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  • CEPA is the Growth Engine For India-UAE Bilateral Trade

    CEPA

    Central Idea

    • The India-UAE Comprehensive Economic Partnership Agreement (CEPA) signifies a deep, fraternal, and strategically important relationship between the two countries that goes beyond just economic cooperation. The success of the agreement in stimulating economic growth and providing investment opportunities has unlocked new possibilities for multi-sectoral collaboration and partnerships

    Background: India-UAE relationship

    • Historical ties: The India-UAE relationship has been shaped by centuries of cultural and economic engagement on the Indian Ocean’s network of exchange. The two countries share historical ties that go back to pre-modern times, with Arab traders having visited the west coast of India since the fourth century AD.
    • India’s third-largest trading partner: The UAE emerged as India’s third-largest trading partner, highlighting the two countries’ positive outlook towards economic cooperation.
    • Trade partnership strengthened with oil: The India-UAE partnership was forged first on the trade of traditional items, and then strengthened with oil. It found a formal dimension after the creation of the UAE Federation in 1971, and then accelerated in the 1990s when a liberalised India embraced the opportunity to export to the UAE and markets beyond.
    • Relationship is today more than an economic partnership: It speaks to the Emirates’s deep, fraternal, and strategically important relationship with India, reinforcing the UAE’s position as a key partner in India’s foreign policy. The two countries share strong cultural and people-to-people ties, with a significant Indian diaspora in the UAE.
    • key partner in India’s development agenda: The UAE has been a key partner in India’s development agenda, including investments in the oil and gas sector, renewable energy, and infrastructure. The UAE has also been supportive of India’s efforts in combating terrorism and enhancing security cooperation.

    India- UAE Comprehensive Economic Partnership Agreement (CEPA)

    • The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is a bilateral trade agreement that aims to strengthen economic ties between the two countries.
    • The CEPA covers a wide range of subjects, including trade in goods, trade in services, investment, intellectual property rights, and competition policy.
    • The CEPA has been in the making for several years, with negotiations starting in 2017 and the agreement finally coming into force on May 1, 2022. The agreement builds on the decades of mutual enterprise between the two countries, with the UAE emerging as India’s third-largest trading partner.

    How India- UAE CEPA benefits both the countries?

    • Increased trade: The CEPA is expected to significantly increase trade volumes between India and the UAE, with the potential to create new investment opportunities and increase business partnerships. This will help both countries to diversify their trade relationships beyond their traditional trading partners.
    • Diversified trade: The CEPA covers a wide range of subjects, including trade in goods, trade in services, investment, intellectual property rights, and competition policy, allowing for a more diversified trade relationship between the two countries.
    • Access to new markets: The CEPA is inspiring innovators and investors, catalysing SMEs, startups, and India Inc to make decisive inroads into new markets, particularly the Emirati market, and from there to the Middle East, Africa, and Europe. This will benefit both countries in terms of access to new markets and opportunities.
    • Support for entrepreneurship: The CEPA provides support for startups in both India and the UAE, enabling them to explore growth and diversification into each other’s markets, as well as other markets in the region and beyond. The India-UAE Startup Bridge will also enable them to attract investment from venture capitalists and angel investors.
    • Addressing developmental challenges: The CEPA provides a trade lens to tackle issues such as energy and food security, agriculture, and sustainability, making it a strategic catalyst in addressing vital developmental challenges.

    CEPA

    Facts for prelims: UPI in UAE

    • Indian travelers can now seamlessly make payments in the UAE using the UPI-based apps.
    • National Payments Corporation of India (NPCI) has partnered with the Mashreq Bank’s NEOPAY to enable UPI-based payments in the Gulf Nation.
    • UPI payments will only be possible in UAE shops that have NEOPAY terminals. The user should have a bank account with an Indian bank account along with a mobile app like BHIM that supports UPI payments.
    • Currently, UPI payments are accepted in Bhutan and Nepal. It is likely to go live in Singapore by the end of this year.
    • Back in 2021, the UPI services were launched in Bhutan in collaboration with its central bank, the Royal Monetary Authority.

    Way ahead?

    • Looking ahead, the India-UAE CEPA presents a unique opportunity to further deepen economic and strategic ties between the two countries. Some of the key steps that can be taken to build on the success of the CEPA include:
    • Strengthening infrastructure: India and the UAE can collaborate to strengthen infrastructure, including ports, airports, and logistics networks, to facilitate the movement of goods and people between the two countries.
    • Enhancing cooperation in emerging sectors: The two countries can explore cooperation in emerging sectors such as renewable energy, artificial intelligence, and fintech, among others, to promote innovation and economic growth.
    • Promoting investment: Both India and the UAE can take steps to promote investment in each other’s markets, including through the creation of investment promotion agencies, bilateral investment treaties, and other measures.
    • Strengthening cultural ties: Cultural exchanges and people-to-people contacts can be further enhanced to deepen the historical and cultural ties between the two countries.
    • Addressing developmental challenges: The CEPA provides a platform for addressing key developmental challenges faced by both countries, such as energy and food security, sustainability, and agriculture. Further efforts can be made to leverage this platform to achieve meaningful progress in these areas.

    Conclusion

    • The UAE-India CEPA has unlocked new possibilities for multi-sectoral collaboration and partnerships, leading the nations to build competitive, resilient, sustainable, and vibrant economies.

    Mains Question

    Q. India-UAE completed its one year of Comprehensive Economic Partnership Agreement (CEPA) implementation. In this background discuss impact on the Bilateral Trade.

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    Also read:

    India-UAE Food Security Partnership Stands to Benefit From Multiple Points of Convergence

  • Aspirational Cities Programme (ACP): A Step in the Right Direction

    ACP

    Central Idea

    • Maharashtra’s Aspirational Cities Programme (ACP) aims to address the challenges of rapid urbanisation by adopting a holistic approach to urban governance. The ACP is set to focus on improved governance, address persistent civic issues, and increase funding avenues for the urban local bodies. The success of the ACP could have a significant impact on Maharashtra’s economy and lead to ease of living in urban areas.

    Urban population of India

    • According to the Census of India 2011, the urban population of India was 377 million, which accounted for 31.16% of the total population. Around 590 million people would live in the cities by 2030.
    • While cities constitute about 3 per cent of the land in the country, they generate 70 per cent of the Gross Domestic Product (GDP) and contribute substantially to economic growth and opportunities.
    • There is a robust relationship between the index of cities’ liveability and the country’s GDP per capita suggesting that long-term growth is only feasible if the city attributes in terms of providing equitable access to basic services, residences, and improved economic management are woven seamlessly through digital service delivery platforms.

    Challenges of urbanization in Maharashtra

    • Deficient Infrastructure: Maharashtra’s cities are grappling with issues of deficient infrastructure, such as inadequate roads, public transport, water supply, and waste management systems.
    • Air Pollution: Urbanization has led to an increase in air pollution in Maharashtra’s cities, primarily due to vehicular emissions and industrial activities.
    • Social Inequities: The growth of informal settlements and slums in Maharashtra’s cities has led to social inequities, with the urban poor lacking access to basic services, such as healthcare, education, and housing.
    • Mobility and Migration: Maharashtra’s cities continue to face the challenge of frequent mobility and migration, with an inward net movement of people for better livelihood opportunities.
    • Vulnerabilities to Disasters and Climate Change: Rapid urbanization has increased the vulnerability of Maharashtra’s cities to disasters and climate change, such as floods and heatwaves.
    • Poor Urban Planning: Many of the challenges faced by Maharashtra’s cities are a result of poor urban planning, with a lack of coordination between various government departments and inadequate implementation of policies and programmes.

    What is Aspirational Cities Programme (ACP)?

    • The Aspirational Cities Programme (ACP) is an initiative of the Government of Maharashtra aimed at addressing the challenges of rapid urbanization in the state by adopting a holistic approach to urban governance.
    • The ACP has identified 57 cities that have been proposed for the programme. Service level benchmarking will be done for the cities based on the data collected on the Performance Assessment System of the Government of Maharashtra.
    • The performance of the 57 selected cities would be monitored and ranked quarterly through a standard digital monitoring platform with indicators on the themes of urban infrastructure, education, urban services, skill development, and climate change.
    • The ACP is based on three priority areas: inclusive urban development, scientific data methods for assessing and monitoring outcomes, and citizen participation in civic affairs.

    ACP

    The Maharashtra government’s Aspirational Cities Programme (ACP) focuses on three priority areas

    1. Inclusive Urban Development: The ACP aims to bring an integrated approach to urban programming that involves all development sectors. This is aimed at ensuring that the benefits of urban development reach all sections of society, including the most vulnerable.
    2. Scientific Data Methods: The ACP seeks to adopt scientific data methods for assessing and monitoring the outcomes of both state and central schemes. This will provide a better understanding of the impact of various policies and programmes on the ground.
    3. Citizen Participation: The ACP aims to enhance the voice and participation of citizens in civic affairs through physical and digital means. This is aimed at ensuring that governance is citizen-centric and responsive to the needs and aspirations of the people.

    Other key features of Maharashtra’s ACP

    • Improved Governance: The ACP is set to focus on improved governance, address persistent civic issues, and increase funding avenues for the urban local bodies. This is aimed at ensuring that the governance of cities is efficient, transparent, and accountable.
    • Service Level Benchmarking: Service level benchmarking will be done for the cities based on the data collected on the Performance Assessment System of the Government of Maharashtra. This will enable the state government to monitor and rank the performance of the 57 selected cities quarterly through a standard digital monitoring platform.
    • Provision of Adequate Potable Tap Water: The ACP agenda includes provisioning adequate potable tap water to all households by taking advantage of the ambitious Jal Jeevan Mission.
    • Reformed Property Tax: The ACP aims to reform property tax by delinking it from the reasonable rental value method and adopting the market value of the property as a base for assessment.

    Facts for prelims

    What is Urban 20 (U20)?

    • Within the G20 ecosystem, a city diplomacy initiative called the Urban 20 (U20) was launched in December 2017.
    • As one of the formal Engagement Groups under G20, the U20 forum was meant to collectively raise critical urban issues of G20 cities during the G20 negotiations.
    • Despite U20’s concerted efforts to run parallel to G20, the absence of any written constitution, procedures, or formal agreement has made U20 unable to effectively address the aspirations and concerns of cities.

    Conclusion

    • It is time to accept the reality that New India is moving from its villages to the cities, and therefore, the need for renewed thinking and policies that are citizen-centric. The ACP is an example of a policy that puts people first as part of urban development. This effort by the Government of Maharashtra is strategically contextualised with the Viksit Bharat vision for India in 2047.

    Mains Question

    Q. New India is moving from its villages to the cities which highlights the need for renewed thinking and policies that are citizen-centric. In light of this discuss how Maharashtra’s Aspirational Cities Programme (ACP) could help to address the challenges of urbanization

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    Also Read:

    [Sansad TV] Perspective: Urban Planning

     

  • 5th May 23 | Prelims Daily with Previous Year Questions

    5th May 23 | Prelims Daily with Previous Year Questions

    [WpProQuiz 1340]

    [WpProQuiz_toplist 1340]

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  • Nikaalo Prelims Spotlight || Current affairs Developments in Economics


    Dear Aspirants,

    This Spotlight is a part of our Mission Nikaalo Prelims-2023.

    You can check the broad timetable of Nikaalo Prelims here

    Session Details

    YouTube LIVE with Parth sir – 7 PM  – Prelims Spotlight Session

    Evening 04 PM  – Daily Mini Tests

    Join our Official telegram channel for Study material and Daily Sessions Here

    5th May 2023

    Current affairs Developments in Economics

    Refer to the economics current affairs compilation.

     

  • [Sansad TV] Mudda Aapka: India’s Logistics Sector

    [Sansad TV] Mudda Aapka: India’s Logistics Sector

    Central Idea: India’s Logistics Progress

    • India improves in the logistics ranking of the World Bank by jumping 6 places to Rank 38 out of 139 countries in the 7th edition of Logistics Performance Index (LPI 2023).
    • This is a strong indicator of India’s global positioning, with this development being powered by our Government’s laser focus on reforms for improving logistics infrastructure.

    Reasons behind

    • GatiShakti: In October 2021, the Government of India launched the PM GatiShakti National Master Plan (PMGS-NMP) towards a coordinated approach, leveraging technology, for infrastructure planning and development.
    • National Logistics Policy (NLP): In September 2022, the Prime Minister launched the National Logistics Policy (NLP) which acts as a guiding document for States / UTs seeking to formulate logistics policy (19 States / UTs have notified their logistics policy).

    India’s logistics sector: A backgrounder

    (1) Road Transport

    • The country faces a skewed logistic modal mix with nearly 71% of all freight transport being done by roads.
    • Highways only account for 2.2 % of the entire road network but carry 40% of all freight traffic, thereby putting immense strain on the highway network of the nation.

    (2) Railways 

    • The Railways’ share in freight transport has dropped from 89% in 1950-51 to only 18%in 2020.
    • The average speed of a freight train in India is only 25 km/hour with a permitted axle load (freight capacity of wagons) of around 20 tonnes.
    • The US, which has a vast rail network like India, runs its freight trains at an average speed of 38 mph (60 kmph) and permits an axle load of nearly 30 tonnes.

    (3) Air Cargo 

    • The picture is similar in terms of the air cargo handled.
    • According to the Ministry of Civil Aviation’s Annual report 2019-20, India has 23 domestic cargo terminals and 20 international cargo terminals which handled a total of 3.56 million tonne (mt) of cargo in 2018-19.
    • In contrast, the Shanghai Pudong International Airport in China alone handled 3.63 mt of cargo in 2019.

     What is NLP?

    • First introduced in 2020 during Finance Minister’s Budget speech, the policy will bring in an integrated and tech-enabled approach to logistics operations to bridge the efficiency gap.
    • A comprehensive action plan is proposed under the policy, with major features including:
    • Integrated digital logistics systems;
    • Unified logistics interface platform;
    • Ease of logistics and standardisation of physical assets and
    • Benchmarking service quality standards, state engagement,
    • Human resource development and capacity building,
    • Export-import logistics
    • Sectoral plans for efficient logistics, and facilitation of the development of logistics parks.

    Need for such a policy

    • Organizing and consolidating the sector: India’s logistics sector is largely unorganized and fragmented. As per estimates, the worth of Indian logistics market is over $200 billion.
    • Reducing logistics cost: This is why the country’s logistics costs are as high as 14-15% of the GDP, against 7-8% in developed nations such as Singapore and the US, who leverage it to boost exports. The NLP aims to bring down India’s logistics cost to 8% in the next five years.
    • Preventing waste of perishable items: As per some estimates in India, about 16% of agri-production is wasted at different stages of the supply chain.
    • Warehousing development: Moreover, due to factors such as limited capacity and availability of warehouses, the cost of transaction increases.
    • Multi-modal integration: The new policy is going about simplification, technology and will have a multimodal approach that will combine rail, water, and air — all modes of transport.
    • Reducing operational complexities: The sector is complex with more than 20 government agencies, 40 PGAs (Partner Government Agencies), 37 export promotion councils, 500 certifications, over 10,000 commodities.
    • Employment generation: The sector provides livelihood to more than 22 million people and improving it will facilitate 10 per cent decrease in indirect logistics cost leading to the growth of 5 to 8 per cent in exports.

    What are the focus areas?

    According to several reports, the policy is expected to touch upon four main steps:

    • Integration of Digital System (IDS): This system will look forward to integrating 30 different systems of seven different departments, which are road transport, railway, customs, aviation, foreign trade, and commerce ministries.   
    • Unified Logistics Interface Platform (ULIP): This system will monitor smooth cargo movement.
    • Ease of Logistics (ELOG): Under this, the new policy will simplify the rules, which is expected to simplify basic business.
    • System Improvement Group (SIG): This system will be used to monitor all logistics-related projects regularly and will facilitate the removal of any hurdle. An empowered group of secretaries (EGoS), constituted under the PM Gati Shakti, would monitor and review the implementation of the policy.  

    How will the NLP increase the participation of state governments?

    • Under the policy, every state in India will have to set up a State Logistics Coordination Committee/Cell.
    • The policy will also annually review the performance of every state through the Logistics Ease Across Different States (LEADS) index.
    • The central government will also let states develop their logistics ecosystems and provide a roadmap for improving logistics efficiency.
    • The SIG will also carry out the annual LEADS performance index of states and union territories in India.
    • The agency will work closely with the states and prepare a comprehensive annual State Engagement Report covering the above-mentioned aspects.

    Policy measures till now

    • Mission Gati-Shakti: This mission has been launched as a national master plan for multi-modal connectivity.
    • Bharatmala Pariyojana: The 34,000 km of road infrastructure works would be undertaken, of which, 11,000 km have been targeted to be completed by March 2022. (Also read about Sagarmala, Parvatmala etc.)
    • High budgetary allocation: Government allocated Rs5.54 trillion towards capital expenditure across various ministries in the Union Budget 2021-22, a 34.5% jump from the previous year.
    • Dedicated freight corridor: There is Eastern and Western Dedicated Freight Corridors commissioned which can be a game-changer for boosting railway freight share
    • National Air Cargo Policy: This has also been formulated that seeks to build air transport shipment hubs in all major airports by 2025.

    Various challenges

    • Skewed modal mix: Nearly 71% of all freight transport is done by roads, while other modes such as railways, air cargo, and waterways remain underutilized.
    • Congestion on highways: Highways carry 40% of all freight traffic, despite accounting for only 2.2% of the entire road network, putting immense strain on the highway network of the nation.
    • Decline in railways’ share: The Railways’ share in freight transport has dropped from 89% in 1950-51 to only 18% in 2020. The average speed of a freight train in India is only 25 km/hour with a permitted axle load of around 20 tonnes, which is significantly lower than that of other countries like the US.
    • Limited air cargo infrastructure: India has only 23 domestic cargo terminals and 20 international cargo terminals, which handled a total of 3.56 million tonnes of cargo in 2018-19. This is much lower than other countries like China.
    • Fragmented sector: India’s logistics sector is largely unorganized and fragmented, with more than 20 government agencies, 40 PGAs (Partner Government Agencies), 37 export promotion councils, 500 certifications, and over 10,000 commodities, making it complex and challenging to navigate.
    • High logistics costs: India’s logistics costs are as high as 14-15% of GDP, against 7-8% in developed nations such as Singapore and the US, which affects its competitiveness and reduces its ability to boost exports.
    • Wastage of perishable items: About 16% of agri-production is wasted at different stages of the supply chain, leading to significant economic losses.
    • Limited warehousing capacity: The availability and capacity of warehouses are limited, increasing the cost of transactions.

    Way forward

    • Use of blockchain technology: The use of blockchain technology can improve transparency, efficiency and traceability in the logistics sector. It can also help reduce fraud and errors, and increase security.
    • Promote inland waterways: The government can promote the use of inland waterways for freight transport by building more ports and terminals, improving infrastructure and providing incentives to transporters.
    • Use of UAV: The use of drones can help improve last-mile delivery and reduce delivery times. They can be used for delivering packages in remote areas and for monitoring the movement of goods in real-time.
    • Encourage multi-modal transportation: Multi-modal transportation involves using more than one mode of transport for freight movement.  
    • Collaboration between private and public sector: The government can collaborate with private players to develop a robust logistics infrastructure.  
    • Development of logistics parks: The government can develop logistics parks that provide warehousing, cold storage, and other facilities required for efficient logistics operations.  
    • Green logistics: The government can promote green logistics by encouraging the use of electric vehicles, promoting the use of renewable energy and adopting sustainable logistics practices.  

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  • Article 355 imposed in Manipur

    manipur

    Central Idea

    • Recently, unrest in the state of Manipur was triggered by a decision of the High Court to pursue a 10-year-old recommendation to grant Scheduled Tribe (ST) status to the non-tribal Meitei community.
    • In view of the prevailing unprecedented burning situation, the Centre has imposed Article 355 in the state, in an effort to control the situation, according to reliable sources.

    What is Article 355?

    • Article 355 of the Indian Constitution is a provision that empowers the Union government to protect every state in India against external aggression and internal disturbances.
    • It is a provision under Part XVIII of the Constitution, titled “Emergency Provisions”.
    • It is based on the principle of “duty to protect” enshrined in the Constitution, which makes it mandatory for the Union government to protect every state from external and internal threats.

    Restrictions under Article 355

    Under Article 355, the Union government has the power to issue directions to any state to ensure compliance with the Union’s laws and regulations. However, there are certain restrictions on this power:

    • The directions can only be given when there is a failure of the state machinery to comply with or give effect to any Union law or regulation.
    • The directions should be of an urgent nature and may not extend beyond the necessary period for remedying the failure of the state machinery.
    • The state government should be given an opportunity to submit its views before the issuance of such directions.
    • The Union government cannot use this power to intervene in the internal affairs of a state unless there is a failure of the state machinery.

    Duration of restriction

    • The duration of the assistance provided under Article 355 is not specified in the Constitution.
    • The Union government can withdraw its assistance when the situation is normalized or when the state government requests it to do so.
    • The duration of the assistance provided under Article 355 is subject to judicial review and can be challenged in court if it violates any fundamental rights or constitutional provisions.

    Circumstances of imposition

    Article 355 can be invoked by the President of India in certain circumstances, such as:

    1. When a state fails to comply with or to give effect to any of the directions given by the Union under the Constitution.
    2. When the security of India is threatened by external aggression or internal disturbance.
    3. When there is a threat to the unity and integrity of India due to any violent activities by any group or organization.
    4. When a state requests for assistance from the Union to maintain public order and the Union is satisfied that the situation in the state cannot be controlled by the state’s own forces.
    5. When a state fails to provide adequate protection to minorities, particularly in cases of communal violence.
    6. When a state government fails to ensure that the constitutional machinery is maintained in the state.

    Reasonable restrictions

    It is important to note that the use of Article 355 is subject to certain restrictions:

    1. The President cannot use this article on his/her own initiative; it must be done on the advice of the Union Council of Ministers.
    2. The use of Article 355 does not authorize the President to intervene directly in the affairs of the state.
    3. The President can use this article only to give directions to the state government, and not to the state legislature or the judiciary.
    4. The use of Article 355 should be limited in duration and scope, and should not result in the permanent erosion of the state’s autonomy or the violation of its constitutional rights.

    Centrestage of the row: Meitei Community

    • Manipur is geographically divided into the Imphal Valley and the surrounding hills.
    • The Imphal Valley is dominated by the non-tribal Meitei community, which accounts for more than 64% of the population.
    • The hills, which comprise 90% of Manipur’s geographical area, are inhabited by more than 35% recognized tribes, which are largely Christians.
    • The Meiteis are largely Hindus followed by Muslims, while the 33 recognized tribes are broadly classified into ‘Any Naga tribes’ and ‘Any Kuki tribes.’

    Behind the ST status: The Meitei Argument

    • The Manipur High Court directed the State government to submit a 10-year-old recommendation for the inclusion of the Meitei community in the Scheduled Tribe (ST) list.
    • The ST status is needed to “preserve” the community and “save the ancestral land, tradition, culture, and language” of the Meiteis.
    • The Meiteis were recognized as a tribe before the merger of the State with the Union of India in 1949.

    Tribal groups’ opposition to the ST Status

    • Advantaged community: Many tribal groups say the Meiteis have a demographic and political advantage besides being more advanced than them academically and in other aspects.
    • Benefits at others cost: They feel the ST status to the Meiteis would lead to loss of job opportunities and allow them to acquire land in the hills and push the tribals out.
    • Already benefited: The language of the Meitei people is included in the Eighth Schedule of the Constitution, and many of them have access to benefits associated with the SC, OBC, or EWS status.
    • Political vendetta: The demand for ST status is a ploy to attenuate the fervent political demands of the Kukis and Nagas, as well as a tacit strategy of the dominant valley dwellers to make inroads into the hill areas of the State.

    Immediate triggers of unrest

    • Some tribal groups with vested interests are trying to scuttle Chief Minister Nongthombam Biren Singh’s crusade against drugs.
    • The anti-drug drive began with destroying poppy fields and the theory that “illegal settlers” from Myanmar — ethnically related to the Kuki-Zomi people of Manipur — are behind clearing forests and government lands to grow opium and cannabis.
    • The first violent protest on March 10 was against the eviction of the residents of a Kuki village.
    • The large-scale arson and violence claiming the life of at least one person on May 3 and 4 followed a “tribal solidarity rally” against the reported move to include the Meiteis in the ST list.

     

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  • CBDC for efficient Cross-Border Payment

    cbdc

    Central Idea: RBI Deputy Governor T. Rabi Shankar commented on CBDC platforms and their potential impact on cross-border payments during the G20 TechSprint.

    About Central Bank Digital Currency (CBDC)

    • CBDC is a central bank-issued digital currency which is backed by some kind of assets in the form of either gold, currency reserves, bonds and other assets, recognised by the central banks as a monetary asset.
    • The present concept of CBDCs was directly inspired by Bitcoin, but a CBDC is different from virtual currency and cryptocurrency.
    • Cryptocurrencies are not issued by a state and lack the legal tender status declared by the government.

    Hurdles in Cross-Border Payments

    • Fragmented and truncated data formats: Lack of standardization in data formats creates inefficiencies in cross-border payments. Fragmented and truncated data formats create additional costs and delays in the processing of transactions.
    • Complex processing of compliance checks: Cross-border payments require compliance with different regulatory frameworks in different jurisdictions. Compliance checks can be complex and time-consuming, causing delays and additional costs.
    • Limited operating hours: Traditional banking systems have limited operating hours, which can cause delays in cross-border payments. International time zone differences also contribute to these challenges.
    • Legacy technology platforms: Traditional banking systems still rely on legacy technology platforms, which can be slow and outdated. This can lead to inefficiencies and delays in cross-border payments.
    • Long transaction chains: Cross-border payments often involve multiple intermediaries, which can lead to long transaction chains. Each intermediary adds additional costs and can increase the time it takes for a transaction to be completed.
    • Funding costs: Cross-border payments require funding in multiple currencies, which can lead to additional costs. Exchange rate fluctuations can also impact the cost of cross-border payments.
    • Weak competition: The lack of competition in the cross-border payments industry can contribute to inefficiencies and high costs. The dominance of a few large players can limit innovation and hinder the development of more efficient solutions.

    Potential benefits with CBDC

    • Less intermediaries: CBDC can reduce the need for multiple intermediaries in cross-border payments, leading to a faster and more efficient process.
    • Enhanced efficiency: It can increase the speed and efficiency of cross-border payments by reducing processing times and delays.
    • Enhanced integration: It can enable better integration between different payment systems, reducing fragmentation and increasing interoperability.
    • Enhanced technical compatibility: It can be designed to work with existing payment infrastructure, making it easier to adopt and integrate into the current system.
    • Enhanced safety: It can provide enhanced security measures that can help mitigate the risk of fraud and cyber-attacks in cross-border payments.
    • Mitigation of cross-currency risks: CBDC can help mitigate risks associated with cross-border and cross-currency transactions, such as exchange rate fluctuations, currency conversion fees, and transaction processing delays.

    How can this be implemented to practice?

     

    Description Examples
    Model 1 Enhancing Compatibility Among Domestic CBDC Systems Many central banks are working to enhance the compatibility of domestic CBDC systems. Common international standards are required, which require regulatory coordination and market practices.
    Model 2 Interlinking CBDC Systems CBDC networks are linked up by synchronizing payment actions without the need for a trusted third party or a common platform.
    Model 3 Establishing a Single mCBDC System Cross-border payments are processed through a jointly operated “corridor network”.

     

    RBI’s push for CBDC adoption @ G20

    • RBI emphasized the need for increased adoption of CBDCs across countries for them to play a role in the cross-border payments arena.
    • Countries need to decide to create CBDCs and create an infrastructure for various CBDCs to interface for CBDCs to be effective in cross-border payments.
    • RBI suggested India’s model of digitization, where the basic infrastructure was created by the public sector and the fintech/financial/start-up ecosystem was allowed to create innovative solutions, could also be successful with CBDCs globally

    Conclusion

    • CBDCs could bring about a significant change in the sphere of cross-border payments, but coordination across countries and between the public and private sectors is essential for that to happen

     

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  • What is the Washington Declaration?

    washington

    Central Idea: The context is the recent visit of the South Korean President to the US to commemorate the 70th anniversary of US-South Korea bilateral relations. During the visit, the two countries signed the “Washington Declaration” as a nuclear deterrence strategy against North Korea’s regional aggression.

    Washington Declaration: Key Terms

    • Nuke deployment by US: According to the declaration, an American nuclear ballistic submarine would be deployed in the Korean peninsula.
    • Intel mechanism: A nuclear consultative group would be formed to formulate principles of joint response tactics, and South Korea would receive Intel from the US regarding nuclear advancements.
    • Joint training: The US will strengthen South Korea’s nuclear deterrence capabilities through joint military training programs and an annual intergovernmental simulation.
    • Deterrence creation: The declaration reaffirmed the Non-Proliferation Treaty implying that South Korea would not venture into the creation of its own independent nuclear capabilities and would instead focus on deterrence measures through an alliance-based approach.

    Implications of the treaty

    • Big power politics: While the existence of the agreement is based on the security needs of South Korea, the policy reflects big power politics where the interests of the larger power (US) takes precedence.
    • US proprietorship over the nukes: The US is the only ‘sole authority’ to use the nuclear arsenal of the US in the event of a nuclear confrontation.
    • Maintaining stability: The assurance that the US and its nuclear weapons would protect its allies by being responsible for maintaining stability in the region aligns with the larger goal of non-proliferation.

    US Stance on South Korea’s Nuclear Capabilities

    • Fouled the SK nuclear program: South Korea’s nuclear development programme supported by former president Park Chung Hee was hindered due to US pressure.
    • Strategic arms reduction: The US withdrew one hundred nuclear weapons from South Korea in the 1990s as part of their “Strategic Arms Reduction Treaty” to make North Korea unarm itself.
    • Renewed interest after North Korea’s Rise: The Nuclear Posture Review 2022 reflects a shift in the US narrative where it is now concerned about the progressing nuclear capacities of North Korea.

    Regional and domestic responses

    • China: It said it undermines the nuclear non-proliferation regime and the strategic interests of other countries.
    • North Korea: Kim Jong-Un’s sister warned that the declaration would only result in making peace and security of North-East Asia and the world be exposed to more serious danger.

    Conclusion

    • Overall, the Declaration is an important step in the direction of creating a more overt and close coordination among the US allies in the Indo-Pacific.
    • It seeks to deal with not only North Korea but also moves of China and Russia.

    Back2Basics: Non-Proliferation Treaty (NPT)

    The NPT is an international treaty signed in 1968 that aims to prevent the spread of nuclear weapons and to promote the peaceful use of nuclear energy.

    Key facts about the NPT include:

    • Members: There are currently 191 parties to the treaty, including the five recognized nuclear-weapon states (the US, Russia, China, France, and the UK).
    • Three main pillars: Non-proliferation, Disarmament and Peaceful use of nuclear energy.
    • Non-nuclear-weapon states: They are parties to the treaty agree not to acquire nuclear weapons and to accept International Atomic Energy Agency (IAEA) safeguards on their nuclear activities.
    • Nuclear-weapon states: They are the parties to the treaty agree not to transfer nuclear weapons or technology to non-nuclear-weapon states.
    • 5 year review: The treaty is reviewed every five years at a conference of parties, with the most recent review conference taking place in 2015.
    • Criticisms: NPT has been criticized for not doing enough to promote disarmament, and for perpetuating a system of haves and have-nots in which certain states have nuclear weapons while others do not. However, proponents argue that the treaty has helped to prevent the spread of nuclear weapons and to promote peaceful use of nuclear energy.

     

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  • All Cantonments to be disbanded: Centre

    cantonment

    Central Idea: The Union government has kicked off a plan to abolish the 62 cantonments around the country as “archaic colonial legacies”. The first cantonment to be renamed a military station is Yol in Himachal Pradesh.

    What is the plan?

    • The plan is to carve out the military areas in all cantonments and convert them into “exclusive military stations” with the Army exercising “absolute control” over them.
    • The civilian areas, in turn, will be merged with the local municipalities, which will be responsible for their maintenance among other things.
    • The Army moved away from the concept of cantonments after independence, mainly due to the friction between military and civilian authorities.
    • But some major cantonments continued to exist. Ex. Pune Cantonment, Agra Cantonment etc.

    What are Cantonments?

    • Cantonments in India are permanent military stations where a group of military personnel are stationed for administrative purposes.
    • These cantonments are governed by the Cantonments Act, 2006 which provides for municipal administration and control of these areas.
    • There are 62 cantonments in India which are located in various states across the country.
    • These areas are maintained by the Defence Estates Organization (DEO) under the Ministry of Defence, and are distinct from military bases or barracks which are temporary locations for military personnel.
    • Cantonments are generally considered to be areas with better infrastructure and facilities compared to other parts of the country.

    Their features

    • Cantonment Boards are democratic bodies comprising elected and nominated members.
    • In terms of Entry 3 of the Union List (Schedule VII) of the Constitution of India, Urban Self Governance of the Cantonments and the Housing Accommodation therein is the subject matter of the Union.
    • The Station Commander of the Cantonment is the ex-officio President of the Board, and an officer of the IDES or Defence Estates Organisation is the Chief Executive Officer who is also the Member-Secretary of the Board.
    • They have equal representation of elected and nominated/ex-officio members to balance official representation with democratic composition.
    • They maintain ecological balance while providing better civic facilities to the residents.

    History of establishments

    • The Cantonments Act, 1924 was enacted by the British to regulate the municipal administration of Cantonments.
    • After India’s independence, the Cantonments Act, 1924, was modified to suit the democratic setup of the country.
    • The Cantonments Act, 2006, replaced the Cantonments Act, 1924, and aims to provide greater autonomy and accountability to the Cantonment Boards.

    Categories

    There are four categories of Cantonments, depending on the size of the population residing inside a Cantonment:

    1. Category I: Cantonments having a population of more than 50,000.
    2. Category II: Cantonments having a population of 10,000 to 50,000.
    3. Category III: Cantonments having a population of less than 10,000.
    4. Category IV: Industrial or training Cantonments, irrespective of their population size.
  • 4th May 2023 | Nikaalo Prelims- Mini test 27 (Agriculture, Industrial sector and Service sector) 

    4th May 2023 | Nikaalo Prelims- Mini test 27 (Agriculture, Industrial sector and Service sector) 

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