💥Mains Ready By December. Smash Mains & Smash PYQ Admissions Open
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • Why are edible oils getting costlier?

    Edible oil prices have risen sharply in recent months.

    How much have edible oil prices rising?

    • The prices of six edible oils — groundnut oil, mustard oil, vanaspati, soya oil, sunflower oil, and palm oil — have risen between 20% and 56% at all-India levels in the last year.
    • The prices of soya oil and sunflower oil, too, have increased more than 50% since last year.
    • In fact, the monthly average retail prices of all six edible oils soared to an 11-year high in May 2021.
    • The sharp increase in cooking oil prices has come at a time when household incomes have been hit due to Covid-19.

    Trends of oil consumption in India

    • With rising incomes and changing food habits, consumption of edible oils has been rising over the years.
    • While mustard oil is consumed mostly in rural areas, the share of refined oils —sunflower oil and soyabean oil — is higher in urban areas.

    How much is produced domestically and how much is imported?

    • In 2019-20, domestic availability of edible oils from both primary sources (oilseeds like mustard, groundnut etc.) and secondary sources (such as coconut, oil palm, rice bran oil, cottonseed) was only 10.65 million tonnes against the total domestic demand of 24 million tonnes.
    • Thus, India depends on imports to meet its demand.
    • In 2019-20, the country imported about 13.35 million tonnes of edible oils or about 56% of the demand.
    • This mainly comprised palm (7 million tonnes), soyabean (3.5 millon tonnes) and sunflower (2.5 million tonnes).
    • The major sources of these imports are Argentina and Brazil for soyabeen oil; Indonesia and Malaysia palm oil; and Ukraine and Argentina again for sunflower oil.

    Answer this PYQ from CSP 2019:

    Q.Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?

    (a) Spices

    (b) Fresh fruits

    (c) Pulses

    (d) Vegetable oils

    Global prices rising

    • The increase in domestic prices is basically a reflection of international prices because India meets 56% of its domestic demand through imports.
    • In the international market, prices of edible oils have jumped sharply in recent months due to various factors.
    • Even the FAO price index (2014-2016=100) for vegetable oils, an indicator of the movement of edible oil prices in the international market, has soared to 162 in April this year, compared to 81 in April last year.

    But why are international prices rising?

    • One of the reasons is the thrust on making biofuel from vegetable oil. There is a shifting of edible oils from food basket to fuel basket.
    • There has been a thrust on making renewable fuel from soyabean oil in the US, Brazil and other countries.
    • Other factors include buying by China, labour issues in Malaysia, the impact of La Niña on palm and soya producing areas, and export duties on crude palm oil in Indonesia and Malaysia.

    What are the options before the government?

    • One of the short-term options for reducing edible oil prices is to lower import duties.
    • However, the edible oil industry is not in favor of reducing duties.
    • If import duties are reduced, international prices will go up, and neither will the government get revenue nor will the consumer benefit.
    • The government can rather subsidize edible oils and make them available to the poor under the Public Distribution System.

  • What is Global Minimum Corporate Tax?

    Global_Minimum_Corporate_Tax

    The US has anticipated support from the G7 industrial democracies for the Biden Administration’s proposed 15%-plus global minimum corporate tax.

    Multinational corporations rather monopolies don’t like to pay their fair share of taxes. They’ll do everything in their power to exploit loopholes and minimize their tax liability. Most companies simply open offices in destinations where tax rates are low or negligible. And at the end of it all, they’ll have done just enough to avoid paying billions of dollars in taxes.

    Global Minimum Corporate Tax

    • Major economies are aiming to discourage multinational companies from shifting profits – and tax revenues – to low-tax countries regardless of where their sales are made.
    • Increasingly, income from intangible sources such as drug patents, software, and royalties on intellectual property has migrated to these jurisdictions.
    • This has allowed companies to avoid paying higher taxes in their traditional home countries.
    • With a broadly agreed global minimum tax, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage.

    How would such tax work?

    • The global minimum tax rate would apply to companies’ overseas profits.
    • Therefore, if countries agree on a global minimum, governments could still set whatever local corporate tax rate they want.
    • But if companies pay lower rates in a particular country, their home governments could “top-up” their taxes to the agreed minimum rate, eliminating the advantage of shifting profits to a tax haven.
    • The Biden administration has said it wants to deny exemptions for taxes paid to countries that don’t agree to a minimum rate.

    Back2Basics: Base Erosion and Profit Shifting (BEPS)

    • BEPS refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions.
    • It thus “erodes” the “tax base” of the higher-tax jurisdictions.
    • Corporate tax havens offer BEPS tools to “shift” profits to the haven, and additional BEPS tools to avoid paying taxes within the haven.
    • It is alleged that BEPS is associated mostly with American technology and life science multinationals.

  • Fundamental problems facing GST regime

    The article highlights the fundamental challenges the GST faces in the form of trust erosion and politicisation of decision making in GST Council.

    Initial issues with GST

    • The multiple rates structure, high tax slabs and the complexity of tax filings as the problems underpinning India’s GST.
    • These were indeed the initial problems in the way GST was implemented, leading to some of its current woes.
    • However, technical fixes such as simplification of GST rates and tax filing systems will not succeed in addressing the fundamental problems with GST.

    Fundamental problems

    1) Politics influence the decision of GST Council

    • The 43rd meeting of the Goods and Services Tax (GST) Council which consists of 31 States and Union Territorie is to be held on May 28.
    • Ideally, political affiliations should not matter in a Council set up to decide indirect taxes.
    • The GST Council was mandated to meet at least once every quarter, but it had not met for two quarters, due to the pandemic.
    • Several of the 14 members of the groups who belong to parties different from the party ruling in the Centre, requested the Finance Minister to convene the GST meeting to help them manage their finances.
    • None of the 17 members of the ruling group deemed it necessary.
    • Even the need for a meeting to determine tax revenues for States is evidently a political decision.

    2) Lack of trust

    • The GST Council is a compact of trust between the States and the Centre, set in the larger context of India’s polity.
    • The tragedy of the GST Council is that it is afflicted with spite and forced to function under the prevailing cloud of politics.
    • If the functioning of the GST Council is subject to the vagaries of elections and consequent vendetta politics, GST will continue to be just a caricature of its initial promise.

    3) Uncertainty after the guarantee of 14% growth ends

    • The States paid a huge price for GST in terms of loss of fiscal autonomy.
    • GST has endured so far primarily because the States were guaranteed a 14% growth in their tax revenues every year.
    • This minimised the risks of this new experiment for the States and compensated for their loss of fiscal sovereignty.
    • This revenue guarantee ends in July 2022.
    • This can lead to a crumbling of the precarious edifice on which GST stands today.

    Consider the question “What are the challenges faced by the States in the GST regime? What would be the impact on States as a guarantee of 14% growth in tax revenue comes to an end in July 2022?” 

    Conclusion

    The end of India’s grand GST experiment seems inevitable unless there is a radical shift in the tone and tenor of India’s federal politics, backed by an extension of revenue guarantee for the States for another five years.

  • [pib] Hallmarking of Gold Jewellery

    Hallmarking of Gold Jewellery is set to begin from 15th June 2021.

    What is Hallmark Gold?

    1. The process of certifying the purity and fineness of gold is called hallmarking.
    2. Bureau of Indian Standards, the National Standards Body of India, is responsible for hallmarking gold as well as silver jewellery under the BIS Act.
    3. If you see the BIS hallmark on the gold jewellery/gold coin, it means it conforms to a set of standards laid by the BIS. Hallmarking gives consumers assurance regarding the purity of the gold they bought.
    4. That is, if you are buying hallmarked 18K gold jewellery, it will actually mean that 18/24 parts are gold and the rest is alloy.
    5. At present, only 30% of Indian Gold Jewellery is hallmarked.

    Here are the four components one must look at the time of buying gold (they are mentioned in the laser engraving of a hallmark seal):

    1. BIS Hallmark: Indicates that its purity is verified in one of its licensed laboratories
    2. Purity in carat and fineness (corresponding to given caratage KT)
    • 22K916 (91.6% Purity)
    • 18K750 (75% Purity)
    • 14K585 (58.5% Purity)
    1. Assaying & Hallmarking Centre’s mark
    2. Jeweler’s unique identification mark

    Answer this PYQ from CSP 2017 in the comment box

    Q.Consider the following statements:

    1. 1. The Standard Mark of the Bureau of Indian Standards (BIS) is mandatory for automotive tyres and tubes.
      2. AGMARK is a quality Certification Mark issued by the Food and Agriculture Organisation (FAO).

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Why need hallmark?

    • Hallmarking will enable Consumers/Jewellery buyers to make the right choice and save them from any unnecessary confusion while buying gold.
    • It will enhance the credibility of gold Jewelry and Customer satisfaction through third-party assurance for the marked purity/fineness of gold, consumer protection.
    • This step will also help to develop India as a leading gold market center in the World.

  • [pib] Shahi Litchi from Bihar exported to the UK

    In a major boost to the export of GI-certified products, the season’s first consignment of Shahi Litchi from Bihar was exported to the United Kingdom by the air route.

    Tap here to read about all GI-tagged products in news.

    Shahi Litchi

    • India is the second-largest producer of litchi (Litchi chin) in the world, after China.
    • The translucent, flavored aril or edible flesh of the litchi is popular as a table fruit in India, while in China and Japan it is preferred in dried or canned form.
    • Shahi litchi was the fourth agricultural product to get GI certification from Bihar in 2018, after Jardalu mango, Katarni rice, and Magahi paan.
    • GI registration for Shahi Litchi is held with the Muzaffarpur-based Litchi Growers Association of Bihar.
    • Muzzafarpur, Vaishali, Samastipur, Champaran, Begusarai districts and adjoining areas of Bihar have favorable climate for growing Shahi Litchi.

    Back2Basics: Geographical Indication (GI)

    • The World Intellectual Property Organisation defines a GI as “a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin”.
    • GIs are typically used for agricultural products, foodstuffs, handicrafts, industrial products, wines and spirit drinks.
    • Internationally, GIs are covered as an element of intellectual property rights under the Paris Convention for the Protection of Industrial Property.
    • They have also covered under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

  • COVID & Economic Inequality

    Pandemic hit hard the lives, livelihood and the economy. It has also worsened income inequality. The article deals with the issues of impacts of pandemic and suggests ways to revive growth the deal with income inequality.

    Need to address growth and inequality issue

    • The second wave of the pandemic is spreading to rural areas also.
    • It is known that rural areas have poor health infrastructure.
    • Similar to the first wave, inequalities are also increasing during the second wave.
    • The country has to address the issue of rising inequalities for achieving higher sustainable growth and the well-being of a larger population.
    • According to the State of Working in India 2021 report of the Azim Premji University, the pandemic would push 230 million people into poverty.
    • CMIE data shows a decline in incomes and rising unemployment during the second wave.
    • U-shaped impact: The recent RBI Bulletin says that the impact of the second wave appears to be U-shaped.
    • In the well of the U are the most vulnerable — blue collar groups who have to risk exposure for a living and for rest of society to survive.

    K-shaped recovery and rising inequality

    • The recovery seemed to be K-shaped during the first wave.
    • The share of wages declined as compared to that of profits.
    • A large part of the corporate sector managed the pandemic with many listed companies recording higher profits.
    • On the other hand, the informal workers including daily wage labourers, migrants, MSMEs etc. suffered a lot with loss of incomes and employment.
    • The recovery post the second wave is also likely to be K-shaped with rising inequalities.

    Policies needed for higher growth and reduction in inequality

    1) Vaccination and healthcare facilities

    • An aggressive vaccination programme and improving the healthcare facilities in both rural and urban areas is needed.
    • Reducing the health crisis can lead to an economic revival.
    • Vaccine inequality between urban and rural areas has to be reduced.
    • The crisis can be used as an opportunity to create universal healthcare facilities for all, particularly rural areas.
    • Other states can learn from Kerala on building health infrastructure.

    2) Investment in infrastructure

    • The budget offered some good announcements relating to capital investment in infrastructure.
    • The Development Financial Institution (DFI) for funding long-term infrastructure projects is being established.
    • This can revive employment and reduce inequalities.
    • The government has to fast track infra investment.

    3) Safety net for vulnerable

    • The informal workers and other vulnerable sections including MSMEs have been dealt back-to-back blows due to the first and second waves.
    • A majority of workers have experienced a loss of earnings.
    • Therefore, the government has to provide safety nets in the form of free food grains for six more months, expand work offered under MGNREGA in both rural and urban areas.
    • The government also need to undertake a cash transfer to provide minimum basic income.

    Policies for growth

    • Focus on demand: On economic growth, the RBI Bulletin says that the biggest toll of the second wave is in terms of a demand shock as aggregate supply is less impacted.
    • Investment: In the medium term, the investment rate has to be increased from the present 30 per cent of GDP to 35 per cent and 40 per cent of GDP for higher growth and job creation.
    • Export: It is one of the main engines of growth and employment creation.
    • There is positive news on exports as the global economy is reviving.
    • Protectionist trade policy: In recent years India’s trade policy has become more protectionist and the country has to reduce import tariff rates.
    • Role of fiscal policy: In the near term, fiscal policy has to play a more important role in achieving the objectives of growth, jobs and equity by expanding the fiscal space by restructuring expenditure, widening the tax base and increasing non-tax revenue.

    Consider the question “Two waves of the Covid pandemic have worsened the inequality. India has to address the issue of rising inequalities for achieving higher sustainable growth and the well-being of a larger population. Suggest the policies that India should follow for higher growth and reduction in inequality.”

    Conclusion

    Vaccination, expansion in rural healthcare and cash transfers should be part of the strategy to boost demand and address inequalities.

  • challenges the second Covid wave poses to India’s path to fiscal consolidation.

    The article highlights the challenges the second Covid wave poses to India’s path to fiscal consolidation.

    Recalibration to growth projection due to second Covid wave

    • The growth projections of different national and international agencies and the fiscal projections of Centre’s 2021-22 Budget require recalibration.
    • The International Monetary Fund (IMF) had forecast real GDP growth for 2021-22 at 12.5%.
    • The Reserve Bank of India (RBI) had forecast real GDP growth for 2021-22 at 10.5%.
    • The Ministry of Finance’s Economic Survey had forecast real GDP growth for 2021-22 at 11.0%.

    Growth rate of 8.7% to keep GDP at same level as in 2019-20

    • Moody’s has recently projected India’s GDP growth in 2021-22 at 9.3%.
    • Benchmark growth rate: 9.3% is close to the benchmark growth rate of 8.7% which would keep India’s GDP at 2011-12 prices at the same level as in 2019-20.
    • This level of growth may be achieved based on the assumption that the economy normalises in the second half of the fiscal year.
    • The 2019-20 real GDP was ₹145.7-lakh crore at 2011-12 prices.
    • It fell to ₹134.1-lakh crore in 2020-21, implying a contraction of minus 8.0%.
    •  At 8.7% real growth, the nominal GDP growth would be close to 13.5%, assuming an inflation rate of 4.5%.
    • This would be lower than the nominal growth of 14.4% assumed in the Union Budget.
    • At 13.5% growth, the estimated GDP for 2021-22 is ₹222.4-lakh crore at current prices.
    • Impact: This will lead to a lowering of tax and non-tax revenues and an increase in the fiscal deficit as compared to the budgeted magnitudes.

    How much the gross tax revenue would be impacted?

    • The budgeted gross and net tax revenues for 2021-22 were ₹22.2-lakh crore and ₹15.4-lakh crore, respectively.
    • The assumed buoyancy for the Centre’s gross tax revenues (GTR) was 1.2.
    • If, however, the buoyancy of 1.2 proves optimistic and instead a buoyancy of 0.9, which is the average buoyancy of the five years preceding the COVID-19 year, is applied, the nominal growth of GTR would be 12.2%.
    • This would lead to the Centre’s GTR of about ₹21.3-lakh crore.
    • The corresponding shortfall in the Centre’s net tax revenues is estimated to be about ₹0.6 lakh crore.
    • The budgeted magnitudes for non-tax revenues and non-debt capital receipts at ₹2.4-lakh crore and ₹1.9-lakh crore, respectively, may also prove to be optimistic.
    • In these cases, the budgeted growth rates were 15.4% and 304.3%, respectively.
    •  The excessively high growth for the non-debt capital receipts was premised on implementing an ambitious asset monetisation and disinvestment programme.
    • Together with the tax revenue shortfall of nearly 0.6 lakh crore, the total shortfall on the receipts side may be about ₹2.1-lakh crore.

    Impact on fiscal deficit estimates

    • Two factors will affect the fiscal deficit estimate of 6.76% of GDP in 2021-22.
    • First, there would be a change in the budgeted nominal GDP growth.
    • Second, there would be a shortfall in the receipts from tax, non-tax and non-debt sources.
    • Together, these two factors may lead to a slippage in fiscal deficit which may be close to 7.7% of GDP in 2021-22 if total expenditures are kept at the budgeted levels.
    • This would call for revising the fiscal road map again.
    • Protecting total expenditures at the budgeted level is, however, important given the need to support the economy in these challenging time.

    Vaccination policy and role of Central government

    • Positive externalities: COVID-19 vaccination is characterised by strong inter-State positive externalities, making it primarily the responsibility of the central government.
    • The entire vaccination bill should be borne by the central government.
    • If the central government is the single agency for vaccine procurement, the economies of scale and the Centre’s bargaining power would keep the average vaccine price low.
    • The central government may transfer the vaccines rather than the money that it has budgeted for transfer.
    • Some of the smaller States may find procuring vaccines through a global tender to be quite challenging.

    Conclusion

    Protecting total expenditures at the budgeted level and mass vaccination are important in India’s pandemic situation.

    Back2basics: Tax buoyancy

    • There is a strong connection between the government’s tax revenue earnings and economic growth.
    • Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP.
    • It refers to the responsiveness of tax revenue growth to changes in GDP.
    • When a tax is buoyant, its revenue increases without increasing the tax rate.
    •  In 2007-08, everything was fine for the economy, GDP growth rate was nearly 9 per cent.
    • Tax revenue of the government, especially, that of direct taxes registered a growth rate of 45 per cent in 2007-08.
    • We can say that the tax buoyancy was five (45/9).

    What is tax elasticity?

    • It refers to changes in tax revenue in response to changes in tax rate.
    • For example, how tax revenue changes if the government reduces corporate income tax from 30 per cent to 25 per cent indicate tax elasticity.

  • Supreme Court says Personal Guarantors liable for Corporate Debt

    The Supreme Court has upheld a government moves to allow lenders to initiate insolvency proceedings against personal guarantors, who are usually promoters of big business houses, along with the stressed corporate entities for whom they gave a guarantee.

    What is the Judgement?

    • The judgment has allowed creditors, usually financial institutions and banks, to move against personal guarantors under the Indian Bankruptcy and Insolvency Code (IBC) was “legal and valid”.
    • The November 15, 2019 notification was challenged before several High Courts initially.
    • The apex court said there was an “intrinsic connection” between personal guarantors and their corporate debtors.

    What is a personal guarantee? How do promoters use this route to get funds?

    • A personal guarantee is most likely to be furnished by a promoter or promoter entity when the banks demand collateral which equals the risk they are taking by lending to the firm, which may not be doing so well.
    • It is different from the collateral that firms give to banks to take loans, as Indian corporate laws say that individuals such as promoters are different from businesses and the two are very separate entities.
    • A personal guarantee, therefore, is an assurance from the promoters or promoter group that if the lender allows them the fund, they will be able to turn around the loss-making unit and repay the said loan on time.

    Impact of the move

    • The apex court ruling will help banks go after those who have offered guarantees to recover dues in case the resolution amount is short of the claims filed by them in the National Company Law Tribunal.
    • Over the years, many companies have repeatedly defaulted in loan repayment and got banks to restructure the debt, often citing systemic issues.
    • But as part of the clean-up initiated five years ago, the IBC was enacted and banks were told to go after those who were not paying their dues.

    About the Insolvency and Bankruptcy Code, 2016

    • IBC is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
    • It is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
    • The code aims to protect the interests of small investors and make the process of doing business less cumbersome.

    Key features of the code

    (1) Insolvency Resolution:

    • The Code outlines separate insolvency resolution processes for individuals, companies, and partnership firms. The process may be initiated by either the debtor or the creditors.
    • A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals.

    (2) Insolvency regulator:

    • The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it.
    • The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.

    (3) Insolvency professionals:

    • The insolvency process will be managed by licensed professionals.
    • These professionals will also control the assets of the debtor during the insolvency process.

    (4) Bankruptcy and Insolvency Adjudicator:

    The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:

    1. the National Company Law Tribunal for Companies and Limited Liability Partnership firms; and
    2. the Debt Recovery Tribunal for individuals and partnerships

  • How AIDS fight offers a COVID vaccine patent pathway

    The possibilities of new strain of Covid-19 emerging from any region of the world could derail the global recovery. To prevent that from happening vaccines need to be made available and affordable to all. This article discusses the ways to ensure that.

    Ensuring affordability and availability of Covid vaccines

    • To achieve global herd immunity and prevent new strains of COVID-19 from emerging, vaccines need to be affordable and available in massive quantities throughout the globe.
    • Following three are the ways to ensure vaccine availability and affordability.
    • 1) Voluntary linceses: This can happen through patent owners voluntarily licensing their products to other companies, especially Indian producers who are experienced at mass-producing low-cost medications.
    • 2) Compulsory licenses: This can also be done by temporarily suspending patent rights for COVID vaccines.
    • 3) COVAX option: Some favour ensuring access to COVID-19 vaccines through the COVAX programme.

    Options to ensure vaccine availability and affordability

    1) Voluntary licencing: Lessons from fight against AIDS

    • Due to anti-TRIPS activism from low-income countries and low profits from low-income markets some manufacturers placed licensing agreements to produce AIDS drugs for which they owned patent rights in the UN-affiliated Medicines Patent Pool.
    • Several India-based companies then used these voluntary licences to manufacture these drugs on a massive scale and sold them at prices they determined.
    • This effort brought down the price of key AIDS medications in these countries.
    • The United Nations’ Medicines Patent Pool and the World Health Organization’s COVID-19 Technology Access Pool are important tools in an effort to promote voluntary licensing for COVID products.
    • Sharing patent rights through voluntary licensing would need to involve India’s large pharmaceutical sector.

    Challenges in voluntary licensing

    • So far, no patent holders have joined the WHO’s COVID-19 Technology Access Pool.
    • This is why India and South Africa called on the WTO to temporarily waive patent protections for COVID-19.
    •  Meanwhile, the UN Medicines Patent Pool stands ready to accept voluntary licences for COVID-19.

    2) Compulsory licenses

    • Compulsory licenses override patent rights to allow local production or import of drugs by generic manufacturers in the event of a public health crisis.
    • Since 2003, this right has been enshrined in the Doha Declaration addendum to the WTO’s TRIPS agreement and this is what India and South Africa are lobbying for.
    • The Doha addendum, Section 5c, offers AIDS, malaria and tuberculosis as examples of what qualifies as a health emergency.
    • By this standard, COVID-19 should easily qualify.

    Issues with compulsory licensing

    • Good will: Manufacturers in India say they prefer to work with voluntary licences because there is more good will between companies while compulsory licences often come with a legal battle brought by the patent holder.
    • Time factor: Voluntary licences also enable production to begin more expeditiously as they usually are accompanied by “technology transfer” meaning that the patent holder reveals to the licensee how to manufacture the medication.
    • No need to reverse engineer: Volunatry licensing spares the licensee the lengthy and costly process of figuring out how to reverse engineer the product.

    3) COVAX option and issues

    • COVAX programme was established to purchase vaccine doses and donate them to low-income countries.
    • It does not involve modifying patent rights.
    • Underfunded: COVAX is also currently underfunded.
    • Delay: The Director-General of WHO warned that people in the lowest-income countries might have to wait until 2022 to get vaccinated through this programme.

    Government aid should entail an obligation

    • The billions of dollars in government aid given to companies to help develop COVID-19 treatments should entail an obligation to enable the mass production of affordable vaccines.
    • Patents are not ironclad ownership rights, they are a temporary contract that balances the public interest with the claims of the innovator. 

    Consider the question “What is the importance of ensuring availability and affordability of Covid-19 vaccine throughout the world? What are the options available to ensure that?”

    Conclusion

    This is not just a question of social justice and ensuring life-saving therapies are available to the world’s poor. It is a necessary step to prevent deadlier, more contagious and possibly vaccine-resistant variants of COVID-19 from proliferating in an under-vaccinated world.

  • Explained: Cryptocurrency Market Crash

    The cryptocurrency market saw a big correction with prices of major currencies, including Bitcoin, Ethereum, BNB, and others crashing as much as 30% within 24 hours.  This came in the backdrop of Chinese regulators announcing a crackdown on cryptocurrencies.

    Try this question from our AWE initiative:

    What is a cryptocurrency? What benefits and challenges do cryptocurrencies pose? (250 Words)

    Crackdown on Crypto Market

    • China has barred financial institutions and payment companies from providing any services related to cryptocurrency transactions.
    • This means that banks and online payment channels must not offer clients any service involving cryptocurrencies, such as registration, trading, clearing, and settlement.
    • China had issued such a ban in 2017 as well, but compared with the previous ban, the new rules have expanded the scope of prohibited services, and surmise that “virtual currencies are not supported by any real value”.

    Other reason behind this crash: The Tesla story

    • Tesla recently announced that it wouldn’t favor Bitcoin on ‘environmental’ concerns because Bitcoin mining requires electricity which is mostly generated using fossil fuels.
    • However, this seems to be motivated and raises a few questions like – didn’t the Tesla management already know about Bitcoin mining before diversifying into it?

    What does this fall imply?

    • A crackdown by one of the world’s biggest economy notwithstanding, those in the ecosystem has termed this decline as a short-term correction.
    • A nearly 40% dip in the bitcoin price from its all-time high looks dramatic but is normal in many volatile markets, including crypto, especially after such a large rally.
    • Such corrections are mainly due to short-term traders taking profits.
    • Long-term value investors might call these lower prices a buying opportunity.

    Back2Basics: Cryptocurrencies

    • A cryptocurrency is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database.
    • It uses strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership.
    • It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
    • Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.