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Archives: News

  • BRICS Summits

    BRICS Innovation Base for 5G and AI Technology

    China has made a proposal to create what it has termed a BRICS innovation base to take forward 5G and Artificial Intelligence (AI) cooperation.

    Try this question from CSP 2019:

    Q.With reference to communication technologies, what is/are the difference/differences between LTE (Long-Term Evolution) and VoLTE (Voice over Long-Term Evolution)?

    1. LTE ‘is commonly marketed as 3G and VoLTE is commonly marketed as advanced 3G.
    2. LTE is data-only technology and VoLTE is voice-only technology.

    Select the correct answer using the code given below.

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    BRICS Innovation Base

    • China is considering the establishment of a BRICS innovation base in China, in order to strengthen practical cooperation with the BRICS.
    • It has urged fellow nations, including India, to boost cooperation in areas including 5G and AI in partnership with Huawei.
    • The move could pose an awkward question for India, which is the only country in the grouping that is leaning towards excluding Chinese participation in the roll-out of India’s 5G networks.

    Huawei in BRICS

    • In South Africa, Huawei is providing services to three of its telecom operators in the roll-out of their 5G networks.
    • Brazil has allowed participation in trials but yet to take a final call.
    • India is unlikely to allow Chinese participation in 5G, particularly in the wake of recent moves to tighten investment from China and national security concerns.

    Back2Basics: BRICS

    • BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
    • The BRICS Leaders Summit is convened annually. It does not exist in form of organization, but it is an annual summit between the supreme leaders of five nations.
    • On November 30, 2001, Jim O’Neill, a British economist who was then chairman of Goldman Sachs Asset Management, coined the term ‘BRIC’ to describe the four emerging economies of Brazil, Russia, India, and China.
    • The grouping was formalized during the first meeting of BRIC Foreign Ministers on the margins of the UNGA in New York in September 2006.
    • The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
    • South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS.
  • Air Pollution

    [pib] Nationally Determined Contributions (NDC) Transport Initiative for Asia (TIA)

    NITI Aayog will virtually launch the India Component of the Nationally Determined Contributions (NDC)–Transport Initiative for Asia (TIA).

    Try this PYQ:

    Q.The term Intended Nationally Determined Contribution is sometimes seen in the news in the context of:

    (a) Pledge made by the European countries to rehabilitate refuges from the war-affected Middle East.

    (b) Plan of nation outlined by the countries of the world to combat climate changes.

    (c) Capital contributed by the member countries in the establishment of Asian Infrastructure Investment Bank.

    (d) Plain of action outlined by the countries of the regarding SDGs.

    What is NDC-TIA?

    • It is a joint programme, supported by the International Climate Initiative (IKI) of the German Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).
    • On behalf of the GoI, NITI Aayog will be the implementing partner.
    • It aims to promote a comprehensive approach to decarbonize transport in India, Vietnam, and China.
    • It is implemented by a consortium of seven other organisations.

    Working

    • The programme has a duration of 4 years.
    • The India Component will focus on establishing a multi-stakeholder dialogue platform for decarbonizing transport in India, strengthening GHG and transport modelling capacities.
    • It would help in financing climate actions in transport, offering policy recommendations on electric vehicle (EV) demand and supply policies.

    Why need TIA?

    • India has a massive and diverse transport sector that caters to the needs of billion people.
    • It has the world’s second-largest road network, which contributes to maximum GHG emissions through all means of transportation.
    • With increasing urbanisation, the fleet size i.e. the number of sales of vehicles is increasing rapidly.
    • It is projected that the total number of vehicles will be doubled by 2030.
  • Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

    [pib] Export Preparedness Index (EPI) 2020

    NITI Aayog in partnership with the Institute of Competitiveness has released the Export Preparedness Index (EPI) 2020.

    Try this PYQ:

    Q.Which one of the following is not a sub-index of the World Bank’s ‘Ease of Doing Business Index? (CSP 2019)

    (a) Maintenance of law and order

    (b) Paying taxes

    (c) Registering property

    (d) Dealing with construction permits

    EPI 2020

    • EPI intends to identify challenges and opportunities; enhance the effectiveness of government policies; and encourage a facilitative regulatory framework.
    • The structure of the EPI includes 4 pillars –Policy; Business Ecosystem; Export Ecosystem; Export Performance.
    • It has 11 sub-pillars –Export Promotion Policy; Institutional Framework; Business Environment; Infrastructure; Transport Connectivity; Access to Finance; Export Infrastructure; Trade Support; R&D Infrastructure; Export Diversification; and Growth Orientation.

    Highlights of the EPI

    • This edition of the EPI has shown that most Indian states performed well on average across the sub-pillars of Exports Diversification, Transport Connectivity, and Infrastructure.
    • Overall, most of the Coastal States are the best performers. Gujarat, Maharashtra and Tamil Nadu occupy the top three ranks.
    • Six of eight coastal states feature in the top ten rankings, indicating the presence of strong enabling and facilitating factors to promote exports.
    • In the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana.
    • Among the Himalayan states, Uttarakhand is the highest, followed by Tripura and Himachal Pradesh.
    • Across the UTs, Delhi has performed the best, followed by Goa and Chandigarh.
  • Coronavirus – Economic Issues

    Eat Out to Help Out Scheme

    Since the lockdown began in India, different bodies representing the country’s hospitality sector have repeatedly asked the government for financial assistance to help tide over the crisis. UK’s popular Eat Out to Help Out (EOHO) Scheme can be an example of the kind of intervention in India.

    Note: The ‘Eat Out to Help Out’ Scheme recently seen in news is related to Hospitality. One may get confused over Poverty and Hunger.

    What is the EOHO Scheme?

    • The EOHO Scheme is an economic recovery measure by the UK government to support hospitality businesses as they reopen after the lockdown.
    • The scheme was announced as part of the Plans for Jobs summer economic update.
    • Under the EOHO Scheme, the government would subsidise meals (food and non-alcoholic drinks only) at restaurants by 50 per cent.
    • There is no minimum spending and no limit on the number of times customers can avail the offer, since the whole point of the scheme is to encourage a return to dining in restaurants.

    Why was this scheme deemed necessary?

    • All over the world, the food services sector is one of the worst affected by the pandemic.
    • The top two concerns were customers avoiding restaurants for fear of contracting the virus and customers having less disposable income for dining out.
    • Instead of delivering a financial package to operators, it makes eating out more affordable for consumers directly and helps restore demand.
    • Restoring consumer demand is being seen as crucial to the UK’s economic recovery.

    Can India benefit from such a scheme?

    • The main problem confronting the restaurant industry, following Unlock 1.0 in June, has been consumer fear, even as the government has remained silent about specific recovery packages aimed at the hospitality industry.
    • The government needs to work on the demand side.
  • RBI Notifications

    New umbrella entities (NUEs) for retail payments.

    Context

    • Last week the Reserve Bank of India (RBI) released a document setting out the framework it plans to adopt to authorize the establishment of new umbrella entities (NUEs) for retail payments.

    What are NUEs

    • Once established, these newly authorized entities will be able to operate their own clearing and settlement systems.
    • establish new standards and technologies; and develop innovative new payment systems that enhance customer access, convenience and safety.
    • All NUEs will have to be interoperable with the National Payments Corporation of India (NPCI).
    • NPCI would also be allowed to set themselves up as for-profit entities, and they will themselves be able to participate in RBI’s payment and settlement systems.
    • The NPCI is at the epicentre of the digital payments in the country.

    If NPCI is doing its job well, then why NUE?

    • Between the UPI, IMPS, Aadhaar-enabled payments, Bharat BillPay, and all the other payment systems that it manages, 48% of all electronic retail payments in the country pass through the NPCI infrastructure.
    • NPCI is the fulcrum around which everything digital revolves.
    • Perhaps RBI’s concern stems from having the operations of so much of the country’s payment system concentrated in one entity.

    Are the concerns of RBI valid?

    • There is nothing wrong with having all digital transactions flow through a single entity—so long as that entity is neutral.
    • If RBI’s concern is technical, we could build sufficient redundancy into NPCI’s technical architecture to ensure that there is no single point of failure in the system.
    • Creating multiple umbrella entities is not the answer to this problem, as NUEs would be allowed to establish themselves as profit-oriented entities.
    • There is also the question of whether the trade-off is even worth it as replicating the NPCI infrastructure will require heavy investments to make participants in one NUE can seamlessly interact with those in every other.
    • Ensuring interoperability while still maintaining the security of the underlying infrastructure is going to be difficult and expensive.
    • There is the cost of the additional regulatory burden that RBI will have to shoulder, now that the banking-sector regulator will have to manage not just one but multiple umbrella entity.

    Issues with NPCI

    • There would be consequences to letting NPCI only entity in handling the payment system.
    • Any sort of monopoly results in market inefficiencies.
    • Of we have just one umbrella regulator, we will never be sure if transaction costs are as low as they could be, or if the variety of product offerings available to us could be better.
    • Problem is that the NPCI is expected to both manage the digital payments industry as well as come up with the frameworks necessary to foster innovation.
    • When NPCI had just small products in its portfolio it was able to perform both functions efficiently.
    • The effort of just keeping the system working seems to be taking a toll on NPCI’s ability to develop the protocols and standards that are needed to encourage innovation in this boom sector.

    What is the solution to issues faced by NPCI

    • One possible solution might be to create a separate and independent standards-setting body.
    • Such body would come up with the protocols and standards required to foster innovation in the digital payments space.
    • This is how most successful digital infrastructure systems work. Take the World Wide Web, for example.
    •  Any new standard that this body creates will have to first be approved by the NPCI, but then it can be rolled out throughout the digital payments ecosystem.

    Consider the question “Examine the role played by the NPCI in revolutionising the payment system in India.”

    Conclusion

    By establishing a neutral and independent standards-setting body, we can make sure that the system as a whole in our country evolves in the best traditions of digital infrastructure adopted anywhere in the world.

  • RBI Notifications

    The idea of Central Bank Digital Currency in India

    The article discusses the idea of digital currency supported by the RBI and its advantages.

    Purpose of NUE

    • RBI recently released the framework for the establishment of a new umbrella entity (NUE) for retail payments.
    • NUE would help reduce payments concentration risk with Unified Payments Interface (UPI) facilitating over 1.5 bn transactions a month.
    • Given the sticky adoption and only a few payments apps dominating the UPI market, RBI intends to create a parallel retail system.

    5 requirements payment systems should fulfil

    • 1) The payments system should reduce the cost and time for government support to reach unbanked and underbanked people.
    • 2) It should ensure ease of access to credit for small and medium businesses.
    • 3) Improve the effectiveness of the implementation of monetary policy.
    • 4) The new payment system should effectively counter risk from unregulated new digital currencies like Bitcoin.
    • 5) It should discourage money laundering and tax evasion.

    CBDC: Solution to the above 5 requirements

    • CBDC is the digital form of fiat money, a digital equivalent of banknotes and coins.
    • A Central Bank Digital Currency (CBDC) could potentially solve the above problems.
    • Retail CBDCs can be issued directly by the central bank to people without going through traditional banks.
    • Individuals would have CBDC accounts directly on the central bank core ledger.
    • CBDC can reduce the cost and time for government support to reach people during desperate times (like pandemic).
    • CBDC can also enable many financial entities to settle directly with RBI.
    • In the current set up only a few large banks can settle directly with RBI.
    • With a digital currency, the settlement can be instantaneous and, as a result, more payments services providers like NBFCs could connect with RBI, thereby, reducing credit and liquidity risk.
    • CBDC lending would build MSMEs history and make further lending easier.
    • For India to be a $5 tn economy, businesses need credit, and that can happen when we have more banks.
    • India had 97 banks in 1947; today we are still at 95!
    • Interest bearing CBDCs can also improve monetary policy effectiveness by enabling real-time pass-through of the policy rate to the lending markets.
    • CBDCs can also allow for direct deposits into accounts of low-income households, senior citizens dependent on pensions and help cushion their purchasing power from the low-level interest rates during the times of economic downturn.
    • CBDC can thwart some competition against privately issued foreign currency-denominated digital currencies.

    Roles and responsibility of RBI with respect to CBDC

    • In terms of managing roles and responsibilities, RBI would only hold the accounts and implement monetary policies as it does now.
    • Fintech companies can become the channel for retail CBDC transmission and manage client relationships.
    • Fintechs can complement the commercial banks and can draw small businesses/poor households into the formal economy.
    • These companies could leverage their data to estimate customers’ creditworthiness and share their findings to banks for more efficient allocation of credit.

    Consider the question “A digital currency backed by the central bank could transform the retail payment landscape in India. Discuss.”

    Conclusion

    India has been at the forefront of the fintech revolution, and other developed countries have been following its path. While the world watches the melee between the Greenback and the Renminbi, it is time India also lays the foundation for a strong currency. CBDC may just be one of the ways to do it.

  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    Boosting manufacturing

    The article analyses the issues of increasing manufacturing in India while dealing with the constraints faced by it. It also suggests the important role States can play.

    Why companies are expected to exit China

    • In the aftermath of the pandemic manufacturing companies are expected to exit China due to three primary reasons.
    • 1) Realisation that relying heavily on China for building capacities and sourcing manufacturing goods is not an ideal business strategy due to supply chain disruptions in the country caused by COVID-19.
    • 2) Fear of Chinese dominance over the supply of essential industrial goods.
    • 3) The growing risk and uncertainty involved in operating from or dealing with China in the light of geopolitical and trade conflicts between China and other countries, particularly the U.S.

    Where India stands in comparison with China

    • China ranks first in contribution to world manufacturing output, while India ranks sixth.
    • Against India’s target of share of manufacturing in Gross Domestic Product (GDP) to 25% by 2022, its share stood at 15% in 2018, only half of China’s figure.
    • Industry value added grew at an average annual rate of 10.68% since China opened up its economy in 1978, India’s grew at 7% after India opened up its economy.
    • Next to the European Union, China was the largest exporter of manufactured goods in 2018, with an 18% world share.
    • India is not part of the top 10 exporters who accounted for 83% of world manufacturing exports in 2018.

    Constraints faced by manufacturing sector in India

    India faces numerous constraints in promoting the manufacturing sector.

    • They chiefly include infrastructure constraints, a disadvantageous tax policy environment, restrictive trade policies, a non-conducive regulatory environment, rigid labour laws.
    • Constraints also include high cost of industrial credit, poor quality of the workforce, Low R&D expenditure, delays and constraints in land acquisition, and the inability to attract large-scale foreign direct investment into the manufacturing sector.

    What role States can play?

    • They  can  contribute land: Federal government system in India demands the participation of States for the lasting solution to the constraints on the sector.
    • An important requirement for the development of the manufacturing sector is the availability of land area.
    • This could be one of the reasons why manufacturing activity is mainly concentrated in Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh.
    • However, what is of concern is that some States that also have large land area contribute disproportionately little in manufacturing GSDP.
    • These states include Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, Odisha, Rajasthan, Telangana, and West Bengal.

    Way forward

    • Identify reasons: The reasons for less manufacturing activity in these States have to be carefully examined.
    • State-specific industrialisation strategies: Based on such reasons, State-specific industrialisation strategies need to be devised and implemented in a mission mode with active hand-holding by the Central government.
    • State specific reforms: Policy actions on the part of individual States would improve India’s overall investment climate, thereby boosting investments, jobs, and economic growth.
    • Policy actions of the Centre and the States should  be well coordinated: Strategy Group consisting of representatives from the Central and State governments along with top industry executives to instil teamwork and leverage ideas through sharing the best practices of the Centre and States could be formed.

    Consider the question “What are the constraints faced by the manufacturing sector in India? Suggest the ways to deal with these constraints highlighting the important role States can play in boosting manufacturing.”

    Conclusion

    Both the States and the Central government needs to work in tandem to boost the manufacturing in India and transform the economic landscape of India.

  • Finance Commission – Issues related to devolution of resources

    India needs a Fiscal Council

    The newscard highlights the need of bipartisan, independent Fiscal Council to report and analyse FRBM discrepancies by the Government.

    Try this question for mains:
    Q.Fiscal Council is an important institution needed to complement the rule-based fiscal policy. Discuss.

    What is a Fiscal Council?

    • A Fiscal Council is an independent fiscal institution (IFI) with a mandate to promote stable and sustainable public finances.
    • They aim to provide nonpartisan oversight of fiscal performance and/or advice and guidance — from either a positive or normative perspective — on key aspects of fiscal policy.
    • These institutions assist in calibrating sustainable fiscal policy by making an objective and scientific analysis.

    Voices for a Fiscal Council

    • The 13th Finance Commission recommended that a committee be appointed by the Ministry of Finance which should eventually transform itself into a Fiscal Council.
    • The FC expected it to conduct an annual independent public review of FRBM compliance, including a review of the fiscal impact of policy decisions.
    • The FRBM Review Committee too made a similar recommendation underlining the need for an independent review by the Finance Ministry appointing the Council.

    Why need a fiscal council?

    (1)Burgeoning deficits

    • For the current year, even without any additional fiscal stimulus, the deficit is estimated at about 7% of GDP as against 3.5% estimated in the Budget due to a sharp decline in revenues.
    • The consolidated deficit of the Union and States could be as high as 12% of GDP and the overall debt could go up to 85%.
    • Thus it is necessary that the government must return to a credible fiscal consolidation path once the crisis gets over.

    (2)Transparency issues

    • Besides large deficits and debt, there are questions of comprehensiveness, transparency and accountability in the Budgets.
    • The practice of repeated postponement of targets, timely non-settlement of bill payments and off Budget financing to show lower deficits has been common.
    • The report of the CAG of India in 2018 has highlighted various advances done to keep the liabilities hidden.

    Fiscal Council can be a game changer. How?

    • First, an unbiased report to Parliament helps to raise the level of debate and brings in greater transparency and accountability.
    • Secondly, costing of various policies and programmes can help to promote transparency over the political cycle to discourage populist shifts in fiscal policy and improve accountability.
    • Third, scientific estimates of the cost of programmes and assessment of forecasts could help in raising public awareness about their fiscal implications and make people understand the nature of budgetary constraint.
    • Finally, the Council will work as a conscience keeper in monitoring rule-based policies, and in raising awareness and the level of debate within and outside Parliament.

    Issues meddling between

    • The problem is that a Council created by the Finance Ministry and reporting to it can hardly be expected to be independent.

    Diverse role to play ahead

    • According to the IMF, there were 36 countries with IFIs in 2014 and more have been established since.
    • While most of the IFIs are in advanced countries, emerging economies too have also shown growing interest in them.
    • Although their common agenda has been to function as watchdogs, there is considerable diversity in their structure and functions.
    • Over the years, monitoring compliance with fiscal rules and costing policies and programmes have become major tasks of these councils.

    Way forward

    • When the markets fail, governments have to intervene.
    • Whenever governments seem obstructed, it is here that we need systems and institutions to ensure checks and balances.
    • In that respect, a Fiscal Council is an important institution needed to complement the rule-based fiscal policy.

    Conclusion

    • Of course, it is not a ‘silver bullet’; if there is no political will, the institution would be less effective, and if there is political will, there is no need for such an institution.
    • That is also true of the FRBM Act. While we cannot state that the FRBM Act has been an unqualified success, it has also not been an abject failure either.
  • Modern Indian History-Events and Personalities

    [pib] Cultural heritage of Hyderabad

    Ministry of Tourism’s DekhoApnaDesh Webinar Series in its 50th session held a webinar on “Cultural heritage of Hyderabad”.

    Note various cultural sites mentioned in the newscard. The entire DekhoApnaDesh series is a potential hotspot for the coming Prelims.

    The story of Hyderabad City

    • Hyderabad is popularly known as the “City of Pearls” and the “City of Nizams”, and has been the centre of a vibrant historical legacy, ever since its inception by the Qutub Shahi dynasty.
    • The city was later conquered by Mughal Empire and finally falling in the hands of Asaf Jahi dynasty.
    • Muhammad Quli Qutb Shah established Hyderabad in 1591 to extend the capital beyond the fortified Golconda. In 1687, the city was annexed by the Mughals.
    • In 1724, Mughal governor Nizam Asaf Jah I declared his sovereignty and founded the Asaf Jahi dynasty, also known as the Nizams.
    • Hyderabad served as the imperial capital of the Asaf Jahis from 1769 to 1948.
    • As capital of the princely state of Hyderabad, the city housed the British Residency and cantonment until Indian independence in 1947.

    Cultural sites of Hyderabad:

    1) Golconda Fort, Hyderabad: A massive fortress whose ruins stand proudly even today displaying the glory of its rich past and some untold sagas of the city’s history. The place oozing charm is a must visit historical place in Hyderabad. Mohammed Quli understood the need of a new City and made Bhagnagar (after the name of his beloved Bhagmati) with Charminar in its centre.

    2) Chowmahalla Palace: Once the seat of the Asaf Jahi Dynasty, the Chowmahalla Palace was built in Hyderabad and is located near the famous monument, Charminar and Laad Bazar. The palace is designed very intricately and holds that Nawabi Charm in itself. Palace, the seat of power of Nizams, has bagged the UNESCO Asia-Pacific Heritage Merit Award for Culture Heritage Conservation.

    3) Charminar: The monument was erected when Quli Qutab Shah shifted his capital from Golconda to Hyderabad. The monument got its name from its structure as it consists of four minarets.

    4) Mecca Masjid: One of the oldest and the largest mosques of India is the grandest historical places in Hyderabad was completed by Aurangzeb in 1693.The bricks used here are believed to be from Mecca, and hence the name.

    5) Paigah tombs: Located in the suburbs of Pisal Banda in Hyderabad, Paigah Tombs are a group of tombs of the Paigah royal family. Although now in a derelict and dilapidated state, the tombs still boast of striking architecture and marvellously carved marble panels.

    6) Salar Jung Museum: Is an art museum established in the year 1951 and located at Dar-ul-Shifa, on the southern bank of the Musi River in the city of Hyderabad. The Salar Jung family is responsible for its collection of rare art objects from all over the world. The family is one of the most illustrious families in Deccan history, five of them having been prime-ministers in the erstwhile Nizam rule of Hyderabad-Deccan.

    7) Warangal Fort: This fort appears to have existed since at least the 12th century when it was the capital of the Kakatiya dynasty. The fort has four ornamental gates, known as Kakatiya Kala Thoranam, that originally formed the entrances to a now ruined great Shiva temple.

  • Indian Navy Updates

    Dismantling INS Viraat

    Decommissioned aircraft carrier INS Viraat is set to be scrapped at a ship breaking yard at Alang in Gujarat soon.

    In rarest case we would see a question based on this in CSP. However, we can expect a question based on INS Viraat in the CAPF exam very well.

    INS Viraat

    • Viraat, a Centaur class aircraft carrier weighing 27,800 tonnes, served in the British Navy as HMS Hermes for 25 years from November 1959 to April 1984.
    • It was commissioned into the Indian Navy in May 1987 after refurbishment and had operated Harrier fighter jets.
    • It was decommissioned from in March 2017, and the Navy had been incurring expenditure since then on its upkeep, such as the provision of electricity and water, and repairs.
    • In 2018, the Maharashtra Cabinet approved a proposal to convert the carrier into a museum and hospitality centre on a PPP basis and had invited bids. But there were no takers.

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