29 Apr 2019: UPSC Exam Comprehensive News Analysis

A. GS1 Related

B. GS2 Related

Context:

In an annex tagged with the Joint Communiqué of the Leaders’ Round table of the Belt and Road Forum (BRF), which concluded in Beijing, the Chinese foreign ministry website has not listed the BCIM as a project covered by the BRI—the giant connectivity initiative speared by China to revive the ancient Silk Road across Eurasia and Africa.

Details:

• Citing “sovereignty” concerns, India, for the second time, has not officially participated in the BRF, as CPEC—a flagship of the BRI—passes through Pakistan occupied Kashmir (PoK).
• India’s decision to skip the BRF may have led to the exclusion of the Bangladesh- China- India- Myanmar (BCIM) Economic corridor from the list of projects covered by the China-led Belt and Road Initiative (BRI) umbrella.
• South Asia is covered by three major undertakings—the China-Myanmar Economic Corridor (CMEC), the Nepal-China Trans-Himalayan Multi-dimensional Connectivity Network, including Nepal-China cross-border railway, as well as the China Pakistan Economic Corridor (CPEC).

Bangladesh–China–India–Myanmar (BCIM) Corridor:

• The 2800 km BCIM corridor proposes to link Kunming in China’s Yunnan province with Kolkata, passing though nodes such as Mandalay in Myanmar and Dhaka in Bangladesh before heading to Kolkata.
• Significantly, a report titled, “The Belt and Road Initiative Progress, Contributions and Prospects,” released by the Leading Group for Promoting the Belt and Road Initiative of the Communist Party of China (CPC) does list the BCIM as a BRI project.
• Over the past five years or so, the four countries [of the BCIM] have worked together to build this corridor in the framework of joint working groups, and have planned a number of major projects in institutional development, infrastructure connectivity, cooperation in trade and industrial parks, cooperation and opening up in the financial market, cultural exchange, and cooperation in enhancing people’s wellbeing,” says the report.

China-Myanmar Economic Corridor (CMEC):

• The CMEC will run from Yunnan Province of China to Mandalay in Central Myanmar. From there it will head towards Yangon, before terminating at the Kyaukpyu Special Economic Zone (SEZ) on the Bay of Bengal.
• The 1,700-km corridor provides China yet another node to access the Indian Ocean.
• Last September, the BRI had got a high octane boost when Myanmar — facing the heat from the West because of the Rohingya refugee crisis — inked an agreement with Beijing to establish the CMEC.
• The CMEC will also reduce Beijing’s trade and energy reliance on the Malacca straits — the narrow passage that links the Indian Ocean with the Pacific.
• Chinese planners worry that the military domination over the Malacca straits of the United States — a country with which it is already engaged in a trade war — can threaten one of China’s major economic lifeline.

Nepal-China Trans-Himalayan connectivity network:

• The Nepal-China Trans-Himalayan connectivity network starts from Chengdu, from where it is linked to Tibet by the Sichuan-Tibet Highway, or the Sichuan-Tibet Railway.
• The Nepal-China Trans-Himalayan connectivity network is listed by the annex
• It is proposed that the railway from Tibet will be further extended to Kathmandu, via Ya’an, Qamdo, Lhasa and Shigatse.
• Chinese planners visualise that that railway will be eventually connected with the Indian railway network, linking China and India across the Himalayas.

Associate Professor of China’s West Normal University, had said that, “The CMEC was proposed during Chinese Foreign Minister Wang Yi’s visit to Myanmar in November 2017, because India has not been acting on the BCIM sub regional cooperation proposal. So it is better for China to go for bilateral cooperation with Myanmar and simultaneously wait for India’s participation.”

Context:

A petition has been filed in the Supreme Court to frame guidelines to protect the reputation and dignity of persons accused of sexual offences.

Details:

• The petition was filed by the Youth Bar Association of India.
• It said that a person was considered innocent unless proven guilty by a court of law.

Concern:

• If a person was falsely accused, his reputation would be lost forever and exposed to public ridicule for no fault of his.
• This would be a violation of the fundamental right to life enshrined under Article 21 of the Constitution.
• Exposing the identity of falsely accused or the one who is not yet proven guilty does not only destroy an individual’s life but also creates a social stigma for the family members too.
• Some preventive measures must be taken to avoid and deal with such situations in the interest of justice.
• Disclosure of his identity, especially during trial, would lead to media trial. Besides, considering the wide reach of social media, the person’s name and even that of his family, which might include minors, would be exposed on the Internet.
• This would be a violation of their fundamental right to privacy.
• “In present times, where people are in a virtual world, the reputation and integrity of a person is always an easy target to destroy,” the petition said.
• The petition said it would be tragic that the person, even after being found innocent, would continue to be known as a suspected sex offender on social media because once his identity entered the public domain it would become searchable and permanent.
• “The previous identification as a suspect will endure in the public sphere,” the petition said.

Context:

Abusing a person with filthy language alone does not constitute the offence of criminal intimidation, the Supreme Court has held.

Details:

• The Bench was hearing an appeal filed by an insurance claim surveyor in Uttar Pradesh, who was accused of criminal intimidation by a factory owner in Mathura district.
• The question before the court was whether the acts of the appellant constituted criminal intimidation under Section 506 of IPC.
• “The threat must be with intention to cause alarm to the complainant to cause that person to do or omit to do any work. Mere expression of any words without any intention to cause alarm would not be sufficient to bring in the application of this section,” a Bench of Justices Ashok Bhushan and K.M. Joseph said in a judgment.
• It was observed that the “intentional insult must be of such a degree that it should provoke a person to break the public peace or commit any other offence.”
• The mere allegation that the appellant came and abused the complainant does not satisfy the ingredients [of criminal intimidation].
• In order to attract Section 506 IPC, the court, said that the the prosecution must prove:

1. That the accused threatened some person.
2. That such threat consisted of some injury to his person, reputation or property; or to the person, reputation or property of some one in whom he was interested;
3. That he did so with intent to cause alarm to that person; or to cause that person to do any act which he was not legally bound to do, or omit to do any act which he was legally entitled to do as a means of avoiding the execution of such threat.

Context:

The Central Board of Indirect Taxes and Customs (CBIC), through a notification, has hiked the basic customs duty (BCD) on wheat to 40 percent.

Details:

• The decision comes in the backdrop of the government’s plan of sell wheat in the open market to offload excess grain from the storage units of Food Corporation of India and state agencies.
• In May last year, the government had hiked the basic customs duty on wheat to 30% from 20%.
• The government has now hiked the customs duty on wheat to 40 % from 30% to “curb imports and protect the domestic industry”.
• The government wants to restrict overseas purchase so that domestic prices of wheat do not come under pressure as the country’s wheat output is expected to scale a record high this year.
• At 40 percent import duty, imports are not viable for flour mills. They have to buy local crop.
• India’s wheat production this season might cross 100 million tonnes.
• The government plans to sell 10 million tonnes of wheat and 2 million tonnes of rice in the open market.
• An oversupply in the domestic market due to back-to-back bumper production of foodgrains has put wheat prices under pressure in the country.
• The government has fixed wheat’s minimum support price (MSP) or the price at which it buys from farmers, at Rs 1,840 per quintal, up from Rs 1,735 a year earlier, as part of its decision to fix the support price at a minimum of 1.5 times the production cost.

C. GS3 Related

Context:

• Recently, investors in Fixed Maturity Plans (FMPs) of two fund houses were told that they may need to be a little flexible about receiving their maturity proceeds.
• Kotak Mutual Fund redeemed its FMPs series 127 and 183 on maturity date, paying back capital while deferring part of the returns to a later date, citing a delay in realisation of debt from the Essel group. It also informed its investors about four other FMPs with exposures to the Essel group and the troubled IL&FS Transportation Networks.
• HDFC Mutual Fund sought investors’ consent for extending the term of its 2016 FMP series 1168D by another 380 days and told them that it could either defer returns or seek a roll-over for other FMPs due later.

What are fixed maturity plans?

FMPs are closed-end debt funds with a maturity period that can range from one month to five years. Because debt funds enjoy long-term capital gains tax after three years, typically three-year FMPs are now popular. FMPs are predominantly debt-oriented, and their objective is to provide steady returns over a fixed-maturity period, thereby protecting investors from market fluctuations.

How do FMPs work?

An FMP portfolio consists of various fixed-income instruments with matching maturities. Based on the tenure of the FMP, a fund manager invests in instruments in such a way that all of them mature around the same time. During the tenure of the plan, all the units of the plan are held until they mature on a specified date. Thus, investors get an indicative rate of return of the plan.

Where do FMPs invest?

FMPs usually invest in certificates of deposits (CDs), commercial papers (CPs), money market instruments, non-convertible debentures over a defined investment tenure. Sometimes, they also invest in bank fixed deposits.

Are FMPs liquid?

Since FMPs are closed-end funds, they can only be traded on the stock exchange where they are listed. However, trading in these units is negligible which makes FMPs illiquid. Compared to this, open-ended debt funds can be bought or sold on a daily basis.

Lessons from the fiasco:

The FMP crisis highlights three hitherto hidden risks in this product for investors.

• One, even FMPs that promise to maintain high-quality portfolios with AAA or A1 rated instruments aren’t immune to default risks. The IL&FS default has shown that even AAA or A1 ratings from Indian rating agencies can be fallible. Therefore, ratings do not completely insulate you against credit risks.
• Two, FMPs can expose one to higher risks than open-end debt schemes by owning concentrated exposures in corporate bonds.
• Three, since they are close-ended and attract more retail than institutional investors, there is less scrutiny into the investing decisions of FMPs than into open-end funds. In open end-debt funds, institutional investors tend to protest risky exposures by exiting the fund, a facility which close-ended FMPs don’t allow.

Conclusion:

All these are reasons for avoiding FMPs as a class. However, it is a lesson for investors to stop thinking of FMPs as substitutes for bank deposits. Investors in ongoing FMPs must immediately check the portfolios of their schemes and watch out for any email communication from their fund houses on troubled bonds. Rolling over the fund, if given the choice, is your best bet though you may have to wait longer for your money.

D. GS4 Related

E. Editorials

Context:

The Supreme Court has ordered the Reserve Bank of India to disclose its annual inspection reports of banks, along with the list of wilful defaulters and information related to them under the Right to Information Act. The Supreme Court has also emphasised that RBI is ‘duty bound under the law’ to disclose information sought under the RTI Act.

Background:

• In 2011 the Central Information Commission said the public has the right to know how banks are functioning since significant amounts of public funds are kept in banks.
• Former CIC Shailesh Gandhi had directed the RBI to disclose the names of banks that had been penalized or served show-cause notices. However, the central bank defended its stance on the grounds of protecting fiduciary and commercial interests.
• In 2015, a petitioner had sought copies of inspection reports of certain commercial banks from April 2011 under the RTI Act.
• THE RBI withheld the information citing ‘economic interest’ and ‘fiduciary relationship’ with banks.
• Ruling on the matter in December 2015, Supreme Court judge M.Y. Eqbal rejected RBI’s defence of “economic interest” and “fiduciary relationship”.
• The court observed that the RBI is a statutory regulatory authority which oversees the functioning of the banks and the information about the banks is with it only by virtue of its nature as a statutory authority.
• The court had held that the RBI is accountable to the general public and cannot withhold information under the defence of “trust” with the financial institutions.
• The banking regulator has repeatedly tried to stonewall multiple requests seeking information ranging from the names of wilful defaulters on bank loans worth hundreds of crores of rupees, to the bank-wise breakup of mark-to-market (MTM) losses and the losses in foreign currency derivatives contract cases.
• The SC has now ruled that the RBI’s Non-Disclosure policy is in violation of its order and has warned RBI that further violations would be viewed seriously.
• The order is a part of long-running attempts to extract financial information in the backdrop of mounting bad debts at banks, with the RBI resisting such attempts and bankers worrying about the potential impact on financial stability.
• Banks’ total non-performing assets amounted to ₹11.2 trillion in FY18.
• In November 2018, the CIC served a show-cause notice to then RBI governor Urjit Patel for “dishonouring” a Supreme Court judgement on disclosure of wilful defaulters’ list. The CIC has also asked the Prime Minister’s Office, the finance ministry and the RBI to make public a letter written by former RBI governor Raghuram Rajan on bad loans.

Details:

• RBI is empowered under section 35 of the Banking Regulation Act, 1949 to conduct annual inspection of all commercial banks—public, private and foreign. It conducts an on-site inspection of all banks once a year.
• RBI officials visit the head offices and branches of banks to inspect the books.
• Currently, the annual inspection is based on a Risk-Based Supervision method which focuses on “evaluating both present and future risks, identifying incipient problems and facilitates prompt intervention/early corrective action”.
• It covers financial position, functioning of board and various links of the bank, details of assets and liabilities, treasury management, asset liability management, liquidity operations, para banking activities, etc. Earlier RBI used to follow the CAMELS approach—capital adequacy, asset quality, management, earning, liquidity and system and control.
• The content of the annual inspection report is discussed with the head of the particular bank before finalization. The final report is then shared with the banks to enable them to take corrective steps.
• “Typically bank inspection reports are not made public. The report is a comprehensive assessment of banks as an entity. Various thoughts can be taken out of context and could lead to wrong conclusions. That is a danger,” said R. Gandhi, former RBI deputy governor.
• “Banks hold deposits on demand. This kind of information, if it goes out in the public domain, will have an impact on financial stability. The RBI has been arguing that this is a matter of confidentiality between the central bank and other entities and section 28 of the RBI Act allows them to disclose only confidential rather than individual information,” said a former RBI official.

Conclusion:

At a time when the level of bad loans at commercial banks continues to remain worryingly high, worsening their combined capital to risk-weighted assets ratio (CRAR), it is inexcusable that the RBI continues to keep the largest lenders to banks, the depositors, and the public in the dark on the specific loan accounts that are endangering the banking system’s health and viability.   The central bank’s intransigence and repeated failure to honour the court’s orders ultimately undermines the very rule of law it seeks to enforce as a banking sector regulator empowered by Parliament.

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Q1) Consider the following statements:

Q2) Microliths were most commonly found in:

Q3) Gandhara School of Art is related to which dynasty?

Q4) Consider the following statements: