing act. In a country of 1.3 billion Indians, a gazillion sects and a country where the dialect changes every 20 kilometers, the Indian Budget is a unique unifying factor. Sitting in a small office, a select group of individuals charts the course of the Indian economy, soon to be the world’s fifth largest. A multitude of Intelligence and Security agencies are tasked to ensure that the Budget remains a secret before it is presented and the markets wait with a bated breath to gauge the winds that will blow with the onset of the Indian Budget. These winds can help the markets move at roaring speeds or topple the very applecart of their existence.

The Narendra Modi led National Democratic Alliance presented it final full Budget on Feb. 1, 2018. With elections due in eight states and the coming of the all-India General Elections, this budget was a final attempt by Modi to deliver on his promise of “Ache Din” (Good Days). But did he? Large sections of India is now restless. Farmers are suffering from a lack of good prices and mounting agricultural loans. Youth is suffering for the want of jobs. Businesses are under stress due to a new tax regime that they are yet to understand and comprehend. The Indian Middle class, BJP’s strongest supporters and among the minuscule few who actually pay a direct tax is reeling under high taxes. This was the last grab attempt to placate these sections and retain power for another five years. But what did it deliver? Sure enough, the budget contains a slew of measures for the agriculture and rural sectors, a new health insurance scheme has been announced for the poor and a small relief in income tax for the salaried class and senior citizens.

Let’s take a closer look at the Indian budget and break out the good, the bad and the ugly.

The Good

To placate the Farmers who have been protesting across the length and the breadth of the country, this budget promises to raise the minimum price offered to farmers for their crops. Stating that the focus of the government in the coming fiscal would be agriculture and rural India, the finance minister has announced that all Kharif crops will be paid a minimum support price (MSP) that is 50 percent more than the cost of production. It has also identified a need to invest heavily in the agricultural markets across India. It has also earmarked more money for rural areas, including that for irrigation projects and for aquaculture projects. The Kisan credit card will be extended to fisheries and animal husbandry farmers while Rs 2,000 crore provided for the development of agriculture market. The central budget directs state governments to purchase extra solar power generated by farmers using solar-powered pumps who have become cheaper after this budget.  The credit to agriculture would be raised to Rs 11 lakh crore in the coming fiscal from Rs 10 lakh crore. The budget provides for a 100 percent tax deduction for farm producer firms with Rs 100 crore turnover. There is a special impetus to promote “Operation Green”. In total, there has been a record allocation of Rs. 14.34 lakh crores for the agriculture sector.

In a bid to provide universal healthcare, the Budget announces a ‘National Health Protection scheme’ to provide health cover of up to Rs 5 lakh to each of the 10 crore poor families per year. Under the Aayushman Bharat programme, a total of 1.5 lakh centers will be set up to provide health facilities closer to the homes for which an outlay of Rs 1,200 crore to be allocated. A total of Rs 600 crore have been allocated for tuberculosis patients who will be provided with a grant at the rate Rs 500 per month during the course of their treatment. There are plans to set up 24 new medical colleges and hospitals by upgrading district level ones.  The budget lists that the PM JivanBimaYojana has benefited 5.22 crore families with more in the pipeline. And here we were really thinking that Obama-care was game changing?  Apart from all these announcements, the Budget contains a slew of announcements for the senior citizens of the nation like Incentives for Senior citizens like exemptions in income of Rs 10,000 from Banks FD and post offices and Rs 50,000 per annum exemption for medical insurance under Sec 80D.

With the finance minister promising a record infrastructure spending on roads and railways, construction and engineering firms, as well as train wagon-producers, could benefit. There is a plan to expand airport handling capacity by five times to handle 1 billion trips a year. It is estimated that Rs 50 lakh crore is needed for infrastructure building and the government will allocate Rs 7,140 crore for the textiles sector in next year.  National highways exceeding 9,000-km will be completed in 2018-19 and allocation of over Rs 1.48 lakh crore has been planned for railways. Regional air connectivity scheme shall connect 56 unserved airports and 31 unserved helipads for better connected and a closer India.

For the rural economy, the budget contains a slew of announcements. 8 crore poor women will get new LPG connections. Under the Prime Minister’s SaubhagyaYojana, it is estimated that 4 crore poor people will get power connection. A total spending estimate for this scheme is Rs 16,000 crore. Under the Swach Bharat Mission, the Government plans to construct 2 crore toilets in the next fiscal year. The government has set an ambitious target to provide a house for all by 2022. A total of 1 crore houses are to be built under Pradhan MantriAwasYojana in the rural areas. The Government will expand the PM Jan DhanYojana. All 16 crore accounts will be included under micro insurance and pension schemes for better returns and social outreach.

To formalize the economy, the Employees Provident Fund Act will be amended to reduce the contribution of women to 8 percent from 12 percent for first three years, with no change in employer’s contribution. The government will contribute 12 per cent of wages of new employees in EPF for all sectors for the next 3 years. The target for loan disbursement under Mudra scheme has been set at Rs 3 lakh crore for next fiscal.

The Bad

The government has extended Corporate Tax of 25% to companies with turnover up to Rs 250 cr in the financial year 2016-17. For a party always under a perception of being a corporate front, this will not go down well in the eyes of the media and the party will have a wild time dousing the flames. Also, 100% tax deduction is allowed to co-operative societies, the majority of whom have cooked books and shady members.

The long-term capital gains will now be taxed at a rate of 10% if exceeding Rs 1 lakh. The Education cess increased to 4% from 3% to collect additional Rs 11,000 crore but in turn, has put an additional burden on the tax paying middle class. The government’s decision to impose long-term capital gains tax on equity investments may dent investor sentiment for financial services companies, life insurers and providers of mutual fund products.

The Indian Defense Budget, while increased contains no clear roadmap to make India a manufacturing powerhouse and increase our armament production. Barely spending money is not good and while the outlays are increasing continuously, it is no secret that our outlay is minuscule in comparison to our GDP. Furthermore, most of the current budget is spent on personnel and maintenance costs, leaving very little for capital acquisition.  There is a serious need to quantify the defense budget and earmark separate funds for the capital acquisition.

The Ugly

Apart from a few scraps here and there like Rs 40,000 standard deduction, Mr. Modi has completely ignored the honest Indian Direct Taxpayer. A resentment is now brewing in this segment which has honestly been paying to tax and has time and again got pinched by every budget. In a nation where barely, 1.9% of the populations pays any tax, the honest Indian Taxpayer has become a minority of sorts, exploited and with no one to raise a voice for it. Hopefully, Modi can mollify this before the General Elections or all hell will break loose.

Conclusion

To conclude, the Indian Budget is prudent, not populist. The Indian Government deserves full credit for bringing out such a balanced budget so close to the General Elections. The fiscal prudence of this government has been lauded by international agencies and the recent budget is in line with the attempt of the government’s fiscal consolidation path. The Finance minister has set the fiscal deficit for 2019/19 (April-March) at 3.3 percent of the gross domestic product, slightly higher than expectations for 3.2 percent. Altogether, the budget has focused more “investments” than one-time hangouts. However, the devil lies in the details. There is a pertinent need for faster and smoother implementation.  The infrastructure projects will generate more jobs and ultimately, more usable projects on completion. R&D will generate more output for this nation. The government is ably trying to focus on both the “Ease of Doing Business” and the “Ease of Living”. Elections are upon the present dispensation and the Government must now focus on the implementation. If the 2014 election was about Ache Din, 2019 (or 2018) will be about the poor. The buildup initiated with the Jan Dhan and theUjwala Yojana, continued with the PAHAL andSaubhagyaYojana and now the AyushmanYojana and this Budget. The ingredients are all there. It now up to the chef Modi to cook his broth. But will his broth taste like sweet victory or a bitter-sweet defeat. This only time, and the Indian Rural Voter will tell.

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South Asia

Aftermath of US-Afghan Peace Talks

Syeda Dhanak Hashmi

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In Doha, the Capital of Qatar, an unprecedented meeting co-hosted by German and Qatari officials brought together diverse factions interested in achieving lasting Afghan peace. Sixteen Taliban and 60 Afghan representatives comprising delegates from political parties, government officials, and civil society organizations engaged in discussions that led to a potentially positive arrangement. This meeting has raised hopes for peace, but it must now be followed up by a cease fire to pave the way to lasting peace in the country.

The Taliban, which has repeatedly refused to negotiate with the West-backed government of President Ashraf Ghani, agreed to join the Peace Talks meeting on the condition that the attendees will do so in a personal capacity. For the first time since the United States started negotiating with the Taliban last year, two Afghan government officials were face-to-face with Taliban representatives at US-Afghan Peace Talks. The Doha peace talks were unlike many other conferences. The Taliban agreed to reduce their reliance on violent attacks by avoiding various public spaces. Many Afghans vulnerable to terrorism and living under severe violence have newfound hope.

The peace talks represents huge success keeping in view the Taliban’s harsh policy toward women and youth. Women, in particular, have been the victims of ignorance and extremism throughout the dark chapters of Afghan history. Thus, it was a momentous development for Afghans as the Taliban leadership dined with female representatives, including one of their leading critics, Fawzia Kofi, a former MP of the Wolesi Jirga or lower house of the Afghan Parliament. This indicated a remarkable shift in Taliban’s perspective towards women as they said that women would protect their rights within an Islamic framework. This change in perception had promoted a democratic framework in Afghanistan which resulted in a significant step in bringing peace and prosperity to the country. Women now work freely in the government and private sector. They represent an important portion of society and have been a symbol of change.

Moreover, the participation of youth at the Doha conference offered another notable step. It was exceptional to see those under the age of 30 who were raised under the threat of war and feared violence by the Taliban, discussed and consequently asked them for the violence to end and hope for a peaceful Afghan future. The Doha framework was conducive to discuss concerns that both sides felt comfortable to share and presented a satisfactory and excellent example of a way that both Taliban and Afghan representatives could clearly raise their thoughts patiently and in a friendly manner.

With productive peace talks between Taliban and Afghan representatives, a remarkable conclusion was reached after strong criticism and arguments. Both sides agreed to reduce violence by withholding attacks on religious centres, schools, hospitals, educational centres, commercial markets, water dams, and workstations. But the understanding now needs to translate into a tangible cease-fire across Afghanistan. The recent non-binding agreement and continued peace talks with the Taliban are suggestive of a few points.

First, the Taliban are willing to accept some sort of cease-fire as they stated that they also feel guilty for killing civilians who are fellow Afghans but they also said that they simply might not have an alternative strategy. Secondly, conferences in Doha, Moscow, Pakistan, and Uzbekistan signify the group’s desire to build a new positive image. Let’s not forget that the Taliban’s Islamic Emirate of the 1990s was tumbled by the U.S. government for sheltering Al-Qaeda terrorists.

To portray their positive image, the Taliban are currently involved in a public relations campaign to demonstrate they are not as unfathomable as the international media has represented them. Sitting openly with Muslims, non-Muslims, and female journalists, as well as dining with them, paints a convincing picture. This could be another tactic to have an influence on Afghans in order to achieve their goals, such as US NATO troop’s withdrawal and establishment of an Islamic State also. The Taliban will not easily abandon their goal of establishing an Islamic Emirate despite continued diplomatic efforts. But in case of a cease-fire, they will certainly function as a political party that might hold major offices in the Afghan government, will also mould the current criminal code of Afghanistan because they consider it as mixture of Roman-Germanic and Islamic sources which is not acceptable to them at all, hence they will work towards adamantly implementing what they view as Islamic Shariah law.

Keeping in view the above mentioned discussion, some hope of peace has been achieved despite corruption, poor internal situation and after 18 years of chaos and instability in Afghanistan. But a country which has undergone four decades of war needs time and space to restructure and overcome such differences. The present version of Afghanistan is altogether different from the pre-9/11 Afghanistan. From women empowerment and youth participating in different fields to technology in villages by which people share their concerns and happiness, via social media, the ideological transition in Afghanistan is incredible. Somehow violence has been switched by better systems through discussions and a positive comprehensive political approach. In an ideological governed nation like Afghanistan, which is predominately tribal, it is fundamental that its own people bring change through talks that concrete the path towards peace and prosperity. The peace in Afghanistan holds significant importance for the neighbouring countries also, but the path toward sustainable peace can be laid only once a cease-fire is agreed and adhered to by all the parties.

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Pak-US Relations: The Way Forward

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Cooperation and Trust is the only way forward for Pakistan –US relations. Both countries have wasted a huge time experienced severe challenges since the relations become soars. Both nations have learned bitter lesson s during recent history and realized that both have suffered a lot due to the coldness of relations between the two countries. I believe it is never too late, always “There is a way if there is a will”. I think the time has reached to restore traditional trust and cooperation.

Prime Minister Imran Khan is scheduled to travel to the USA on 20 July. He will meet President Trump and senior administration during his stay in the USA. He is also accompanied by a powerful high-level delegation to make the decision at the spot instantly. However, Foreign Offices at Islamabad and State Department in Washington are working day and night to make this visit a turning point and historic success.  Expectations are high from both sides. The whole world has focused on this important visit and make their own opinion. Some of them are discussing the challenges, and others are focused on positive outcomes. I myself am very much optimistic.

It has been realized by the US administration that they cannot achieve strategic goals in this region without the instrumental role of Pakistan. And Pakistan has also suffered a lot, especially on the economic front without US support. It is in the best interests of the two nations to respect each other and cooperate with each other. The way out is trust and dialogue, but not the coercion and isolation.

Background

During the Cold War, Pakistan was a big supporter of the US and protected American interests in the region, including during the Soviet occupation of Afghanistan. Pakistan was also a close ally in the “war on terror” after the attacks on the World Trade Center and the Pentagon on September 11, 2001. Our history is full of success stories and excellent cooperation.

However, although Pakistan extends a cordial hand of friendship to the US whenever it needs support, the US always steps back when it no longer needs a Pakistani role on an issue, and relations decline. Pakistan has faced some of the toughest and strictest US-sanctions in history.

The two countries have always cooperated with each other on their common goals and interests, though the US has failed to value Pakistan’s interests and has kept on making demands. “Do more” has been the message of the US leadership in recent years, without understanding Pakistan’s capacity to comply, or its own interests. Our relations were transactional in nature and limited to assignment based. Once the project was completed, the relations were cooled down.

During the past few years, the US has blamed, coerced and threatened Pakistan. The US used all international forums to pressurize Pakistan like FATF, IMF, UNSC, etc. Extended hands of extreme friendship toward India, without considering the impact on Pakistan. The sacrifices of Pakistan being the ally of the US, especially casualties of 8000 Pakistani nations during the Afghan war and an estimated economic loss of US$ 250 billion, along with a gift of extremism, terrorism, gun culture, corruption, misgovernance, ethnic violence, and religious divide, etc. Of course, there exist some concerns on both sides, and some of these may be genuine, but some are based on misunderstandings only.

Afghan Situation

Currently, the major part of Afghanistan is controlled by the Taliban. Americans cannot walk freely and fearlessly in the streets of Kabul or any other big city. They are not safe except inside military camps. In practical terms, it is the Taliban who rule most of Afghanistan, not the US-supported government of President Ashraf Ghani.

The US is the superpower, spent US$ trillions and used all possible lethal weapons along with best-trained troops, could not win the Afghan War. The US was fully supported by NATO and its allies, utilized their resources and involved India, but still failed to achieve any success.

A situation has been reached where the US administration has decided to withdraw its troops from Afghanistan. Whether they can withdraw easily? A big question mark? Afghanis bordered with China, Iran, Central Asia, and Pakistan. I think only Pakistan can help peaceful and honored the withdrawal of its troops from Afghanistan.

There is a convergence of interests in resolving the Afghan issue. Pakistan and the US may cooperate with each other in a very positive way. But, after the assignment is over, what will be the behavior of the US with Pakistan, past experience was never satisfactory.

But we are optimistic that the Visits of Imran Khan may bring a different outcome. We may cooperate on the Afghan issue and hope the US will respect Pakistan’s strategic interests with China, Russia and in the region. The US may not create hurdles in smooth execution of CPEC and acquisition of defense needs from any country including China and Russia. The US may not allow India to use American support against Pakistan, American weapons and technologies against Pakistan, American intelligence against Pakistan.

The way forward

However, Pakistan is a peace-loving country and our record in the UN peacekeeping force is admirable. Our sacrifices during the “war on terror” go beyond any other country.

We promote peace, stability, and prosperity all around the globe. Our role in this region is vital. Pakistan’s geostrategic importance is well known to the US. Think-tanks, civil and military leaders in the US also understand Pakistan’s importance.

Pakistan wants good relations with all countries and would like to extend all possible support and cooperation for achieving the common goal of “Peace, Stability, and Prosperity” throughout the world. We desire to work closely with all countries – including the US.

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From Gujral doctrine to Modi doctrine

Punsara Amarasinghe

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Authors: Punsara Amarasinghe and Eshan Jayawardene*

The predictions made by larger number of academics based in Delhi, Mumbai and Calcutta about Indian General elections vouching that Narendra Modi would not get his second term as prime minister were shattered in reality as Modi could uphold his strong position better than the previous time resulting a steeping success of his Bharatiya Janatha Party which won 302 seats in Indian Lok Saba. The election result has palpably shown a shocking decline of India’s largest political party National Congress led by Rahul Gandhi as Congress could solely win only 52 seats in the legislature. The gob smacking results of the election seems to have given a clear picture of voters pulsation as the ground reality in the sub-continent albeit many pundits made pro congress predictions while accusing Modi’s poor economic policy and demonetization as two major factors behind the economic crisis India has been facing now.

However, the Himalayan image Indian premier has built up on himself among countries majority Hindu population has been mainly attributed to his stanch belief in Hindu ideology and his image seems to have depicted as a Hindu messiah who has come to regain the deserving place for nationalist forces. It is an important question to focus whether such ideological attitudes possessed by Modi and his Bharatiya Janatha Party would make impacts upon carving India’s foreign policy for next five years. Before reaching the position of Indian premier’s approach towards foreign affairs, particularly regarding South Asia, it becomes an interesting factor to trace how Indian foreign policy on South Asian states were shaped under Gujral Doctrine which happened to be a milestone in Indian foreign policy when it was rendered by minister of external affairs in Dev Gowda’s government in 1996. Basic mantra of Gujral doctrine affirmed India being the larger power in South Asia should not ask for reciprocity, but gives all that it could in good faith to the neighboring countries like Sri Lanka, Bhutan, Nepal, Maldives and Bangladesh. Notably Pakistan was excluded from this benefited category and it further elucidated that no country would allow to be used against the interest of another country in the region. One of another pivotal principle of Gujral doctrine was the noninterference of the internal affairs of the neighboring countries and resolving disputes through amicable bilateral negotiations.

This doctrine has been regarded as a strategy initiated by Mr. Gujral in reducing the influence of both Pakistan and China in a hostile manner while upholding a stable peace with other neighbors. In fact, this doctrine has played an indispensible role as a major principle for many prime ministers since 1996 though none of them had officially admitted the influence of Gujral doctrine over their foreign policy mechanism. Yet the changing winds of Indian foreign policy seems to be evident after the astonishing victory of Narendra  Modi and it would be an interesting task to assess how would Gujral doctrine prevail before the galactic persona of Modi as a leader who seeks much dominating authority in his foreign relations in South Asia. Since Modi became premier in India, its foreign policy was heavily affected by his personal aura and besides his troublesome past of his alleged involvement in the communal violence of Gujarat in 2002 during his tenure as its chief minister, many countries have received him with awe and Russia honored Modi by awarding him the highest state decoration called “Order of Saint Andrew the Apostle “in 2019.

In understanding his foreign policy for his second term, it becomes salient that his famous slogan “neighborhood first” is likely to continue, at least nominally. But the truth in reality is Narendra Modi’s sole personal image driven by his Hindutva ideology would make some lasting impacts in foreign relations with India’s immediate neighbors and beyond it. The next notable factor appears to be stunning in Modi’s foreign policy is that contrary to India’s fervent position of defending secularism, the space for religious diplomacy has rapidly increased for past few years in India’s foreign policy. In the contest between China and India as rivals for decades, it is a question beyond doubt that Chinese political, militarily and economic powers are far ahead of India, yet in terms of soft power mechanism India has successfully forged ahead and Modi’s approach to his foreign relations too has taken a special interest in portraying India’s spiritual legacy to the world extensively as propaganda tool. For example during most of his foreign tours as premier, Modi paid frequent visits to major Hindu, Buddhist and Sikh sacred sites, also his active role in introducing June  21st as International Yoga Day shows his effort in propagating India’s ancient practice of meditation yoga as a soft power tool beyond the sub-continent.  The utmost veneration towards Indic religions such as Buddhism, Hinduism, Jainism and Sikhismas an important feature in foreign policy had not been a principle practiced by previous Indian prime ministers since Nehru who was a doyen of secularism. On the other hand the notion of Hindutva stemming from Modi’s political party BJP and his personal ideology may confront with carving the foreign policy of India generally. The notion that Hindutva involves an obsession with national power needs to be placed in its historical context. V. D. Savarkar, M. S. Golwalkar, H. V. Sheshadri, and other stalwarts who developed its ideational foundations believed that the golden age of ancient Hindu civilization had been lost owing to material and moral weakness, which had brought it under the prolonged subjugation of Muslim and Christian/ British power. The great iconic personality he has been creating abroad as leader coming from a greater civilization and his ardor of using Hindi as the language of communication in his foreign state visits even though he is well versed in Hindi are the most notable examples showing the way of his foreign policy driven by Hidututva ideology.

Modi’s beginning of his first term was quite optimistic in terms of his attitude to India’s immediate neighbors in South Asia and this was visible as all South Asian leaders were invited to his inaugural ceremony in Delhi in 2014,but throughout his first term it was evident that Modi could not keep his grip over India’s neighbours like Sri Lanka, Nepal, Maldives and Bangladesh where Chinese influence have appeared to be a predominant factor. For instance New Delhi was alleged to have some involvement in toppling former president Mahinda Rajapakse from power yet his successor Maithripala Sirisena and government of Sri Lankan premier Ranil Wickramasinghe have not been able to completely get rid of Chinese presence in Sri Lanka despite both personalities are known for their pro Indian policies. Modi” s last few months may have brought him a sudden success from the jingoistic voters from Hindu mainstream in India as last February India’s jet fighters crossed into Pakistan territory and engaged in aerial combat in first time in nearly 50 years. In India’s history since independence several prime ministers had confronted Pakistan militarily, yet the propaganda used by Modi convinced the people only he is able to keep India secure from Pakistan.

Cardinal approach likely to be adopted during Modi’s second term on Indian foreign policy has much idealistic feature to uphold Indian hegemony in South Asia and moreover Modi’s foreign policy would pay a much attention in using soft power as a greater strategy in India’s path to global governance. Rise of Xi Jinping as China’s powerful assertive president and his astute actions on expanding Belt and Road initiative across South Asia seems to have created a sneaking agitation in India for past few years. In such a situation Modi’s foreign policy for next four years five years would be decisive in terms of uplifting India’s image a key player.

*Eshan Jawardane is a Sri Lankan researcher currently lives in New Zealand. He holds BA in Sociology from Delhi University and completed MA in International Relations at Jawaharlal Nehru University in New Delhi. He served as a guest lecturer at Sri Lanka Open University for a short period. Eshan can be reached at eshan.jayawardane[at]gmail.com

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