💥UPSC 2026, 2027, 2028 UAP Mentorship (March Batch) + Access XFactor Notes & Microthemes PDF
Talk to mentor

Civilsdaily

Login

Archives: News

  • Direct Benefits Transfers

    Universal basic income

    op-ed snap | Economics | Mains Paper 2: Schemes For Vulnerable Sections

    universal basic income Context

    • New evidence from two Kenyan counties shows that universal basic income  and other income supplements reduce hunger, illness, and risk exposure during crises.
    • Countries should consider building universal basic income that can be activated at short notice to help people weather unanticipated shocks.

    Why in news?

    • When the COVID-19 pandemic and the resulting recession pushed 120 million people worldwide into extreme poverty in 2020, many countries relied on social-protection measures to cushion the blow.

    What is social protection?

    • Social protection is concerned with preventing, managing, and overcoming situations that adversely affect people’s well-being.
    • Social protection programs that assist low-income families, insure against shocks, and break poverty traps offer a potential solution.

    universal basic income Universal basic income meaning

    • Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status.
    • The purpose of UBI is to prevent or reduce poverty and increase equality among citizens.

    What is social security?

    • Social securityin India includes a variety of statutory insurances and social grant schemes bundled into a formerly complex and fragmented system run by the Indian government.
    • These are retirement, healthcare, disability, childcare, gratuity and provident fund and insurance programs.

    What is insurance simple words?

    • An agreement by which a person pays a company and the company promises to pay money if the person becomes injured or dies or to pay for the value of property lost or damaged.

    Constitutional mandate

    • The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state.

    Interesting fact

    India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country.

    What are the benefits of Universal Basic Income?

    • Ending poverty: Advocates for UBI say that it could help bring everyone’s income above the poverty line.
    • Discouraging low wages: UBI would give employees enough security to have bargaining power.
    • Redistributing wealth: The economic growth of high-income countries is making the rich richer, but having very little effect on the working classes.

    Case study / value addition

    Namibia

    Namibia had a basic income pilot program between 2008 and 2009. Every resident of Otjivero-Omitara was entitled to 100 Namibian dollars ($6.75) every month. The program was funded by donors from around the world.

    Findings from the pilot program showed that cases of child malnutrition had dropped significantly while school enrollment went up. Also, social crimes such as theft had significantly dropped.

    universal basic income Negative implications of UBI

    • Induce lethargy: UBI removes the incentive to work, adversely affecting the economy and leading to a labour and skills shortage.
    • Inequity: Universal basic income would be just that: universal. That means that everyone, regardless of how poor, or rich, they were would get the same amount of money.
    • Huge Cost: The cost of implementing UBI could be huge. In the United States it’s estimated to be about $3.9 trillion per year.
    • Motivation to work: One concern is that UBI would incite millions of workers to stop working. If people aren’t working, there is less taxable income.

    Some government initiatives

    • National Pension Scheme for Traders and Self Employed Persons.
    • Pradhan Mantri Suraksha Bima Yojana.
    • Employees’ State Insurance Scheme.
    • Minimum Wages for various employment roles.
    • National Pension System.

    Conclusion

    • One of the major criticisms of poverty alleviation programs is significant leakages. UBI is seen as a more efficient alternative. Though UBI has many advantages, there are many practical challenges too. The idea should be to save costs with better targeting. This will help create the necessary conditions for higher growth which will decisively lift people out of poverty.

    Mains question

    Q. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. Do you think they are enough? Discuss in context of rising demand for universal basic income and its pros and cons for ensuring social security.

     

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

    Challenging the Special Marriage Act, 1954

    SC Judgements | Indian Society | Mains Paper 1: Communalism, Secularism, Regionalism

    The Supreme Court has dismissed a writ petition challenging the Constitutional validity of certain provisions of the Special Marriage Act, 1954 under which couples seek refuge for inter-faith and inter-caste marriages.

    What is Special Marriage Act, 1954?

    • The Special Marriage Act, 1954 (SMA) was enacted to facilitate the marriage of couples professing different faiths, and preferring a civil wedding.
    • However, some practical problems arise in registering such marriages.
    • The law’s features on prior public notice being given and objections for the safety and privacy of those intending to marry across religions.
    • To overcome this, many settle for marriage under the personal law of one of them, with the other opting for religious conversion.

    What does the petition seek?

    • The Supreme Court dismissed a writ petition challenging the Constitutional validity of certain provisions of the SMA under which couples seek refuge for inter-faith and inter-caste marriages.
    • The writ petition has called these provisions violative of Article 21, which guarantees the right to privacy.
    • Under this act, the couples require to give a notice of 30 days before the date of marriage inviting objections from the public.
    • The provisions contravene Article 14 on prohibition of discrimination on grounds of religion, race, caste and sex as well as Article 15 on right to equality as these requirements are absent in personal laws.

    What did the court say?

    • The SC Bench rejected the writ petition on the grounds that the petitioner was no longer an aggrieved party as she had already solemnised her marriage under SMA.
    • The petitioner’s lawyers said that they were now deliberating on an alternative approach to initiate this litigation such as through a public interest litigation involving other victims.
    • Another writ petition is admitted by the Supreme Court in 2020 and the government’s reply to is awaited.

    What are the provisions that have been challenged?

    • Section 5 of the SMA requires couples getting married under it to give a notice to the Marriage Officer 30 days before the date of marriage.
    • Section 6 requires such a notice to be then entered into the Marriage Notice Book maintained by the Marriage Officer, which can be inspected by any person desirous of inspecting the same.
    • These notices have to be also affixed at a “conspicuous place” in the office of the Marriage Officer so that anyone can raise an objection to the marriage.
    • Section 7 provides the process for making an objection such as if either party has a living spouse, is incapable of giving consent due to “unsoundness of mind” or is suffering from mental disorder resulting in the person being unfit for marriage or procreation.
    • Section 8 specifies the inquiry procedure to be followed after an objection has been submitted.

    Why are these provisions contentious?

    • The provisions throw the personal information of the individuals open to public scrutiny. This may result into vigilantism.
    • This seriously damages one’s right to have control over her or his personal information and its accessibility.
    • By making the personal details of the couple accessible to everyone, the very right of the couple to be the decision makers of their marriage is being hampered by the state.

    How do these provisions make couples vulnerable?

    • These public notices have been used by anti-social elements to harass couples getting married.
    • For many who often marry without their parent’s consent this can be life-threatening.
    • Many states publicly share the details of couples marrying under SMA on their websites.
    • Many also complain about the behaviour of the staff at the SDM’s office who often delete or delay applications and dissuade couples from marrying under SMA.
    • With as many as 11 States passing anti-conversion (or so-called love-jihad) laws, parents and the State are now armed to punish and harass such couples.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Labour Codes

    op-ed snap | Economics | Mains Paper 2: Government Scheme/Policies

    Addressing to the National Labour Conference, Prime Minister said that the Centre had taken initiatives to abolish laws from “the period of slavery” that reflected a slavery mentality through the Labour Codes.

    New Labour Codes

    The four codes likely to be implemented in FY23 are:

    1. Code on Wages
    2. Industrial Relations Code
    3. Social Security Code, and
    4. Occupational Safety, Health and Working Conditions Code

    Objectives of the Labour Code

    • The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
    • The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
    • The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.

    What is the current status of the codes?

    • The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
    • With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.

    How many labour laws do Indian states have?

    • The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
    • India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
    • The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.

    What are the major reforms in these codes?

    • Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
    • Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
    • Four days work: There could also be a permissible four-day work week of 12 hours per day.

    How will it affect ease of doing business?

    • Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
    • Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
    • Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
    • Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.

    Also read

    [Burning Issue] New Labour Laws

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

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

    Contract Enforcement in India

    | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

    Ease of doing business in India remains low, dragged down by the way contracts are enforced in the country. Recent reforms have improved the business climate somewhat, but there is a long way to go.

    What is the Ease of Doing Business index?

    • It is an index designed by the World Bank to rank 190 economies.
    • A higher rank (closer to 1) means the country’s regulatory environment is favourable to business operations.
    • India was ranked 63rd in the overall index in 2020.
    • World Bank has now discontinued the Doing Business index.

    Indicators used

    The ranking is calculated on the basis of indicators such as:

    1. Starting a Business
    2. Dealing with Construction Permits
    3. Getting Electricity
    4. Registering Property
    5. Getting Credit
    6. Protecting Minority Investors, Paying Taxes
    7. Trading across Borders
    8. Enforcing Contracts and
    9. Resolving Insolvency

    How is ‘Enforcing Contracts’ measured?

    • In 2020, in the parameter of ‘Enforcing Contracts’, India was ranked 163rd, against 186th in 2015. The parameter considers time, cost and quality of the judicial process.
    1. Time considers the number of days to resolve a commercial dispute in courts;
    2. Cost measures the expenses of attorney, courts and enforcement as a percentage of claim value; and
    3. Quality considers the use of best practices which can promote efficiency and quality i.e., court proceedings, case management, alternative dispute resolution and court automation.
    • Each of the three indicators have a 33.3% weightage.

    How is India doing on this parameter now?

    • At 163rd position in 2020, the country continues to struggle, with the time taken to resolve a commercial dispute being approximately 1,445 days in the Doing Business Report 2020.
    • However, as of August 2022, law ministry data shows a marked improvement of close to 50% in days taken to resolve a dispute to 744 days in New Delhi and 626 days in Mumbai.

    What are some of the reforms undertaken?

    • The Department of Justice, the nodal point for ‘Enforcing Contracts’ indicator along with the eCommittee of the Supreme Court, has undertaken a series of reforms.
    • Some of the steps include the establishment of dedicated commercial courts with monetary jurisdiction up to ₹3 lakh.
    • There also exists online case filing, e-payment of court fees, electronic case management, special courts for infrastructure project contracts, as well as automatic and random allocation of commercial cases thereby eliminating human intervention.

    What further steps are required?

    • An efficient judiciary instils confidence in investors and signals the commercial viability of transactions.
    • The number of court hearings should be minimized too; often, lawyers have an incentive to stretch out the process.
    • The judicial system should encourage out-of-court settlements through the respective lawyers as practised in advanced countries.
    • It is equally important that the judiciary leaves matters relating to economic governance to governments.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Fertilizer Sector reforms – NBS, bio-fertilizers, Neem coating, etc.

    One Nation One Fertiliser (ONOF) Scheme

    | Agriculture | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

    The Ministry of Chemicals and Fertilisers will implement One Nation One Fertiliser (ONOF) by introducing a Single Brand for Fertilisers and Logo under the fertiliser subsidy scheme named “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP).

    One Nation One Fertiliser (ONOF)

    • The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertiliser Companies, State Trading Entities (STEs) and Fertiliser Marketing Entities (FMEs).
    • Also a logo indicating Fertiliser subsidy scheme namely Pradhanmantri Bhartiya Janurvarak Pariyojna will be used on said fertiliser bags.
    • Under the scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.
    • On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown.

    What is the government’s argument for introducing this scheme?

    The government’s logic for introducing a single ‘Bharat’ brand for all subsidised fertilisers being marketed by companies is as follows:

    (1) Subsidies normalization

    • The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them.
    • The MRPs of non-urea fertilisers are, on paper, decontrolled.
    • But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government.
    • Simply put, there are some 26 fertilisers (inclusive of urea), on which government bears subsidy and also effectively decides the MRPs;

    (2) Harmonizing markets

    • Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell.
    • This is done through the Fertiliser (Movement) Control Order, 1973.
    • Under this, the department of fertilisers draws an agreed monthly supply plan on all subsidised fertilisers in consultation with manufacturers and importers.
    • This supply plan is issued before the 25th of each month for the following month, with the department also regularly monitoring movement to ensure fertiliser availability as per requirement, including remote areas.

    (3) Farmers welfare

    • The government is spending vast sums of money on fertiliser subsidy (the bill is likely to cross Rs 200,000 crore in 2022-23).
    • By deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.

    What can be the drawbacks of the scheme?

    • It may disincentivise fertiliser companies from undertaking marketing and brand promotion activities.
    • They will now be reduced to contract manufacturers and importers for the government. Any company’s strength ultimately is its brands and farmer trust built over decades.
    • Currently, in case of any bag or batch of fertilisers not meeting the required standards, the blame is put on the company. But now, that may be passed on fully to the government.
    • Politically, the scheme might well boomerang rather than benefit the ruling party.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Police Reforms – SC directives, NPC, other committees reports

    NCRB releases ‘Crime in India’ Report

    DOMR | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    A new edition of ‘Crime in India’, the annual report of the National Crime Records Bureau (NCRB), was released on August 29, for crime-related statistics in 2021.

    Why in news?

    • NCRB reports have been a valuable compilation of statistics over the years on offences ranging from crimes against women to economic and financial crimes.
    • It has provided honest and credible sets of crime related data in India.

    Crime in India: Key highlights

    • Overall, 2021 saw a 6 per cent decline in the number of crimes registered, as compared to 2020.
    • The crime rate per lakh population declined from 487.8 in 2020 to 445.9 in 2021.
    • However, crime statistics do not always tell the full story, and lower crimes reported in an area do not necessarily mean it is safe.
    • Crimes against women rose 15 per cent in India in 2021 and Delhi is the most unsafe metropolitan city.
    • Rajasthan reported the highest number of rape cases and Maharashtra topped the list when it comes to most suicides.
    • Around 1.73 lakh people died in traffic accidents. Uttar Pradesh saw the highest number of deaths (24,711) in traffic accidents.
    • Jammu and Kashmir registered the most Unlawful Activities (Prevention) Act (UAPA) cases under the ‘special and local laws’ in 2021, as per NCRB data.
    • Of the total 814 cases under the UAPA in India, J&K lodged 289 cases last year, followed by Manipur (157), Assam (95), Jharkhand (86) and Uttar Pradesh (83).
    • Jharkhand and Maharashtra filed the highest cases of communal riots last year with 100 and 77 cases respectively.

    Who publishes the NCRB report?

    • The NCRB was established in January 1986 with the aim of establishing a body to compile and keep records of data on crime.
    • It functions under the Union Home Ministry.
    • Apart from publishing annual reports, its functions include “Collection, coordination and exchange of information on inter-state and international criminals to the respective states”.
    • NCRB also acts as a “national warehouse” for the fingerprint records of Indian and foreign criminals, and assists in locating interstate criminals through fingerprint search.

    How does the NCRB collect information for its report?

    • The NCRB report contains data received from the 36 states and Union Territories across the country.
    • Similar data is furnished for 53 metropolitan cities, or those having a population of more than 10 lakh as per the 2011 census, by respective state-level crime records bureaus.
    • This information is entered by state/UT police at the police station/ district level, and is then validated further at the district level, then the state level, and finally by the NCRB.

    Issues with NCRB data

    • By its own admission, the NCRB says there are limitations to its data.
    • Since the publication caters to the ‘Principal Offence Rule’ for classification of crime, the actual count of each crime head may go under-reporting.
    • The Principal Offence Rule states that in a case where multiple offences are registered, only the “most heinous crime”, carrying the most stringent punishment, is considered when counting.
    • For example, ‘Murder with Rape’ is accounted as ‘Murder’, leading to undercounting of the crime of rape.
    • Vacancies or a shortage of police officers at the local level may hinder the collection of data.
    • Also the data record the incidence of registered crime rather than of actual crime.

    Antithesis to NCRB data

    • Reported crimes against women in Delhi rose significantly in the aftermath of the 2012 Nirbhaya Gangrape case.
    • This is not because the heinous crimes got trivialized.
    • It may have been a reflection of increased awareness about the need for registering crimes, both among those affected and the police, rather than an actual increase in the incidence of crime against women.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Primary and Secondary Education – RTE, Education Policy, SEQI, RMSA, Committee Reports, etc.

    PARAKH: A new regulator for ‘uniformity’ in all board exams

    Prelims Only | Governance | Mains Paper 2: Health & Education

    The Centre is planning to draw up a benchmark framework ‘PARAKH’ to assess students at the secondary and higher secondary level to bring about “uniformity” across state and central boards.

    What is PARAKH?

    • PARAKH stands for Performance Assessment, Review and Analysis of Knowledge for Holistic Development.
    • The proposed regulator will act as a constituent unit of the NCERT.
    • It will also be tasked with holding periodic learning outcome tests like the National Achievement Survey (NAS) and State Achievement Surveys.
    • The benchmark assessment framework will seek to put an end to the emphasis on rote learning, as envisaged by the National Education Policy (NEP) 2020.
    • PARAKH, the proposed implementing agency, is also part of the NEP proposal.

    Response form States

    • Most states endorsed the proposal to hold board exams twice a year, including one for helping students improve their scores.
    • States are also on board regarding a proposal to offer two types of papers on mathematics — a standard exam, and another to test higher level competency.
    • It will help reduce the fear of maths among students and encourage learning.

    Significance of PARAKH

    • PARAKH will help tackle the problem of students of some state boards being at a disadvantage during college admissions as compared to their peers in CBSE schools.
    • It will develop and implement “technical standards for the design, conduct, analysis and reporting” of tests at all levels of school education.
    • PARAKH will eventually become the national single-window source for all assessment related information and expertise, with a mandate to support learning assessment in all forms, both nationally and where applicable, internationally.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • G20 : Economic Cooperation ahead

    G20 presidency opportunities for India’s growth and prosperity

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India,International Institutions

    G20 Context

    • India’s presidency of the G20 grouping next year arguably the sole remaining effective forum for global governance presents an enormous opportunity to accelerate sustainable growth within India, in the emerging world, and beyond.

    About G20

    • Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.

    Features

    • Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
    • To tackle the problems or the address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
    • In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.

    Objectives

    • Stability: The Group was formed with an aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
    • Fiscal responsibilities: The forum aims to pre-empt balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
    • Universal Support: The forum seeks to address issues that go beyond the responsibilities of any one organisation.

    G20Is India ready for G20 leadership?

    • At some levels, India is ready.
    • Indian business and industry is becoming a noteworthy competitor globally.
    • The country’s domestic economy is starting to pick up, thanks to structural economic reforms.
    • The central government is economically stronger, and the states are starting to learn about economic independence, making them more aligned with their global counterparts.

    Punchline

    It is said that “those who hold the pen, write the rules”.

    The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance.

    Issues and Challenges

    • India need to have a clear global financial agenda.
    • The country should also have the capacity to lead the G20 year intellectually, financially, managerially and administratively.
    • Geopolitically, India is more internationally engaged but less so geoeconomically.
    • Its narrow focus is on the World Bank, IMF, WTO and foreign investment issues.
    • But India has much to contribute on issues like reconfiguration of global financial regulations, design of a new framework for trade in services and the digital economy and establishing better cross-border standards for transparency in financial flows.
    • To make its G20 year a success, India has to address organisational challenges, where the country has an infrastructure, management and intellectual gap.

    G20What could India bring to the table?

    • Mediation: Firstly, it remains pertinent for the world that escalating tensions between Russia and Ukraine come to a halt. Maintaining its balanced stance, India needs to neutralise this situation by introducing peace talks between the two nations.
    • Open trade: It’s about time for India to raise its voice in support of a transparent New Economic Order and building a prosperous and just world. Unreasonable bans on certain commodities from various countries limits commerce between states when trade liberty exists.
    • Collaboration around science and technology: The global agenda has been tilted towards investment, whereas science and technology are the driving force for economic diversification, sustainably urbanising the world, and ushering the hydrogen economy and new crop varieties as the answer to both human well-being and global climate change.
    • Redefining digital access as universal service: Harnessing the potential of the digital-information-technology revolution requires redefining digital access as a “universal service” that goes beyond physical connectivity to sharing specific opportunities available.

    Conclusion

    • India’s presidency must leave the grouping with the agility and energy to respond to new realities, and it must create a future-ready multilateralism through a novel and robust institutional architecture.

    Mains question

    Q. It is said that “those who hold the pen, write the rules”. The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance. Discuss in the context of India’s presidency of G20 summit with challenges and opportunities ahead.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Black Money – Domestic and International Efforts

    Decoding the Crypto Route for Money Laundering

    | Economics | Mains Paper 3: Money-Laundering & Its Prevention

    Money laundering is one of the key charges made by the Enforcement Directorate (ED) against crypto exchange WazirX.

    Also a leader in Maharashtra has made ridiculous claim after ED inquiry that he has made Rs.15 Lakh by investing only Rs.5000 in crypto.

    Are Blockchains traceable?

    • Transactions on a blockchain are always traceable.
    • Most courts and law enforcement bodies around the world have recognized their immutable nature and accept blockchain records as legal proof of transaction histories.
    • However, crypto transactions can sometimes happen “off-chain”, or other methods can be used to obfuscate the flow of funds.
    • Moreover, blockchains are like conveyor belts, which facilitate the flow of crypto from one wallet to another.
    • The identity of the person who holds that wallet has to be ascertained by the wallet service provider and this is often not done to protect user privacy.

    How do they hide transaction trails?

    • One of the most common methods used by hackers and criminals, is called mixing or tumbler.
    • As each crypto token is traceable, tumblers break down multiple tokens from different blockchains and mix them.
    • They then transfer the original amount to the owner, but through multiple transactions and from multiple wallets, obfuscating the trail.
    • Illicit users also transfer traceable tokens to privacy-centric blockchains such as Monero, which hide wallet addresses and particulars.
    • There are also over-the-counter brokers who accept payments in any form, including cash, and transfer the equivalent amount in crypto to a user’s wallet.

    What has ED accused Binance and WazirX of?

    • Among other things, the ED claims that WazirX’s holding company is offering “contradictory and ambiguous answers” about crypto-to-crypto transactions made on WazirX.
    • The ED said WazirX had failed to provide data and show transactions on its blockchain for purchases made by numerous under-investigation fintech firms.

    How do off-chain transactions work?

    • When users withdraw crypto from an exchange, they enter a wallet address and the tokens are transferred, with a record being maintained on the blockchain.
    • However, they also have to pay a gas fee, which is used to pay miners on the blockchain.
    • To avoid this fee, two platforms can integrate with each other and allow users to transfer crypto without using the blockchain.
    • Such transactions can raise questions regarding the tracing of money, as the records aren’t maintained on the blockchain.

    How can exchanges prevent laundering?

    • Exchanges could adopt a resolution on KYC data and maintain transaction logs for eight to 10 years on a blockchain, said industry stakeholders.
    • The use of KYC-compliant wallets could help add a layer of traceability.
    • However, KYC norms for wallets held on platforms outside India can differ from those in India.
    • Some blockchain research firms are also working on machine learning-based tools that can flag illicit accounts.

    Back2Basics: Cryptocurrency

    • Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions.
    • It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments.
    • Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions.
    • When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
    • The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today.
    • Much of the interest in cryptocurrencies is to trade for profit, with speculators at times driving prices skyward.

    How does cryptocurrency work?

    • Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
    • Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.
    • Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
    • If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
    • Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future.
    • Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.

     

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Foreign Policy Watch: India-Sri Lanka

    India-Srilanka Relations

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India,India & Its Neighborhood – Relations

     

    Context

    The present economic crisis in Sri Lanka has pushed it closer to India for immediate relief.

    Reasons for the Crisis

    The first wave of the pandemic in 2020 offered early and sure signs of distress.

    • In-migration: Thousands of Sri Lankan laborers in West Asian countries were left stranded and returned jobless.
    • Shut-down: Garment factories and tea estates could not function, as infections raged in clusters. Tourism sector to saw a big dip.
    • Domestic job losses: Thousands of youth lost their jobs in cities as establishments abruptly sacked them or shut down.
    • Forex decline: It meant that all key foreign exchange earning sectors, such as exports and remittances, along with tourism, were brutally hit.

    Reasons behind crisis

    • The Easter bomb blasts of April 2019 in churches in Colombo resulting in 253 casualties,consequently, dropped the number of tourists sharply leading to a decline in foreign exchange reserves.
    • The newly led government by Gotabaya Rajapaksa in 2019 promised lower tax rates and wide-ranging SoPs for farmers during their campaign.
    • No strategy: The lack of a comprehensive strategy to respond to the crisis then was coupled with certain policy decisions last year.
    • Ill-advised policies: It included the government’s abrupt switch to organic farming —widely deemed “ill-advised”, further aggravated the problem.
    • Food hoarding: The government declared emergency regulations for the distribution of essential food items. It put wide import restrictions to save dollars which in turn led to consequent market irregularities and reported hoarding.
    • Continuous borrowing: Fears of a sovereign default rose by the end of 2021, with the country’s foreign reserves plummeting to $1.6 billion, and deadlines for repaying external loans looming.

    Brief background of India-SL relations

    • India is the only neighbor of Sri Lanka, separated by the Palk Strait; both nations occupy a strategic position in South Asia and have sought to build a common security umbrella in the Indian Ocean.
    • There are deep racial and cultural links between the two countries. Both share a maritime border.
    • The India- SL relations have been however tested by the Sri Lankan Civil War and by the controversy of Indian intervention during the war.
    • In recent years Sri Lanka has moved closer to China, especially in terms of naval agreements.
    • India has signed a nuclear energy deal to improve relations and made a nuclear energy pact with Sri Lanka in 2015.

    India’s role in the Lankan Civil War

    • In the 1970s–1980s, the RAW and the state government of Tamil Nadu were believed to be encouraging the funding and training for the Liberation Tigers of Tamil Eelam (LTTE), a separatist insurgent force.
    • In 1987, faced with growing anger amongst its own Tamils, and a flood of refugees India intervened directly in the conflict for the first time.
    • This was after the Sri Lankan government attempted to regain control of the northern Jaffna region by means of an economic blockade and military assaults; India supplied food and medicine by air and sea.

    Why did India intervene?

    • Indian intervention in Sri Lankan civil war became inevitable as that civil war threatened India’s unity, national interest and territorial integrity.

    Outcomes

    • The peace accord assigned a certain degree of regional autonomy in the Tamil areas with a body controlling the regional council and called for the Tamil militant groups to lay down their arms.
    • Further India was to send a peacekeeping force, named the IPKF to Sri Lanka to enforce the disarmament and to watch over the regional council.
    • The accord failed over the issue of representations. The result was that the LTTE now found itself engaged in military conflict with the Indian Army.

    Areas of cooperation

    (1) Political Relations

    • Regular Exchange: Political relations between the two countries have been marked by high-level exchanges of visits at regular intervals.
    • Bilateral Cooperation: A joint statement covering all areas of bilateral cooperation, titled ‘MitratvaMaga’ was issued following the Virtual Summit of 2020.

    (2) Commercial Relations

    • ISFTA: The India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade in areas such as infrastructure, connectivity, transportation, housing, health, livelihood and rehabilitation, education, and industrial development.
    • Trading Partner: India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC.
      • In 2020, India was Sri Lanka’s 2nd largest trading partner with the bilateral merchandise trade amounting to about USD $ 3.6 billion.
    • India and Sri Lanka are member nations of several regional and multilateral organizations such as the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Unionand BIMSTEC.
    • India is Sri Lanka’s third-largest export destination, after the US and UK.
    • Exports: Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force.
    • FDI: India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to BoI, FDI from India amounted to about US$ 1.7 billion during the period 2005 to 2019.

    (3) Development Cooperation

    • Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion.
      • Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
    • The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
    • Emergency Ambulance Service: The Service which was initially launched in July 2016 is now expanded to all the Provinces.
      • At a total cost of more than USD 22.5 million, close to 300 ambulances were provided by GOI under this project.
    • Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
    • Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.

    (4) Projects under Lines of Credit

    • Sectors: 11 Lines of credit (LOC) have been extended to Sri Lanka by the Export Import Bank of India in the last 15 years.
      • Important sectors under these LOCs include: Railway, transport, connectivity, defense, solar.
    • Infrastructure: Some important Projects completed are- supply of defense equipments; up-gradation of the railway line from Colombo to Matara; track laying by IRCON on Omanthai-Pallai sector; reconstruction of the Railway line; signaling and telecommunication system; supply of engine kits for buses, diesel locomotives railways, DMUs, Carrier and fuel tank wagons etc.
    • Rehabilitation: A project for the rehabilitation of the Kankesanthurai harbor is being executed under a LOC of USD 45.27 million, bringing immense economic benefits to the Northern region of Sri Lanka.
    • Solar Energy: A US$ 100 million LoC for undertaking solar projects in Sri Lanka has been signed for rooftop solar units for Government buildings, rooftop solar units for low-income families and a floating solar power plant.
    • Security: In 2019, a LOC of USD 400 million for development and infrastructure projects and USD 50 million for security and counter-terrorism were announced.
      • These LOC Agreements are currently under discussion.

    (5) Cultural relations

    • India and Sri Lanka have a shared legacy of historical, cultural, religious, spiritual and linguistic ties that is more than 2,500 years old.
    • In contemporary times, the Cultural Cooperation Agreement signed by the Government of India and the Government forms the basis for periodic Cultural Exchange Programmes between the two countries.

    (6) People-to-people ties: Buddhism

    • Buddhism is one of the strongest pillars connecting the two nations and civilizations from the time when Emperor Ashoka sent his children Arhat Mahinda and Sangamitta to spread the teachings of Lord Buddha at the request of King Devanampiya Tissa of Sri Lanka.
    • Underlining the deep people-to-people connect and shared Buddhist heritage, the venerated relics of Lord Buddha from Kapilawasthu discovered in 1970 in India have been exhibited two times in Sri Lanka.
    • India in 2020, announced USD 15 million grant assistance for the protection and promotion of Buddhist ties between India and Sri Lanka.
      • It may be utilized for the construction/renovation of Buddhist monasteries, education of young monks, strengthening engagement of Buddhist scholars and clergy, development of Buddhist heritage museums, etc.
    • Transport- In July 2020, the GoI declared the Kushinagar Airport in India, the place of Lord Buddha’s Mahaparinibbana, as an international airport, to allow Buddhist pilgrims from around the world to visit the revered site associated with Lord Buddha with ease.
    • The Swami Vivekananda Cultural Centre (SVCC)– since its inception in 1998, is actively promoting awareness of Indian culture by offering classes in Bharatnatyam, Kathak, Hindustani and Carnatic vocal, Violin, Sitar, Tabla, Hindi and Yoga.

    (7) Tourism

    • e-Visa- Tourism also forms an important link between India and Sri Lanka. GoI formally launched the e-Tourist Visa (eTV) scheme for Sri Lankan tourists on 14 April 2015.
    • Visa Fee- Subsequently, in a goodwill gesture, the visa fee for eTV was sharply reduced. In 2019, out of the total 1.91 million tourists, 355,000 tourists arrived from India.
    • Sri Lankan tourists too are among the top ten sources for the Indian tourism market.
    • Visa on arrival- On 24 July 2019 Sri Lanka included India in the free visa on arrival scheme and commenced the scheme on 1 August 2019.

    Plummeting relations

    • The ties began to worsen between the two since February, 2021 when Sri Lanka backed out from a tripartite partnership with India and Japan for its East Container Terminal Project at the Colombo Port, citing domestic issues.
      • However, later, the West Coast Terminal was offered under a public private partnership arrangement to Adani Ports and Special Economic Zones Ltd.
    • Sri Lanka in a state of economic emergency: Sri Lanka is running out of foreign exchange reserves for essential imports like food. It has recently declared a state of economic emergency.
    • Covid Impact:
      • Sri Lanka increased policy rates after the covid pandemic in response to rising inflation in August 2021 caused by currency depreciation.
      • Tourism sector has suffered since the Easter Sunday terror attacks of 2019, followed by the pandemic.
      • Earnings fell from $3.6 billion in 2019 to $0.7 billion in 2020, even as FDI inflows halved from $1.2 billion to $670 million over the same period.
      • Sri Lanka’s fragile liquidity situation has put it at high risk of debt distress. Its public debt-to-GDP ratio was at 109.7% in 2020, and its gross financing needs remain high at 18% of GDP.
      • Its gross official reserves slipped to $2.8 billion, which is equivalent to just 1.8 months of imports. More than $2.7 billion of foreign currency debt will be due in the next two years.

    Major outstanding issues

    1. Fishing disputes
    • There have been several alleged incidents of Sri Lankan Navy personnel firing on Indian fishermen fishing in the Palk Strait, where India and Sri Lanka are only separated by 12 nautical miles.
    • The issue started because of Indian fishermen having used mechanized trawlers, which deprived the Sri Lankan fishermen (including Tamils) of their catch and damaged their fishing boats.
    • The Sri Lankan government wants India to ban use of mechanized trawlers in the Palk Strait region, and negotiations on this subject are undergoing.
    • So far, no concrete agreement has been reached since India favors regulating these trawlers instead of banning them altogether.
    2.Alleged political interference
    • A media report from Colombo soon after Rajapaksa’s defeat in the January 8 elections of 2015 had said that an Indian Intelligence official was instrumental in uniting rival political parties — the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP) — against him during the polls.
    • In October 2018, President Sirisena alleged that Indian intelligence agencies were plotting his assassination.
    3.Katchatheevu Island
    • It is an uninhabited island that India ceded to Sri Lanka in 1974 based on a conditional agreement called “Kachchativu island pact”.
    • Later on, Sri Lanka declared Katchatheevu, a sacred land given the presence of a Catholic shrine.
    • But Tamil Nadu claimed that Katchatheevu falls under the Indian Territory and Tamil fishermen have traditionally believed that it belongs to them and therefore want to preserve the right to fish there.
    4.China factor
    • Sri Lanka has a history of taking independent decisions even if they cause misgivings in India.
    • In the period of low profile relationship between the two nations, Sri Lanka apparently started favoring China over India.
    • China is Sri Lanka’s largest bilateral creditor: China’s loans to the Sri Lankan public sector amounted to 15% of the central government’s external debt, making China the largest bilateral creditor to the country.
      • Sri Lanka has increasingly relied on Chinese credit to address its foreign debt burden.
    • China’s Exports surpasses India: China’s exports to Sri Lanka surpassed those of India in 2020 and stood at $3.8 billion.
      • India’s exports were $3.2 billion.
    • Infrastructural Investment by China: Owing to Sri Lanka’s strategic location at the intersection of major shipping routes, China’s investment stands at $12 billion between 2006 and 2019.
      • Unable to service its debt, in 2017, Sri Lanka lost the unviable Hambantota port to China for a 99-year lease.
      • Sri Lanka passed the Colombo Port City Economic Commission Act, which provides for establishing a special economic zone around the port and also a new economic commission, to be funded by China.
      • The Colombo port is crucial for India as it handles 60% of India’s trans-shipment cargo.

    Why is Sri Lanka important to India?

    • India is Sri Lanka’s closest neighbor. Both sides have built upon a legacy of intellectual, cultural, religious and linguistic interaction.
    • Sri Lanka has always been politically and economically important to India given its strategic geographical position in the Indian Ocean. The relationship has been marked by close contacts at all levels.
    • Sri Lanka sits at the epicenter of the arc connecting the Persian Gulf to the Strait of Malacca. An island nation with an economy that’s mainly reliant on tourism and tea exports, Sri Lanka’s blessed geography puts it at a crucial juncture of the busy shipping lanes of the Indian Ocean.
    • India also has a vital strategic stake in Sri Lanka for its own security interests. An unfriendly Sri Lanka or a Sri Lanka under influence of a power unfriendly to India would strategically discomfit India.
    • For the Indian Navy, Sri Lanka is important as the switching of naval fleets from the Bay of Bengal to the Arabian Sea and vice versa requires the fleets to go around the island nation.
    • Both countries share a common broad understanding on major issues of international interest and experience common social-political problems relating to community divides.

    How India has helped to boost Sri Lanka’s economy

    • Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion. Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
    • The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
    • Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
    • Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.

    sri lanka

    Impact of recent Economic crisis on India

    • Export:
      • Sri Lanka’s share in India’s total exports has declined from 2.16 percent in FY15 to just 1.3 percent in the first 10 months of FY22.
    • Shipping:
      • If the current situation in the island nation persists, it could cause a major disruption to the normal functioning of the Colombo Port.
      • This would be detrimental to India’s interest.
      • The port handles over 30 percent of India’s container traffic and 60 percent of its trans-shipment.
    • Investments:
      • India has had a substantial investment in Sri Lanka in areas including real estate, manufacturing, and petroleum refining. They all might be adversely affected if the crisis continued.
    • Migration:
      • Also, the continuing Sri Lankan crisis could compel many Sri Lankans to leave for India for their survival.
      • Already, scores of them have fled from the island nation to India.

    Opportunities for India for deeper engagement

    • Dairy sector: Sri Lanka imports a considerable quantity of milk powder. On average, Colombo annually imports dairy products worth $315 million. . India can help Sri Lanka develop its dairy sector.
    • Poultry sector: In this area, through its host of agricultural universities, India can share its knowledge on ways to increase both production and productivity.
    • Energy sector: Considering how the problem on the energy front exploded into a major political crisis in Sri Lanka, India’s participation in energy projects will be desirable.
    • Education sector: School education is another area where India’s presence could be more felt. India can expand its scheme of establishing smart classrooms and modern computer labs to cover all those institutions teaching children of hill country Tamils, the most underprivileged section in society.

    sri lanka

    Challenges

    • Possibility of greater economic collaboration: Whether this bonhomie can lead to greater economic collaboration between Sri Lanka and south India, not necessarily Tamil Nadu alone, given the historical baggage, is anybody’s guess.
    • Baggage of history: Some sections of the Sinhalese still hold the view that India had been a threat to them and it can still be a threat to them.
    • Modest investment in development: Despite India’s open willingness to take part in the development of Sri Lanka after the civil war, the scale of its involvement has been modest.
    • Incomplete projects due to lack of political will: After the cancellation of the tripartite agreement, India was later provided with projects such as the West Container Terminal, the Trincomalee oil tank farm and a couple of renewable projects, there were several proposals that envisaged India’s participation but did not see the light of day.

    Way forward

    • Infrastructure development: Even now, there is enormous scope for collaboration between the two countries in the area of infrastructure development.
    • Cross-border energy trade: The economic crisis has revived talk of linking Sri Lanka’s electricity grid with that of India.
    • Facilitating people-to-people interaction: The apprehension in the minds of sections of the Sinhalese majority about India being a threat can be dispelled only by facilitating greater people-to-people interaction, including pilgrimages by monks and other sections of  society to places of Buddhist importance not only in north India but also in the south (Andhra Pradesh).
    • No china factor indeed: Labeling governments in Sri Lanka as “pro-China” or “pro-India” is irrelevant. It is evident that China’s economic and strategic salience in the subcontinent is not tied to the regime leadership. Previous Lankan President Maithripala Sirisena who considered as pro-India came to power criticizing the Chinese projects in Sri Lanka, but within two years into power, it extended full backing to the Chinese projects.

    Conclusion

    • Given the history of bilateral ties, instances such as the Hambantota controversy are bound to arise. But what should not be glossed over is that a politically and economically stable Sri Lanka will be in India’s interest too.

    Mains question 

    Q. There is no such thing as charity in international politics. Critically analyse this statement showing how India can reap benefits of economic cooperation with Sri Lanka.

     

     

    Get an IAS/IPS ranker as your 1: 1 personal mentor

Join the Community

Join us across Social Media platforms.