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Subject: Economics

  • India’s ‘wheat waiver’ WTO demand is risk-fraught

    Context

    The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.

    Public stockholding issue at WTO

    • India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.
    • PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.
    • Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
    • India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
    • Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
    • The WTO ministerial meeting in June at Geneva did precious little to address this issue.
    •  India’s concerns about the PSH issue have been taken on board.

    India’s concerns

    • For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).
    • Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
    • However, there is no mention of price support in the Geneva declaration.
    • India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
    • India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
    • However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
    • Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.
    • The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.
    •  However, it is very unlikely that such a request will be acceded to.
    • As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.

    Way forward

    • Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.
    • India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.
    • Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
    • Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
    • Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.
    • Adding newer objectives and shifting goalposts might result in falling between two stools.

    Conclusion

    Instead of asking for the waiver to export wheat from public stockholding, the laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.

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  • Online Dispute Resolution in new-age digital commerce

    Context

    Despite the rapid advancement of digital platforms on the one hand and the pervasiveness of the Internet-enabled phone on the other, small enterprises such as local kirana stores have not gained from this. Online purchases from “near and now” inventory from the local store remain in a digital vacuum.

    Online revolution in country

    • Increased smartphone use: The rise in smartphone use fuelled by affordable data plans has catalysed an online revolution in the country.
    • Pandemic accelerated digital inclusion: The novel coronavirus pandemic has further accelerated the process of digital inclusion.
    • It is now not only routine to transact online it is also common to learn online, have medical consultations online, and even resolve disputes online.
    • Increased scope for innovation in digital space: These realisations have given India the opportunity to disrupt the status quo with its innovative abilities.
    • Systems such as the Unique Identification Authority of India (UIDAI) and Aadhaar, the Unified Payments Interface (UPI) and the Ayushman Bharat Digital Mission have reengineered markets.

    Why mall and medium sided businesses have not benefited from digital revolution?

    • Despite the rapid advancement of digital platforms small enterprises such as local kirana stores have not gained from this.
    • Cost of infrastructure: This is because, to sell on numerous platforms, sellers must maintain a separate infrastructure, which only adds costs and limits participation.
    • Distinct terms and conditions of platforms: The distinct terms and conditions of each platform further limit the sellers’ flexibility.
    • Consequently, small and medium-sized businesses have lost their freedom to choose and participate in the country’s e-commerce system at their will and on their terms.

    Way forward: Open Network for Digital Commerce

    • The Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India established the Open Network for Digital Commerce (ONDC) to level the playing field by developing open e-commerce and enabling access to small businesses and dealers.
    • The ONDC began its pilot in five cities in April 2022, i.e., New Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.
    • Currently, the pilot has expanded to 18 cities, and there are immediate plans to add more cities.
    • The ONDC network makes it possible for products and services from all participating e-commerce platforms to be displayed in search results across all network apps.
    • For instance, a consumer shopping for a product on an e-commerce app named “X” would also receive results from e-commerce app named “Y”, if both X and Y integrated their platforms with the ONDC.

    Dispute resolution through ODR

    • Disputes will be the obvious by-product of this e-commerce revolution.
    • Therefore, it is imperative to support this initiative with a modern-day, cost-effective, timely and high-speed dispute resolution system.
    • Online Dispute Resolution, or ODR as it is popularly called, has the propensity to work alongside the incumbent setup and deliver quick, affordable and enforceable outcomes.
    • The ODR is not restricted to the use of legal mechanisms such as mediation, conciliation and arbitration in an online environment but can be tailormade for the specific use case keeping the participants in mind.
    • ODR commonly involves case management systems, integration of communication technologies such as email, SMS, WhatsApp, Interactive Voice Response, audio/video conferencing.
    • With appropriate data sets in place, it can also involve advanced automation, the use of technologies such as artificial intelligence and machine learning to enable resolutions at the same time as it would take to initiate a transaction over the network.
    • Many e-commerce companies have turned to the ODR with the realisation that in order to maximise transactions it is important to ensure a positive dispute resolution experience.
    • Adoption in India: The ODR is no more a distant dream for India as well.
    • The National Payments Corporation of India (NPCI) has mandated platforms in the UPI ecosystem to adopt the ODR for complaints and grievances connected to failed transactions.
    •  Ingram, SEBI SCORES (or the Securities and Exchange Board of India SEBI COm plaints REdress System), RBI CMS (or the Reserve Bank of India Complaint Management System), MahaRERA (or the Maharashtra Real Estate Regulatory Authority), MSME Samadhaan (or the Micro Small and Medium Enterprises Delayed Payment Monitoring System), and RTIOnline (or the Right to Information Online) are other examples of ODR systems that are widely used in the country.
    • Mitigating litigation risks: The ODR will help mitigate litigation risk and provide valuable insights into problems faced by consumers.
    • Consumers are provided with another choice for effective redress of their grievances, thereby building trust, confidence and brand loyalty.

    Advantages of ONDC

    • Wider choice for consumers: The ONDC achieves the dual objective of wider choice for consumers on the one hand and access to a wider consumer base for sellers on the other.
    • With India’s e-commerce industry set to reach $200 billion by 2027, this shift from a platform-centric paradigm to democratisation of the nation’s online market will catalyse the inclusion of millions of small business owners and kirana businesses.

    Conclusion

    A dispute resolution framework that includes a customised ODR process can play a role in the network achieving its steep five-year target of adding $48 billion in gross merchandise value to India’s e-commerce market, a network of 90 crore buyers and 12 crore sellers with the least hiccups.

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  • Farmer suicide

    farmer suicideContext

    • An agricultural labourer died by suicide every 2 hours in 2021: NCRB
    • The national catastrophe of farmer suicide since the 1990s, often by drinking pesticides is attributed to their inability to repay loans mostly taken from landlords and banks.

    NCRB Stats on Farmers Suicide

    • Some 5,563 agricultural labourers died by suicide in 2021, according to the latest report of the National Crime Records Bureau (NCRB). The number of suicides increased by nine per cent from 2020 and by around 29 per cent from 2019.

    Causes of Farmers Suicide

    • Non sustainable cropping: Most of the suicides have occurred in areas of cash crops like cotton and sugarcane, which is high input, high output gambling, not based on the principle of sustained and resilient high yield.
    • Multiple causes: There is no consensus on what the main causes might be but studies show farmer suicide victims are motivated by more than one cause however the primer reasons being the inability to repay loans.
    • Combined causes: Major causes reportedly are bankruptcy/indebtedness, problems in the families, crop failure, illness and alcohol/substance abuse.

    farmer suicideFaulty measures

    • Low penetration of irrigation: Irrigation reaches less than half of India’s overall farmland, a picture that has not changed much over the past decade, and more than 60% of our farmers are susceptible to rainfall anomalies.
    • Dry land farming: Rain-fed farming yields are typically less than half those of irrigated farmland.
    • High input cost: Though India has caught up with global levels of fertilizer use, this is neither efficient nor environmentally sustainable. Both add to the cost of cultivation.
    • Slow R&D: Research on high-yielding crops has plateaued after an initial burst during the Green Revolution and farmers have to resort to patented seeds to draw more out of their scanty acres.

    farmer suicide7R’ model utility

    It looks at the prevention of farmer suicide

    • Remunerative agriculture,
    • Resilience building,
    • Rational expenditure,
    • Reassurance through connectivity,
    • Righteous conduct,
    • Religious support and
    • Responsible reporting

    farmer suicideWay Forward

    • Information technology promises to improve weather forecasting, crop identification as well as damage control, soil health monitoring, and mapping of available water resources.
    • Improvements in marketing and logistics can significantly raise the share that cultivators get of the money people pay for their food.
    • The govt. is using technology to connect farmers to a nationwide e-market, but the states need to amend their antiquated farm produce marketing laws that have squeezed farmers’ earnings.
    • An old problem of price signals failing to adjust demand and supply may also need fixing.
    • For agricultural incomes to rise, reforms, rather than cash transfers, loan waivers and the like, are the way ahead.

    Conclusion

    • Along with subsidies, increased farm profits, the focus should also be on resilience building and problem-solving skills of farming families.
    • In suicide-prone states, agricultural institutes and scientists should start distributing seeds of resilience, tolerance and contentment among farmers, suggested researchers.

    Mains question

    Q. Despite agricultural growth Indian farmers are committing suicides Discuss the causes and give dynamic way forward to address the issue.

     

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  • Universal basic income

    universal basic income Context

    • New evidence from two Kenyan counties shows that universal basic income  and other income supplements reduce hunger, illness, and risk exposure during crises.
    • Countries should consider building universal basic income that can be activated at short notice to help people weather unanticipated shocks.

    Why in news?

    • When the COVID-19 pandemic and the resulting recession pushed 120 million people worldwide into extreme poverty in 2020, many countries relied on social-protection measures to cushion the blow.

    What is social protection?

    • Social protection is concerned with preventing, managing, and overcoming situations that adversely affect people’s well-being.
    • Social protection programs that assist low-income families, insure against shocks, and break poverty traps offer a potential solution.

    universal basic income Universal basic income meaning

    • Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status.
    • The purpose of UBI is to prevent or reduce poverty and increase equality among citizens.

    What is social security?

    • Social securityin India includes a variety of statutory insurances and social grant schemes bundled into a formerly complex and fragmented system run by the Indian government.
    • These are retirement, healthcare, disability, childcare, gratuity and provident fund and insurance programs.

    What is insurance simple words?

    • An agreement by which a person pays a company and the company promises to pay money if the person becomes injured or dies or to pay for the value of property lost or damaged.

    Constitutional mandate

    • The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state.

    Interesting fact

    India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country.

    What are the benefits of Universal Basic Income?

    • Ending poverty: Advocates for UBI say that it could help bring everyone’s income above the poverty line.
    • Discouraging low wages: UBI would give employees enough security to have bargaining power.
    • Redistributing wealth: The economic growth of high-income countries is making the rich richer, but having very little effect on the working classes.

    Case study / value addition

    Namibia

    Namibia had a basic income pilot program between 2008 and 2009. Every resident of Otjivero-Omitara was entitled to 100 Namibian dollars ($6.75) every month. The program was funded by donors from around the world.

    Findings from the pilot program showed that cases of child malnutrition had dropped significantly while school enrollment went up. Also, social crimes such as theft had significantly dropped.

    universal basic income Negative implications of UBI

    • Induce lethargy: UBI removes the incentive to work, adversely affecting the economy and leading to a labour and skills shortage.
    • Inequity: Universal basic income would be just that: universal. That means that everyone, regardless of how poor, or rich, they were would get the same amount of money.
    • Huge Cost: The cost of implementing UBI could be huge. In the United States it’s estimated to be about $3.9 trillion per year.
    • Motivation to work: One concern is that UBI would incite millions of workers to stop working. If people aren’t working, there is less taxable income.

    Some government initiatives

    • National Pension Scheme for Traders and Self Employed Persons.
    • Pradhan Mantri Suraksha Bima Yojana.
    • Employees’ State Insurance Scheme.
    • Minimum Wages for various employment roles.
    • National Pension System.

    Conclusion

    • One of the major criticisms of poverty alleviation programs is significant leakages. UBI is seen as a more efficient alternative. Though UBI has many advantages, there are many practical challenges too. The idea should be to save costs with better targeting. This will help create the necessary conditions for higher growth which will decisively lift people out of poverty.

    Mains question

    Q. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. Do you think they are enough? Discuss in context of rising demand for universal basic income and its pros and cons for ensuring social security.

     

     

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  • Labour Codes

    Addressing to the National Labour Conference, Prime Minister said that the Centre had taken initiatives to abolish laws from “the period of slavery” that reflected a slavery mentality through the Labour Codes.

    New Labour Codes

    The four codes likely to be implemented in FY23 are:

    1. Code on Wages
    2. Industrial Relations Code
    3. Social Security Code, and
    4. Occupational Safety, Health and Working Conditions Code

    Objectives of the Labour Code

    • The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
    • The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
    • The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.

    What is the current status of the codes?

    • The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
    • With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.

    How many labour laws do Indian states have?

    • The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
    • India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
    • The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.

    What are the major reforms in these codes?

    • Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
    • Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
    • Four days work: There could also be a permissible four-day work week of 12 hours per day.

    How will it affect ease of doing business?

    • Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
    • Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
    • Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
    • Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.

    Also read

    [Burning Issue] New Labour Laws

     

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  • Contract Enforcement in India

    Ease of doing business in India remains low, dragged down by the way contracts are enforced in the country. Recent reforms have improved the business climate somewhat, but there is a long way to go.

    What is the Ease of Doing Business index?

    • It is an index designed by the World Bank to rank 190 economies.
    • A higher rank (closer to 1) means the country’s regulatory environment is favourable to business operations.
    • India was ranked 63rd in the overall index in 2020.
    • World Bank has now discontinued the Doing Business index.

    Indicators used

    The ranking is calculated on the basis of indicators such as:

    1. Starting a Business
    2. Dealing with Construction Permits
    3. Getting Electricity
    4. Registering Property
    5. Getting Credit
    6. Protecting Minority Investors, Paying Taxes
    7. Trading across Borders
    8. Enforcing Contracts and
    9. Resolving Insolvency

    How is ‘Enforcing Contracts’ measured?

    • In 2020, in the parameter of ‘Enforcing Contracts’, India was ranked 163rd, against 186th in 2015. The parameter considers time, cost and quality of the judicial process.
    1. Time considers the number of days to resolve a commercial dispute in courts;
    2. Cost measures the expenses of attorney, courts and enforcement as a percentage of claim value; and
    3. Quality considers the use of best practices which can promote efficiency and quality i.e., court proceedings, case management, alternative dispute resolution and court automation.
    • Each of the three indicators have a 33.3% weightage.

    How is India doing on this parameter now?

    • At 163rd position in 2020, the country continues to struggle, with the time taken to resolve a commercial dispute being approximately 1,445 days in the Doing Business Report 2020.
    • However, as of August 2022, law ministry data shows a marked improvement of close to 50% in days taken to resolve a dispute to 744 days in New Delhi and 626 days in Mumbai.

    What are some of the reforms undertaken?

    • The Department of Justice, the nodal point for ‘Enforcing Contracts’ indicator along with the eCommittee of the Supreme Court, has undertaken a series of reforms.
    • Some of the steps include the establishment of dedicated commercial courts with monetary jurisdiction up to ₹3 lakh.
    • There also exists online case filing, e-payment of court fees, electronic case management, special courts for infrastructure project contracts, as well as automatic and random allocation of commercial cases thereby eliminating human intervention.

    What further steps are required?

    • An efficient judiciary instils confidence in investors and signals the commercial viability of transactions.
    • The number of court hearings should be minimized too; often, lawyers have an incentive to stretch out the process.
    • The judicial system should encourage out-of-court settlements through the respective lawyers as practised in advanced countries.
    • It is equally important that the judiciary leaves matters relating to economic governance to governments.

     

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  • One Nation One Fertiliser (ONOF) Scheme

    The Ministry of Chemicals and Fertilisers will implement One Nation One Fertiliser (ONOF) by introducing a Single Brand for Fertilisers and Logo under the fertiliser subsidy scheme named “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP).

    One Nation One Fertiliser (ONOF)

    • The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertiliser Companies, State Trading Entities (STEs) and Fertiliser Marketing Entities (FMEs).
    • Also a logo indicating Fertiliser subsidy scheme namely Pradhanmantri Bhartiya Janurvarak Pariyojna will be used on said fertiliser bags.
    • Under the scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.
    • On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown.

    What is the government’s argument for introducing this scheme?

    The government’s logic for introducing a single ‘Bharat’ brand for all subsidised fertilisers being marketed by companies is as follows:

    (1) Subsidies normalization

    • The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them.
    • The MRPs of non-urea fertilisers are, on paper, decontrolled.
    • But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government.
    • Simply put, there are some 26 fertilisers (inclusive of urea), on which government bears subsidy and also effectively decides the MRPs;

    (2) Harmonizing markets

    • Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell.
    • This is done through the Fertiliser (Movement) Control Order, 1973.
    • Under this, the department of fertilisers draws an agreed monthly supply plan on all subsidised fertilisers in consultation with manufacturers and importers.
    • This supply plan is issued before the 25th of each month for the following month, with the department also regularly monitoring movement to ensure fertiliser availability as per requirement, including remote areas.

    (3) Farmers welfare

    • The government is spending vast sums of money on fertiliser subsidy (the bill is likely to cross Rs 200,000 crore in 2022-23).
    • By deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.

    What can be the drawbacks of the scheme?

    • It may disincentivise fertiliser companies from undertaking marketing and brand promotion activities.
    • They will now be reduced to contract manufacturers and importers for the government. Any company’s strength ultimately is its brands and farmer trust built over decades.
    • Currently, in case of any bag or batch of fertilisers not meeting the required standards, the blame is put on the company. But now, that may be passed on fully to the government.
    • Politically, the scheme might well boomerang rather than benefit the ruling party.

     

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  • 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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