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Daily Current Affairs 07.04.2022(India offers help to end Russia-Ukraine conflict ,Repairing the complex India-Nepal relationship,A candid conversation about the ‘caged parrot’,How the UAPA is wrecking lives ,The HDFC Ltd.-HDFC Bank merger,Realism versus liberalism in international relations,Centre extends relief to Tibetan Committee by 5 years,UNGA to vote on Russia’s HRC suspension)

Daily Current Affairs 07.04.2022(India offers help to end Russia-Ukraine conflict ,Repairing the complex India-Nepal relationship,A candid conversation about the ‘caged parrot’,How the UAPA is wrecking lives ,The HDFC Ltd.-HDFC Bank merger,Realism versus liberalism in international relations,Centre extends relief to Tibetan Committee by 5 years,UNGA to vote on Russia’s HRC suspension)

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1. India offers help to end Russia-Ukraine conflict  

Russia is ‘very important partner’: External Affairs Minister

India will be “glad” to help in bringing about a resolution for the crisis in Ukraine, External Affairs Minister S. Jaishankar said on Wednesday. Speaking in the Lok Sabha during a discussion under Rule 193 regarding the crisis in Ukraine and its implications, Dr. Jaishankar said that Russia is “a very important partner” but also held that India is against the conflict. He acknowledged the support from Russia, Ukraine and even Indian nationals based in Eastern Europe during Operation Ganga to evacuate Indian students from Ukraine.

“In terms of diplomacy, India continues to press forcefully for an immediate cessation of hostilities and an end to violence. We encourage talks between Ukraine and Russia, including at the level of their Presidents. The Prime Minister has spoken to them both. This was precisely the message that was conveyed to Russian Foreign Minister Sergey Lavrov when he was in Delhi. If India can be of any assistance in this matter, we will be glad to contribute,” he said.

‘Stabilising transactions’

“Our effort today is to stabilise economic transactions between India and Russia because this is very important for us. Russia is a very important partner in a variety of areas,” Dr. Jaishankar said, indirectly referring to the crucial role Russia plays in India’s defence sector.

Russia continues to remain the largest arms supplier to India despite strong competition from France, Israel, the United States and other western countries. The specific remarks on economic ties with Russia came after Congress MP Adhir Ranjan Chowdhury sought an explanation on how India would conduct business with Russia as it was hit by western sanctions.

2. Repairing the complex India-Nepal relationship

There needs to be quiet dialogue to resolve their many differences, with New Delhi needing to be sensitive and generous

The Nepal Prime Minister, Sher Bahadur Deuba, paid a long-awaited visit to India last week (April 1-3). Sworn in in July 2021, this was his first bilateral visit abroad, in keeping with tradition. The outcome might appear modest but what is significant is that India and Nepal effectively managed to steer clear of divisive issues. At 75, Mr. Deuba is a political veteran and first became Prime Minister in 1995. Now in his fifth stint, he is no stranger to the complex relationship between the two countries.

Positive outcomes

Among the highlights was the operationalisation of the 35 kilometre cross-border rail link from Jayanagar (Bihar) to Kurtha (Nepal). Two further phases will extend it to Bijalpura and Bardibas. The ₹787 crore project had been ready for over a year but operationalisation was held up because of the necessary administrative requirements in Nepal to set up a company that could recruit staff. The Konkan Railway Corporation will provide the necessary technical support initially.

The second project that was inaugurated was the 90 km long 132 kV double circuit transmission line connecting Tila (Solukhumbu) to Mirchaiya (Siraha) close to the Indian border. Constructed with an Exim Bank concessional loan of ₹200 crore, there are a dozen hydroelectric projects planned in the Solu corridor for which the Nepal Electricity Authority has concluded PPAs of 325 MW.

In addition, agreements providing technical cooperation in the railway sector, Nepal’s induction into the International Solar Alliance, and between Indian Oil Corporation and Nepal Oil Corporation on ensuring regular supplies of petroleum products were also signed.

The Mahakali Treaty, signed in 1996 during Mr. Deuba’s first visit as Prime Minister, covers the Sarada and Tanakpur barrages as well as the 6,700 MW (approximately) Pancheshwar Multipurpose project. Both sides have agreed to push for an early finalisation of the detailed project report. The ambitious $7 billion project needs political will to move it forward. The joint vision statement on power sector cooperation recognises the opportunities for joint development power generation projects together with cross border transmission linkages and coordination between the national grids; it can provide the momentum.

On February 27, Mr. Deuba pushed through the ratification of the agreement with the U.S. Millennium Challenge Corporation (MCC), despite the reservations of his coalition partners, the Maoists and the UML (Unified-Socialist). The agreement provides a grant of $500 million for building 318 km of high voltage transmission lines along with sub-stations and the maintenance of 300 km of the East-West highway. The Chinese Embassy in Kathmandu had actively sought to sabotage the agreement by planting stories that it was part of the U.S.’s Indo-Pacific strategy aimed at containing China. The agreement had been signed in 2017, during Mr. Deuba’s fourth stint as Prime Minister, and was awaiting ratification. Together with the Pancheshwar project, it provides welcome synergy.

China’s growing role

During the monarchy, China maintained a link with the Palace and its concerns were primarily related to keeping tabs on the Tibetan refugee community. With the abolition of the monarchy, China has shifted attention to the political parties and to institutions such as the Army and Armed Police Force and considers Nepal an important element in its growing South Asian footprint.

In recent years, India’s relations with Nepal have had both ‘highs’ and ‘lows’. Prime Minister Narendra Modi has often spoken of the “neighbourhood first” policy. He started with a highly successful visit in August 2014 but then saw the relationship take a nosedive in 2015, with India first getting blamed for interfering in the Constitution drafting process and then for an “unofficial blockade” that generated widespread resentment against India. It reinforced the notion that Nepali nationalism and anti-Indianism were two sides of the same coin that Mr. Deuba’s predecessor, Mr. K.P. Sharma Oli, exploited successfully.

In 2016, Mr. Oli visited Beijing to negotiate an Agreement on Transit Transportation. Three years later, a Protocol was concluded with China providing access to four sea ports and three land ports. The first ever visit of the Chinese Defence Minister took place in March 2017, followed by joint military exercises a month later. A military grant of $32 million was also announced.

China has overtaken India as the largest source of foreign direct investment. In 2019, China’s President Xi Jinping visited Kathmandu. Annual development assistance has been hiked to $120 million. Today, China is also engaged with airport expansion projects at Pokhara and Lumbini. Rather than compete with China, India needs to up its own game.

The growing Chinese presence means that India cannot afford to let issues linger but reach out actively to find resolution.

Managing differences

Over the years, a number of differences have emerged between India and Nepal that need attention. The political narrative has changed in both countries and these issues can no longer be swept under the carpet or subsumed by invoking a ‘special relationship’ based on ties of a shared culture, language and religion. Part of the success of Mr. Deuba’s visit was that none of the differences was allowed to dominate the visit. Yet, to build upon the positive mood, it is necessary these issues be discussed, behind closed doors and at Track 2 and Track 1.5 channels.

As one of the oldest bonds, the 1950 Treaty of Peace and Friendship was originally sought by the Nepali authorities in 1949 to continue the special links they had with British India. It provides for an open border and for Nepali nationals to have the right to work in India. But today, it is viewed as a sign of an unequal relationship, and an Indian imposition. The idea of revising and updating it has found mention in Joint Statements since the mid-1990s. It has been discussed sporadically, but in a desultory manner, by the Foreign Secretaries in 1997, and even at the ministerial level at the 2014 Joint Commission.

In 2016, an eight-member Eminent Persons Group was set up to discuss it. The report is available with both governments but the perception in Kathmandu is that it should be formally presented to the two governments. As long as it is clearly understood that this is only a report by well-intentioned experts in their individual capacity and not binding on governments, it should be possible for the two Foreign Ministers to acknowledge it publicly. It could even be made public to kickstart Track 2 conversations.

Demonetisation is another irritant. In November 2016, India withdrew ₹15.44 trillion of high value (₹1,000 and ₹500) currency notes. Today, over ₹15.3 trillion has been returned in the form of fresh currency. Yet, many Nepali nationals who were legally entitled to hold ₹25,000 of Indian currency (given that the Nepali rupee is pegged to the Indian rupee) were left high and dry. The Nepal Rashtra Bank, which is the central bank, holds ₹7 crore and estimates of public holdings are ₹500 crore. After more than five years, it should certainly be possible to resolve this to mutual satisfaction.

On the boundaries

In 2019, Mr. Oli, facing domestic opposition within his party, needed a distraction and found one in the form of the Kalapani boundary issue. These boundaries had been fixed in 1816 by the British, and India inherited the areas over which the British had exercised territorial control in 1947. While 98% of the India-Nepal boundary was demarcated, two areas, Susta and Kalapani remained in limbo. In November 2019, India issued new maps following the division of the State of Jammu and Kashmir as Union Territories, Jammu and Kashmir and Ladakh. Though the new Indian map did not affect the India-Nepal boundary in any material way, Mr. Oli expanded the Kalapani area dispute. By whipping up nationalist sentiment, he got a new map of Nepal endorsed by the legislature through a constitutional amendment. While it did not alter the situation on the ground, it soured relations with India and added a new and emotive irritant.

The need today is to avoid rhetoric on territorial nationalism and lay the groundwork for quiet dialogue where both sides display sensitivity as they explore what is feasible. India needs to be a sensitive and generous partner for the “neighbourhood first” policy to take root.

3. A candid conversation about the ‘caged parrot’

If the CBI is to tread the path of virtue, it should have a strong leader with a distinct belief in the law and ethics

The Chief Justice of India (CJI), Justice N.V. Ramana, must be lauded for his candid appraisal recently of the pathetic state of India’s investigating agencies. Last week in Delhi, while delivering the annual (and the 19th edition) D.P. Kohli Memorial Talk organised by the Central Bureau of Investigation (CBI), the CJI minced no words in condemning the utter subordination of agencies to the executive and its disastrous consequences for the cause of justice.

D.P. Kohli was the first Director of the CBI after the agency was renamed the CBI in 1963 from the earlier Special Police Establishment. A man of impeccable character, he was faceless and fearless, and a model to be emulated by his successors.

Judiciary’s gaze is crucial

The CJI has not said anything new at the lecture that we in India do not already know. But coming as it did from the head of the Indian judiciary, his stern warning that investigating agencies will pay a heavy price for their utter willingness to stoop to please politicians should be taken seriously by all outfits, especially the CBI, which has had a patchy record with regard to political interference in sensitive investigations. The CJI called upon investigators to stand up to unethical pressures in order not to betray the trust reposed in them by the public. He even dropped a hint that if middle- and senior-level investigators deviated from the path of objectivity and neutrality, they would pay for it dearly. We have already seen how the Supreme Court of India and High Courts have often admonished investigators for their sloppiness and deviation from ethics. Therefore, we need a strong Supreme Court and equally strong High Courts to keep our investigators on the straight and narrow path.

Some change

There is no denying the fact that the CBI has been grossly misused by successive governments. This is why in December 1997, another fearless judge, Justice J.S. Verma had lambasted the then CBI Director in the so-called Hawala case, rebuking him for stalling the investigation at will, thereby sending inappropriate signals to his subordinates in the crucial investigation.

Justice Verma was so provoked by state of affairs that he went on to prescribe a new clinical procedure for the selection of the CBI chief, giving him also a much needed and fixed tenure of two years during which he could not be removed by the government. It may not be an exaggeration to say that earlier, CBI Directors were changed at will almost like how one would wear new garments every day. This mandatory tenure was meant to insulate the CBI Director from the caprice of the executive. This process has since been expanded to include the CJI in the selection panel.

It will be incorrect to assert that all this has transformed the CBI into an apolitical and objective body. Meticulous supervision by the Supreme Court in some important cases has made more than a marginal difference to the honesty of investigation. There is palpable fear among CBI officers that the judiciary could intervene were an aggrieved person to prove that an investigator had been arbitrary and dishonest. It will be unfair to the CBI to say that its investigation has not acquired any greater uprightness than before even after the many reprimands it had received from the higher judiciary. My view is also that the allegation of political interference has been blown out of proportion, because only about 10% of cases handled by the CBI have political overtones.

A bright spot and lows

The CBI now has some of the brightest Indian Police Service officers in its higher echelons. None of them may be expected to be reckless and sacrifice their careers by bending to unethical pressures from their Director or from the government’s echelons. However, it is not enough if the middle-rung supervisors alone are straightforward. There needs to be a strong and virtuous leader who will not only be honest but also stick his neck out to protect his deputies if and when confronted by an unscrupulous political heavyweight. If the CBI has to tread the path of virtue, it should have the strongest leader with a distinct belief in the law and ethics.

Unfortunately, in recent years, at least two Directors brought ignominy to the CBI. This has proved that whatever the courts may do to enforce discipline and adherence to the law, there are the odd leaders who could subvert the system. Little can be done to move away from this unfortunate situation unless there are bold and enlightened persons heading investigation agencies, and who will be firm with the executive if it tries to intimidate junior officers.

My own experience is that if one stands up and explains to a Prime Minister why a particular course of action suggested by a junior Minister or someone in the ruling party was unacceptable, then one has shown the right path to one’s subordinates within the organisation. It is equally true that a Prime Minister will support you nine times out of 10 if you present your view in a rational and reasonable manner. If a Director is unable to display even this element of courage he should not be heading the organisation. If this honest approach to investigation does not get fused internally, mere tinkering with the criminal law and the procedure to appoint heads of important criminal justice organisations will be of no avail.

It is not that the CJI and the other judges are unaware of some investigating officers swerving from the right path at the instance of a small-time politician. But they are helpless in their efforts to stem the rot because many in the higher judiciary do not want to exceed their brief and upset things.

There have also been some big fish who have been caught in the net of investigators — a former Chief Minister of Bihar and a former Home Minister of Maharashtra, are examples. But given the magnitude of the problem, the steps taken so far to check dishonesty in the higher echelons of the government are only cosmetic. This is why I am still cynical: however much the judiciary stands by law enforcement outfits, little will change in terms of the public servant (including popular and elected Ministers) curbing the unabated corruption in the country.

What is needed

Finally, I do not endorse the CJI’s proposal of an umbrella organisation that will oversee all investigating agencies. This idea was meant to avoid having multiple agencies looking into the same set of allegations. Apart from its impracticality, such a novel body could generate its own problems — of turf wars and ego clashes. I would rather have the focus on weeding out the dishonest among officers and rewarding those who have shown and proven themselves to be honest and professionally innovative.

4. How the UAPA is wrecking lives 

Under the draconian law, the court’s decision on bail, de facto, becomes the decision on the case

On March 24, a Sessions Court in Delhi denied bail to Umar Khalid as part of a set of cases that have commonly come to be known as “the Delhi riots cases”. The case of the police was that Mr. Khalid was one of the conspirators behind the February 2020 violence in Delhi, which had claimed more than 50 lives. For this, Mr. Khalid, along with many others, was charge-sheeted under the Unlawful Activities (Prevention) Act (UAPA), 1967, and jailed pending trial. Mr. Khalid has been in jail for over 500 days. The trial has not yet begun.

Much has been written about the serious problems with the manner in which the Delhi Police has conducted its investigation, and prosecution of the Delhi riots: in particular, its selective targeting of activists who were involved with the protests against the Citizenship (Amendment) Act of 2019, which was the alleged trigger for the violence, while refraining from prosecuting individuals who are on record delivering incendiary speeches. The denial of bail to Mr. Khalid highlights an equally serious problem: the broken nature of India’s criminal justice system.

Bail hearing becomes trial

First, consider these facts. Mr. Khalid’s bail application was filed in July 2021. The order denying bail was passed eight months later, after multiple hours-long hearings, multiple adjournments, and three deferrals of the order itself. It is important to ask why an application for bail took so many hearings and eight months to decide: in criminal law, the purpose of bail is to ensure that an individual is not unjustly denied their liberty while the trial against them is still proceeding and their guilt has not yet been established. As such, in normal circumstances, courts are supposed to consider whether an accused is a flight risk, or is likely to tamper with evidence or intimidate witnesses. If neither of those dangers exist, there is no purpose in denying an individual their freedom before their guilt has been established in a court. This, in other words, is the real meaning of the hoary phrase ‘innocent until proven guilty’.

This is where the notorious UAPA comes in. Shorn of legalese, the UAPA prohibits a judge from granting an individual bail if, on a perusal of the police diary or the police report, the judge is of the opinion that there are “reasonable grounds for believing that the accusation is … prima facie true.” The effect of this, as the criminal legal scholar Abhinav Sekhri has pointed out, is that the UAPA introduces elements of the criminal trial into the question of bail. There are traces of this in the Indian Penal Code as well, for bail under serious non-UAPA offences. This hints at a larger problem with the criminal justice system, of which the UAPA is only the starkest example. Questions of guilt or innocence are meant to be determined at the end of a trial, after evidence has been sifted, witnesses examined and cross-examined, and arguments completed. The question of guilt or innocence at the stage of bail short-circuits that essential procedure.

But that is not the only problem with turning bail hearings into mini-trials. The problem is also that this mini-trial — to borrow a colourful phrase from the U.S. Supreme Court — licenses “one side … to fight freestyle, while requiring the other to follow the Marquis of Queensberry Rules (i.e., the rules of professional boxing)”. What the judge has before them is entirely one side of the case: the police version. In a trial, the defence would be entitled to cross-examine the prosecution’s witnesses, determine inconsistencies in their testimony, examine its own witnesses, present its own evidence, and otherwise demonstrate that the case against the accused has not been made out beyond reasonable doubt. In a bail hearing, the defence can do none of that. The starting point of the bail hearing is the presumption that everything in the police report is true. Based on that presumption, all the two sides can then argue about is whether according to these “facts”, the legal ingredients of the offence are fulfilled — or, in some rare cases, about whether the facts themselves are self-contradictory or flat-out implausible, so that no reliance can be placed on them even at the stage of bail. To use an analogy, it is like holding a debate between two sides, stopping it after one side finishes, allowing the other side to pose two or three questions but not say anything more, and then deciding whether the motion passes or falls.

Such a system might possibly be defensible in a situation where criminal justice was swift, efficient, and trustworthy. If, for example, criminal trials habitually concluded within six months, it might just be possible to argue that in terrorism cases, six months of pretrial incarceration is a painful but proportionate price to pay (in my opinion, it is still unjustifiable, but there is at least a case to be made). However, that is not the case in India: a UAPA trial takes years — often more than 10 years. In such a situation, the court’s decision on bail, de facto, becomes the decision on the case: the denial of bail means that a person is likely to spend a decade or more behind bars, as the trial winds on. And given the UAPA’s abysmally low conviction rates, the trial will likely end in acquittal.

This, thus, explains why bail hearings take so long, and are so convoluted (although there is still little excuse for the eight-month-long process in Mr. Khalid’s case). Both the defence and the prosecution know that the outcome of the bail hearing is, for all practical effects, the outcome of the case itself. The result of the denial of bail is, functionally, the same as the result of a finding of guilt: a decade-plus in jail. But, as we have seen, while the denial of bail is effectively a finding of guilt, it has none of the safeguards that the criminal law puts into place before an actual finding of guilt. The accused is first gagged from contesting the police’s version and is then condemned for not being able to disprove the police’s case.

Rank injustice

In a notorious judgment in National Investigation Agency v. Zahoor Ahmad Shah Watali (2019), the Supreme Court made a bad situation even worse by forbidding the lower courts from scrutinising in depth even the police case. This leads to absurd situations like Mr. Khalid’s bail order. A reading of the bail order shows that the court reproduces various allegations against Mr. Khalid — some of them hearsay, and therefore inadmissible during the trial, and some extremely implausible; dismisses the defence’s challenges to them without any engagement; and then denies bail. Lawyers and legal scholars may disagree over whether the UAPA actually requires the courts to become stenographers for the prosecution, even under existing legal doctrine. The point, however, is that for all the reasons we have discussed above, the result is rank injustice.

Reforming the criminal justice system is the task of many years. In the immediate future, however, it is at least possible to curtail the manner in which the UAPA plays havoc with the lives of so many individuals. Striking down or reading down its bail prohibitions and subjecting the police case to stricter scrutiny during bail hearings would be a start. It remains to be seen whether the judiciary has the will and the inclination to do so.

5. The HDFC Ltd.-HDFC Bank merger

What is the financial rationale of this amalgamation? Is the stage set for more mega deals?

Mortgage lender HDFC Ltd. and India’s largest private sector bank HDFC Bank on Monday announced a mega merger. Under the terms of the deal, HDFC Bank will be 100% owned by public shareholders, while existing shareholders of HDFC Ltd. will own 41% stake in HDFC Bank.

Post-merger, the mortgage lending business gets access to HDFC Bank’s CASA (current and savings accounts) deposits, which are lower cost funds. For HDFC Bank, every home loan customer can be tapped to become a bank customer.

The regulatory framework of the NBFC (non-banking financial company) industry has been moving closer to harmonise with the banking sector’s regulatory framework. If you are a large NBFC, it makes more sense to be merged with a bank because banks are more tightly regulated and have far more oversight of the RBI.

The story so far: Mortgage lender HDFC Ltd. and India’s largest private sector bank HDFC Bank on Monday announced a mega merger.

The amalgamation will create a financial behemoth that is expected to better tap the rising demand for credit.

Under the terms of the deal, which is one of the biggest in the Indian financial sector, HDFC Bank will be 100% owned by public shareholders, while existing shareholders of HDFC Ltd. will own 41% stake in HDFC Bank.

What are the terms of the merger?

The two companies have announced that their respective boards have approved the amalgamation. Subsequently, the merger has to go through a series of regulatory approvals.

It also has to get approval from shareholders of both companies. At this moment what has been announced by the two entities is that its an all-share deal, so there’s no cash transaction involved.

The terms of the share swap are such that shareholders of HDFC Ltd. will receive 42 shares of HDFC Bank for every 25 shares they hold in HDFC Ltd.

Post-merger HDFC Ltd. will no longer be a separate mortgage lender, it will get folded into the bank. The bank, which is the offspring of HDFC Ltd. and the older legacy entity, is the one which is acquiring the mortgage lender. With its acquisition of the mortgage lender, it also acquires all its subsidiaries, which includes a general insurance company, a life insurance company, and an asset management company.

What happens to existing customers and employees?

As far as customers are concerned, HDFC Ltd.’s customers will become the bank’s customers as well. As for employees, HDFC Bank is planning to absorb and retain all the employees.

Neither of the entities are very heavy on employee numbers and have been fairly conservative in their employee sizes.

At the press conference to announce the merger, HDFC chairman Deepak Parekh specifically said that the employees of HDFC Ltd. will become part of the bank.

Is it worth going through this exercise, which is going to take about 18 months or so to fructify? What is the rationale for it?

Every merger, when it involves two entities, takes a certain amount of time. But because both these entities are of the same house or group, this will not be too much of a challenge for them. As both HDFC Ltd. and HDFC Bank have largely had a fairly conservative lending culture, both reasonably customer-friendly, customer-centric, culturally, there wouldn’t be a big challenge. The integration part of it would only be a matter of ensuring that everything is seamless and smooth, getting the books mapped on to each other, the IT systems merging with each other and so on.

From a perspective of the rationale for the merger, Mr. Parekh said a few things, one of which was that in recent years, the evolution of the regulatory framework for the NBFC (non-banking financial company) industry has been gradually moving closer, to harmonise with the banking sector’s regulatory framework. Earlier, NBFCs had a fairly different and a far more loose sort of framework for lending and deposits. This led to issues in the industry with some NBFCs struggling and going under or being taken over by others. The Reserve Bank of India has over the years been tightening the regulatory structures for the NBFC industry. Mr. Parekh specified that the regulatory environment has been harmonised to the point where it makes sense, and the RBI too is likely to be happy. If you are a large NBFC with the sort of size that say HDFC Ltd. has, it makes more sense for it to be merged with a bank because the banks are much more tightly regulated and have far more oversight of the RBI.

As Basel III norms for capital adequacy are in place, the NPA (non-performing asset) book is very closely monitored. Even from a regulatory perspective, the RBI is unlikely to be unhappy to see this merger going through because it wants NBFCs to be tightly regulated. And if you are a part of a bank, you will be better regulated.

What is in it for HDFC Ltd. and HDFC Bank?

Post-merger, the mortgage lender, HDFC Ltd., gets access to HDFC Bank’s CASA (current and savings accounts) deposits, which are lower cost funds. For the mortgage lending business, the capital cost will come down. As the capital cost comes down, automatically it will have the ability to lend at a finer rate. For HDFC Bank, every home loan customer can be tapped to become a bank customer.

Was there any pressure or immediate requirement for the merger?

The competition in the housing finance space has increased, say from 30 years ago, when HDFC Ltd. was one among a handful of housing finance entities. Now entities providing loans for housing have gone up substantially. The larger ones are LIC Housing Finance, PNB Housing, Bank of Baroda Housing etc. SBI too has a housing business. Banks have also been lending through subsidiaries — Canfin Homes is Canara Bank’s housing finance subsidiary. So, in a sense for HDFC, it makes sense that HDFC Ltd. and HDFC Bank are under the same roof because if you are lending from a banking perspective, it makes it easier for your cost of funds to come down as your balance sheet size grows. When you are raising capital, your cost of capital also comes down.

For HDFC Bank, it’s about getting access to a large base of customers for cross-selling purposes. For HDFC Ltd., or the mortgage lending business, it’s primarily about the lower cost of capital.

Does a larger balance sheet help in terms of the NPA situation?

As far as HDFC Bank is concerned, bad loans are not a major pressure point because it has been a conservative lender compared to competitors. They have always shied away from big ticket lending to corporates. Most of their lending is to retail borrowers. As for HDFC Ltd., there might have been some pressure on home loans during the pandemic but based on what they have disclosed so far, it is not a major pressure point either. Also, the merger with the bank sort of helps alleviate any upcoming pressure.

Will the lending pattern change?

Infrastructure lending has been a serious problem in India. With the government making it clear that there is need for funding the infrastructure segment, we will have to wait and see whether the merged entity has the expertise to lend to infrastructure projects, which is a risky proposition. They do have a large volume of funds, and if they see specific opportunities with good entrepreneurs and good government projects, they may go for it.

What will be the impact of this deal?

It’s possible that we might see more NBFCs seeking to merge with banks. There is already talk of the number of banks coming down. So in some ways, HDFC Bank’s merger with HDFC Ltd. may be a precursor to what is going to happen in the state-run banking space, where the government has said it is going to reduce the number of public sector banks.

6. Realism versus liberalism in international relations

Understanding basic concepts which explain great power politics and rivalries

Proponents of liberalism emphasise on the internal characteristics of states which they argue impact a state’s external policies. Within the liberal framework, there are three different but interconnected theoretical approaches — economic interdependence, democratic peace and international institutions.

Realists consider nation states as the primary actors in a world which is basically an anarchic place with no supreme authority to maintain order. There are three main streams of realist theory — human nature realism, defensive realism and offensive realism.

Both theories try to understand the behaviour of states, especially great powers, from different perspectives.

Russia’s invasion of Ukraine has rekindled the realism versus liberalism debate in international relations. While liberals in general call the war an attack by “authoritarian Russia” on “democratic Ukraine”, realists argue the war was the culmination of the post-Cold War power games in Europe. While this debate can go on with no consensus, it’s important to understand the basic tenets of the two theories that are fuelling it.

Basically, both theories try to understand the behaviour of states, especially great powers, from different perspectives. Liberalism broadly has three core beliefs: states are the main actors in the international system; the internal characteristics of each state vary from the other and these differences shape the state’s behaviour; and some governance models are good and some are bad (for example, democracies versus dictatorships).

After the end of the Cold War, in which the liberal West defeated the communist Soviet Union, Francis Fukuyama, in The End of History and the Last Man, called the western liberal democracy the final form of human government. So, liberals emphasise on the internal characteristics of states which, they argue, impact states’ external policies. According to them, good states are supposed to make peace while bad states could seek to expand their power at the expense of others. Within the liberal framework, there are three different but interconnected theoretical approaches — economic interdependence, democratic peace and international institutions.

Theories of liberalism

The proponents of economic interdependence argue that a liberal economic order is essential for a stable international order. Economic globalisation is intrinsically linked to this argument. Democratic peace theorists claim that democracies do not go to war with each other. So, to create a world without war, according to this theory, a world of democracies should be built. And the role of institutions, according to them, is critical to maintain peace and order in the global system.

The League of Nations was formed after the First World War. The League collapsed and the Second World War broke out. But the post-War world order was rebuilt with new international institutions starting with the United Nations. Therefore, the ideal world order that liberals want is the one where democratic states are connected through economic globalisation and function in a system that is regulated by international organisations.

While liberalism offers an optimistic view of the global order, it’s more about what the world ought to be. Realism is more about what the world is.

For realists, a peaceful global order is desirable, but that’s far from reality. Hence, they are pessimists. Realists, like liberals, also consider nation states as the primary actors in the international system. For them, the world is basically an anarchic place with no supreme authority to maintain order. Therefore, this makes the world a dangerous place.

As historian E.H. Carr notes, realism “tends to emphasise the irresistible strength of existing forces and the inevitable character of existing tendencies, and to insist that the highest wisdom lies in accepting, and adapting oneself to these forces and these tendencies”.

Premises of realism

There are three main streams of realist theory in international relations — human nature realism, defensive realism and offensive realism. And all streams seek to explain why states seek more power.

Human nature realism (also called classical realism), laid out by Hans Morgenthau in Politics Among Nations, is based on the argument that humans’ lust for power can have a profound impact on the nature of states as states are led by human beings. According to human nature realists, states, by default, have this ‘will to power’ wired into them like human beings, and in an anarchic order, they continue to seek expansion of power. This could create conflicts.

Defensive realists, on the other hand, don’t believe that states are inherently aggressive. Kenneth Waltz argues in Theory of International Politics that the fundamental aim of states is survival. But Waltz also agrees that the global order is anarchic and this structural factor forces states to compete with each other.

Offensive realism is also a structural theory like defensive realism that bases its arguments on the structural factors rather than human behaviour. John Mearsheimer, the Chicago University professor who conceptualised offensive realism, argues that great powers always seek to maximise their power at the expense of rivals. While defensive realists argue that great powers seek to maintain the existing balance of power, offensive realists argue that status quo powers are rarely seen in international politics. “A state’s ultimate goal is to be the hegemon in the system,” writes Mearsheimer in The Tragedy of Great Power Politics.

7. Centre extends relief to Tibetan Committee by 5 years

Scheme was extended after Galwan incident in June 2020

The Union government has extended the scheme to provide ₹40 crore grants-in-aid to the Dalai Lama’s Central Tibetan Relief Committee (CTRC) for another five years, up to fiscal year 2025-26, the Rajya Sabha was informed on Wednesday.

Annual grant

The scheme was extended after the Galwan incident in June 2020 where 20 soldiers were killed in violent clashes with the Chinese People’s Liberation Army (PLA) in Eastern Ladakh.

To a question by the BJD’s Sujeet Kumar regarding the details of the committee during the last five years, Minister of State for Home Ajay Kumar Mishra said in a written reply, “The scheme provides for an annual grant of ₹8 crore to CTRC to meet the administrative expenses of Settlement Offices and social welfare expenses for Tibetan refugees staying in Tibetan settlements spread across 12 States/UTs in the country.”

The entire amount of ₹40 crore (₹8 crore per annum) from 2016-17 to 2020-21 for this scheme has been released/reimbursed to the CTRC,” it added.

On being asked, whether there is any plan to release a second tranche of such funds, the reply stated, “Yes. The scheme has been further extended for five years from 2021-22 to 2025-26. An amount of ₹8 crore to CTRC has been released for the year 2021-22.”

The reply added that the Tibetan Rehabilitation Policy of 2014 is reviewed in consultation with all the concerned stake holders i.e. State/Central Departments.

8. UNGA to vote on Russia’s HRC suspension

India’s vote after it called for inquiry into excesses in Bucha to be watched closely

India’s vote at the UN General Assembly will be watched closely, as a resolution sponsored by the U.S., U.K. and other countries seeks to suspend Russia’s membership of the UN Human Rights Council (HRC), where it is an elected member, after the discovery of mass graves and human rights excesses in the Ukrainian city of Bucha.

Thus far, India has abstained on at least 10 resolutions critical of Russia at the UN Security Council, UN General Assembly, Human Rights Council and the International Atomic Energy Agency (IAEA).

On Thursday, the UNGA is expected to vote on the resolution calling for the suspension of Russia from the Human Rights Council, after which members will make their statements on the situation in Ukraine.

The vote will follow after a series of foreign officials and Ministers from countries that are part of the U.S.-EU led sanctions regime visited Delhi in the past two weeks, calling on India to change its position on Ukraine.

Russian Foreign Minister Sergey Lavrov had also visited Delhi last week, praising India for its “independent” position.

When asked about India’s vote on the UNGA resolution, officials said that while India had called for an “independent enquiry” into the killings in Bucha, an investigation team had yet to be constituted and it might be more difficult to vote until there was a definitive conclusion about who was responsible for the excesses.

According to an official, the vote is not just about Russia and Ukraine, but the principle of whether such a procedure should be used to suspend an elected member at the UN body.

Toughening stance

In what was seen as a toughening of its stance, India on Tuesday condemned the killings of civilians in Bucha and called for an independent enquiry into them, although its statement at the UNSC didn’t directly refer to Russia.

As a result, the vote, the first such resolution since Libya was suspended by a unanimous UNGA decision in 2011, will be watched keenly for whether India would change its stand from the previous abstentions. If India abstains in this case, the vote would work in favour of the U.S.-led resolution which needs a two-thirds majority of the “present and voting” members in the UNGA on Thursday.

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