23 November, 2020
- 132 countries attend global meet on criminal finances Economy
- No Minister, the trade agreement pitch is flawed - Economy
- Pressure and punishment 06 Economy
- PM for integrated fight against climate change - Env
- Question for the day
UPSC Current Affairs: 132 countries attend global meet on criminal finances | Page 09
UPSC Syllabus: Mains – GS Paper III – Economy + GS Paper II – International Relation
Sub Theme: Crypto currencies and terror financing | UPSC
Context – Over 2,000 representatives from 132 countries attended the virtual 4th Global Conference on Criminal Finances and Cryptocurrencies organised by the Interpol, Europol and the Basel Institute on Governance from November 18 to 19.
“Representatives from law enforcement and the judiciary, Financial Intelligence Units (FIUs), international organisations and the private sector have met virtually to shape international cross-sector solutions against the criminal use of cryptocurrencies,” said the Interpol.
In this context lets understand Virtual and crypto currencies.
Understanding Virtual and crypto currencies
Decentralisation implies that there is no central authority where records of transactions are maintained. Instead, transaction data is recorded and shared across multiple distributor networks, through independent computers. This technology is known as Distributed Ledger Technology.
- Virtual currency is a digitally tradable form of value, which can be used as a medium of exchange or acts as a store of value or a unit of account. It does not have the status of a legal tender.
- A legal tender is guaranteed by the central government and all parties are legally bound to accept it as a mode of payment.
- Cryptocurrency is a specific type of virtual currency, which is decentralised and protected by cryptographic encryption techniques.
Issues related to virtual currencies
- Fund illegal activities: Cryptocurrencies provide greater anonymity making them more vulnerable to money-laundering and terrorist funding activities.
- Investment Risk: Cryptocurrencies are subjected to market fluctuations. For instance, the value of Bitcoin cryptocurrency reduced from around USD 20,000 (December’17) to USD 3,800 (November’18) in less than a year;
- Regulation risk: Cryptocurrencies are decentralised, which makes them difficult to regulate.
- Security risk: Cryptocurrency design has several vulnerabilities which leave consumers open to risk of phishing cyber-attacks and Ponzi schemes. Further, transactions are irreversible, meaning there is no way to redress wrong transactions.
- Huge Processing power needed: Cryptocurrencies require large amount of storage and processing power, which can have unfavourable consequences on country’s energy resources.
Regulatory framework around the world
Different regulatory frameworks are followed in different countries with respect to cryptocurrencies. Countries such as Japan, Switzerland and Thailand allow use of cryptocurrencies as a mode of payment.
In Russia, they can be used as a mode of exchange (barter exchange), but not for payments. On the other hand, China has a complete ban on virtual currencies. However, it is to be noted that no country has allowed use of any virtual currency as legal tender.
Subhash Chandra Garg Committee Recommendations
Ban on Private Cryptocurrencies: All private cryptocurrencies should be banned in India and any activity connected with cryptocurrencies be criminalised through a law.
Introduction of official Digital Currency: An official digital currency can have several advantages over the existing payment mechanisms. These include availability of all records of transactions, cheaper alternate for cross-border payments and ease and safety of distribution.
In this regard, the Committee recommended that an open mind needs to be kept regarding introduction of an official digital currency in India. It recommended that, if required, a Committee may be setup to examine and develop an appropriate model of digital currency in India. If such a digital currency is issued, RBI should be the regulator.
Applications of Distributed Ledger Technology (DLT): The Committee observed that DLT has several potential applications in other fields. The DLT makes it easier to identify duplicate transactions, and therefore can be utilised for fraud-detection, processing KYC requirements, and claim management for insurance. Further, it can be helpful for removing errors, frauds in land markets, if used for maintaining land records.
The Committee recommended that the Department of Economic Affairs should identify uses of DLT and take measures to facilitate its usage. Similarly, financial sector regulators should examine the utility of the technology in their respective fields.
UPSC Current Affairs:No Minister, the trade agreement pitch is flawed | Page 06
UPSC Syllabus: Mains – GS Paper III – Indian Economy
Sub Theme: | Impact of the Free Trade Agreements | Promotion of local goods | UPSC
Context Recently, India’s External Affairs Minister S. Jaishankar has highlighted the adverse impact of the Free Trade Agreements (FTAs) on the Indian Economy. According to him, the FTAs have led to surge in imports, adversely affected domestic manufacturing, led to jobless growth and thus in a nutshell led to De-Industrialisation of Indian Economy.
Accordingly, the Government has adopted inward oriented strategies to focus on bringing about growth and development. However, the article highlights that such inward oriented strategies would rather end up affecting the Indian Economy.
Present Strategies adopted by Government to promote Local Goods
- Nationalistic Sentiments: Appeal to the Nationalistic sentiments of the Indians to buy and Promote Indian Goods as evident in "Vocal for Local" Campaign
- Withdrawing from FTAs: Decided to withdraw from RCEP to protect its domestic Industry; Also called for review of all existing FTAs to make them more India friendly.
- Increasing Customs duty/ Safeguard Duty: Decided to impose Safeguard Duty on some of the goods such as Solar Panel Cells to promote domestic Manufacturing.
- Higher Preference to Domestic Companies in Public Procurement.
Flawed Assumptions of the Government
The Government's strategy on adopting Inward Oriented Strategies and focusing less on Trade Integration is based upon number of assumptions. However, a recent research paper published by Shoumitro Chatterjee and Arvind Subramanian, ‘India’s Inward (Re)Turn: Is it Warranted? Will it Work?’ has highlighted that these flaws are actually flawed.
Large Domestic Size: The Indian Government believes that the demand in the Indian Domestic Market is large enough to support higher Economic Growth and hence there is no need to boost exports.
However, the research paper has highlighted that Indian Domestic Market is quite small and would continue to remain small in the near and medium term. Hence, India cannot rely on Domestic market alone to boost economic growth, it has to rely even on the exports as well. Hence, India cannot afford to adopt inward oriented strategies, rather it requires to adopt outward oriented strategies.
Growth Driven by Demand, not by Exports: The second myth is that India’s growth has been driven by domestic demand, not by exports, and definitely not manufacturing exports. However, the research paper highlights that, for almost three decades a stellar export performance has played a critical role in India’s overall growth.
For example, between 1995 and 2018, India’s overall export growth averaged 13.4% annually. This is the third best performance in the world among the top 50 exporters. It is nearly twice the world average growth and not far behind China’s growth of just over 15%.
Decrease in Exports in Post-CoVID World: Some advocates of inward orientation argue that even if India’s exports have done well in the past, the future is going to be different. In particular, export growth will inevitably be slow in a post Covid world because of protectionist policies followed by number of countries.
However, the research paper has highlighted that reports of globalisation’s demise have been greatly exaggerated. It is true that world exports of goods have declined post COVID-19. However, the global exports of services have continued to increase. In other words, the globalization of services is continuing and hence India needs to leverage this opportunity.
It has also highlighted that in future, Indian Economy can account for the large share in the export of merchandise Goods. If Countries like Vietnam and Bangladesh can increase their share of exports, even India could also do the same.
Hence, Government must realize that path to self-sufficiency is through export promotion and global economic integration rather than through protectionism and import-substitution.
UPSC Current Affairs: Pressure and punishment | Page – 06
UPSC Syllabus: Mains: GS Paper II – International Relation + GS Paper III – Internal Security
Sub Theme: FATF | ‘40+9’ FATF standards | UPSC
Context: An anti-terrorism court in Lahore has convicted Hafiz Saeed, a UN-designated terrorist whom India and the U.S. blame for the 2008 Mumbai terror attacks, on terror finance charges. This shows that Pakistan can be forced to act against terror networks under international pressure. Earlier Pakistan was a safe haven for him and it refused to act against him and his networks.
Only after UNSC condemned LeT , US put a bounty on his head and FATF put pressure of backlisting Pakistan, that it started to toe the line.
- The Financial Action Task Force (FATF) was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.
- Though organisationally different from OECD , it’s secretariat is housed at OECD in Paris.
- The Financial Action Task Force (FATF) is the global money laundering and terrorist financing
- The inter-governmental body sets international standardsthat aim to prevent these illegal activities and the harm they cause to society.
- The FATF is an international policy-making body. It does not take a role in law enforcement matters, investigations or prosecutions.
- In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering. In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.
- The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system
- The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.
FATF Standards and recommendations
- The FATF has developed the FATFRecommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism.
- It has come out with 40 recommendations against money laundering and 9 against terrorist financing in 2001, together know as ‘40+9’ FATF standards.
- They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes.
- It does deal with issues related to low tax jurisdiction or tax competition and does not maintain any similar list of countries that are considered low tax jurisdiction or tax shelters. The FATF mandate focuses only on the fight against laundering of proceeds of crimes and the financing of terrorism.
- The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documentsthat are issued three times a year.
- Black list / "High-Risk Jurisdictions subject to a Call for Action" (previously called "Public Statement"), identifies countries or jurisdictions with serious strategic deficienciesto counter money laundering, terrorist financing, and financing of proliferation. For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country. Iran and North Korea are only two countries in this list.
- Grey List / "Jurisdictions under Increased Monitoring” identifies countries that are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. Pakistan , Myanmar , Syria , Yemen are some of the countries in this list.
UPSC Current Affairs: PM for integrated fight against climate change | Page - 09
UPSC Syllabus: Prelims: Environment & Ecology | Mains – GS Paper III – Environment & Ecology
Sub Theme: National Action Plan on Climate Change | UPSC
India's efforts for combating Climate Change
As a Party to the UNFCCC, India submitted its Second Biennial Update Report (BUR) to the UNFCCC towards fulfillment of the reporting obligation under the Convention. As per the BUR, the emission intensity of India’s GDP has reduced by 21 per cent over the period of 2005-2014 which is the result of India’s proactive and sustained actions on climate change.
National Action Plan on Climate Change (NAPCC): Launched in 2008, India’s National Action Plan on Climate Change (NAPCC) identifies a number of measures that simultaneously advance the country’s development and climate change related objectives of adaptation and mitigation through focused National Missions.
National Mission for Enhanced Energy Efficiency (NMEEE): Under it, The Perform, Achieve and Trade (PAT) scheme was designed on the concept of reduction in Specific Energy Consumption.
National Solar Mission: It aims to increase the share of solar energy in the total energy mix. Under the total target of 100 GW, 32.5 GW of solar electric generation capacity has been installed.
National Water Mission: It focuses on monitoring of ground water, aquifer mapping, capacity building, water quality monitoring and other baseline studies. It seeks to increase water use efficiency by 20%.
National Mission for a Green India : It seeks to increase tree and forest cover by 5 mha. It also seeks to increase the quality of existing forests by additional 5 mha.
National Mission on Sustainable Habitat: It is being implemented through three programmes: Atal Mission on Rejuvenation and Urban Transformation, Swachh Bharat Mission, and Smart Cities Mission. Energy Conservation Building Rules 2018 for commercial buildings has been made mandatory.
National Mission for Sustainable Agriculture: It aims at enhancing food security and protection of resources. Key targets include covering 3.5 lakh hectare of area under organic farming, 3.70 under precision irrigation, 4.0 lakh hectare under System of Rice Intensification, 3.41 lakh hectare under diversification to less water consuming crop, 3.09 lakh hectare additional area under plantation in arable land and 7 bypass protein feed making. The mission has resulted in the formation of National Innovations on Climate Resilient Agriculture, a network project.
National Mission for Sustaining the Himalayan Ecosystem : It aims to evolve suitable management and policy measures for sustaining and safeguarding the Himalayan Ecosystem.
National Mission on Strategic Knowledge for Climate Change: It seeks to build a knowledge system that would inform and support national action for ecologically sustainable development. Key achievements include setting up of 11 Centres of Excellence and 10 State Climate Change Centres.
Climate Change Action Program (CCAP): Central sector scheme to build and support capacity at central and state levels, strengthening scientific and analytical capacity for climate change assessment, establishing appropriate institutional framework and implementing climate actions.
Energy Efficiency Measures: Energy Conservation Building Code (ECBC) 2017 prescribes energy performance standards for new commercial buildings to be constructed across India to achieve a 50 per cent reduction in energy use by 2030 translating to energy savings of about 300 Billion Units by 2030 and peak demand reduction of over 15 GW in a year. Schemes like UJALA for LED bulb distribution has crossed 360 million whereas under street light national program, 10 million conventional streetlights have been replaced by LED street lights thus cumulatively saving 43 million tons of CO2 emission.
Promotion of Electric Vehicles: National Electric Mobility Mission Plan (NEMMP) 2020, Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) scheme was formulated in 2015 to promote manufacturing and sustainable growth of electric and hybrid vehicle technology.
Promotion of Bio-fuels: The National Bio-fuels Policy 2018 targets 20 per cent blending of ethanol in petrol and 5 per cent blending of biodiesel in diesel by 2030.
Separate Fund for Climate Change: National Adaptation Fund on Climate Change (2015) supports concrete adaptation activities for the States/UTs that are particularly vulnerable to the adverse effects of climate change and are not covered under on-going schemes. The Scheme has been taken as Central Sector Scheme with National Bank for Agriculture and Rural Development (NABARD) as the National Implementing Entity.
National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities: The Indian Institute of Corporate Affairs in 2011 developed a concept of NVG for adoption by the corporate sector. In 2012, the Securities and Exchange Board of India (SEBI), mandated the Annual Business Responsibility Reporting (ABRR), a reporting framework based on the National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business released by the Ministry of Corporate Affairs. These guidelines serve as a driver to pursue sustainable management practices.
Green Bonds: Green bonds are debt securities issued by financial, non-financial or public entities where the proceeds are used to finance 100 per cent green projects and assets. India has the second largest Emerging green bond market after China. A number of Government agencies have contributed to issuance: Indian Renewable Energy Development Agency (IREDA) and the Indian Railway Finance Corporation (IRFC). In 2018, the SBI entered the market with an US$ 650 million Certified Climate Bond.
International Platform on Sustainable Finance (IPSF): The IPSF acknowledges the global nature of financial markets which has the potential to help finance the transition to a green, low carbon and climate resilient economy by linking financing needs to the global sources of funding. India joined the International Platform on Sustainable Finance (IPSF) in October 2019.