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Subject: Economics

  • Decoding the Crypto Route for Money Laundering

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

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

    Are Blockchains traceable?

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

    How do they hide transaction trails?

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

    What has ED accused Binance and WazirX of?

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

    How do off-chain transactions work?

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

    How can exchanges prevent laundering?

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

    Back2Basics: Cryptocurrency

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

    How does cryptocurrency work?

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

     

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  • Solar energy & India

     

    Context

    • Tesla and SpaceX CEO Elon Musk has said that civilisation will be mostly solar-powered in the future, a world without Sun will turn into a dark ice ball as the Earth gets all of its energy from it.

    Definition of solar energy

    • Solar energy is radiant light and heat from the Sun that is harnessed using a range of technologies such as solar power to generate electricity, solar thermal energy, and solar architecture.

    India’s solar target.

    • Target: India is targeting about 500 GW by 2030, of renewable energy deployment, out of which ~280 GW is expected from solar PV. This necessitates the deployment of nearly 30 GW of solar capacity every year until 2030.
    • Commitment: Solar power is a major prong of India’s commitment to address global warming according to the terms of the Paris Agreement, as well as achieving net zero, or no net carbon emissions, by 2070.

    International solar alliance and India’s pledge

    • Climate action commitment: It symbolizes about the sincerity of the developing nations towards their concern about climate change and to switch to a low-carbon growth path.
    • Clean energy: India’s pledge to the Paris summit offered to bring 40% of its electricity generation capacity from non-fossil sources (renewable, large hydro, and nuclear) by 2030.
    • Global electrification: India has pledged to let solar energy reach to the most unconnected villages and communities and also towards creating a clean planet.
    • Global cooperation: It is based on world cooperation irrespective of global boundaries.
    • India’s Soft power: For India, possible additional benefits from the alliance can be a strengthening of ties with the major African countries and increasing goodwill for India among them.

    Some Interesting facts

    Solar power is the most abundant energy source on earth.

    Solar is the cheapest source of energy in the world.

    Solar electricity has been around since 1839.

    Solar panels can produce power without direct sunlight.

    Challenges before solar future

    • High Imports: Indian solar deployment or installation companies depend heavily on imports. It currently imports 100% of silicon wafers and around 80% of cells even at the current deployment levels.
    • Field deployment: Also, out of the 15 GW of module manufacturing capacity, only 3-4 GW of modules are technologically competitive and worthy of deployment in grid-based projects.
    • Land issue: Land, the most expensive part of solar projects, is scarce in India — and Indian industry has no choice but to move towards newer and superior technologies as part of expansion plans.
    • Lack of investment: India has hardly invested in this sector which can help the industry to try and test the technologies in a cost-effective manner.

    Way forward

    • Supportive policies and innovative technological approaches are needed for the sector to achieve its potential.
    • Indian policymakers need to plan for rooftop solar plus storage, rather than rooftop solar alone with the grid as storage (net / gross metering).
    • The declining cost of storage solutions, along with that of rooftop solar solutions, is likely to change the future of the Indian power sector.

    Conclusion

    • In the foreseeable future, one can witness a just and equitable energy order if solar energy, along with other forms of renewable energy, can be harnessed more positively.

    Mains question

    Q. Fossil fuels have a 60% share in India’s total energy mix in this context discuss solar future for India with challenges for the same.

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  • Fiscal prudence

    Fiscal prudenceContext

    • The Central government’s alarm has been on the mounting debt burden and the deteriorating fiscal situation in some States due to diversion in fiscal prudence.
    • As both the Union government and States are expected to work closely in a co-operative federal structure, frictions arising out of these exchanges might have repercussions on both resource sharing and expenditure prioritisation.

    What is India’s fiscal federalism?

    • Fiscal federalism refers to the financial relations between the country’s federal government system and other units of government.
    • It refers to how federal, state, and local governments share funding and administrative responsibilities within our federal system.

    Three issues in India’s fiscal federalism                   

    • First: are a set of issues related to Goods and Services Tax (GST) such as the rate structure, inclusion and exclusion of commodities, revenue sharing from GST and associated compensation.
    • Second: State-level expenditure patterns especially related to the welfare schemes of States.
    • Third: the conception and the implementation of central schemes.

    Fiscal prudenceMeaning of fiscal prudence

    • Fiscal prudence is defined as the ability of a government to sustain smooth monetary operation and long-standing fiscal condition.

    Where should state government spend the borrowed money?

    • Fundamental infrastructure: Ideally, governments should use borrowed money to invest in physical and social infrastructure that will generate higher growth, and thereby higher revenues in the future so that the debt pays for itself.
    • Targeted expenditure only: On the other hand, if governments spend the loan money on populist giveaways that generate no additional revenue, the growing debt burden will eventually implode.

    Fiscal prudenceWhy there is a need for Fiscal Council?

    • Institutionalizing fiscal practices: With a complex polity and manifold development challenges, India need institutional mechanisms for fiscal prudence.
    • Transparency: An independent fiscal council can bring about much needed transparency and accountability in fiscal processes across the federal polity.
    • Fiscal prudence: International experience suggests that a fiscal council improves the quality of debate on public finance, and that, in turn, helps build public opinion favourable to fiscal discipline.

    What does fiscal consolidation mean?

    • Fiscal consolidation is defined as concrete policies aimed at reducing government deficits and debt accumulation.

    Why fiscal consolidation is needed?

    • Fiscal expansion financed through debt and the resultant debt accumulation have important impacts on the economy both in the short run as well as in the long run.

    How to achieve fiscal consolidation?

    • Better targeting of government subsidies and extending Direct Benefit Transfer scheme for more subsidies
    • Improved tax revenue realization For this, increasing efficiency of tax administration by reducing tax avoidance, eliminating tax evasion, enhancing tax compliance etc. are to be made.
    • Enhancing tax GDP ratio by widening the tax base and minimizing tax concessions and exemptions also improves tax revenues.

    Suggestions

    • Amend FRBM Act for complete disclosure: First, the FRBM Acts of the Centre as well as States need to be amended to enforce a more complete disclosure of the liabilities on their exchequers.
    • Centre should impose conditionalities: Under the Constitution, States are required to take the Centre’s permission when they borrow. The Centre should not hesitate to impose conditionalities on wayward States when it accords such permission.
    • Use of financial emergency provision: There is a provision in the Constitution of India which allows the President to declare a financial emergency in any State if s/he is satisfied that financial stability is threatened.
    • Course correction by the Centre: The Centre itself has not been a beacon of virtue when it comes to fiscal responsibility and transparency. It should complete that task in order to command the moral authority to enforce good fiscal behaviour on the part of States.

    Conclusion

    • Fiscal correction at the State level is important. While there exists a need for raising additional resources at the sub-national levels, expenditure prioritisation has to be carried out diligently. The Centre, too, on its part needs to demonstrate commitment to fiscal discipline by sticking to announced fiscal glide path to ensure the sustainability of a frictionless cooperative federal structure.

    Mains question

    Q. Why Fiscal correction at the State level is important? Why fiscal consolidation is needed? Write in context frictionless cooperative fiscal federal structure.

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  • What is Positive Indigenisation List (PIL)?

    In line with the effort to promote self-reliance in defence manufacturing, the Defence Minister has approved the third Positive Indigenisation List (PIL) of 780 strategically important line replacement units (LRU).

    What is a Positive Indigenisation List (PIL)?

    • The positive indigenisation list essentially means that the Armed Forces—Army, Navy, and Air Force—will only procure the listed items from domestic manufacturers.
    • The manufacturers could be private sector players or Defense Public Sector Undertakings (DPSUs).
    • This concept was rolled out in the Defence Acquisition Procedure (DAP) 2020.

    Why in news?

    • This third list is different from the three PILs announced for the armed forces.
    • This list is in continuation to the two PILs of LRUs, sub-systems, assemblies, sub-assemblies and components that were published in December 2021 and March 2022.
    • These lists contain 2,500 items which are already indigenised and 458 (351+107) items which will be indigenised within the given timelines.
    • Out of the 458 items, 167 items (163 from the first PIL, and four from the second PIL) have been indigenised, so far, it stated.

    Other steps taken by the Centre to boost defence production

    • Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
    • Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
    • Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
    • Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.
    • Defence Industrial Corridors: The government has also announced 2 dedicated Corridors in the States of TN and UP to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital.
    • Long-term vision: The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.
    • Push for self-reliance: The govt has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative.

    Issues retarding defence indigenization

    • Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
    • Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
    • Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
    • Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
    • ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
    • Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
    • Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
    • FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
    • R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
    • Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.

    Way forward

    • Reducing import dependence: India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, says 2019 SIPRI report.
    • Security Imperative: Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
    • Economic boost: Indigenization in defence can help create a large industry which also includes small manufacturers.
    • Employment generation: Defence manufacturing will lead to the generation of satellite industries that in turn will pave the way for a generation of employment opportunities.

     

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  • Green finance for green future

    green finance Context

    • Inclusion of climate change and green finance in policy is crucial for a strong economy.

    What is green finance?

    • Green finance is a phenomenon that combines the world of finance and business with environment friendly behaviour. It may be led by financial incentives, a desire to preserve the planet, or a combination of both.
    • In addition to demonstrating proactive, environment friendly behaviour, such as promoting of any business or activity that could be damaging to the environment now or for future generations.

    Green finance instruments       

    • Dedicated fund: A “green super fund” could be established to jumpstart green investments by pooling together international and domestic capital.
    • Sovereign green bond (SGB): The sovereign green bond is a novel idea. It will be a part of the government’s borrowing programme. The gross borrowing programme of the government is pegged at Rs 14.95 lakh crore. The SGB (sovereign green bond) raised will be part of the aggregate borrowing programme and has to be used for projects which are ESG (environment, social and governance) compliant.

    green financeNetwork for Greening the Financial System

    • The Network for Greening the Financial System is a network of 114 central banks and financial supervisors that aims to accelerate the scaling up of green finance and develop recommendations for central banks’ role for climate change.
    • The NGFS was created in 2017 and its secretariat is hosted by the Banque de France.

    Purpose

    • The Network’s purpose is to help strengthening the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system to manage risks and to mobilize capital for green and low carbon investments in the broader context of environmentally sustainable development.

    green financeSignificance

    • Green goals: Reaching net-zero emissions and other climate-related and environmental goals will require significant investments to enable decarbonisation and innovation across all sectors of the economy. Greening the financial system is key to making these investments happen.
    • SDG goals: Green finance initiatives also aim to achieve the 2030 Sustainable Development Goals (SDGs), shifting the focus from creating value for shareholders (economic) to creating value for stakeholders (economic, environmental, and social).
    • Green future: And as we begin to recover from the pandemic, green finance presents a huge opportunity to build back with a greener future, creating new businesses and jobs.
    • Robust growth: Supports strong and green growth in all sectors of economy .

    The issues in mobilization and effective use of green finance are

    • Low incentives: The return on green finance is long term, low in monetary value & many times intangible, so that the ability of the financial system to mobilize private green finance, especially in developed countries is difficult.
    • Distribution challenge: Developing countries like India have challenges of development & poverty alleviation, so allocation of resources towards meeting fundamental needs & promoting the green projects which require heavy investment is a challenge.
    • Skewed investment: In many countries, green finance & much of the green projects are limited to the investment in renewable energy: India whose 60% of installed capacity is coal based, greening of coal technology is required which is mostly limited to private players in developed countries. It is subjected to IPR & makes them cost prohibitory.
    • High risk: Green bonds are perceived as new and attach higher risk and their tenure is also shorter. There is a need to reduce risks to makes them investment grade.

    Conclusion

    • Our future depends on how we resolve our environmental challenges. Further, we are the world’s third-largest carbon emitter and will play a crucial role in getting the planet to a low-carbon trajectory. Simply put, we must urgently transform our economy to get to the green frontier.

    Mains question

    Q. As the world copes with the repercussions of carbon emissions, there is growing pressure to achieve climate-compatible growth. In this context What do you understand by the term green finance? Discuss how it will help to achieve climate-compatible growth along with limitations of green finance.

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  • Dams in news: Vishnugadh Project

    An independent panel of the World Bank is considering a plea by residents of some village to investigate environmental damage from the under-construction Vishnugad Pipalkoti Hydro Electric Project (VPHEP).

    Vishnugadh Project

    • The 444-MW VPHEP is being built by the Tehri Hydropower Development Corporation (THDC), a partially State-owned enterprise.
    • It is being constructed on Dhauliganga River in Chamoli District of Uttarakhand.
    • The project is primarily funded by the World Bank and was sanctioned in 2011. It is proposed to be completed in June 2023.
    • About 40% of the funds for the $792 million project (â‚č64,000 crore approx.) has already been disbursed.

    Why in news now?

    • Residents in their complaint have said muck dumping from the dam threatens the local Lakshmi Narayan Temple, which is deemed to be of historical and cultural importance.
    • They also complained about the limited availability of water, saying that 70 of the 92 households received water only for two hours daily.
    • Before the project construction, they had ready access to water.

     

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  • Automatic Number Plate Reader (ANPR) cameras for toll collection

    In light of congestion at toll plazas, the Road Transport and Highways Ministry is now moving ahead with a plan to replace toll plazas with cameras that could read number plates, also known as Automatic Number Plate Reader (ANPR) cameras.

    ANPR cameras

    • The plan is to remove toll plazas on national highways and instead rely on ANPR cameras, which will read vehicle number plates and automatically deduct toll from the linked bank accounts of vehicle owners.
    • The model is simple: Entry and exit of toll roads will have cameras capable of reading number plates, and toll will be deducted based on these cameras.

    Can all number plates be read by the cameras?

    • Not all number plates in India can be read, and only those that have come after 2019 will be registered by the cameras.
    • The government, in 2019, had come up with a rule mandating passenger vehicles to have company-fitted number plates, and only these number plates can be read by cameras.
    • The government plans to come up with a scheme to replace older number plates.
    • A pilot of this scheme is underway and legal amendments to facilitate this transition are also being moved to penalise vehicle owners who skip toll plazas and do not pay.

    Current model for toll collection: FASTags

    • Currently, about 97 per cent of the total toll collection of nearly Rs 40,000 crore happens though FASTags — the remaining 3 per cent pay higher than normal toll rates for not using FASTags.
    • With FASTags, it takes about 47 seconds per vehicle to cross a toll plaza.
    • There’s a marked throughput enhancement – more than 260 vehicles can be processed per hour via electronic toll collection lane as compared to 112 vehicles per hour via manual toll collection lane, according to government data.
    • While FASTags have eased traffic at toll plazas across the country, congestion is still reported as there are toll gates that need to be crossed after authentication.

    Why such move?

    • Congestion at toll plazas on national highways continues to impact commuters despite 97 per cent of tolling happening through FASTags.
    • Apart from ANPR helping to ease congestion, the government is also looking at GPS technology as one of the options for toll collection.

    Are there issues with ANPR?

    • The success of ANPR cameras will depend on creating an ecosystem that is in sync with the requirements of the camera.
    • The biggest problem being faced during the trials is when things are written on number plates, beyond the nine digit registration number, such as ‘Govt of India/Delhi’ etc.
    • Another problem that ANPR cameras face is in reading number plates on trucks, as most of the time they are hidden or soiled etc.
    • A pilot on a key expressway has found that about 10 per cent of vehicles with such number plates are being missed by the ANPR cameras.

    Back2Basics: What is ‘FASTag’?

    • As per Central Motor Vehicles Rules, 1989, since 1st December 2017, the FASTag had been made mandatory for all registered new four-wheelers and is being supplied by the Vehicle Manufacturer or their dealers.
    • It has been mandated that the renewal of fitness certificate will be done only after the fitment of FASTag.
    • For National Permit Vehicles, the fitment of FASTag was mandated since 1st October 2019.
    • FASTags are stickers that are affixed to the windscreen of vehicles and use Radio Frequency Identification (RFID) technology to enable digital, contactless payment of tolls without having to stop at toll gates.
    • The tags are linked to bank accounts and other payment methods.
    • As a car crosses a toll plaza, the amount is automatically deducted, and a notification is sent to the registered mobile phone number.

    How does it work?

    • The device employs Radio Frequency Identification (RFID) technology for payments directly from the prepaid or savings account linked to it.
    • It is affixed on the windscreen, so the vehicle can drive through plazas without stopping.
    • RFID technology is similar to that used in transport access-control systems, like Metro smart card.
    • If the tag is linked to a prepaid account like a wallet or a debit/credit card, then owners need to recharge/top up the tag.
    • If it is linked to a savings account, then money will get deducted automatically after the balance goes below a pre-defined threshold.
    • Once a vehicle crosses the toll, the owner will get an SMS alert on the deduction. In that, it is like a prepaid e-wallet.

     

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  • Benami Law can’t be applied retrospectively: SC

    The Supreme Court has declared as “unconstitutional and manifestly arbitrary” the amendments introduced to the Benami Property Transactions Act, 1988  in 2016, which apply retrospectively and can send a person to prison for three years even as it empowers the Centre to confiscate “any property” subject to a benami transaction.

    What is Benami Property?

    • Benami in Hindi means without name. So, a property bought by an individual not under his or her name is benami property.
    • It can include property held in the name of spouse or child for which the amount is paid out of known sources of income.
    • A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income also falls under benami property.
    • The transaction involved in the same is called benami transaction.
    • The benami transactions include buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents.

    Why do people indulge in such transactions?

    • As a usual practice, to evade taxation, people invest their black money in buying benami property.
    • The real owner of these properties are hard to trace due to fake names and identities.

    What is the Benami Law?

    • The first act against benami properties was passed in 1988 as the Prohibition of Benami Property Transactions Act, 1988.
    • To block all loopholes, the government in July 2016 decided to amend the original act.
    • So after further amendment, Benami Transactions (Prohibition) Amendment Act, 2016 came into force on November 1, 2016.
    • The PBPT Act defines benami transactions, prohibits them and further provides that violation of the PBPT Act is punishable with imprisonment and fine.
    • The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner.
    • Such, properties are liable for confiscation by the Government without payment of compensation.

    What amendment is this article talking about?

    • The 2016 law amended the original Benami Act of 1988, expanding it to 72 Sections from a mere nine.
    • Sections 3(2) and 5 were introduced through the Benami Transactions (Prohibition) Amendment Act, 2016.
    • A Bench, led by CJI N.V. Ramana, declared Sections 3(2) and 5 introduced through this amendment as unconstitutional.

    Which sections did the Supreme Court declare unconstitutional?

    (b) Section 3(2)

    • A/c to this, a person can be sent behind bars for a benami transaction entered into 28 years before the Section even came into existence.
    • CJI Ramana held that the provision violated Article 20(1) of the Constitution.
    • Article 20(1) mandates that no person should be convicted of an offence, which was not in force “at the time of the commission of the act charged as an offence”.

    (b) Section 5

    • It said that “any benami property shall be liable to be confiscated by the Central Government”.
    • The court held that this confiscation provision cannot be applied retrospectively.
    • The CJI dismissed the government’s version that forfeiture, acquisition and confiscation of property under the 2016 Act was not in the nature of prosecution and cannot be restricted under Article 20.

    What else did the apex court observe?

    • The court observed that the 2016 Act condemned not only transactions that were traditionally denominated as benami but also a “new class of fictitious and sham transactions”.
    • The court said the intention of Parliament was to condemn property acquired from ill-gotten wealth.
    • These proceedings cannot be equated as enforcing civil obligations, the CJI noted.

    Why curb benami transactions?

    • Inflationary implications: Rather than hoarding the black money in cash, the tax evader invest their accumulated illegal money in buying benami properties.
    • Loss of economic activity: The whole process affects the revenue generation of government hampering growth and development of the state.
    • Tax evasion: Since the percentage of tax payer in the country is a dismal low, the government fails to successfully implement its policies and schemes due to lack of resources.
    • Money laundering: Benami transactions also serves the illicit purpose of money laundering.

    Conclusion

    • A tough law against benami properties is the need of the hour to check corruption.
    • However, due process of law needs to be followed in true letter and spirit.

     

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  • With eye on defaulters, Centre tweaks Overseas Investment Rules

    The Finance Ministry has released the Rules for Foreign Exchange Management (Overseas Investment Rules), 2022 subsuming extant regulations for Overseas Investments and Acquisition and Transfer of Immovable Property outside India Regulations, 2015.

    What are the news Overseas Investment Rules?

    • With an eye on wilful defaulters, the new rules stipulate that:
    • Any Indian resident will have to seek an no objection certificate before making any overseas financial commitment:
    1. Who has an account appearing as a non-performing asset
    2. Or is classified as a wilful defaulter by any bank
    3. Or is under investigation by a financial service regulator or by investigative agencies in India

    What are the tweaks in overseas investment norms?

    • Any resident in India acquiring equity capital in a foreign entity or overseas direct investment (ODI), will have to submit an Annual Performance Report (APR) for each foreign entity, every year by December 31.
    • No such reporting shall be required where a person resident in India is holding less than 10% of the equity capital without control in the foreign entity.
    • There is no other financial commitment other than equity capital or a foreign entity is under liquidation.

    Ceiling on investment

    • Any resident individual can make ODI by way of investment in equity capital or overseas portfolio investment (OPI) subject to the overall ceiling under the Liberalised Remittance Scheme (LRS) of the Reserve Bank.
    • Currently, the LRS permits $2,50,000 outward investment by an individual in a year.
    • These norms make it easier for domestic corporates to invest abroad.

    What are the prohibitions?

    • Any Indian resident, who has been classified as a wilful defaulter or is under investigation by the CBI, the ED or the Serious Frauds Investigation Office (SFIO), will have to obtain a no-objection certificate (NOC).
    • NOC can be obtained from his or her bank, regulatory body or investigative agency before making any overseas “financial commitment” or disinvestment of overseas assets.
    • The rules also provide that if lenders, the concerned regulatory body or investigative agency fail to furnish the NOC within 60 days of receiving an application, it may be presumed that they have no objection to the proposed transaction.
    • Additionally, the new rules also prohibit Indian residents from making investments into foreign entities that are engaged in real estate activity, gambling in any form, and dealing with financial products linked to the Indian rupee without the specific approval of the RBI.

     

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  • Data diplomacy

    Context

    • The government has withdrawn the Personal Data Protection Bill from Parliament after several amendments were proposed by the Joint-Parliamentary Committee.

    Definition of data

    • Data is a collection of discrete values that convey information, describing quantity, quality, fact, statistics, other basic units of meaning, or simply sequences of symbols that may be further interpreted.

    What is Data Protection?

    • Data protection refers to policies and procedures seeking to minimise intrusion into the privacy of an individual caused by collection and usage of their personal data.

    What is data localisation?

    • Data localization or data residency law requires data about a nation’s citizens or residents to be collected, processed, and/or stored inside the country, often before being transferred internationally.

    What is Data Governance?

    • Data governance is a collection of processes, roles, policies, standards, and metrics that ensure the effective and efficient use of information in enabling an organization to achieve its goals. Data governance defines who can take what action, upon what data, in what situations, using what methods.

    Interesting facts

    • Over 90% of all the data in the world was created in the past 2 years;
    • The total amount of data being captured and stored by industry doubles every 1.2 years;
    • If you burned all of the data created in just one day onto DVDs, you could stack them on top of each other and reach the moon – twice.

    Data sovereignty of India

    • Definition: India has placed itself at the heart of the battle, its foreign policy vision fuelled by the principle of ‘data sovereignty’—a broad notion that supports the assertion of sovereign writ over data generated by citizens within a country’s physical boundaries.
    • Issues: The ideal of “data sovereignty”, and global attempts to leverage it, has come under heavy criticism from various stakeholders who are of the view that the concept violates the principle of “free and open internet”. They also argue that “data sovereignty” hampers innovation and economic growth, and is a ruse for authoritarian digital governance.

    India’s Data Diplomacy: Three Pillars

    • Pillar 1: India’s data for India’s development

    The flagship ‘Digital India’ programme clearly views data as the cornerstone of India’s socioeconomic future—one where the government leverages the Indian citizen’s data for the benefit of the people themselves, and not solely for profit-making.

    • Pillar 2: Cross-border data flows and digital trade

    In keeping with its foreign policy tradition of actively shaping debates on global trade rules, India has been an active participant in the ongoing contestation on regulating cross-border data flows.

    • Pillar 3: Securitising the economic

    The final pillar of India’s data diplomacy has been predicated ostensibly on safeguarding its citizens’ data from external threats.

    Why data is important?

    • Improve People’s Lives: Data will help you to improve quality of life for people you support: Improving quality is first and foremost among the reasons why organizations should be using data.
    • Make Informed Decisions: Data = Knowledge. Good data provides indisputable evidence, while anecdotal evidence, assumptions, or abstract observation might lead to wasted resources due to taking action based on an incorrect conclusion.
    • Stop Molehills from Turning into Mountains: Data allows you to monitor the health of important systems in your organization: By utilizing data for quality monitoring, organizations are able to respond to challenges before they become full-blown crisis.
    • Get The Results You Want: Data allows organizations to measure the effectiveness of a given strategy: When strategies are put into place to overcome a challenge, collecting data will allow you to determine how well your solution is performing, and whether or not your approach needs to be tweaked or changed over the long-term.

    Conclusion

    • The fulcrum of India’s data diplomacy should be predicated on the rule of law and the genuine protection of fundamental rights enshrined in the Constitution. A commitment to the rule of law and accountability for all actors sets India apart from present adversaries like China and offers an opportunity to burnish its reputation globally.

    Mains question

    Q.Data is considered as new gold across the globe in this context analyse data sovereignty along with status of data diplomacy of India.

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