23 May 2022: UPSC Exam Comprehensive News Analysis

23 may

CNA 23 May 2022:- Download PDF Here

TABLE OF CONTENTS

A. GS 1 Related
B. GS 2 Related
GOVERNANCE
1. Understanding the process of issuing LOCs
2. The case against Mehul Choksi
C. GS 3 Related
SCIENCE AND TECHNOLOGY
1. The rise of AI chips
D. GS 4 Related
E. Editorials
HEALTH
1. India needs to keep an eye on its myopia prevalence
INTERNATIONAL RELATIONS
1. Iran’s regional centrality and isolation
ECONOMY
1. Poor recovery, increasing delays mar IBC resolution process
F. Prelims Facts
G. Tidbits
1. PM to attend Tokyo launch of U.S. trade initiative
2. Indian aid reaches Sri Lanka port
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions
FIP Magazine

Nut Graf
Since the arbitrary issue of LOCs against individuals is violative of the fundamental right to travel abroad guaranteed under Article 21 of the constitution, the judiciary has played a proactive role and has provided instructions to the Ministry to ensure accountability.

 

2. The case against Mehul Choksi

Syllabus: Important aspects of governance, transparency and accountability

Prelims: Facts about Interpol and Extradition treaties 

Mains: Measures undertaken by the government against economic offenders.

Context

The Dominican government has decided to drop all charges against Mehul Choksi.

Background

  • Mehul Choksi is wanted by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) in the ₹13,578 crores Punjab National Bank (PNB) fraud case.
  • He had fled to Antigua and Barbuda in January 2018, a few days before a case was filed against him.
  • He was missing from Antigua and Barbuda in May 2021 and was found in Dominica, where he was detained on the charge of illegal entry. 
  • In July 2021, a Dominica High Court permitted him to travel back to Antigua and Barbuda after giving him bail for medical treatment. 
  • The Dominican government has recently dropped all criminal proceedings against him.

 

Charges against Mehul Choksi in India

  • Based on the Punjab National Bank’s complaint, the CBI had registered a case against Choksi, Nirav Modi and others in January 2018 for their role in alleged bank fraud of about ₹280 crores in conspiracy with some officials. 
  • The alleged role of three firms namely Diamonds R US, Solar Exports and Stellar Diamonds, was found after they approached the PNB’s branch in Mumbai for buyer’s credit to make payment to the overseas suppliers.
  • CBI also registered another case against three Gitanjali group companies of Choksi for causing an alleged ₹4,887 crore loss to the bank. After the investigations, the CBI filed a chargesheet alleging that the amount involved was about ₹7,080 crores.
  • The CBI registered another case against Gitanjali Gems Limited and others for allegedly cheating the IFCI Limited of ₹22.06 crore.
  • The ED has filed cases under the Prevention of Money Laundering Act and has attached properties worth hundreds of crores in India and abroad. 
  • Proceedings have also been initiated against him under the Fugitive Economic Offenders Act.

Mehul Choksi’s shift to Antigua and Barbuda

  • Mehul Choksi and his relatives fled India in January 2018, a few days before the bank filed a complaint with the CBI. 
  • CBI found that he had applied for Antiguan citizenship in May 2017 and his application was processed in November 2017 and in  January 2018, he took the oath of allegiance to Antigua and has been living in the country. 
  • It is also said that he had visited Hong Kong in December 2017 and told the dummy directors of his so-called supplier companies to apply for a Thailand visa.
  • This has made the ED allege that he knew about the following criminal proceedings very much earlier.

 

Measures undertaken by the Indian agencies to bring back Choksi

  • CBI approached the Interpol and succeeded in getting a Red Notice issued against Choksi in December 2018. 
  • Although India does not have an extradition treaty with Antigua and Barbuda, as per a Ministry of External Affairs’ order provisions of the Extradition Act, 1962, (other the Chapter III) apply to Antigua and Barbuda with effect from the date of notifying India as a Designated Commonwealth Country under the Extradition Act of Antigua and Barbuda on September 17, 2001.
  • India is trying for Choksi’s extradition in the court of Antigua and Barbuda
  • He also faces charges against the validity of his Antiguan citizenship.
Nut Graf
As large sums of money are at stake and acknowledging a possibility of severe consequences if such individuals escape without prosecution, India must use its soft power and diplomatic channels to seek the fugitive’s custody and his prosecution in India.

 

Nut Graf
The advent of AI Chips has revolutionised the Chipmaking industry with wide ranging applications in various sectors such as robotics, network security, automobiles, healthcare, and retail. Increased investments and government support to the Industry are essential to realise the complete potential of AI Chips.

Category: ECONOMY

1. Poor recovery, increasing delays mar IBC resolution process

Syllabus:  Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains: The progress in the recovery process of Insolvency and Bankruptcy Code (IBC) and various challenges associated with it

Context

In the fourth quarter of FY22, the amount to be realised from the resolution process was found to be lower than the liquidation value of assets for the first time.

 

Details

  • Poor recovery of claims and delays in resolving bad assets have been the problems for various recovery mechanisms 
  • It is important to recover the maximum amount possible from the defaulter, and also do it quickly without delays so that the amount can be freed-up to lend new credit. 
  • In 2016, the Insolvency and Bankruptcy Code (IBC) was introduced to address the problems of bad debts and help the creditor with the resolution process. 
  • The IBC has performed compared to other recovery mechanisms such as SARFAESI, Lok Adalats, and Debt Recovery Tribunals. But IBC also suffers from systemic issues. 
    • Example: Out of the 2,600 cases that were closed by December 2021, 55% ended in liquidation while only 16% were completed with proper resolution plans approved by the lender. 
    • Also, the resolution process is affected due to delays in the process. 
      • On average, about 700 days were taken in FY22 to complete a resolution process, against the stipulated deadline of 330 days. 
    • The lenders continued to take steep haircuts (the debt foregone by the lender as a share of the outstanding claim).
      • In 100 out of 500 companies that saw proper resolutions, the haircuts were more than 90%.
  • The main challenge has been delays and it is due to the capacity of tribunals. 
    • The functioning of the NCLT [National Company Law Tribunal] during the COVID-19 pandemic has impacted IBC. 

 

Data on recovery progress

data

  • Chart 1 denotes that most of the cases resulted in liquidation in most of the quarters while approved cases ranged between 15% and 25% since 2018
  • Chart 2 suggests that in FY22, it took 772 days to resolve cases involving companies that had loans of more than ₹1,000 crores and the average number of days it takes to resolve such cases has increased significantly in the last five years.
  • Chart 3 shows the actual value realised by the creditors through the resolution process as a share of outstanding claims. The wider the gap between the two values, the greater the impact of the insolvency process and it is seen that the gap has been narrowing.
  • Chart 4 denotes that nearly 33 of 85 companies that owed more than ₹1,000 crores, lenders had to take above 90% haircuts.

 

Nut Graf
Problems of delays and haircuts continue to be the main challenges to the loan recovery in India further affecting the resolution process through Insolvency and Bankruptcy Code (IBC).

F. Prelims Facts

Nothing here for today!!!

G. Tidbits

1. PM to attend Tokyo launch of U.S. trade initiative

  • The Prime Minister of India will participate in the unveiling of the Indo-Pacific Economic Framework (IPEF) in Tokyo 
  • Indo-Pacific Economic Framework (IPEF) is said to be a U.S. initiative for trade partnerships in the region
  • Although India has not taken a decision on joining the framework, the attendance of the Indian PM at the event is a significant step towards building economic ties among Quad countries (India, the U.S., Australia and Japan) in the Indo-Pacific
  • The Indo-Pacific Economic Framework (IPEF) is touted to counter the dominance of the 15-nation Regional Comprehensive Economic Partnership (RCEP) and the 17-nation Trans-Pacific Partnership (TPP) that China is a member of.

2. Indian aid reaches Sri Lanka port

  • India’s relief supplies such as rice, life-saving medicines and milk powder for the crisis-hit Sri Lanka reached the country and were handed over to the government.
  • The consignment consists of 9,000 metric tonnes (MT) of rice, 50 MT of milk powder and more than 25 MT of drugs and other medical supplies worth ₹2 Billion.
  • This is also the first consignment under a $16 million commitment of 40,000 MT of rice, 500 MT of milk powder and medicines by the Government of Tamil Nadu.

H. UPSC Prelims Practice Questions

Q1. Which of the following statement/s is/are incorrect? (Level – Medium)
  1. India has been progressively decreasing its reliance on external debt and stressing on increasing domestic debt in the total debt of the country given the concerns of vulnerability associated with external debt.
  2. Among India’s external debt, Commercial borrowings accounted for the highest proportion.

Options:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
CHECK ANSWERS:-

Answer: a

Explanation:

    • Statement 1 is not correct, India’s debt market is being progressively opened up to the foreign capital in a careful and calibrated manner.
    • Statement 2 is correct, Commercial borrowings have remained the largest component of external debt.
Q2. Which of the following reports are associated with the World Economic Forum? (Level – Medium)
  1. Global Risks Report
  2. Fostering Effective Energy Transition
  3. Global Gender Gap Report
  4. Global Economic Prospects
  5. Global Competitiveness Report
  6. World Economic Outlook

Options:

  1. 1, 2 and 6 only
  2. 1, 2, 3 and 5 only
  3. 1, 2, 3, 4 and 5 only
  4. All of the above
CHECK ANSWERS:-

Answer: b

Explanation:

  • Global Risks Report, Fostering Effective Energy Transition, Global Gender Gap Report, Global Competitiveness Report are associated with World Economic Forum
  • Global Economic Prospects Report is released by World bank
  • World Economic Outlook is released by International Monetary Fund
Q3. Which of the following statement/s is/are correct? (Level – Easy) 
    1. Among the Agricultural exports from India, rice accounts for the largest share in terms of
      value.
    2. India has been the largest producer and exporter of sugar in the world in the last 5 years.

Options:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
CHECK ANSWERS:-

Answer: a

Explanation:

  • Statement 1 is correct, Among the Agricultural exports from India, rice accounts for the largest share in terms of value.
  • Statement 2 is not correct, Since 2019–2020 India is the world’s second-largest sugar producer after Brazil and Brazil is also the largest exporter of sugar.
Q4. Consider the following instruments: (Level – Medium)
  1. Kanjira
  2. Mridhangam
  3. Ghatam

Which of the following are closely related with Carnatic music?

  1. 2 only
  2. 2 and 3 only
  3. 1, 2 and 3 only
  4. 3 only
CHECK ANSWERS:-

Answer: c

Explanation:

  • Instruments used in Carnatic music include the ghatam, mridangam, kanjira, morsing, venu flute, veena, chitraveena, etc.
  • Hence option c is correct.

 

Q5. Consider the following pairs: (Level – Difficult) [UPSC 2019]

      Famous place              River

  1. Pandharpur             Chandrabhaga
  2. Tiruchirappalli        Cauvery
  3. Hampi                      Malaprabha

Which of the pairs given above are correctly matched?

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3
CHECK ANSWERS:-

Answer: a

Explanation:

  • The Chandrabhaga (Bhima) river flows through Pandharpur.
  • Tiruchirapalli is located along the Kaveri River in Tamil Nadu.
  • Hampi is located in the Tungabhadra basin in Central Karnataka.

I. UPSC Mains Practice Questions

  1. The issuance of LOCs (look out circular) remains highly discretionary, and the exercise of power under it remains questionable. Explain.  (10 Marks, 150 Words) (GS II – Governance)
  2. What are the different ways in which AI chips are being used in various sectors? What are the recent innovations in the industry? (15 Marks, 250 Words) (GS III – Science and Technology)

Read the previous CNA here.

CNA 23 May 2022:- Download PDF Here

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