1. Explained | The issues in the Collegium’s functioning READ MORE
2. The ‘plumbing’ of inner party democracy READ MORE
3. In Supreme Court hijab judgment, an inversion of Indian secularism READ MORE

(Newspapers, PIB and other important sources)

Prelim and Main

1. As wildlife diplomacy takes wing, government considers Sri Lankan proposal for translocating gaurs READ MORE
2. Neutralising antibody against multiple SARS-CoV-2 variants READ MORE
3. India to attract FDI worth $475 billion in 5 years: EY-CII report READ MORE
4. Explained | Understanding the Global Hunger Index READ MORE
5. Wildlife board nod to Kedarnath ropeway project READ MORE
6. Organic fertiliser: A must for the next green revolution Govt considering proposals for extending Rs 35,000 cr PLI scheme to more sectors READ MORE
7. Alzheimer’s disease: surprising new theory about what might cause it READ MORE India’s first aluminium freight rake introduced by Hindalco for Indian Railways READ MORE

Main Exam

GS Paper- 1

1. Earth just had its 5th-warmest September on record READ MORE
2. Do India’s women have the right to choose? READ MORE

GS Paper- 2

POLITY AND GOVERNANCE

1. Explained | The issues in the Collegium’s functioning READ MORE
2. The ‘plumbing’ of inner party democracy READ MORE
3. In Supreme Court hijab judgment, an inversion of Indian secularism READ MORE

SOCIAL ISSUES

1. Malnutrition challenge: India lags in meeting goal of zero hunger READ MORE

INTERNATIONAL ISSUES AND RELATIONS

1. What a third Xi term means for India READ MORE
2. India needs to play a big role to end Ukraine war READ MORE

GS Paper- 3

ECONOMIC DEVELOPMENT

1. Explained | Why did bank bailout research get the Nobel? READ MORE
2. Conceptual haze around CBDC READ MORE
3. Strengthening the agri startup ecosystem READ MORE
4. Institutions and Economy~I READ MORE
5. Institutions and Economy~II READ MORE
6. Despite moderate performance over 40 yrs, India’s economic growth set to be substantial in 2023 READ MORE

ENVIRONMENT AND ECOLOGY

1. Ashok Gulati writes: Balancing climate change and global nutrition READ MORE
2. Erratic weather, ineffective solutions: Annual stubble burning sets off pollution concerns again READ MORE

SCIENCE AND TECHNOLOGY

1. Securing India’s cyberspace from quantum techniques READ MORE

GS Paper- 4

ETHICS EXAMPLES AND CASE STUDY

1. Addiction and return of the prodigal son READ MORE
2. How to know God READ MORE

Questions for the MAIN exam

1. ‘Though, the Indian Constitution is influenced by the American and European models. But the Constitution is not an unmediated legal transplant from the West’. Examine with suitable examples.
2. ‘The world is moving towards an era in which the applications of quantum physics in strategic domains will soon become a reality, increasing cybersecurity risks. India needs a holistic approach with a focus on post-quantum cybersecurity to tackle these challenges’. Discuss.

QUOTATIONS AND CAPTIONS

• Never think that war, no matter how necessary, nor how justified, is not a crime.
• The Indian Constitution was indeed influenced by the American and European models. But the Constitution was not an unmediated legal transplant from the West.
• This year’s economics Nobel offers a deeper understanding of the genesis, the propagation, and the management of financial crises.
• The thankless, complex and risky endeavour of inner party elections serves as a disincentive for most parties to attempt such an exercise.
• The challenge today is to develop technologies that supply the food and nutritional needs of the world while also addressing climate change imperatives. Today, there seems to be a lack of sync between policies and technologies. It is high time India wake up.
• The world is moving towards an era in which the applications of quantum physics in strategic domains will soon become a reality, increasing cybersecurity risks. India needs a holistic approach with a focus on post-quantum cybersecurity to tackle these challenges.
• India need a coordinated institutional framework tying together the different parts of policy making in order to navigate the increasing volatility triggered by climate change and energy transition.
• The decades-old Integrated Child Development Services and Midday Meal Scheme and the recent Poshan Abhiyaan designed to address hunger and malnourishment must be integrated holistically with health projects for better results.
• The pandemic has led to an increase in the number of agri startups that work across the value chain. But the key hitch is still the small farm size, coupled with low digital adoption by small and marginal farmers. They recommend a hub-and-spoke model that nurtures these agri startup initiatives.
• Structural reform can be supported to overcome the problems of inflation by improving productivity and easing supply constraints.
• In the last decade or so, there has been a renewed urge to implement the reform process. India has reaffirmed its policy to follow fiscal prudence, with a new time path for reducing the national fiscal deficit to 3 per cent of GDP.

50-WORD TALK

• In order to enhance its regional status vis-a-vis China, India takes its role in the Quad very seriously. And yet, New Delhi’s refusal to slam Russia’s aggression risks generating tensions within the group. Firstly, this is because both China and Russia oppose the Quad. Secondly, Japan, the US and Australia have imposed some of the harshest sanctions on Moscow. India has been a party to Quad’s joint statements that support ‘democratic values’ and ‘democratic resilience’.

Things to Remember:

• For prelims-related news try to understand the context of the news and relate with its concepts so that it will be easier for you to answer (or eliminate) from given options.
• Whenever any international place will be in news, you should do map work (marking those areas in maps and exploring other geographical locations nearby including mountains, rivers, etc. same applies to the national places.)
• For economy-related news (banking, agriculture, etc.) you should focus on terms and how these are related to various economic aspects, for example, if inflation has been mentioned, try to relate with prevailing price rises, shortage of essential supplies, banking rates, etc.
• For main exam-related topics, you should focus on the various dimensions of the given topic, the most important topics which occur frequently and are important from the mains point of view will be covered in ED.
• Try to use the given content in your answer. Regular use of this content will bring more enrichment to your writing.

SOCIAL ISSUES AND SOCIAL JUSTICE

1. WHAT IS THE GLOBAL HUNGER INDEX AND WHY IS INDIA TRAILING?

THE CONTEXT: Recently, India ranks 107 out of 121 countries on the Global Hunger Index in which it fares worse than all countries in South Asia barring war-torn Afghanistan.

THE EXPLANATION:

HIGHLIGHTS OF THE REPORT:

• India’s score of 29.1 places it in the ‘serious’ category.India also ranks below Sri Lanka (64), Nepal (81), Bangladesh (84), and Pakistan (99). Afghanistan (109) is the only country in South Asia that performs worse than India on the index.
• China is among the countries collectively ranked between 1 and 17 having a score of less than five.
• India’s child wasting rate (low weight for height), at 19.3%, is worse than the levels recorded in 2014 (15.1%) and even 2000 (17.15%), and is the highest for any country in the world and drives up the region’s average owing to India’s large population.
• Prevalence of undernourishment, which is a measure of the proportion of the population facing chronic deficiency of dietary energy intake, has also risen in the country from 14.6% in 2018-2020 to 16.3% in 2019-2021. This translates into 224.3 million people in India considered undernourished out of the total 828 million people undernourished globally.
• India has shown improvement in the other two indicators – child stunting has declined from 38.7% to 35.5% between 2014 and 2022 and child mortality has also dropped from 4.6% to 3.3% in the same comparative period. On the whole, India has shown a slight worsening with its GHI score increasing from 28.2 in 2014 to 29.1 in 2022. Though the GHI is an annual report, the rankings are not comparable across different years. The GHI score for 2022 can only be compared with scores for 2000, 2007 and 2014.
• There are 44 countries that currently have “serious” or “alarming” hunger levels and “without a major shift, neither the world as a whole nor approximately 46 countries are projected to achieve even low hunger as measured by the GHI by 2030”.

ABOUT THE REPORT:

The Global Hunger Index (GHI) is a tool for comprehensively measuring and tracking hunger at global, regional, and national levels. GHI scores are based on the values of four component indicators – undernourishment, child stunting, child wasting and child mortality. The GHI score is calculated on a 100-point scale reflecting the severity of hunger, where zero is the best score (no hunger) and 100 is the worst.

GHI is based on four indicators:

• The proportion of undernourished in a population
• The proportion of children under the age of five suffering from wasting (less weight in proportion to their height)
• The proportion of children under five suffering from stunting (low height in proportion to their age)
• The mortality rate of children under five

ECONOMIC DEVELOPMENTS: INFRASTRUCTURE

2. THE LEADS (LOGISTICS EASE ACROSS DIFFERENT STATES) INDEX 2022

THE CONTEXT: LEADS (Logistics Ease Across Different States) 2022 was released recently by the Ministry of Commerce and Industry.

THE EXPLANATION:

• The LEADS survey assesses the views of various users and stakeholders involved in the value chain of logistics sector. This survey is conducted recognize the enablers, hindrances and gaps within the logistics ecosystem.
• This annual survey ranks logistics ecosystem of each state and union territory across India using data received from stakeholders (perception data) and states and union territories (objective data).
• The LEAD 2022, unlike the former versions, adopted the classification-based grading, with states and union territories classified under four broad categories – coastal states, hinterland/landlocked states, northeastern states and union territories.
• This indigenous data-backed index assesses the logistics infrastructure, services, and human resources across 36 states and union territories.
• It provides three performance categories – Achievers (states and UTs achieving 90 per cent or more), Fast Movers (states and UTs scoring between 80 and 90 per cent), and aspirers (states and UTs with percentage scoring below 80 per cent).
• The 15 states and UTs that have been categorized as achievers in the logistics index chart 2022 are Andhra Pradesh, Assam, Chandigarh, Delhi, Gujarat, Haryana, Himachal Pradesh, Karnataka, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh and Uttarakhand.
• The fast movers in the latest report are Kerala, Madhya Pradesh, Rajasthan, Puducherry, Sikkim and Tripura.
• 15 states and UTs categorized as aspirers are Bihar, Chhattisgarh, Goa, Mizoram, Andaman and Nicobar Islands, Lakshadweep, Ladakh, Nagaland, Jammu and Kashmir, and Arunachal Pradesh.
• The index aims to boost the logistics performance across India, which is critical for reducing the cost of transactions and boosting international and domestic trade.
• The LEADS 2022 will assist in the implementation of the PM Gati Shakti National Master Plan (PMGS-NMP) and the National Logistics Policy (NLP) by identifying gaps in the existing logistics services, infrastructure and regulatory environment.

ENVIRONMENT, ECOLOGY AND CLIMATE CHANGE

3. NITI AAYOG REPORT ON LEAD POISONING IN INDIA

THE CONTEXT: The report, prepared jointly by government think tank Niti Aayog and the Council of Scientific & Industrial Research (CSIR), it highlighted the growing concern of lead poisoning among children under 19 years of age in India.

THE EXPLANATION:

• A new report by the CSIR and NITI Aayog found that India has the highest health and economic burden caused by lead poisoning.
• It analysed 89 data sets from 36 researches that were carried out between 1970 and 2014 to confirm the findings of the 2020 report of the UNICEF and the non-profit Pure Earth.
• The 2020 report found that India accounted for 275,561,163 of the total 800 million children who were poisoned by lead across the world. This means that 50 per cent of children in India suffered lead poisoning.
• This report also found that lead poisoning costed 5 per cent of the Indian GDP because of low economic productivity and lesser lifetime earnings. It also caused 2.3 lakh premature deaths in the country.
• The NITI Aayog-CSIR report assessed lead poisoning caused by battery recycling, occupational hazards like lead mining, smelting, welding, soldering and automobile repatriating as well as other sources like adulterated spices, cosmetics and traditional medicines.
• It found that lead poisoning continues to spike in India despite the phasing out of usage of lead in petrol – the major source of lead poisoning – by the year 2000.
• The recent study confirmed that India has the highest prevalence of lead poisoning among children under the age of 19.
• This is causing slow, irreversible brain damages that are adversely affecting the children’s intellectual capabilities and causing other health complications.
• The report found that Bihar, Uttar Pradesh, Madhya Pradesh, Jharkhand, Chhattisgarh and Andhra Pradesh have the highest average blood lead levels (BLL) among the Indian states. They accounted for 40% the total Indian population with high average BBL.
• The report called for the implementation of national and state-level policies to tackle the issue of lead poisoning.
• These include identification of at-risk population through BLL monitoring, finding the sources of spike in BLLs and sensitization of healthcare workers to strengthen the monitoring, detection and treatment against lead poisoning.
• It also recommends conducting targeted research and intervention to identify new sources of lead poisoning.

VALUE ADDITION:

About Lead Poisoning:

Lead is a naturally occurring toxic metal found in the Earth’s crust. Its widespread use has resulted in extensive environmental contamination, human exposure and significant public health problems in many parts of the world.

KEY FACTS:

• Lead is a cumulative toxicant that affects multiple body systems and is particularly harmful to young children.
• Lead in the body is distributed to the brain, liver, kidney and bones. It is stored in the teeth and bones, where it accumulates over time. Human exposure is usually assessed through the measurement of lead in blood.
• Lead in bone is released into blood during pregnancy and becomes a source of exposure to the developing fetus.
• There is no level of exposure to lead that is known to be without harmful effects.
• Lead exposure is preventable.

DISASTER MANAGEMENT

4. GLOBAL STATUS OF MULTI-HAZARD EARLY WARNING SYSTEMS — TARGET G

THE CONTEXT: The report titled “Global Status of Multi-Hazard Early Warning Systems — Target G” was jointly released by United Nations Office for Disaster Risk Reduction (UNDRR) and the World Meteorological Organization (WMO) on the occasion of International Day for Disaster Reduction (October 13).

THE EXPLANATION:

• The findings of the report are based on the assessment of the data from the Sendai Framework Monitor (SFM) – an online tool the enables the member states to report their progress on the targets of The Sendai Framework (2015-2030).
• Target G of the Sendai Framework seeks to increase the availability of and access to multi-hazard early warning systems (MHEWS) and disaster risk information and assessment by the year 2030.
• The recently released report found that 50 per cent the countries in the world do not have early warning systems to prepare against natural disasters.
• Africa, South America and several countries in Arab and Caribbean region have very low coverage of MHEWS.
• On average, at least 40% of countries in every region have reported the use of MHEWS.
• Less than half of Least Developing Countries (LDC) and only 33 per cent of Small Island Developing Countries have MHEWS.
• The number of deaths in countries with limited early warming coverage is eight times higher than in countries with substantial to comprehensive coverage.
• An early warning system is up to the mark if it covers the four elements – risk knowledge, technical warning and monitoring service, communication and dissemination of warnings and community response capability.
• The recent report called for the increased investment in all these elements, with a particular focus on risk knowledge to improve disaster planning and boosting capacity of at-risk community for early action.
• It also called for increasing investments in data and technology for strengthening hazard monitoring, faster warning dissemination and better tracking of progress.
• It also recommends rating of effectiveness of the MHEWS, especially in Least Developed Countries and Small Island Developing countries.

About United Nations Office for Disaster Risk Reduction (UNDRR):

• UNDRR (formerly UNISDR) is the United Nations focal point for disaster risk reduction. UNDRR oversees the implementation of the Sendai Framework for Disaster Risk Reduction 2015-2030, supporting countries in its implementation, monitoring and sharing what works in reducing existing risk and preventing the creation of new risk.
• UNISDR’s Strategic Framework 2016-2021 has a vision to substantially reduce disaster risk and losses for a sustainable future with the mandate to act as the custodian of the Sendai Framework, supporting countries and societies in its implementation, monitoring and review of progress.

SCIENCE AND TECHNOLOGY

5. SCIENTISTS HAVE SUCCESSFULLY IMPLANTED AND INTEGRATED HUMAN BRAIN CELLS INTO NEWBORN RATS

THE CONTEXT: Scientists have successfully implanted and integrated human neurons into new-born rats.

THE EXPLANATION:

• Studying of complex psychiatric disorders like schizophrenia and autism is difficult since animals do not experience them like people and human beings cannot be used for the research.
• Human brain cells made using stem cells in perti dishes do not grow to the size of human neurons and their isolation from human body makes it difficult to study the symptoms of the neurological disorders.
• These limitations are addressed by implanting and integrating a group of human brain cells called organoid into the brains of new-born rats.
• Integration of human brain cells in new-born rats helps research psychiatric disorders and test treatment against them.
• Only young rats are used for the implantation since brain stops developing after a certain age in rats. This limits how the implanted brain cells integrate.
• The researchers found that the organoids can grow relatively large in young rats, covering about one-third of the rat’s brain.
• The integration was tested by blowing air across the rats’ whiskers, which triggered electrical activity in the human neurons. This means that the human tissue in the brain was able to process the external stimulation of the rat’s body.
• The researchers also tested and concluded that the implanted human neuron can send signals back to the rat’s body.
• The technique was recently used to study the Timothy Syndrome. The researchers found that organoids made using brain cells of patients with Timothy Syndrome grew more slowly and displayed less electrical activity than those from healthy people.
• This study will play a major role in improving the current understanding about human brain development and neurodevelopment disorders.
• However, implanted neurons did not replicate the key features of the developing human brain.
• The implantation of human neurons in rats does not make them more human-like because of the limitations on how deeply these neurons integrate with the rat brain.
• However, these barriers may not exist in species closely related to humans like primates and thus causes ethical concerns over progressing further into the experiment.

GOVERNMENT SCHEMES AND INITIATIVES IN NEWS

6. WHAT ARE RYTHU BHAROSA KENDRAS?

THE CONTEXT: Recently, an Ethiopian delegation led by the country’s Agricultural Minister Dr Meles MekonenYimer is in Andhra Pradesh (AP) to study the first-of-its kind Rythu Bharosa Kendras (RBKs), which have been set up by the AP Government.

THE EXPLANATION:

According to the officials, that Ethiopia has shown keen interest in the RBKs. Since the country wants to increase its agriculture output, it seeks to improve the quantity and quality of yields, reduce production costs, and provide newer skills to its farmers.

What are Rythu Bharosa Kendras?

• Set up for the first time in the country, the RBKs are unique seeds-to-sales, single-window service centres for farmers that have been set up across the state.
• They are a one-stop solution to all farmers’ needs and grievances. RBKs sell pre-tested quality seeds, certified fertilisers and animal feed. Farmers can purchase or hire farm equipment, and even sell their produce at the prevailing MSP in the RBKs.
• Touted as role models for the country, agriculture and horticulture officials manning the RBKs also provide services like soil testing and make recommendations — on which crops to sow, and quantity and type of fertiliser to be used. The state government also pays crop insurance, procures grains and makes payments to farmers through the RBKs.

Have the RBKs proved to be helpful to farmers?

• RBKs facilitate interaction between farmers, agriculture scientists, and agriculture extension officers right at the village level. Apart from providing services and items for sale, RBK officials demonstrate new farm equipment and provide training to farmers.
• Based on inputs provided by officials after soil testing and weather conditions, many farmers have changed their cropping patterns and benefited immensely, according to the state Agriculture Department. The RBKs have been responsible for elimination of spurious seeds and uncertified and dangerous fertilisers, which can cause crop damage and failures.
• Over 10,700 RBKs — multi-functional kiosks with digital Aadhar authentication equipment — have been set up across the state. The RBKs, staffed by agriculture and horticulture graduates, help farmers decide the crops they should cultivate in a scientific manner.
• They also assist in selling their produce at MSPs, through supporting systems of e-cropping, geo-tagging, and the CM App through which payments are made to farmers. AP CM who floated the RBK concept says it is a game-changer for Andhra Pradesh’s farmers.
• The Centre has recently nominated the RBK concept for the Food and Agriculture Organisation’s “Champion’’ award. Officials say several agrarian countries are expressing interest in understanding the RBK concept and seek to implement it in their countries.

THE CONTEXT: A November 2020 decision by the Reserve Bank of India (RBI) to permit banks to “co-lend with all registered NBFCs (including HFCs) based on a prior agreement” has led to unusual tie-ups like the one announced in December 2021 between the State Bank of India (SBI) and Adani Capital. This article analyses the issue in detail.

THE ‘CO-LENDING MODEL’

• In September 2018, the RBI had announced “co-origination of loans” by banks and Non-Banking Financial Companies (NBFCs) for lending to the priority sector. The arrangement entailed joint contribution of credit at the facility level by both the lenders as also sharing of risks and rewards”, the RBI said.
• Subsequently, based on feedback from stakeholders and “to better leverage the respective comparative advantages of the banks and NBFCs in a collaborative effort”, the central bank allowed the lenders greater operational flexibility while requiring them to conform to regulatory guidelines.
• The primary focus of the revised scheme, rechristened as ‘Co-Lending Model’ (CLM), was to “improve the flow of credit to the unserved and underserved sector of the economy and make available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from banks and the greater reach of the NBFCs.

HOW DOES A CO-LENDING MODEL WORK?

• The Reserve Bank of India (RBI) came out with the co-origination framework in 2018, allowing banks and NBFCs to co-originate loans. These guidelines were later amended in 2020 and rechristened as co-lending models (CML) by including Housing Finance Companies and some changes in the framework.
• The primary aim of CLM is to improve the flow of credit to the unserved and underserved segments of the economy at an affordable cost. This happens as banks have lower costs of funds and NBFCs have greater reach beyond tier-2 centres.
• A minimum of 20 percent of the credit risk by way of direct exposure shall be on NBFC’s books till maturity and the balance are on the bank’s books. Upon maturity, the repayment or recovery of interest is shared by the bank and NBFC in proportion to their share of credit and interest.
• This joint origination allows banks to claim priority sector status in respect of their share of the credit. NBFCs act as the single point of interface for the customers and a tripartite agreement is done between the customers, banks and NBFCs.

BANK-NBFC TIE-UPS

• Several banks have entered into co-lending ‘master agreements’ with NBFCs, and more are in the pipeline.
• In December 2021, SBI, the country’s largest lender, signed a deal with Adani Capital, a small NBFC of a big corporate house, for co-lending to farmers to help them buy tractors and farm implements.
• SBI’s giant network includes 22,230 branches, 64,122 automated teller machines (ATMs) and cash deposit machines (CDMs), and 70,786 business correspondent (BC) outlets across the country. Adani Capital has a network of just 60 branches and has disbursed around Rs 1,000 crore, according to its website.
• On November 24, Union Bank of India entered into a co-lending agreement with Capri Global Capital Ltd (GCC), with the aim “to enhance last-mile finance and drive financial inclusion to MSMEs by offering secured loans between Rs 10 lakh to Rs 100 lakh” initially through “100+ touch points pan-India”.

CORPORATES IN BANKING

• While the RBI hasn’t officially allowed the entry of big corporate houses into the banking space, NBFCs, mostly floated by corporate houses, were already accepting public deposits. They now have more opportunities on the lending side through direct co-lending arrangements.
• This had come at a time when four big finance firms — IL&FS, DHFL, SREI and Reliance Capital — which collected public funds through fixed deposits and non-convertible debentures, have collapsed in the last three years despite tight monitoring by the RBI. Collectively, these firms owe around Rs 1 lakh crore to investors.
• While the RBI has referred to “the greater reach of the NBFCs”, many bankers point out that the reach of banks is far wider than small NBFCs with 100-branch networks in serving underserved and unserved segments.

WHAT TOOK SO LONG FOR CO-LENDING TO TAKE OFF?

• On several occasions, the Ministry of Finance has pushed for PSU banks to adopt co-lending models. Some of the PSU banks in the initial days had tied up with large non-banks. For instance, SBI had tied up with ECL Finance, a subsidiary of Edelweiss Financial Services, in September 2019.
• But some of these tie-ups didn’t take off as expected. According to bankers, banks and NBFCs both are open for these kinds of tie-ups, but the challenge was in execution at ground level.
• Some of the main hurdles were IT integration of systems as both banks and NBFCs would operate on different systems, different underwriting processes and parameters. All of these took a lot of time to solve for the marriage to happen.
• In the co-lending model, beyond technology challenges, the longevity of the relationship of Banks and NBFCs is a concern.
• The co-lending model is still in the nascent stages, and one may enter into an agreement, but over a period of time, the relationship should sustain.
• Most of these arrangements are with NBFCs that have sizable distribution but are low on capital. Most of the mid-sized well-rated NBFCs still opt for term loans over entering into co-lending models, given the complexities around integration and processes.

WHAT ARE THE OPPORTUNITIES?

• The co-lending model, if it takes off and is executed rightly, will ensure delivery of credit to the unserved and underserved.
• The real gap of credit exists with the segments such as small and medium businesses, credit to lower and middle-income groups, rural areas, etc.
• The opportunity can be taken up by digital lending start-ups and mid-size NBFCs, and they can actually marry their strength of distribution with bank’s funds.
• As banks are flushed with funds, they can cater to vast customers as NBFCs have reached in tier-3 and tier-4 cities. On the execution side, it really needs to be tested at ground level.

RISK IN CO-LENDING

• The move by big banks to tie up with small NBFCs for co-lending has come in for criticism from several quarters.
• Under the CLM, NBFCs are required to retain at least a 20 per cent share of individual loans on their books. This means 80 per cent of the risk will be with the banks — who will take the big hit in case of a default.
• The terms of the master agreement may provide for the banks to either mandatorily take their share of the individual loans originated by the NBFCs on their books or to retain the discretion to reject certain loans after due diligence prior to taking them on their books.
• Interestingly, the RBI guidelines provide for the NBFCs to be the single point of interface for customers and to enter into loan agreements with borrowers, which should lay down the features of the arrangement and the roles and responsibilities of the NBFCs and banks. In effect, while the banks fund the major chunk of the loan, the NBFC decides the borrower.

CAN CHANGES IN THE CO-LENDING MODEL EASE CREDIT AVAILABILITY FOR THE PRIORITY SECTOR?

Though, direct assignment in a co-lending model typically with a bank calls for various critical challenges, as below.

COMPLIANCE WITH DIRECT ASSIGNMENT GUIDELINES

• The co-lending model requires that the taking over bank shall ensure compliance with all the requirements of direct assignment guidelines except the Minimum Holding Period (MHP) requirement.
• In a traditional direct assignment transaction, the direct assignment happens for a pool of assets through execution of an assignment deed, payment of stamp duty on the deed, seeking legal opinion on true sale, among others.
• Replicating the same in co-lending would mean the execution of assignment deeds for each customer, payment of stamp duty on a case-to-case basis and so on.
• This will not only increase the documentation/ procedures but also add to the cost of lending to the end borrower.

SECURITY CREATION AND RECOVERY

• The co-lending model very conveniently mentions that the co-lenders shall arrange for the creation of security and charge as per mutually agreeable terms and same for monitoring and recovery too.
• The bank which is to typically own a larger share in the exposure, would want the security to be created in its name.
• The loan is getting disbursed by the NBFC, and the security is created before even knowing the bank’s decision on its participation. It is not practically possible to create security in the name of a bank.

TAKEOVER OF LOAN AND CREDIT ENHANCEMENT

• The transaction in the co-lending arrangement involving post disbursal takeover of the bank’s share in the loan is akin to direct assignment, and the cases will be sourced as per the pre-agreed parameters.]
• Banks still want to do a 360-degree diligence within their internal policies while cherry-picking the loans and tend to follow an ideal co-origination approach.
• PSUs have always been unconvinced about the processes and practices of NBFCs.

Bottom line: Despite its multiple operational challenges, the direct assignment mode of co-lending has done justification in drawing a lot of confidence amongst the banks. The attributing factor is the familiarity of its structure and practical aspects. Riding on the same, combined with the greater objective of leveraging the collaborative efforts effectively towards financial inclusion, would certainly garner positive results in the time to come.

THE WAY FORWARD:

• To address the huge credit gap, the co-lending model is one of the right ways to go forward, but challenges around tech integrations and ground-level executions should be addressed.
• The country’s largest lender, SBI, it is actively looking at co-lending opportunities with multiple NBFCs / NBFC-MFIs for financing farm mechanisation, warehouse receipt finance, farmer producer organisations (FPOs), etc., for enhancing credit flow to double the farmers’/individuals’ income.
• The bank entered into a co-lending agreement with Vedika Credit Capital Ltd (VCCL), Save Microfinance Pvt Ltd (SMPL) and Paisalo Digital Ltd (PDL); it is a good move.
• Finance Minister Nirmala Sitharaman in visited to Mumbai in August to meet MDs of PSU banks. The focus should be towards credit growth to support MSMEs and underserved segments.
• The necessity of making the co-lending model work to enhance affordable credit to MSME and retail sectors.
• As the economy recovers coupled with pent-up demand, these kinds of models will evolve and grow to fulfil the credit requirements of the priority sector segments.

THE CONCLUSION: The co-lending model is a necessary step to help the priority sector. Though it has many challenges, it brings confidence in India’s banking sector that is much needed to address the challenges in a pandemic time. The collaboration is an effective effort for financial inclusion would certainly garner positive results in the time upcoming time.

[WpProQuiz 354]

1. Light up your life with happiness READ MORE
2. Karma and economics READ MORE

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3. Pollution is blackening Ladakh’s glaciers and the repercussions could be devastating READ MORE

1. Do India’s women have the right to choose? READ MORE
2. Ramana’s collegium didn’t diversify judiciary. Data shows most judges are upper-caste Hindus READ MORE

1. No time for placebo: India has to work harder on its image of having an independent drug regulator READ MORE
2. Onus of salvaging democracy lies with us READ MORE
3. Liberal values are absolute READ MORE

(Newspapers, PIB and other important sources)

Prelim and Main

1. Dangerous to push policy rate above neutral rate when growth outlook fragile: RBI Monetary Policy Committee member READ MORE
2. India ranks 107th out of 121 countries on Global Hunger Index READ MORE
3. Nuclear-powered INS Arihant carries out successful launch of SLBM READ MORE
4. ISRO’s LVM3 to make commercial foray with launch of 36 OneWeb satellites on October 23 READ MORE
5. Xi Jinping, the Chinese Communist Party, and India READ MORE
6. Organic fertiliser: A must for the next green revolution READ MORE
7. India’s green push for second-generation bioethanol READ MORE
8. Ocean currents protect Galápagos Islands from global warming; but are they safe forever? READ MORE
9. Heavy metal out there: Researchers detect barium in atmospheres of 2 exoplanets READ MORE

Main Exam

GS Paper- 1

1. Do India’s women have the right to choose? READ MORE

GS Paper- 2

POLITY AND GOVERNANCE

1. No time for placebo: India has to work harder on its image of having an independent drug regulator READ MORE
2. Onus of salvaging democracy lies with us READ MORE
3. Liberal values are absolute READ MORE

SOCIAL ISSUES

1. Ramana’s collegium didn’t diversify judiciary. Data shows most judges are upper-caste Hindus READ MORE

INTERNATIONAL ISSUES AND RELATIONS

1. FOREIGN POLICY IN FLUID WORLD ORDER READ MORE

GS Paper- 3

ECONOMIC DEVELOPMENT

1. Indian Deep Tech and a case for a strategic fund READ MORE
2. Economics Nobel Has Lessons for India’s Macro-Economic Policy Thought READ MORE
3. The Digital Rupee: The launch of the central bank digital currency is a bold step in the right direction. READ MORE

ENVIRONMENT AND ECOLOGY

1. Shrinking biodiversity: An alarming wake-up call to halt unsustainable growth READ MORE
2. Lesson From Nepal: Decentralisation Alone Won’t Enable a Local Climate Response READ MORE
3. Pollution is blackening Ladakh’s glaciers and the repercussions could be devastating READ MORE

GS Paper- 4

ETHICS EXAMPLES AND CASE STUDY

1. Light up your life with happiness READ MORE
2. Karma and economics READ MORE

Questions for the MAIN exam

1. India needs a better, broad-based and transparent method of appointing senior judges to the High Courts and the Supreme Court. In the light of the statement discuss whether the mechanism of collegium should be preplaced with new mechanism?
2. ‘Inclusive economic growth requires reaching out to the poorest of the poor’. Discuss why India needs dedicated and sustained efforts are made to pull millions of destitute citizens out of poverty and how can India achieve it?
3. India Judiciary has become a more public Judiciary in recent times but is hampering the image of this institution. Critically examine.

QUOTATIONS AND CAPTIONS

• The heresy of one age becomes the orthodoxy of the next.
• Holding peaceful assemblies only at “designated” spaces makes them inferior to other “regular” activities conducted in a public space.
• If correctly aligned with the Government’s programmes, CSR funds and tax incentives can boost a nascent Indian Deep Tech ecosystem.
• India has to work harder on its image of having an independent drug regulator.
• India has to work harder at its image of having an impartial and independent regulator that can be trusted internationally as well as domestically.
• Our apex court understands that their adjudicative obligation is to be able to discern changing mores — in this case, the varied contexts of relationships and families.
• There is also a need to strengthen our drug alert and pharmacovigilance programmes. These are ways to ensure the safety of our products post-marketing.
• Policy-makers must step up conservation and restoration efforts to mitigate the crisis before it is too late.
• Democracy’s demise is not only about the capture of institutions by populists; it is about us, the people, who have not taken on the responsibilities of a political public.
• India actively maintained a neutral stance on Russia’s attack on Ukraine, but gradually it is fine-tuning the narrative to sound more and more critical of Russian action.

50-WORD TALK

• While the transition towards other sources of energy and increasing the fossil fuel output is an ongoing process, India due to its sheer consumer base can bargain on price, if it remains consistent in its approach and does not buckle under international pressure as it did during the Iran sanctions.
• An RTI application is the cheapest and most effective weapon to redress governmental apathy. It has led to the uncovering of several corruption scandals in the public sector and inspired persistent efforts to dig out information by RTI activists and common citizens, several of whom have been at the receiving end.

Things to Remember:

• For prelims-related news try to understand the context of the news and relate with its concepts so that it will be easier for you to answer (or eliminate) from given options.
• Whenever any international place will be in news, you should do map work (marking those areas in maps and exploring other geographical locations nearby including mountains, rivers, etc. same applies to the national places.)
• For economy-related news (banking, agriculture, etc.) you should focus on terms and how these are related to various economic aspects, for example, if inflation has been mentioned, try to relate with prevailing price rises, shortage of essential supplies, banking rates, etc.
• For main exam-related topics, you should focus on the various dimensions of the given topic, the most important topics which occur frequently and are important from the mains point of view will be covered in ED.
• Try to use the given content in your answer. Regular use of this content will bring more enrichment to your writing.

[WpProQuiz 353]

THE CONTEXT: An ongoing debate in India is whether or not Indian non-banking fi nancial companies (NBFCs) are “shadow banks”. This question appears important because we have learned from the ongoing global financial crisis that shadow banking might create systemic risks which have been defined “broadly as the expected losses from the risk that the failure of a significant part of the financial sector leads to a reduction in credit availability with the potential for adversely affecting the real estate and economy at large.

WHAT IS SHADOW BANKING?

• Shadow banking is a blanket term to describe financial activities that take place among non-bank financial institutions outside the scope of federal regulators. These include investment banks, mortgage lenders, money market funds, insurance companies, hedge funds, private equity funds and payday lenders, all of which are a significant and growing source of credit in the economy.
• Although these entities do not accept traditional demand deposits offered by banks, they do provide services similar to what commercial banks offer.
• The shadow banking system had overtaken the regular banking system in offering loans in US before the financial crisis erupted in 2008.

WHAT ARE THE RISKS ASSOCIATED WITH SHADOW BANKING?

• The 2008 financial crisis has shown that shadow banking can be a source of systemic risk to the banking system. The risks can be transmitted directly and through the interconnectedness of partially-regulated entities with the banking system.

WHY IS RBI TIGHTENING SHADOW BANKING RULES?

• The Reserve Bank is simply following the trend of global central banks increasing surveillance on shadow banking. Basel III norms require central banks to tighten supervision on shadow banks across the globe through steps such as defining minimum capital.

WHAT STEPS ARE RBI TAKING?

• The Usha Thorat committee has come out with draft regulations on NBFCs, such as increasing tier I capital and risk weight on certain assets. After the recommendations, smaller NBFCs with asset size of less then 25 crore are likely to go out of business.

WHAT IS THE GLOBAL SITUATION?

• The size of shadow banking has reached a record $67 trillion in 2011, according to a report by the Finance Stability Board, a regulatory task force for the world’s group of 20 economies. America has the biggest shadow banking system, followed by the Eurozone and the United Kingdom.

Key Takeaways:

• The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking.
• It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are.
• The shadow banking system played a major role in the expansion of housing credit in the run up to the 2008 financial crisis, but has grown in size and largely escaped government oversight even since then.

WHY SHADOW BANKING SHOULD WORRY POLICYMAKERS?

• RBI has warned that economic disruptions may intensify systemic risks to India’s financial sector primarily because NBFCs remain vulnerable with their deteriorating asset quality and reluctance of the market to lend them money.
• The banking regulator RBI issued a clear warning in its Fiscal Stability Report, that the economic disruptions may intensify risks to its shadow banking firms, the Non-Banking Financial Companies (NBFCs), “and consequently” the systemic risks to the entire financial sector.

THREAT TO INDIA’S FINANCIAL SYSTEM

• The threats to the NBFCs come from two sources: (i) their deteriorating asset quality and (ii) continued reluctance of market to lend money in the aftermath of implosion in two leading NBFC players, Infrastructure Leasing & Financial Services Limited (IL&FS) and Dewan Housing Finance Corporation Ltd (DHFL) in 2018 and 2019. Both were taken over by the RBI for loan defaults and now face bankruptcy proceedings.
• About 50% of the NBFCs’ aggregate assets were under the moratorium on loan repayment as per the latest analysis. Banks, which have been fighting shy of lending directly to the industry because of growing threat of bad loans (non-performing assets or NPAs), increased their lending to the NBFCs in recent years, as a result of which bank lending accounted for 28.9% of the total NBFC borrowings in December 2019 – up from 23.1% in March 2017.
• The RBI noted that notwithstanding this support from banks, the real risks to the NBFCs’ liquidity come from declining market borrowings. It said that under the stress tests, 11.2% to 19.5% of NBFCs would not be able to comply with the minimum regulatory capital requirements (CRAR) of 15%.

The following graph maps the NBFCs’ assets quality (GNPA and NNPA ratios) and capital-to-risk-assets ratio (CRAR) since FY14.

In the meanwhile, the NBFCs have grown in influence, as is evident from the RBI data mapped below, against the GDP (at constant prices).

• Shadow banking not only poses a threat to India but is equally a risk to the global financial order. For better appreciation, the 2007-08 financial crisis needs to be revisited.

ENDURING OVERALL GROWTH IN SHADOW BANKING

• When the world woke up and started monitoring shadow banking, Kodres recorded the growth in their assets. In 2015, she wrote, their assets in the US was 28% of the total financial sector (down from 32% in 2011); in the euro area, it was 33% (up from 32% in 2011) and globally they accounted for $92 trillion (up from $62 trillion in 2007 and $59 trillion during the crisis).
• One big initiative to monitor shadow banking was the multinational Financial Stability Board (FSB), set up in 2011. India is a part of this initiative.
• But Kodres was not happy. She commented: “The authorities (monitoring shadow banking) are making progress, but they work in the shadows themselves – trying to piece together disparate and incomplete data to see what, if any, systemic risks are associated with the various activities, entities, and instruments that comprise the shadow banking system.”
• Initially, the FSB defined shadow banks broadly to include all entities “outside the regulated banking system that perform core banking function”, which meant credit intermediation (taking money from savers and lending it to borrowers) and they were called Non-Banking Financial Intermediation (NBFI).
• In its latest report of January 2020, the FSB divided those into three categories: (a) MUNFI (Monitoring Universe of Non-bank Financial Intermediation): “broad measure” of all NBFIs that are not central banks, banks or public financial institutions (b) OFIs (Other Financial Intermediaries): a subset of MUNFI that excludes insurance corporations, pension funds or financial auxiliaries and (c) NBFIs: “narrow measure” of NBFI comprising of non-banks that authorities have identified as the ones that may pose bank-like financial stability risks and/or regulatory arbitrage.
• The NBFIs (narrow measure) are the ones identified as posing systemic risks.

HEIGHTENED SYSTEMIC RISKS FROM SHADOW BANKING

• The 2020 FSB report shows that global estimates for the MUNFI assets stood at $183.6 trillion in 2018 or 49% of the total financial assets ($379 trillion). Of this, OFIs accounted for $114.3 trillion (30% of the total); NBFI for $50.9 trillion (13.4% of the total), and the rest for $18 trillion.
• The FSB 2020 report says the “systemic risk” comes from activities that are “typically performed by banks, such as maturity/liquidity transformation and the creation of leverage”.
• The alarming aspect of the NBFI is that it is growing.
• The FSB 2020 report says it “has grown faster than GDP since 2012, increasing to 77% of all participating jurisdictions’ GDP in 2018 from 64% in 2012. This trend is observed in most jurisdictions”.
• The FSB measures 29 jurisdictions (including India and China), representing over 80% of global GDP.

GROWTH IN INDIA’S SHADOW BANKING (NBFCS)

• What does the FSB of 2020 say about India? (India’s NBFCs correspond to the NBFIs.)  It shows India is an outlier – in a negative way.

Here are two examples –

• India recorded 22.4% growth in OFI assets in 2018, while the global growth was 0.4%.
• As for NBFIs (NBFCs in India), a major drawback is their over-dependence on short-term funding for long-term lending (technically called EF2 function).
• Globally, such funding accounted for 7% of the total in 2018 and it grew 6.9%. In sharp contrast, India recorded a 17.4% growth in 2018. As for its share in the total NBFC funding, the RBI’s banking trend report released in December 2017 revealed that it stood at an unbelievably high of 99.7%.
• In the NBFC context, short-term means a period of up to three years and long-term for up to 15 years, as in the case of housing and infrastructure loans. Why such anomaly continues in the NBFCs’ functioning is an abiding mystery.
• Little wonder, when the NBFC crisis hit India in 2018 and 2019, the two big players to implode (IL&FS and DHIL) were associated with infrastructure and housing sectors, though this is only one part of the saga.

IS SHADOW BANKING A SERIOUS THREAT IN EMERGING MARKETS?

• The IL&FS crisis has exposed the vulnerabilities of non-bank lending. But in India,the problem is one of a huge bad debt pile-up despite low credit disbursal.
• Everyone seems to have woken up to the fact that global debt levels are too high and portent difficulties ahead. As Figure 1 indicates, the levels of credit to GDP, which were so high as to be unsustainable and resulted in the big crisis of 2008, have increased even more since then.
• There was a phase of deleveraging in the advanced economies until around 2014, and in developing countries and emerging markets until 2011, but since then, credit/debt has been expanding again.
• So much so that the credit GDP levels in 2017 were 15 per cent higher than in 2008 in the advanced economies, and more than 80 per cent higher for emerging markets (Figure 1).
• More recently, the attention has shifted from bank lending to shadow banking activities, which are by those institutions that do not collect deposits but still provide loans. These include a variety of institutions, ranging from trusts, investment funds and similar corporations to kerb lenders.
• Because they do not come under the regulatory framework for banks, yet tend to be interlinked with them in various ways, there are concerns that over lending and default in such institutions can destabilise the financial system.

LINGERING FRAGILITIES

• Ever since the IL&FS crisis broke in India, there has been much discussion of the fragilities posed by non-bank lending and the potential for financial and economic crises in emerging markets that could be led by the collapse of shadow banks. This is in no small measure due to the significant role played by such shadow lending in the core capitalist countries (especially the US) in the build-up to the Great Financial Crisis in 2008.
• However, since then, shadow lending appears to have reduced, or at least been contained relative to GDP, as indicated by Figure 2. For the G20 countries taken as a group, credit from non-banks as a per cent of GDP was about 6 percentage points lower in 2017 than in 2007, while bank credit had actually increased by 15 percentage points. This suggests that excessive debt creation is much more a problem of the banking sector as a whole than the non-bank or shadow bank sector.
• Table 1 provides data for some important advanced and emerging economies to assess the extent to which this argument is valid. Significantly, the reliance on shadow banking appears to have reduced significantly in the advanced economies by 2015-17 from what it was during 2008-10, other than in Germany where it seems to have remained at roughly the same level of around 30 per cent. Even the increase in bank credit was confined to Japan and South Korea, rather than the US, UK or Germany, where it has fallen relative to the levels of 2008-10.

WAY FORWARD:

• It is also increasingly suggested that the problem of shadow banking has become more significant in emerging markets rather than in advanced economies, and that the dramatic increase in such loans in these economies is what will be associated with the next big systemic risk to global finance.
• In particular, it is suggested that the rapid increase of shadow banking in Asia, especially China, points to the likely area of greatest future concern.

CONCLUSION:

NBFC sector has been stung by a crisis set off by the shock collapse of non-bank lender IL&FS group in 2018. India’s shadow banks, which lend to everyone from teashop merchants to property tycoons, get a mixed bill of health in Bloomberg’s latest check. Revitalization of the industry, whose woes mounted when major mortgage lender Dewan Housing Finance Corp. missed repayments, is key to helping staunch a further slowdown in the nation’s economy. In a sign that creditors remain jittery, borrowing costs rose. The extra yield investors demand to hold five-year AAA rated bonds from shadow banks over government notes increased, one of the gauges shows. Shadow lender woes have made it harder for policy makers to prop up the economy, which grew at its weakest pace since 2009. The slowdown hurts borrowers’ ability to repay debt, and has prompted the central bank to predict that an improvement in banks’ bad-loan ratios will reverse. So, it is established that Indian NBFCs are shadow banks and they do pose systemic risks to certain extent. Hence, the RBI should make a long term policy for Indian NBFC sector to mitigate any risk that may crop up in the already fragile financial sector in India.

POLITY AND CONSTITUTION

1. LANGUAGES PANEL RECOMMENDATIONS AND A FRESH ‘HINDI IMPOSITION’ ROW

THE CONTEXT: Recently, the 11th volume of the Report of the Official Language Committee headed by Home Minister, which was submitted to President in September 2022 has triggered angry reactions from the Chief Ministers of Tamil Nadu and Kerala, who have described the Report as an attempt by the Union government to impose Hindi on non-Hindi-speaking states.

THE EXPLANATION:

What is this language panel led by Union Home Minister?

• The Committee of Parliament on Official Language was set up in 1976 under Section 4 of The Official Languages Act, 1963. Section 4 of the Act says “there shall be constituted a Committee on Official language, on a resolution to that effect being moved in either House of Parliament with the previous sanction of the President and passed by both Houses”.
• The Committee is chaired by the union Home minister, and has, in accordance with the provisions of the 1963 Act, 30 members — 20 MPs from Lok Sabha and 10 MPs from Rajya Sabha. The job of the Committee is to review the progress made in the use of Hindi for official purposes, and to make recommendations to increase the use of Hindi in official communications.

What has the panel recommended in its latest (2021) report?

• The contents of the report submitted to President on September 9 by Union Home Minister and other members of the Committee are not in the public domain. Sources close to the Committee said it has made around 100 recommendations, including that Hindi should be the medium of instruction in IITs, IIMs, and central universities in the Hindi-speaking states.
• “The language used for communication in the administration should be Hindi, and efforts should be made to teach the curriculum in Hindi, but the latter is not mandatory. Lower courts in Uttar Pradesh, Uttarakhand, Madhya Pradesh, Bihar, Haryana, and Rajasthan already use Hindi.
• High Courts in other states, where proceedings are recorded in English or a regional language can make available translations in Hindi, because verdicts of High Court of other states are often cited in judgments,” according to sources, referring to the recommendations.

Is this the first time that such recommendations have been made?

• The makers of the Constitution had decided that both Hindi and English should be used as official languages for the first 15 years of the Republic, but in the wake of intense anti-Hindi agitations in the south, the Centre announced that English would continue to be used even after 1965.
• On January 18, 1968, Parliament passed the Official Language Resolution to build a comprehensive programme to increase the use of Hindi for official purposes by the Union of India.
• With the active promotion of Hindi being mandated by Article 351 of the Constitution, the Official Language Committee was set up to review and promote the use of Hindi in official communications. The first Report of the Committee was submitted in 1987.
• The ninth Report, submitted in 2011 by the panel headed by then Home Minister, made 117 recommendations, including suggestions to increase the use of Hindi in computers in government offices.

What does the new education policy say about teaching in Hindi and other regional languages?

• The announcement of the new National Education Policy (NEP) in 2020 too had triggered controversy over this issue. Politicians from Southern India had alleged attempts to “impose Hindi and Sanskrit”; however, the Centre had said it was only promoting regional languages.
• The NEP says that mother tongue or the regional language would be the “preferred” mode of instruction until Class 5, and possibly Class 8.

2. THE SUPREME COURT TO EXAMINE VALIDITY OF 2016 NOTE BAN AND HOW IT WAS DONE

THE CONTEXT: Recently, the Constitution Bench questioned whether the government and the Reserve Bank of India (RBI) realised their stated objectives of choking black money, terror financing and fake currency through the policy to demonetise ₹500 and ₹1,000 notes in 2016.

THE EXPLANATION:

• According to Solicitor-General questioned the very maintainability of the case which concerned a purely economic policy of the government.
• Also, it must be noted that Demonetisation in 1946 and 1978 were implemented through separate Acts debated by Parliament. In 2016, it was done through a mere notification issued under provisions of the Reserve Bank of India Act, 1934. The court should declare the law or nothing would stop the government from repeating the exercise which had seen “horrendous consequences”.
• Citing the RBI’s annual report, submitted that ₹15.44 lakh crore worth of currency was demonetised. The withdrawn money amounted to 86.4% of the currency in circulation at the time. Only ₹16,000 crore out of the ₹15.44 lakh crore was not returned. According to experts only .0027% fake currency was “captured” following demonetisation.
• The court wondered whether the government had thought about the consequences before going ahead with the withdrawal of the banknotes. It scheduled the next hearing on November 9, 2022 and directed the government and the RBI to file comprehensive affidavits in response to then opponent’s submissions.

INTERNATIONAL RELATIONS

3. HOW MUCH CRUDE OIL DOES THE EU STILL IMPORT FROM RUSSIA?

THE CONTEXT: According to the International Energy Agency (IEA), Russian oil imports into the European Union and United Kingdom fell 35% to 1.7 million barrels per day (bpd) in August from 2.6 million bpd in January 2022, but the EU was still the biggest market for Russian crude.

THE EXPLANATION:

• Recently Poland said it had detected a leak in one pipeline in the Druzhba system that carries oil from Russia to Europe, an event that will add to concerns about Europe’s energy security after the Nord Stream gas pipeline leak.
• The UK has already stopped importing Russian crude following Moscow’s invasion of Ukraine, and the EU will ban imports from December in an attempt to strip the Kremlin of revenue to fund the war.
• The ban will most likely create a shortage of oil due to a general lack of spare crude volumes in the world.

What are the alternatives to Russian crude?

• Under the looming ban, the EU will need to replace an additional 1.4 million barrels of Russian crude, with some 300,000 bpd potentially coming from the United States and 400,000 bpd from Kazakhstan, the IEA has said.
• Norway’s largest oilfield Johan Sverdrup, which produces medium-heavy crude similar to Russia’s Urals, also plans to ramp-up production in the fourth-quarter, potentially by 220,000 bpd.
• The IEA says imports from other areas such as the Middle East and Latin America would be needed to fully meet EU demand.
• Some Russian oil will continue to flow into the EU via pipelines as the ban excludes some landlocked refineries unless Russia decides to stop the flows.

How much does the EU depend on Russian crude imports?

• Germany, the Netherlands and Poland were the top importers of Russian oil in Europe last year, but all three have capacity to bring in seaborne crude.
• Landlocked countries in Eastern Europe, such as Slovakia or Hungary, however, have few alternatives to pipeline supplies from Russia.
• The EU’s dependence on Russia has also been underpinned by companies such as Rosneft and Lukoil, controlling some of the bloc’s largest refineries.
• According to the IEA, Russian crude oil flows, based on loading data in August, rose month-on-month to Italy and the Netherlands, where Russian oil major Lukoil owns refineries.

VALUE ADDITION:
ABOUT NORD STREAM 2 GAS PIPELINE:

• In 2015, the Russian energy major Gazprom and five other European firms decided to build Nord Stream 2 which is valued at around $11 billion.
• The Approx 1,200-km pipeline will run from Ust-Luga in Russia to Greifswald in Germany through the Baltic Sea and will carry 55 billion cubic metres of gas per year.
• The under-construction pipeline will run along with the already completed Nord Stream 1 system, and the two together will supply an aggregate of 110 billion cubic metres of gas to Germany per year.
• The pipeline falls in the territory of EU members Germany and Denmark and is about 98% complete.

ENVIRONMENT, ECOLOGY AND CLIMATE CHANGE

4. THE FIRST WORLD SLOTH BEAR DAY-12TH OCTOBER

THE CONTEXT: The first ever World Sloth Bear Day celebrations by Wildlife SOS in Agra in collaboration with International Union for Conservation of Nature (IUCN) and the UP-Forest Department.

THE EXPLANATION:

• It was observed to generate awareness and strengthen conservation efforts around the unique bear species endemic to the Indian subcontinent.
• A proposal for observing the World Sloth Bear Day was mooted by Wildlife SOS India, an organisation involved in sloth bear conservation and protection for over two decades and the IUCN-Species Survival Commission sloth bear expert team accepted the proposal and declared the day to be celebrated worldwide.
• Sloth bears are identified by their very distinct long, shaggy dark brown or black fur, distinct white V-shaped chest patch and four-inch long ivory-coloured curved claws used for digging out termites and ants from rock-hard mounds.

Barbaric tradition being resolved

A statement issued by Wildlife SOS stated that the organisation rescued and rehabilitated over hundreds of “performing dancing bears, thereby resolving a 400-year-old barbaric tradition (of dancing bears) while also providing alternative livelihoods to the nomadic Kalandar community members “.

Conservation Status:

Listed under Schedule I of The (Wildlife Protection) Act of India, 1972 the species has the same level of protection as tigers, rhinos and elephants. They can occupy a wide variety of habitats, such as grasslands, thorn scrub and forests, but their range has shrunk considerably in recent years due to habitat loss.

IUCN Status: Vulnerable.
CITES listing: Appendix I

Habitat:

Sloth bears are one of the eight bear species found across the world, and they mainly inhabit the region of India, Nepal, Sri Lanka and presumably Bhutan.

5. TAMIL NADU NOTIFIES INDIA’S FIRST SLENDER LORIS SANCTUARY

THE CONTEXT: In a first in the country, the Tamil Nadu government notified the Kadavur slender loris sanctuary covering 11,806 hectares in Karur and Dindigul districts.

THE EXPLANATION:

• Slender lorises, which are small nocturnal mammals, are arboreal as they spend most of their life on trees.
• The species acts as a biological predator of pests in agricultural crops and benefits farmers. Listed as an endangered species by the International Union for Conservation of Nature, slender loris has a wide range of ecological roles in the terrestrial ecosystem.
• Also, it has been brought under Schedule I of the Wild Life (Protection) Act, 1972 in order to provide the highest level of legal protection

Habitat improvement

• The survival of the species depends on habitat improvement, conservation and mitigation of threats,
• The sanctuary will cover Vedasandur, Dindigul East and Natham taluks in Dindigul district and Kadavur taluk in Karur district.
• In significant steps towards conservation of wildlife, the State government notified India’s first Dugong Conservation Reserve in the Palk Bay,Kazhuveli bird sanctuary in Villupuram, Nanjarayan Tank birds sanctuary in Tiruppur and the State’s fifth elephant reserve at Agasthyamalai in Tirunelveli. Further, 13 wetlands were declared as Ramsar sites. These path-breaking initiatives in 15 months have put Tamil Nadu at a pivotal position in the field of conservation.

THREATS:

• As it is believed that these animals have some medicinal properties, they are captured and sold.
• Since there is great demand for keeping these animals as pets, they are illegally smuggled.
• Habitat loss, electrocution of live wires, and road accidents are other threats that have caused its populations to dwindle.

GOVERNMENT SCHEMES AND INITIATIVES IN NEWS

6. THE PM-DEVINE SCHEME

THE CONTEXT: The Union Cabinet has approved the Prime Minister’s Development Initiative for North East Region (PM-DevINE) – a new scheme for the Northeastern states which was announced in the Union Budget earlier this year. The scheme will be operational for the remaining four years of the 15th Finance Commission, from 2022-23 to 2025-26, and will have an outlay of Rs 6,600 crore.

THE EXPLANATION:

What is PM-DevINE?

• The new scheme, PM-DevINE, is a Central Sector Scheme with 100% Central funding and will be implemented by Ministry of Development of North Eastern Region (DoNER) through North Eastern Council or Central Ministries/ agencies.
• The PM-DevINE Scheme will have an outlay of Rs.6,600 crore for the four-year period from 2022-23 to 2025-26 (remaining years of 15th Finance Commission period).
• PM-DevINE will lead to creation of infrastructure, support industries, social development projects and create livelihood activities for youth and women, thus leading to employment generation.
• Measures would be taken to ensure adequate operation and maintenance of the projects sanctioned under PM-DevINE so that they are sustainable.
• To limit construction risks of time and cost overrun, falling on the Government projects would be implemented on Engineering-procurement-Construction (EPC) basis, to the extent possible.
• Efforts will be made to complete the PM-DevINE projects by 2025-26 so that there are no committed liabilities beyond this year.

What are the objectives of PM-DevINE?

The objectives of PM-DevINE are to:
(a) Fund infrastructure convergently, in the spirit of PM Gati Shakti;
(b) Support social development projects based on felt needs of the NER;
(c) Enable livelihood activities for youth and women;
(d) Fill the development gaps in various sectors.

Initiatives/activities of MDoNER:

NESIDS

• North East Special Infrastructure Development Scheme” (NESIDS) was approved by the Government of India as a Central Sector Scheme. Under the Scheme guidelines of NESIDS, 100% centrally funding is provided to the State Governments of North Eastern Region for the projects of physical infrastructure relating to water supply, power and connectivity enhancing tourism and Social infrastructure relating to primary and secondary sectors of education and health.

The North East Venture Fund (NEVF)

• Ministry of DoNER had joined with North Eastern Development Finance Corporation Ltd (NEDFi) to set up the North East Venture Fund, the first and the only Venture Fund for Northeast with an initial corpus of Rs. 100 crores.
• The fund targets to invest in Start-Ups and unique business opportunities to provide resources for new entrepreneurships. The main focus of North East Venture Fund (NEVF) is for mostly the enterprises involved in Food Processing, Healthcare, Tourism, segregation of services, IT, etc.

THE DATA POINT

THE PRELIMS PRACTICE QUESTION

QUESTION OF THE DAY

Q1. ‘Vyommitra’, recently seen in news, is

a) A Supercomputer developed by C-DAC.
b) A Humanoid designed and developed by ISRO to fly aboard unmanned test mission.
c) An asteroid which will be explored for minerals.
d) A space mission of ISRO to study atmosphere of Venus.

Answer: B

Explanation:

• Vyommitra, the humanoid designed and developed by the Indian Space Research Organisation (ISRO) to fly aboard unmanned test missions ahead of the Gaganyaan human spaceflight mission.
• The ISRO and the IISU were in the news when they unveiled Vyommitra, a “female” robot astronaut, in 2020. Vyommitra is a half-humanoid lacking lower limbs.
• The IISU was responsible for the design, development, and integration of the robot, while the Vikram Sarabhai Space Centre (VSSC) at Thumba here developed its fingers. The AI-enabled robot is designed to fly aboard a rocket, withstanding vibrations and shock during the flight.

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1. Enforce laws firmly to eradicate caste crimes READ MORE
2. Vishwaguru needs high HEI ranking READ MORE

1. We need a forest-led COP27: Technology, at best, can assist us, not lead us, on the pathway to a sustainable, regenerative and equitable world READ MORE
2. In maps: The extent of destruction being unleashed on the forests of Great Nicobar Island READ MORE
3. Climate litigation demands an environmental consciousness READ MORE

1. The Court and the problem with its collegium: There needs to be a better, broad-based and transparent method of appointing senior judges to the High Courts and the Supreme Court READ MORE
2. Measure topography to ensure the equitable delivery of goods and services to all READ MORE
3. Are Indian judges now playing a more public role from interviews to speeches? READ MORE

(Newspapers, PIB and other important sources)

Prelim and Main

1. The grandeur of the Chola Empire, one of the longest ruling dynasties in South India  READ MORE
2. Experts call for protection of sloth bear on first World Sloth Bear Day READ MORE
3. After inspection, India stops Maiden Pharma unit from making drugs READ MORE
4. Putin says Russia can supply EU via Nord Stream 2 READ MORE
5. August industrial production shrinks 0.8%, inflation drags READ MORE
6. India’s first sanctuary for endangered Slender Loris to be set up in Tamil Nadu READ MORE
7. IMF’s latest world economy report: Red flags for India READ MORE
8. NASA Confirms DART Mission Impact Changed Asteroid’s Motion in Space READ MORE
9. Under cheetah deal, sought India’s support on lifting ivory ban: Namibia READ MORE

Main Exam

GS Paper- 1

1. We need a forest-led COP27: Technology, at best, can assist us, not lead us, on the pathway to a sustainable, regenerative and equitable world READ MORE
2. In maps: The extent of destruction being unleashed on the forests of Great Nicobar Island READ MORE
3. Enforce laws firmly to eradicate caste crimes READ MORE

GS Paper- 2

POLITY AND GOVERNANCE

1. The Court and the problem with its collegium: There needs to be a better, broad-based and transparent method of appointing senior judges to the High Courts and the Supreme Court READ MORE
2. Measure topography to ensure the equitable delivery of goods and services to all READ MORE
3. Are Indian judges now playing a more public role from interviews to speeches? READ MORE

SOCIAL ISSUES

1. Vishwaguru needs high HEI ranking READ MORE

INTERNATIONAL ISSUES AND RELATIONS

1. Dangerous spiral: Only a compromise through talks can end the hostilities in Ukraine READ MORE
2. India needn’t worry about the US-Pak relationship READ MORE

GS Paper- 3

ECONOMIC DEVELOPMENT

1. Winter is coming: India’s growth impulses slowing; the IMF warns ‘worst yet to come’ READ MORE
2. Spend wisely: Global slowdown and domestic food inflation are growth constraints. Govts must stop freebies & hike capex READ MORE
3. Breathe easy when the rupee falls: Free currency depreciation will counter slowing growth without worsening other problems READ MORE
4. Green shoots: Reducing poverty, unemployment should be top priorities READ MORE

ENVIRONMENT AND ECOLOGY

1. Climate litigation demands an environmental consciousness READ MORE

GS Paper- 4

ETHICS EXAMPLES AND CASE STUDY

1. Man’s search for something not man-made READ MORE
2. Adapt yourself READ MORE
3. Two tragic Heroes READ MORE

Questions for the MAIN exam

1. India needs a better, broad-based and transparent method of appointing senior judges to the High Courts and the Supreme Court. In the light of the statement discuss whether the mechanism of collegium should be preplaced with new mechanism?
2. ‘Inclusive economic growth requires reaching out to the poorest of the poor’. Discuss why India needs dedicated and sustained efforts are made to pull millions of destitute citizens out of poverty and how can India achieve it?
3. India’s Judiciary has become a more public Judiciary in recent times but is hampering the image of this institution. Critically examine.

WSDP Bulletin

(13/10/2022)

• It is good that war is so horrible, or we might grow to like it.
• Technology, at best, can assist us, not lead us, on the pathway to a sustainable, regenerative and equitable world.
• There needs to be a better, broad-based, transparent method of appointing senior judges to the High Courts and the Supreme Court.
• Only a compromise through talks can end the hostilities in Ukraine.
• States can have differential sources of revenue. Alternatively, the cost of delivering that basket may vary across geographical zones. Measuring topography might be an idea worth toying with.
• Incidents of attacks on Dalits are depressingly common across the country, partly due to persistent feudal attitudes among a section of the upper caste population and the marginalised castes’ continuing social and economic vulnerability.
• Inclusive economic growth requires reaching out to the poorest of the poor.

50-WORD TALK

• Finance Minister Nirmala Sitharaman is correct to warn the West that current high gas prices will compel India to return to thermal power. Developed countries will have to choose between their political interests–exhibited by their sanctions on countries like Venezuela, Iran, and Russia–and their climate goals. They can’t have everything.
• The latest imbroglio over appointing SC judges has again exposed the collegium system’s weaknesses. With its opacity and inherent distrust among members, the system is caught in a trap of its own making. It’s time judges realise what they want the world to believe – that sunlight is the best disinfectant.

Things to Remember:

• For prelims-related news try to understand the context of the news and relate with its concepts so that it will be easier for you to answer (or eliminate) from given options.
• Whenever any international place will be in news, you should do map work (marking those areas in maps and exploring other geographical locations nearby including mountains, rivers, etc. same applies to the national places.)
• For economy-related news (banking, agriculture, etc.) you should focus on terms and how these are related to various economic aspects, for example, if inflation has been mentioned, try to relate with prevailing price rises, shortage of essential supplies, banking rates, etc.
• For main exam-related topics, you should focus on the various dimensions of the given topic, the most important topics which occur frequently and are important from the mains point of view will be covered in ED.
• Try to use the given content in your answer. Regular use of this content will bring more enrichment to your writing.

[WpProQuiz 352]

THE CONTEXT: The Indian government was planning to introduce a Bill, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 during the recently concluded Winter Session of the Parliament to classify cryptocurrencies as financial assets while protecting the interests of small investors. The Bill also proposes to lay the groundwork for the creation of the official digital currency to be issued by the Reserve Bank of India (RBI) and regulated under the RBI Act.

Note: The Bill has not been introduced in the Winter Session.

WHAT IS CRYPTOCURRENCY?

A cryptocurrency is a medium of exchange such as the Indian Rupee, US dollar etc. Bitcoin, the first cryptocurrency, appeared in January 2009 and was the creation of a computer programmer using the pseudonym Satoshi Nakamoto.

The term cryptocurrency is used because the technology is based on public-key cryptography, meaning that the communication is secure from third parties. This is a well-known technology used in both online transactions and communication systems.

Public key cryptography involves a pair of keys known as a public key and a private key (a public key pair), which are associated with an entity that needs to authenticate its identity electronically or to sign or encrypt data. Each public key is published, and the corresponding private key is kept secret. Data that is encrypted with the public key can be decrypted only with the corresponding private key.

CRYPTOCURRENCY V/S NORMAL CURRENCY

Cryptocurrency

• Like the US dollar, cryptocurrency has no intrinsic value. Therefore, it is not redeemable for another commodity such as gold.
• Cryptocurrency is not backed by any central bank
• Cryptocurrency doesn’t have any physical form
• Its supply is not determined by a central bank and the network is completely decentralized, with all transactions performed by the users of the system.

US Dollar ($) or Indian currency (₹)

• It also has no intrinsic value.
• It is a legal tender, which implies it is backed by a central bank or the government. Thus, banks cannot refuse to accept it.
• The currency does have a physical form
• Its supply is determined by the central bank on the basis of inflation or contractionary or expansionist fiscal policies.

WHY DO CRYPTOCURRENCIES NEED TO BE REGULATED?

PREVENT MARKET MANIPULATION AND PROTECT INVESTORS:

• Market manipulation and price volatility are common in cryptocurrencies. Take, for example, Bitcoin, the world’s oldest and most popular cryptocurrency, which rose to all-time highs since the beginning of 2021, before plummeting and losing a huge amount of its value.
• So, the lack of authorised information on these digital assets and the technological complexities associated with them makes it imperative to put regulations in place for safeguarding investors.

PROVIDING MARKET INFORMATION

• Thousands of cryptocurrencies exist around the world. Most investors, however, are only familiar with a few of those, such as Bitcoin, Ether, Ripple, and Dogecoin among others. They hardly have any knowledge about the thousands of other virtual assets.
• So, to protect customers, a regulatory authority clearing cryptocurrency is required, which can disclose all information about the performance of the digital assets, their risks, and potential.

UNDERSTANDING RISKS ASSOCIATED WITH TECHNOLOGY

• Technology is advancing at a breakneck pace. This carries a significant danger, as such changes have the potential to render technology, including blockchain, outdated in the future.
• Given the rapid rate of technological change, information infrastructure and professional financial advisors skilled in cryptocurrency are required. That way, investors can understand the technological risks of cryptocurrencies and make informed decisions.

ENSURING ACCOUNTABILITY

• Investing in cryptocurrencies comes with another risk — online fraud. Hacking is a major threat worldwide, and cyber-attacks have become common. One cyber-attack could result in losses for investors who have put their savings in cryptocurrencies.
• Through regulations, the authorities can implement measures to help cryptocurrency investors protect their assets. Also, investors can address concerns or reclaim their investments in case they lose them.

MONEY LAUNDERING

• Any unregulated system has the ability to fund criminal acts. As a result, a client due diligence process akin to that of a bank is required.
• For long, it was theoretical that cryptos could be used for money laundering and for terror financing. Recently, it turned out that the Enforcement Directorate of India had identified that using cryptos, Rs 4,000 crores has been laundered out of India in the last one year.
• This can help in keeping track of investors’ real identities and verifying their locations when they are buying or selling cryptocurrencies. Any infringement of such norms should be met with severe sanctions.

TAX ON THE TRANSACTIONS

• Nearly 10 crore Indians already have investments exceeding a total of $10 million in them.
• This not only creates an avenue for the generation of tax revenue for the nation but also puts forth a Herculean challenge for the tax authorities who must track and tax transactions involving cryptocurrencies.

WHAT HAS BEEN THE STEPS TAKEN BY THE GOVERNMENT TO REGULATE THE CRYPTOCURRENCY?

Currently, there is no regulation or any ban on the use of cryptocurrencies in the country. The Reserve Bank of India’s (RBI) order banning banks from supporting crypto transactions, was reversed by the Supreme Court order of March 2020.

HERE WE EXAMINE THE REGULATORY JOURNEY OF CRYPTOCURRENCY IN INDIA SO FAR.

• In 2013, the Reserve Bank of India (RBI) issued a circular warning to the public against the use of virtual currencies. The bank warned users, holders, and traders of virtual currencies about the potential financial, operational, legal, customer protection, and security-related risks they are exposing themselves to.
• The central bank pointed out that it has been keeping a close eye on developments in the virtual currency world, including Bitcoins, Litecoins, and other altcoins.
• But as banks continued to allow transactions on cryptocurrency exchanges — on February 1, 2017, RBI released another circular, reiterating its concerns with virtual coins. And by the end of 2017, a warning was issued by RBI and the finance ministry clarifying that virtual currencies are not legal tender.
• At the same time, two Public Interest Litigations (PILs) were filed in the Supreme Court, one asking for a ban on buying and selling of cryptocurrencies in India, the other asking for them to be regulated. In November, the government formed a committee to study issues around virtual currencies and propose actions.
• At this time, there was no ban on cryptocurrencies and most banks allowed transactions from cryptocurrency exchanges.

2018-2020

• In March 2018, the Central Board of Direct Tax (CBDT) submitted a draft scheme to the finance ministry for banning virtual currencies.
• A month later, the RBI issued a circular that restrained banks and financial institutions from providing financial services to virtual currency exchanges.
• In April 2018, the finance ministry appointed committee proposed a draft Bill for the regulation of virtual currencies but did not recommend a ban. However, in February 2019, the committee proposed a fresh draft Bill that recommended a blanket ban.
• In March 2020 a significant development took place, the Supreme Court of India lifted the curb on cryptocurrency imposed by RBI, which restricted banks and financial institutions from providing access to banking services to those engaged in transactions in crypto assets.

2021

• In November 2021, the Standing Committee on Finance met representatives of crypto exchanges, Blockchain and Crypto Assets Council (BACC), among others, and came to the conclusion that cryptocurrencies should not be banned, but regulated.
• In the same month, Prime Minister Narendra Modi called a meeting on cryptocurrencies with senior officials. The indications are that strong regulatory steps will probably be taken to deal with the issue.
• Meanwhile, the Reserve Bank of India has repeatedly underlined its strong view against cryptocurrencies, saying these pose a serious threat to the macroeconomic and financial stability of the country. It has also raised doubts about the number of investors trading on cryptocurrencies and their claimed market value.
• During the winter session, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was listed for introduction in Parliament’s. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

Although, Government wants to regulate cryptocurrencies, RBI in a complete ban on such currencies. In December 2021 RBI Said that “Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint”.

SO, IF BITCOIN IS LEGALISED IN INDIA, THE FOLLOWING WOULD HAPPEN:

• It would fall under the purview of RBI’s 1934 Act.
• Its investors would be taxed.
• RBI would issue guidelines regarding investment and purchase of Bitcoin.
• If any foreign payment is made through Bitcoins, it would fall under the purview of the FEMA Act.
• Returns from investment in Bitcoin would be taxed.

HOW THE CRYPTOCURRENCIES ARE BEING REGULATED AROUND THE WORLD?

• United States:The US has regulations under the central and state governments (similar to India), which means that rules differ from state to state. The overall sentiment, however, is positive.
• China:China has been the harshest towards cryptocurrencies, moving from initially welcoming crypto mining to completely banning it as of June 2021.
• United Kingdom:The UK does not have specific legislation on cryptocurrencies and the sector is currently governed by the Financial Conduct Authority (FCA), which grants licenses for crypto businesses and exchanges.
• El Salvador: The South American country became the first to officially declare Bitcoin legal tender.

THE BLOCKCHAIN TECHNOLOGY AND ITS USE IN CRYPTOCURRENCY

1. The blockchain is the technology underlying Bitcoin and other cryptocurrencies. In the blockchain, the data is stored in the cloud network. In the case of Bitcoin, the decentralized public ledger takes the place of cloud storage that keeps a record of all transactions that take place across the peer-to-peer network.
2. This technology allows participants to transfer assets across the Internet without the need for a broker or an intermediary (central third party).
3. Blockchain technology uses public-key cryptography to secure transactions. Public-key cryptography employs two keys: a public key and a private key. An individual party to the crypto transaction will have a public key and a private key. The public key is widely distributed across the network, while the private key is a secret key for the individual.
4. Using a private key, a digital signature can be created so that anyone with the corresponding public key can verify that the message was created by the owner of the private key and was not modified since (See the diagram: Digital Signature).
5.  Using this a transaction record is created. One transaction record is called one block. When other transactions happen in the future, those transactions are recorded once again in a block and connected to the earlier block in a chain network. This chain of transactions from the source of origin to the end is called the blockchain. Thus, you can backtrace the source money by travelling back in the chain.
6. Given the latest block, it is possible to access all previous blocks linked together in the chain, so a blockchain database retains the complete history of all assets and instructions executed since the very first one – making its data verifiable and independently auditable.

FEATURES OF BLOCKCHAIN

• Data is stored in a decentralized cloud network. In the case of Bitcoin, this cloud is the public transaction ledger.
• Blockchain code is resistant to counterfeiting since data once added, can’t be reversed.
• Data security is enabled by public-private key cryptography.

WHAT ARE THE DIFFERENCES BETWEEN PUBLIC AND PRIVATE BLOCKCHAINS?

There are different types of blockchain: some are open and public and some are private and only accessible to people who are given permission to use them.

PUBLIC BLOCKCHAIN

• A public blockchain is an open network. Anyone can download the protocol and read, write or participate in the network.
• A public blockchain is distributed and decentralised. Transactions are recorded as blocks and linked together to form a chain. Each new block must be time stamped and validated by all the computers connected to the network, known as nodes before it is written into the blockchain.
• All transactions are public, and all nodes are equal. This means a public blockchain is immutable: once verified, data cannot be altered.
• The best-known public blockchains used for cryptocurrency are Bitcoin and Ethereum: open-source, smart contract blockchains.

PRIVATE BLOCKCHAIN

• A private blockchain is an invitation-only network governed by a single entity.
• Entrants to the network require permission to read, write or audit the blockchain. There can be different levels of access and information can be encrypted to protect commercial confidentiality.
• Private blockchains allow organisations to employ distributed ledger technology without making data public.
• But this means they lack a defining feature of blockchains: decentralisation. Some critics claim private blockchains are not blockchains at all, but centralised databases that use distributed ledger technology.
• Private blockchains are faster, more efficient and more cost-effective than public blockchains, which require a lot of time and energy to validate transactions.

ADVANTAGES OF BLOCKCHAIN IN THE INDIAN CONTEXT

1. Online voting: With a unique digital identity to identify the voter and a private key, online voting can be facilitated. Since blockchain doesn’t allow reversing the data once entered, every voter using this option can exercise this privilege only once.
2. To trace black money: Provided people become completely cashless and shift to digital transactions. That is the biggest challenge since this operates on a digital network. Most blockchains are entirely open-source software. This means that anyone and everyone can view its code. This gives auditors the ability to review cryptocurrencies like Bitcoin for security.
3. Improve the efficiency of the approval process in the social benefits scheme: If personal health record is stored on a cloud network and secured with blockchain, every single addition of data by a medical practitioner will be recorded and connected to earlier blocks of data. Tracing the sequence of earlier treatments and medical tests will reduce the duplication of the same tests and treatment. This will make the process of approval of health insurance policies faster and more efficient. This is what Estonia has done and can be used in the Indian context to improve the efficiency of medical insurance schemes faster. Additionally, since the data is stored in the cloud, some person can sell it for clinical trials or experiments or research to a pharma company within a few seconds, since the digital data can be transferred in a few mouse clicks.
4. Reduces chances of fraud: Since all the data is stored in the cloud and encrypted and can be transferred across platforms, it will help to reduce frauds since this can be checked immediately. For e.g., if all the banks and insurance companies collaborate the data of blacklisted people on a common blockchain platform that they can check, chances are rare that the person under suspicion will be able to commit the same once again.  Since every single payment will be recorded on the blockchain network and transparent to authorized people on the blockchain network, it will reduce the chances of scams.
5. To reduce the burden of pending cases on courts: If all the land records are digitized and stored on the blockchain, each and every transaction can be back-traced with complete details including the identity of the person, time and place when the land title was transferred etc. This will help to immediately trace out frauds.
6. Protection of Aadhaar data by creating a Dynamic registry (a distributed database that updates as assets are exchanged on the digital platform: Since the blockchain stores all the records including, when the transaction has happened, who stored the data, who added value to it, it can be used to trace when and from where my Aadhar data was accessed by whom. This will help to trace the source of leakage if any fraud has happened by using Aadhar data.

WHAT ARE THE CURRENT BOTTLENECKS IN REGULATING CRYPTO?

TYPE OF REGULATION

• The Industry bodies demand self-regulation by crypto exchanges while the RBI wants complete ban. The government has set up committees and which said regulation by government. Thus, there seems to be divergence on this aspect.

WHETHER CRYPTO CAN BE REGULATED AT ALL?

• Some analysts point out that it is nearly impossible to regulate crypto currencies as they simply move to P2P exchanges outside India, may use hawala type informal system to get around regulation.
• Crypto exchanges that are operating outside India and accessible from India just like any other internet-based service will not follow the laws of the Indian government.
• How can one enforce any regulation brought in by the government in such a case?

CURRENCY OR COMMODITY?

• Cryptocurrency itself is a misnomer as its legal existence in most countries is that of a commodity and not a currency. What it implies is that most countries globally do not accept cryptos as legal tender.
• In the Indian context, this aspect need to be made clear and the regulation need to tailored accordingly

CAPACITY TO REGULATE

• Crypto is a cutting edge technological innovation that is being improved upon day by day. Thus to regulate them, the regulator should have the expertise, technical capacity etc.
• Whether the country especially the government sector has the talent pool is a debatable issue.

ISSUE OF PRIVATE AND PUBLIC  CRYPTO CURRENCY

• The Bill seeks to ban all private crypto currencies in India with some exceptions. But since the Bill is not in the open, what is public crypto and private crypto is open to interpretation.
• Whether the Central Bank Digital Currency will be the public crypto that will be allowed is also not clear?
• If RBI regulates crypto and is itself a player, that would create conflict of interest is another issue.

THE WAY FORWARD:

• Banning cryptocurrency is not a viable solution, so it must be regulated. Banning will lead to underground activities and people will continue illegal trading of these currencies.
• The decision for banning/regulation should be based on consensus and it should not be taken in a hurry.
• India can learn from other countries how to regulate such currencies and how to tax them (for example, Israel).
• Digital currencies have the potential to solve many issues, India needs to use it utility.
• Accepting cryptocurrency allows scope for effective regulation. RBI has already expressed interest in blockchain technology and is even planning to introduce its own Digital Rupee, much like the Digital Yuan. This entry into the e-money market could well be a balancing act by the RBI, perhaps making it a more acceptable fiat than crypto, while being well within the ambit of regulation.
• Cryptocurrency opens great opportunities for the economy. It poses an intriguing ‘regulator’s dilemma’ – striking a balance between technological progress ushering financial innovation while remaining as sovereign authority. The central bank can investigate what constitutes crypto and technologies like blockchain to assess its role in the value chain instead of banning it altogether.
• A comprehensive crypto currency Bill is the need of the hour.

THE CONCLUSION: India is considered an inspiration when it’s comes to frugal innovation. Combing the advantage of a highly skilled workforce in IT Sector, Artificial intelligence and encrypted data stored on the blockchain, India can be a scale up the efficiency of the delivery of its various schemes and the pace of delivery of justice. The need of the hour is to develop an architecture or an institution that can implement this at the grassroots level.

POLITY AND CONSTITUTION

1. WHAT LAWS REGULATE SURROGACY IN INDIA?

THE CONTEXT: Recently, the Tamil film celebrities are under the scanner after announcing that they have become parents of twin boys. The state government is now inquiring if the power couple violated the country’s surrogacy laws.

THE EXPLANATION:

What are the conditions for allowing surrogacy, as per the law?

• In India, for a long time, foreign couples opted for surrogacy due to its good and affordable medical system. Over the years, the government has put restrictions on the practice with the stated aim of regulation.
• Surrogacy is defined by law as “a practice whereby one woman bears and gives birth to a child for an intending couple” and intends to hand over the child to them after the birth, as per The Surrogacy (Regulation) Act, 2021 (SRA).
• It further allows for surrogacy to be available only to infertile Indian married couples. The other legislation on this matter, the Assisted Reproductive Technology (ART) (Regulation) Act, 2021, defines ART procedures as all techniques that attempt to obtain a pregnancy by handling the sperm or the oocyte (the immature female egg) outside the human body and transferring into the reproductive system of a woman.
• This is open to married couples, live-in partners, single women, and also foreigners. ART procedures include gamete donation, intrauterine insemination, and in-vitro fertilisation or IVF.

The SRA Act says:

• The surrogate should be married and have a child of her own. Restricting altruistic surrogacy to legally wedded infertile Indian couples, the Act sets an age limitation for the couple where a husband must be between 26 and 55 years of age and a wife between 23 and 50 years.
• Further, Indian couples with biological or adopted children are prohibited to undertake surrogacy, save for some exceptions such as mentally or physically challenged children, or those sufferings from a life-threatening disorder or fatal illness.

How does opting for surrogacy work?

• Relevant authorities have been set up by the Act at several levels to check whether these specifications have been met. All surrogacy clinics must be registered with the government and only then can they conduct the procedure. According to the Health Ministry, the estimated number of clinics practising surrogacy in India is likely to be less than 1,000.
• The central and the state governments are to constitute the National Surrogacy Board (NSB) and the State Surrogacy Boards (SSB), respectively. Functions of the NSB include advising the central government, laying down the code of conduct of surrogacy clinics and reviewing the implementation of the Act. Similarly, appropriate authorities are constituted at national and state levels to grant or suspend clinics’ licences, to check on complaints of breach of the Act’s provisions and carry out other similar tasks.
  For example,
• Certificates of proven infertility/expert medical reports of either spouse or of intending couple from a District Medical Board are mandatory. A certificate of eligibility issued by the appropriate authority shows the criteria have been met – both by the to-be parents and the surrogate woman.
• Other requisite authorities, such as the Director or in-charge of the surrogacy clinic must also be satisfied that conditions have been met.
• Commercial surrogacy, among other offences, can lead to imprisonment for a term of at least 10 years and a fine extending to Rs 10 lakh.

2. BOMBAY HC ASKS UNION GOVT TO MAKE IPC SECTION 498A ‘COMPOUNDABLE’

THE CONTEXT: Recently,the Bombay high court has asked the Union government to consider making cases under the Indian Penal Code (IPC) Section 498A (cruelty to wife by husband, relatives) a compoundable offence.

THE EXPLANATION:

A division bench of Justices in an order said the importance of making IPC Section 498A ‘compoundable’ can hardly be overlooked or understated, noting that every day a minimum of 10 petitions are heard seeking quashing of cases under the section by consent since it is non-compoundable.

Description of IPC Section 498A:

According to section 498A of Indian penal code, Whoever, being the husband or the relative of the husband of a woman, subjects such woman to cruelty shall be punished with imprisonment for a term which may extend to three years and shall also be liable to fine.

What are Non-Compoundable Offences?

• Non-Compoundable offenses are some offenses, which cannot be compounded. They can only be quashed. The reason for this is, because the nature of the offense is so grave and criminal, that the Accused cannot be allowed to go scot-free. Here, in these types of cases generally, it is the “state”, i.e. police, who has filed the case, and hence the question of the complainant entering into compromise does not arise.
• All those offenses, which are not mentioned in the list under Section (320) of CrPC, are non-compounds.
• Under a non-compoundable offense, a private party as well as the society, both are affected by such offenses.
• In a Non-compoundable offense, no compromise is allowed. Even the court does not have the authority and power to compound such an offense. A full trial is trial that ends with the acquittal or conviction of the offender, based on the evidence given.

Example of Non-Compoundable Offences (Where Court’s Permission is Required):

• Voluntarily causing hurt by dangerous weapons or means.
• Causing grievous hurt by doing an act so rashly and negligently as to endanger human life or the personal safety of others.
• Wrongfully confining a person for three days or more.
• Assault or criminal force to woman with intent to outrage per modesty.

3. TAMIL NADU: UNDERSTANDING THE IMPACT OF THE 7.5% RESERVATION FOR GOVT SCHOOL STUDENTS IN NEET

THE CONTEXT: In April 2022 the Madras High Court upheld the constitutional validity of a State law passed in October 2020 to provide 7.5% horizontal reservation to students who pass out of government schools and clear the National Entrance-cum-Eligibility Test (NEET), in medical admissions.

THE EXPLANATION:

Why was Tamil Nadu opposed to NEET?

• Among the States that were strident in their opposition to NEET (National Eligibility-cum-Entrance Test) was Tamil Nadu. The opposition was manifest in protests on the streets and in the corridors of justice.
• One of the primary arguments that were made was that NEET would push certain categories of students out of the race for MBBS degrees, and its goal of providing equitable opportunities for all would be frustrated.
• Students from government schools and rural areas would not be able to afford the coaching that would be essential for the competitive test, the State government argued. The State wanted to continue its own criteria for entry of students from government schools and rural areas into medical colleges — candidates were being accommodated with a computed aggregate score of relevant subjects in the Class XII examination.

The Special Case:

• Tamil Nadu is a special case when it comes to both reservations and NEET, the entrance test for medical education.
• Nearly 69% of the seats are reserved in the state through a constitutional amendment – much above the 50% limit that applies to the rest of India. Additionally, 97.2% of the population in the state is classified as a Scheduled Caste, Scheduled Tribe or Other Backward Class – the highest in India.

Understanding the 7.5% quota

• The existing reservation structure for medical students in Tamil Nadu is 31% for Open Competition (OC), 30% for Backward Class (out of which 3.5% is reserved for BCM, 20% for MBC, 18% for SC and 1% for ST. Within this, 7.5% of the community within each can attain reservation.
• The horizontal quota ensures that there is a minimum representation of a specific group within each of the vertical quotas. For example, a women’s horizontal quota of 10% would mean that at least 10% of the seats in OC, BC, MBC, SC, and others are filled with women candidates.
• This means that the 7.5% quota doesn’t change the 69% caste-based reservation, but ensures that 7.5% within each is reserved specifically for the students of government schools.

Who goes to government schools?

• Analysing the main provisional merit list, and the merit list specifically for the government school pupils for the 2020-21 session, allows us to compare the community mix of the two lists. In the government students list, MBC students comprise 34% as compared to 23% in the main list i.e., approximately 48% more in proportionate terms.
• In contrast, the BC students show a proportionate decrease of 24% – from 45% in the main list to 35% in the government school students list. This indicates the higher level of deprivation within the MBC as compared to the BC category.
• The third category of SCs also shows that there is an increase of 20% in the government school students list as compared to 17% for the main list. These three together account for 90% of the government school list.

What lies a head?

• This innovative reservation policy adopts a wider definition of deprivation than mere caste. While caste is a rigid and static characteristic of an individual and family, schooling is not. Improved economic outcomes of families lead to students being enrolled into private schools i.e., the scope of this policy is dynamic rather than static.
• This policy’s success can be seen from the numbers which have clearly improved the representation of government school students within undergraduate admissions. It further needs to be investigated if this policy has impacted different castes within the same group.
• The lopsided distribution of benefits within the same block of castes is an identified problem, and whether this policy has helped reach those untouched by reservations would be critical to examine.

INTERNATIONAL RELATIONS

4. HISTORIC DEAL BETWEEN ISRAEL-LEBANON: TERMS, SIGNIFICANCE

THE CONTEXT: In a major diplomatic breakthrough, Israel announced a “historic” deal with Lebanon, aimed at resolving a long-running maritime border dispute over Mediterranean waters. Israel and Lebanon do not have official diplomatic relations and the two countries remain technically at war.

THE EXPLANATION:

A long history of conflict

• Israel and Lebanon have been at war for decades since 1948, with both countries staking claim over a swathe of territory in the Mediterranean Sea, which contains part of the Karish gas field and Qana, a prospective gas field.
• Negotiations pertaining to the Israeli-Lebanese border dispute over gas-rich waters off the countries’ Mediterranean coasts have been ongoing since October 2020.
• The Karish gas field, which is being developed by Israel, has come under threat from Hezbollah, Lebanon’s powerful political and militant group backed by Iran.

What the agreement does:

• While Israel is already producing natural gas at nearby fields, what this agreement does is that it resolves a territorial dispute in the eastern Mediterranean sea, in an area that Lebanon wants to explore for natural gas.
• The gas field in question is located on the maritime boundary between the two countries and this agreement would allow both countries to get royalties from the gas. It also sets a border between the maritime waters of Lebanon and Israel for the first time.
• According to a New York Times report, the agreement is also expected to avert the immediate threat of conflict between Israel and Hezbollah militants in Lebanon, after fears of escalation if negotiations fell apart.
• The report states that analysts hope that the agreement will create new sources of energy and income for both countries, particularly important for Lebanon, which is facing a crippling energy and financial crises.
• It could also have a potentially wider impact: it would likely provide Europe with a potential new source of gas amid energy shortages caused by the Russian invasion of Ukraine.

Crucial gas exports

• As for what the deal looks like, the U.S. proposal essentially divides the sea border in two, with the first 3 miles from the shore marked as Israel’s border, which has been treated as such for several years. Beyond that, the border will track along a line demarcated by Lebanon, called Line 23, meaning that each country’s exclusive economic zone (EEZ) will be clearly outlined.

5. INDIA’S REQUEST FOR ACTION AGAINST PANNUN REJECTED: WHAT IS THE INTERPOL, AND WHAT IS A RED NOTICE?

THE CONTEXT: Recently,the Interpol has rejected a second request by India to issue a Red Corner Notice against Gurpatwant Singh Pannun, the Canada-based founder and legal advisor of the pro-Khalistan outfit Sikhs for Justice (SFJ), whom the Union Ministry of Home Affairs has listed as a “terrorist” under the Unlawful Activities (Prevention) Act (UAPA).

THE EXPLANATION:

• The Interpol has said India has failed to provide sufficient information to support its case, and that the UAPA has been criticised for being “misused” to target minority groups and human rights activists without “respecting” their right to due process and a fair trial.
• While acknowledging that Pannun is a “high-profile Sikh separatist”, the Interpol has said that his activities have a “clear political dimension”, which cannot be the subject of a Red Corner Notice according to Interpol’s Constitution.

What is the Interpol?

• The Interpol, or International Criminal Police Organization, is an inter-governmental organisation comprising 195 member countries, which helps police forces in all these countries to better coordinate their actions. According to the Interpol website, the organisation enables member countries to share and access data on crimes and criminals, and offers a range of technical and operational support.
• The Interpol general secretariat coordinates the organisation’s day-to-day activities. It is run by a secretary general (currently Jurgen Stock of Germany, who has been Interpol’s chief executive since 2014), with its headquarters in Lyon, France, with a global complex for innovation in Singapore, and several satellite offices in different regions.

TYPES OF NOTICES:

ECONOMIC DEVELOPMENTS

6. IMF CUTS INDIA’S FY23 ECONOMIC GROWTH TO 6.8%, SAYS WORST YET TO COME FOR GLOBAL ECONOMY

THE CONTEXT: According to the International Monetary Fund,the world, including India, will experience an overall slowdown in the next year (2023) owing to the impact of the Russia-Ukraine war, tightening monetary conditions globally, the highest inflation in decades, and lingering effects of the pandemic.

THE EXPLANATION:

• India is projected to grow at 6.8% in the current fiscal year, following 8.7% growth in fiscal year that ended March 31 as per figures released in the IMF’s October 2022 World Economic Outlook: Countering the Cost-of-Living Crisis at the start of the World Bank IMF Annual Meetings.
• Growth rate for this year for India has been revised downward by 0.6 percentage points relative to the IMF’s June 2022 forecast, following a weaker output in the second quarter, and subdued external demand. The forecast for the next fiscal year remains unaltered at 6.1%.
• “India has been doing fairly well in 2022 and is expected to continue growing fairly robustly in 2023.

Inflation above target

• Inflation in India was above the RBI’s target, Experts adding that the fiscal and monetary policy should be “probably be on the tightening side”. The IMF has projected 6.9% consumer price inflation this year and 5.1% next year.
• The IMF expects inflation in India to return to the inflation tolerance band… in fiscal year 2023-24, “and additional monetary tightening is going to ensure that that happens”.
• For the world as a whole, growth will slow down from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is reflective of a U.S. GDP contraction in first half of 2022, a Euro Area contraction in second half, extended COVID-19 outbreaks in China and a property sector crisis.

VALUE ADDITION:
About IMF:

• The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. IMF came into operation on 27th December 1945 and is today an international organization that consists of 189 member countries.
• Headquartered in Washington, D.C., IMF focuses on Fostering global monetary cooperation, Securing financial stability, Facilitating and promoting international trade, employment, and economic growth around the world.

The IMF is a specialized agency of UN.

• The IMF became operational on 27th December 1945 with 29 member countries that agreed to bound to this treaty. It began its financial operations on 1st March 1947. Currently, the IMF consists of 189 member countries.

PRELIMS PRACTICE QUESTION

QUESTION OF THE DAY

Q1. Consider the following statements about Mahakal Temple of Ujjain:
1. It is the only jyotirlinga facing north, while all other face south direction.
2. Kalidasa has described temple in Meghadutam.
3. The present structure of temple is built by Maratha general Ranoji Shinde.
Which of the statements given above is/are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 3 only
d) 1 and 3 only

Answer: B
Explanation:
About Mahakal temple:

• Puranas say that Lord Shiva pierced the world as an endless pillar of light, called the jyotirlinga. There are 12 jyotirlinga sites in India, considered a manifestation of Shiva.
• Besides Mahakal, these include Somnath and Nageshwar in Gujarat, Mallikarjuna in Andhra Pradesh, Omkareshwar in Madhya Pradesh, Kedarnath in Uttarakhand, Bhimashankar, Trimbakeshwar and Grishneshwar in Maharashtra, Viswanath at Varanasi, Baidyanath in Jharkhand, and Rameshwar in Tamil Nadu.
• Mahakal is the only jyotirlinga facing the south, while all the other jyotirlingas face east. This is because the direction of death is believed to be the south. In fact, people worship Mahakaleshwar to prevent an untimely death.
• In the early part of the Meghdutam (Purva Megha) composed in the 4th century, Kalidasa gives a description of the Mahakal temple. It is described as one with a stone foundation, with the ceiling on wooden pillars. There would be no shikharas or spires on the temples prior to the Gupta period.
• The city of Ujjain was also one of the primary centres of learning for Hindu scriptures, called Avantika in the 6th and 7th centuries BC. Later, astronomers and mathematicians such as Brahmagupta and Bhaskaracharya made Ujjain their home.
• In the 18th century, an observatory was built here by Maharaja Jai Singh II, known as the Vedh Shala or Jantar Mantar, comprising 13 architectural instruments to measure astronomical phenomena.
• In the 13th century, the temple complex was destroyed by Turk ruler Shams-ud-din Iltutmish during his raid on Ujjain.
• The present five-storeyed structure was built by the Maratha general Ranoji Shinde in 1734, in the Bhumija, Chalukya and Maratha styles of architecture. A century later, its marble walkways were restored by the Scindias.

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