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Subject: Economics

  • What ails the Ken-Betwa River Link Project?

    ken-betwa

    The Steering Committee of the Ken-Betwa Link Project (KBLP) held its third meeting in New Delhi.

    What is the Ken Betwa Link Project?

    • The Ken-Betwa Link Project is the first project under the National Perspective Plan for the interlinking of rivers.
    • Under this project, water from the Ken River will be transferred to the Betwa river.
    • Both these rivers are tributaries of the river Yamuna.

    The Project has two phases:

    • Under Phase-I, one of the components — Daudhan dam complex and its appurtenances like Low Level Tunnel, High Level Tunnel, Ken-Betwa link canal and Power houses — will be completed.
    • While in the Phase-II, three components — Lower Orr dam, Bina complex project and Kotha barrage — will be constructed.

    Utility of the Project

    • Irrigation: The project is slated to irrigate 10.62 lakh hectares annually, provide drinking water supply to 62 lakh people and generate 103 MW of hydropower and 27 MW of solar power.
    • Water supply: The project will be of immense benefit to the water-starved Bundelkhand region, spread across Madhya Pradesh and Uttar Pradesh.
    • Agricultural boost: The project is expected to boost socio-economic prosperity in the backward Bundelkhand region on account of increased agricultural activities and employment generation.
    • Addressing Rural Distress: It would also help in arresting distress migration from this region.

    Ecological issues with the project

    • The government’s plan is based on a ‘surplus and deficit’ model that have little basis in science.
    • There may not even be enough water in the Ken, a non-perennial river, to meet the projected needs of the Betwa – forget the needs of the Bundelkhand region.
    • UP and MP could not agree on how water would be shared, particularly in the non-monsoonal months.
    • The project plans to create a high reservoir-dam on the Ken River in the Panna National Park and Tiger Reserve for the KBLP.
    • Downstream of the national park lies the Ken Gharial Sanctuary, created to protect the critically endangered Gangetic gharial (Gavialis gangeticus).

    What are the legal problems?

    • Approval by the Standing Committee of the National Board for Wildlife to the Ken-Betwa link Project has not been proved.
    • This is necessary for the improvement and better management of the wildlife therein as provided in Section 35(6) of the Wildlife (Protection) Act, 1972.

    Issues with the projects

    • Migration: It will lead to massive displacement of people
    • Topography change: Since the Ganga basin topography is flat, building dams would not substantially add to river flows.
    • Inundation: The transfer of such enormous amounts of water will inundate forests and land for reservoirs.
    • Seismic hazards: The weight of billions of liters of water can have seismic implications in the Himalayan region.
    • Financial expense: River inter-linking is an expensive business from building the link canals to the monitoring and maintenance of infrastructure.
    • Political will: Implementation of the project not only needs a huge financial capital but also political support both is scarce commodities as of now.
    • Consensus building for land acquisition: Another important issue is building consensus among states and Land acquisition.
    • Ecological feasibility: Once the project is implemented it would lead to large-scale displacement of people and animals.

    Criticisms of such projects

    • Bad Science: Such projects are built on bad science and an outdated understanding of water systems and water management.
    • Human determinism: Such projects go in contravention with natural process thereby generating more scope for threat than any opportunity.

    Way forward

    • Due diligence: Expert scrutiny during the project-approval stage are cornerstones of sound environmental governance.
    • Independent hydrological study: of these rivers is necessary.

    Conclusion

    • No developmental project should destroy the ecology of remnant fragile ecosystems and an important tiger habitat in the country.
    • Destructive impact of the proposed dam on the flow of water into and outside of this sanctuary should be immediately clear, as also its violation of the requirement under the Act for a sanctuary

     

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  • Insolvency and Bankruptcy Code 2016 (IBC)

    Insolvency

    Context

    • The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 brought about a structural change in the resolution architecture in the country. However, despite its promise, the IBC, in its functioning, has fallen short of expectations. Last week, the Ministry of Corporate Affairs invited comments on a fresh set of changes it is considering to bring about in the Code. This is a welcome step.

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    What is Insolvency?

    • Simply speaking, insolvency is a financial state of being one that is reached when you are unable to pay off your debts on time.
    • Insolvency is essentially the state of being that prompts one to file for bankruptcy. An entity a person, family, or company becomes insolvent when it cannot pay its lenders back on time.

    Insolvency

    What is Bankruptcy?

    • Bankruptcy, on the other hand, is a legal process that serves the purpose of resolving the issue of insolvency.
    • Bankruptcy is a legal declaration of one’s inability to pay off debts. When one files for bankruptcy, one obliges to pay off what is owed with help from the government.

    What is the Insolvency and Bankruptcy Code 2016 (IBC)?

    • The IBC was enacted in 2016 to simplify insolvency and bankruptcy proceedings, safeguard interests of all stakeholders (the firm, employees, debtors and especially creditors), and resolve non-performing assets.
    • From a ‘debtor in possession’ regime, it was a shift to a ‘creditor in control’ one.
    • IBC provides for a time-bound process for resolving insolvencies.
    • The Insolvency and Bankruptcy Board of India (IBBI) is the regulator implementing the code and overseeing the functioning of stakeholders.

    Why the IBC introduced?

    • Increasing Non-Performing Assets: In 2016, at a time when India’s Non-Performing Assets and debt defaults were piling up, and older loan recovery mechanisms were performing badly, the IBC was introduced to overhaul the corporate distress resolution regime in India.
    • Time bound mechanism: To consolidate previously available laws to create a time bound mechanism with a creditor­ in­ control model as opposed to the debtor ­in ­possession system.
    • Two positive outcomes: When insolvency is triggered under the IBC, there can be just two outcomes: resolution or liquidation. liquidation means the process of winding up a corporation or incorporated entity

    Insolvency

    What are the shortcomings in the code’s functioning?

    • Timelines are not followed: Realizations of creditors have been lower than expectations, and the strict timelines prescribed in the Code for resolving cases have not been adhered to.
    • Less realizable value: According to the most recent data, the total realisable value in cases resolved till September 2022 stood at only 30.8 per cent of the admitted claims.
    • Average time is rising: The data also shows that 64 per cent of the ongoing cases have crossed 270 days. In fact, as per reports, the average time taken for cases to be resolved has risen, driven in part by more time being spent on associated litigation.

    Insolvency

    Proposals to address the shortcomings

    • Removing ambiguity and bringing the predictability: The changes aim to reduce the time for admitting cases and streamline the process by pushing for greater reliance on data with Information Utilities. Considering the delays in admitting cases, and the implications of recent judicial interventions, this proposal seeks to remove ambiguity, and bring about predictability in the process.
    • Extending the pre-packed resolution to other firms: It has also been proposed that the pre-packaged insolvency resolution process that was introduced for micro, small and medium enterprises now be extended to other firms as well. While such a proposal should be appealing, so far very few cases have been admitted under this.
    • A clear distinction between the real estate projects: A distinction is now being made between a particular real estate project and the larger corporate entity. The government’s rationale for doing so is that this could allow the corporate entity to continue on other projects, while the stressed project can be tackled separately.
    • Changes to the manner in which proceeds will be distributed: Creditors will receive proceeds up to the liquidation value in line with the priority as prescribed under section 53 of the Code, and any surplus over such liquidation value will be rateably distributed between all creditors in the ratio of their unsatisfied claims.

    Conclusion

    • Attempts to improve IBC’s functioning are welcome. But some of the proposals need more careful examination. Changes to the Code should, after all, be driven by the objective of improving its functioning, and outcomes. This should be done keeping in mind the incentive structures of all stakeholders.

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  • RBI says no Foreign Investment cap on Sovereign Green Bonds

    green bond

    The sovereign green bonds issued by the Indian government will not have any restrictions on foreign investment, the Reserve Bank of India (RBI) said.

    What are Sovereign Green Bonds?

    • A bond is an instrument to raise debt.
    • Since 2007, a market for bonds specifically self-labeled or designated as ‘green’ has emerged.
    • This label differentiates a green bond from a regular bond, which signifies a commitment to exclusively use funds raised to finance or re-finance “green” projects, assets, or business activities.
    • When these bonds carry guarantees related to the repayment of principal and payment of interest by the sovereign or the government, they are called sovereign green bonds (SGrB).

    How are the projects for green bonds selected?

    • A project is classified “green” on the basis of four key principles. These include-
    1. Encouraging energy efficiency in resource utilisation
    2. Reducing carbon emissions and greenhouse gases
    3. Promoting climate resilience and
    4. Improving natural ecosystems and biodiversity, especially in accordance with SDG (Sustainable Development Goals).

    When is the first sovereign green bond likely to be issued? 

    • In her Budget speech early this year, Finance Minister announced that sovereign green bonds will be issued for mobilising resources for green infrastructure.
    • The proceeds will be deployed in public sector projects that help in reducing the carbon intensity of the economy.
    • These green bonds would be available in 5-year and 10-year tenure.

    How are they different from conventional government bonds?

    • Government bonds or government securities (G-Secs) are normally categorised into two — Treasury Bills and dated or long-term securities.
    • These bonds carry coupon rates and are tradable in the securities market.
    • SGrB is one form of dated security. It will have a tenor and interest rate.
    • Money raised through SGrB is part of overall government borrowing.

    Who are likely to be the buyers of these bonds? 

    • Both domestic and international investors are expected to be interested in SGrB.
    • However, one thinking is foreign investors may be slightly hesitant due to currency risk.

     

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  • State of the Economy Report and the Macroeconomic Stability

    Economy

    Context

    • The Reserve Bank of India (RBI) just-released State of the Economy report. The report suggests that while controlling inflation was a big concern in 2022, the bank may now be more focused on avoiding a recession in 2023. There is still debate about whether the recession will be short and mild or long and severe.

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    What is State of the Economy report?

    • A State of the Economy report is a paper that the Reserve Bank of India (RBI) releases which gives a summary of how the country’s economy is doing.
    • The report talks about things like prices going up, how much the economy is growing, how many people have jobs, and the bank’s plan for managing money.
    • The RBI uses the report to make decisions about interest rates and other economic rules, and it also helps people like economists, investors, and regular citizens understand the economy and make smart choices.

    Economy

    What the RBI’s State of the Economy report says?

    • Retail inflation eased: Retail inflation eased to 5.72 per cent in December. In November, the inflation print was 5.88 per cent. The government has mandated the central bank to keep inflation at 4 per cent with a +/- 2 per cent band.
    • Consumer price inflation within RBI’s upper tolerance limit: The report said the country’s macroeconomic stability is getting bolstered with inflation being brought into the tolerance band. consumer price inflation in the last two months falling within the RBI’s six per cent upper tolerance limit
    • Hopeful for the fiscal consolidation: It is even hopeful of fiscal consolidation underway at central and sub-national levels and the external current account deficit on course to narrow through the rest of 2022 and 2023. RBI said in a report that they want to keep prices steady at a certain level and bring it down to 4% by 2024.
    • Narrowing CAD: Lead indicators suggest that the current account deficit is on course to narrow through the rest of 2022 and 2023.
    • Stock market continue to outperform peers: The country’s stock markets stood out in 2022 and continue to outperform peers on the strength of macroeconomic fundamentals and retail participation.

    Who prepares the report and what the authors says?

    • Views expressed are not of the institution: The report was prepared by RBI’s deputy governor Michael Patra and other RBI officials. The views expressed in the report are of the authors and not of the institution, the report said.
    • India at a bright spot: Authors said the prospect of India as a bright spot amidst 2023’s encircling gloom is burnished by most recent history and current developments. By cross-country standards, the country’s economy exhibited resilience through 2022 in the face of the triad of shocks war; monetary policy tightening; and recurring waves of the pandemic.
    • India will be ahead of UK: According to the authors, at current prices and exchange rates, India will still be the 5th largest economy in the world in 2023, worth $3.7 trillion and will be ahead of the UK.

    Economy

    Back to basics: What is Monetary policy?

    • Monetary policy is the macroeconomic policy laid down by the central bank.
    • It involves the management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
    • A contractionary policy increases interest rates and limits the outstanding money supply to slow growth and decrease inflation.
    • During times of slowdown or a recession, an expansionary policy grows economic activity, by lowering interest rates, saving becomes less attractive, and consumer spending and borrowing increase.

    What are the concerns and prognosis over the report?

    • Predictions are too optimistic: The report’s release is significant, as it comes before the Union Budget for 2023-24. However, the report’s predictions may be too optimistic.
    • Risks tilted towards growth than inflation: The balance of risks is currently tilted towards growth rather than inflation, both globally and domestically.
    • Slowing down the pace of monetary tightening: It is appropriate for the RBI to slow down or pause the pace of monetary tightening. Monetary policy takes time to have an effect, so the impact of these increases may take a few quarters to realise actually.
    • Wait and Watch Approach: The RBI can afford to adopt a wait-and-watch approach and allow the impact of past actions to be fully felt. This does not mean neglecting inflation, as bringing it down to 4% is still important.

    Economy

    Conclusion

    • The world is, no doubt, viewing India favourably as an investment destination, both for its large domestic market and the need to de-risk from China in the current geopolitical environment. The government’s focus on improving the country’s physical as well as digital infrastructure is boosting the investors’ confidence. Demonstrating macroeconomic stability and policy credibility can be the icing on the cake to bring the world to India.

    Mains question

    Q. Highlight RBI’s State of the Economy report and discuss what makes India a favorable investment destination?

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  • What are Additional Tier-1 (AT-1) Bonds?

    The Bombay High Court has quashed the write-off of Additional Tier-1 (AT1) bonds worth Rs 8,400 crore issued by Yes Bank Ltd, bringing relief to investors.

    What are AT1 bonds?

    • AT-1, short for Additional Tier-1 bonds, are a type of unsecured, perpetual bonds that banks issue to shore up their core capital base to meet the Basel-III norms.
    • AT-1 bonds are complex hybrid instruments, ideally meant for institutions and smart investors who can decipher their terms and assess if their higher rates compensate for their higher risks.
    • They carry a face value of ₹10 lakh per bond.
    • There are two routes through which retail folk have acquired these bonds — initial private placement offers of AT-1 bonds by banks seeking to raise money; or secondary market buys of already-traded AT-1 bonds based on recommendations from brokers.

    Why are they important?

    AT-1 bonds have several unusual features lurking in their fine print, which make them very different from plain bonds.

    • One, these bonds are perpetual and carry no maturity date. Instead, they carry call options that allow banks to redeem them after five or 10 years. But banks are not obliged to use this call option and can opt to pay only interest on these bonds for eternity.
    • Two, banks issuing AT-1 bonds can skip interest payouts for a particular year or even reduce the bonds’ face value without getting into hot water with their investors, provided their capital ratios fall below certain threshold levels. These thresholds are specified in their offer terms.
    • Three, if the RBI feels that a bank is tottering on the brink and needs a rescue, it can simply ask the bank to cancel its outstanding AT-1 bonds without consulting its investors. This is what has happened to YES Bank’s AT-1 bond-holders who are said to have invested ₹10,800 crore.

     

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  • Forex Reserves zoom by $10.417 billion to $572 billion

    India’s forex reserves zoomed by $10.417 billion to $572 billion, making it one of the biggest weekly jumps in recent times.

    Recent trends in FOREX Reserves

    • In the previous reporting week, the overall reserves had dropped by $1.268 billion to $561.583 billion.
    • In October 2021, the country’s forex reached an all-time high of $645 billion.
    • The reserves have been declining as the central bank deploys the kitty to defend the rupee amid pressures caused majorly by global developments.
    • In October 2022, the reserves had swelled by $14.721 billion during a week.

    What is Foreign Exchange (Forex) Reserve?

    • Foreign exchange reserves are important assets held by the central bank in foreign currencies as reserves.
    • They are commonly used to support the exchange rate and set monetary policy.
    • In India’s case, foreign reserves include Gold, Dollars, and the IMF’s quota for Special Drawing Rights.
    • Most of the reserves are usually held in US dollars, given the currency’s importance in the international financial and trading system.
    • Some central banks keep reserves in Euros, British pounds, Japanese yen, or Chinese yuan, in addition to their US dollar reserves.

    India’s forex reserves cover:

    1. Foreign Currency Assets (FCAs)
    2. Special Drawing Rights (SDRs)
    3. Gold Reserves
    4. Reserve position with the International Monetary Fund (IMF)

    Countries with the highest foreign reserves

    • Currently, China has the largest reserves followed by Japan and Switzerland.
    • India earlier overtook Russia to become the fourth-largest country with foreign exchange reserves. (Data from August 2022)
    1. China – $3,349 Billion
    2. Japan – $1,376 Billion
    3. Switzerland – $1,074 Billion
    4. Russia – $597.40 Billion

    Why are these reserves so important?

    • All international transactions are settled in US dollars and, therefore, required to support India’s imports.
    • More importantly, they need to maintain support and confidence for central bank action, whether monetary policy action or any exchange rate intervention to support the domestic currency.
    • It also helps to limit any vulnerability due to sudden disturbances in foreign capital flows, which may arise during a crisis.
    • Holding liquid foreign currency provides a cushion against such effects and provides confidence that there will still be enough foreign exchange to help the country with crucial imports in case of external shocks.

    Initiatives taken by the government to increase forex

    • To increase the foreign exchange reserves, the Government of India has taken many initiatives like AatmaNirbhar Bharat, in which India has to be made a self-reliant nation so that India does not have to import things that India can produce.
    • Other than AatmaNirbhar Bharat, the government has started schemes like Duty Exemption Scheme, Remission of Duty or Taxes on Export Product (RoDTEP), Nirvik (Niryat Rin Vikas Yojana) scheme, etc.
    • Apart from these schemes, India is one of the top countries that attracted the highest amount of Foreign Direct Investment, thereby improving India’s foreign exchange reserves.

     

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  • What constitutes a Trademark Violation?

    trademark

    The Delhi High Court dismissed a case of trademark infringement brought by the global fast food chain against a Delhi-based restaurant.

    What is a trademark?

    • A trademark is a symbol, design, word or phrase that is identified with a business.
    • When a trademark is registered, its owner can claim “exclusive rights” on its use.
    • The Trademark Act, 1999, governs the regime on trademark and its registration.
    • The Act guarantees protection for a trademark that is registered with the Controller General of Patents, Designs, and Trademarks, also known as the trademark registry.
    • A trademark is valid for 10 years, and can be renewed by the owner indefinitely every 10 years.

    Violation of trademark

    • Using a registered trademark without authorization of the entity that owns the trademark is a violation or infringement of the trademark.
    • Using a substantially similar mark for similar goods or services could also amount to infringement.
    • In such cases, courts have to determine whether this can cause confusion for consumers between the two.
    • There are several ways in which a trademark can be infringed. However, the trademark owner has to show that the trademark has a distinct character-
    1. Deceptive similarity: The law states that a mark is considered deceptively similar to another mark if it nearly resembles that other mark, confusing the consumer in the process. Such deception can be caused phonetically, structurally or visually.
    2. Passing off: Say, a brand logo is misspelt in a way that’s not easy for the consumer to discern. The Supreme Court has ruled that passing off is a “species of unfair trade competition or of actionable unfair trading by which one person, through deception, attempts to obtain an economic benefit of the reputation which other has established for himself in a particular trade or business”.

     

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  • Economic growth and the government disintermediation

    Context

    • Between spending and saving, governments are generally better at the former. High growth comes with the advantage that government revenue expands and gets spent, as is happening this fiscal. But this is also habit-forming. If growth tapers down as is expected in FY 2024 cutting back government spending will be politically rocky just before a general election. Better then, to get selective on spending early on.

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    Current economic indicators

    • Finance Minister Nirmala Sitharaman took over the hot seat in May 2019. True to character, she resolved to pick up this rolling can by tabling in the FY 2021 budget, an amount of INR 2.64 trillion (1.2 percent of GDP) to pay these overdues.
    • India, yet again, in an era of high inflation and high oil import prices. It has taken courage and sagacity to reduce the FD from 9.2 percent (FY 2021—the COVID-19 year) to a targeted 6.4 percent this fiscal.

    Challenges to establish a declining trend back towards an FD of 3.5 percent of GDP

    • The oil slick of global uncertainty and inflation: Oil price uncertainties, created by the Ukraine standoff, which was partially cushioned via nimble Indian diplomacy resisting the boycott of cheaper Russian oil, has kept imported oil at US$77.7 per barrel in January 2023. But the ongoing opening up of China could firm up oil prices.  
    • India’s high-debt burden compromises fiscal resilience: Interest payments in FY 2023 (budgeted) at INR 9.4 trillion, are the largest expense outlay bucket, accounting for 43 percent of budgeted Union net revenue receipts, up from 41.7 percent in FY 2021. Defence and domestic security services at 15 percent come next, followed by subsidies (food, fertilizers, and fuel) at 14 percent and inflation-indexed government pensions at 9 percent.
    • Infrastructure lags: Infrastructure remains a drag on growth although intercity highways have improved. Multimodal transport solutions remain underdeveloped as do train stations and bus terminals in most towns and rural areas. The competitiveness of major Indian ports in 2018 was ranked 42nd well below China, Malaysia and Thailand- pulled down by low outcomes in infrastructure and turn-around time. The gas grid remains nascent with just 10.1 million connections versus 309 million users for LPG canisters a more volatile substitute for cooking fuel, than piped natural gas.

    What is the worrying situation?

    • Inflation: The Reserve Bank of India (RBI) expects retail inflation, assessed at 5.78 percent (December 2022) to trend downwards in FY 2024. But signals of embedded inflation via core inflation (other than volatile food and fuel) above 6 percent are worrying.
    • Disrupted energy supply: A disruption in energy supplies could upset sanguine inflation expectations.
    • Taming inflation would increase fiscal crunch: Taming the resulting inflation by reducing taxes on the retail supply of petroleum products would increase the fiscal crunch.
    • Interests funded by additional borrowings is risky strategy: High-growth economies can afford to fund by borrowings as can start-ups, which borrow against their future growth prospects. For a large, lower middle-income economy like India, with historically moderate long-term growth rates (4 to 6 percent), it compromises reserve fiscal capacity to respond, through counter-cyclical measures, to economic downturns induced by economic shocks a risk-laden strategy.

    What India should do?

    • Resume much delayed disinvestment: Resume the much-delayed privatisation and disinvestment of public sector enterprises and government-owned financial sector entities.
    • Make Indian railway and autonomous entity: Second, make Indian Railway an autonomously regulated, commercially run entity, providing a surplus to the government rather than looking for budgetary support.
    • Encourage public finance outlays: Maximise the economic impact by encouraging public finance outlays to be driven by competitive metrics of allocative efficiency across investment options and program/project implementation models.

    Conclusion

    • For a new phase of growth, government disintermediation is appropriate. It allows for increased competition and innovation in the private sector, leading to greater efficiency and economic growth. India has momentum. What it needs is for the reins to be lightly held.

    Mains question

    Q. What obstacles does the Indian economy face as it enters a new era of growth, and what should India do?

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  • In news: National Export Co-operative Society

    The first consignment expected to be exported by the first-ever National Export Co-operative Society.

    Why in news?

    • The Union Cabinet on January 11 approved the setting up Multi-State Seed Society, Multi-State Organic Society and Multi State Export Society.

    What is National Export Co-operative Society (NECS)?

    • The society will have an authorised share capital of ₹2,000 crore with the area of operation all over the country.
    • It will be registered under the Multi-State Cooperative Societies (MSCS) Act, 2002.
    • It will have its registered office in Delhi.
    • The Society’s registration will be complete in the next few days and the first consignment will be exported in three months.
    • It will work as an export house for handicrafts, handlooms, khadi and other products, ensuring enhancement of income of the cooperative member entrepreneurs.

    Funding of NECS

    • Leading cooperatives like IFFCO, KRIBHCO, NAFED, Amul and National Cooperative Development Corporation (NCDC) will be the promoters of the Society.
    • They will contribute ₹100 crore each.

    Working of NECS

    • The Society will be different from the Export Promotion Council under the Ministry of Commerce.
    • This Society will provide end-to-end services to the cooperatives.
    • It will open foreign bank accounts and complete all the formalities, including necessary permissions for exporting a product.
    • The dividends will be shared with the manufacturer instantly and without any brokerage fee.
    • The Society will hire consultants in foreign countries who will help expand its footprint across continents.

    Why need cooperatives for export promotion?

    • Cooperatives contribute 28.80% in fertilizer production, 35% in fertilizer distribution, 30.60% in sugar production and 17.50% in milk in the national economy.
    • However, their contribution to exports is negligible.
    • Society will benefit the smallest of farmer or artisan who has a good product but does not have access to the right platform.
    • Through this Society, they will get access to international market and good returns too.
    • Once a product has been tested for international standards, the packaging and export will be done by the Society.

     

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  • TRAI’s Calling Name Presentation (CNAP) Proposal

    cnap

    Telecom operators have expressed concerns over user privacy on the Telecom Regulatory Authority of India’s Calling Name Presentation (CNAP) proposal.

    Calling Name Presentation (CNAP)

    • Under this phones would need to display the name of a caller, by extracting the name of the telecom subscriber from their SIM registration data.
    • The feature would provide the called individual with information about the calling party (similar to ‘Truecaller’ and ‘Bharat Caller ID & Anti-Spam’).
    • The idea is to ensure that telephone subscribers are able to make an informed choice about incoming calls and curb harassment by unknown or spam callers.

    Why need CNAP?

    • Securing important calls: Genuine calls should not get unanswered. Hence proper system is solicited.
    • Blocking of spammers: Since subscribers are not given the name and identity of the caller, they may choose not to answer them believing it could be commercial communication from unregistered telemarketers.
    • Rise of robocalls: There have been rising concerns about robocalls (calls made automatically using IT-enabled systems with a pre-recorded voice), spam calls and fraudulent calls.

    What are the proposed models? 

    The regulator has proposed four models for facilitating the CNAP mechanism-

    1. TSPs operating CNAP database: The first model involves each telecom service provider (TSP) establishing and operating a CNAP database of its subscribers. Here, the caller’s TSP would have to extract the relevant data from its own database.
    2. Database sharing: In the second model, the operator of the calling entity shares its CNAP database with the receiver’s operator. The difference here is that the calling operator would permit the receiver’s operator to access its database for the caller’s CNAP data.
    3. Creating a Centralised database: The onus rests on the receiver’s operator to delve into the centralized database to retrieve and present the caller’s data. This model is similar to a plan envisaged by the Department of Telecommunications (DoT) in 2018, involving the setting up of a Digital Intelligence Unit at the central level.
    4. Centralized CNAP database: TSP retains a copy of a synchronized central database operated by a third party. It works this way: the call is facilitated as per the routine procedure, and since the receiver’s operator has access to both the centralized and their own database, the lookup is, therefore, internal.

    Issues involved

    • Latency: The regulator has said that latency in setting up the call must be ensured and CNAP must be inter-operable. The responsiveness might also suffer when moving from a faster wireless network (4G or 5G) to a comparatively slower one (2G or 3G), or vice-versa.
    • Privacy Issue: It is not clear how the CNAP mechanism would balance the caller’s right to remain anonymous, an essential component of the right to privacy. To put it into perspective, an individual may opt to remain anonymous for multiple reasons, for example, whistle-blowers or employees being harassed.
    • Gendered impact: The proposal may particularly harm women. The service will display a woman subscriber’s name and data, to every calling party whether or not she consents to it.
    • Data sharing without consent: We have to see it in parallel with The Digital Personal Data Protection Bill (2022) which has a clause on deemed consent lacking adequate safeguards including sharing of data with third parties.
    • Implementation loopholes: Marketers have figured out newer ways to circumvent the existing framework. Previously, telemarketers were required to be registered as promotional numbers. Now they have started deploying people not necessarily part of the entity’s set-up, but rather “at-home workers”.

    Way forward

    • Innovative solution: TRAI must build an interface that is user-friendly and in turn, an effective mechanism.
    • Spam identification: Active participation from the subscribers would ensure that spammers are rightly identified and are unable to make further calls.
    • Digital literacy: The government must also invest in digital literacy, skilling citizen’s to navigate and use the tech better, ensuring they do not share their data indiscriminately and are informed about dangers such as financial fraud and spoofing.

     

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