DAILY QUESTIONS & MODEL ANSWERS
Q 1. The “India Digital Ecosystem Architecture (IndEA) 2.0” marks a paradigm shift in the nation’s digital governance and has the potential to improve the delivery of services that are focused on the needs of the citizens. Discuss. (250 words)
Paper & Topic: GS II – Government Policies and Interventions
Model Answer:
Introduction:
- Digital governance is utilising technology to offer citizen-centric services, and the text defines the digital ecosystem as “a distributed, adaptive, and open socio-technical system with properties of self-organization, scalability, and sustainability.”
- The most overused technical buzzword now is Web 3.0. The Ministry of Electronics and Information Technology (MeitY) recently released a document titled “India Digital Ecosystem Architecture (IndEA) 2.0.” It provides guidelines for designing the government’s digital infrastructure for the Web 3.0 age.
Body:
IndEA 2.0:
- A framework known as the India Digital Ecosystem Architecture 2.0 enables both public and private sector organisations to develop IT systems that can extend beyond of their organisational boundaries and allow for the provision of comprehensive and integrated services to the customers.
- While InDEA 2.0 relies on the guidelines in India Enterprise Architecture (IndEA 1.0 – 2018), it takes a fundamentally different approach to the creation of architectural designs.
- Instead of focusing on the architectural requirements of a company, as its predecessor did, it does so for an ecosystem.
- A framework called InDEA 2.0 encourages the development of digital eco-systems.
- With a concentration on the public sector, it consists of a collection of concepts and architectural patterns that instruct, direct, and facilitate the construction of big digital systems.
Change in service delivery paradigm:
- Along with the overarching belief in embracing decentralised technology, the study offers a few unique and interesting elements.
- It first emphasises the importance of using a federated architecture strategy to reduce hazards associated with large-scale data centralization, like hacking into data “honeypots” and surveillance.
- In order to reduce the number of IDs a citizen must own, it also suggested the idea of “federated identities.”
- The notion that citizens can select a small number of IDs they trust to use for a variety of use cases is a promising one, even though the specifics need to be understood.
- Thirdly, it suggests a module-based strategy to improve abilities and alter mindsets throughout government in recognition that creating capacity within government for a new generation of GovTech demands new capabilities.
Moving ahead:
- Although it is a historic document, some of the “non-tech” aspects of governance and community interaction require further consideration.
- The study mentions participatory design, but more has to be said about how future GovTech systems might be created by citizens, not just for them.
- In a similar vein, while the report acknowledges the significance of securing data, user “consent”—the main structure to accomplish this—needs comprehensive reform.
- In addition to consent, it would be beneficial to promote nudges like privacy “star ratings” and best practises for applying ideas like “privacy-by-design” in the real world.
- Contrary to Web 3.0’s decentralised governance models, such as DAOs, IndEA 2.0 calls for a branch of government or a Special Purpose Vehicle (SPV) along the lines of UIDAI (Aadhaar) or NPCI (UPI) to be in charge of managing the project’s technical, domain, legal, commercial, and programme management aspects.
- Such a strategy is desirable, and the success of the next stage of GovTech will depend on how well this anchor “governance” institution is managed as a professionally administered, independent, and accountable organisation.
- The “Good Digital Public Infrastructure Principles” outlined in the white paper on National Open Digital Ecosystems (NODEs) by CoDevelop and MeitY serve as helpful benchmarks in this regard.
- Aadhaar (or the India Stack project), the Unified Payments Interface, etc. are some examples of NODEs in India.
- In summary, more precise and useful instructions are needed to translate the blueprint’s concepts into practise.
Describe open market operations (OMO) as a concept. What effects does it have on different macroeconomic factors? (10 points for 150 words)
Paper & Topic: GS III – Economy-related issues
Model Answer:
Introduction:
- The sale and purchase of treasury bills and other government assets by the RBI, the nation’s central bank, are known as open market operations (OMO). OMO’s goal is to control the amount of money in the economy. It is a quantitative tool for monetary policy. Financial institutions and commercial banks take part in open market operations (OMO).
Body:
OMO details:
- In industrialised nations, open market operations are the main tool for monetary regulation, and they are starting to matter to developing nations and economies in transition.
- Open market operations give central banks a significant deal of autonomy over the timing and scale of their monetary operations, promote an impersonal, business-like relationship with market participants, and give them a way to get around the inefficiencies of direct controls.
- The two categories of open market operations are repo and outright OMO.
Impact on different macroeconomic metrics:
Expansionary strategy:
- The RBI will attempt to increase the amount of money in circulation during a recession or other period of economic weakness in an effort to reduce the overnight lending rate between banks.
- The RBI will acquire bonds from banks and other financial institutions to accomplish this and deposit the money into the accounts of the buyers.
- As a result, banks and other financial institutions will have more cash on hand, which they can use to make loans.
- With more cash on hand, banks will cut interest rates to encourage individuals and companies to borrow money and make investments, ultimately boosting the economy and creating jobs.
Policy contraction:
- When the economy is overheating and inflation is over its acceptable level, the RBI will take the opposite action.
- The money supply is decreased when the RBI sells bonds to the banks because it removes funds from the financial system.
- Interest rates will increase as a result, deterring people and businesses from borrowing and investing while enticing them to invest their money in less profitable assets like interest-bearing savings accounts and certificates of deposit.
- As a result, inflation and economic development are slowed.
Conclusion:
- Based on the macroeconomic situation in the Indian economy, the RBI conducts Open Market Operations. OMO has been a powerful weapon for manipulating the easily available liquidity in the economy, with cascading consequences on inflation, bond yields, and other economic variables. The money supply, interest rates, economic growth, and employment are all impacted by the RBI’s purchases or sales of securities.