24 February 2023

DAILY CURRENT AFFAIRS ANALYSIS

1 – Crypto Currency: GS III – Topic Indian Economy:

Context:

• According to Chainalysis’ 2023 Crypto Crime Report, which was released this month, the amount of cryptocurrency received by addresses connected to illegal activities reportedly hit a new all-time high in 2022, for the second year in a row, to reach a volume of $20.6 billion in what may still be a “lower bound” estimate.
• The corporation asserts that this growth exceeded the figure for 2021 by more than $2 billion despite a slowing market.

Cryptocurrency: What is it?

• Any kind of money that exists digitally or virtually and uses encryption to secure transactions is referred to as cryptocurrency, sometimes known as crypto-currency or crypto.
• Cryptocurrencies employ a decentralised system to log transactions and create new units as opposed to being issued or governed by a single organisation.
• The blockchain, a decentralised peer-to-peer network, underpins it.

What Advantages Can You Get by Using Cryptocurrency?

• Quick and Economical Transactions: Because there are fewer middlemen involved, using cryptocurrencies to execute international transactions results in substantially cheaper transaction costs.
• Bitcoin and other cryptocurrencies have a limited quantity, just like there is for physical gold. However, during the last few years, the price of cryptocurrencies has increased more quickly than the price of traditional financial assets.
• As a result, investing in cryptocurrencies might become more popular.
• Anti-inflationary Currency: Cryptocurrency prices have largely continued to rise due to the great degree of demand for them. In this situation, people are more likely to retain cryptocurrencies than to actually use them.
• The currency will experience deflation as a result.
• Why are nations like the CAR recognising cryptocurrency as a form of payment?
• Strong and Inclusive Growth: If implemented, the idea would allow for “strong and inclusive growth” and would put the African nation on the “map of the most brave and forward-thinking nations in the world.”
• The CAR, with a population of 5 million, has one of the weakest and most unstable economies in the whole world.
• 71% of the people will fall below the international poverty level of USD 1.90 per day in July 2021, according to World Bank projections.
• Positive Growth: It’s conceivable that the adoption of cryptocurrencies in nations and inflation are related.
• Cryptocurrencies can change the inflation-induced drop in the value of legal money into growth.
• This potential direct connection would be essential for CRA. The IMF forecasts that the country’s inflation rate would reach 4% in 2022 as a result of rising food and fuel costs.

 Geopolitical significance:

Arrangements with the Other Country:

• There are no national currencies in the two nations that accepted Bitcoin as a means of payment.
• 14 African countries share a currency called the CAR franc; El Salvador uses the US dollar. The bulk of these nations, collectively known as the “Franc Zone,” were historically French possessions.
• Francs can be converted into other currencies in the Paris exchange market, which is modelled after the European nation.

Preventing the Imposition of Sanctions and Embargoes:

• Due to the blockade put in place by the U.S., nations like Cuba are shut off from global financial networks and are unable to use financial instruments like debit or credit cards. As a result, they have trouble travelling abroad to buy goods and services from other countries.

 What shortcomings exist?

• Highly Volatile: Because cryptocurrencies are unregulated, they are risky investments. Volatility has raised questions about how it can impact a nation’s macroeconomic stability, especially countries with fragile socioeconomic roots.
• Recently, many nations—particularly those with weak monetary systems and persistent inflation—have thought about enacting legislation that would control the use of cryptocurrencies.
• Unregulated: The International Monetary Fund (IMF) had also urged El Salvador to restrict the use of unregulated assets due to the serious risks involved with using Bitcoin for fiscal contingent liabilities, financial stability, and consumer protection.
• Using Cryptocurrency to Pay Taxes The risks of paying taxes in cryptocurrencies would become clear to nations like the CRA if tax payments were made using cryptocurrency but that local currency was still used for transactions.
• For instance, if the government uses cryptocurrencies to collect $100 in taxes, a decline in the asset’s value releases $40 for spending.
• Not Subject to a Defined Mechanism: As cryptocurrencies are speculative assets and are not subject to a defined mechanism like stocks or fiat money, central banks would be unable to establish interest rates that would satisfy domestic demand.
• Blockchains may be used inappropriately to track transactions but not the parties involved. As a result, it might be applied to crimes like money laundering or financing terrorism.

 Source The Hindu

2 – Social Stock Exchange: GS II – Topic Social Issues:

Context:

• Leading exchange NSE said on Thursday that the establishment of social stock exchange (SSE) as a separate sector on its platform has got final permission from markets regulator SEBI.
• The National Stock Exchange (NSE) said in a statement that the final approval was received on February 22.

An SSE is what?

• An SSE enables non-profit or non-governmental organisations to list on stock exchanges, giving them access to a different structure for collecting money.
• Either the BSE or the NSE may list it.
• SSEs exist in nations like the UK, Canada, and Brazil.
• Many vehicles, including zero-coupon, zero-principal bonds, mutual funds, and social venture funds are suggested for the fund-raising.

What is the market’s size?

• India has about 31 lakh NPOs, which is one NPO for every 400 People, more than twice as many as there are public schools and 250 times as many as there are government hospitals.

The goals of SSEs are:

• A social stock exchange could be useful in helping those whose livelihoods are destroyed by pandemics like COVID-19 to rebuild them.
• In order for conventional capital and social capital to collaborate to address the pressing issues of COVID-19, the SSEs will work to unlock sizable pools of social capital and promote blended finance models.

Tax advantages:

• Investors will benefit from Section 80G, which enables tax deductions for all investments made in stocks and other instruments of NPOs listed on SSE.
• Companies’ investments will be taken into account as a part of their Corporate Social Responsibility (CSR) programmes.

New principles or framework:

A distinct section:

• SSE will be a distinct division of the current stock markets.

Eligibility:

• Entities NPOs and for-profit social enterprises with social intent and effect as their primary goal will be eligible to participate in the SSE.

Lack of Eligibility:

• Business foundations, political or religious groups or activities, professional or trade associations, infrastructure corporations, and housing companies—apart from those providing affordable housing—will not be qualified to get the designation of social enterprise.

In order to qualify as a not-for-profit organisation, you must:

• A NPO must be registered as a charity trust and must have been registered for at least three years. It also needs to have spent at least Rs 50 lakh annually and received at least Rs 10 lakh in funding in the previous fiscal year.
• There are annual disclosure requirements that need to be met by NPOs on such exchanges, as well as disclosure requirements for NPOs obtaining funds through the issuance of zero-coupon zero principal instruments.

NPO registration:

• The organisations need to be registered as “charitable trusts registered under the public trust statute of the appropriate state” in India, as well as under the Societies Registration Act of 1860, the Indian Trusts Act of 1882, or as companies under Section 8 of the Companies Act of 2013.

Utilization statement:

• According to SEBI regulations, Listed NPO must produce a statement of fund utilisation to SSE within 45 days of the end of the quarter.

Report on Annual Impact (AIR):

• Social enterprises that use SSE to raise capital are required by SEBI to disclose the Annual Impact Report (AIR) within 90 days of the end of the fiscal year.
• The qualitative and quantitative facets of the social impact that the entity creates are captured, as well as, if applicable, the impact that is created by the project or solution for which money has been raised on SSE.

Meaning of the action:

• Social goals: This intention should be made clear by the emphasis placed on deserving social goals for underprivileged or neglected populations or areas.
• The social companies must participate in one of the 16 general activities that the regulator has classified as a social activity.
• The goals include alleviating hunger, poverty, malnutrition, and inequality; advancing healthcare; assisting with education, employability, and livelihoods; empowering women and LGBTQIA+ groups through gender equality; and assisting social entrepreneurship incubators.

 Source The Hindu

3 – World Bank: GS II – Topic International Organizations:

Context:

• The United States is recommending former Mastercard CEO Ajay Banga to lead the organisation, according to U.S. Vice President Joe Biden, in reaction to World Bank President David Malpass’s revelation that he would be stepping down early.
• Candidate nominations are now being accepted by the development lender and will remain open until March 29. The bank pledged its “special” support for female candidates.

Which Institutions Comprise the World Bank Group?

• The International Bank for Reconstruction and Development (IBRD) and the International Development Association make up the World Bank, which provides financial assistance, advice on public policy, and technical assistance to governments of poor countries (IDA). whereas the World Bank Group is made up of five development-related organisations.
• Grants, loans, and credits are available from IBRD, or the International Bank for Reconstruction and Development.
• The International Development Association (IDA) offers loans to low-income countries at zero or extremely low interest rates.
• The International Financial Corporation (IFC) assists enterprises, governments, and investors with asset management, investment, and advice.
• The Multilateral Guarantee Agency (MIGA) insures lenders and investors against political risk, including war.
• The International Centre for the Settlement of Investment Disputes settles investment disputes between investors and nations (ICSID).
• Each and every one of these activities supports the dual goals of the Bank Group, which are to eradicate extreme poverty by 2030 and increase shared prosperity for the poorest 40% of the global population.

How was the World Bank founded?

• The Bretton Woods Conference, also known as the United Nations Monetary and Financial Conference, was an international conference that took place in Bretton Woods, New Hampshire (USA), from July 1 to 22, 1944. A number of new rules for the post-World War II financial and monetary order were to be established during the meeting.
• The International Monetary Fund and the International Bank for Reconstruction and Development (IBRD) were the conference’s two primary triumphs (IMF).
• Since its founding in 1944, the World Bank, formerly known as the International Bank for Reconstruction and Development (IBRD), has expanded to include five closely connected development agencies.
• At first, its loans helped rebuild countries that had been devastated by World War II. During time, the focus shifted from reconstruction to development, with a focus on infrastructure projects like roads, dams, and power grids.
• Since its founding in 1956, the International Finance Corporation (IFC) has been able to lend money to private companies and financial institutions in developing countries.
• With the establishment of the International Development Association (IDA) in 1960, the Bank Group’s primary goal of eradicating poverty gradually shifted to include a greater emphasis on the world’s poorest countries.
• The International Centre for Settlement of Investment Disputes (ICSID), founded in 1966, settles investment disputes between investors and countries.
• The Multilateral Investment Guarantee Agency (MIGA), established in 1988, shields investors and borrowers from political risk, such as war.

The International Bank for Reconstruction and Development, or IBRD, is what, exactly?

• After World War II, the International Bank for Reconstruction and Development enlarged its mandate to include fostering global economic growth and eradicating poverty.
• Only sovereign governments or initiatives with their support receive direct funding from the Bank.
• Now, the IBRD focuses its services on middle-income countries, defined as those with yearly per capita incomes between $1,026 and $12,475. Like Indonesia, India, and Thailand, these countries usually have fast rising economies that attract a lot of foreign investment and support major infrastructure building efforts.
• Because the advantages of this economic growth are not equally distributed among their populations, 70% of the world’s poor reside in middle-income countries.

Governance of IBRD:

• IBRD Boards of Governors: To the Boards of Governors, each member country appoints a Governor and an Alternate Governor. This role is normally held by the central bank governor and the nation’s finance minister. The majority of the power that the Board of Governors would normally have over day-to-day matters like finances and operations is transferred to the Board of Directors.
• IBRD’s Board of Directors: The board, which is led by the president of the World Bank Group, currently has 25 executive directors. The Executive Directors are chosen or appointed by the Governors. Executive directors elect the World Bank President, who presides over the board of directors. Executive Directors may manage everyday matters such as loans and operations.
• International financial markets provide the majority of IBRD’s funding. It has been able to do this since 1946 by financing more over $500 billion to help alleviate poverty around the world, with the shareholder countries’ capital contributions amounting to about $14 billion.
• IBRD has maintained its triple-A rating since 1959. Since it has a high credit rating, it may borrow money at fair interest rates and give middle-income developing countries preferential access to financing, ensuring the more sustainable advancement of development initiatives.
• The two sources of income that IBRD receives each year are the return on its shares and the tiny profit margin it makes on loans. These funds are used to meet the operational costs of the World Bank, are set aside in reserves to strengthen the balance sheet, and are yearly transferred to IDA, the fund for the world’s poorest countries.

 Sour The Hindu

4 – Anti Defection Law: GS II – Topic Election-related issues:

Context:

• The “Maharashtra political conflict cases” are a group of cases now being heard by a five-judge Supreme Court of India Bench. These court cases are a direct outcome of the events that occurred in June of last year, when the Shiv Sena, the Nationalist Congress Party, and the Congress, the ruling Maha Vikas Aghadi (MVA) alliance, lost control as a result of a party split within the Shiv Sena. The new ruling coalition was then formed by the Bharatiya Janata Party (BJP) along with a group led by Eknath Shinde. Since then, disputes have persisted between the various factions, with the Election Commission of India (ECIlatest )’s decision indicating that Eknath Shinde’s faction is entitled to the party name and symbol being the most recent development.

What is meant by the anti-defection law?

• The 52nd Amendment Act of 1985 introduced the anti-defection law.
• It was added to the Tenth Schedule of the Indian Constitution and is frequently referred to as the Anti Defection Act.
• Defection is defined as the “conscious abandoning of allegiance or duty.”
• The process for disqualification due to defection is described.
• The presiding officer may exclude a member from voting if there is proof of defection.
• The goal was to prevent the lawmakers from reversing their support for a political party while they were in office.
• It must be followed by both the Parliament and state legislatures.

What about the law changed?

• In 1967, Gaya Lal, a member of the Haryana legislature, changed parties three times on the same day.
• After that, “Aaya Ram Gaya Ram” became widely used in Indian politics.
• When moving political parties across States became a common practise, state governments were overturned.
• Concerned about this, the Lok Sabha urged the home minister, Yashwantrao Balwantrao, to form a committee to look into the situation.
• According to the Chavan Committee, politicians who switch parties in order to profit financially should be ejected from the Parliament and temporarily barred from holding public office.
• In order to prevent such floor selecting, the anti-defection act was first put into effect under Rajiv Gandhi’s presidency through the 52nd Amendment.
• In the well-known case of Kihoto Hollohan v. Zachillhu and others, the Supreme Court was asked to rule on the constitutionality of the Tenth Schedule in 1992.
• In order to better address frequent defection, the 91st Amendment tightened the anti-defection statute in 2003.
• The provisions that would have shielded lawmakers from a party break were eliminated.
• It also stated that anyone who was banned from serving as a lawmaker under the Tenth Schedule would also be ineligible for an executive or ministerial office.

What are the objectives here?

• It is done to prevent defections caused by the attractiveness of the job, financial benefits, or other comparable considerations.
• Lawmakers are discouraged from switching parties in order to further their own agendas.
• It prevents the possibility of overturning governments and maintains the stability of the party system.
• It promotes party discipline by making sure that the legislators obey the party whip.
• Political parties can combine with no loss of membership eligibility.
• Both corruption and the democratic institution are supported.

How Does a Defection Occur?

• The Supreme Court has provided interpretations of the Anti-Defection Law’s several clauses.
• One of the main grounds is “voluntarily giving up his membership.”
• Beyond resignation, its meaning is complex.
• The legislator’s actions can also be used to infer that he has resigned from membership in the absence of a written resignation.
• As an example, the Chairman of the Rajya Sabha in 2017 suspended the membership of two Janata Dal (United) members on the basis that they “voluntarily gave up their membership.” They took part in opposition party demonstrations and frequently criticised the party in front of the public.
• Another justification for defecting is “Violation of Instructions.” Thus, a politician is seen as being ineligible if their acts in the House go against a directive given by their political party.
• The phrase “party whip” is commonly used to describe the directives issued by the political party.
• A lawmaker may potentially lose their seat if, while serving as an independently elected member, they join a political party.
• A legislator will be declared ineligible if, after six months from the date of his election, he joins any political party while remaining a nominated member.
• The legitimacy of the grounds for defection disqualification may be subject to judicial review following the presiding officer’s ruling.
• The decision of the presiding officer was initially immune from judicial review.
• In 1992, the Supreme Court opened the door for appeals against the Presiding Officer’s decision to be heard by both the High Court and Supreme Court.
• A judge cannot become involved until the Presiding Officer gives his order, though.

 Source The Hindu