01 April 2023

DAILY QUESTIONS & MODEL ANSWERS

Q1. What are some of the social effects of the use of digital currencies in India? (250 Words)

Paper & Topic: GS III – Indian Economy

Model Answer:

Introduction:

• A Central Bank Digital Currency (CBDC) or national digital currency is the digital representation of a country’s fiat money. Instead than creating paper money or minting coins, the central bank instead releases electronic tokens. This token’s value is supported by the full faith and credit of the government.

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Background:

• The Reserve Bank of India is anticipated to soon start pilot programmes to assess the viability of using digital money to perform wholesale and retail payments in order to fine-tune its approach for implementing a full-scale central bank digital currency (CBDC).
• According to the Union Finance Minister’s budget address, the Reserve Bank of India (RBI) will launch a central bank digital currency (CBDC) around 2022-2023. This is the official first announcement addressing the launch of the much-anticipated digital currency from the Union government.

Impact of digital currency use on Indian society:

• An official digital currency would reduce the cost of currency management in addition to enabling real-time payments without interbank settlement.
• Another benefit of CBDC is that it can dramatically cut the cost of printing, distributing, and storing paper money to the extent that it can replace heavy cash usage. The relative high currency-to-GDP ratio of India makes this benefit particularly pertinent.
• It can provide a dependable way to do business as a type of digital cash. Digital currency also eliminates the issues with paper money and coins. Coins and cash have storage expenses and security risks built-in, like the most recent currency heist at the RBI.
• There are about 3,000 privately-issued cryptocurrencies available worldwide. IMF asserts that preventing the growth of private digital currencies is the primary argument for considering a government digital currency.
• Without any protections, these companies could fail, which is a possibility. This will result in losses for creditors and investors alike. But, the government will support the domestic digital currency in the event of a financial crisis.
• Because the state-backed digital currency can provide investor and consumer protection, the private sector can invest in the associated infrastructure with confidence and without worrying about its regulation. They will consequently get better services.
• The national digital currency will be regulated by the RBI. Thus there will be less volatility than there would be with other digital currencies.
• The current inflation targeting work being done by the RBI can also be used to national digital currency. Since India plans to ban other cryptocurrencies, the RBI can better manage fiat and digital currency. Using digital currency will thereby balance macroeconomic stability.
• With the adoption of CBDC, money laundering would be decreased because a nation’s central bank would be able to track the exact location of every piece of cash.
• The funding of terrorism and money laundering are both illegal activities that may be swiftly found and stopped.

Questions raised:

• Existing threats to India’s cyber security are numerous. Digital theft, like that which occurred in the Mt. Gox bankruptcy case, may become more common with the adoption of digital currency, which could boost cyberattacks.
• According to study conducted by the Digital Empowerment Foundation in 2018, over 90% of Indians are digitally illiterate. As a result, the Indian economy would face a variety of new challenges as a result of the adoption of digital currency.
• The emergence of digital currency also raises a variety of concomitant problems, including regulation, tracking investments and purchases, and individual taxation.
• The digital currency must gather all necessary information on a person so that the person may prove he is the rightful owner of the digital currency. Private information, such as a person’s identity or fingerprints, may be included in these basic specifics.

Conclusion:

• The design of the currency must take into account a number of important issues, such as how it will be issued, how much anonymity it will have, the sort of technology to be used, and other elements. There is no doubt that the introduction of the National Digital Currency will develop the digital economy of India and put an end to the numerous issues related to privately held cryptocurrencies. Yet, the government must first implement the necessary safeguards. India needs to move forward with the creation of its own digital money.

Q2. In India, pressure groups have a major impact on how policies are made. Discuss (250 Words)

Paper & Topic: GS II – Social Issues

Model Answer:

Introduction:

• Pressure groups are types of organisations that apply pressure to a nation’s political or administrative structure in order to gain advantages and further their own goals. Any interest organisation that asserts demands on other groups and the political process on account of its members’ shared traits is referred to as a “pressure group.” Pressure groups that are caste-based emerge from a specific caste and influence government policy to support their social and political goals.

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Several strategies can be employed by pressure organisations to achieve their goals. They consist of:

• utilising petitions, letters, and deputations to lobby state representatives and the Parliament.
• obtaining advice from ministers or top government officials.
• engaging qualified lobbyists.
• pursuing legal action through injunctions or court appeals.
• election-related campaigning for or against certain candidates.
• demonstrating outside of the legislature and other government buildings or taking to the streets.
• utilising strikes’ industrial might for political ends.

Pressure groups have an impact on politics:

• Size and organisational structure of pressure groups varies, which may not accurately reflect the degree of influence they have over a government’s policy. Pressure groups are primarily a result of political parties’ shortcomings.
• It is clear that corporate groupings, professional associations, and labour unions can put significant pressure on governments.
• Pressure organisations support the government’s accountability and function as a crucial check on its acts and inaction. It promotes the growth of an adaptable and proactive government. For instance, the Mazdoor Kisan Shakti Sanghthan (MKSS), a people’s group, could be successful in having the people in the State of Rajasthan question and demand information on money spent on roads; loans to the poor; and other expenditures. The movement for access to information was founded on this.
• A crucial link between the government and the governed is provided by pressure groups. They keep governments more receptive to community demands, particularly in the interim between elections.
• The opinions of minority groups in the community that might not otherwise be heard can be expressed by pressure organisations. For instance, the Narmada Bachao Andolan (NBA) movement has raised awareness among the populace about the need to challenge the government’s decisions surrounding the construction of dams and its effects.
• Pressure groups can use their knowledge to offer the government crucial information. It also applies to problems like inter-Indigenous harmony.
• Pressure organisations provide the government with advice that is distinct from that provided by the Public Service. For instance, the Bharatiya Muslim Mahila Andolan’s bill to criminalise triple talaq
• Pressure organisations typically encourage possibilities for citizens to participate in politics without having to join a party. Additionally, they permit the protection of democratic freedoms of expression, assembly, and association.

The political system is distorted by pressure groups:

• Pressure groups may be a significant minority force in society and have political sway to the disadvantage of society as a whole. This criticism is frequently levied at commercial organisations and labour unions. Consider the protest at the nuclear power project in Kudankulam.
• Certain pressure groups have clout due to their resources, membership, or structure. It’s possible that their influence is excessive given where they are in society. g.: As opposed to MSMEs, large scale enterprises and entrepreneurs are projected to gain more from the recently introduced goods and services tax system. The growing impact of pressure groups like the CII and FICCI may have contributed to the same.
• The community as a whole may suffer when pressure groups adopt direct action (such as picketing, protests, blockades, and union strikes).
• Several advocacy organisations lack democracy in their core. Some of these groups have strong, unrepresentative leaders who may not even be true to themselves. Some leaders don’t represent the views of the people that make up their organisation.
• Pressure groups advocate for many sections’ interests, some of which may be at odds. This often results in polarisation, which undermines the cohesiveness of our nation. For instance, the Vishwa Hindu Parishad’s Ghar Wapsi programme, which aims to encourage the conversion of non-Hindus to Hinduism, has strained ties between the Hindu and Muslim communities.

Conclusion:

• Pressure groups offer an informal way to meet and service the demands of various strata and sections of society in a democratic country like India. To ensure a dynamic and inclusive polity, affirmative action should not be prioritised over the pursuit of unreasonable or needless objectives.