MAINS DAILY QUESTIONS & MODEL ANSWERS
Q1. Discuss the various implications of using digital currencies on Indian Society?
GS III – Economy-related issues
Introduction:
- A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency. Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government.
Background:
- The Reserve Bank of India is likely to soon kick off pilot projects to assess the viability of using digital currency to make wholesale and retail payments to help calibrate its strategy for introducing a full-scale central bank digital currency (CBDC).
- Union Finance Minister in the budget speech said the Reserve Bank of India (RBI) will launch a central bank digital currency (CBDC) in 2022-23, marking the first official statement from the Union government on the launch of much-awaited digital currency.
Implications of using digital currencies on Indian Society:
- An official digital currency would reduce the cost of currency management while enabling real-time payments without any inter-bank settlement.
- India’s fairly high currency-to-GDP ratio holds out another benefit of CBDC — to the extent large cash usage can be replaced by CBDC, the cost of printing, transporting and storing paper currency can be substantially reduced.
- As the currency in digital form, it can provide an efficient way for financial transaction. Further, digital currency also solves the challenges with Cash and coins. Cash and coins require expenses in storage and have inherent security risks like the recent heist in the RBI currency chest.
- There are about 3,000 privately issued cryptocurrencies in the world. According to IMF, the key reason for considering national digital currency is to counter the growth of private forms of digital money.
- There is a possibility of these companies going bankrupt without any protection. This will create a loss for both investor and creditor. But the National Digital currency has government backing in case of any financial crisis.
- As the state-backed digital currency can provide investor/consumer protection, the private can confidently invest in the associated infrastructure without any doubts over its regulation. This will improve the services to people.
- The national digital currency will be regulated by the RBI. So, there will be less volatility compared to other digital currencies.
- Current RBI’s work on inflation targeting can be extended to national digital currency also. Since India is planning to ban other cryptocurrencies, the RBI can better regulate digital and fiat currency. Thus, upgrading to digital currency and balancing the macroeconomic stability.
- With the introduction of CBDC in a nation, its central bank would be able to keep a track of the exact location of every unit of the currency, thereby curbing money laundering.
- Criminal activities can be easily spotted and ended such as terror funding, money laundering, and so forth.
Concerns posed:
- India is already facing many cyber security threats. With the advent of digital currency, cyberattacks might increase and threaten digital theft like Mt Gox bankruptcy case.
- According to the Digital Empowerment Foundation in 2018 report, around 90% of India’s population is digitally illiterate. So, without creating enough literary awareness introduction of digital currency will create a host of new challenges to the Indian economy.
- Introduction of digital currency also creates various associated challenges in regulation, tracking investment and purchase, taxing individuals, etc.
- The digital currency must collect certain basic information of an individual so that the person can prove that he’s the holder of that digital currency. This basic information can be sensitive ones such as the person’s identity, fingerprints etc.
Conclusion:
- There are crucial decisions to be made about the design of the currency with regards to how it will be issued, the degree of anonymity it will have, the kind of technology that is to be used, and so on. There is no doubt that the introduction of National Digital currency prevents the various threats associated with the private-owned cryptocurrencies and take India the next step as a digital economy. But the government has to create necessary safeguards before rolling out. India needs to move forward on introducing an official digital currency.
Q2. Pressure Groups play a pivotal role, in influencing policy making in India? Discuss.
GS II – NGO and Pressure Groups
Introduction:
- Pressure groups are forms of organizations, which exert pressure on the political or administrative system of a country to extract benefits out of it and to advance their own interests. The term ‘pressure group’ refers to any interest group whose members because of their shared common attributes make claims on the other groups and on the political process. Caste based pressure groups arise from a particular caste and influence government policies in favour of their social and political demands.
Pressure groups may use a variety of methods to pursue their requirements. These include:
- lobbying state members and the Parliament via petitions, letters and deputations;
- consulting with ministers or senior public servants;
- hiring professional lobbyists;
- taking legal action through injunctions or appeals to higher courts;
- campaigning for, or opposing, certain candidates at elections;
- demonstrating outside Parliament and government offices or marching in the streets;
- using the industrial muscle of strikes for political purposes.
Pressure Groups influence the political system:
- Pressure groups vary in size and organizational structure, which may not necessarily represent the amount of influence exerted upon a government’s policies. Pressure groups are primarily a consequence of inadequacies of the political parties.
- It is obvious that trade unions, business organizations and professional associations can exert considerable pressure upon governments.
- Pressure groups shores up the accountability of the government and serve as a vital check on government actions and inaction. It helps in cultivating a responsive and pro-active government. For instance, in the State of Rajasthan, a people’s organization known as Mazdoor Kisan Shakti Sanghthan (MKSS), could succeed in making the people question and demand information on money spent on roads; loans to poor and so on. This made the basis for the right to information movement.
- Pressure groups are a vital link between the government and the governed. They keep governments more responsive to the wishes of the community, especially in between elections.
- Pressure groups are able to express the views of minority groups in the community who might not otherwise receive a hearing. For example, the Narmada Bachao Andolan (NBA) movement has generated consciousness amongst the people in questioning the actions of government regarding dam construction and its repercussions.
- Pressure groups are able to use their expertise to provide the government with important information. It is also applicable to issues such as Indigenous reconciliation.
- Pressure groups offer an alternative source of advice to the government, separate from that coming from the Public Service. E.g.: Bharatiya Muslim Mahila Andolan – Criminalization of Triple Talaq bill
- Pressure groups generally promote opportunities for political participation for citizens, without the need to join a political party. Moreover, they allow for the democratic rights of freedom of speech, assembly and association to be upheld.
Pressure Groups distort the political system:
- Pressure groups may represent a powerful minority force in society and exert political influence to the detriment of the majority of society. This is an argument often leveled at trade unions and business groups. E.g.: protest in Kudankulam nuclear power plant
- Some pressure groups exert influence because of their financial position, membership or organization. This influence may be out of proportion to their position in society. g.: Large scale businesses and entrepreneurs are likely to benefit better from the newly implemented goods and services tax system as compared to MSMEs. The greater influence of pressure groups such as FICCI and CII may have played a part in the same.
- The use of direct action by pressure groups (e.g. strikes by unions, demonstrations, blockades, pickets) can cause hardship to the community in general.
- Some pressure groups are not democratic in themselves. Some have powerful, but unrepresentative leaders who may not be representative of anyone but themselves. Some leaders do not reflect the opinions of their organization’s members.
- Pressure groups promote interests of multiple sections which may be conflicting in nature. This has a tendency to lead to polarization which affects the unity of our country. E.g.: Ghar wapsi movement of Vishwa Hindu Parishad to facilitate re-conversion of non-Hindus to Hindus has soured relations between Hindu and Muslim communities.
Conclusion:
- In a democratic nation like India, Pressure groups provide an informal means to meet and serve needs of different classes and sections of society. However, pursuit of illogical and unnecessary demands should not override affirmative action to ensure a vibrant and inclusive polity.
