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Subject: Economics

  • UPI QR Code-Central Bank Digital Currency interoperability: How does it work and how do customers benefit?

    interoperability

    What’s the news?

    • The fusion of UPI and CBDC is an essential component of the Reserve Bank of India’s (RBI) ongoing pilot project aimed at propelling the retail digital rupee.

    Central idea

    • Banks are boosting digital rupee (e₹-R) adoption by integrating UPI QR codes with CBDC or e₹ apps. Users can now scan any UPI QR code for transactions, while merchants can accept digital rupee payments using their existing UPI QR codes.

    Definition- Interoperability

    • Interoperability, as defined by the RBI, is the technical compatibility that enables a payment system to operate harmoniously with other payment systems.
    • This fosters the seamless execution, clearance, and settlement of payment transactions across diverse systems.
    • The synergy between payment systems contributes to fostering adoption, coexistence, innovation, and efficiency for end-users.

    Understanding QR Codes

    • A Quick Response (QR) code is a pattern of black squares arranged in a grid on a white background, interpretable by imaging devices like cameras. It carries information about the attached item.
    • This versatile tool provides an alternative contactless payment channel, allowing merchants to directly receive payments into their bank accounts.

    What is a Central Bank Digital Currency (CBDC)?

    • CBDC is a legal tender issued by the central bank in digital form. Like rupee notes or coins, which are in physical form.
    • Simply put, it’s just like rupee (₹) notes but in digital form (e₹). You can also exchange e₹ for physical currency notes.
    • However, unlike fiat currency that’s usually stored in banks and hence their liability, CBDC is a liability on the RBI’s balance sheet. That’s why you don’t necessarily need to have a bank account to own a digital rupee.

    What is the Unified Payments Interface (UPI)?

    • UPI is India’s mobile-based fast payment system, which enables customers to make round-the-clock payments instantly using a virtual payment address (VPA) created by the customer.
    • It eliminates the risk of the remitter sharing bank account details with the remitter.
    • UPI supports both Person-to-Person (P2P) and Person-to-Merchant (P2M) payments, and it also enables a user to send or receive money.

    The interoperability between UPI and CBDC

    • The interoperability between UPI and CBDC introduces the concept of UPI QR code-CBDC interoperability. This entails the compatibility of all UPI QR codes with CBDC applications.
    • In the pilot phase of the retail digital rupee, e₹-R users had to scan a specific QR code for transactions. However, with UPI-CBDC interoperability, transactions can now be initiated using a single QR code.
    • The digital rupee, a tokenized digital variant of the rupee, is issued by the RBI as CBDC. The e₹ is stored within a digital wallet linked to a customer’s existing savings bank account, while the UPI directly connects to the customer’s account.

    Significance of Interoperability

    • Enhanced User Experience: Interoperability simplifies the payment process, allowing users to seamlessly make transactions using any UPI QR code. This eliminates the inconvenience of switching between multiple payment apps or systems, enhancing user satisfaction.
    • Accelerated Adoption of the Digital Rupee: Leveraging the popularity of UPI, interoperability promotes the adoption of the retail digital rupee. This aligns with the government’s objectives to drive digital currency usage and reduce reliance on physical cash.
    • Merchant-Friendly: Merchants benefit from this interoperability as it eliminates the need for them to manage a separate QR code for digital rupee payments. This lowers the entry barrier for merchants to accept digital currency, making it more accessible to a wider range of businesses.
    • Expanding Financial Inclusion: Interoperability has the potential to extend financial inclusion efforts, particularly in underserved regions. Users and merchants with limited exposure to digital payments can now participate more easily in the digital economy.
    • Efficiency and Cost Savings: For both users and merchants, interoperability reduces the operational costs associated with maintaining multiple payment platforms. It simplifies accounting and transaction management for businesses.

    How will it drive CBDC adoption?

    • Presently, UPI is a widely used payment method. The interoperability between UPI and CBDC is poised to accelerate the adoption of the digital rupee.
    • With over 70 mobile apps and 50 million merchants accepting UPI payments, the existing UPI ecosystem sets the stage for the retail digital rupee’s growth.
    • The RBI reported 1.3 million customers and 0.3 million merchants using e₹-R in July, with daily transactions ranging from 5,000 to 10,000.
    • Prominent banks, including State Bank of India, Bank of Baroda, Kotak Mahindra Bank, Yes Bank, Axis Bank, HDFC Bank, and IDFC First Bank, have introduced UPI interoperability on their digital rupee applications.

    interoperability

    Benefits for Users

    • Seamless Transactions: Users can effortlessly execute digital rupee transactions by scanning any UPI QR code, eliminating the need for multiple apps or QR codes for different transactions.
    • Wider Acceptance: Users are no longer restricted to specific QR codes; they can utilize their digital wallets linked to UPI for transactions at various merchants, increasing flexibility.
    • Financial Inclusion: Interoperability ensures that users, including those in remote areas, can easily access and use the digital rupee without specialized infrastructure or additional QR codes, promoting financial inclusion.
    • Reduced Transaction Costs: Users can avoid extra fees associated with using multiple payment platforms. Interoperability makes digital rupee transactions more cost-effective.
    • Streamlined Wallet Management: Users can consolidate their digital transactions within a single digital wallet, simplifying financial management.

    Benefits for Merchants

    • Ease of Adoption: Merchants can accept digital rupee payments without the complexity of creating and maintaining a separate QR code for CBDC, simplifying onboarding for businesses, including small retailers.
    • Expanded Customer Base: With interoperability, merchants can cater to a broader range of customers using digital rupees, regardless of whether customers possess a specific QR code.
    • Reduced Infrastructure Costs: Merchants save on expenses related to setting up and maintaining additional payment infrastructure, such as separate QR codes or payment terminals.
    • Efficient Settlement: The integration allows for efficient settlement of digital rupee payments, whether or not the merchant has a CBDC account. This ensures prompt and secure payment receipts for merchants.
    • Increased Sales: Simplified payment options often lead to smoother and quicker checkouts, potentially boosting customer satisfaction and increasing sales for merchants.

    Conclusion

    • The convergence of UPI and CBDC through interoperability marks a transformative phase in the realm of digital payments. With the fusion of two powerful platforms, the retail digital rupee is poised to gain widespread adoption, revolutionizing the landscape of digital transactions in India.

    Also read:

    India’s Central bank digital currency (CBDC) in detail

     

  • The State Hunger Index (SHI)

    What’s the news?

    • Despite boasting the world’s largest public distribution system and comprehensive food security schemes, India’s standing on the Global Hunger Index (GHI) remains alarming.

    Central idea

    • The 2022 GHI ranked India a staggering 107 out of 121 nations, trailing behind Nigeria (103) and Pakistan (99). The GHI, encompassing calorie undernourishment, child malnutrition, and under-five mortality dimensions, highlights India’s ongoing battle against these challenges.

    Extent of the Issue

    • The State of Food Security and Nutrition in the World report for 2022 reveals a staggering statistic – India is home to approximately 224.3 million undernourished individuals.
    • Alarming disparities surface among various states, prompting the utilization of subnational data to develop a more nuanced and localized hunger index.
    • By harnessing such data, India can assess the extent of undernourishment at the state and union territory level, a crucial step towards achieving the Sustainable Development Goals aimed at eradicating hunger and malnutrition.

    The State Hunger Index (SHI)

    • Indicators: The SHI is derived from the Global Hunger Index (GHI) framework, utilizing four main indicators:
      • Prevalence of stunting, wasting, and under-five mortality among children below five years of age.
      • Body Mass Index (BMI) undernourishment among the working-age population.
    • Calorie Undernourishment Replacement: Calorie undernourishment, a GHI indicator, is replaced by BMI undernourishment due to data unavailability post-2012.
    • Data Sources: SHI calculations involve data from various sources, including:
      • National Family Health Survey (NFHS-5)
      • Longitudinal Ageing Study in India (LASI)
    • Calculation: Normalized values of the indicators are combined using techniques recommended by the GHI.
    • Score Range and Categories:
      • SHI scores range from 0 to 100.
      • Higher scores indicate higher hunger levels.
      • The categories of SHI scores are as follows:
        • Below 10: Low hunger
        • 10-20: Moderate hunger
        • 20-30: Serious hunger
        • 30-40: Alarming hunger
        • 50 or above: Extremely alarming hunger

    Findings of the State Hunger Index (SHI)

    • Alarming Hunger Levels: States like Bihar, Jharkhand, and Chhattisgarh have alarmingly high SHI scores of 35, indicating significant hunger levels.
    • Moderate Hunger Levels: States such as Gujarat, Uttar Pradesh, Assam, Odisha, Madhya Pradesh, Tripura, Maharashtra, and West Bengal score above the national average (29), indicating moderate hunger levels.
    • Lower Hunger Levels: Chandigarh stands out with a notably low SHI score of 12, suggesting relatively lower hunger levels.
    • Moderate Hunger Category: States like Sikkim, Puducherry, and Kerala have SHI scores below 16, placing them in the ‘moderate hunger’ category.
    • Serious Hunger Concerns: Several states score below the national average but above 20, pointing to serious hunger challenges in these regions.

    Calorie Undernourishment: A Critical Challenge

    • Deteriorating GHI Score: Over the past few years, India’s Global Hunger Index (GHI) score has worsened primarily due to the increasing prevalence of calorie undernourishment. This underscores the urgent need to address this challenge effectively.
    • Escalating Proportions: Data from the Food and Agriculture Organization reveals that the proportion of calorie undernourishment has been on the rise since 2017, reaching a concerning 16.3% in 2020. This trend mirrors statistics from over a decade ago, such as those from 2009.
    • Government Disputes and Data Concerns: Despite these alarming figures, the Indian government has raised doubts about the accuracy of the data and methodologies employed in calculating the GHI. However, the absence of empirical evidence to support these disputes leaves room for further clarity.
    • Data Limitations: Notably, a challenge in understanding the scale of calorie undernourishment stems from the lack of recent National Sample Survey (NSS) rounds on nutritional intake since 2011-12. This survey previously offered insights into the prevalence of undernourishment at both national and subnational levels.
    • Impact on Health and Development: Calorie undernourishment directly affects health and development, leading to weakened immune systems, stunted growth, impaired cognitive development, and increased susceptibility to diseases.
    • Economic and Social Implications: The persistence of calorie undernourishment has far-reaching socio-economic consequences, hindering productivity, reducing human capital potential, and perpetuating the cycle of poverty.

    Way forward

    • Urgent Focus on Calorie Undernourishment: Recognize the urgent need to address calorie undernourishment, which has contributed to India’s declining GHI score.
    • Reviving NSS Rounds: Prioritize conducting new National Sample Survey (NSS) rounds on nutritional intake to obtain updated and accurate data on undernourishment levels.
    • Evidence-Based Approach: Encourage the Indian government to substantiate their concerns about GHI data accuracy with empirical evidence.
    • Collaborative Efforts: Collaborate between government agencies, NGOs, researchers, and communities to formulate and implement targeted strategies.
    • Alignment with SDGs: Align efforts with Sustainable Development Goals (SDGs), particularly Goal 2 focused on eradicating hunger and malnutrition.

    Conclusion

    • While the GHI is not immune to criticism regarding its methodology and aggregation techniques, it remains a critical tool for gauging undernourishment and child nutrition. Despite strides in reducing extreme poverty, disparities persist in addressing food insecurity, hunger, and child malnutrition. India must prioritize targeted interventions to overcome these challenges and fulfill its commitment to sustainable development.

  • China’s economic slowdown, its ripple effect

    Central Idea

    • The recent news of China’s economic slowdown has sparked a range of responses. China’s concerns about stagnation and the middle-income trap have shifted to fears of deflation, raising global implications. To comprehend the root causes and gravity of China’s current economic dilemmas, it is crucial.

    Background: Unstable Growth and Strategic Choices

    • Premier Wen Jiabao’s Concerns (2007): Premier Wen Jiabao raised alarms in 2007, highlighting instability, imbalances, a lack of coordination, and unsustainability as China’s economic challenges.
    • 2008 Global Financial Crisis Strategy: China responded to the 2008 crisis by investing heavily in infrastructure (railways, highways, energy, and construction) to maintain double-digit growth and stabilize the economy.
    • Deferred Structural Issues: While this strategy spurred growth, it deferred addressing issues like low consumption, regional disparities, and inadequate social security measures.
    • Leadership Imperative for Growth: The need to sustain prosperity for domestic legitimacy drove China’s focus on high growth rates, even if it meant overlooking structural concerns.

    Current Realities

    • Transition to the New Normal: President Xi Jinping’s 2017 shift focused on quality-of-life issues, acknowledging the limitations of export-driven, investment-heavy growth.
    • Acceptance of Slower Growth: China entered the new normal, accepting slower growth rates and requiring adjustments in economic expectations.
    • Challenges in Transition: Slower export growth due to rising labor costs from increased wages and social security investments led to unemployment challenges.
    • Balancing Priorities in the New Normal: Adapting to the “new normal” entails managing the delicate balance between sustainable growth, addressing structural issues, and maintaining social stability.

    Escalating Challenges and the Evergrande Crisis

    • Trade War and De-risking Impact: The escalation of challenges was fueled by the impact of the US-China trade war and the implementation of de-risking strategies. These factors introduced complexities to China’s economic landscape.
    • Evergrande Crisis Unveiled: The Evergrande crisis, spanning from 2020 to 2023, emerged as a significant event exposing vulnerabilities within China’s housing sector. The crisis highlighted potential issues of misregulation and systemic risk.
    • Path-Dependency Concerns: The Evergrande crisis exacerbated concerns about China’s economic dependence. The fear of a crash landing became more pronounced, underscoring the importance of addressing structural challenges.
    • Complexity of Structural Problems: The challenges faced by Evergrande shed light on broader structural issues present within China’s economy. The crisis revealed the intricate interplay of development challenges and regulatory oversights.
    • Policy Implications and Regulatory Oversight: The Evergrande crisis triggered discussions about the need for stronger regulatory oversight and effective policy responses. Stabilizing the housing market has emerged as a critical concern for the government.

    China’s economic slowdown and its ripple effect

    • Global Trade Impact: China’s economic slowdown has implications for global trade. As one of the world’s largest economies and trading partners, China’s reduced economic activity affects international trade flows, impacting both suppliers and consumers worldwide.
    • Commodity Markets: The slowdown has led to decreased demand for commodities such as crude oil, cement, and steel. China’s status as a major consumer in these markets has caused a cooling of prices, impacting countries that rely on exporting these commodities.
    • Supply Chain Disruptions: China plays a critical role in global supply chains. Its economic slowdown and disruptions in production have affected supply chain dynamics, causing delays and disruptions for companies worldwide.
    • Investor Sentiments: China’s economic challenges have led to cautious investor sentiments. Uncertainties about the Chinese economy have influenced global financial markets and investment decisions.
    • Global Economic Growth: China’s slowdown contributes to lower global economic growth rates. The country’s reduced demand for goods and services affects other economies, particularly those that heavily depend on exports to China.
    • Regional Trade Partners: Neighboring countries that have strong economic ties with China, such as those in Asia, are directly impacted by China’s slowdown. Reduced demand for their exports to China affects their economies as well.
    • Currency Exchange Rates: China’s economic slowdown can impact currency exchange rates. Fluctuations in China’s economic performance can influence the value of its currency, affecting exchange rates globally.

    Future Outlook

    • State-Owned Enterprises (SoEs) Challenges: State-owned enterprises, due to preferential treatment and political networks, pose ongoing challenges. Their resistance to change and reliance on political influence can hinder necessary reforms for economic growth.
    • Evergrande Crisis and Systemic Issues: The Evergrande crisis exposed vulnerabilities within China’s housing sector and revealed potential systemic issues. Addressing these challenges is crucial to preventing further disruptions in the economy.
    • Middle-Income Trap and Value Chain Advancement: The looming middle-income trap poses a dilemma for China’s economic trajectory. To avoid stagnation, China must navigate this challenge and advance its position in the global value chain, which requires innovation and upgrading industries.
    • Economic Growth Comparison with India: Despite the challenges, China’s projected 5% growth rate still surpasses India’s anticipated 6.1% growth rate. China’s size and economic influence make this growth rate significant and impactful on global markets.

    Conclusion

    • China’s economic challenges underscore the need for strategic decisions in a shifting landscape. Achieving growth while addressing internal imbalances and global uncertainties remains a formidable task. As China’s economy evolves, its choices will resonate on the international stage, reshaping the perception of its rise and risk appetite.

     

  • Deloitte heaps praises on India’s ONDC

    Central Idea

    • The Open Network for Digital Commerce (ONDC) is poised to revolutionize India’s digital commerce sector, which is projected to reach $350 billion by 2030.
    • Deloitte India recently released a whitepaper that outlines the potential of ONDC and its alignment with India’s Digital Public Infrastructure (DPI).

    ONDC Framework: Enabling Seamless Commerce

    • The ONDC framework leverages India’s Digital Public Infrastructure (DPI) to facilitate seamless commerce interactions.
    • ONDC aims to promote open networks developed through open-source methodologies.
    • The project seeks to combat digital monopolies by creating a platform for all online retailers, based on standardized open specifications and network protocols.

    Understanding Open-Source

    • Open-source projects allow for the free use, study, modification, and distribution of the project for any purpose.
    • ONDC’s open-source approach could potentially impact operational aspects like seller onboarding, vendor discovery, price discovery, and product cataloguing.

    Significance of Open-Sourcing

    • Open-sourcing a process involves making its code or steps freely available for use, redistribution, and modification.
    • Implementing ONDC’s open-source processes could level the playing field for smaller online retailers and new entrants.

    ONDC’s Objectives: Countering Digital Monopolies

    • ONDC aims to digitize value chains, standardize operations, and enhance efficiency, benefiting stakeholders and consumers.
    • Digital monopolies, dominated by e-commerce giants, are being challenged by ONDC, aligned with India’s draft e-commerce policy.

    ONDC Processes and Government’s Move

    • ONDC streamlines processes like seller onboarding, vendor and price discovery, and product cataloguing.
    • The Indian government’s move is spurred by the need to reduce foreign companies’ control over the domestic e-commerce ecosystem.

    Evolution and Challenges of Digital Commerce

    • The whitepaper charts the evolution of digital commerce in India, highlighting the hurdles faced in its early stages.
    • Challenges like resistance from major e-commerce players and MSME compliance burdens must be addressed.
    • Challenges included concerns about security, trust, and the perceived value of digital transactions.
    • ONDC’s framework addresses these challenges, offering agility, security, and profitability simultaneously.

    ONDC’s Impact across Industries

    • Deloitte India emphasized ONDC’s potential to empower various industries.
    • ONDC’s vision aligns with India’s growth trajectory, shifting power towards consumers and small and medium enterprises (SMEs).
    • The framework’s unique proposition bridges gaps in value chains, fosters innovation, and streamlines interactions.

    Agriculture and ONDC

    • ONDC has transformative implications for the agriculture sector.
    • It provides farmers direct access to buyers, eliminating intermediaries.
    • Farmers Producer Organisations (FPOs) can establish direct connections with potential clients, enhancing value chain optimization.
    • This integration benefits various stakeholders, including mandis, corporations, traders, hospitality establishments, and farm-to-table start-ups.

    Unlocking Commerce Potential

    • While India’s digital commerce sector is projected to touch $350 billion by 2030, e-commerce currently constitutes only about 4.3% of retail commerce.
    • ONDC’s innovative approach is poised to drive higher participation in digital commerce, optimizing value chains, and accelerating sector growth.

    Conclusion

    • The Open Network for Digital Commerce (ONDC) is set to redefine India’s digital commerce landscape.
    • The framework’s alignment with India’s Digital Public Infrastructure (DPI) and its potential to foster seamless interactions across industries hold great promise.
    • ONDC’s agility, security, and profitability features make it a catalyst for innovation and economic growth.

  • India as Aviation Transit Hub

    transit hub

    Central Idea

    • In the world of aviation, a transit hub serves as a crucial intermediary point for travelers making their way from one foreign country to another.
    • It’s like a well-orchestrated stopover where passengers switch from one aircraft to another, aiming for a seamless journey.

    What is a Transit Hub in Aviation?

    • A transit hub is like a bridge in the sky, connecting travellers from one foreign destination to another with minimal fuss.
    • It should offer a smooth experience for passengers moving from Country A to Country C via Country B.
    • Such hubs usually rely on a major airline with an extensive network to provide one-stop flights, ideally with no more than a 2 to 3-hour wait between flights.
    • Picture it as a hub-and-spoke model, where flights come together at the hub and then branch out to various destinations, making travel affordable and efficient.

    Can India Become a Transit Hub?

    • In 2018-19, Indian airlines managed 40.2% of air passenger traffic to and from India.
    • This number has grown to 44% in 2022-23, while overseas airlines’ share has shrunk to 56%.
    • India now boasts low-cost carriers for short and medium-haul international flights, including newcomers like Akasa.
    • These trends signal India’s potential to become an economical transit hub, offering essential services to start.

    Which Airlines could make it happen?

    • Air India group and IndiGo are potential game-changers in turning India into a transit hub.
    • Together, they have nearly 1,500 aircraft on order, with most being narrow-body planes capable of covering 5 to 8 hours of travel, including European destinations.

    Any other player for transit hubs?

    • The plan begins with New Delhi, where a collaborative effort between the government, Delhi airport, and airlines seeks to optimize the hub experience.
    • Transit hubs are also in the works for Mumbai, Bengaluru, Hyderabad, and Kolkata, depending on flight origins.
    • Mumbai could be an attractive stop for African travellers, while Delhi might serve Central Europe and West Asia.

    Is there any Policy Support?

    • The Ministry of Civil Aviation endorses the idea, urging airlines to offer more non-stop international routes.
    • Airports and airlines are working to create larger spaces within airports for transit passengers.
    • Initiatives might include dedicated terminals for international flights or large carriers to streamline travel.

    Conclusion

    • India’s aviation landscape is evolving, with a rising share of passenger traffic attributed to domestic airlines and the emergence of low-cost international carriers.
    • The potential for India to become a transit hub is grounded in these shifting dynamics.

  • Decoding the OCCRP’s Adani Report

    adani

    Central Idea

    • Following a Supreme Court directive in March 2023, the Securities and Exchange Board of India (SEBI) was tasked with investigating allegations related to the Adani-Hindenburg matter.
    • The Organized Crime and Corruption Reporting Project (OCCRP) has recently unveiled new allegations against the Adani Group, adding to the scrutiny.

    OCCRP’s allegations against Adani Group

    • OCCRP’s report alleges stock manipulation by the Adani Group.
    • The report cites exclusive documents indicating that investors connected to the Adani family influenced Adani companies’ stock prices.
    • The Adani Group has strongly denied these allegations, attributing them to “Soros-funded interests.”

    What is OCCRP?

    • The Organized Crime and Corruption Reporting Project (OCCRP) is a global network of investigative reporters.
    • Founded by Drew Sullivan and Paul Radu in 2006, OCCRP focuses on investigating organized crime and systemic corruption.
    • OCCRP has grown to over 150 journalists in 30 countries and collaborates with regional partners and organizations like the Global Investigative Journalism Network.

    OCCRP’s Impact

    • OCCRP’s investigative efforts have led to numerous official investigations, arrests, resignations, and substantial fines.
    • It played a pivotal role in high-profile probes, including investigations on Russia’s oligarchs and the Panama Papers project.
    • The organization has been nominated for the Nobel Peace Prize for its contributions in unmasking political corruption and organized crime.

    SEBI’s Investigation

    • SEBI was directed by the Supreme Court to investigate Rule 19A violations, non-disclosure of related party transactions, and stock price manipulation.
    • The OCCRP investigation alleges that Mauritius-based funds, connected to the Adani family, invested in Adani companies’ stocks.
    • A UAE-based firm, linked to Adani, purportedly received advisory fees from the investment funds.
    • The OCCRP’s evidence, along with the Hindenburg report, suggests potential regulatory breaches and contraventions by the Adani Group.

    Decoding Rule 19A

    • Rule 19A is a significant provision of the Securities Contracts (Regulation) Rules, 1957.
    • It mandates that any company listed on the Indian stock market must maintain a minimum of 25 per cent public shareholding.
    • “Public” in this context refers to individuals other than the “promoter and promoter group.” These terms encompass immediate family members and subsidiaries or associates of the company.
    • This rule ensures that a sufficient number of a listed company’s shares are available for trading, promoting price discovery.

    SEBI’s Response and Expert Committee

    • SEBI is conducting investigations into Adani-Hindenburg matters, with some investigations still ongoing.
    • The Expert Committee has reported regulatory loopholes facilitating the concealment of “ultimate beneficiary ownership” and transactions with “related parties.”
    • SEBI’s handling of alerts generated in relation to Adani stocks and its evaluation of suspected FPIs have raised questions about its role.

    Conclusion

    • OCCRP’s investigation provides further allegations against the Adani Group, accentuating regulatory concerns.
    • The complex web of potential regulatory violations and economic crimes warrants a thorough forensic audit by an independent auditor.
    • SEBI’s role in the investigation, regulatory amendments, and handling of alerts requires scrutiny to ensure transparency and accountability.

  • Understanding Curbs on Rice Exports

    rice

    Central Idea

    • The Indian government takes measures to stabilize domestic rice prices and ensure food security.
    • Recent actions include banning white rice exports, imposing a 20% export duty on par-boiled rice, and allowing Basmati rice exports under specific conditions.

    Rice Production Estimate: Shows decline

    • Third Advanced Estimate shows a 13.8% decline in Rabi season 2022-2023’s rice production.
    • Kharif sowing data indicates increased rice cultivation, but delayed sowing predicted due to monsoon issues.
    • Expectations of new season crop arrivals starting after the first week of September.

    Rice Exports

    • India holds a 45% share in the global rice market and leads in exports.
    • April-May 2023 rice exports show a 21.1% increase compared to the previous fiscal year.
    • May records a 10.86% rise in Basmati rice exports and 7.5% increase in non-Basmati rice exports.
    • Non-Basmati rice shipments have been rising for three years, and Basmati exports in 2022-2023 exceed the previous year.
    • Total rice exports (excluding broken rice) till August 17 are 15% higher than the same period last year.

    Impact on Indian Farmers

    • Increased Minimum Support Price (MSP) for rice benefits farmers.
    • Current paddy procurement prices by rice millers are higher than MSP, ensuring better returns.
    • Export restrictions prevent steep rice price increases in the domestic market.
    • The government’s high benchmark price strategy benefits farmers, ensures availability, and avoids price spikes.

    Exporters’ Perspectives

    • Competitive prices of Indian par-boiled rice globally, despite the 20% export duty.
    • Some rice-exporting countries, like Indonesia, now seek imports due to market dynamics.
    • Calls for classifying rice based on type (common vs. specialty) instead of Basmati and non-Basmati.
    • Suggestion to insulate Geographical Indication (GI) recognized rice from general market interventions.
    • Concerns about the impact of export restrictions on farmers and calls for policy adjustments.

    Conclusion

    • India’s efforts to balance domestic and international rice markets involve export restrictions and price management.
    • Rice exports remain competitive even with export duty, driven by global demand.
    • Export policies and decisions need to be aligned with market dynamics to benefit farmers and the economy.

  • Sanchar Saathi: Empowering Citizens

    Central Idea

    • Recent reforms in the Indian telecom sector target cybercrime and financial fraud prevention.
    • The reforms focus on revising bulk SIM card procurement norms and registering final points of sale (PoS).
    • The objective is to bolster the effectiveness of the citizen-centric portal Sanchar Saathi, initiated earlier for the same purpose.

    Sanchar Saathi: Empowering Citizens

    • Sanchar Saathi empowers citizens to manage mobile connections and prevent misuse.
    • Users can verify their registered connections, block stolen or lost phones, report suspicious connections, and verify device authenticity using IMEI.
    • The system employs Central Equipment Identity Register (CEIR) and Telecom Analytics for Fraud Management and Consumer Protection (TAFCOP) modules.
    • Sanchar Saathi has already analyzed 114 crore active mobile connections, identified 66 lakh suspicious connections, and disconnected 52 lakh connections.
    • Additional achievements include blocking 66,000 WhatsApp accounts and freezing 8 lakh bank/wallet accounts linked to fraud.
    • Over 300 FIRs have been filed against more than 1,700 dealers under the initiative.

    Point of Sale (PoS) Reforms

    • Reforms mandate registration of SIM card franchisees, agents, and distributors (PoS) with telecom operators.
    • Operators are accountable for robust PoS verification, including mandatory police verification.
    • Written agreements between PoS and licensees for SIM card sales are now obligatory.
    • Existing SIM card providers are given a year to comply with the new registration process.
    • Non-compliance results in termination, a 3-year blacklist, and a Rs 10 lakh penalty.

    Addressing Bulk SIM Card Misuse

    • The new approach replaces ‘bulk procurement’ with ‘business’ connections.
    • Businesses can procure numerous connections, but each end-user must undergo KYC.
    • KYC involves end-user verification, activating the SIM card only after successful KYC and address verification.
    • To prevent misuse of printed Aadhaar, demographic details must be captured by scanning the QR code.
    • Subscribers require full KYC for SIM replacement; outgoing and incoming SMS services are suspended for 24 hours during this process.
    • Biometric authentication options, including thumb impression, iris, and facial recognition, are introduced.
    • Disconnected mobile numbers cannot be assigned to other customers for 90 days.

    Challenges and Considerations

    • Effective enforcement at the local level for smaller stores needs examination.
    • Concerns arise regarding infrastructure and safeguards for handling sensitive data.
    • Clarity on agent requirements for data acquisition, processing, and retention is necessary.
    • Despite Aadhaar-based KYC, persisting issues in fraud prevention need attention.
    • Data acquisition should strictly align with its intended purpose.

    Conclusion

    • The telecom reforms aim to strengthen cybersecurity and financial safety.
    • Balancing effective data collection and privacy is essential.
    • Continuous vigilance and adaptation are vital to a robust cybersecurity framework.

  • Understanding curbs on rice exports

    What’s the news?

    • The Indian Government Implements Rice Export Restrictions to Stabilize Domestic Prices

    Central Idea

    • In a bid to control domestic rice prices and safeguard the country’s food security, the Indian government has implemented a series of measures that impact rice exports and production. These steps include prohibiting the export of white rice, imposing a 20% export duty on par-boiled rice and allowing the export of Basmati rice only for contracts valued at $1,200 per tonne or higher.

    What is the rice production estimate?

    • Rabi season: According to the third Advanced Estimate of the Department of Agriculture and Farmers Welfare, during the Rabi season 2022-2023, rice production was 13.8% less, at 158.95 lakh tonnes tons, compared to 184.71 lakh tonnes during Rabi 2021-2022.
    • Kharif season: Kharif sowing data show that rice is sown on 384.05 lakh hectares this year as on August 25 compared with 367.83 lakh hectares during the same period last year.
    • Shortfall in the south-west monsoon: In states such as Tamil Nadu, where the Samba crop sowing usually starts in August in the Cauvery delta area, now it will be delayed due to a shortfall in the south-west monsoon.
    • El Niño effects: Trade and rice millers say that new-season crop arrivals will start after the first week of September, and that El Niño effects are likely to impact arrivals to some extent. According to M. Sivanandan, secretary of the Tamil Nadu Rice Millers Association, paddy prices that were ₹27 a kg last year this month is at ₹33 a kg now.

    Rice Exports Overview

    • India’s Global Leadership: India boasts the position of being the world’s largest rice exporter, holding a significant 45% share in the global rice market.
    • Export Growth in 2023: During the months of April and May in 2023, rice exports surged significantly by 21.1% compared to the same period in the preceding fiscal year.
    • Basmati Rice Export Surge: Notably, the month of May saw a remarkable growth of 10.86% in Basmati rice exports as opposed to May 2022.
    • Non-Basmati Exports Rise: Despite the introduction of a 20% export duty on white rice and the prohibition of broken rice exports in September, non-Basmati rice shipments saw a noteworthy increase of 7.5% in exports.

    Trends and Data

    • Steady Non-Basmati Exports: The trend of rising non-Basmati rice exports has remained consistent over the past three years.
    • Basmati Exports Performance: Data from the All-India Rice Exporters’ Association indicates that exports of Basmati rice for the 2022-2023 period surpassed the figures from the previous year.
    • August 17 Exports: Up until August 17, 2023, the total rice exports (excluding broken rice) reached 7.3 million tonnes, showcasing a substantial 15% increase in comparison to the 6.3 million tonnes recorded during the corresponding period in the preceding year.

    Global Challenges and Impact

    • Challenges in Other Nations: Beyond India, several countries are grappling with challenges in rice production and exports.
      • Thailand anticipates a nearly 25% decrease in production in the upcoming year.
      • Myanmar has halted raw rice exports.
      • Adverse crop conditions are reported in Iraq and Iran, affecting their rice crops.

    How Will These Measures Help India?

    • Food Security Assurance: Banning rice exports ensures a steady supply of rice within the country.
    • Price Stability: By restricting rice exports, the government can prevent abrupt spikes in domestic rice prices.
    • Supporting Vulnerable Populations: The ban on exports helps maintain affordable prices for rice.
    • Managing Supply Chain Resilience: Export bans mitigate disruptions in the rice supply chain. This ensures that even in the face of challenges such as adverse weather conditions or logistical issues, the availability of rice in the domestic market remains consistent.
    • Strengthening Local Procurement: By redirecting rice to local markets, the government can enhance its efforts to procure grains for public distribution programs.

    Concerns Raised

    • Export Revenue Impact: Exporters might experience reduced revenue due to limited access to international markets. This can affect their financial viability and potentially lead to job losses within the export sector.
    • Trade Relations: Imposing export bans could strain trade relationships with countries that rely on India as a rice supplier. Diplomatic efforts might be required to manage any potential tensions arising from these restrictions.
    • Long-Term Export Effects: Prolonged export restrictions could result in a loss of market share over time. Competing rice-exporting countries might seize the opportunity to strengthen their presence in international markets, impacting India’s export potential once the ban is lifted.
    • Global Food Price Influence: Reduced rice supply from a major exporter like India could contribute to global food price volatility, affecting the food security of other nations.
    • Efficiency Concerns: In some cases, export bans might lead to inefficiencies in resource allocation. If farmers have surplus produce that cannot be exported, it could result in wastage or inadequate storage facilities.

    What can Indian farmers expect?

    • Minimum Support Price (MSP) Increase: The government has raised the Minimum Support Price (MSP) for rice, indicating that farmers can anticipate better returns for their crops. This ensures that the paddy purchased by rice millers will be priced higher than the MSP, providing farmers with improved income.
    • Price Stability for Farmers: Rice prices are not expected to decline for farmers due to the increased MSP and other measures. This stability in prices can contribute to more consistent and predictable incomes for agricultural producers.
    • Controlled Rice Price Climbs: The restrictions on rice exports are designed to prevent steep price increases in the domestic market. Farmers can expect that the government’s efforts to stabilize rice prices will positively impact their ability to fetch reasonable rates for their produce.
    • Better Income Prospects: With a higher benchmark price established by the government, farmers are likely to benefit from improved earnings. This elevation in benchmark prices is expected to translate into better market rates for their rice.
    • Secured Long-Term Availability: While there may be a minor current increase in rice prices for domestic consumers, the long-term availability of rice is secured. Farmers can anticipate a steady demand for their produce without fear of drastic price fluctuations.

    Suggestions provided by exporters

    • Reclassification for Export Decisions: Exporters suggest that the government should classify rice as either common rice or specialty rice for export policy decisions, rather than solely categorizing it as Basmati and non-Basmati. This approach aims to tailor policies to different rice varieties.
    • Geographical Indication Recognition: Trade policy consultant S. Chandrasekaran proposes that rice varieties with Geographical Indication (GI) recognition should be shielded from general market interventions. This measure aims to preserve the unique qualities of these specific rice types.
    • Basmati Rice Export Policy: A Basmati rice exporter, Mohit Gupta, recommends that the government should have allowed Basmati rice exports to continue or set a minimum value for exports, such as $900 per tonne. Gupta argues that such restrictions could impact both exporters and farmers, as demand influences paddy purchases.

    Conclusion

    • The Indian government’s recent measures to control rice exports and stabilize the domestic market exhibit a multifaceted approach. As stakeholders await further developments and clarifications on government policies, the long-term impact on Indian agriculture and rice exports remains an evolving narrative.

  • Magic Rice ‘Chokuwa Saul’ gets GI Tag

    chokuwa

    Central Idea

    • Chokuwa rice, the unique possession of Assam’s Ahom dynasty, recently earned a GI (Geographical Indication) tag.

    Chokuwa Saul

    • Chokuwa rice, a semi-glutinous winter rice type known as Sali rice, carries the legacy of the past.
    • The rice variety is classified into Bora and Chokuwa based on amylose concentration, which affects stickiness.
    • The Chokuwa variant, low in amylose, yields soft rice, referred to as Komal Chaul.
    • This whole grain can be consumed after a preliminary soaking process.
    • Its versatility extends to its application in traditional Assamese delicacies like Pithe and various local dishes.
    • It is primarily cultivated in the Brahmaputra region and various parts of Assam, including Tinsukia, Dhemaji, Dibrugarh, Lakhimpur, Sivasagar, Jorhat, Golaghat, Nagaon, and Morigaon.

    Back2Basics: Geographical Indication (GI)

    • A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Nodal Agency: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
    • India, as a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 w.e.f. September 2003.
    • GIs have been defined under Article 22 (1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
    • The tag stands valid for 10 years.