9 PM Daily Current Affairs Brief – May 31st, 2023
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GS PAPER - 2
India – Switzerland relationship: Fighting together for a peaceful world
Source: The post is based on the article “Fighting together for a peaceful world” published in the “The Indian Express” on 31st May 2023.
Syllabus: GS2 – International relations.
Relevance: About India – Switzerland relationship.
News: The article explains the foreign policy priorities of Switzerland and its convergence with Indian foreign policy.
What are the foreign policies and priorities of Switzerland at UNSC?
The President of Swiss convened a UNSC open debate on the protection of civilians in zones of armed conflicts.
There are twin strands in Switzerland’s foreign policy – peace promotion and the protection of civilians in zones of armed conflict. Switzerland has been active in pushing forward these principles.
The Swiss Foreign Minister chaired a high-level open debate focusing on building mutual trust to promote sustainable peace. It declared that it is time for the Security Council to reflect on its potential for action in the face of the increasing number of crises.
What are the historical reasons behind Switzerland’s peace promotion policy?
Switzerland itself has not always been a peaceful country. It was ravaged by several civil wars between Catholics and Protestants for a period of up to 300 years.
The last civil war of 1847 led to deep reflection for the Swiss people and their political leadership. As a result of this, the Swiss people decided to set up inclusive federal institutions to build domestic peace.
Switzerland’s history helps to explain the choice of the Swiss government’s priorities for its two-year term in the UNSC.
What are the similarities in foreign policy-related priorities of India and Switzerland?
The priorities of Switzerland are also the same ones ingrained in ahimsa. It is the Indian religious and ethical principle of not causing harm to other living things.
India, in whose teachings the non-violence values are rooted, is a natural partner when it comes to Swiss foreign policy priorities.
There are evident convergences between Swiss and Indian foreign policy priorities. Both of which aim at peace promotion. Peace and harmony are also integral to India’s G20 presidency vision of Vasudhaiva Kutumbakam.
At this historic moment, Switzerland and India together can contribute greatly to world peace – Switzerland as a non-permanent member of the Security Council in New York, and India by presiding over the G20.
Using Buddhism as a tool of soft power
Source: The post is based on the article “Using Buddhism as a tool of soft power” published in “The Hindu” on 31st May 2023.
Syllabus: GS2- International relations
Relevance: About Buddhist diplomacy of India and China.
News: Recently, the Global Buddhist Summit took place in New Delhi in April.
What are some facts about Shakyas after Buddha’s death and its importance for Indian diplomacy?
The Shakyas who ruled Kapilavastu after Buddha’s Parinirvana did not have an army. Many were massacred. The remaining Shakyas fled to different parts of the country.
Many also went to the Kathmandu Valley. They were granted a status comparable to that of the Vajracharya priests, but were not permitted to practise priesthood outside of their families.
Therefore, in Golden Temple Shakyas alternate as temple caretakers and conduct all the rituals. This is one of the few temples in the Kathmandu valley where a 1,000-year-old tradition continues.
Nepal accepted a grant from the Government of India to renovate portions of the Golden Temple complex. But, it has created a controversy.
Many locals believe that India was only interested in this project because it is the temple complex most frequently visited by Chinese tourists.
What are some facts about the Buddhist diplomacy of China?
China is home to around 245 million Buddhists, 28,000 Buddhist monasteries, 16,000 temples, and 2,40,000 Buddhist monks and nuns. This makes Buddhism an important soft power for China.
China has added religious overtones to China’s existing portfolio of cultural and linguistic diplomacy. The state religious system is supporting the growing political and economic power of China abroad.
Beijing pursues a multifaceted and flexible approach to promote Chinese Buddhism abroad. Its approach varies depending on whether the target country is Buddhist-majority, Western, or one of China’s Asian competitors.
As a source of Buddhism, the Chinese look to Nepal rather than India. The popular temples in Beijing have a connection with Nepal.
China utilised Buddhist narratives alongside infrastructure investments in Sri Lanka. China would prefer to use its own version of Buddhism as a tool of soft power.
In Nepal, a popular rumour is that China will send five million Buddhist pilgrims and establish hotels and other businesses through its investment arms as a big soft power push.
What are some facts about Buddhist diplomacy in India?
For India, Buddhism provided an identity of peace and tranquillity after independence when there was intense violence and division between Hinduism and Islam.
There has been usage of Buddhist symbolism as a means of escaping difficult times. Due to such usage and evidence, India likes to claim Buddhism as its own.
It convened the Global Buddhist Summit in April to promote Tibetan Buddhism and the Dalai Lama. There were no Nepal and Bhutan representatives present.
The India International Centre for Buddhist Culture and Heritage is coming up in Lumbini, Nepal. Prime Minister laid the foundation stone in May 2022. This could be seen as an attempt to counter the opening of the Gautam Buddha International Airport in Bhairahawa, Nepal.
India’s overtures of Buddhism in Nepal began only after ‘Buddha is Born in Nepal’ became a populist slogan of sovereignty in Nepal.
Our DPI approach is just what the world was seeking
Contents
Source: The post is based on the article “Our DPI approach is just what the world was seeking” published in Live Mint on 31st May 2023.
Syllabus: GS 2 – E-governance, International Relations.
Relevance: About India’s digital public infrastructure (DPI) approach.
News: Recently, few global organisations have endorsed India’s digital public infrastructure (DPI) approach.
What is DPI and how India is approaching it?
Must read: India’s Digital Public Infrastructure (DPI) and associated challenges – Explained, pointwise |
Which organisations have endorsed India’s DPI?
The Shanghai Cooperation Organisation (SCO) agreed to assess, evaluate, and adopt DPI with an interoperable approach to digital inclusion to the extent possible.
India and the European Union have agreed to take steps to accelerate the development and deployment of DPI in other countries in an effort to build open, inclusive digital economies and societies around the world.
The Joint statement from the QUAD and G7 countries formally recognised the transformative power of DPI in supporting sustainable development and delivering economic and social benefits to the people of the Indo-Pacific.
How DPIs are developed generally?
Digital services can either be developed by private companies or by the government.
When private companies deliver digital services, their motive is profit and commercialization. They do not focus on a citizen-centric approach. Further, leaving these services completely to private companies denies governments necessary sovereign control over critical government services.
Whereas, leaving digital services completely in the hands of the government, results in a level of state surveillance that is unacceptable to most democratic nations.
Why are various international organisations taking an interest in India’s DPI approach?
India’s DPI offers a better-balanced approach. It combines technology, markets, and governance to create large-scale digital ecosystems that are controlled by countries.
This approach allows countries to have flexibility while also benefiting from the power of markets and private enterprise. The aim is to promote inclusive and competitive services for their citizens.
Therefore, this kind of approach is usually looked at by the developing nation because they do not want to be left on the mercy of private players nor do they want to act as a surveillance government by solely taking up the responsibility.
How will DPI benefit the nations?
By adopting the DPI model, countries can design fully interoperable solutions that meet their specific national requirements using secure, privacy-preserving solutions that is required for large population.
The DPI approach will also enable countries to maintain control over the systems they build and have the freedom to adjust the underlying protocols according to their specific national objectives.
Finally, the spread of India’s DPI approach will enable India to play an important role in leading and guiding the world and be a rule maker rather than a rule taker.
Universal cover – IRDAI’s plans to expand risk protection levels need government backing
Contents
Source: The post is based on the article “Universal cover – IRDAI’s plans to expand risk protection levels need government backing” published in The Hindu on 31st May 2023
Syllabus: GS – 2: Issues relating to the development and management of Social Sector/Services relating to Health.
Relevance: About all-in-one insurance policy.
News: Insurance Regulatory and Development Authority (IRDA) is devising a “UPI-like moment” in the insurance sector by planning an all-in-one insurance policy.
About India’s insurance sector
Earlier, the Indian insurance sector was a public sector-led industry. But now with the entry of private players, India’s insurance penetration (the ratio of premium payments to GDP) has risen — from 2.7% in 2001-02 to 4.2% in 2021-22. This is a slide in the metric over the past decade from 5.2% in 2009-10. Further, non-life policies are yet to surpass 1% of the total mark.
About the all-in-one insurance policy
Must read: All-in-one policy plan to spread insurance in India |
What will be the expected benefits of an all-in-one insurance policy?
-State government’s involvement and the creation of state-level insurance committees would help formulate granular district-wise strategies for raising awareness and coverage levels.
-Industry players need to look beyond the top cities and the ‘Bima Vistaar’ scheme could catalyse the volumes they need to get out of their comfort zones.
What more should be done to make all-in-one insurance policy work?
India is a country where one health calamity can push a household below the poverty line. So, the Centre needs to rethink the 18% GST levy on health and life insurance premiums.
The IRDA underwent a nine-month vacuum before the appointment of the current chairmen. To make policies work the government should ensure a continuity of leadership in the IRDA.
[Yojana May 2023 Summary] Potential of India’s EdTech sector – Explained, pointwise
Contents
For 7PM Editorial Archives click HERE → |
Introduction
Since a decade, Education Technology or EdTech, as it is popularly known, and its potential to provide affordable learning at scale have been a matter of discussion in academic and policy circles. In recent years, news about India’s EdTech sector startups raising billions has hit the headlines. Hence, it is important to understand its nuances, potential, challenges, and impact in nurturing the largest student base.
What is EdTech?
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EdTech, or Education Technology, refers to the use of the Information and Communications Technology (ICT) ecosystem to enhance teaching and learning. It includes the use of smartphones, apps, and online platforms to make education more accessible, affordable, and engaging. EdTech allows students to learn at their own pace and provides access to quality teachers and resources, regardless of location or learning abilities. It has the potential to transform education by offering personalized learning experiences and improving educational outcomes for students.
What are the key growth drivers of India’s EdTech sector?
Demographic dividend: Large student population and increasing enrollment rates create a significant market for EdTech. For instance, with over 300 million students in K-12 and around 40 million students in higher education, there is immense potential for EdTech to reach and impact a large number of learners.
Expansion of digital infrastructure: Initiatives like the National Broadband Mission, Digital India, and BharatNet have significantly expanded digital infrastructure in the country. This has improved internet connectivity, making it easier for EdTech platforms to reach remote areas and provide online education to students across the country.
Increased Internet and Smartphone users: The rise in the number of Internet users and smartphone users in India has created a large user base for EdTech platforms. With over 932 million internet users and 931 million smartphone users, EdTech has the potential to reach a vast number of students and provide them with quality education through digital platforms.
Affordable mobile data rates: India has one of the cheapest mobile data rates globally, with 1 GB costing only Rs 14. This affordability has made internet access more accessible to a wider population, enabling students from diverse backgrounds to access online educational resources and benefit from EdTech platforms.
Decreasing smartphone prices: Over the last decade, there has been a significant drop in smartphone prices in India. The average selling price has decreased by around 12%. This affordability has made smartphones more accessible to students, allowing them to access EdTech apps and platforms for learning purposes.
Government initiatives: Programs like SWAYAM, DIKSHA, and the introduction of the National Digital University (NDU) support the growth of digital education. Such as, SWAYAM provides free online courses from the best universities, allowing students to access quality education at no cost.
Pandemic-led behavioural Changes: The COVID-19 pandemic has accelerated the adoption of online education and increased the demand for EdTech solutions.
Increased funding: EdTech has attracted significant investments from venture capitalists and private equity firms, enabling companies to expand their offerings and reach a larger user base.
Read more: India’s edtech ecosystem: Let our learning curve be hybrid, holistic and hyper-personalized |
What are the potential benefits of India’s EdTech sector?
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Learning while playing: Gamified techniques in EdTech make learning fun and interactive. For example, educational games that teach math concepts through puzzles and challenges.
Classes anywhere and anytime: EdTech allows students to access classes and educational resources remotely. Like, online learning platforms that offer recorded lectures and interactive lessons accessible 24/7.
Access to quality teachers: EdTech enables students to learn from experienced and qualified teachers, regardless of their location.
Engaging learning experience: EdTech incorporates interactive elements into the curriculum, enhancing student engagement. Such as interactive simulations and virtual labs that allow students to explore and experiment in a virtual environment.
Personalized learning: EdTech platforms can adapt to individual student needs and provide personalized learning experiences. Like, adaptive learning software that adjusts the difficulty level of questions based on a student’s performance.
Improved administrative tasks: EdTech tools automate administrative tasks, saving time and effort for teachers. For example, classroom management software assists in grading assignments and organizing student records.
Enhanced collaboration and communication: For instance, online discussion boards and video conferencing tools for group projects and virtual classrooms. Access to diverse educational resources: EdTech platforms offer a wide range of educational materials, including e-books, videos, and interactive tutorials.
What are the challenges faced by India’s EdTech sector?
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Access and infrastructure disparities: Unequal access to technology and internet connectivity among students, particularly in rural or underserved areas, can hinder the widespread adoption of EdTech.
Digital literacy and skills gap: Students, teachers, and parents may face challenges in adapting to and effectively utilizing EdTech tools and platforms due to a lack of digital literacy and skills.
Equity and inclusion: Ensuring equitable access to EdTech resources and opportunities for all students, including those from marginalized communities, is a challenge.
Data privacy and security: Protecting sensitive student data and ensuring the security of online platforms and systems is a critical concern in EdTech implementation.
Teacher training and professional development: Providing adequate training and professional development opportunities for teachers to effectively integrate EdTech into their teaching practices can be challenging.
Psychological and social effects of online education: Lack of face-to-face interaction and socialization opportunities in online education can impact students’ mental health and social skills. For instance, students may experience feelings of isolation or struggle to develop interpersonal skills without in-person interactions.
Perception of parents: Some parents may have reservations about the effectiveness and reliability of EdTech compared to traditional classroom-based education. Such as concerns about the quality of instruction or the ability to provide holistic learning experiences may lead parents to prefer traditional education methods.
Pupil-teacher ratio: Maintaining a low pupil-teacher ratio in online education programs is essential to ensure personalized attention and support for students. For example, limited teacher availability and the challenge of providing individualized guidance to a large number of students in virtual classrooms.
Read more: Edtech’s teachable moment |
How India’s EdTech sector will evolve in future?
Personalized learning experiences: Advancements in Artificial Intelligence (AI) can enable EdTech platforms to provide individualized learning experiences for students. AI algorithms can adapt to student’s learning styles, pace, and preferences, delivering customized content and recommendations. This can lead to more efficient and effective learning, catering to the unique needs of each student.
Integration of emerging technologies: EdTech is likely to incorporate emerging technologies such as Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR) to create immersive and engaging learning environments.
Blended learning approaches: This approach combines traditional classroom instruction with digital resources and platforms, offering a hybrid learning experience.
Lifelong learning and skill development: Online platforms and courses will cater to professionals seeking continuing education and individuals acquiring new skills to adapt to changing job market requirements.
Data-driven insights and analytics: EdTech’s future will likely involve leveraging data analytics to gain insights into student performance, learning patterns, and areas of improvement.
Collaboration and global connections: EdTech will continue to facilitate collaboration and global connections among students, educators, and experts. Virtual classrooms, online discussion forums, and collaborative projects will promote cross-cultural exchanges and knowledge sharing.
Focus on future Skills: EdTech will increasingly emphasize the development of future skills, such as critical thinking, problem-solving, creativity, and digital literacy. Adaptive learning platforms can incorporate these skills into their curriculum and assessments, preparing students for the demands of the 21st-century workforce.
Read more: Technology can democratise education |
What should be done?
Continue investing in improving digital infrastructure: Such as internet connectivity and network coverage, particularly in remote and underserved areas. Government initiatives should focus on bridging the digital divide to ensure equitable access to EdTech resources for all students.
Promote digital literacy and skills: Incorporate digital literacy programs into school curricula and provide training for students, teachers, and parents on effectively using EdTech tools and platforms.
Collaborate with stakeholders: Foster collaboration between educational institutions, EdTech providers, policymakers, and parents to create a shared vision and effective implementation strategies.
Continuous teacher training and support: Provide comprehensive training and professional development programs for teachers to effectively integrate EdTech into their teaching practices. Support teachers in adapting to new technologies, designing engaging online learning experiences, and utilizing data analytics to personalize instruction.
Ensure data privacy and security: Establish robust data privacy policies and guidelines to protect sensitive student information and ensure secure online platforms. Regularly assess and update security measures to maintain the integrity and confidentiality of student data.
Promote research on the impact and effectiveness of EdTech: Conduct evaluations to measure the outcomes and benefits of EdTech implementations, identifying areas of improvement and best practices.
Source: Yojana
Syllabus: GS 2: Social Justice: Issues relating to development and management of Social Sector/Services relating to Education
GS PAPER - 3
Indian toy industry: Unboxing the ‘export turnaround’ in India’s toy story
Contents
- 1 How has been the performance of the Indian toy industry?
- 2 What explains the sharp turnaround in the toy trade in just three years?
- 3 How is the scenario of the Indian toy industry different from other countries in Asia?
- 4 How do more recent policy initiatives, such as ‘Make in India’, have a bearing on the Indian toy industry?
- 5 What is the way forward for the growth of the toy industry?
Source: The post is based on the article “Unboxing the ‘export turnaround’ in India’s toy story” published in “The Hindu” on 31st May 2023.
Syllabus: GS3- Indian economy
Relevance: About Indian toy industry.
News: India has recently turned a net exporter of toys, during 2020-21 and 2021-22. Between 2018-19 and 2021-22, toy exports increased from ₹812 crore to 1,237 crore. Imports declined from $371 2,593 crore to ₹819 crore.
How has been the performance of the Indian toy industry?
India’s toy industry is minuscule. In 2015-16, the industry had about 15,000 enterprises. They produced toys valued at ₹1,688 crores and employed 35,000 workers.
Registered factories accounted for 1% of the number of factories and enterprises. They employed 20% of workers and produced 77% of the value of output.
Between 2000 and 2016, industry output was halved in real terms with job losses. Imports accounted for up to 80% of domestic sales until recently. Between 2000 and 2018-19, imports rose by nearly three times as much as exports.
India hardly figures in the global toy trade. Its exports are merely a half-percentage point of total global export.
What explains the sharp turnaround in the toy trade in just three years?
Imports contracted as the basic customs duty on toys tripled from 20% to 60% in February 2020.
Numerous non-tariff barriers were imposed as well such as production registration orders and safety regulation codes. It contributed to import contraction.
How is the scenario of the Indian toy industry different from other countries in Asia?
Historically, Asia’s successful industrialising nations promoted toy exports for job creation. For example, Japan started about a century ago, China since the 1980s, and currently Vietnam is following in their footsteps.
India followed an inward-oriented industrial policy in the planning era. It provided a “double protection” by import tariffs and reservation of the product for the small-scale sector. As a result, toy manufacturing remained stagnant, archaic and fragmented.
In 1997, the reservation policy was abolished. New firms entered the organised sector, but only for a while. Productivity growth improved. But the unorganised sector languished with job losses.
How do more recent policy initiatives, such as ‘Make in India’, have a bearing on the Indian toy industry?
There is no evidence of ‘Make in India’ positively affecting the toy industry on a sustained basis. The output of the informal or unorganised sector shrank. But, it continues to account for the majority of establishments and employment.
Industry de-reservation failed to sustain output, investment, and productivity growth after 2007-08. ‘
What is the way forward for the growth of the toy industry?
Neither the reservation policy nor its abolition after the liberal reforms boosted the industry’s performance.
One should perhaps look beyond simplistic binaries of planning versus reforms. There is a need to examine the ground reality of industrial locations and clusters to make policies and institutions to nurture such industries.
Recycling permanent magnets for rare earths
Contents
Source: The post is based on the article “Recycling permanent magnets for rare earths” published in the Business Standard on 31st May 2023.
Syllabus: GS 3 – Changes in industrial policy and their effects on industrial growth.
Relevance: About rare earth permanent magnets.
News: Recently, the PM has inaugurated India’s first facility to produce rare earth permanent magnets in Visakhapatnam. The plant is based on indigenous reduction-diffusion technology and produces samarium-cobalt (SaCo) rare earth permanent magnets and neodymium-iron-boron (NdFeB) permanent magnets.
What is the significance of the Vishakapatnam rare earth permanent magnets plant for India?
The supply chain of rare earths is one of the biggest concerns because China has the highest concentration of rare earth metals which gives it a huge strategic leverage. Therefore, setting up a production facility for permanent magnets in India is a significant step as it will safeguard India from any supply chain disruption.
Moreover, India’s Make in India initiative has given a boost in the electronics, defence, and aerospace sectors, which has led to an increase in the demand for rare earth permanent magnets.
Since India is an importer of these metals, setting up such kinds of plants will cater India’s domestic demand while reducing its reliance on China.
Why is the production of rare earth permanent magnets important?
Rare earth permanent magnets have a wide-range applications in electronics, automobiles, the military, etc. These are also used in new technologies like hypersonic weapons and directed energy systems.
Compared to ordinary ferrous magnets, rare earth permanent magnets generate a very high magnetic field strength and large amounts of torque. This makes them ideal for applications requiring high-performance, compact and light-weight motors.
Moreover, a rare earth permanent magnet also has nearly 30 percent of rare earth metals by weight. Recycling them can further benefit India in catering rare earth metal demand.
How will recycling rare earth permanent magnets benefit India?
According to a report of the United Nations, India was the third-largest country in e-waste generation in 2019. The e-waste generation is expected to increase further in the coming years. As these permanent magnets contain rare earth metals, recycling them would help in catering to domestic rare earth metal demand in India.
Given the large amount of e-waste generated in India, recycling them would provide rare earth metals much more than the quantities imported currently.
Must Read: Rare Earth Elements: Strategic Importance and Reducing Import Dependence – Explained |
What are the concerns present with e-waste collection and recycling?
E-waste collection and recycling in India suffer from several institutional and management weaknesses.
Only about 22% of the e-waste generated is collected while the recycling technology employed is primitive and it is mostly about scavenging precious metals like gold and silver. Therefore, improving e-waste collection requires a behavioural change in society.
Must read: India’s e-waste challenge – Explained, pointwise |
What can be the way ahead?
India does not have a recycling plant for permanent magnets. To address this issue, companies from friendly nations can be incentivised to set up recycling facilities in India while efforts can be taken to develop indigenous technology simultaneously. Moreover, recycling plants should adhere to environmental norms as well.
Note: Neodymium and Dysprosium are two elements required to make permanent magnets, which also contain rare earth metals in it.
Economics of biofuels – Food and feed must be given priority
Source: The post is based on the article “Economics of biofuels – Food and feed must be given priority” published in the Business Standard on 31st May 2023
Syllabus: GS – 3: Energy.
Relevance: About E20 target.
News: The government said to achieve the level of ethanol blending in petrol to 20% (E20) by 2025, instead of 2030. But a recent report rules out the availability of enough raw material to reach E20.
About the recent Amendments to the National Policy on Biofuels
Read more: Cabinet approves Amendments to the National Policy on Biofuels -2018 |
Why does India need to revisit its E20 target?
Non-availability of land and low production capability: Brazil, the world’s leading sugar and ethanol producer, are able to grow crops exclusively for biofuel production because they have abundant land. Further, the productivity of these crops in India is lower than the global averages and their use for food and feed has to be given priority.
Not easy to divert food grains: Last year, the Food Corporation of India gave about one million tonnes of subsidised rice to distilleries for ethanol production. But diverting food grains like rice and corn for ethanol production often is not feasible as malnutrition is rampant, and India’s ranking on the global hunger index is low.
Vehicles need modifications: Most of the existing vehicles are, typically, not made to run on high ethanol doped fuels. They would require modifications, even if minor ones.
The level of emission reduction is low: The level of emission reduction achieved by replacing a small part of petrol with ethanol is too meagre to justify additional investment in engine modifications and creating fresh capacities to manufacture E20-compliant autos. According to a NITI Aayog report, the extra cost would be Rs 3,000-5,000 for every four-wheeler and Rs 1,000-2,000 for a two-wheeler.
Must read: Amendments to the National Policy on Biofuels – Explained, pointwise |
What should be done to achieve the E20 target?
At present, the bulk of the ethanol is produced by the sugar industry, which has been permitted to utilise all products of sugarcane, including cane juice and finished sugar, for this purpose. To achieve E20 target, India should explore ways to produce ethanol by deploying second-generation (2G) technology. At least four such 2G ethanol plants are already coming up. India needs to set up more such plants.
Withdrawal of Rs 2000 notes: The short history of a large note
Contents
Source: The post is based on the article “The short history of a large note” published in The Hindu on 31st May 2023
Syllabus: GS – 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Relevance: About RBI’s decision to withdraw Rs 2,000 notes.
News: The Reserve Bank of India (RBI) has decided to withdraw the Rs 2000 denomination banknotes from circulation.
Why has the RBI withdrawn Rs 2,000 notes?
Must read: Why has the RBI withdrawn Rs 2,000 notes? |
What are the issues faced in the economy with Rs 2,000 notes?
The credibility of the monetary system: India’s monetary system has taken a serious credibility hit due to frequent changes and U-turns in currency management.
Automated Teller Machine (ATM) Recalibration: During demonetisation, the 2000 notes had to be printed in larger numbers. The RBI printed the new ₹2,000 notes in a new size. Normally, an ATM contained four cassettes; two cassettes held ₹500 notes and the other two cassettes held ₹1,000 and ₹100 notes. The new ₹2,000 note would not fit into any of these cassettes. Consequently, every one of the 2.2 lakh ATMs in India had to be “re-calibrated”.
Re-calibration was a massive and complex exercise that required coordination across banks, ATM manufacturers, the National Payments Corporation of India, and switch operators. Engineers had to personally visit each ATM and spend between two to four hours with an ATM to complete the re-calibration.
Limited funds during demonetisation: Most of the banks packed all four ATM cassettes with available notes of ₹100. This limited the ATM’s access to citizens. (One ATM could, at the maximum, meet the needs of only 105 people per day as ATM could store currency worth ₹2.1 lakh in ₹100 notes).
When the stock of ₹100 notes was quickly exhausted, banks demanded more from the RBI. The RBI had no option but to supply old and soiled notes that banks had returned to the RBI earlier. Soiled notes often jammed the ATMs and further complicated the issue.
The quality of Rs 2000 notes: According to Ramakumar, many notes were poorly printed; some notes had a shadow of Mahatma Gandhi’s face in addition to the photograph of his face; some others had uneven borders; while others were of varying colour shades and sizes.
The issue of change: There locals in villages do not offer change or a balance payment over transactions in Rs 2000 even today. In effect, the problem of a short supply of notes was exacerbated by the release of the ₹2,000 note.
Must read: Withdrawal of currencies: need and challenges |
Can a growing economy have the ₹500 note as the highest denomination?
The highest denomination note in an economy serves as a store of value and is scarcely used in day-to-day transactions. As per capita incomes and inflation rise, the highest denomination note sheds value and becomes a note for day-to-day transactions. The economy would need a new higher denomination note to act as a store of value. This is the reason the RBI had requested the government to let it issue ₹5,000 and ₹10,000 notes in 2014.
The cash-to-GDP ratio in India was 12% in 2015-16 but it rose to 14.5% in 2020-21 and 13.3% in 2021-22. This highlights the value of notes is eroding with inflation, and real interest rates are falling. So, the demand for higher denominations will increase.
Read more: RBI’s Demonetization data report |
Would an e-rupee be a perfect substitute for a larger denomination note?
For that, the digital currency must meet the properties such as anonymity, general purpose use, exchangeability and etc. The RBI has stated that anonymity can be assured only “to a certain degree.” The other properties are still evolving. So, it is hard for a digital currency will emerge as a new store of value in shorter time.
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