Mains Q & A 14 March 2023

Q1. What are cryptocurrencies exactly? Discuss the requirement that India offer a clear, practical, and adaptable regulatory framework for cryptocurrencies. (250 Words)

Paper & Topic: GS III Indian Economy

Model Answer:

Introduction:

Digital currencies called cryptocurrencies work without a central bank and use encryption to manage the generation of units of currency and validate payment transfers. In 2008, Satoshi Nakamoto invented Bitcoin, the most well-known cryptocurrency. It is an entirely decentralised peer-to-peer electronic cash system that does not need the supervision of any other financial organisations.

Body:

Bitcoins are necessary because:

Blocks’ capacity to monitor money transfers and transaction activity on a peer-to-peer network aids in preventing corruption.

Time Savings: Because bitcoin transactions are entirely online, have extremely low transaction costs, and are processed almost instantly, they can save the sender and the recipient a significant amount of time and money.

Cost-effective: Intermediaries including banks, credit card firms, and payment gateways take about 3% of the $100 trillion yearly output of the global economy as payment for their services.

Using blockchain technology could result in hundreds of billions of dollars saved in these sectors.

Cryptocurrencies in India:

In 2018, the RBI issued a circular forbidding all banks from dealing in cryptocurrencies. In May 2020, the Supreme Court declared that this circular was unconstitutional.

The government has declared that a bill to create a national digital currency and simultaneously abolish all private cryptocurrencies would be launched in 2021.

Indian blockchain firms have received less than 0.2% of the total funding raised by the global blockchain industry.

It is practically hard for blockchain investors and business owners to realise large financial gains given the current perception of cryptocurrencies.

Necessary regulation:

Indeed, regulating cryptocurrencies is required to prevent serious problems, ensure that they are not handled improperly, and protect inexperienced investors from unreasonable market volatility and potential scams.

But legislation must be succinct, open, unified, and motivated by a clear knowledge of the objectives it is supposed to achieve.

India is at risk of losing the race entirely since it has failed to check these boxes.

Moving ahead:

Any new regulations made in this area should avoid restricting innovation and investment while guarding against the abuse of these digital assets.

The definition of “cryptocurrency” A legal and regulatory framework must first categorise cryptocurrencies as securities or other financial instruments under the applicable national laws. This framework must also identify the regulatory agency that has this authority.

Arrangements must be made in order to convey the value generated by these networks freely into our financial system.

The need for clever policy creation is highlighted by the regulatory uncertainties surrounding India’s stance on cryptocurrency.

Conclusion:

India has the chance to invest its human capital, knowledge, and resources in the digital revolution as it is currently on the threshold of the next stage and has the potential to emerge as one of the revolution’s winners. Making wise policies is all that is necessary. Blockchain technology and digital assets will play a significant role in the Fourth Industrial Revolution; Indians shouldn’t be compelled to ignore it.

Q2. What do you think the "Green Deal" means? In order to solve the challenges of fairness and emissions, does India need a green pact akin to that of the members of the European Union? Examine (250 Words)

Paper & Topic: GS III Environment related issues

Model Answer:

Introduction:

The European Union created the European Green Deal, a climate action plan outlining further efforts it will take to address climate change, on the outskirts of COP25 in Madrid in 2019. The EU, which comprises 28 member nations, is the third-largest emitter of greenhouse gases in the world after China and the United States. Hence, even while it needs more action from other countries to make a real difference, the declaration was praised as a huge step in the right direction.

An Indian Green Deal will simultaneously address equity and emissions, two of the most pressing issues of the day, in a manner similar to the EU Green Deal.

Body:

A breakdown of the key elements of the European Green Deal:

Climate inequity:

In order to attain “carbon neutrality” by 2050, the EU has promised to enact laws that will be binding on all of its members.

While the removal of carbon requires technology like carbon capture and storage, increasing carbon sinks like trees can increase absorption.

A higher emission reduction goal for 2030 will be set:

With its climate action plan, which was made public as part of the Paris Agreement, the EU committed to cutting its emissions by 40% by 2030 compared to 1990 levels.

This reduction will now be raised to a minimum of 50% and will be pushed up to 55%.

Sector-specific planning:

Sectoral plans that aim for the steel industry to be carbon-free by 2030, new energy and transportation policies, an overhaul of train and shipping operations to boost efficiency, and higher air pollution emission standards for autos are all part of the effort to achieve these goals.

An EU-style Green Deal-style climate action plan is required for India:

According to a recent study on the paper “Preparing India for Severe Climate Events,” released by the Council on Energy, Environment, and Water, about 75% of India’s districts are hotspots for extreme climate events such cyclones, floods, droughts, heat waves, and cold waves (CEEW).

It seems obvious that global warming is to blame for the Himalayan glaciers’ melting, which resulted in the floods and landslides in Uttarakhand.

In 2013, during the monsoon season, glacier floods in Uttarakhand resulted in around 6,000 fatalities.

Less light is reflected as glacier cover is replaced by water or land, which also adds to warming, unbearable heat in cities like Delhi and Hyderabad, as well as disastrous floods in Chennai or Kerala.

Super cyclones like Amphan in the east or Tauktae in the south, devastating droughts in Maharashtra, constant rain and flooding in Chennai or Uttarakhand, and Delhi being put under complete lockdown due to extremely poor air quality are just a few of the climate emergencies that India is dealing with.

Potential outcomes:

An Indian Green Deal might consist of three components: green energy programme, care economy, and infrastructure development.

In comparison to projections based on the Stated Policies Scenario (STEP) of the International Energy Agency, the green energy programme will lower India’s overall carbon emissions by 0.8 gigatonnes by 2030. (IEA).

India has a significantly greater energy intensity than the rest of the world, which evaluates how much energy is utilised in a country’s GDP per unit of energy used.

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These industries have a substantial capacity for providing jobs. The Indian Green Deal could absorb those who are already jobless and create more jobs, which can surely absorb a significant amount of covert unemployment, according to the PLFS May 2019 Employment Report.

Moving ahead:

IGD can be changed into a revenue-neutral programme that holds the wealthy accountable by raising taxes on luxury products, money, and inheritance, which are now either low or nonexistent in India.

Another portion can be funded by a carbon tax, which reduces emissions but is regressive in contrast to other taxes.

The policy proposal can be amended to include a carbon dividend that takes the form of cost-free electricity, meals, and public transportation to make up for that.