Topic: Inclusive growth and issues arising from it.
5. Given its benefits and recent emphasis on cryptocurrencies, India should take rapid strides towards a ‘Digital Rupee’. Comment. (250 words)
Difficulty level: Easy
Reference: Indian Express
Why the question:
Key Demand of the question:
To understand the dynamics between Inflation and economic growth and the role of RBI in this.
Directive word:
Analyse – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary.
Structure of the answer:
Introduction:
Start by explaining the emerging concept of ‘Digital Rupee’ or central bank digital currency (CBDC).
Body:
First, give context about implementation of digital currencies via various governments in different capacities. Also, the recent onslaught of decentralised crypto currency.
Next, write about potential benefits that India can accrue from Digital Rupee. financial inclusion, the cashless society, decrease the cost of printing, expanding the digital economy and empowering citizens etc.
Next, write about potential challenges with regards to CBDC. User adoption, security, threat to traditional banking, complexity, domination by Chinese and Opportunity cost due to RBI’s reluctance etc.
Conclusion:
Conclude with way forward as to how India should step up to CBDC.
