News & Editorial Analysis 3 January 2023
The Hindu News Analysis
1 – International Monetary Fund (IMF)
GS II Topic International Organizations:
The IMF director predicts that this year, a third of the global economy will be in recession, and that 2023 will be “tougher” than 2018 due to the slowing of the economies of the United States, the European Union, and China.
With 190 member countries, the International Monetary Fund (IMF) is a membership-based organisation. On the IMF’s executive board, the most important countries in terms of their economic weight are represented.
What are the IMF’s objectives?
Encourage financial cooperation between nations
International trade is facilitated by stable financial conditions.
Encourage sustained economic growth and strong employment.
includes a decrease in global poverty, macroeconomic development guidance on public policy and funding for developing countries, encouraging the creation of an international payment system, and stability in exchange rates
What Are the IMF’s Procedures?
The promotion of trade and economic growth, the advancement of international monetary cooperation, and the prevention of measures that might be harmful to prosperity are its three main goals.
To complete these missions, member countries of the IMF work together as well as with other international organisations.
What is the history of the IMF?
At a UN conference held in Bretton Woods, New Hampshire, in July 1944, the concept for the IMF, sometimes known as the Fund, first surfaced.
The 44 nations present at the meeting aspired to create a framework for economic cooperation in order to avoid a repeat of the competitive devaluations that had contributed to the Great Depression of the 1930s.
To be eligible for membership in the International Bank for Reconstruction and Development, countries had to be IMF members (IBRD).
The IMF introduced a system of convertible currencies with fixed exchange rates and replaced the U.S. dollar as the official reserve with gold (gold at $35 per ounce) in order to encourage international financial cooperation.
Since the Bretton Woods system (a system of fixed exchange rates) failed in 1971, the IMF has supported the floating exchange rate system. Because governments are free to select their preferred exchange system, market forces determine the value of currencies relative to one another. This system is still in operation today.
According to IMF estimates, 100 developing countries who imported oil during the 1973 oil crisis faced a 150% increase in their foreign debt between 1973 and 1977, which was further exacerbated by a global switch to floating exchange rates. The Oil Facility was a brand-new credit programme that the IMF administered between 1974 and 1976. It was funded by oil-exporting nations and other lenders and made accessible to countries that were having serious issues with their trade balance as a result of the rise in oil prices.
The IMF, one of the most significant organisations in the world economy, ensured a balance between the promotion of national economic sovereignty and human welfare, or embedded liberalism, and the revival of international capitalism.
The IMF played a significant role in helping the former Soviet Union’s countries transition from centrally planned to market-based economies.
1997 saw a wave of financial crises sweep over East Asia, hurting nations like Korea, Thailand, and Indonesia.
The International Monetary Fund created a series of bailouts (rescue packages) that were dependent on financial, banking, and currency reforms in order to assist the most severely affected economies escape default.
(2008) Global Economic Crisis: In response to a world that is becoming more interconnected and globalised, the IMF took considerable actions to improve surveillance.
These initiatives included modernising the legal framework for surveillance to take into account spillovers (when economic policies in one country may have an impact on those in another), in-depth research into risks and financial systems, accelerated evaluations of members’ external positions, and quicker responses to member concerns.
What functions does the IMF perform?
Financial Assistance: In order to replenish foreign reserves, stabilise currencies, and enhance the conditions for economic growth, the IMF lends money to member countries who are having balance of payments problems. Governments are required to carry out IMF-supervised structural adjustment plans.
IMF It monitors the monetary system around the world as well as the economic and financial policies of the 190 countries that make up its membership.
In this process, which takes place both internationally and in particular countries, the IMF emphasises potential stability threats and provides advice on necessary policy adjustments.
Capacity Building It provides technical assistance and training to central banks, finance departments, tax authorities, and other financial entities.
This supports the improvement of governance, modernization of banking systems, growth of public income, and better reporting of macroeconomic and financial data. Furthermore, it helps countries move closer to achieving the Sustainable Development Goals (SDGs).
2 – Domestic Systemically Important Banks:
GS III Topic Indian Economy
The Reserve Bank of India (RBI) has once more classified the State Bank of India, ICICI Bank, and HDFC Bank as Domestic Systemically Important Banks based on data gathered as of March 2022. (D-SIBs).
The State Bank of India (SBI), ICICI Bank, and HDFC Bank “continue to be recognised as D-SIBs, utilising the same bucketing structure as in the 2021 list of D-SIBs,” according to a circular from the RBI.
After the financial crisis of 2008, which was exacerbated by the failure of multiple strategically important banks across numerous areas, the D-SIB system was put into place.
The economy of the nation depends on D-SIBs. In times of need, the government assists these banks, and if one of them failed, it would have an impact on the country’s whole economy.
The scale, complexity, lack of substitutability, and bank interconnection are among the factors that the RBI considers when choosing such organisations, according to official media.
D-SIBs: How are they determined?
Every year since 2015, the RBI has made the list of all D-SIBs available to the public. Depending on how important they are to the entire economy, they are categorised into five classes.
For a bank to be listed on the D-SIB list, its assets must be more than 2% of the GDP of the nation. The significance of the banks is then further divided into each of the five buckets.
What rules are these banks required to follow?
Due to the importance of the banks to the economy and society, they are required to hold a higher percentage of risk-weighted assets as tier-I equity. Due to its placement in D-SIB bucket three, SBI is
required to maintain Additional Common Equity Tier 1 (CET1) at 0.60 percent of its risk-weighted assets (RWAs).
If such a bank failed, the essential services they provide to the banking system and the entire economy would be severely affected.
The expression “too big to fail” also refers to the expectation that the government will support important institutions in difficult times.
This viewpoint benefits these institutions in several respects in terms of funding. It also suggests that these institutions have a special set of guidelines for handling systemic risk and moral hazard.
3 – Forest Rights Act:
GS II Topic Government Policies and Interventions
Harsh Chouhan, chair of the National Commission for Scheduled Tribes (NCST), declared on Monday that despite the Environment Ministry rejecting these worries, the ST body’s view on the new guidelines being in breach of the Forest Rights Act, 2006 “would be the same.” This indicates that the confrontation between the government and the ST body regarding the FCR 2022 is getting worse.
The FRA, passed in 2006, recognises the rights of indigenous people who rely on the forest for a variety of needs, including housing, a way of sustaining themselves, and other sociocultural necessities.
It recognises and grants other traditional forest dwellers (OTFD) and scheduled tribes of forest dwellers (FDST) who have lived there for many generations the right to occupy forest land.
It strengthens the forest conservation regime while safeguarding the FDST and OTFD’s way of life and food security.
The Gram Sabha must initiate the process for determining the type and extent of Individual Forest Rights (IFR), Community Forest Rights (CFR), or both, that may be awarded to FDST and OTFD.
It allows FDST and OTFD the right to ownership of land farmed by tribal people or forest residents, subject to a maximum of 4 hectares.
Ownership only extends to land that the concerned family is actively cultivating; no new lands will be provided.
Residents have the right to use grazing areas, small amounts of wood, and other areas.
Rights to development and assistance:
Depending on restrictions for forest protection, access to necessities, and recovery in the event of an unauthorised eviction or forcible alocation.
Any community forest resource that has historically been protected and kept for use in the future is protected under rights linked to forest management.
A constitutional provision was expanded:
It increases the reach of the Constitution’s Fifth and Sixth Schedules, which protect the rights of indigenous groups to the lands and forests they call home.
Security Concerns: The alienation of tribes was a contributing factor in the Naxal Movement, which had an influence on regions such as Chhattisgarh, Odisha, and Jharkhand.
It has the ability to democratise forest governance by recognising community rights to forest resources.
As a result, government exploitation of forest resources will be constrained, forest governance will be improved, and tribal rights will be better managed. This will ensure that people have the chance to manage their forests autonomously.
Because tribals do not make up a sizable vote bank in the majority of states, governments find it more convenient to undermine FRA or abandon it entirely in favour of financial rewards.
Although the FRA was meant to be a welfare programme for tribe members, the forest bureaucracy mistook it for a means of legalising expansion.
Business organisations fear losing their easy access to irreplaceable natural resources.
Some ecological organisations are concerned that the FRA favours individual rights over community rights, which will leave less room for them.
Institutional Barrier: Gram Sabha creates rough maps of collective and individual claims, but it occasionally lacks technical expertise and is educationally incompetent.
Misuse of FRA: When the FRA was applied improperly, communities hastily filed lawsuits. All political parties have used the FRA as a tool to distribute land and define district goals.
How to Proceed:
It is imperative that the governments at the Central and State levels be strengthened with human and financial resources to support the mission-mode execution of FRA.
In order to provide services to gramme sabhas, the forest bureaucracy needs to be reorganised in addition to using technology to map and track the implementation of FRA.
4 – Financial Inclusion:
GS III Topic Indian Economy
The Supreme Court’s majority decision on January 2, 2023, which is based on a thorough examination of the records kept by the government, states that the Central Board of the Reserve Bank of India was well-informed before recommending the demonetisation of Rs. 500 and Rs. 1,000 banknotes in November 2016.
Financial inclusion is the process of ensuring that vulnerable groups, such as weaker individuals and low-income groups, have affordable access to financial services and prompt and sufficient financing when needed.
In a multiethnic country like India, financial inclusion is essential to the development process. Since the nation’s independence, successive governments, regulatory agencies, and civil society have worked together to spread the country’s financial inclusion net.
Compared to before, financial inclusion is currently in considerably better form. Financial inclusion hasn’t yet helped the lowest of the poor, and there are many issues that need quick solutions.
Reaching out to the unbanked and bringing them into the financial system is therefore extremely important and presents a great opportunity.
Financial Inclusion Initiatives:
The Jan Dhan-Aadhar-Mobile Trinity (JAM):
The deployment of Aadhaar, PMJDY, and increased mobile connection have altered how citizens access government services.
According to estimates from March 2020, the Jan Dhan scheme has generally helped over 380 million people.
To support the progress of financial inclusion, Aadhaar has fundamentally changed the concept of personal identity and developed a system that is secure, easy to verify, and quick to obtain.
The government has also created a number of flagship programmes to promote financial inclusion and provide financial stability in order to empower the nation’s impoverished and unbanked citizens.
These include the Pradhan Mantri Suraksha Bima Yojana, Stand-Up India Scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana, and Pradhan Mantri Mudra Yojana.
Growth of financial services in semi-urban and rural areas:
The Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD) have taken actions to promote financial inclusion in rural areas.
The opening of bank branches in remote areas is one of them.
Issuing Kisan credit cards (KCC).
Self-help groups’ (SHGs) ties to financial institutions.
Increasing the number of automated teller machines (ATMs).
Business correspondents in banking, etc.
Encouragement of digital payments:
By strengthening the Unified Payment Interface (UPI), NPCI has improved the security of digital payments.
Thanks to the Aadhar-enabled payment system, an Aadhar enabled bank account (AEBA) may be used anywhere and at any time by using micro ATMs (AEPS).
The payment system has grown more accessible as a result of offline transaction-enabling technologies like Unstructured Supplementary
Service Data (USSD), which enable the usage of mobile banking services even on the most basic mobile devices without internet.
Enhancing Financial Literacy:
The Reserve Bank of India launched a project called Project Financial Literacy.
The project’s objective is to educate various target populations about the central bank and general banking concepts, including school- and college-age children, women, rural and urban poor, members of the military, and older residents.
The flagship project of the National Institute of Securities Markets (NISM) and Securities and Exchange Board of India (SEBI), Pocket Money, aims to raise the financial literacy of schoolchildren.
The objective is to help pupils comprehend the value of money and the relevance of saving, investing, and budgeting.
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The Hindu Editorial Analysis
Wil The Migrants Be Able To Vote Remotely?
The Election Commission of India (ECI) recently announced that it was prepared to test remote electronic voting equipment to eliminate the need for domestic migrants to travel back to their home State or district to cast their ballots (RVMs). In January 2023, the EC will provide a prototype of RVM to political parties and solicits their feedback.
How important is the vote from immigrants?
The European Commission (EC) has identified remote voting as being complicated by the lack of a centralised database for migrants in a concept note. The EC did agree that “in the age of technological innovation, disenfranchisement based on migration is actually not an option.”
47 percent of India’s population, or 45.36 crore individuals, are internal migrants, meaning they migrated somewhere other than where they were legally permitted to live.
Despite 67.4% of the eligible 91.2 crore Indians voting, the Election Commission (EC) reports that around 30 crore voters did not cast
votes in the 2019 Lok Sabha election, raising concerns about a stagnant electoral participation rate.
“Voter inability due to internal movement (domestic migrants) is one of the main concerns to be addressed to increase voter turnout and ensure participatory elections,” the EC declared.
RVMs should heed EC’s counsel:
In 2015, the Supreme Court ordered the EC to look into the possibility of remote voting in response to a petition demanding to permit domestic migrants to vote. Although the poll panel’s committee looked into distant voting options like early voting, proxy voting, postal ballots, and Internet voting, they ultimately opted against recommending any of them for a number of reasons.
The Multi-Constituency Remote Electronic Voting Machine (RVM), a modified version of the current EVM architecture, has been developed by the ECI as a prototype for migrant voting.
According to the EC, the RVM may manage up to 72 constituencies from a single remote polling place. The voter must register (online or offline) with the appropriate Returning Officer (RO) of their home constituency within the pre-notified time for a remote voting option.
A multi-constituency remote polling station will be established in the vicinity of a voter’s current residence once their eligibility has been confirmed and they have been given the go-ahead for distant voting. The security system and voting process for RVMs and EVMs are identical; the main difference is that RVMs will use an electronic ballot display with candidates and symbols rather than a fixed ballot paper sheet. A voter’s matching constituency and candidate list will appear on the RVM display when they scan their constituency card in front of the presiding officer at the station. The automated system will count and record the votes for each candidate in a constituency as well as the total votes.
NRIs voting remotely:
Due to the approximately 1.35 crore non-resident Indians who are dispersed throughout the world, India has the largest diaspora population. Even though India revised the Representation of the People Act in 2010 to allow qualified NRIs who have been overseas for longer than six months to vote, the requirement that they physically visit the polling station is a major factor in the low proportion of NRI registration and voting.
The petitioners contend that NRIs shouldn’t be denied the right to vote because they exercised their freedom to freely practise a profession or trade, despite the worries of some observers who wonder why people who emigrated abroad should be given special voting privileges.
Another issue that has been brought up is whether people who have lived overseas for a significant amount of time, say more than two years, should be allowed to vote. As long as they are not gone for a certain amount of time or indicate a “intend to return,” international voters in several countries are permitted to cast absentee ballots.
As instructed by the Court, ECI established a Committee in 2014 to investigate the alternatives for overseas voters. Only email ballots and proxy votes were accepted as forms of remote voting by the committee.
The Electronically Transmitted Postal Ballot System (ETPBS) mandates that NRI voters submit an application in person or online to the returning officer. The ballot will be electronically transmitted by the returning officer.
The voter can mark the printed ballot after making their selection and mail it back along with an authorised declaration. The ballot will either be mailed to the voter by ordinary mail or left at an Indian embassy to be separated and posted. Voters can elect proxies to cast their ballots on their behalf through the proxy voting method.
Currently, only service voters, such as those enlisted in the military forces or engaged in diplomatic missions overseas, are permitted to
use ETPBS and proxy voting. Proxy voting would be a “convenient” and “doable” option, according to the ECI.
Change implementation roadblocks:
Numerous opposing parties have already voiced their worries. Because the proposed remote voting technology could “seriously undermine the credibility in the electoral system,” Congress has requested the EC to first restore voter confidence by “transparency and via honest engagement with the Opposition’s concerns.” The party emphasised that worries about EVM exploitation had not been “systematically addressed.”
The EC itself has identified a number of procedural concerns that require stakeholder input, including:
How to locate a voter who changed addresses but kept their registration at their old place of residence.
No matter if a voter is momentarily absent or away from their “usual residence” for an extended period of time, equitable voter representation will be provided by including remote voting into the electoral concept of territorial districts or areas that are clearly established in States.
Putting the Model Code of Conduct (MCC) into practise, allocating poll workers to far-flung polling places, etc. in rural areas to ensure voting privacy.
The Hindu reports that the goal is to evaluate RVMs during the impending 2023 Assembly elections in nine States. If it is a success, it might be fully implemented in the general elections of 2024.
Whether remote voting for migrants actually occurs will depend on the potential for modifying election regulations and on current discussions with parties.
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The Indian Express Editorial Analysis
The Path To Decarbonization
The energy security of those nations that rely on carbon-based energy is in peril as a result of recent global events like the CoVid-19 outbreak, which disrupted the supply chain, the conflict between Russia and Ukraine, and the increase in coal prices.
How will the conflict between Russia and Ukraine impact global carbon-based gasoline prices:
The world energy market has been impacted by the Ukrainian crisis.
There are four things in particular that set this convulsion apart.
One is that the policy-making process is driven by energy nationalism and the fragmented nature of the energy market.
Two, another iron curtain has been lowered. Russia won’t be able to access western markets as long as President Putin is in power, regardless of how or when the conflict in Ukraine is resolved.
Three, the OPEC plus one group, which essentially consists of Saudi Arabia and Russia, has departed from the Western world’s sphere of influence. Saudi Arabia has made it clear that it intends to establish relations with all nations, including the US, that are non-aligned and “Saudi first.”
Four, regions that are rich in the metals, minerals, and other components required for clean energy are coalescing into new energy power hubs. China now holds the top position.
How these events are affecting India’s energy strategy:
In light of the global environment, India must orient its energy compass toward long-term decarbonization and near-term energy security.
To tackle such challenges, the government should take the following actions:
To assure such a cover, government must increase the output of our existing producing fields. Additional monies should be set aside to get access to relevant improved oil recovery technology.
In order to develop an equity partnership and a long-term supply deal with Saudi Arabia, it should also make use of Iran’s market potential.
In order to allow their traders to work freely, the public sector petroleum organisations’ strategic petroleum stocks should be boosted to at least cover 30 days’ worth of consumption, and the CBI, CVC, and CAG should be relieved of their sword of Damocles-like hold over their heads.
It is crucial to move fast with the construction of India’s national gas pipeline network.
However, phase down coal-based energy gradually:
Coal will continue to be an important component of India’s energy system for many years to come.
It is unquestionably the dirtiest fuel, yet it is also one of the most affordable sources of energy. Additionally, hundreds of people rely on the coal environment for their way of life.
Although phasing out coal is good for the environment, it is not yet a macroeconomic or social possibility. The government must develop an energy transition plan that protects jobs in the meantime while pursuing the green objective.
An incremental but politically sound step in that direction would be to increase R&D funding on technology for coal gasification and carbon capture and sequestration charging for carbon.
the development of observational and regulatory methods to measure industrial carbon emissions and the decision to not approve any new plants while shutting down old and inefficient ones.
It would also be advantageous if Niti Aayog put together a group of economists and energy experts to compare the cost-effectiveness of coal and solar on a full-cost basis.
Increasing the effectiveness of the demand side to better utilise resources (energy security):
Energy security cannot be reached by focusing solely on the supply and distribution side of the equation. Demand efficiency and conservation are equally important.
It is the simplest, shortest, and most affordable method of reducing dependency on external sources.
Europe will annually save 10 billion cubic metres of gas by just lowering their thermostats by 1 degree Celsius.
The government has created a number of demand management techniques, however they have not all been properly implemented. The main objective for 2023 should be to close this deficit.
The following three steps should be incorporated into this year’s decarbonization policy agenda:
The transmission grid network should first receive funding for an upgrade so that it can sporadically absorb “clean” electrons.
Both the wind and the sun do not always blow, especially at night. In addition, it is necessary to address the structural issues that are limiting the expansion of renewable energy sources. Among its most important elements are the repair of the balance sheets of state distribution enterprises (discoms), the simplification of the land purchase procedure, and the elimination of contractual and regulatory uncertainties. People will lose faith in the reliability of the Power Purchasing Agreements (PAAs) the discoms have with renewable energy sources if their financial affairs are not in order.
The development and promotion of third-generation clean energy is the second issue.
The arrows of mineral and chip diplomacy are also in the quiver of the Indian ambassadors. It will take decades to develop a local chip industry and use our natural resources for the metals and minerals required for renewable energy. Diplomats should set up various sources of supply to decrease the country’s vulnerability in the interim.
diversifying the sources of renewable energy the creation of an environment that makes it easier for third-generation clean energy technologies, such as modular nuclear reactors, hydrogen, and biofuels, to be developed and commercialised. Promote nuclear energy in particular.
India would suffer the most while not being a contributor to global warming.
Millions of people live along the coastline. Their way of life will be threatened by rising sea levels. Numerous millions of people will also be affected by the melting of glaciers and temperature extremes.
India must continue down the path of decarbonization regardless of the offender. It is unable to afford to develop first, then clean up.
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