Indian Express EXPLAINED _ Current Affairs for UPSC _ May 2021, Week-4
- Central Bank Digital currency - various associated issues â (Economy)
- Social Media and Safe Harbour â (Polity & Governance)
- Rising prices of edible oil (Economy)
Current Affairs: The Fed Reserve’s plan for cryptocurrencies, and why it is significant? | May Explained
UPSC Syllabus: Prelims: Economy | Mains: GS Paper III - Economy
Sub Theme: Fiat Money & Legal Tender | Cryptocurrencies |CBDC | UPSC
What is money?
It is an accepted medium of exchange for goods and services . Virtually anything can be considered money, as long as it performs the three major functions of money, namely as a medium of exchange, store of value and unit of account.
Fiat Money & Legal tender
Currency notes and coins are therefore called fiat money. They do not have intrinsic value like a gold or silver coin. They are also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction
What is Central bank Digital Currency?
- Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency that is also a claim on the central bank.
- Instead of printing money, the central bank issues electronic coins or account backed by the full faith and credit of the government.
- Just like currency notes issued by the Central Bank, the CDBC is a legal tender and accepted for the payment of various transactions within a country.
- unlike the cryptocurrencies, the CBDC is backed by the Central Bank and hence enjoy more amount of stability and less volatility.
How is it different from the present digital cash that we use?
- Using a debit or credit card, or payment app, to purchase coffees or make payments in shops is also a form of digital money.
- But this is created by commercial banks, based on central bank money credited electronically to their accounts.
- The difference is this form of digital cash is not as "risk-free" as a CBDC.
- As commercial banks, you could lose your savings if a bank fails as governments usually only insure a certain amount.
Why are central banks taking interest in digital currency?
- Central banks fear losing control over the supply of money and payments systems to cryptocurrencies, such as Bitcoin or even the planned Facebook-backed cryptocurrency Diem.
- The spread of forms of payment not overseen by any central or public body could weaken central banks' grip on the supply of money, and economic stability.
- The threat has grown even deeper as cryptocurrencies are increasingly embraced.
- Further as we use less physical cash, a CBDC would ensure that the public has access to central bank money.
- They could also offer a new tool for central banks to transmit monetary policy and keep economies stable.
How would a digital currency look like?
- A CBDC could take the form of a token saved on a mobile phone or a pre-paid card.
- It could also exist in an account directly managed by the central bank or an intermediary bank.
Technology to be used for
Centralized ledger vs Distributed ledger-
- The distributed ledger database is spread across several nodes (devices) on a peer-to-peer network, where each replicates and saves an identical copy of the ledger and updates itself independently.
- The primary advantage is the lack of central authority.
- When a ledger update happens, each node constructs the new transaction, and then the nodes vote by consensus algorithm on which copy is correct.
- Once a consensus has been determined, all the other nodes update themselves with the new, correct copy of the ledger.
- Security is accomplished through cryptographic keys and signatures.
- A type of DLT is the Blockchain technology
Distributed ledger vs Blockchain
Is DLT necessary for CBDC?
- While the technology that is often associated with the use of CBDCs is the distributed ledger technology ("DLT"), CBDCs may exist without DLT as well.
- There is nothing to say it should use a blockchain, the technology that powers cryptocurrencies.
- CBDC can essentially be any non-physical digital token issued by the central bank to substitute cash.
- The People's Bank of China (PBOC), for instance, said its digital yuan would not rely on a blockchain while Sweden's e-krona, which is currently being tested, is based on a blockchain.
- Thus, the central bank could rely upon any existing technology to issue e-money, without relying on DLT.
- In contrast to traditional decentralized cryptocurrencies, a CBDC is likely to be introduced on a permissioned blockchain network, which means that the central bank will likely appoint specific authorities (which would function as nodes) to approve the transactions to be recorded on the blockchain network.
- This will enable the relevant central bank to exercise control over the money supply.
What is the likely Benefits of introduction of CBDC?
- Ensure public access to legal tender if cash were phased out
- Transition towards a cashless society
- Break the monopoly of Crypto currencies
- Financial stability
- Promotes cashless society.
- Increase in Financial Inclusion
- Increase in effectiveness of Monetary Policy
- Push to development of Fintech sector
- Provide a real time picture of economic activity and hence better GDP estimates and efficient monetary policy formulation.
- Traceability of transactions would crack down on corruption and money laundering.
What are the concerns with CBDC?
- Because of complex technological, design, policy and economic issues associated with it, there could be hurdles in implementation.
- Disintermediation - Adverse impact on Banking sector - This is because consumers are likely to shift their deposits from banks into CBDCs.
- To attract deposits banks will have to provide higher rates of interest, this would in turn lead to costly lending by the banks.
- Privacy - Cash payments afford citizens some anonymity and privacy, which CBDCs may not be able to provide. CBDCs will need to comply with the AML regime, so it cannot be completely anonymous, but the digital nature of CBDC makes it an easy target for government surveillance. This is likely to be a violation of the right to privacy and the right to be forgotten as well. Moreover, this may enable the government to track and suppress political dissent
- Vulnerable to Cyber Attacks - It could particularly be attractive to those who intend to disrupt the economy by attacking payment systems. Ensuring high standards of cybersecurity is therefore essential for any country dealing with CBDC.
Current Affairs:Social Media and Safe Harbour | May Explained
UPSC Syllabus: Prelims: Geography | Mains: GS Paper I - Geography
Sub Theme: Intermediary Guidelines | IT Act Section 79 | Global Norms | UPSC
Intermediary Guidelines and Digital Media Ethics Code
These rules have come into effect recently
What if any Social Media intermediary does comply with the rules?
- Failure to comply with any one of these requirements would take away the indemnity provided to social media intermediaries under Section 79 of the Information Technology Act
What is Section 79 of the IT Act?
- Section 79 says any intermediary shall not be held legally or otherwise liable for any third party information, data, or communication link made available or hosted on its platform.
- This protection shall be applicable if the said intermediary does not in any way, initiate the transmission of the message in question, select the receiver of the transmitted message and does not modify any information contained in the transmission.
When is the Protection not available?
- The protection is not granted if the intermediary, despite being informed or notified by the government or its agencies, does not immediately disable access to the material under question. The intermediary must not tamper with any evidence of these messages or content present on its platform, failing which it lose its protection under the Act.
When was this protection provided?
- Section 79 was introduced after a Supreme Court verdict held that the executives of the social media intermediary shall not be held accountable since they are directly not involved in the generation of the messages being transmitted on the platform.
What is the issue with new rules?
- Social media intermediaries such as Twitter, Facebook, and Instagram have so far not appointed a resident grievance officer, chief compliance officer and a nodal contact person as requires under the new rules.
- Rule 4(a) of the IT Rules, which mandates that significant social media intermediaries must appoint a chief compliance officer (CCO) who would be held liable in case the intermediary fails to observe the due diligence requirements
- Thus, protection under Section 79 of the IT Act will not hold for them.
What are Global safe harbor norms for the protection of social media intermediaries?
- In USA Section 230 of the 1996 Communications Decency Act provides Internet companies a safe harbor from any content users post of these platforms.
- “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”
- This effectively means that the intermediary shall only be like a bookstore owner who cannot be held accountable for the books in the store, unless it is proven that there is a connection between the writer or publisher of the book and the bookstore owner.
But there are few conditions which need to be abided by while submitting the names:
- The proposed name should be neutral to (a) politics and political figures (b) religious believes, (c) cultures and (d) gender
- Name should be chosen in such a way that it does not hurt the sentiments of any group of population over the globe
- It should not be very rude and cruel in nature
- It should be short, easy to pronounce and should not be offensive to any member
- The maximum length of the name will be eight letters
- The proposed name should be provided with its pronunciation and voice over
- The names of tropical cyclones over the north Indian Ocean will not be repeated. Once used, it will cease to be used again. Thus, the name should be new.
Current Affairs: Why edible oils are costlier, and the way forward | May Explained
UPSC Syllabus: Prelims: Economy | Mains: GS Paper III – Economy
Sub Theme: Edible Oil | Money Supply | UPSC
Oilseeds Profile of India
Sources of vegetable oil:
- Nine oilseeds are the primary source of vegetable oils in the country - Soybean, Groundnut, Rape seed and Mustard, Sunflower, Safflower, Sesame, Niger, Castor, linseed.
- Among these, soybean (34%), groundnut (27%), rapeseed & mustard (27%) contributes to more than 88% of total oilseeds production.
- Andhra Pradesh & Gujarat (Groundnut), Haryana(Mustard), Karnataka(Groundnut), M.P(Soybean), Maharashtra(Soybean), Rajasthan (Mustard & Soybean), Tamil Nadu(Ground nut), U.P(Mustard), West Bengal(Mustard) contribute more than 95% of total oilseed production in the country.
- In addition to nine oilseeds, vegetable oil is also being harnessed from secondary sources like cottonseed, rice bran, coconut, Tree Borne Oilseeds (TBOs) and Oil Palm.
Present status of Oilseeds and Vegetable Oil Production in India
- Almost 70% of the oilseeds are cultivated in rainfed areas.
- In 2019-20, domestic availability of edible oils from both primary sources and secondary sources was only 10.65 million tonnes against the total domestic demand of 24 million tonnes — a gap of over 13 million tonnes.
- In 2019-20, the country imported about 13.35 million tonnes of edible oils worth Rs 61,559 crore, or about 56% of the demand.
- This mainly comprised palm (7 million tonnes), soyabean (3.5 million tonnes) and sunflower (2.5 million tonnes).
- The major sources of these imports are Argentina and Brazil for soyabean oil; Indonesia and Malaysia palm oil; and Ukraine and Argentina again for sunflower oil.
- Due to demand-supply mismatch, India has emerged as the largest importer of vegetable oils in the world followed by China & USA.
- Of imported edible oils , share of palm oil is about 60% followed by soybean oil and sunflower
Why are international prices rising?
- Countries worldwide have been focusing on making biofuel from vegetable oil.
- There has been 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.
- Lower than-expected planting intentions and accounts of below-average temperatures and dry conditions in parts of USA’s main soya growing regions cast doubts over the supply prospects for the upcoming 2021/22 season.
- Argentina is staring at lower-than-anticipated yields owing to prolonged dryness
Government's initiatives to boost production of Oilseeds
- National Food Security Mission (NFSM)-Oilseeds & Oil Palm: It aims to augment the availability of vegetable oils and to reduce the import of edible oils by increasing the production and productivity of oilseeds from an average production of 30 million tonnes and productivity of 1122 kg/ha during 12th plan period to 36 million tonnes and 1290 kg/ha, respectively by end of 2019-20. Under this scheme, financial assistance is provided to farmers through State Government for various interventions like Production and distribution of quality seeds of new varieties, Demonstration of improved technologies, Distribution of bio-pesticides, weedicides, micronutrients, gypsum, lime, bio-fertilizer, Farm machinery & implements etc.
- Increase in the import duties on Vegetable Oils: The Government has increased the customs duty on the imported crude and refined vegetables so as to incentivise the farmers to increase the production of the oilseeds.
- Increase in the Minimum Support Price (MSP): The Government has been increasing the MSP of the Oilseeds to encourage the farmers to grow more oilseeds.
Strategy to promote cultivation of Oilseeds
- Import Duty Structure: The difference between import duty on the crude and refined oil is quite lower wherein the import duty on refined vegetable oil is 10% lower than that of crude vegetable oil. If the import duty between crude & refined oil is not very high, more of refined oil would be imported into India affecting domestic refineries as well as the farmers. Thus, it is necessary to raise the duty differential between the crude and refined oil and it must be maintained at 20%.
- Increasing production of Oilseeds: Adoption of high yielding varieties of seeds; Adoption of soil and moisture conservation techniques in rainfed areas; promoting balanced Utilisation of fertilisers; Promotion of intercropping of Oilseeds with other crops; Promote contract farming by oil industry and exporters
- Encourage Cooperatives and Oil Federations: The oilseed farmers have to be organised into Farmer Producer Organisations (FPOs), Self-help groups (SHGs), Cooperatives etc and link such collective organisations to oil processing Industries.
- Discourage Excessive consumption of vegetable Oils: The excessive consumption of vegetable oil is not good for health. As per nutritional requirement, 12-13 kg per person per annum is sufficient, while an average Indian consumes more than 18 kg per person per annum. The excessive consumption habits can be normalized by educating the consumers through electronic & print media, mobile apps, advertisements etc.