01 January 2023

DAILY CURRENT AFFAIRS ANALYSIS

 1 – Demonetisation: GS III – Topic Indian Economy

 Context:

• A number of challenges challenging the government’s decision to demonetize currency notes with denominations of 1,000 and 500 in 2016 are anticipated to be decided by the Supreme Court on January 2, 2023.
• The Constitution bench, which consists of five judges and is presided over by Justice S. A. Nazeer, who will retire on January 4 when the supreme court reconvenes on January 2 after its Christmas break, is expected to issue its ruling.

Demonetization history:

• the removal of cash or other valuables by the central bank for use as the nation’s legal tender. These currencies are either discarded or placed in banks where they are exchanged for new ones.
• Governments in several countries throughout the world have implemented this strict measure to curb the use of black money and currency note counterfeiting. While some countries sadly fell short of their demonetization goals, others succeeded. Let’s examine the countries that went through demonetisation and the challenges they faced.
• The UK applied the decimal system as follows in 1971: The decimal system was implemented by the British in 1971, which was the most significant alteration to their monetary system in more than a thousand years. Under this arrangement, a pound was split into 100 pence. As a result of three years of awareness-raising and instructional efforts, the decimalization of British currency was a success.

African countries:

• In 1984, the government of Muhammadu Buhari in Nigeria banned old notes and introduced a new currency. However, the debt-ridden country was unable to adjust when inflation started, and the economy collapsed.
• Ghana is another country in Africa that had demonetisation in 1982. Ghana stopped printing the 50 cedi note to prevent tax fraud and drain the country’s reserves. Nationalists consequently started to support the black market and make investments in tangible goods, severely weakening the economy.
• The Zimbabwean government shifted from using the Zimbabwe dollar to using the US dollar in 2015. Prior to this, Zimbabwe had a currency denomination of 100 trillion Zimbabwean dollars. The Reserve Bank of Zimbabwe has formally replaced the various currency system with the RTGS Dollar, a new Zimbabwean dollar.

Myanmar:

• In 1987, the military government of Myanmar invalidated 80% of the Myanmar kyat to prohibit illicit trade and black market activity. Demonetisation caused severe economic upheaval because there were no provisions for exchanging the cancelled denominations. There were widespread protests, which resulted in the horrific killing of nearly a thousand people.

The 1991 Monetary Reform in the Soviet Union:

• In 1991, Mikhail Gorbachev decided to stop issuing the 50 and 100 ruble bills. It was also referred to as the Pavlov Reform in honour of the late former finance minister Valentin Pavlov. The economy collapsed as a result of this change, which also contributed to the dissolution of the Soviet Union.

Australia:

• The Australian government was the first to deploy polymer-based plastic notes in 1992. In an effort to combat black money and improve security, Australia conducted Demonetisation in 1996, replacing all paper currency with plastic money. The switchover occurred smoothly and had no detrimental repercussions on the economy because polymer-based notes had been in use for four years.

Pakistan:

• Pakistan’s central bank decided in 2016 to phase out banknotes of earlier designs and gave the general public six years to convert their currency in an effort to curb illegal money. Because everyone was made aware of the change, there was no controversy during the procedure. The central bank’s field staff, however, would continue to accept notes with an older design until December 31, 2021.

About Demonetisation:

• It refers to a decision by the government or the RBI to revoke a currency note’s status as legal tender. As long as a currency note hasn’t been demonetized, recalled, or otherwise revoked, its value is guaranteed by the RBI, making it typically acceptable for use as legal tender. Central banks all around the world have a programme whereby old currency notes are returned and new currency notes with stronger security features are introduced in order to tackle the problem of counterfeit money.

According to the government, the following reasons are why demonetization was implemented in this case:

• to counter the threat posed by the shadow economy, black market, and parallel economy.
• We want to reduce cash transactions, fight corruption, and eventually move to cashless transactions because currency circulation in India is intimately tied to corruption.
• to counter the threat of fake currency.
• to prevent terrorism funding or support from being done with the money.
• This is the only other time since independence that the policy known as “Demonetization” has been announced (even before Independence Demonetization was done in 1946).
• When the administration of Morarji Desai demonetized the Rs. 500, Rs. 1000, and Rs. 10000 notes in 1978, it was the last time this was done. A CBDT analysis that looked at this measure claims.
• It was a fruitless endeavour because just 15% of the high value bills were swapped.
• The rest of the information was never made public out of concern for severe punishment from the authorities. Transferring and receiving large denomination banknotes was prohibited under the High Denomination Bank Notes (Demonetization) Act of 1978, and any violations—including falsified declarations made by depositors and others—were subject to a fine or a three-year prison term.
• Demonetization may not be the best solution, the report claims, as the majority of black money was held in the form of jewellery, bullion, and benami assets. This proposal would only increase the price because more currency notes would need to be made. It may also be detrimental to the financial logistics.

 Demonetization benefits:

• Threats like black money can be somewhat controlled.
• Terrorism financing, the use of unexplained money for illegal activities, and other problems will worsen.
• The fake currency that undermines the real economy will be eliminated.
• More credit demand and lower loan interest rates could result from increased deposit mobilisation at banks.
• Black money raises hidden demand, hence inflation will be somewhat under control.
• The administration also seeks to improve revenue collection (eg- by taxing exorbitant IT rates over certain deposits, the tax collection in other forms will also increase, etc).
• Real estate is one of the primary means by which people generate illicit revenue. It is anticipated that as a result of this action, real estate market rates may plateau or moderate.
• A big step has been made by the government toward a cashless world.
• The truthful workers will be rewarded in such a situation.
• Since elections are frequently associated with the production and transfer of black money, it will be detrimental to the funding of elections through questionable means.
• This will, it is hoped, lessen the fiscal deficit of the government.

Cons of demonetization:

• Black money is not totally stored in cash because it is mostly produced as a result of tax fraud and corruption. Furthermore, the measures merely deal with the effect and not the underlying problem. This strategy does not deal with the underlying reasons of black money, despite the fact that it can reduce its use.
• The demand for the new currencies has suddenly skyrocketed.
• People are afraid (already we have seen the case wherein people have looted fair price shop in MP, Cash Carrying companies seeking higher insurance, etc). Already, consumer money hoarding brought on by the panic has further reduced market liquidity.
• Traders and small company owners are encountering difficulties.
• The illegal market for the brand-new bills and coins is growing.
• Institutions like banks, hospitals, and other businesses are under a lot of strain.
• Another area that is worrying is the probable fall in rural demand as a result of the restricted use of cash. Experts also predict impacts on agricultural production and the SME sector (the economy was expected to perform well as there was an expectation of a good rabi crop after two bad monsoons but a prominent economist, Pronab Sen has said that demonetization is akin to third bad monsoon year as it will have an impact on agricultural production, but the more dangerous situation is this having a spillover effect on to fertilizer, tractor sectors).

Source The  Hindu

2 – European Union: GS II – Topic International Relations

 Context:

• At the stroke of midnight on Saturday, Croatia switched to the euro and got rid of dozens of border checks to join the largest passport-free zone in the world.

About:

• The European Union, which consists of 27 countries, operates as a single economic and political entity.
• 19 of these countries use the euro as their official currency. Eight EU countries—Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden—do not use the euro.
• The EU was founded with the aim of creating a single political organisation for all of Europe in order to stop decades of conflict between European nations, which culminated in World War II and devastated most of the continent.
• The EU has established an internal single market by creating a uniform set of rules that are applicable in all member states when all members agree to operate as one.

What objectives does the EU want to accomplish?

• Encourage peace, morality, and the welfare of all EU citizens.
• Offer freedom, safety, and justice regardless of national boundaries.
• Environmental protection, a market economy that is competitive and offers full employment and social advancement, as well as sustainable development built on a foundation of price stability and balanced economic growth
• combat social isolation and discrimination.
• Encourage technological and scientific developments.
• Boost the territorial, social, and economic integration and solidarity of the EU’s member states.
• Be mindful of its language and cultural distinctiveness.
• Create a currency based on the euro: an economic and monetary union.

What led to the formation of the EU?

• Extreme nationalism decimated the continent following World War II, and European unity was seen as a solution.
• At the University of Zurich in Switzerland in 1946, Winston Churchill went a step further and argued for the establishment of a United States of Europe.
• According to the terms of the Treaty of Paris (1951), the European Coal and Steel Community (ECSC) was founded in 1952 by the six countries collectively known as the Six (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) in order to cede some of their sovereignty by combining their coal and steel production into a single market.
• As part of the Paris Treaty, the European Court of Justice was also established in 1952. (referred to until 2009 as the “Court of Justice of the European Communities”).
• The Euratom Treaty (1957) established the European Atomic Energy Community (EAEC or Euratom), a global organisation with the initial objective of developing nuclear energy, dispersing it to its member states, and selling the excess to non-member states in order to establish a specialised market for nuclear power in Europe.
• Its members are the same as those of the European Union, and it is governed by the European Commission (EC) and Council, functioning under the authority of the European Court of Justice.

Source The  Hindu

3 – Millets Production: GS III – Topic Indian Agriculture

 Context:

• The government said on January 1 that it has planned a variety of millet-centered promotional activities across the country as the International Year of Millets (IYM) gets underway, highlighting the fact that millets are also an important part of the G-20 meetings.
• The Centre ministries, State governments, and Indian embassies would have a month set aside in 2023 to organise various activities to promote IYM and spread knowledge of the benefits of millets, according to a statement from the nodal agriculture ministry.
• Millets are a family of small-seeded grasses that are commonly grown as a cereal crop or grain for human and animal nutrition around the world.

 Historical background:

• Millets were one of the first crops to be domesticated. The Indus valley people began eating millets around 3,000 BC, and India is where many of the varieties of millets that are cultivated today originally came from.
• Global distribution:
• Millets are still the main source of nutrition for more than 500 million people in Asia and Africa. Today, millets are grown in more than 130 countries. The most common millet crop grown worldwide is sorghum (jowar). The top jowar producers are the United States, China, Australia, India, Argentina, Nigeria, and Sudan. Bajra is a crucial millet crop that is extensively grown in India and certain African countries.
• Benefits of millets:
• Nutritional Security: more affordable and healthful. For instance, ragi, which has the largest calcium and iron content, might aid in the fight against the high prevalence of anaemia.
• These crops are recognised for being hardy and drought-resistant due to their climate resilience. They require a lot less water than rice and wheat because they are frequently grown in rain-fed areas.
• Low input costs for financial security.
• In relation to Health: Because millets are gluten-free and have a low glycemic index, they can help with a variety of lifestyle and health conditions, such as diabetes and obesity (glucose level).
• Millets have antioxidant and anti-aging properties.
• It is said that millets are “nutrition powerhouses.” 2018 saw millets classified as “Nutritional Cereals” by the Agriculture Ministry.

Challenges:

• more desirable Because gluten makes meals softer and more appealing, wheat is a staple food.
• For instance, the National Food Security Act promotes the consumption of wheat and rice.
• lack of understanding about Millet’s benefits.
• Even though coarse grains are included in the NFSA’s definition of “foodgrains” in Section 2(5), they are rarely distributed as part of PDS.
• MSP difficulties: Only Jawar, Bajra, and Ragi are subject to the minimum support price set by the government (MSP).
• Reduced Consumption According to the most recent NSSO household consumption expenditure survey, which is older than ten years, less than 10% of rural and urban households reported eating millets.
• Lack of price incentives, input subsidies, and changing consumer preferences are additional challenges.

 Efforts in India:

• Due to their “high nutritive content” and “anti-diabetic qualities,” millets were named “Nutri-Cereals” by the government in 2018.
• 2018 is the “National Year of Millets.”
• The MSP of Millets has increased.
• The government’s POSHAN Abhiyan and public distribution system include millets (PDS).
• (As part of the Mission for National Food Security) The millet mission is to increase farm-gate processing and provide farmers more clout through the use of FPOs.
• Kerala’s Department of Agriculture: Millet’s Startup Innovation Challenge for its Village Program.
• a contest where the theme was “India’s Wealth, Millets for Health”

Additional millets-related projects:

• The “Millet Food Festival” in the SCO was proposed by India.

Source The  Hindu

4 – Bhima Koregaon War Memorial: GS I – Topic Indian Culture

 Context:

• Numerous Ambedkarites congregated beside the Ranstambh (victory pillar) in Perne village, Pune district, on Sunday to commemorate the 205th anniversary of the Bhima-Koregaon battle under tight security.
• Since Saturday night, throngs of people have been pouring into Bhima-Koregaon to offer floral tributes in remembrance of the Mahar warriors’ bravery in the 1818 conflict with the Peshwa army.

About the Battle:

• In Bhima Koregaon, a neighbourhood of Pune with a significant historical Dalit link, on January 1, 1818, Peshwa soldiers and British troops fought in warfare.
• The primarily Dalit British army engaged the upper caste-heavy Peshwa army. The British army defeated the Peshwa army.

 Conflict repercussions:

• The result was seen as a victory over caste-based discrimination and prejudice. The Peshwas were renowned for victimising and persecuting Mahar dalits. Dalits gained a moral victory in their struggle against caste-based oppression, discrimination, and sense of identity with the win against the Peshwas.
• But the British approach of “divide and rule” created a number of rifts in Indian society, some of which are still observable today in the form of extreme caste and religious prejudice that must be repressed while keeping in mind the principles of the Constitution.

 The Dalits are linked to Bhima Koregaon for what reason?

• Mahar Dalits formed up a large percentage of the Company army, hence the fight has come to symbolise Dalit pride. Because the Peshwas, who were Brahmins, were perceived as oppressors of Dalits, the victory of the Mahar warriors over the Peshwa troops is seen as a Dalit statement.
• The memorial obelisk there that had been built on January 1st, 1927, was visited by B.R. Ambedkar. Along with more than a dozen Mahar fighters, it lists the names of those who have passed away. They were Untouchables called Mahars who took part in the Battle of Koregaon.

Source The  Hindu