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[ Day 31 – Synopsis ] 75 Days Mains Revision Plan 2022 – Economy & Ethics

 

 

NOTE: Please remember that following ‘answers’ are NOT ‘model answers’. They are NOT synopsis too if we go by definition of the term. What we are providing is content that both meets demand of the question and at the same time gives you extra points in the form of background information.


Economy:


Q1. Examine the challenges posed by cryptocurrencies to emerging economies. Discuss the measures taken by the government for regulating it. 10M

INTRODUCTION

Crypto currencies are digital currencies in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Examples: Bitcoin, Ethereum etc.

Benefits of crypto currency

Fig : Benefits of crypto currency

 

Challenges posed by crypto currencies

  • Market volatility: Their speculative nature makes them highly volatile.
    • For instance, the value of Bit coin fell from USD 20,000 to USD 3,800 in November 2018.
  • Risk in security:
    • A user loses access to their crypto currency if they lose their private key (unlike traditional digital banking accounts, this password cannot be reset).
  • Malware threats:
    • In some cases, these private keys are stored by technical service providers (crypto currency exchanges or wallets), which are prone to malware or hacking.
    • Dark Web or Dark Marketwhich cause it to exploit users through hacking.

 

  • Money laundering.
    • According to the “Crypto currency Anti-Money Laundering Report,”criminals also use theft and gambling to launder cryptocurrencies.
  • Energy use: a migration of crypto “mining” activity out of India to other emerging market and developing economies can have an important impact on domestic energy use—especially in countries that rely on more C02-intensive forms of energy, as well as those that subsidize energy costs—given the large amount of energy needed for mining activities.
  • Stock market issue
    • SEBI has flagged the issue that it has no control over the “clearing and settlement” of crypto currencies, and it cannot offer counterparty guarantee as is being done for stocks.
  • Other issues:
    • Threats to fiscal policy could also intensify, given the potential for crypto assets to facilitate tax evasion.
    • And seigniorage (the profits accruing from the right to issue currency) may also decline.
    • Increased demand for crypto assets could also facilitate capital outflows that impact the foreign exchange market.

Measures taken by the government for regulating it

  • Crypto currency and Regulation of Official Digital Currency Bill, 2021 introduced.
    • Under this, there is a plan to ban private digital currencies and favour RBI backed currency.
  • RBI exploring DLT (Distributed Ledger Technology) based Central Bank Digital Currency.
    • Under DLT, details are recorded in multiple places at the same time.
    • For ex: Block chain is just one type of distributed ledger.
  • Central Bank Digital Currency (CBDC): It will be a legal tender.
    • Can be converted or exchanged at par with similarly denominated cash.

Conclusion

India is currently on the cusp of the next phase of digital revolution and has the potential to channel its human capital, expertise and resources into this revolution, and emerge as one of the winners of this wave. All that is needed to do is to get the policymaking right. Block chain and crypto assets will be an integral part of the Fourth Industrial Revolution; Indians shouldn’t be made to simply bypass it.

 

Q2.To attract investment in the global value chain, integrated infrastructure development is necessary. Critically analyze the scope of Gati Shakti mission in this regard. 10M

Introduction

Large-scale absence of coordination and collaboration among agencies has been a major challenge to time bound infrastructure project implementation in India. Very often these projects have faced time overruns, leading to significant cost escalations.

PM Gati Shakti mission was launched to reduce these bottlenecks and attract investment in global value chain.

Body:

Need for integrated infrastructure development:

  • Logistics cost: logistics costs in India are about 13-14% of GDP as against about 7-8% of GDP in developed economies.
    • High logistics costs impact cost structures within the economy, and also make it more expensive for exporters to ship merchandise to buyers.
  • Lower productive potential: in India, many SEZs and industrial parks are not running at their full productive potential due to inefficient and fragmented multi-modal connectivity.
  • Delays in projects: As per the Ministry of Statistics and Programme Implementation (MoSPI), in the beginning of 2021, 1,687 Union Government projects under implementation, valued more than Rs 21.45 lakh crore, had run into cost overrun of nearly 20 percent, largely because of their delays.
  • Coordination issue: wide gap exists between various department and ministries over macro planning and micro implementation and advanced information sharing as departments think and work in silos.
  • Poor infrastructure quality: there is poor development of quality infrastructure in India. Infrastructure quality becomes more critical in GVCs as they are predicated on timely production of products of international standards at a reasonable cost.
    • Weak infrastructure dents firms’ competitiveness reducing their ability to be a part of GVCs.
  • Spatial connectivity: due to poor infrastructural connectivity in different states India’s exports tend to be spatially concentrated.
    • As highlighted in the Economic Survey 2017-18, 75 per cent of India’s exports emanate from only six states, with share of exports ranging from 30 per cent in Gujarat to less than one per cent in Bihar.
  • Implementation overlaps: Poor infrastructure planning included newly-built roads being dug up by the water department to lay pipes.
    • This has badly affected the road Infrastructure and movement of the country.

PM Gati Shakti mission: On India’s 75th Independence Day, the government launched ‘PM Gati Shakti Master Plan’, a Rs. 100 lakh-crore project for developing ‘holistic infrastructure’.

It aims to ensure integrated planning and implementation of infrastructure projects in the next four years, with a focus on expediting works on the ground, saving costs and creating jobs, and bringing down the logistics cost.

 

Benefits of Gati Shakti mission

  • Last mile connectivity: it will lead to last mile connectivity. It is known that better connectivity infrastructure reduces the time taken to carry products across different locations and widens access to labour markets, thereby improving competitiveness.
  • Reduction in logistics cost: Gati Shakti mission is expected to cut down logistics cost in India and bring it on par with developed countries where it is 7-8%. Thus integrating it with global value chain.
  • Reduce implementation overlaps: since it brings together 16 infrastructure related ministries it will reduce implementation overlaps by removing long-standing issues such as disjointed planning, lack of standardisation, problems with clearances, and timely creation and utilisation of infrastructure capacities.
  • Boosting trade: it will increase cargo handling capacity and reducing the turnaround time at ports thereby leading to boost in trade activities.
  • Help in increasing economic zones and industrial parks: with better connectivity industrial parks and economic zones will start functioning at their full efficiency leading to increased contribution by India in global value chain.
  • Integrated connectivity: it will lead to integrated and holistic transport connectivity strategy will greatly support Make in India and integrate different modes of transport.
  • Other benefits:
    • Will help in mapping of proposed and existing connectivity projects.
    • Will help India become” business mecca of world”.

Issues

  • Low credit take-off: despite various reforms taken in banking sector and implementation of insolvency and Bankruptcy code, Banking institutions are hesitant about investing in infrastructural projects due to higher NPAs, long gestation period etc.
  • CoVid impact: CoVid has significantly affected the business activity in world economy and domestic as well leading to lower private and investment demand.
  • Structural issues: India needs to address the issues of land acquisition litigation and delays, cost overruns of projects, environmental clearance issue etc. that hampers the overall development of infrastructural linkages.

Conclusion

Currently, India is a small player in GVCs, accounting for only 1.3 per cent of the world’s GVC exports. This is less than several smaller economies like the Republic of Korea, Russia and Malaysia.

Gati Shakti scheme is expected to boost India’s connectivity to GVCs and make India a business capital of world. But all the challenges must be addressed on priority in order for the project to be a success.

 


Ethics:


Q3. Examine the relevance of the following in the context of civil service. 10M

    • Transparency
    • Accountability
    • Spirit of service
    • Ethical governance

 

Introduction

Civil servants hold important positions, enjoy several wide-ranging powers and have special obligations because they are responsible for managing resources entrusted to them by the community. They provide and deliver services to the community and take important decisions that affect all aspects of a community’s life. Consequently, the community has a right to expect that the civil service functions fairly, impartially and efficiently.

Body

  • Transparency – Transparency in governance is the idea that the people have a right to know what their government is doing, and the government must provide that information.

  • Accountability – Accountability means making the public officials answerable for their behaviour and responses to the entity from which they derive their authority.

  • Spirit of service – It is the quality of being committed to public service without any self-motives.

  • Ethical governance – Ethical governance is the ethical element of good governance, where public officials adhere to high moral standards like Integrity, compassion, humanity

Conclusion

In today’s world, Where India is facing corruption, favouritism, and political influence in the administration, transparency, accountability and spirit of service by civil servants will not only ensure good governance but also be able to build ethical governance in the administration.