25 Jan 2021: UPSC Exam Comprehensive News Analysis

25 Jan 2021 CNA:- Download PDF Here

TABLE OF CONTENTS

A. GS 1 Related
B. GS 2 Related
POLITY AND GOVERNANCE
1. Govt. has taken many steps to empower the girl child: Modi
INTERNATIONAL RELATIONS
1. U.S. vows support to Taiwan as Chinese incursions enter Day 2
2. U.S. interfering in domestic affairs: Russia
C. GS 3 Related
SECURITY
1. Terror groups in Pakistan switch to new messaging apps
ENVIRONMENT AND ECOLOGY
1. Sunderbans is home to 428 species of birds, says ZSI
D. GS 4 Related
E. Editorials
INTERNATIONAL RELATIONS
1. Troubled waters - The Palk Bay conflict
2. On Iran, it is decision time for Biden
ECONOMY
1. After the storm
F. Prelims Facts
G. Tidbits
1. Mock trials of remote voting project soon: CEC
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

Category: INTERNATIONAL RELATIONS

1. U.S. vows support to Taiwan as Chinese incursions enter Day 2

Context:

As a part of the second day of incursions by China, a total of 15 Chinese aircraft, including 12 fighter jets, entered the southwestern corner of Taiwan’s air defence identification zone.

• The overflights are a part of a long-standing pattern of incursions aimed at pressuring the government of Taiwan into caving to Beijing’s demand that she recognise Taiwan as a part of Chinese territory.

Read more about the One China Policy.

The U.S. support to Taiwan:

• The U.S. State Department statement said that Washington would continue to deepen ties with Taiwan and ensure its defence from Chinese threats, while supporting a peaceful resolution of issues between the sides.
• Also, a U.S. aircraft carrier group led by the USS Theodore Roosevelt entered the South China Sea to ensure freedom of the seas, build partnerships that foster maritime security.

2. U.S. interfering in domestic affairs: Russia

Context:

Russia has accused the U.S. Embassy of interfering in its domestic affairs after the mission distributed a demonstration alert to U.S. citizens in Russia recommending they avoid protests.

Details:

• Tens of thousands took to the streets across Russia following Kremlin critic Alexei Navalny’s call to demonstrate against President Vladimir Putin’s 20-year rule.

Read more about the related issue covered in 3^rd July 2020 Comprehensive News Analysis.

• Nearly 3,500 protesters were arrested at demonstrations.
• Ahead of the demonstrations, the U.S. Embassy issued a safety warning to Americans based in Russia.
  • The Russian President, accusing the U.S. Embassy of indirectly supporting the violation of Russian legislation, said that the U.S was backing unauthorised protests.

Category: ENVIRONMENT AND ECOLOGY

1. Sunderbans is home to 428 species of birds, says ZSI

Context:

“Birds of the Sundarban Biosphere Reserve” has been released by the Zoological Survey of India (ZSI).

Details:

• The publication documents the avifauna of the Sunderbans.
• It also serves as a comprehensive photographic field guide, with detailed distribution and locality data for all the species from the region.
• According to the publication, the Indian Sunderbans, which is part of the largest mangrove forest in the world, is home to 428 species of birds.
  • India has over 1,300 species of birds and if 428 species of birds are from the Sunderbans, it means that one in every three birds in the country is found in the unique ecosystem.
  • Of the 428 birds listed, some, like the masked finfoot and the Buffy fish owl, are recorded only from the Sunderbans.
  • The area is home to nine out of 12 species of kingfishers found in the country as well as rare species such as the Goliath Heron and the spoon-billed sandpiper.

Indian Sundarbans:

• The Indian Sunderbans covers 4,200 sq. km, and includes the Sunderban Tiger Reserve of 2,585 sq. km.
  • The tiger reserve is home to about 96 royal Bengal tigers (census 2020).
  • It is a world heritage site and a Ramsar site (a wetland site designated to be of international importance).

2. On Iran, it is decision time for Biden

Context:

• With the change of guard in the US, the new President’s approach in handling Iran will be closely looked at.

Details:

• The new U.S. President Joe Biden will have a number of foreign policy issues in hand, ranging from relations with China, Russia and the need for reconciliation with key European allies who were disillusioned with some of the decisions of the previous U.S. President Donald Trump.
• However, one of the key foreign policy challenges for the former recent US Presidents have been Iran and Mr Biden will be no exception.
• One promising factor going in favour of Biden is that many of his top appointees in the foreign policy and security arenas were involved in the negotiations with Iran under the Obama regime that finally led to the nuclear deal of 2015.

Trump action, Iran reaction

• 2016 saw the coming of Donald Trump to the White House as the new President of the US. His policy was the polar opposite of what the previous administration had worked towards.
• Donald Trump was very vocal in his criticism of the Iranian regime, and singled out Iran for numerous incidents in the Middle-East. Donald Trump went as far as pulling out of JCPAO and imposed strict sanctions on Iran.
• The US argued that the time-frame of 15-years on Iran’s nuclear programme was insufficient and that Iran must give up on its right to enrich uranium.
• Some of the demands or conditionalities from the Trump administration was that a moratorium is imposed on Iran’s ballistic missile programme and that Tehran withdraws its support to regional allies and proxies opposed to U.S. policies.
• The US pullout came even after the United Nations acknowledged that Iran was compliant with the terms of the agreement. Thus pulling out of the JCPOA and re-imposing severe sanctions meant that Iran was backed into a corner.
• He referred to his policy as ‘Maximum Pressure’, he was hoping that the US and its allies would pressurize Iran to return to the negotiating table and it would be a perfect opportunity for the US to dictate terms to Iran. This was welcomed by Israel and Saudi Arabia.
• The US actions meant that Israel got the opening it was eyeing to carry out its numerous covert and overt operations against Iran. This was very evident when Israeli agents carried out an audacious operation to steal the documents pertaining to Iran’s nuclear programme from a warehouse in Iran.
• Iran’s nuclear scientists came under attack as seen in the recent assassination of Mohsen Fakhrizadeh. Iranian military personnel in Syria also suffered at the hands of Israeli bombing.

Counterproductive move from the US

• The other parties to the agreement failed to persuade the US administration to honour the JCPOA, this gave Iran a ‘green-signal’ to breach the limit for uranium enrichment imposed by the JCPOA.
• Iran also began raising its stockpile of enriched uranium beyond the amount permitted under the agreement.
• The International Atomic Energy Agency (IAEA) estimates have revealed that current Iran’s stockpile of low-enriched uranium had reached more than 2,442 kilograms, eight times the limit permitted by the JCPOA.
• These developments indicated that Mr Trump’s policy of exerting maximum pressure was counterproductive, bringing Iran closer to weaponisation.
• The ‘maximum pressure’ policy has meant that the new US administration will have a tough diplomatic riddle to crack in Iran.

Biden strategy, complexities

• Mr Biden’s team has reaffirmed his stance about the willingness to return to the JCPOA if Tehran does the same, the new policy appears to be the one that is willing to engage with Iran and not isolate it.
• Iran has also expressed its desire to honour the agreement and undo the steps undertaken of late if the U.S. withdraws all sanctions imposed on Tehran by the Trump administration.
• However, it is not a simple task to go back on the JCPOA, as it does not appear to be an alignment with what Washington expects and to what Iran can commit to.
• The U.S. sees a return to the JCPOA as an agreement that encompasses a wide number of issues, thereby thinking that via JCPOA, the US can limit Iran’s missile programme and also Iran’s regional ambitions that often come in conflict with the U.S. and its allies, especially Israel and Saudi Arabia.
• However, Iran considers the JCPOA as a stand-alone agreement having jurisdiction over Iran’s nuclear programme only.
• Iran, on several occasions, has hinted that issues such as Iran’s missile programme and its regional policy would have to be dealt with independently and cannot be linked or clubbed with the nuclear deal.
• The faultlines between the two have grown deeper, with both the countries feeling that the other is not meeting them at the half-way line. The U.S. feels that Iran has been steadfast on its regional policy that often challenges the US’s interests in the region.
• For example,
  • Iran’s Islamic Revolutionary Guard Corps has trained proxy militias that have played a pivotal role in helping the Assad regime in Syria to combat the U.S.-supported opposition forces.
  • Iran is a chief financier of anti-Israeli Lebanese Hezbollah and is the principal supporter of the Houthis in Yemen. Houthis have been able to stonewall Saudi’s efforts in Yemen and also have gone on the offensive by attacking major Saudi oil facilities with Iranian-supplied drones and missiles.
  • Iran trains and arms Shia militias in neighbouring Iraq and to spoil any American policies in Iraq.

Boost to hardliners

• The unilateral decision on behalf of the US to withdraw from the U.S. JCPOA has fuelled the voices in Iran to not go back to the JCPOA.
• This section is primarily led by hardliners and have criticized Iran’s President Hassan Rouhani for being in favour of the JCPOA.
• It was the Rouhani led government that signed the JCPOA in 2015 with the reluctant endorsement of Iran’s supreme leader, Ayatollah Ali Khamenei.
• The unilateral moves of the US have meant that there is a trust deficit, fuelling feelings of paranoia about America’s regime change ambitions in Iran.
• The Iranian domestic political dynamics are also very tricky as Mr Rouhani is a lame-duck President and the Iranian laws will forbid him from contesting again as he has already served two terms.
• The recent parliamentary elections have stacked up the Iranian legislature with the hardline conservative faction known as the ‘principlists’.
• If the trends were to go by, then it is a foregone conclusion that the next President will belong to the same grouping unless an agreement is reached with the U.S. about lifting economic sanctions and returning to JCPOA, thus vindicating Mr Rouhani’s moderate position.
• The situation gets murkier even in the event of Biden and Rouhani administrations coming to an understanding about returning to the JCPOA, the hardliners who dominate the Iranian Parliament are likely to insist that the renewed agreement must include a clause that would prevent a signatory from unilaterally abandoning the JCPOA.

Within the U.S.

• The Senate in the US is finely balanced, thus there will not be overwhelming support in favour of joining the JCPOA.
• One can also expect a great deal of opposition in the U.S. Congress, particularly in the delicately balanced Senate, to a return to the JCPOA without the imposition of some restraint on Iran’s ballistic missile programme and a perceptible indication of a change in its adversarial policy in West Asia.
• The US regional allies in Israel and Saudi Arabia have made their intentions clear to the US administration about the need to rein in Iran’s growing regional hegemony.

Conclusion:

• The leadership in both countries face a considerable challenge in securing domestic support to go ahead with the deal.
• This will require both the leaders to display statesmanship and use the diplomatic capital to assuage each other’s concerns.
• Both the countries will have to meet the other at half-way, by making some concessions wherever possible without endangering the process and this is where statesmanship is required and any attempts to bully the other will only be counterproductive.

Category: ECONOMY

1. After the storm

Context:

• The Reserve Bank of India (RBI) in its discussion paper on “Revised Regulatory Framework for NBFCs — a Scale-Based Approach”, proposed a framework that resembles a pyramidical structure, comprising NBFCs grouped in four layers — Base Layer (BL), Middle Layer (ML), Upper Layer (UL) and a possible Top Layer (TL).

Details:

• The Reserve Bank of India is hinting at possible reforms in NBFC regulations.
• The early signs are that the largest 25-30 non-banking finance companies will be subjected to bank-like regulation and capital requirements.

RBI’s proposal

• The RBI proposal resembles a paradigm shift in the regulation towards India’s non-banking financial companies (NBFCs).
• The proposal will bring in more scrutiny for the NBFCs and the monitoring framework will be similar to that of banks.
• The proposals if implemented will be a watershed moment in the regulation, this will be a major overhaul of the regulatory framework for such finance companies (or shadow banks) in over two decades.
• After multitudes of investors were left high and dry as CRB group firms reneged on high-interest fixed deposits in 1997, Parliament bestowed greater powers over such firms to the central bank to fix the mess. The trigger now is similar though the scale of the problem has changed.

Exponential growth of NBFCs

• The size of NBFC balance sheets has grown in excess of a quarter of that of banks’ balance sheets, from just about 12% in 2010.
• To put it in absolute terms, the balance sheets of NBFCs have more than doubled, from ₹20.7-lakh crore in 2015 to ₹49.2-lakh crore in 2020.
• The exponential growth is largely due to watered-down regulations, these regulations which gave NBFCs the luxury to meet a range of financing needs, from home loans to micro-finance and large infrastructure projects, have also exposed them to systemic risk.
• Unlike banks, NBFCs are less cautious while lending, for example, NBFCs have grown their portfolio of small and microloans in a big way where there are risks of lack of credit history, scale and historically high NPAs. The unsecured loan segment is also on the rise in the NBFC segment.
• Default followed by a downgrade of IL&FS recently has created a liquidity squeeze for the entire non-banking financial company (NBFC) sector.
• The collateral damage has resulted in NBFCs not being able to raise funds easily, and are now faced with liquidity pressures that have led to solvency concerns on a few occasions.
• The recent example of Dewan Housing Finance Corporation Limited (DHFL) is a case in point.

The possible impact of the regulations

• The RBI discussion paper proposes the non-banking finance companies to be split into four categories, depending on their size and systemic relevance for better regulation.
• The four categories include:
  • Base layer (NBFC-BL) – These will be NBFCs with an asset size of up to Rs 1,000 crore.
  • Middle layer (NBFC-ML)- This category will include all non-deposit taking NBFCs classified currently as ‘systemically important’ and all deposit-taking NBFCs.
  • Upper layer (NBFC-UL) – This layer will be made up of the top 25 to 30 NBFCs identified as systemically significant. This is the category where regulation will move towards what is followed in the case of banks.
  • Top layer– This layer will be empty for now and will be populated with NBFCs where the RBI may see elevated systemic risk.

• The timing of RBI’s proposed regulatory changes to such large NBFC failures has been spot on.
• The NBFC failures have had a profound impact on the economy as a whole. The regulations will aim to secure a balance between the need to be nimble and mitigate systemic risks, with a four-tiered regulatory structure.
• The regulatory proposal will involve a graded response, with a large number of small NBFCs in the country subjected to the least regulation since they have limited impact on systemic stability, whereas there will be stricter ‘bank-like’ capitalisation, governance and monitoring norms for the largest players and whose failure will have a ripple effect on the others segments of the economy.

Conclusion

• The banking sector has had its fair share of troubles with examples like the PMC Bank, Yes Bank, Lakshmi Vilas Bank. Therefore, there is a need to rework the oversight mechanism for NBFCs and banks to ensure there is financial stability and retain confidence.
• NBFCs are an important part of the Indian economy in the mobilization of resources, they lend for activities banks often do not support.
• Therefore, it is important to establish a framework that is robust enough to prevent any adverse risk-taking behaviour on behalf of the NBFCs and at the same time, it should not stifle its lending abilities.

Q1. Consider the following statements about the Congress-Khilafat Swarajya Party:

Q2. Consider the following statements with respect to Bal Kalyan Puraskar:

Q3. Consider the following statements with respect to PRAGATI:

Q4. Consider the following statements with respect to the Montreal Protocol:

25 Jan 2021 CNA:- Download PDF Here