💥Mains Ready By December. Smash Mains & Smash PYQ Admissions Open
Talk to Mentor

Civilsdaily

Login

GS Paper: GS3

  • India needs thoughtful legislation on digital currency

    Context

    The dramatic changes in technology have created new challenges for the law, lawmakers, courts and lawyers to confront.

    Challenges posed by technological transformation

    • Technology has outpaced the law, and lawmakers are being challenged by how quickly “we the people” have embraced technological transformations.
    • Challenges of regulation: Challenges include regulation of digital media platforms, censorship of Over The Top (OTT) streaming services, fixing accountability for procuring and deploying spyware like Pegasus, dealing with the bias within artificial intelligence etc.
    • Regulation of cryptocurrencies: In probably no other area are lawmakers required to appreciate science and technology than in cryptocurrency.
    • With 10 crore users of cryptocurrency and crypto assets in India, this ever-expanding market is almost entirely unregulated.

    Practices or legislative models that have been adopted the other countries for regulation of cryptocurrencies

    • KYC, AML and CFT: Countries where cryptocurrencies and crypto-assets are legal have frameworks that mandate KYC (know your customer), AML (Anti-Money Laundering) mechanisms and demand adherence to CFT (Combating Financing of Terrorism) requirements.

    [1] How Singapore regulates crypto-currencies?

    • Singapore adopted the approach which favours strong regulation rather than ban.
    • Common law to regulate traditional and cryptocurrencies: Singapore has the Payments Services Act, 2020 that has streamlined both traditional and cryptocurrencies under one law.
    • Provision for licences: The law also provides a framework to obtain licences to operate crypto businesses.

    [2] How Switzerland regulates cryptocurrencies?

    • Switzerland has also favoured the strong regulation model overseen by an already established financial regulator.
    • Provision for licences: The Swiss Financial Market Supervisory Authority (FINMA) that oversees the country’s financial markets mandates that all virtual asset service providers, including cryptocurrency exchanges must be licenced.
    • KYC, AML and CFT procedures must be strictly complied with. These are the checks on the use of cryptocurrencies and crypto assets that could facilitate criminal enterprise.

    [3] Approach adopted by the US

    • Crypto exchanges to be transmitters: The US does not consider cryptocurrency to be legal tender but defines cryptocurrency exchanges to be money transmitters.
    • Cryptocurrencies as property: The Internal Revenue Service (IRS) treats cryptocurrency as property for US federal taxation purposes.
    • Exchanges must obtain requisite licences from the Financial Crimes Enforcement Network and implement the standard AML and CFT requirements that have become the norm in most jurisdictions that regulate cryptocurrencies.
    • Revenue potential: One of the most important lessons to absorb from the US is the revenue potential of cryptocurrencies and crypto assets.

    Conclusion

    In India, the need of the times is thoughtful legislation and rigorous regulation of cryptocurrencies and crypto-assets that are already here and being used.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How James Webb Telescope seeks to unlock Universe’s Secrets

    Today, NASA’s James Webb Space Telescope (JWST), the largest and most powerful space telescope ever built, will be launched from French Guiana, on the northeast coast of South America on the European Ariane 5 rocket.

    James Webb Space Telescope

    • JWST is a space telescope jointly developed by NASA, the European Space Agency (ESA), and the Canadian Space Agency (CSA).
    • It is planned to succeed the Hubble Space Telescope as NASA’s flagship astrophysics mission.
    • It will conduct a broad range of investigations across the fields of astronomy and cosmology, including:
    1. Observing some of the most distant events and objects in the universe such as the formation of the first galaxies
    2. Detailed atmospheric characterization of potentially habitable exoplanets

    How is it different from other telescopes?

    • JWST is much more powerful and has the ability to look in the infrared spectrum, which will allow it to peer through much deeper into the universe, and see through obstructions such as gas clouds.
    • As electromagnetic waves travel for long distances, they lose energy, resulting in an increase in their wavelength.
    • An ultraviolet wave, for example, can slowly move into the visible light spectrum and the infrared spectrum, and further weaken to microwaves or radio waves, as it loses energy.
    • Hubble was designed to look mainly into the ultraviolet and visible regions of the electromagnetic spectrum.
    • JWST is primarily an infrared telescope, the first of its kind.

    Special features of JWST

    (1) Time machine in space

    • Powerful space telescopes, like JWST or the Hubble Telescope, are often called time machines because of their ability to view very faraway objects.
    • The light coming from those objects, stars or galaxies, which is captured by these telescopes, began its journey millions of years earlier.
    • Essentially, what these telescopes see are images of these stars or galaxies as they were millions of years ago.
    • The more distant the planet or star, the farther back in time are the telescopes able to see.

    (2) Farthest from Earth

    • JWST will also be positioned much deeper into space, about a million miles from Earth, at a spot known as L2.
    • It is one of the five points, known as Lagrange’s points, in any revolving two-body system like Earth and Sun, where the gravitational forces of the two large bodies cancel each other out.
    • Objects placed at these positions are relatively stable and require minimal external energy to keep them there. L2 is a position directly behind Earth in the line joining the Sun and the Earth.
    • It would be shielded from the Sun by the Earth as it goes around the Sun, in sync with the Earth.

    (3) Engineering marvel

    • JWST has one large mirror, with a diameter of 21 feet (the height of a typical two-storey building), that will capture the infra-red light coming in from the deep universe while facing away from the Sun.
    • It will be shielded by a five-layer, tennis court-sized, kite-shaped sunscreen that is designed to block the heat from Sun and ensure the extremely cool temperatures that the instruments are built to operate at.
    • Temperatures on the sun-facing side can get as high as 110°C, while the other side would be maintained at –200° to –230°C.
    • The extremely cold temperatures are needed to detect the extremely faint heat signals from distant galaxies.
    • The mirror as well as the sunscreen is so large they could not have fit into any rocket. They have been built as foldable items and would be unraveled in space.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Meendum Manjappai Scheme

    Tamil Nadu CM has launched the ‘Meendum Manjappai’ Scheme to promote the use of cloth bags by the public and discourage the use of plastic bags.

    Meendum Manjappai Scheme

    • This awareness campaign on using ‘yellow’ cloth bag or ‘manjapai’ as it is called in Tamil, is aimed at encouraging the people to return to the use of this eco-friendly bag and discard the plastic bags.
    • Manjal means turmeric in Tamil which has curative power. The manjapai was an integral part of daily life in the past.
    • Traditionally the manjapais were used for shopping, carrying books, ration and even cash.
    • The state government had enforced a ban on the production, use, storage, distribution, transportation or sale of 14 types of plastics with effect from January 1, 2019.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What is Tokenization of Debit and Credit Cards?

    The Reserve Bank of India (RBI) has decided to defer the implementation of tokenization of debit and credit cards for online transactions by a further six months following representations from stakeholders.

    RBI decision

    • RBI has also extended tokenization of Card-on-File (CoF) transactions where card details are saved by merchants — and directed the merchants not to store card details in their systems from January 1, 2022.
    • A CoF transaction is one in which a cardholder has authorized a merchant to store his or her Mastercard or Visa payment details, and to bill the stored account.
    • E-commerce companies and airlines and supermarket chains often store card details.

    What is Tokenisation?

    • Tokenisation refers to the replacement of credit and debit card details with an alternative code called a ‘token’.
    • This token is unique for a combination of card, token requestor (the entity that accepts a request from the customer for tokenisation of a card and passes it on to the card network to issue a token) and the device.

    Benefits of Tokenization

    • Transaction safety: Tokenization reduces the chances of fraud arising from sharing card details.
    • Easy payments: The token is used to perform contactless card transactions at point-of-sale (PoS) terminals and QR code payments.
    • Data storage: Only card networks and card-issuing banks will have access to and can store any card data.

    How are the transactions currently processed?

    • There are many players involved in processing one card transaction today:
    1. Merchant
    2. Payment aggregator
    3. Issuing bank
    4. Card network
    • When a transaction happens on a merchant platform, the data is sent to the payment aggregator (PA).
    • The PA next sends the details to either the issuing bank or the card network.
    • Then issuing bank sends an OTP and the transaction flows back.

    Which companies dominate card transactions in India?

    Is the industry ready to implement this?

    • Not fully, that is why the RBI had to extend the deadline.
    • The industry currently can convert CoF into a tokenized number. However, the readiness to process the token is negligible.
    • About 90% of banks are ready with provisioning of token on Visa. Only 25-30% banks are ready on Mastercard.

    Impact on businesses

    If the industry isn’t ready, several business models would be impacted.

    • E-mandates (recurring payments) will stand ineffective from 1 July.
    • Card EMIs account for 25% of online e-commerce sales. That option will no longer be available.
    • Cashbacks/discount offers by banks will be impacted, too.
    • A user may not be able to use Mastercard saved cards on a merchant platform to make a transaction and will have to enter the card details every time a transaction is made.
    • This could be the same for some Visa cards.

    Way forward

    • The new system is a much bigger disruption to the way digital payments will henceforth be processed.
    • Integration of systems and the ability to process is one part.
    • The industry also needs to test the performance and success rate of the tokenization solution.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • RBI proposes new norms for Capital Requirement for Banks

    The Reserve Bank of India (RBI) has proposed to replace existing approaches for measuring minimum operational risk capital requirements of banks with a new Basel-III standardized approach.

    What are Capital Requirements of a Bank?

    • Capital requirements are standardized regulations in place for banks and other depository institutions that determine how much liquid capital must be held of a certain level of their assets.
    • They are set to ensure that banks and depository institutions’ holdings are not dominated by investments that increase the risk of default.
    • They also ensure that banks and depository institutions have enough capital to sustain operating losses (OL) while still honoring withdrawals.

    Why need such a requirement?

    • An angry public and uneasy investment climate usually prove to be the catalysts for capital requirements provisions.
    • This is essential when irresponsible financial behavior by large institutions is seen as the culprit behind a financial crisis, market crash, or recession.

    What are the risks for a Bank?

    There are many types of risks that banks face.

    • Credit risk
    • Market risk
    • Operational risk
    • Liquidity risk
    • Business risk
    • Reputational risk
    • Systemic risk
    • Moral hazard

     What is Operational Risk?

    • ‘Operational risk’ refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
    • This has been defined by the Basel Committee on Banking Supervision I as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
    • This definition includes legal risk, but excludes strategic and reputational risk.

    Pros of Capital Requirements

    • Ensure banks stay solvent, avoid default
    • Ensure depositors have access to funds
    • Set industry standards
    • Provide way to compare, evaluate institutions

    Unwanted consequences of such move

    • Raise costs for banks and eventually consumers
    • Inhibit banks’ ability to invest
    • Reduce availability of credit, loans

    Back2Basics: Basel Accords

    • They refer to the banking supervision Accords (recommendations on banking regulations)—Basel I, Basel II and Basel III—issued by the Basel Committee on Banking Supervision (BCBS).
    • They are called the Basel Accords as the BCBS maintains its secretariat at the Bank for International Settlements in Basel, Switzerland and the committee normally meets there.
    • These are a set of recommendations for regulations in the banking industry.
    • India has accepted Basel accords for the banking system.

    Let’s revise them:

    [1] Basel I

    • In 1988, BCBS introduced capital measurement system called Basel capital accord, also called as Basel 1.
    • It focused almost entirely on credit risk. It defined capital and structure of risk weights for banks.
    • The minimum capital requirement was fixed at 8% of risk-weighted assets (RWA).
    • RWA means assets with different risk profiles.
    • For example, an asset backed by collateral would carry lesser risks as compared to personal loans, which have no collateral. India adopted Basel 1 guidelines in 1999.

    [2] Basel II

    • In June ’04, Basel II guidelines were published by BCBS, which were considered to be the refined and reformed versions of Basel I accord.
    • The guidelines were based on three parameters, which the committee calls it as pillars:
    • Capital Adequacy Requirements: Banks should maintain a minimum capital adequacy requirement of 8% of risk assets.
    • Supervisory Review: According to this, banks were needed to develop and use better risk management techniques in monitoring and managing all the three types of risks that a bank faces, viz. credit, market and operational risks.
    • Market Discipline: This need increased disclosure requirements. Banks need to mandatorily disclose their CAR, risk exposure, etc to the central bank. Basel II norms in India and overseas are yet to be fully implemented.

    [3] Basel III

    • In 2010, Basel III guidelines were released. These guidelines were introduced in response to the financial crisis of 2008.
    • A need was felt to further strengthen the system as banks in the developed economies were under-capitalized, over-leveraged and had a greater reliance on short-term funding.
    • Also the quantity and quality of capital under Basel II were deemed insufficient to contain any further risk.
    • Basel III norms aim at making most banking activities such as their trading book activities more capital-intensive.
    • The guidelines aim to promote a more resilient banking system by focusing on four vital banking parameters viz. capital, leverage, funding and liquidity.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Indian Army inducts Armoured Engineer Reconnaissance Vehicle (AERV)

    The first batch of next-generation indigenously designed Armoured Engineer Reconnaissance Vehicles (AERV) was inducted by the Indian Army.

    About AERV

    • AERV is indigenously designed and developed by DRDO and manufactured by the Pune unit of Bharat Electronics Limited.
    • It has more than 90% indigenous content.
    • It is a versatile BMP-IIK amphibious Infantry Combat Vehicle (ICV) fitted with instruments for water reconnaissance, land reconnaissance, navigation, and data backup.

    Unique capabilities of AERV

    • AERV is capable of measuring soil bearing capacity on riverbanks.
    • It works to determine if they are motorable for military vehicles on Go-No Go basis (critical parameters for bridge laying), dry and wet gaps in day and night conditions, slopes and height of river banks or canals.”
    • AERVs can navigate terrain using Military Grid Coordinate System, measure and plot underwater beds and water currents of rivers or canals.
    • They can store data from various instruments on Control Console for further analysis and decision-making.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Reintroduction of African Cheetahs in India

    Kuno National Park in Madhya Pradesh was all prepped to welcome the African cheetahs — a project that has been a decade in the making — this year. The project has now been postponed, as the new coronavirus variant of concern omicron prompted travel restrictions.

    Confused over Leopard and Cheetah?

    The most common difference between these two animals is the patterns on their coat. At first glance, it may look like they both have spots, but in actual fact, a leopard has rosettes which are rose-like markings, and cheetahs have a solid round or oval spot shape.

    About Asiatic Cheetah

    • Cheetah, the world’s fastest land animal was declared extinct in India in 1952.
    • The Asiatic cheetah is classified as a “critically endangered” species by the IUCN Red List, and is believed to survive only in Iran.
    • It was expected to be re-introduced into the country after the Supreme Court lifted curbs for its re-introduction.
    • From 400 in the 1990s, their numbers are estimated to have reached to 50-70 today, because of poaching, hunting of their main prey (gazelles) and encroachment on their habitat.

    Why reintroduce Cheetahs?

    • Reintroductions of large carnivores have increasingly been recognized as a strategy to conserve threatened species and restore ecosystem functions.
    • The cheetah is the only large carnivore that has been extirpated, mainly by over-hunting in India in historical times.
    • India now has the economic ability to consider restoring its lost natural heritage for ethical as well as ecological reasons.

    Why was the project halted?

    • The court was worried whether the African cheetahs would find the sanctuary a favorable climate as far as the abundance of prey is concerned.
    • Those who challenged the plan argued that the habitat of cheetahs needed to support a genetically viable population.

    Try this PYQ:

    Q. Consider the following:

    1. Black necked crane

    2. Cheetah

    3. Flying squirrel

    4. Snow leopard

    Which of the above are naturally found in India?

    (a) 1, 2 and 3 only

    (c) 2 and 4 only

    (b) 1, 3 and 4 only

    (d) 1, 2, 3 and 4

     

    [wpdiscuz-feedback id=”ekzomobozv” question=”Please leave a feedback on this” opened=”1″]Post your answers here:[/wpdiscuz-feedback]

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What rising inequality means

    Context

    In the aftermath of Covid-19 pandemic, evaluating the state of inequality serves as an eye-opener on the income/wealth divides prevailing across regions.

    Income and wealth inequality in the world

    • The top 10% of the global population share 52% of the total income, while the bottom half survives with a mere 8.5% of it.
    • This leaves the 40% in the middle with 40% of the income.
    • This distribution shows the tendency of a rising middle class with lower disparity in income, but it also shows that the status of the poor is worsening day by day.
    • Inequality of wealth: In terms of wealth, the top 10% of the global population own 76% of the total wealth, while the bottom 50% share a mere 2%.
    • Some additional features of this exposition of inequality also relate to imbalance of women’s share in income as well as the ecological inequities indicated by the differential carbon emission levels.

    Factors responsible for rising inequality

    [1]  Absence of effective measures of redistribution

    • Inequality varies across regions. It is moderate in Europe and sharp in Africa.
    •  The top 10% have an income share of 36% in Europe vis-à-vis the top 10% with a share of 58% of the total income in West Asia and North Africa.
    • Measures for redistribution: This disparity shows that worsening inequalities are avoidable with appropriate measures in place.

    [2] The absence of measures discouraging undue accumulation

    • Kuznet’s curve not follower everywhere: While there is an argument in literature that inequalities are a manifestation of the average level of income, as explained by the Kuznets’ theory, the prevailing pattern across countries does not follow the same.
    • Average income level is poor predictor of inequality: The average income levels seem to be poor predictors of the levels of inequality, with high-income countries such as the U.S. having higher levels of inequality as against countries such as Sweden, which have moderate levels of inequality.
    • Similar contradictions are also seen when we contrast middle-income nations such as Brazil, India and China as against Malaysia and Uruguay.
    • Hence, emerging inequalities are not necessarily an outcome of rising levels of income in the post-liberalisation era, but a depiction of poor redistributive policies towards discouragement of accumulation by governments with due sensitivity towards inequalities.

    How inequality hurts government finances

    • This prevailing pattern of wealth concentration and differential levels of income around the world has also resulted in rich nations having poor governments.
    • Such a situation has two underpinnings: one, governments have a limited capacity to act on inequality aversion measures and two, private interests overshadow the distributional fairness of wealth. 

    Way forward

    • Focus also needs to be placed on reducing disparities in capability domains like education and differential endowments (tangible and intangible) that have the potential to sustain inequalities.

    Consider the question “How rising income and wealth inequality could harm us in various ways? What are the factors responsible for the rising inequality? Suggest the way forward.”

    Conclusion

    The rising levels of income and wealth need to be addresses by policy measures and reducing disparity in capacity domains.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How the new Warehousing Policy will transform India’s logistics

    In order to reduce transportation and logistic cost, the union government along with the National Highway Authority of India (NHAI) is working on warehouse policy.

    What are Warehouses?

    • A warehouse is a building for storing goods.
    • Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.
    • They are usually large plain buildings in industrial parks on the outskirts of cities, towns, or villages.

    Objectives of the New Warehousing Policy

    • Logistics boost: The new policy is aimed at improving logistics throughout the country.
    • Supply chain management: The modern warehouses will house cold-storage chains and will be able to store all kinds of cargo—wet and dry.
    • De-congesting cities: These facilities are expected to come up outside city centres so that large trucks carrying the cargo do not need to enter the city to unload their goods.
    • Fuel efficiency: This will also help boost bulk carrying capacity and save fuel.
    • Curbing air pollution: The idea is to minimize pollution and traffic congestion in major cities.

    Who will frame and implement the policy?

    • NHAI: The policy will be framed by the National Highways Authority of India (NHAI). It will also be the implementing agency.

    How?

    • Through Land Banks: There are land banks along the highways and expressways of the country with the NHAI.
    • PPP mode: Tenders will be floated for such land parcels, inviting private players to develop warehousing zones in PPP mode on a revenue-sharing basis or for a fixed fee.

    What will be the impact on logistic costs?

    • Logistics cost-saving: Warehousing zones will help cut India’s logistics cost, which is 14%-16% of gross domestic product (GDP), compared to 8%-10% of GDP in China and 12%-13% in the US.
    • Establishment of MMLPs: The warehousing zones and multi-modal logistics parks (MMLPs) are being set up by the NHAI.
    • FMCG sector boost: This will help Fast-moving consumer goods (FMCG) firms,  steel and cement makers stock inventory near major hubs.

    How will MMLPs aid warehousing policies?

    • Integration of multi-modal transport includes the development of 35 MMLPs.
    • The MMLPs are aimed at fostering inter-modal connectivity through dedicated railway lines and access from highways to provide connectivity to an airport or a seaport or an inland waterway terminal.
    • The aim is to:
    1. Remove deficiencies related to logistics
    2. Draw the associated costs down, and
    3. Strategically integrate highway projects and other connectivity initiatives

    Why such move?

    Ans. E-commerce boom

    • The e-commerce sector has been driving the demand for logistics and warehousing across global markets.
    • It has emerged as the most prominent driver of Indian warehousing market volumes along with the third party logistics sector.
    • This sector’s share in transactions has grown from 18% in FY17 to 31% in FY21.
    • The Indian market is on the verge of its next phase of growth with domestic groups such as Tatas and Reliance entering the business.
    • Thus far, Amazon.com Inc. and Walmart Inc. have driven the market.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • UDAN scheme

    PM launched the UDAN scheme nearly five years back with the aim to take flying to the masses. However, many routes have launched by airlines have been discontinued.

    UDAN Scheme

    • The Ude Desh Ka Aam Nagrik (UDAN) scheme is a low-cost flying scheme launched with the aim of taking flying to the masses.
    • The first flight under UDAN was launched by the PM in April 2017.
    • It is also known as the regional connectivity scheme (RCS) as it seeks to improve air connectivity to tier-2 and tier-3 cities through revival of unused and underused airports.

    Working of the Scheme

    • Airlines are awarded routes under the programme through a bidding process and are required to offer airfares at the rate of ₹2,500 per hour of flight.
    • At least 50% of the total seats on an aircraft have to be offered at cheaper rates.
    • In order to enable airlines to offer affordable fares they are given a subsidy from the govt. for a period of three years.

    Present status of working

    • A total of nine rounds of bidding have taken place since January 2017.
    • The Ministry of Civil Aviation has set a target of operationalizing as many as 100 unserved and underserved airports and starting at least 1,000 RCS routes by 2024.
    • So far, the Airports Authority of India (AAI) has awarded 948 routes under UDAN, of which 403 routes have taken off that connect 65 airports.
    • Out of the total 28 seaplane routes connecting 14 water aerodromes, only two have commenced.

    Issues with the working

    • Discontinuance: In reality, some of the routes launched have been discontinued as most of the routes awarded under UDAN are not active.
    • On-paper Ambitions: UDAN was expanded to provide improved connectivity to hilly regions and islands through helicopters and seaplanes. However, they mostly remain on paper.
    • The reasons include:
    1. Failure to set up airports or heliports due to lack of availability of land
    2. Airlines unable to start flights on routes awarded to them or finding the routes difficult to sustain
    3. Adverse impact of the COVID-19 pandemic

    Various challenges

    • Lack of funds: Many small airlines await infusion of funds, to be able to undertake maintenance of aircraft, pay rentals to lessors, give salaries to its staff, etc.
    • Maintenance issue: Many players don’t have more than one or two planes and they are often poorly maintained. New planes are too expensive for these smaller players.
    • Availability of pilots: Often, they also have problems with the availability of pilots and are forced to hire foreign pilots which costs them a lot of money and makes the business unviable.
    • Competition: Only those routes that have been bagged by bigger domestic players such as IndiGo and SpiceJet have seen a better success rate.

    Way forward

    • The govt offers subsidies for a route for a period of three years and expects the airline to develop the route during this time so that it becomes self-sufficient.
    • Airlines need an extension of the subsidy period for their operational continuity.
    • Due to the rise in COVID cases, travel restrictions and passenger safety too needs to be taken into consideration in the loss-making of such airlines.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)