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  • Cryptocurrency

    Context

    Vitalik Buterin, co-creator of the crypto network Ethereum, has made a 1 billion dollar cryptocurrency donation for India’s relief funds as the country battles the latest deadly COVID-19 wave.

    Definition

    The 2019 Bill defined cryptocurrency as any information, code, number or token, generated through cryptographic means or otherwise, which has a digital representation of value and has utility in business activity, or acts as a store of value or a unit of account. According to professionals a system must need these six points to be called a cryptocurrency system:

    • The system does not require a central authority; its state is maintained through distributed consensus.
    • The system keeps an overview of cryptocurrency units and their ownership.
    • The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
    • Ownership of cryptocurrency units can be proved exclusively cryptographically.
    • The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
    • If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.

    History/Background

    • In 1983, the American cryptographer David Chaum conceived an anonymous cryptographic electronic money called ecash. Later, in 1995, he implemented it through Digicash, an early form of cryptographic electronic payments which required user software in order to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient.
    • In 1998, Wei Dai published a description of “b-money”, characterized as an anonymous, distributed electronic cash system.
    • Shortly thereafter, Nick Szabo described bit gold. Like bitcoin and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange, BitGold) was described as an electronic currency system which required users to complete a proof of work function with solutions being cryptographically put together and published.
    • In 2009, the first decentralized cryptocurrency, bitcoin, was created by presumably pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, in its proof-of-work
    • In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult.
    • In October 2011, Litecoinwas released. It used scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin used a proof-of-work/proof-of-stake
    • On 6 August 2014, the UK announced its Treasuryhad been commissioned a study of cryptocurrencies, and what role, if any, they could play in the UK economy. The study was also to report on whether regulation should be considered.

    Types of cryptocurrency

    • The most common and valued cryptocurrency is Bitcoin.
    • All the other cryptocurrencies other than Bitcoin are together as a set are known as alternate coins or commonly called “Altcoins”. Most famous alt coins are:-
    • Litecoin
    • Cardano
    • Polkadot
    • Stellar(XLM)
    • Binance Coin
    • By the end of March 2021 the total share of altcoins in the cryptocurrency market was estimated to be at 40% of the total market value.

    How it works?

    • Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.

    What is Blockchain Technology?

    • Simply, blockchain is decentralized, distributed and public digital ledger.  Blockchains is a new type of network infrastructure (a way to organize how information and value move around on the internet) that create ‘trust’ in networks by introducing distributed verifiability, auditability, and consensus.
    • Blockchains create trust by acting as a shared database, distributed across vast peer-to-peer networks that have no single point of failure and no single source of truth, implying that no individual entity can own a blockchain network, and no single entity can modify the data stored on it unilaterally without the consensus of its peers.
    • New data can be added to a blockchain only through agreement between the various nodes of the network, a mechanism known as distributed consensus. Each node of the network keeps its own copy of blockchain’s data and keeps the other nodes honest – if one node changes its local copy, the other nodes can reject it.
    • Imagine a blockchain as a ledger—because that’s essentially how most blockchains function. Each block of data represents some new transaction on the ledger, whether that means a contract or a sale or whatever else you’d use a ledger for.
    • Interestingly, blockchains leverage techniques from a field of mathematics and computer science, known as cryptography, to sign every transaction (e.g. the transfer of assets from one person to another) with a unique digital signature belonging to the user who initiated the transaction.

    Advantages

    • Low transaction Fee: Because miners are simply rewarded cryptocurrency from network itself, there are typically little or no fees for core transactions.
    • Ownership: With your digital key, access to your currency is yours alone. Unlike money you store at a bank, your use of cryptocurrency cannot be frozen or limited by any entity.
    • Identity Protection: Paying with credit/debit cards requires submitting sensitive banking information that could be stolen or compromised. Cryptocurrency can be sent directly to a recipient without any information other than total amount you want to send.
    • Risk-free for sellers: Payments using Cryptocurrency can’t be reversed, which means merchants don’t have to worry about stopped payments. The blockchain makes it difficult for you to be defrauded.

    Disadvantages

    • Privacy Concerns: The privacy of users’ data is at stake. There is concern regarding privacy of users data in using cryptocurrencies as all the transaction information is stored in distributed ledger (called blockchain), which is publicly visible. Thus Hacker can easily observe how the money flows.
    • High Volatility: The price of Bitcoin suddenly rose to almost $20,000 and then dropped to $6,000. Due to such incidents, it is complicated for the investors to trust the ecosystem.
    • Destination for black money: The fear among regulators and policymakers is that cryptocurrencies, being an alternative source of value to fiat currency, could be misused to launder black money or finance terrorist activities.
    • Cybersecurity Concerns: Cryptocurrencies are prone to cybersecurity breaches and hacks. Various attacks are common, even companies and governments are not full proof to them. For example, the Swiss blockchain company, Trade.io, has reported that crypto tokens worth almost $8 million have been stolen from their cold wallet.
    • Dark activities: The possibility that the new money will nurture illicit activities and markets like drug selling, weapons etc. through Darknet is always high using cryptocurrency anonymously. It also increases the risk of its use in various terrorist activities across the border.
    • Monetary control and economic behavior: It could dramatically change global monetary policymaking. People will exchange their national currencies for the new digital coin in order to buy and sell the many products that will be priced in it. This will further impact the profit of banks and will put stress on their balance sheet.
    • Inflation: Governments and policymakers will have reduced ability to control inflation. Usually, when inflation picks up, central banks take steps to control it through various monetary rates. Cryptocurrency will be out of control of the central bank so liquidity control will be an issue.

    Cryptocurrency and India

    • The country, at present, has around 75 lakh cryptocurrency investors who have together pooled over Rs 10,000 crore into Bitcoins and other such digital currencies.
    • The prices have surged by over 900%, courtesy of the worldwide boom – a single bitcoin that used to cost around Rs 4 lakh in 2020 now costs somewhere around Rs 41 lakh now.
    • FM Nirmala Sitharaman has said that the Centre will take a “calibrated approach” and leave a window open for experiments with blockchain technology.

    Legitimacy of Cryptocurrency in India

    • Finance minister Arun Jaitley, in his budget speech on 1 February 2018, stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India for criminal uses.
    • He reiterated that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems. “The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system,” Jaitley said
    • In early 2018 India’s central bank, the Reserve Bank of India(RBI) announced a ban on the sale or purchase of cryptocurrency for entities regulated by RBI
    • In March 2020, the Supreme Court of India passed the verdict, revoking the RBI ban on cryptocurrency trade.
    • In 2021, the government is exploring the creation of a state-backed digital currency issued by the Reserve Bank of India, while banning private ones like bitcoin.

    Cryptocurrency Bill India 2019

    • Cryptocurrency cannot be used as a legal tender or currency at any place in India.
    • The bill prohibits everyone to mine, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency in the territory of India.
    • The central government is allowed to declare Digital Rupee to be the legal tender with the consent of Reserve Bank of India.
    • The use of Distributed Ledger Technology (DLT) for creating a network for delivery of any financial or other services or for creating value , without involving any use of cryptocurrency is not prohibited.
    • Direct or indirect use of cryptocurrency shall be punishable with fine or imprisonment of 1 year which may be extended o 10 years or both.
    • The court is empowered to transfer any fees recovered to the consolidated fund of India.
    • The central government on the recommendation of the investigating agency without being bound to it is empowered to grant immunity for any offense under this act.
    • The bill also provides that no such immunity can be granted by the central government in cases where the proceedings for any such offence have been instituted before the date of receipt of application for grant of such immunity.
    • The Bill promises to “allow for certain exceptions to promote the underlying technology of cryptocurrency (blockchain) and its uses.”
    • The way the technology is built, an ownerless, consensus-driven, distributed ledger like a blockchain needs cryptocurrency to grease its wheels.

    International Scenario

    United states of America

    • The U.S. has the highest number of cryptocurrency users, the highest number of Bitcoin ATMs and also the highest Bitcoin trading volumes globally.
    • The US government, in 2013, accepted bitcoin as a decentralized virtual currency that can be used for performing transactions. It was classified as a commodity by CFTC in September 2015.
    • Bitcoin is also taxable as a property. To sum up, bitcoin is legal in the USA, however, there is no clarification about the legalization of other cryptocurrencies.

    Japan

    • Japan has eliminated the consumption tax on Bitcoin trading on April 1, 2017, when it officially declared Bitcoin as a legal tender. Japan also eliminated the possibility of double taxation on trading of Bitcoins.
    • Japan is now widely considered a hub for cryptocurrency trading/exchange in Asia.

    Canada

    • Bitcoin is viewed as a commodity by the Canada Revenue Agency (CRA).  This means that Bitcoin transactions are viewed as barter transactions, and the income generated is considered as business income. The taxation also depends on whether the individual has a buying-selling business or is only concerned with investing.
    • Canada considers Bitcoin exchanges to be money service businesses. This brings them under the purview of the anti-money laundering (AML) Bitcoin exchanges need to register with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
    • In addition, some major Canadian banks have banned the use of their credit or debit cards for Bitcoin transactions.

    European Union

    • On Oct. 22, 2015, the European Court of Justice (ECJ) ruled that buying and selling digital currencies is considered a supply of services, and that this is exempt from value-added tax (VAT)in all European Union (EU) member states.
    • Some individual EU countries have also developed their own Bitcoin stances.
    • In Finland, the Central Board of Taxes (CBT) has given Bitcoin a VAT exempt status by classifying it as a financial service. Bitcoin is treated as a commodity in Finland and not as a currency.
    • The National Revenue Agency (NRA) of Bulgaria has also brought Bitcoin under its existing tax laws.
    • Germany is open to Bitcoin; it is considered legal but taxed differently depending upon whether the authorities are dealing with exchanges, miners, enterprises, or users.

    China

    • Bitcoin is essentially banned in China. All banks and other financial institutions like payment processors are prohibited from transacting or dealing in Bitcoin. Cryptocurrency exchanges are banned.
    • The government has cracked down on miners.

    Way Forward

    • A worldwide regulatory authority must be established to control the volatility, security and inflation of the cryptocurrency market.
    • While the number of merchants who accept cryptocurrencies has steadily increased, they are still very much in the minority. For cryptocurrencies to become more widely used, they have to first gain widespread acceptance among consumers.
    • The more popular they become, the more regulation and government scrutiny they will likely to attract, which erodes the fundamental premise for their existence. And therefore the central authority must be made so in keeping mind that the fundamental of the cryptocurrency existence must not be mended.
    • For cryptocurrencies to become part of the mainstream financial system must :
      • Be made mathematically complex (for frauds and hackers) but graphically easy for the users to make them understand better.
      • Be Decentralized but with adequate consumer safeguards and protection.
      • Preserve user anonymity without being a conduit for tax evasion, money laundering and other nefarious activities.

  • Important Schemes Regarding MSME Sectors

     
    19th May 2021

    About MSMEs

    Revised Classification applicable w.e.f 1 July 2020
    Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover
    Classify Micro Small Medium
    Manufacturing Enterprises and Enterprises rendering Services Investment in Plant and Machinery or Equipment:
    Not more than INR 1 cr and Annual Turnover; not more than INR 5 cr    		 Investment in Plant and Machinery or Equipment:
    Not more than INR 10 cr and Annual Turnover; not more than INR 50 cr    		 Investment in Plant and Machinery or Equipment:
    Not more than INR 50 cr and Annual Turnover; not more than INR 250 cr

    Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE)

    What is CGTMSE?

    • CGTMSE is a fund which provides a guarantee for loans given to MSEs i.e. in case borrowers fails to give back loans, the bank will get their money from this fund.
    • It is a Central Government program to promote MSMEs.
    • Government has increased corpus of fund from Rs 2500 crore to Rs 7500 crore
    • Now loans given by NBFCs can also be covered under this fund

    Udyami Mitra’ portal

    • Small Industries Development Bank of India (SIDBI) has revamped its Udyami Mitra with enhanced features.
    • The portal was launched to improve the accessibility of credit for the MSMEs.
    • It helps MSMEs for submission of loan applications which can be picked up by multiple lenders.
    • It aims at bringing in transparency in the processing of loans by the banks.
    • Now non-banking finance companies and small finance banks are being on-boarded on the platform for enhancing the flow of credit to MSMEs.
    • Under the new capitalisation plan, banks will have to compete for loans through the revamped udyamimitra portal.

    A Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE)

    • ASPIRE has been launched on 16.03.2015 with an objective to set up a network of technology centres, incubation centres to accelerate entrepreneurship and also to promote start-ups for innovation and entrepreneurship in the rural and agriculture-based industry with a fund of Rs.210 crores.
    • The planned outcomes of ASPIRE are setting up Technology Business Incubators (TBI), Livelihood Business Incubators (LBI) and creation of a Fund of Funds for such initiatives with SIDBI.

    Prime Ministers Employment Generation Programme, PMEGP

    • Khadi and Village Industries Commission (KVIC) is a nodal implementation agency at the national level.
      At State and district level, State offices of KVIC, Khadi and Village Industries Boards (KVIBs) and District Industry Centres (DIC) are the implementing agencies.

    Objectives

    • To generate continuous and sustainable employment opportunities in Rural and Urban areas of the country
    • To provide continuous and sustainable employment to a large segment of traditional and prospective artisans, rural and urban unemployed youth in the country through setting up of micro-enterprises.
    • To facilitate the participation of financial institutions for higher credit flow to the micro sector.

    Eligibility

    • Individuals above 18 years of age
    • VIII Std. pass required for the project above Rs.10.00 lakhs in manufacturing and above Rs. 5.00 lakhs for Service Sector
    • Self Help Groups and Charitable Trusts
    • Institutions registered under Societies Registration Act- 1860
    • Production-based Co-operative Societies

    Salient features of the scheme

    • The Scheme is implemented through KVIC and State/UT Khadi & V.I. Boards in Rural areas and through District Industries Centres in Urban and Rural areas in ratio of 30:30:40 between KVIC / KVIB / DIC respectively.
    • No income ceiling for setting up projects.
    • Assistance under the Scheme is available only to new units to be established.
    • Existing units or units already availed any Govt. Subsidy either under State/Central Govt. Schemes are not eligible.
    • Any industry including Coir Based projects excluding those mentioned in the negative list.
    • Per capita investment should not exceed Rs. 1.00 lakhs in plain areas and Rs. 1.50 lakhs in Hilly areas.
    • The maximum project cost of Rs. 25.00 lakhs in the manufacturing sector and Rs. 10.00 lakhs in Service Sector.
    Credit Linked Capital Subsidy Scheme (CLCSS) -CLCSS aims at facilitating technology up-gradation of Micro and Small Enterprises (MSEs) by providing 15% capital subsidy (limited to maximum Rs.15 lakhs) for purchase of Plant & Machinery.

     

    -Maximum limit of eligible loan for calculation of subsidy under the scheme is Rs.100 lakhs. Presently, more than 1500 well established/improved technologies under 51 sub-sectors have been approved under the Scheme.

    UDYAM SAKHI

    It is a network for nurturing social entrepreneurship creating business models revolving around low-cost products and services to resolve social inequities.

    Mission

    • Udyam Sakhi seeks to encourage women entrepreneurs and to aid, counsel, assist and protect their interests. It also preserves free competitive enterprise and to maintain and strengthen the overall economy of our nation.
    • The Udyam Sakhi helps Indian women to start, build and grow businesses. It recognises that women entrepreneur in the industry is critical to economic recovery and strength, in building the nation’s future, and to helping India compete in today’s global marketplace.
    Samadhan Portal The portal aims at empowering micro and small entrepreneurs across country to directly register their cases relating to delayed payments by Central Ministries, Departments, CPSEs, State Governments. The Samadhaan portal will give information about pending payment of MSEs with individual CPSEs/Central Ministries, State Governments, etc.

     

    The CEO of PSEs and Secretary of Ministries concerned will also be able to monitor cases of delayed payment under their jurisdiction and issue necessary instructions to resolve the issues.

    The portal will facilitate monitoring of delayed payment in more effective manner. The information on portal will be available in public domain, thus exerting moral pressure on defaulting organisations. The MSEs will also be empowered to access portal and monitor their cases.

    Zero Defect, Zero Effect

    • ZED Scheme aims to rate and handhold all MSMEs to deliver top quality products using clean technology.
    • It will have sector-specific parameters for each industry.
    • ZED Scheme is meant to raise quality levels in unregulated MSME sector which is an engine of growth for the Indian economy.
    • The scheme will be the cornerstone of the Central Government’s flagship Make in India programme, which is aimed at turning India into a global manufacturing hub, generating jobs, boosting growth and increase incomes.

    National Schedule Caste and Schedule Tribes (SC/ST) Hub

    • Ministry of  Micro, Small and Medium Enterprises (MSME) is implementing a scheme of  National Schedule Caste and Schedule Tribes (SC/ST) Hub.
    • The Hub is set up to provide professional support to SC/ST entrepreneurs to fulfil the obligations under the Central Government Public Procurement Policy for Micro and Small Enterprises Order 2012, adopt applicable business practices and leverage the Stand-Up India initiatives.
    • The functions of Hub include collection, collation and dissemination of information regarding SC/ST enterprises and entrepreneurs, capacity building among existing and prospective SC/ST entrepreneurs through skill training and EDPs, vendor development etc.
    • Four special subsidy schemes/programmes have been approved under National SC/ST Hub namely
      • Single Point Registration Scheme
      • Special Marketing Assistance Scheme (SMAS)
      • Performance & Credit Rating Scheme and
      • Special Credit Linked Capital Subsidy Scheme.

    SFURTI

    • As per the revised guidelines, the following schemes are being merged into SFURTI:
    1. The Scheme for Enhancing Productivity and Competitiveness of Khadi Industry and Artisans
    2. The Scheme for Product Development, Design Intervention and Packaging (PRODIP)
    3. The Scheme for Rural Industries Service Center (RISC) and
    4. Other small interventions like Ready Warp Units, Ready to Wear Mission, etc.

    Objectives of Scheme

    • To organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability and economy of scale;
    • To provide sustained employment for traditional industry artisans and rural entrepreneurs;
    • To enhance the marketability of products of such clusters by providing support for new products, design intervention and improved packaging and also the improvement of marketing infrastructure;
    • To equip traditional artisans of the associated clusters with the improved skills and capabilities through training and exposure visits;
    • To make provision for common facilities and improved tools and equipment for artisans to promote optimum utilization of infrastructure facilities;
    • To strengthen the cluster governance systems with the active participation of the stakeholders, so that they are able to gauge the emerging challenges and opportunities and respond to them in a coherent manner;
    • To build up innovated and traditional skills, improved technologies, advanced processes, market intelligence and new models of public-private partnership s, so as to gradually replicate similar models of cluster-based regenerated traditional industries
    • To look for setting up of multi-product cluster with an integrated value chain and a strong market-driven approach for viability and long term sustainability of the cluster;
    • To ensure convergence from the design stage with each activity of the cluster formation and operations thereof.
    • To develop specific product lines out of the currently offered diversified basket of heterogeneous products based on the understanding of the target consumer segment. A brand unification exercise also needs to be done to maximize the value.

    Trade-Related Entrepreneurship Development Assistance Scheme (TREAD) Women entrepreneurship programme

    • There is a provision of Govt of India Grant up to 30% of Loan/credit sanctioned subject to a maximum ceiling of 30 Lakhs to NGOs as appraised by Lending Institutes/Banks for undertaking capacity building activities such as Training, counselling, participation in exhibitions, the establishment of new SHGs etc and other components as approved by Bank/Steering Committee.
    • The non-farming activities taken up by women are Tailoring, Handicrafts, Embroidery, Toy making, Readymade garments, Candle making, Agarbatti making, paper cup and plate making, Masala powder making, Saree weaving, Coir mat making, Pickles making, Readymade garments, basketry and brooms making, Jute bag making etc.
    • The focus of the scheme is to promote self-employment and income generation activities for women mostly from SHG groups in the non-farm sector.

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  • India needs to engage with U.S. progressives

    The artcle highlights the role played by the progressive section in the US politics in influencing U.S. governments decision on TRIPS waiver and providing aid to India. Incidentally, these progressives include names such as Pramila Jayapal whose comment on human rights violations in Jammu and Kashmir had annoyed India.

    What led to change in U.S.’s approach on aid

    • There was a shift in the U.S.’s approach on providing COVID-19-related aid to India as well as on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) waiver on COVID-19 vaccines.
    • It is tempting to surmise the shift as being driven by the Comprehensive Global Strategic Partnership with New Delhi.
    • But it is more than just that.
    • The development was a result of the determined push by some sections of the political and business class, civil society, and Indian Americans.
    • Besides them, the progressives in the Democratic Party made a big difference.

    Role of the progressives

    • Days ahead of the May 5 decision of the Biden administration on the TRIPS waiver, 110 members of the U.S. Congress wrote to President Biden urging him to support the waiver.
    • Thus, the Biden administration’s decision on the waiver and the vaccines, characterised as courageous by many, was a result of the push by the progressives.
    • Joining in this effort, the co-chair of the Congressional India Caucus, and over 50 colleagues wrote last week to President Biden seeking supply of specific items.
    • The overall approach is to work with India in its battle against the second wave and prepare for subsequent ones.

    Conclusion

    It is evident that the progressives have a grip on policymaking. India will have to remain engaged with this section instead of offering a cold shoulder as it did in the recent past. As the adage goes, all politics is local.

  • Explained: India, Israel and Palestine Ties

    Recently India’s permanent representative to the UN made a carefully crafted statement at the UN Security Council “open debate” on the escalating Israel-Palestine violence.

    Must read:

    [Burning Issue] West Asia Peace Plan

    The story so far

    • The violence started on 6 May, when Palestinian protests began in Jerusalem over an anticipated decision of the Supreme Court of Israel on the eviction of six Palestinian families a neighbourhood of occupied East Jerusalem.
    • Israel’s operation “Guardian of the Walls” began with attacks on Hamas (a fundamentalist Palestinian group) tunnels close to the border fence with Israel.
    • India has adopted a balanced approach to the current Israeli-Palestine conflict that has pushed the volatile region into yet another cycle of violence.

    India’s long-standing position

    • India has since long been maintaining that the Israel-Palestine conflict should be resolved through negotiation resulting in sovereign, independent, viable and united State of Palestine, with East Jerusalem as its capital.
    • India has urged both countries to “engage with each other, including on the recent proposals put forward by the United States, and find an acceptable two-state solution for peaceful coexistence”.

    The dilemma

    • India seems to strive to maintain a balance between India’s historic ties with Palestine and its blossoming relations with Israel.
    • The request that both sides refrain from “attempts to unilaterally change the existing status quo including in East Jerusalem and its neighbourhoods” seems to be a message to Israel about its settler policy.
    • The statement was also emphatic that “the historic status quo at the holy places of Jerusalem including the Haraml al-Sharif/Temple Mount must be respected”.

    Ties with spikes

    • India’s policy on the longest-running conflict in the world has gone from being unequivocally pro-Palestine for the first four decades, to a tense balancing act with its three-decade-old friendly ties with Israel.
    • In recent years, India’s position has also been perceived as pro-Israel.

    From Nehru to Rao

    • The balancing began with India’s decision to normalize ties with Israel in 1992, which came against the backdrop of the break-up of the Soviet Union.
    • There were massive shifts in the geopolitics of West Asia on account of the first Gulf War in 1990.
    • That year, the Palestinian Liberation Organisation (PLO) lost much of its clout in the Arab world by siding with Iraq and Saddam Hussein in the occupation of Kuwait.
    • The opening of an Indian embassy in Tel Aviv in January 1992 marked an end to four decades of giving Israel the cold shoulder, as India’s recognition of Israel in 1950 had been minus full diplomatic ties.
    • PM Nehru’s reasoning for the decision to recognise Israel was that it was “an established fact”, and that not doing so would create bitterness between two UN members.

    Why did India then support Palestine?

    • In 1948, India was the only non-Arab-state among 13 countries that voted against the UN partition plan of Palestine in the General Assembly that led to the creation of Israel.
    • Scholars ascribe various reasons for this India’s own Partition along religious lines; as a new nation that had just thrown off its colonial yoke; solidarity with the Palestinian people who would be dispossessed; and to ward off Pakistan’s plan to isolate India over Kashmir.
    • Later, India’s energy dependence on the Arab countries also became a factor, as did the sentiments of India’s own Muslim citizens.

    India and Palestine

    • The relationship with Palestine was almost an article of faith in Indian foreign policy for over four decades.
    • At the 53rd UN session, India co-sponsored the draft resolution on the right of the Palestinians to self-determination.
    • In the 1967 and 1973 wars, India lashed out at Israel as the aggressor.
    • In the 1970s, India rallied behind the PLO and its leader as the sole and legitimate representative of the Palestinian people.
    • In 1975, India became the first non-Arab country to recognise the PLO as the sole representative of the Palestinian people and invited it to open an office in Delhi.
    • In 1988, when the PLO declared an independent state of Palestine with its capital in East Jerusalem, India granted recognition immediately.

    Continuity for the cause

    • India voted in favour of the UN General Assembly resolution in October 2003 against Israel’s construction of a separation wall.
    • It voted for Palestine to become a full member of UNESCO in 2011, and a year later, co-sponsored the UNGA resolution that enabled Palestine to become a “non-member” observer state at the UN without voting rights.
    • India also supported the installation of the Palestinian flag on the UN premises in September 2015.

    Changes after 2014

    • For two-and-a-half decades from 1992, the India-Israel relationship continued to grow, mostly through defence deals, and in sectors such as science and technology and agriculture.
    • But India never acknowledged the relationship fully.
    • There were few high-profile visits, and they all took place when the PM Vajpayee was in office.
    • Israel was perceived as an ideal of a “strong state” that deals “firmly” with “terrorists”.
    • It was during NDA-2 that the government under PM Modi decided to take full ownership of the relationship with Israel.

    Balancing act

    • Meanwhile, India continues to improve ties with Arab countries, especially Saudi Arabia and the UAE and feels vindicated by the decision of some Arab states to improve ties with Israel.
    • For instance, even as it abstained at UNESCO in December 2017, India voted in favour of a resolution in the UNGA opposing Trump’s recognition of Jerusalem as the Israeli capital.

  • Creating a new District

    Punjab CM has recently declared Malerkotla the 23rd district of the State.

    How are new districts carved?

    • The power to create new districts or alter or abolish existing districts rests with the State governments.
    • This can either be done through an executive order or by passing a law in the State Assembly.
    • Many States prefer the executive route by simply issuing a notification in the official gazette.

    How does it help?

    • States argue that smaller districts lead to better administration and governance.
    • For example, in 2016, the Assam government issued a notification to upgrade the Majuli sub-division to the Majuli district for “administrative expediency”.

    Are there are any exceptions?

    • The State government has been vested with unfettered powers under Section 5 of the Punjab Land Revenue Act, 1887 to create new districts.
    • This power is generally held temporarily in abeyance only during active census operations or during the delimitation exercise of Lok Sabha/Vidhan Sabha constituencies.

    Answer this PYQ in the comment box:

    Q. The Constitution (Seventy-Third Amendment) Act, 1992, which aims at promoting the Panchayati Raj Institutions in the country, provides for which of the following?

    1. Constitution of District Planning Committees.
    2. State Election Commissions to conduct all panchayat elections.
    3. Establishment of State Finance Commissions.

    Select the correct answer using the codes given below:

    (a) Only 1

    (b) 1 and 2 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

    Does the Central government have a role to play here?

    • The Centre has no role to play in the alteration of districts or creation of new ones. States are free to decide.
    • The Home Ministry comes into the picture when a State wants to change the name of a district or a railway station.
    • The State government’s request is sent to other departments and agencies such as the Ministry of Earth Sciences, Intelligence Bureau, Department of Posts, Geographical Survey of India Sciences and the Railway Ministry seeking clearance.
    • A no-objection certificate may be issued after examining their replies.

    What has been the trend?

    • According to the 2011 Census, there were 593 districts in the country.
    • The Census results showed that between 2001-2011, as many as 46 districts were created by States.
    • Though the 2021 Census is yet to happen, Know India, a website run by the Government of India, says currently there are 718 districts in the country.
    • The surge in number is also due to the bifurcation of Andhra Pradesh into A.P and Telangana in 2014. Telangana at present has 33 districts and A.P has 13 districts.

  • West Bengal government to set up a Legislative Council

    The West Bengal government will set up a Legislative Council (Vidhan Parishad), as per a decision taken up at the Cabinet meeting chaired by its Chief Minister.

    What is a State Legislative Council?

    • The SLC is the upper house in those states of India that have a bicameral state legislature; the lower house being the State Legislative Assembly.
    • As of Jan 2020, 6 out of 28 states have a State Legislative Council. These are Andhra Pradesh, Karnataka, Telangana, Maharashtra, Bihar, and Uttar Pradesh The latest state to have a council is Telangana.

    Creation and abolition

    • According to Article 169, the Parliament can create or abolish the SLC of a state if that state’s legislature passes a resolution for that with a special majority.
    • The existence of an SLC has proven politically controversial.
    • A number of states that have had their LCs abolished have subsequently requested its re-establishment; conversely, proposals for the re-establishment of the LC for a state have also met with opposition.

    Its composition

    • The size of the SLC cannot be more than one-third of the membership of the State Legislative Assembly.
    • However, its size cannot be less than 40 members.
    • These members elect the Chairman and Deputy Chairman from the Council.

    MLCs are chosen in the following manner:

    • One third are elected by the members of local bodies such as municipalities, Gram panchayats, Panchayat samitis and district councils.
    • One third are elected by the members of Legislative Assembly of the State from among the persons who are not members of the State Legislative Assembly.
    • One sixth are nominated by the Governor from persons having knowledge or practical experience in fields such as literature, science, arts, the co-operative movement and social services.
    • One twelfth are elected by persons who are graduates of three years’ standing residing in that state.
    • One twelfth are elected by teachers who had spent at least three years in teaching in educational institutions within the state not lower than secondary schools, including colleges and universities.

    Answer this PYQ in the comment box:

    Q.Consider the following statements:

    1. The Legislative Council of a State in India can be larger in size than half of the Legislative Assembly of that particular State.
    2. The Governor of a State nominates the Chairman of Legislative Council of that particular State.

    Which of the statements given above is/are correct?

    (a) Only 1

    (b) Only 2

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Powers and functions

    • The Constitution of India gives limited power to the State Legislative Council.
    • The State Legislative Council can neither form nor dissolve a state government.
    • The State Legislative Council also have no role in the passing of money bills.
    • But some of the powers it has is that the Chairman and Deputy Chairman of the State Legislative Council enjoy the same status as Cabinet Ministers in the state.

    Issues with LC

    • It was argued that a second House can help check hasty actions by the directly elected House, and also enable non-elected persons to contribute to the legislative process.
    • However, it was also felt that some of the poorer states could ill afford the extravagance of two Houses.
    • It has been pointed out that the Councils can be used to delay important legislation and to park leaders who have not been able to win an election.

  • Independent panel to appoint EC members

    A petition was filed in the Supreme Court seeking the constitution of an independent collegium to appoint members of the Election Commission.

    Election Commission of India (ECI)

    • The ECI is a constitutional body responsible for administering elections in India according to the rules and regulations mentioned in the Constitution of India.
    • It was established on January 25, 1950.
    • The major aim of the election commission of India is to define and control the process for elections conducted at various levels, Parliament, State Legislatures, and the offices of the President and Vice President of India.
    • It can be said that the Election Commission of India ensures the smooth and successful operation of the democracy.

    Functions

    According to Article 324 of the Indian Constitution:

    • the ECI has superintendence, direction, and control of the entire process for conduct of elections to Parliament and Legislature (state legislative assembly & state legislative council) of every State and to
    • the offices of President and Vice-President of India

    Answer this PYQ in the comment box:

    Q.Consider the following statements:

    1. The Election Commission of India is a five-member body.
    2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
    3. Election Commission resolves the disputes relating to splits/mergers of recognized political parties.

    Which of the statements given above is/are correct? (CSP 2017)

    (a) 1 and 2 only

    (b) 2 only

    (c) 2 and 3 only

    (d) 3 only

    Its composition

    • Initially, the commission had only a Chief Election Commissioner. Presently, it consists of a Chief Election Commissioner and two Election Commissioners.
    • For the first time, two additional Commissioners were appointed on 16th October 1989 but they had a very short term till 1st January 1990.
    • Afterwards, on 1st October 1993, two additional Election Commissioners were appointed.
    • The concept of a multi-member Commission has been in operation since then, with decision-making power by majority vote.

    Appointment & Tenure of Commissioners

    • The President has the power to select Chief Election Commissioner and Election Commissioners.
    • They have a tenure of six years, or up to the age of 65 years, whichever is earlier.
    • They have the same status and receive pay and perks as available to Judges of the Supreme Court of India.
    • The CEC can be removed from office only through accusation by Parliament.
    • The election commissioner or a regional commissioner shall not be removed from office except on the recommendation of the CEC.

    Why such demand for independent collegium?

    • The plea filed has said that the practice of government making the appointments is a violation of the Basic Structure of the Constitution and creates a dent in free and fair elections in a democracy.
    • The petition said the recommendation to have a neutral collegium to fill up vacancies in the Election Commission has been given by several expert committees, commissions from 1975.
    • The recommendation was also part of the Law Commission in its 255th report in March 2015.

    Basis for such demand

    • The EC is not only responsible for conducting free and fair elections, but it also renders a quasi-judicial function between the various political parties including the ruling government and other parties.
    • In such circumstances, the Executive cannot be the sole participant in the appointment of members of the Election Commission as it gives unfettered discretion to the ruling party.
    • Therefore it could appoint someone whose loyalty is ensured and thereby renders the selection process vulnerable to manipulation.

  • SEBI proposes framework for Gold Exchange

    The Securities & Exchange Board of India (SEBI) has floated a consultation paper on the proposed framework for Gold Exchange in India.

    Why such a move?

    • According to SEBI, the proposed exchange would bring in more transparency in the gold trading market in terms of spot price discovery, quality of the gold and enable greater integration with the financial markets.

    What is a Gold Exchange?

    • As the name suggests, this would offer trading facilities in the precious metal.
    • Entities like retail investors, banks, foreign portfolio investors (FPIs), jewellers and bullion dealers among others would be allowed to trade on the exchange.
    • While there are existing commodity exchanges that offer trading in gold contracts, those are derivative instruments while the proposed gold exchange would allow trading akin to the spot market.
    • This move assumes significance as India is the second-largest consumer of gold – after China – with an annual demand of around 800-900 tonnes.

    Answer this PYQ:

    Q.What is/are the purpose/purposes of the Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

    1. To bring the idle gold lying with India households into the economy
    2. To promote FDI in the gold and jewellery sector
    3. To reduce India’s dependence on gold imports

    Select the correct answer using the code given below

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    What are the ways in which one can invest in gold now?

    • For those wanting to buy physical gold, a visit to the neighbourhood jeweller would suffice.
    • Meanwhile, there are online platforms such as Paytm, Kuvera and Indiagold among others that allow an individual to buy gold in digital form.
    • The advantage of buying gold in digital form is that one can put in a very small amount as well with some platforms allowing a minimum investment of just Rs 100.
    • Digital gold products have become quite popular among millennials. Then there are sovereign gold bonds issued by the government.
    • One can even look at Gold ETFs or gold funds by mutual funds.
    • Even gold derivative contracts traded on the exchanges have the option of physical settlement, which means investors can get physical delivery of gold.

    How can one trade on a gold exchange?

    • The SEBI has proposed an instrument called ‘Electronic Gold Receipt’, or EGR.
    • The gold exchange, along with intermediaries like the vault manager and the clearing corporation, would facilitate the creation of EGR and its trading.
    • So, participants can convert their physical gold into EGR, which can then be bought or sold on the exchange like any normal equity share of a listed company.
    • The EGR can even be converted back into physical gold. As part of the draft regulations, SEBI has proposed three denominations of EGR – one kilogram, 100 grams and 50 grams.
    • It has, however, added that EGRs of five grams or 10 grams can also be allowed for trading to increase the liquidity of the market and attract more participants.

    How can one convert physical gold into EGRs?

    • An entity that intends to convert physical gold into EGR will have to go to a ‘Vault Manager’.
    • According to the proposed framework, any entity registered in India and with a net worth of at least Rs 50 crore can apply to become a vault manager.
    • After the receipt of the gold, the vault manager would create an EGR for which the depository will assign an International Securities Identification Number, or ISIN, which is a unique code to identify the specific security.
    • Once the ISIN is issued, the EGR can be traded on the gold exchange just like any other tradable security.

    Can EGRs be again converted into physical gold?

    • To convert an EGR into physical gold, the owner of the EGR will have to surrender the EGR to the vault manager who will deliver the gold and extinguish the electronic receipt.
    • Considering the logistics and delivery challenges, it has been proposed that conversion of an EGR into physical gold should be allowed only if a minimum of 50 grams of gold has been accumulated in electronic form.

    Issues with gold exchange

    • Since the EGRs would be traded on an exchange, Securities Transaction Tax (STT) would be levied. Also, GST would be applicable when EGRs are converted into physical gold for withdrawal.
    • If in case the buyer and seller are from different states then levying state GST could be cumbersome. SEBI is mulling if only IGST or Integrated Goods and Services Tax can be levied to resolve this issue.
    • As far as transactions are concerned, SEBI working groups have suggested that an entire transaction be divided into three tranches.

  • 19th May 2021 | Prelims Daily with Previous Year Questions

    [WpProQuiz 640]

    [WpProQuiz_toplist 640]

  • Brain drain of India’s health worker

    The article highlights the issue of shortage of healthcare workers in India even as it exports its healthcare workers to other countries.

    India as an exporter of healthcare workers

    • For several decades, India has been a major exporter of healthcare workers to developed nations particularly to the Gulf Cooperation Council countries, Europe and other English-speaking countries.
    • As per OECD data, around 69,000 Indian trained doctors worked in the UK, US, Canada and Australia in 2017.
    • In these four countries, 56,000 Indian-trained nurses were working in the same year.
    • There is also large-scale migration of health workers to the GCC countries but there is a lack of credible data on the stock of such workers in these nations.
    • There is no real-time data on high-skilled migration from India as in the case of low-skilled and semi-skilled migration.

    Shortage of nurses and doctors

    • The migration of healthcare workers is part of the reason for the shortage in nurses and doctors.
    • If we look at the figures for countries where we export our healthcare workers, we see just how big the difference is between the sending and the receiving countries.
    • As per government reports, India has 1.7 nurses per 1,000 population and a doctor to patient ratio of 1:1,404.
    • This is well below the WHO norm of 3 nurses per 1,000 population and a doctor to patient ratio of 1:1,100.
    • But, this does not convey the entire problem.
    • The distribution of doctors and nurses is heavily skewed against some regions.
    • Moreover, there is high concentration in some urban pockets.

    Factors driving migration

    • There are strong pull factors associated with the migration of healthcare workers, in terms of higher pay and better opportunities in the destination countries.
    • However, there are strong push factors that often drive these workers to migrate abroad.
    • The low wages in private sector outfits along with reduced opportunities in the public sector plays a big role in them seeking employment opportunities outside the country.
    • The lack of government investment in healthcare and delayed appointments to public health institutions act as a catalyst for such migration.

    Measures to check brain drain and issues with it

    • Over the years, the government has taken measures to check the brain drain of healthcare workers with little or no success.
    • In 2014, it stopped issuing No Objection to Return to India (NORI) certificates to doctors migrating to the US.
    • The NORI certificate is a US government requirement for doctors who migrate to America on a J1 visa and seek to extend their stay beyond three years.
    • The non-issuance of the NORI would ensure that the doctors will have to return to India at the end of the three-year period.
    • The government has included nurses in the Emigration Check Required (ECR) category.
    • This move was taken to bring about transparency in nursing recruitment and reduce the exploitation of nurses in the destination countries.
    • The government’s policies to check brain drain are restrictive in nature and do not give us a real long-term solution to the problem.

    Way forward

    • We require systematic changes that could range from increased investment in health infrastructure, ensuring decent pay to workers and building an overall environment to motivate them to stay in the country.
    • The government should focus on framing policies that promote circular migration and return migration — policies that incentivise healthcare workers to return home after the completion of their training or studies.
    •  It could also work towards framing bilateral agreements that could help shape a policy of “brain-share” between the sending and receiving countries.
    • The 2020 Human Development Report shows that India has five hospital beds per 10,000 people — one of the lowest in the world.
    • Increased investment in healthcare, especially in the public sector, is thus the need of the hour.
    • This would, in turn, increase employment opportunities for health workers.

    Consider the question “What are the factors driving the migration of healthcare workers from India? Suggest the measure to stem their migration.”

    Conclusion

    India needs systematic changes that could range from increased investment in health infrastructure, ensuring decent pay to health workers and building an overall environment that could prove to be beneficial for them and motivate them to stay in the country.

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