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  • What is Yellow Dust?

    North Korean authorities have urged citizens to remain indoors to avoid contact with a mysterious cloud of ‘yellow dust’ blowing in from China, which they have warned could bring Covid-19 with it.

    Try this PYQ:

    Q.Consider the following

    1. Birds
    2. Dustblowing
    3. Rain
    4. Windblowing

    Which of the above spread plant diseases?

    (a) 1 and 3 only

    (b) 3 and 4 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

    What is yellow dust?

    • Yellow dust is actually sand from deserts in China and Mongolia that high-speed surface winds carry into both North and South Korea during specific periods every year.
    • The sand particles tend to mix with other toxic substances such as industrial pollutants, as a result of which the ‘yellow dust’ is known to cause a number of respiratory ailments.
    • Usually, when the dust reaches unhealthy levels in the atmosphere, authorities urge people to remain indoors and limit physical activity, particularly heavy exercise and sport.
    • Sometimes, when the concentration of yellow dust in the atmosphere crosses around 800 micrograms/cubic meter, schools are shut and outdoor events cancelled in the affected areas.

  • Species in news: Himalayan Brown Bear

    A recent study has predicted massive habitat decline for the Himalayan brown bear (Ursus arctos isabellinus) by 2050 due to climate change.

    Try this PYQ:

    Q. The Himalayan Range is very rich in species diversity. Which one among the following is the most appropriate reason for this phenomenon?

    (a) It has a high rainfall that supports luxuriant vegetative growth.

    (b) It is a confluence of different bio-geographical zones.

    (c) Exotic and invasive species have not been invasive species have not been introduced in this region.

    (d) It has less human interference.

    Himalayan Brown Bear

    • The Himalayan brown bear is one of the largest carnivores in the highlands of Himalayas.
    • It occupies the higher reaches of the Himalayas in remote, mountainous areas of Pakistan and India, in small and isolated populations, and is extremely rare in many of its ranges.
    • While the brown bear as a species is classified as Least Concern by the IUCN, this subspecies is highly endangered and populations are dwindling.
    • It is ‘Endangered’ in the Himalayas and Critically Endangered in the Hindu Kush.

    What did the study say?

    • The study carried out in the western Himalayas by scientists of Zoological Survey of India, predicted a massive decline of about 73% of the bear’s habitat by the year 2050.
    • These losses in habitat will also result in loss of habitat from 13 protected areas (PAs), and eight of them will become completely uninhabitable by the year 2050, followed by loss of connectivity in the majority of PAs.
    • The study highlights for the need to adopt preemptive spatial planning of PAs in the Himalayan region for the long-term viability of the species.

  • Base Year of CPI- Industrial Workers revised to 2016

    The Labour and Employment Ministry has revised the base year of the Consumer Price Index (CPI) for Industrial Workers (CPI-IW) from 2001 to 2016.

    Why such a move?

    • This revision reflects the changing consumption pattern, giving more weightage to spending on health, education, recreation and other miscellaneous expenses while reducing the weight of food and beverages.

    What is the Consumer Price Index (CPI)?

    • The CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
    • It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.
    • The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
    • Essentially it attempts to quantify the aggregate price level in an economy and thus measure the purchasing power of a country’s unit of currency.

    Types of CPI in India

    • CPI in India comprises multiple series classified based on different economic groups.
    • There are four series, viz the CPI UNME (Urban Non-Manual Employee), CPI AL (Agricultural Labourer), CPI RL (Rural Labourer) and CPI IW (Industrial Worker).
    • While the CPI UNME series is published by the Central Statistical Organisation, the others are published by the Department of Labour.
    • From February 2011 the CPI (UNME) released by CSO is replaced as CPI (urban), CPI (rural) and CPI (combined).

    How it is different from WPI?

    • CPI is different from WPI, or Wholesale Price Index, which measures inflation at the wholesale level.
    • While WPI keeps track of the wholesale price of goods, the CPI measures the average price that households pay for a basket of different goods and services.
    • WPI measures and tracks the changes in the price of goods before they reach consumers; goods that are sold in bulk and traded between entities or businesses (rather than consumers).
    • Even as the WPI is used as a key measure of inflation in some economies, the RBI no longer uses it for policy purposes, including setting repo rates.
    • The central bank currently uses CPI or retail inflation as a key measure of inflation to set the monetary and credit policy.

    Major components of WPI

    • Primary articles are a major component of WPI, further subdivided into Food Articles and Non-Food Articles.
    • Food Articles include items such as Cereals, Paddy, Wheat, Pulses, Vegetables, Fruits, Milk, Eggs, Meat & Fish, etc.
    • Non-Food Articles include Oil Seeds, Minerals and Crude Petroleum
    • The next major basket in WPI is Fuel & Power, which tracks price movements in Petrol, Diesel and LPG
    • The biggest basket is Manufactured Goods. It spans across a variety of manufactured products such as Textiles, Apparels, Paper, Chemicals, Plastic, Cement, Metals, and more.
    • Manufactured Goods basket also includes manufactured food products such as Sugar, Tobacco Products, Vegetable and Animal Oils, and Fats.

    Note: WPI has a sub-index called WPI Food Index, which is a combination of the Food Articles from the Primary Articles basket, and the food products from the Manufactured Products basket.

    Now try this PYQ from 2014 CSP:

    Q.With reference to India, consider the following statements:

    1. The Wholesale Price Index (WPI) in India is available on a monthly basis only
    2. As compared to the Consumer Price Index for Industrial Workers (CPI (IW)), the WPI gives less weight to food articles.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Back2Basics: Base Year

    • A base year is the first of a series of years in an economic or financial index. It is typically set to an arbitrary level of 100.
    • Any year can serve as a base year, but analysts typically choose recent years. They are periodically revised to keep data current in a particular index.
    • A base year is used for comparison in the measure of business activity or economic index.
    • For example, to find the rate of inflation between 2013 and 2018, 2013 is the base year or the first year in the time set.

  • Forex Reserves hit a record high

    India’s foreign exchange reserves touched a lifetime high of $555.12 billion, according to RBI data.

    Aspirants must make a note here:

    1. Authority managing FOREX in India
    2. Components of FOREX
    3. IMF’s SDRs
    4. Emergency use of FOREX

    What are Forex Reserves?

    • Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves.
    • RBI accumulates foreign currency reserves by purchasing from authorized dealers in open market operations.
    • The Forex reserves of India consist of below four categories:
    1. Foreign Currency Assets
    2. Gold
    3. Special Drawing Rights (SDRs)
    4. Reserve Tranche Position
    • The IMF says official Forex reserves are held in support of a range of objectives like supporting and maintaining confidence in the policies for monetary and exchange rate management including the capacity to intervene in support of the national or union currency.
    • It will also limit external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.

    Where are India’s forex reserves kept?

    • The RBI Act, 1934 provides the overarching legal framework for the deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.
    • As much as 64 per cent of the foreign currency reserves is held in the securities like Treasury bills of foreign countries, mainly the US.
    • 28 per cent is deposited in foreign central banks and 7.4 per cent is also deposited in commercial banks abroad.
    • In value terms, the share of gold in the total foreign exchange reserves increased from about 6.14 per cent as at end-September 2019 to about 6.40 per cent as at end-March 2020.

    Try this PYQ:

    Q. Gold tranche(Reserve tranche) refers to (CSP 2020)-

    (a) A loan system of World bank

    (b) One of the operations of a central bank

    (c) A credit system of WTO granted to its members

    (d) A credit system granted by IMF to its members

    Rising above the 1991 crisis

    • Unlike in 1991, when India had to pledge its gold reserves to stave off a major financial crisis, the country can now depend on its soaring Forex reserves to tackle any crisis on the economic front.
    • The level of Forex reserves has steadily increased by 8,400 per cent from $5.8 billion as of March 1991 to the current level.

  • Action Plan for Vulture Conservation 2020-2025

    Uttar Pradesh, Tripura, Maharashtra, Karnataka and Tamil Nadu will get a vulture conservation and breeding centre each, according to the Action Plan for Vulture Conservation 2020-2025.

    Action Plan for Vulture Conservation

    • The action plan was approved by the National Board for Wildlife (NBWL) October 5, 2020. An earlier one was formulated in 2006 for three years.
    • The new plan has laid out strategies and actions to stem the decline in vulture population, especially of the three Gyps species:
    1. Oriental white-backed vulture (Gyps bengalensis)
    2. Slender-billed vulture (Gyps tenuirostris)
    3. Long-billed vulture (Gyps indicus)

    Note: These three vulture species were listed by  IUCN, in 2000 as ‘Critically  Endangered’,  which is the highest category of endangerment.

    • This would be done through both ex-situ and in-situ conservation.
    • The plan has also suggested that new veterinary non-steroidal anti-inflammatory drugs (NSAIDS) be tested on vultures before their commercial release. NSAIDS often poisons cattle whose carcasses the birds pray on.

    Highlights of the new plan

    • A system to automatically remove a drug from veterinary use if it is found to be toxic to vultures, with the help of the Drugs Controller General of India.
    • Conservation breeding of red-Headed vultures and Egyptian vultures and the establishment at least one vulture-safe zone in each state for the conservation of the remnant populations in that state.
    • Coordinated nation-wide vulture counting, involving forest departments, the Bombay Natural History Society, research institutes, non-profits and members of the public.
    • A database on emerging threats to vulture conservation, including collision and electrocution, unintentional poisoning, etc.

    Why protect vultures?

    • Vultures are often overlooked and perceived as lowly scavengers, but they play a crucial role in the environments in which they live.
    • The scavenging lifestyle that gives them a bad reputation is, in fact, that makes them so important for the environment, nature and society.
    • Vultures, also known as nature’s cleanup crew, do the dirty work of cleaning up after death, helping to keep ecosystems healthy as they act as natural carcass recyclers.

  • Promotion of nutri-cereals(Millet crop) in India

    Promotion of millet crops serves the dual purpose of securing health and supporting farmers. This article explains the strategy adopted by the government to achieve the same.

    Millet crops in India

    • The three major millet crops currently growing in India are jowar (sorghum), bajra (pearl millet) and ragi (finger millet).
    • India also grows a rich array of bio-genetically diverse and indigenous varieties of “small millets” like kodo, kutki, chenna and sanwa.
    • Major producers include Rajasthan, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Maharashtra, Gujarat and Haryana.

    Advantages of millet cultivation

    • Millets are good for the soil, have shorter cultivation cycles and require less cost-intensive cultivation.
    • These unique features make millets suited for and resilient to India’s varied agro-climatic conditions.
    • Millets are not water or input-intensive, making them a sustainable strategy for addressing climate change and building resilient agri-food systems.

    Reasons for decline in millet production in India

    • In the 1960s before the Green Revolution, millets were extensively grown and consumed in India.
    • With the Green Revolution, the focus, rightly so, shifted to food security and high-yielding varieties of wheat and rice.
    • An unintended consequence of this policy was the gradual decline in the production of millets.
    • Millets were increasingly seen as “poor person’s food”.
    • The cost incentives provided via MSPs also favoured a handful of staple grains.

    Health issues related to refined food

    • Along with declining millet production, India saw a jump in consumer demand for ultra-processed and ready-to-eat products, which are high in sodium, sugar, trans-fats and even some carcinogens.
    • This demand was again met by highly-refined grains.
    • With the intense marketing of processed foods, even the rural population started perceiving mill-processed rice and wheat as more aspirational.
    • This has lead us to the double burden of mothers and children suffering from micronutrient deficiencies and the astounding prevalence of diabetes and obesity.

    Strategy for promotion of nutri-cereals

    1) Rebranding the cereals as nutri-cereals

    • The first strategy from a consumption and trade point of view was to re-brand coarse cereals/millets as nutri-cereals.
    • As of 2018-19, millet production had been extended to over 112 districts across 14 states.

    2) Incentive through hiking MSP

    • Second, the government hiked the MSP of nutri-cereals, which came as a big price incentive for farmers.
    • From 2014-15 to 2020 MSPs for ragi has jumped by 113 per cent, by 72 per cent for bajra and by 71 per cent for jowar.
    • MSPs have been calculated so that the farmer is ensured at least a 50 per cent return on their cost of production.

    3) Providing steady markets through inclusion in PDS

    • To provide a steady market for the produce, the Modi government included millets in the public distribution system.

    4) Increasing area, production and yield

    • The Ministry of Agriculture & Farmers’ Welfare is running a Rs 600-crore scheme to increase the area, production and yield of nutri-cereals.
    • With a goal to match the cultivation of nutri-cereals with local topography and natural resources, the government is encouraging farmers to align their local cropping patterns to India’s diverse 127 agro-climatic zones.
    • Provision of seed kits and inputs to farmers, building value chains through Farmer Producer Organisations and supporting the marketability of nutri-cereals are some of the key interventions that have been put in place.

    5) Intersection of agriculture and nutrition

    • The Ministry of Women and Child Development has been working at the intersection of agriculture and nutrition by -1) setting up nutri-gardens, 2) promoting research on the interlinkages between crop diversity and dietary diversity 3) running a behaviour change campaign to generate consumer demand for nutri-cereals.

    Consider the question “What are the reasons for decline in the millet production in India? What are the steps taken by the government to encourage its production?”

    Conclusion

    As the government sets to achieve its agenda of a malnutrition-free India and doubling of farmers’ incomes, the promotion of the production and consumption of nutri-cereals seems to be a policy shift in the right direction.

  • NASA’s OSIRIS-REx lands on Asteroid Bennu

    NASA’s OSIRIS-REx spacecraft briefly touched asteroid Bennu, from where it is meant to collect samples of dust and pebbles and deliver them back to Earth in 2023.

    The OSIRIS-REx mission

    • OSIRIS-REx stands for Origins, Spectral Interpretation, Resource Identification, Security, Regolith Explorer. This is NASA’s first mission meant to return a sample from the ancient asteroid.
    • The mission is essentially a seven-year-long voyage and will conclude when at least 60 grams of samples are delivered back to the Earth.
    • As per NASA, the mission promises to bring the largest amount of extraterrestrial material back to our planet since the Apollo era.
    • The mission was launched in 2016, it reached its target in 2018 and since then, the spacecraft has been trying to match the velocity of the asteroid using small rocket thrusters to rendezvous it.
    • This week, the spacecraft’s robotic arm called the Touch-And-Go Sample Acquisition Mechanism (TAGSAM), made an attempt to “TAG” the asteroid and collected a sample.

    About Bennu

    • Bennu is a B-type asteroid, implying that it contains significant amounts of carbon and various other minerals.
    • It was discovered by a team from the NASA-funded Lincoln Near-Earth Asteroid Research team in 1999.
    • Because of its high carbon content, the asteroid reflects about four per cent of the light that hits it, which is very low when compared with a planet like Venus, which reflects about 65 per cent of the light. Earth reflects about 30 per cent.
    • Around 20-40 per cent of Bennu’s interior is empty space and scientists believe that it was formed in the first 10 million years of the solar system’s formation, implying that it is roughly 4.5 billion years old.

    Why are scientists studying asteroid Bennu?

    • Bennu is an asteroid about as tall as the Empire State Building and located at a distance of about 200 million miles away from the Earth.
    • Scientists study asteroids to look for information about the formation and history of planets and the sun since asteroids were formed at the same time as other objects in the solar system.
    • Another reason for tracking them is to look for asteroids that might be potentially hazardous. It is also relatively close to the Earth.
    • It is for these reasons that scientists are interested in gathering information about this particular asteroid.
    • Significantly, Bennu hasn’t undergone drastic changes since its formation over billions of years ago and therefore it contains chemicals and rocks dating back to the birth of the solar system.

    How do chemicals and rocks offer scientists clues about the solar system?

    • Because of Bennu’s age, it is likely to contain material that contains molecules that were present when life first formed on Earth, where life forms are based on carbon atom chains.
    • Even so organic material like the kind scientists hope to find in a sample from Bennu doesn’t necessarily always come from biology.
    • It would, though, further scientists’ search to uncover the role asteroids rich in organics played in catalyzing life on Earth.

    Back2Basics: Asteroid

    • Asteroids are rocky objects that orbit the Sun, much smaller than planets. They are also called minor planets.
    • According to NASA, 994,383 is the count of known asteroids, the remnants from the formation of the solar system over 4.6 billion years ago.
    • Asteroids are divided into three classes. First, those found in the main asteroid belt between Mars and Jupiter, which is estimated to contain somewhere between 1.1-1.9 million asteroids.
    • The second group is that of Trojans, which are asteroids that share an orbit with a larger planet.
    • The third classification is Near-Earth Asteroids (NEA), which have orbits that pass close by the Earth. Those that cross the Earth’s orbit are called Earth-crossers.
    • More than 10,000 such asteroids are known, out of which over 1,400 are classified as potentially hazardous asteroids (PHAs).

  • Discovering the Tubarial Glands

    Researchers from the Netherlands have discovered a new location of salivary glands.

    Try this PYQ:

    Q.With references to the scientific progress of ancient India, which of the statements given below are correct?

    1. Different kinds of specialized surgical instruments were in common use by 1st century AD.
    2. Transplant of internal organs in the human body had begun by the beginning of 3rd century AD.
    3. The concept of sine of an angle was known in 5th century AD.
    4. The concept of cyclic quadrilaterals was known in 7th century AD.

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 3 and 4 only

    (c) 1, 3 and 4 only

    (d) 1, 2, 3 and 4

    Tubarial Glands

    • The salivary gland system in the human body has three paired major glands and over 1,000 minor glands that are spread throughout the mucosa.
    • These glands produce saliva necessary for swallowing, digestion, tasting, mastication and dental hygiene.
    • When researchers were studying scans from about 100 people, they found a bilateral structure at the back of the nasopharynx and these glands had characteristics of salivary glands.
    • Researchers have proposed the name “tubarial glands” for their discovery.
    • The researchers believe that these glands would qualify as the fourth pair of major salivary glands.
    • The proposed name is based on their anatomical location; the other three glands are called parotid, submandibular and sublingual.

    Why are these glands being discovered only now?

    • The location of these glands is at a poorly accessible anatomical location under the base of the skull, which is an area that can only be visualized using nasal endoscopy.
    • Further, conventional imaging techniques such as a CT scan, MRI and ultrasound have not allowed the visualization of these glands.
    • For the scans done on the 100 patients, a new type of scan called the PSMA PET/CT scan was used, which was able to provide the high sensitivity and specificity required to detect these glands.

    What is the purpose of these glands?

    • So far, researchers suspect that the physiological function of the glands is to moisten and lubricate the nasopharynx and the oropharynx.
    • However, this interpretation needs to be confirmed with additional research.

    Significance of this discovery

    • The discovery is potentially good news for some cancer patients with head and neck cancers.
    • Patients with head and neck cancers and tumours in the tongue or the throat are treated with radiation therapy that can damage the new salivary glands, whose location was not previously known.
    • Oncologists will be able to circumvent these areas and protect them from the side effects of radiation which can lead to complications such as trouble speaking, swallowing and speaking.
    • Some patients may even face an increased risk of caries and oral infections that can significantly impact their life.

  • The NEP 2020 must look beyond just data science and AI

    The article deals with the issues with the emphasis on the coding instead of understanding the basic algorithmic process.

    Issues with focusing on coding in NEP 2020

    • The National Education Policy 2020 (NEP) envisages putting greater emphasis on mathematical and computational thinking throughout the school years.
    • The framing in the NEP appears to put it at the same level of distinction as the more instrumental ‘coding’, and almost as a mere tool towards the utilitarian goals of artificial intelligence (AI) and data science.
    • An overemphasis on learning the nitty-gritty of specific programming languages prematurely — even from middle school — may distract from focusing on the development of algorithmic creativity.

    What is coding?

    Coding is basically the computer language used to develop apps, websites, and software. Without it, we’d have none of the most popular technology we’ve come to rely on such as Facebook, our smartphones, the browser we choose to view our favorite blogs, or even the blogs themselves. It all runs on code.

    About computation and algorithms

    • Algorithmics is the abstract process of arriving at a post-condition through a sequential process of state changes.
    • It is among the earliest human intellectual endeavours that has become imperative for almost all organised thinking.
    • All early learning of counting and arithmetic is method-based, and hence algorithmic in nature, and all calculations involve computational processes encoded in algorithms.
    • The core algorithmic ideas of modern AI and machine learning are based on some seminal algorithmic ideas of Newton and Gauss, which date back a few hundred years.
    • Though the form of expressions of algorithms — the coding — have been different, the fundamental principles of classical algorithm design have remained invariant.

    Algorithms in modern world

    • In the modern world, the use of algorithmic ideas is not limited only to computations with numbers, or even to digitisation, communication or AI and data science.
    • They play a crucial role in modelling and expressing ideas in diverse areas of human thinking, including the basic sciences of biology, physics and chemistry, all branches of engineering, in understanding disease spread, in modelling social interactions and social graphs, in transportation networks, supply chains, commerce, banking and other business processes, and even in economic and political strategies and design of social processes.
    • Hence, learning algorithmic thinking early in the education process is indeed crucial.

    So, how coding is different from arithmetics?

    • Coding is merely the act of encoding an algorithmic method in a particular programming language which provides an interface.
    • AS computational process can be invoked in a modern digital computer.
    • Thus, it is less fundamental.
    • While coding certainly can provide excellent opportunities for experimentation with algorithmic ideas, they are not central or indispensable to algorithmic thinking.
    • After all, coding is merely one vehicle to achieve experiential learning of a computational process.

    Way forward

    • Instead of focusing on the intricacies of specific programming languages, it is more important at an early stage of education to develop an understanding of the basic algorithmic processes behind manipulating geometric figures.
    • Indeed, this is a common outcome of the overly utilitarian skills training-based approaches evidenced throughout the country.

    Conclusion

    The NEP guideline of introducing algorithmic thinking early is a welcome step, it must be ensured that it does not degenerate and get bogged down with mundane coding tricks at a budding stage in the education process.

  • Analysing the success of NPCI

    The article tracks the evolution of digital payments system in India and the transformational role played by the NPCI in it.

    Adoption of digital payments in India

    • Digital payments have found strong ground in India reducing all other modes of payments to the background.
    • Through a faster system of simultaneous debits and credits, the money value is transferred from one account to the other across banks.
    • With such versatility and ease of settling financial transactions, the growth of digital payments is going to be phenomenal, supported by banks and Fin-Tech companies.

    Evolution of digital payments in India

    • A major thrust toward large value payments was effected through the Real Time Gross Settlement System, or RTGS, launched by the RBI in March 2004.
    • The large value payments on stock trading, government bond trading and other customer payments were covered under the RTGS.
    • It substantially reduced the time taken for settlements.
    • Around the same time, the RBI introduced National Electronic Funds Transfer, or NEFT to support retail payments.
    • Now, NEFT is available round the clock and RTGS will follow from December 2020 — only a few countries have achieved this.
    • These systems were seeded and reinforced with the setting up of the umbrella retail payments institution: National Payments Corporation of India (NPCI).
    • NPCI was set up by 10 lead banks at the instance of the RBI in 2009.
    •  The NPCI as a not-for-profit company

    How NPCI transformed retail payment systems in India

    • The NPCI’s success against deeply entranced formidable international players, supported by innovative technology, viz. Unified Payments Interface (UPI) and Immediate Payment Service (IMPS), is well recognised by central banks in many other countries.
    • The Bank for International Settlements’s endorsement of the NPCI model in 2019 is a major accolade.
    • With digital payment being a public good like currency notes, it was necessary that the corporation was fully supported by the RBI and the government as an extended arm of the sovereign.
    • It was also necessary to contain expectations on profits, avoiding direct or indirect control by powerful private interests could dilute the public good character of the outfit.

    Issue of converting NPCI into for-profit

    • Converting NPCI intro for-profit company will be a retrograde step with huge potential for loss of consumer surplus along with other strategic implications.
    • Instead the strategy should be to assist the NPCI financially, either by the RBI or the government, to provide retail payment services at reduced price (in certain priority areas).
    • This may also help support expansion of the payment system network and infrastructure in rural and semi-urban areas in partnership with Fin-Tech companies and banks.

    Issue fo MDR

    • In Budget 2020-21, the government prescribed zero Merchant Discount Rate (MDR) for RuPay and UPI, both NPCI products.
    • Zero MDR on UPI and RuPay will help to popularise digital payments benefiting both customers and merchants.
    • There is justification in this zero MDR prescription by the government.
    • It is justified because depositors implicitly pay around 3% to banks as net interest margin, being the difference between saving and risk free bond rate, for enjoying certain payments services traditionally.
    • When banks enjoy such a huge amount of current account savings account (CASA) deposits, in return, is it not incumbent on them to provide such payment services?
    • The government left out other providers of digital payment products from this MDR prescription.
    • Taking advantage of this dichotomy, many issuing banks switched to mainly Visa and Master cards for monetary gains.
    • As customers were induced by such supplier banks, it created a kind of indirect market segmentation and cartel formation, though there is hardly any quality difference in payment products.
    • It may be noted that even the European Central Bank imposed a ceiling on MDR for all, protecting consumer interest.
    • It is hoped that the government will take corrective action in the next Budget to ensure a level playing field and to relieve the NPCI from such policy-induced market imperfection.

    Pricing for digital payments

    • The ideal pricing for digital payments products should be based on an analysis of-(i) producer surplus (ii) consumer surplus (i.e. gain or loss of utility due to pricing) (iii) social welfare for which we need cost-volume-price data.
    • A factor which needs to be reckoned is the float funds digital payments allow (cash withdrawal is a drain on the banking system), which is a source of sizeable income for banks.
    • The RBI will do well to study and arrive at a rational structure of pricing including MDR (possibly also penalty on default by customer).

    Consider the question “Elaborate on how the NPCI has been successful in transforming the digital payment landscape in the country through innovations? What are the challenges facing retail payments infrastructures?”

    Conclusion

    Given that the digital payment system is like a national superhighway, for which the government has a crucial role to play in protecting consumers against exploitation.

    Back2Basics: RTGS and NEFT

    • With NEFT (National Electronic Funds Transfer)
      you can transfer any amount to the recipient’s account in a one-on-one transfer basis.
    • NEFT transactions don’t have a maximum limit for funds that can be transferred in a single day.
    • The NEFT system is available round the clock throughout the year on all days (24x7x365).
    • Funds are transferred in batches that are settled in 48 half-hourly time slots throughout the day.
    • There is no maximum or minimum limit on the amount of funds that could be transferred through NEFT.

    RTGS (Real Time Gross Settlement)

    • Business owners can use RTGS when they need to transfer large amounts instantly.
    • One advantage that RTGS has over the other methods is the transaction speed, since the entire amount is transferred in real time.
    • The available hours for RTGS transactions vary based on the individual banks and their branches.
    • There’s a minimum limit of Rs. 2 lakhs for RTGS transactions, and there’s no maximum limit as such.

    What is MDR?

    • The merchant discount rate (MDR) is charged to merchants for processing debit and credit card transactions.
    • To accept debit and credit cards, merchants must set up this service and agree to the rate.
    • The merchant discount rate is a fee, typically between 1%-3%, that merchants must consider when managing business costs