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  • Carbon Footprints of Cryptocurrencies

    Bitcoin prices are rising these days and so will be its mining. As cryptocurrency will become mainstream, its carbon footprint cannot be ignored.

    What are Cryptocurrencies?

    Cryptocurrency

    Global crypto market

    • In 2019, the global cryptocurrency market was approximately $793 million.
    • It’s now expected to reach nearly $5.2 billion by 2026, according to a report by the market research organization Facts and Factors.
    • In just one year—between July 2020 and June 2021—the global adoption of cryptocurrency surged by more than 880 percent.

    Carbon footprints of Bitcoins

    • Increasing popularity of cryptocurrency has environmentalists on edge, as the digital “mining” of it creates a massive carbon footprint due to the staggering amount of energy it requires.
    • A/c to the Bitcoin Energy Consumption Index, the carbon footprint of Bitcoin is equivalent to that of New Zealand.
    • Both emit nearly 37 megatons of carbon dioxide into the atmosphere every year.

    What is Mining?

    • Mining is a process in which computational puzzles are solved in order to verify transactions between users, which are then added to the blockchain.
    • In simpler terms, the works are created, or “minted,” through a process called proof-of-work (PoW), which establishes its unique identity.

    How do cryptocurrencies create such a footprint?

    • Unlike mainstream traditional currencies, bitcoin is virtual and not made from paper or plastic, or even metal.
    • Bitcoin is virtual but power-hungry as it is created using high-powered computers around the globe.
    • Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles.
    • This is an energy-intensive process that often relies on fossil fuels, particularly coal, the dirtiest of them all.

    Conclusion

    • What this means is that, unlike traditional currency or gold, Bitcoin is not solely a settlement layer, not solely a store of value, and not solely a medium of exchange.
    • This makes Bitcoin’s relative energy consumption productive in comparison to comparative sectors, given its robust potential uses.
    • The promise of such an endeavor offers hope for a more sustainable cryptocurrency future.
    • Whether this will make much difference to the climate crisis in light of government and industrial inaction remains to be seen.

    Back2Basics: Bitcoin Energy Consumption Index

     

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  • How women cadets benefit the army

    Context

    Last year, the Supreme Court threw open the hallowed portals of the National Defence Academy for women. Something to truly celebrate on January 15, Army Day, this year.

    Background

    • The first batch of women officers was inducted into the Indian Army in non-medical roles via the Short Service Commission in 1992.
    • Since 2008, women were inducted as permanent commissioned officers in the legal and education corps  and as permanent commissioned officers in eight more non-combative corps in 2020.

    The low number of women in Army

    • As recent as 2020, women officers in the Indian army (excluding the medical corps) numbered just about three per cent.
    • Compare this to 16 per cent in the US, 15 per cent in France and 10 per cent in both Russia and the UK.

    Significance of allowing women to NDA

    • When in February 2020, the Supreme Court decreed that women officers should get command positions on par with male officers, it also effectively dismissed the military’s earlier objection that it would lead to “operational, practical and cultural problems”.
    • The SC went on to say that denying women commands based on the above argument was discriminatory and reinforced stereotypes.
    • Last year, the Supreme Court threw open the National Defence Academy for women to compete for the seats and subsequent permanent commission in the Indian army in any corps they desire, including the combat ones.
    • Addressing the shortage of officers: This may effectively address the long-standing shortage of officers in the Indian army in general. In response to a question in Rajya Sabha a month ago, the Minister of State for Defence said the Army has a shortage of 7,476 officers.
    • This torch may also help confront the chauvinism, often misspelt as chivalry, that indisputably exists in the Army.

    Conclusion

    The move promises to change the composition of this arm of the defence force not just quantitatively, but also qualitatively — both dire requirements of the force at present.

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    Back2Basics: Permanent Commission (PC) Vs. Short Service Commission (SSC)

    • SSC means an officer’s career will be of a limited period in the Indian Armed Forces whereas a PC means they shall continue to serve in the Indian Armed Forces, till they retire.
    • The officers inducted through the SSC usually serve for a period of 14 years.
    • At the end of 10 years, the officers have three options.
    • A PC entitles an officer to serve in the Navy till he/she retires unlike SSC, which is currently for 10 years and can be extended by four more years, or a total of 14 years.
    • They can either select for a PC or opt-out or have the option of a 4-years extension.
    • They can resign at any time during this period of 4 years extension.

  • MSP is necessary to make farming viable

    Context

    There has been debate on the issue of MSP with some arguing against it while some favouring it.

    The issues with MSP

    • The broad strands of argument against MSP are:
    • MSP hinders the price discovery: Providing MSP does not allow the market to discover the prices; if market cleared prices are less than MSP, then the only buyer would be the government; this would render the government bankrupt.
    • FPO as a mechanism to deal with markets: If markets have any distortions, the way to negotiate it is through Farmer Producer Organisations (FPOs) — as demonstrated by Amul.
    • Provide income support through DBT: A better way to address the possible income gap is to give an income support-based direct benefit transfer (DBT).

    Why MSP is necessary?

    1] Barriers in agri-markets

    • Through tariffs and other measures, we have built a national barrier on markets, where gates are opened on the basis of strategic intent.
    • If we were to open our borders for free movement of grains from elsewhere, we may even argue for unlocking agricultural land for more lucrative purposes without worrying about food self-sufficiency, buffer stocking and domestic food safety.
    • We may have to accept a national food safety for at least the essential foodgrains and pulses.

    2] Role of MSP as price signalling and why it needs to be given as legal guarantee

    • Disproportionate risk: If we were to look at farming, we realise that this exposes itself to disproportionate risks. 
    •  First, there is no stop-loss mechanism after sowing the seed, except for destroying the crop for the season.
    • This enterprise not only has the usual business risks but also has the enhanced risk of the force majeure elements that destroy the enterprise — a sudden hail storm, drought, unseasonal showers, a pest attack, a locust attack — there are too many things that the farmer cannot control.
    • Therefore, an MSP provides a powerful signal to the farmer to exercise the choice of sowing a particular crop because the farmer can back-calculate the expected margin.
    •  If MSP is a signal that helps the farmer to choose a crop, then it must remain a choice at the harvest time as well.
    • The significance of MSP is only when the markets do not clear the price.
    • In such a situation, the farmer gets a return less than the MSP and by this argument we are escorting the farm fraternity towards bankruptcy.
    • A legal guarantee is, therefore, needed.
    • The argument that the state will have to procure all the floating stock in the market and may become bankrupt is fallacious.
    • The intervention of the state in the markets usually covers information asymmetry, arbitrage and cools the markets when they get overheated.

    3] Why not opt for income support instead of MSP?

    •  Income support does not address the issue of viability of the farming operations.
    • There is no doubt that we need to make farming viable.
    •  It is important to address the prices of each crop as a strategic signalling mechanism: For crops that would be encouraged and those that would be discouraged.

    4] Issues with drawing parallels with AMUL

    •  While the Amul model recognised the inherent power of markets, it took about five decades to make the system competitive — the investments were made in breed improvement, free veterinary services, better cattle feed, capital subsidy for processing plants, and return-free capital as investments.
    • The nature of subsidies was smart and innovative.
    • Dairying was the last bit to be liberalised, and it enjoyed protection even when we opened up in 1991.

    Way forward

    • Modernise the markets: We need to modernise the markets and storage and processing facilities.
    • There is no point in conflating modernisation with liberalisation.
    • Investment: If we need to take Indian agriculture on the path of Amul, we need to start making those investments now.

    Consider the question “What are the objectives of providing MSP? How legal basis to MSP could help in making agriculture viable in India?”

    Conclusion

    Let us use the MSP framework smartly on diversified crops, on a decentralised basis while we develop the markets. A legal guarantee will only assure the farmers that they will not be bankrupted.

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  • The Indo-Pacific opportunity

    Context

    The geopolitics of the Indo-Pacific, which is changing fast. As it moves into 2022, the region will carry the imprint of the past five years, and will have to chart a course through inter-state tensions and crises, using both diplomacy and military preparedness.

    What will shape the geopolitics and geoeconomics of the Indo-Pacific?

    • Key players in the region: The region is central to world economy and peace, and nine countries are key players: the US, China, Japan, India, Germany, the UK, Russia, Australia and France.
    • The geopolitics and geo-economics of the Indo-Pacific will be largely shaped by the interplay of relations among these nations.
    • US-China relations: Of paramount importance is the US-China equation.
    • Expect this relationship to be marked by continually adversarial, competitive and cooperative traits.
    • Beijing’s south/east China policy, aggressive postures towards Taiwan, human rights violations in Xinjiang, the subjugation of Hong Kong’s citizenry and assertive economic outreach in the Indo-Pacific — these will weigh heavily on US-China relations.

    A significant role of groupings and individual nations

    • In this standoff, the role of new groupings and individual nations is significant.
    • Role of Quad: Foremost are the Quad, a strategic partnership between the US, India, Japan and Australia and the militaristic AUKUS (Australia, UK, US). 
    • India-Australia ties: Meanwhile, India and Australia are on track to deepen ties, not only bilaterally but also with the other two Quad powers.
    • The next Quad summit, probably hosted by Japan, will cement the grouping.
    • EU’s role: The EU’s Indo-Pacific strategy, announced last September, aims at increasing its economic and security profile in, and linkages with, the region.
    • UK’s role: Only by being more strategic and less mercantilist, more candid and assertive with China, and more cooperative with partners such as India, can the EU — and its former member the UK — hope to become vital players in the Indo-Pacific.
    • ASEAN, located in the middle of the Indo-Pacific waters, faces the heat of China’s aggression and the sharpening great power rivalry.
    •  It must enhance its realism and shed its tendency of wishing away problems.

    Suggestions for India

    • 1]Strengthen the Quad – especially by ensuring that the grouping fulfils its commitment to deliver at least one billion vaccine doses to Indo-Pacific nations by December 2022.
    • India must protect its established relationship with Russia, and show some resilience in dialogue with Beijing.
    • 2] Enhance relations with ASEAN nations: It must enhance cooperation with key Southeast Asian partners —Indonesia, Vietnam, Philippines and Thailand — while humouring ASEAN as a grouping.
    • 3] Give attention to African and Indian Ocean island states: The eastern and southern planks of Africa and the Indian Ocean island states need continued high policy attention and financial resources.
    • A clear economic and trade agenda to follow the flag in this vital region, is certain to yield long-term dividends.

    Consider the question “Indo-Pacific will present India strategic and economic opportunities that India must not miss. However, the region will have to chart a course through inter-state tensions and crises. Comment.”

    Conclusion

    India has done well by fulfilling its humanitarian duties during the pandemic. Learning how to convert them smartly into economic and strategic opportunities in its periphery is the focused task for the nation in 2022.

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  • China does not have it all its way in the South China Sea

    Context

    South-East Asian countries are increasingly wary of their giant neighbour.

    Background of dispute

    • Disputes in the South China Sea go back decades.
    • But it was only ten years ago that China, which makes maritime claims for nearly the whole sea, greatly upped the ante.
    • Countries involved: They involve Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam, all with contesting claims.
    • China provoked a stand-off that left it in control of an uninhabited atoll, Scarborough Shoal, which under un maritime law clearly belongs to the Philippines.
    • Then China launched a massive terraforming exercise, turning reefs and rocks into artificial islands hosting airstrips and bases.

    China’s strong-arm tactics

    • China’s long-term aim is to project Chinese power deep into the South China Sea and beyond, and to hold the Americans away during any conflict.
    • The immediate aim, though, is to dominate politically and economically as much as militarily.
    • China has challenged oil-and-gas activity by both Indonesia and Malaysia, and sent drilling rigs to both countries’ eezs and continental shelves.
    • It has bullied foreign energy companies into dropping joint development with Vietnam and others.

    Implications

    • China has paid a diplomatic price.
    • Impact on relations with ASEAN: Had Mr Xi engaged in none of the terraforming and bullying, China would be better admired among members of the ten-country Association of South-East Asian Nations (ASEAN).
    • Naval presence of the US: The United States and its Western allies have upped their naval presence in the sea, welcomed by most ASEAN members.

    Negotiation on Code of conduct on South China Sea

    • For years China dragged its feet on agreeing with ASEAN a code of conduct on the South China Sea, a principle agreed on 20 years ago in order to promote co-operation and reduce tensions.
    • These days, China likes to play willing.
    • China is demanding, in effect, the right of veto over ASEAN members’ naval exercises with foreign powers.
    • It also wants to keep out foreigners from joint oil-and-gas development.
    • Such demands are unacceptable to members.

    Conclusion

    Despite China’s efforts to establish its wild claims of sovereignty, China has been facing sustained resistance from the ASEAN countries.

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  • A new form of socialism powered by cooperative economic enterprises is required

    Context

    Inequalities of wealth have increased around the world and India is becoming one of the world’s most unequal countries.

    Role of globalisation and privatisation in increasing economic distress

    • Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.
    • Role of Globalisation: Opening national borders to free trade became an ideology in economics in the last 30 years.
    • Taxes of incomes and wealth at the top were also reduced.
    • The ideological justification was that the animal spirits of ‘wealth creators’ must not be dampened.
    • With higher taxes until the 1970s, the U.S. and many countries in Europe had built up their public health and education infrastructure and strengthened social security systems.
    • The rich are now being taxed much less than they were.
    • The pie has grown larger but the richest few have been eating, and hoarding, most of it themselves.
    • Role of privatisation: ‘Privatisation’ of everything became another ideological imperative in economics by the turn of the century.
    • Selling off public enterprises raises resources for funds-starved governments.
    • Another justification is efficiency in delivery of services, setting aside ethical questions of equity.
    • When ‘public’ is converted to ‘private’, rich people can buy what they need.
    • The gaps between the haves and the have-nots become larger.

    How liberal economic policies are creating illiberal societies

    • Liberal economists, promoting free markets, free trade, and privatisation, are worried by nationalism and authoritarian governments.
    • They rail against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens.
    • Liberals must re-examine their ideas of economics, to understand their own culpability in creating authoritarian and identitarian politics.

    The failure of capitalism and communism

    • While communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s solution to the “property” question — that there should be no private property — was a failure.
    • It deprived people of personal liberties.
    • Capitalism’s solution to the property problem — replacing all publicly owned enterprises with privately owned ones (and reducing taxes on wealth and high incomes) has not worked either.
    • It has denied many of their basic human needs of health, education and social security, and equal opportunities for their children.
    • The private property solution has also harmed the natural environment.

    Way forward

    • Climate change and political rumblings around the world are both warnings that capitalism needs reform.
    • Economic policies must be based on new ideas.
    • Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it seems to be trapped.
    • Principles of human rights must not be overpowered by property rights.
    • A new form of “Gandhian” democratic socialism, powered by cooperative economic enterprises, is required in the 21st century, to create wealth at the bottom, not only at the top, and save humanity and the planet.

    Conclusion

    A new form of ‘Gandhian’ democratic socialism powered by cooperative economic enterprises is required.

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  • How to deal with hate speech

    Context

    On January 12, 2022 , the Supreme Court of India agreed to hear petitions asking for legal action to be taken against the organisers of, and speakers at, the “Hardwar Dharma Sansad”.

    What constitutes hate speech

    • Hate speech is speech that targets people based on their identity, and calls for violence or discrimination against people because of their identity.
    • There is an absence of any legal or social consensus around what constitutes “hate speech.”
    • As societies around the world have long understood, the harm in hate speech is not restricted to direct and proximate calls to violence.
    • Inciting discrimination is part of hate speech: Hate speech works in more insidious ways, creating a climate that strengthens existing prejudices and entrenches already-existing discrimination.
    • This is why – with the exception of the United States of America – most societies define hate speech in terms of both inciting violence, but also, inciting discrimination.

    Challenges in dealing with hate speech

    • Legal challenge: Our laws – as they stand – are unequipped to deal with the challenges of hate speech.
    • The laws commonly invoked in such cases are section 295A of the Indian Penal Code (blasphemy) and section 153A of the Indian Penal Code (creating enmity between classes of people).
    • Hate speech will not always be self-evident: Hate speech, by its very nature, will not always trumpet itself to be hate speech.
    • Rather, it will often assume plausible deniability – as has been seen in the Hardwar case, where statements, worded with the right degree of ambiguity, are now being defended as calls to self-defence rather than calls to violence.
    • Any comprehensive understanding of hate speech is a matter of judgment, and must take into account its ambiguous and slippery nature.
    • Lack of social consensus against hate speech: No matter how precise and how definite we try to make our concept of hate speech, it will inevitably reflect individual judgment. 
    • If, therefore, social and legal norms against hate speech are to be implemented without descending into pure subjectivity, what is needed – first – is a social consensus about what kind of speech is beyond the pale.
    •  In Europe, for example, holocaust denial is an offence – and is enforced with a degree of success – precisely because there is a pre-existing social consensus about the moral abhorrence of the holocaust.

    Conclusion

    Achieving this social consensus is an immense task, and will require both consistent legal implementation over time, but also daily conversations that we, as a society need to have among ourselves.

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  • Criminalizing Marital Rape in India

    The Delhi High Court has told the Centre that it will continue hearing the petitions challenging the legal exception to marital rape and not wait for the government’s ongoing process of initiating reform in the criminal laws.

    What is Marital Rape?

    • Marital rape is the act of sexual intercourse with one’s spouse without her consent.
    • It is no different manifestation of domestic violence and sexual abuse.
    • It is often a chronic form of violence for the victim which takes place within abusive relations.

    Status in India

    • Historically considered as right of the spouses, this is now widely classified as rape by many societies around the world.
    • In India, marital rape is not a criminal offense (as protected under IPC section 375).
    • India is one of fifty countries that have not yet outlawed marital rape.

    Reasons for disapproval of this concept

    • The reluctance to define non-consensual sex between married couples as a crime and to prosecute has been attributed to:
    1. Traditional views of marriage
    2. Interpretations of religious doctrines
    3. Ideas about male and female sexuality
    4. Cultural expectations of subordination of a wife to her husband
    • It is widely held that a husband cannot be guilty of any sexual act committed by himself upon his lawful wife their on account of their mutual matrimonial consent.

    Why it must be a crime?

    • Associated physical violence: Rape by a spouse, partner or ex-partner is more often associated with physical violence.
    • Mental harassment: There is research showing that marital rape can be more emotionally and physically damaging than rape by a stranger.
    • Compulsive relationship: Marital rape may occur as part of an abusive relationship.
    • Revengeful nature: Furthermore, marital rape is rarely a one-time event, but a repeated if not frequent occurrence.
    • Obligation on women: In the case of marital rape the victim often has no choice but to continue living with their spouse.

    Violation of fundamental rights

    • Marital rape is considered as the violation of FR guaranteed under Article 14 of the Indian constitution which guarantees the equal protection of laws to all persons.
    • By depriving married women of an effective penal remedy against forced sexual intercourse, it violates their right to privacy and bodily integrity, aspects of the right to life and personal liberty under Article 21.

    Problems in prosecuting marital rape

    • Lack of awareness: A lack of public awareness, as well as reluctance or outright refusal of authorities to prosecute is common globally.
    • Gender norms: Additionally, gender norms that place wives in subservient positions to their husbands, make it more difficult for women to recognize such rape.
    • Acceptability of the concept: Another problem results from prevailing social norms that exist.

    Present regulations in India

    • Indian Penal Code criminalizes rape in most cases, although marital rape is not illegal when the woman is over the age of 18.
    • However, until 2017, men married to those between 15 and 18 could not be convicted of rape.
    • Marital rape of an adult wife, who is unofficially or officially separated, is a criminal offence punishable by 2 to 7 year in prison; it is not dealt by normal rape laws which stipulate the possibility of a death sentence.
    • According to the Protection of Women From Domestic Violence Act (2005), other married women subject to such crime by their husband may demand for financial compensation.
    • They also have the right to continue to live in their marital household if they wish, or may approach shelter or aid homes.

    However, marital rape is still not a criminal offence in this case and is only a misdemeanour.

    Arguments against criminalization

    • Subjective: It is very subjective and intricate to determine whether consent was acquired or not.
    • Prone to Misuse: If marital rape is criminalized without adequate safeguards it could be misused like the current dowry law by the dissatisfied wives to harass and torture their Husbands.
    • Burden on Judiciary: It will increase the burden of judiciary which otherwise may serve other more important causes.

    Way forward

    • Sanctioning marital rape is an acknowledgment of the woman’s right to self-determination (i.e., control) of all matters relating to her body.
    • In the absence of any concrete law, the judiciary always finds it difficult to decide the matter of domestic rape in the absence of solid evidence.
    • The main purpose of marriage is procreation, and sometimes divorce is sought on the ground of non-consummation of marriage.
    • Before giving a final interpretation, the judiciary must balance the rights and duties of both partners.

    Must read:

    [RSTV Archive] Sexual Crime – Fast-tracking Justice

     

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  • Highlights of the India State of Forest Report, 2021

    The Ministry of Environment, Forests and Climate Change (MoEFCC) has released the India State of Forest Report (ISFR) 2021.

    About India State of Forest Report

    • ISFR is an assessment of India’s forest and tree cover, published every two years by the Forest Survey of India under the MoEFCC.
    • The first survey was published in 1987, and ISFR 2021 is the 17th.
    • It compiles data computed through wall-to-wall mapping of India’s forest cover through remote sensing techniques.

    Why need ISFR?

    • It is used in planning and formulation of policies in forest management as well as forestry and agroforestry sectors.

    How are forests categorized?

    The Forest Survey of India has listed four categories of forests. They are:

    1. Very Dense Forest (with tree canopy density of 70 per cent or above)
    2. Moderately Dense Forest (tree canopy density of 40 per cent or above but less than 70 per cent)
    3. Open Forest (tree canopy density of 10 per cent or above but less than 40 per cent)
    4. Scrub (tree canopy density less than 10 per cent)

    Highlights of the ISFR, 2021

    [1] Forest cover is increasing

    • ISFR 2021 has found that the forest and tree cover in the country continues to increase with an additional cover of 1,540 square kilometres over the past two years.
    • India’s forest cover is now 7,13,789 square kilometres, 21.71% of the country’s geographical area, an increase from 21.67% in 2019.
    • Tree cover has increased by 721 sq km.
    • Bamboo forests have grown from 13,882 million culms (stems) in 2019 to 53,336 million culms in 2021.

    [2] State-wise gain/losses

    • The states that have shown the highest increase in forest cover are Telangana (3.07%), Andhra Pradesh (2.22%) and Odisha (1.04%).
    • The Northeast states account for 7.98% of total geographical area but 23.75% of total forest cover.
    • Five states in the Northeast – Arunachal Pradesh, Manipur, Meghalaya, Mizoram and Nagaland have all shown loss in forest cover.
    • The report has attributed the decline in the NE states to a spate of natural calamities, particularly landslides and heavy rains, in the region as well as to anthropogenic activities.

    [3] Increase in Mangrove cover

    • Mangroves have shown an increase of 17 sq km. India’s total mangrove cover is now 4,992 sq km.

    [4] Increase in carbon stock

    • The total carbon stock in country’s forests is estimated at 7,204 million tonnes, an increase of 79.4 million tonnes since 2019.

    [5] Big cats population

    • ISFR 2021 has some new features. It has for the first time assessed forest cover in tiger reserves, tiger corridors and the Gir forest which houses the Asiatic lion.
    • The forest cover in tiger corridors has increased by 37.15 sq km (0.32%) between 2011-2021, but decreased by 22.6 sq km (0.04%) in tiger reserves.
    • Buxa, Anamalai and Indravati reserves have shown an increase in forest cover while the highest losses have been found in Kawal, Bhadra and the Sunderbans reserves.
    • Pakke Tiger Reserve in Arunachal Pradesh has the highest forest cover, at nearly 97%.

     [6] Impact of climate change

    • The report estimates that by 2030, 45-64% of forests in India will experience the effects of climate change and rising temperatures, and forests in all states will be highly vulnerable climate hot spots.
    • Ladakh (forest cover 0.1-0.2%) is likely to be the most affected.
    • India’s forests are already showing shifting trends of vegetation types, such as Sikkim which has shown a shift in its vegetation pattern for 124 endemic species.

    [7] Forest fires

    • The survey has found that 35.46 % of the forest cover is prone to forest fires.
    • Out of this, 2.81 % is extremely prone, 7.85% is very highly prone and 11.51 % is highly prone
    • The highest numbers of fires were detected in Odisha, Madhya Pradesh and Chhattisgarh.

    Concerns with the declining trends

    • It is worrying that a 1,582 sq km decline was in moderately dense forests, or “natural forests”.
    • This decline shows a degradation of forests in the country, say experts, with natural forests degrading to less dense open forests.
    • Also, scrub area has increased by 5,320 sq km – indicating the complete degradation of forests in these areas.

     

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  • India extends $900 mn aid to Sri Lanka

    India has confirmed a $400 million currency swap with Sri Lanka while deferring another $500 million due for settlement to the Asian Clearing Union (ACU).

    What is the news?

    • Sri Lanka is facing a severe dollar crunch that economists say might lead to a default on external debt and create a food shortage in the imports-reliant island nation.
    • In this regard, the Reserve Bank of India has extended currency swap facilities of $900 million to Sri Lanka.

    What are Currency Swaps?

    • A currency swap, also known as a cross-currency swap, is an off-balance sheet transaction in which two parties exchange principal and interest in different currencies.
    • Currency swaps are used to obtain foreign currency loans at a better interest rate than could be got by borrowing directly in a foreign market.

    Practice question for mains:

    Q. What are Currency Swaps? Discuss the efficacy of Currency Swap Agreements for enhancing bilateral cooperation in Indian context.

    How does it work?

    • In a swap arrangement, RBI would provide dollars to a Lankan central bank, which, at the same time, provides the equivalent funds in its currency to the RBI, based on the market exchange rate at the time of the transaction.
    • The parties agree to swap back these quantities of their two currencies at a specified date in the future, which could be the next day or even three months later, using the same exchange rate as in the first transaction.
    • These swap operations carry no exchange rate or other market risks, as transaction terms are set in advance.

    Why does one need dollars?

    • FPIs investors look for safer investments but the current global uncertainty over COVID outbreak has led to a shortfall everywhere in the global markets.
    • This has pulled down foreign exchange reserves of many small and developing countries.
    • This means that the government and the RBI cannot lower their guard on the management of the economy and the external account.

    Benefits of currency swap

    • The absence of an exchange rate risk is the major benefit of such a facility.
    • This facility provides the flexibility to use these reserves at any time in order to maintain an appropriate level of balance of payments or short-term liquidity.
    • Swaps agreements between governments also have supplementary objectives like the promotion of bilateral trade, maintaining the value of foreign exchange reserves with the central bank and ensuring financial stability (protecting the health of the banking system).

    Back2Basics: Asian Clearing Union (ACU)

    • The ACU with headquarters in Tehran, Iran, was established on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    • The primary objective of ACU was to secure regional co-operation as regards the settlement of eligible monetary transactions among the members of the Union/
    • It now aims to provide a system for clearing payments among the member countries on a multilateral basis.
    • The unit of settlement of ACU transactions is a common unit of account of ACU, and the unit is equivalent to one USD, and the Asian Monetary Unit may be denominated as ACU dollars and Euro.

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