- CURRENT AFFAIRS – 05/09/2023
- One nation, one election plan: How the Constitution is amended?
- This G20, focus on how to make agriculture less damaging
- The Interconnection of Gender, Environment, and Climate Change
- Aditya-L1: its functioning and purpose
- IAF Western Air Command’s annual exercise Trishul
- CBDCs can make cross-border payments efficient
CURRENT AFFAIRS – 05/09/2023
One nation, one election plan: How the Constitution is amended?
(General Studies- Paper II)
Source : The Indian Express
The Law Ministry has established a panel of eight members haired by former President Ram NathKovind which also includes Union Home Minister Amit Shah.
- One of the panel’s tasks is to investigate the need for a constitutional amendment to enable simultaneous elections in India.
- Simultaneous elections would involve holding national and state elections together, reducing the frequency of elections.
The panel will assess whether such a constitutional amendment would require ratification by the states.
- Making changes to the Indian Constitution varies in complexity; some amendments can be passed like regular legislation, while others require more rigorous methods.
- Rigorous methods typically involve a special majority in Parliament and may necessitate ratification by a majority of state legislatures.
- The panel’s findings and recommendations will have a significant impact on the future discussion and potential implementation of simultaneous elections in India.
- Constitutional Amendment:
- During the Constituent Assembly debates, there was extensive discussion about whether the Constitution should be flexible (like the British Constitution) or rigid (like the United States Constitution).
- Comparison with British and US Constitutions:
- British Constitution: Considered flexible, as it can be amended by Parliament passing a law in the same manner as any ordinary legislation.
- United States Constitution: Cannot be amended without the ratification of at least three-fourths of the individual states.
- Article 368: In India, Article 368 of the Constitution deals with the power and process of amending the Constitution.
- The interpretation of Article 368 has led to tensions between Parliament and the judiciary since 1951, highlighting the complex and evolving nature of constitutional amendment processes in India.
- Three Standards for Amending the Constitution: The Indian Constitution prescribes three different standards for amending its various provisions:
- Simple Majority:
- Some provisions can be amended through a simple legislative process in Parliament.
- This process requires a majority vote of those present and voting and does not necessitate a quorum.
- Special Majority:
- For provisions not falling under the first category, Article 368 of the Constitution mandates that the amendment Bill must be passed in both Houses of Parliament by a majority of not less than two-thirds of the members present and voting.
- Ratification by States:
- Another category of provisions requires not only a special majority but also ratification by the legislatures of at least half of the states.
- Only after such ratification can such amendments be presented to the President for assent.
- Categories of Amendments.
- While the first two categories are not explicitly listed under Article 368, provisions that require ratification are explicitly outlined.
- These provisions usually pertain to the federal character of the Constitution and are known as “entrenched provisions.“
- Examples of Amendments
- The Constitution (Ninety-ninth Amendment) Act, 2014, which established the National Judicial Appointments Commission (NJAC), was passed by both Houses of Parliament and ratified by 16 state legislatures before receiving the President’s assent on December 31, 2014.
- However, it was later struck down by the Supreme Court.
- The Constitution (One hundred and first Amendment) Act, 2016, which introduced the Goods and Services Tax (GST) regime, was ratified by numerous states and Union Territories before receiving the President’s assent on September 8, 2016.
- Relevance of Ratification
- The question of ratification has been significant in constitutional matters.
- In the case of KihotoHollohan v. Zachillu (1992), the Supreme Court considered the constitutionality of the Tenth Schedule, which deals with the disqualification of elected representatives.
- The challenge included the argument that the amendment was not ratified by the states.
- The amendment sought to bar the jurisdiction of courts in matters related to disqualification, affecting one of the six aspects that require ratification by half of the states—jurisdiction of the Supreme Court and the High Courts.
- The Supreme Court struck down this part of the amendment while upholding the validity of the Tenth Schedule.
- Entrenched Provisions in the Indian Constitution
- Certain provisions of the Indian Constitution are considered “entrenched,” meaning they have additional safeguards for amending them.
- These provisions are designed to protect the core principles and structures of the Constitution. They are:
- Article 54 and 55: These articles pertain to the election of the President of India.
- They are safeguarded to maintain the integrity of the presidential election process.
- Article 73 and 162: These articles deal with the extent of executive powers of the Union (Article 73) and the states (Article 162).
- Safeguarding these provisions ensures the balance of power between the central government and state governments.
- Articles 124–147 and 214–231: These articles relate to the powers, jurisdiction, and functions of the Supreme Court (Articles 124–147) and the High Courts (Articles 214–231).
- Protecting these provisions is essential for upholding the independence and authority of the judiciary.
- Articles 245–255: These articles outline the scheme of distribution of legislative, taxing, and administrative powers between the Union and the states.
- Safeguarding this section ensures the federal structure of India’s government remains intact.
- Articles 81–82: These articles address the representation of states in the Parliament of India.
- Protecting these provisions is vital to maintain the balance of power between states and ensure equitable representation.
- Article 368 Itself: The article that deals with the procedure and power to amend the Constitution, Article 368 itself, is also subject to additional safeguards.
This G20, focus on how to make agriculture less damaging
(General Studies- Paper III)
Source : The Indian Express
As India assumes the G20 presidency, it is important to address food and nutritional security issues in the Global South, which are exacerbated by climate change.
- The solution to challenges may lie in the Deccan High-Level Principles, which were outlined during the G20 Agriculture Working Group (AWG) meeting held in Hyderabad.
- These principles are aimed at addressing the challenges of food and nutritional security in the Global South, exacerbated by climate change.
They serve as a potential answer to addressing these challenges:
- Facilitating Humanitarian Assistance: Providing aid to countries and populations in vulnerable situations.
- Enhancing Availability and Access to Nutritious Food: Improving access to nutritious food, particularly for vulnerable populations.
- Climate-Resilient and Sustainable Agriculture: Developing policies and actions for agriculture and food systems that can withstand climate impacts.
- Resilience and Inclusivity in Food Value Chains: Strengthening the resilience and inclusivity of food value chains.
- Promoting the One Health Approach: Recognizing the interconnectedness of human health, animal health, and the environment in addressing food security.
- Accelerating Innovation and Digital Technology: Utilizing technology and innovation to improve agricultural practices and productivity.
- Scaling up Responsible Investments: Increasing public and private investments in agriculture while considering social and environmental impacts.
Challenges in Implementation
- One of the key challenges discussed in the text is the funding required to implement these principles effectively.
- While the principles are deemed necessary, finding the necessary financial resources remains a concern.
Application of Precision Technologies
- The text highlights the need for India to leverage its expertise in precision technologies, similar to its space achievements, to develop technologies that can help farmers overcome challenges posed by extreme weather events.
- These technologies could then be shared with other Global South countries.
Digital Transformation in Agriculture
- The importance of digital transformation in agriculture is emphasized.
- Standardized agricultural data platforms, sensor-equipped technology, drones, and Low Earth Orbits (LEOs) are seen as tools to enhance the efficiency and sustainability of agriculture while conserving resources.
Biofortification and Agri-R&D
- The significance of biofortification and agri-research and development (R&D) to achieve nutritional security is also highlighted.
- India has made strides in developing climate-resistant and nutritious crop varieties but emphasizes the need for dissemination of this research to the Global South.
Sustainable Agri-Policies and Global Cooperation
- It is also emphasized for India to rethink its agricultural policies, moving towards environmentally sustainable and nutritious food systems.
- There are calls for G20 countries to collaborate to make agriculture less damaging to the planet and achieve food security and sustainability goals by 2030.
Agriculture and the Environment
- Agriculture is the world’s largest industry.
- It employs more than one billion people and generates over $1.3 trillion dollars’ worth of food annually.
- When agricultural operations are sustainably managed, they can preserve and restore critical habitats, help protect watersheds, and improve soil health and water quality.
- But unsustainable practices have serious impacts on people and the environment.
Let us look at some of the interlinkages:
Greenhouse Gas Emissions:
- Methane (CH4) Emissions: Enteric fermentation in ruminant livestock (e.g., cows) and rice cultivation in flooded fields are significant sources of methane emissions.
- Methane is a potent greenhouse gas that contributes to global warming.
- Nitrous Oxide (N2O) Emissions: Agricultural activities, especially the use of synthetic fertilizers and manure application, can lead to nitrous oxide emissions.
- N2O is another potent greenhouse gas and contributes to both climate change and ozone depletion.
- Agriculture can have a positive impact on the environment by sequestering carbon dioxide (CO2) in soil and vegetation.
- Healthy soils and forests can act as carbon sinks, helping to mitigate the effects of climate change.
Land Use Change:
- Conversion of natural ecosystems, such as forests and wetlands, into agricultural land can lead to habitat loss and biodiversity decline.
- This affects the overall health of ecosystems and disrupts natural balances.
Water Usage and Pollution:
- Agriculture accounts for a significant portion of global freshwater use.
- Excessive water extraction for irrigation can deplete water resources and harm aquatic ecosystems.
- Additionally, agricultural runoff, carrying pesticides and fertilizers, can lead to water pollution, impacting aquatic life.
- Unsustainable farming practices, such as excessive tillage and the use of chemical pesticides and fertilizers, can degrade soil quality.
- This can result in soil erosion, reduced fertility, and decreased ability to sequester carbon.
- Monoculture farming practices, where a single crop is cultivated over large areas, can lead to the loss of biodiversity.
- It reduces the variety of plant and animal species in agricultural landscapes.
- The application of chemical pesticides in agriculture can have harmful effects on non-target species, including pollinators like bees and other beneficial insects.
- This can disrupt ecosystems and agricultural productivity.
- Food waste in the supply chain and by consumers contributes to environmental issues.
- It represents a waste of resources, including energy, water, and land, used in food production.
- Sustainable agricultural practices, such as organic farming, agroforestry, and no-till farming, aim to minimize the negative environmental impacts of agriculture.
- They focus on conserving soil, reducing greenhouse gas emissions, and promoting biodiversity.
- Climate-smart agriculture integrates practices that reduce greenhouse gas emissions, enhance resilience to climate change, and improve food security.
- These practices include conservation tillage, crop rotation, and efficient water management.
The Interconnection of Gender, Environment, and Climate Change
(General Studies- Paper II and III)
Source : The Hindu
There is an intricate relationship between gender, the environment, and climate change.
- These factors are interconnected and mutually influential and hence there is a need for addressing gender-specific impacts in the context of climate change and environmental conservation.
Vulnerability of Women to Climate Change:
- Women, particularly in low-income and developing countries, are more vulnerable to climate change due to their dependence on natural resources and labour-intensive work for their livelihoods.
- Women often bear the responsibility for essential unpaid domestic work, such as food and water provisioning, and are disproportionately affected by the time and effort required to obtain basic necessities.
Climate Change and Rural Women:
- Rural women, in particular, are affected as they shoulder the burden of ensuring access to clean water, cooking fuel, and nutritious food for their families.
- Climate change exacerbates their challenges as they must travel long distances to collect resources, making them more susceptible to health and safety risks.
Impact on Women in Agriculture:
- The agricultural sector, where a significant proportion of women in low-income countries work, faces negative impacts from climate change, including reduced productivity and increased heat stress.
- Women in agriculture often lack access to quality inputs, education, and technology, making them vulnerable to climate-induced challenges.
- According to the ILO, over 60% of working women in southern Asia and sub-Saharan Africa are still in agriculture, where they are often underpaid and overworked.
- Despite being the backbone of the food production system, women own only about 10% of the land used for farming.
Displacement and Vulnerabilities:
- Climate-related disasters disproportionately affect women, with around 80% of those displaced being women and girls.
- They face specific difficulties during and after natural disasters.
- Separation from social networks, increased risk of gender-based violence, and limited access to essential services are among the gender-specific challenges women face during displacement.
Women’s Role in Climate Solutions:
- Women have significant contributions to offer in adapting to and mitigating climate change, but investments in their education, training, and access to resources are crucial.
- Empowering women in sustainable agriculture, water management, and clean energy generation is vital to reduce the negative impacts of climate change on livelihoods.
Example from India – SEWA:
- The Self-Employed Women’s Association (SEWA) in India serves as an example of an organization that educates and trains women farmers to respond to shifting climate patterns.
- These efforts not only enhance their resilience but also improve their financial well-being.
Gender-Inclusive Climate Policy:
- Gender-inclusive decision-making in climate policy is essential.
- Women’s participation at all levels of climate policy decision-making is crucial for effective climate change mitigation and adaptation.
- Initiatives, such as the Gender and Climate Change Development Programme in South Asia, aim to empower women and increase their influence in policymaking.
The policy initiatives should focus on women-led climate action, particularly in developing and emerging countries, to address the gender-specific impacts of climate change effectively.
There is also a need for global efforts to support climate action driven by women.
The Self-Employed Women’s Association (SEWA)
The Self-Employed Women’s Association (SEWA) is a prominent organization in India that focuses on improving the lives and working conditions of women in the informal labour sector.
- SEWA was founded in 1972 by Ela Bhatt, a prominent Indian social worker and labour leader.
- Established in the state of Gujarat, SEWA’s primary mission is to empower and uplift women who work in the informal sector, including domestic workers, street vendors, agricultural labourers, and artisans.
- It seeks to promote economic and social justice, financial inclusion, and gender equality among its members.
- SEWA’s core objectives include improving women’s working conditions, ensuring their access to social security, and enhancing their economic opportunities.
- SEWA is a membership-based organization, and its members are primarily women from marginalized and vulnerable communities.
- As of the last available data, SEWA had a membership of over 2 million women across various states in India.
Activities and Programs:
- SEWA offers a wide range of programs and services to its members.
- These include access to financial services, training and capacity building, health and insurance benefits, and advocacy for workers’ rights.
- The organization also operates cooperatives and producer groups to help women earn a sustainable income through various livelihood activities.
- SEWA is known for its microfinance and microinsurance initiatives that provide financial support and security to its members.
Aditya-L1: its functioning and purpose
(General Studies- III)
Source : The Hindu
Aditya L1 mission is a space mission by the Indian Space Research Organization (ISRO).
- The mission’s primary goal is to study the Sun and its outermost layer, the solar corona.
- Scientists and researchers anticipate that data and observations from the Aditya L1 mission will help unravel the mysteries surrounding the Sun’s dynamics, solar variability, and its impact on Earth’s climate and space weather.
Importance of Understanding the Sun:
- Understanding the dynamics of the Sun and its influence on Earth is crucial for various reasons, including predicting space weather events that can affect satellite communication, GPS systems, and power grids on Earth.
- Solar variability and activity can also impact Earth’s climate, making it essential to gain insights into the Sun’s behaviour.
L1 Lagrange Point and Solar Observation:
- The L1 Lagrange point, discovered by mathematician Joseph Louis Lagrange, is one of five points located approximately 1.5 million kilometers from Earth.
- Here, the gravitational forces of the Sun and Earth are in equilibrium.
- A spacecraft placed at L1 orbits the Sun at the same rate as Earth, offering an uninterrupted and stable view of the Sun.
- This positioning makes L1 an ideal observation point for space-based solar observatories, allowing for continuous monitoring of the Sun’s activities and dynamics.
Current Solar Observatory at L1:
- The L1 Lagrange point currently hosts the European Space Agency (ESA)-National Aeronautics and Space Administration (NASA)’s Solar and Heliospheric Observatory (SOHO).
- SOHO is dedicated to observing the Sun and its various phenomena.
Aditya L1 Mission:
- The Aditya L1 mission, launched on September 2, aims to study and monitor the Sun’s behavior and dynamics.
- The spacecraft will undergo five orbit-raising maneuvers before reaching the L1 Lagrange point.
- Upon arrival at L1, the spacecraft will perform thruster maneuvers to establish a halo orbit around L1.
- In this halo orbit, Aditya L1 will have the capability to observe the Sun 24×7 using its four remote sensing payloads.
- The mission’s objectives include studying space weather parameters in-situ and unraveling the mysteries of the Sun’s dynamics.
In Image: Aditya L1 payloads
Solar Activity and Sunspots:
- Solar activity is measured by the number of sunspots on the Sun’s surface, which undergoes an 11-year cycle of increase and decrease.
- During periods of high solar activity, hundreds of sunspots can be observed, while during solar minimum, sunspot numbers are nearly zero.
Variation in Solar Radiation:
- Despite variations in solar activity, the emission of visible and long wavelengths from the Sun remains relatively steady.
- However, approximately 80% of the changes in solar radiation occur in the ultraviolet (UV) range.
- UV rays emitted by the Sun are absorbed by the Earth’s upper atmosphere, influencing its composition, temperature, and other parameters.
Importance of Understanding UV Radiation:
- It is crucial to understand the extent to which variations in UV radiation emitted by the Sun contribute to climate variability on Earth.
- Monitoring and analyzing UV radiation can provide insights into how solar activity affects the Earth’s climate.
The Solar Ultraviolet Imaging Telescope (SUIT):
- SUIT has been developed by the Inter-University Centre for Astronomy & Astrophysics in collaboration with ISRO, the Center of Excellence in Space Sciences India, Manipal Academy of Higher Education, and others.
- SUIT is designed to observe UV radiation from different regions of the solar atmosphere.
- It includes an onboard intelligence system to detect solar flares and trigger rapid imaging of different solar layers, providing a 3D view of the Sun’s surface.
Contributions to Climate Understanding:
- Data from SUIT and other instruments, such as the Solar Low Energy X-ray Spectrometer (SoLEXS) and the High Energy L1 Orbiting X-ray Spectrometer (HEL1OS) developed by ISRO, can help scientists gain insights into transient solar events in the UV region.
- Observing the Sun using SUIT and similar instruments can aid in understanding climate variation on Earth, including the contribution of natural and anthropogenic factors to climate change.
Coronal Mass Ejections (CMEs):
- CMEs are sudden eruptions on the Sun’s surface, where chunks of the corona, consisting of energetic plasma and magnetic fields, are ejected into interplanetary space.
- These ejections can travel at speeds ranging from 250 kilometers per second to 3,000 kilometers per second.
Challenges in Observing the Solar Corona:
- Solar physicists have traditionally observed the corona during total solar eclipses, but such opportunities are brief and rare.
- Space telescopes have limitations in observing the inner corona, where CME acceleration occurs.
- The lack of insight into the dynamics of the inner corona hinders the understanding of CME mechanisms.
The Visible Emission Line Coronagraph (VELC):
- VELC has been developed by the Indian Institute of Astrophysics in collaboration with ISRO.
- It can observe the solar corona as close as 1.05 solar radii, a region never imaged before by any solar telescope.
- It has the capability to scan up to three solar radii.
- VELC is expected to provide crucial information about the mechanisms responsible for CME acceleration.
Solar Wind and Space Weather:
- The Sun emits a constant stream of charged particles and magnetic fields, known as the solar wind, which affects interplanetary space.
- The solar wind interacts with Earth’s magnetosphere, creating phenomena like auroras.
- Solar flares and CMEs can trigger strong solar storms that affect space weather.
- Space weather includes changes in the solar wind’s density, speed, and direction and can impact satellites, GPS, communication, and power grids.
Aditya L1’s Role as a Space Weather Station:
- Aditya L1 serves as a space weather station and carries instruments like ASPEX, PAPA, and Tri-axial High-Resolution Digital Magnetometers to monitor space weather parameters.
- These instruments help predict geomagnetic storms and understand space weather dynamics.
- Understanding space weather is essential for safeguarding satellites and space assets, as changes can affect trajectories and impact upper atmospheres.
- Space weather is an international concern, and the data from Aditya L1 will aid in creating models and predicting space weather events in advance.
What is a solar radii?
- A solar radius (often denoted as “R☉”) is a unit of measurement used in astronomy to describe the size or distance relative to the Sun’s physical characteristics.
- Specifically, it represents the radius of the Sun.
- The actual value of the solar radius is not a fixed number because the Sun is not a perfectly uniform sphere.
- However, the average value used by astronomers is approximately 696,340 kilometers (about 432,685 miles).
- This means that one solar radius is approximately equal to the average distance from the center of the Sun to its outer edge.
- So, in terms of Visible Emission Line Coronagraph (VELC) of ISRO, it means that the VELC can observe regions of the solar corona that are as close as 1.05 times the average radius of the Sun, and it can scan areas within a range of up to three times the average solar radius.
About UV radiation
- UV radiation, or ultraviolet radiation, is a type of electromagnetic radiation that exists beyond the violet end of the visible light spectrum.
- It has shorter wavelengths than visible light, which means it carries more energy.
- UV radiation is invisible to the human eye but can have a range of effects on living organisms and materials.
- UV radiation has wavelengths shorter than those of visible light, typically ranging from about 10 nanometers (nm) to 400 nm.
- It is divided into three categories based on wavelength:
- UVA (Ultraviolet A): Wavelengths from 315 nm to 400 nm.
- UVB (Ultraviolet B): Wavelengths from 280 nm to 315 nm.
- UVC (Ultraviolet C): Wavelengths from 100 nm to 280 nm.
- UVC is highly dangerous but is mostly absorbed by the Earth’s atmosphere and doesn’t reach the surface.
- The primary source of UV radiation is the Sun.
- It emits various forms of UV radiation, including UVA and UVB.
- Artificial sources of UV radiation include tanning lamps, black lights, and certain types of lamps used for disinfection.
Effects on Health: UV radiation can have both beneficial and harmful effects on health:
- Beneficial: UV radiation is essential for the production of vitamin D in the skin when exposed to sunlight.
- Harmful: Prolonged or excessive exposure to UV radiation, particularly UVB and UVC, can damage living tissues.
- It can cause sunburn, skin aging, and is a known risk factor for skin cancer.
Effects on Materials:
- UV radiation can cause materials to degrade and fade.
- This is why it is a concern for items exposed to sunlight, such as fabrics, paints, and plastics.
- UV stabilizers are often added to materials to reduce their susceptibility to UV damage.
- UV radiation is used in various scientific and industrial applications, including UV imaging.
- Special cameras and detectors can capture UV images, which can reveal details not visible in visible light.
- To protect against harmful UV radiation from the Sun, people often use sunscreen, wear protective clothing, and use sunglasses that block UV rays.
IAF Western Air Command’s annual exercise Trishul
(General Studies- Paper II and III)
Source : The Hindu
The Indian Air Force’s (IAF) Western Air Command (WAC) commenced its annual training exercise called “Trishul” on September 4.
This exercise involves the activation of all air assets and force multipliers deployed along the Line of Control with Pakistan and the Line of Actual Control with China.
- Trishul is scheduled to take place from September 4 to September 14, during which it will validate the command’s operational readiness.
- The exercise features the participation of various frontline assets, including fighter jets, transport aircraft, helicopters, and other force multipliers.
- It is conducted at a high tempo, simulating various operational scenarios.
Focus on Operational Preparedness:
- The primary objective of the Trishul exercise is to assess and ensure the operational preparedness of the Western Air Command.
- The Indian military has been reorienting its focus from Pakistan to China, especially in light of the ongoing standoff in eastern Ladakh that began in May 2020.
- The Indian Air Force has been actively involved in supporting the military’s efforts in the region.
- During the Ladakh standoff, the IAF played a significant role by airlifting troops, infantry vehicles, tanks, artillery guns, and other equipment to the area.
High Alert During G-20 Summit:
- The exercise will be paused for a few days to coincide with the G-20 summit.
- This decision aims to ensure that the armed forces are on high alert during the high-profile event, considering potential security threats.
The Air Commands of the Indian Air Force (IAF)
The Indian Air Force (IAF) is divided into several operational and functional commands, each responsible for specific geographical areas and operational roles.
Western Air Command (WAC):
- Headquarters: New Delhi, India.
- Responsible for air operations in the western sector of India, particularly along the border with Pakistan.
Eastern Air Command (EAC):
- Headquarters: Shillong, Meghalaya, India.
- Responsible for air operations in the eastern sector, covering the northeastern states and the border with China.
Central Air Command (CAC):
- Headquarters: Prayagraj (formerly Allahabad), Uttar Pradesh, India.
- CAC is responsible for air operations in the central and northern regions of India.
Southern Air Command (SAC):
- Headquarters: Thiruvananthapuram, Kerala, India.
- Responsible for air operations in the southern part of India, including coastal defense and maritime surveillance.
South Western Air Command (SWAC):
- Headquarters: Gandhinagar, Gujarat, India.
- SWAC oversees air operations in the southwestern region of India, covering parts of Gujarat and Rajasthan.
Training Command (TC):
- Headquarters: Bengaluru, Karnataka, India.
- TC is responsible for training and development of IAF personnel, including pilots, engineers, and other technical and non-technical staff.
- It operates various training establishments and institutions across the country.
Maintenance Command (MC):
- Headquarters: Nagpur, Maharashtra, India.
- MC is responsible for aircraft and equipment maintenance, repair, and logistics support for the IAF.
- It ensures that the IAF’s fleet remains operational and mission-ready.
CBDCs can make cross-border payments efficient
(General Studies- Paper III)
Source : The Hindu
Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted the challenges facing cross-border payments, including high costs, slow processing, limited access, and a lack of transparency.
- He emphasized that Central Bank Digital Currencies (CBDCs) could significantly enhance cross-border payments’ efficiency, making them faster, cheaper, and more transparent.
India’s CBDC Pilots and Expansion
- Governor Das mentioned that India is among the few countries that have initiated CBDC pilots in both wholesale and retail segments.
- These pilots are gradually expanding to involve more banks, cities, people, and use cases.
- The data generated from these pilots will inform future policies and actions.
CBDCs for Instant Settlement in Cross-Border Payments
- RBI Governor emphasized the potential role of CBDCs in achieving instant settlement for cross-border payments, making them more secure, cost-effective, and rapid.
G20 TechSprint 2023 Problem Statements
Th RBI governer also highlighted the problem statements identified for this G20 TechSprint 2023.
The G20 TechSprint 2023 addressed three key problem statements:
- Reducing Illicit Finance Risk: Participants were encouraged to develop technology solutions that integrate anti-money laundering (AML) and counter-financing of terrorism (CFT) measures into multilateral platforms.
- The goal is to reduce the risks of illicit finance while improving screening processes.
- Forex and Liquidity Solutions: The focus here was on technology solutions that facilitate settlement in a broader range of emerging market and developing economy (EMDE) currencies.
- Using local currencies in cross-border payments can provide resilience against global shocks and exchange rate fluctuations.
Technology Solutions for Multilateral Cross-Border CBDC Platforms:
- This problem statement aimed to solicit solutions for technology platforms that support interoperability across multi-CBDC platforms or domestic payment systems.
- The goal is to reduce operational costs, enhance efficiency, and ensure consistent standards across multiple jurisdictions.
Governor Das emphasized the potential for CBDC adoption to significantly improve cross-border payments, calling for a technology platform that is interoperable and can benefit the future cross-border payments ecosystem.
Addressing the Challenge of Illicit Finance
- RBI Governor pointed out the substantial challenge posed by illicit finance.
- The global money laundering is estimated at 2-5% of global GDP, which is approximately $800 billion to $2 trillion.
- Innovative solutions are needed to address this risk effectively.
Enhancing Local Currency Usage in Cross-Border Payments
- Encouraging the use of local currencies in cross-border payments can help protect EMDEs from global shocks and exchange rate fluctuations.
- Multilateral payment platforms supporting multiple currencies can facilitate this, but they require effective liquidity mechanisms.
What is Central Bank Digital Currencies (CBDCs)?
- Central Bank Digital Currencies (CBDCs) are digital forms of a country’s national currency issued and regulated by its central bank.
- Unlike cryptocurrencies like Bitcoin, which are decentralized and not controlled by any single entity, CBDCs are centralized and managed by the central authority responsible for a nation’s monetary policy, typically the central bank.
- Key characteristics of CBDCs include:
- Digital Representation: CBDCs exist only in digital form, with no physical counterpart like paper money or coins.
- They are represented as electronic tokens or account balances in a digital ledger.
Government Backing: CBDCs are fully backed by the government and enjoy the same legal status as physical currency.
- They are considered official legal tender within the issuing country.
Centralized Control: Unlike cryptocurrencies, which operate on decentralized blockchain networks, CBDCs are centrally controlled and regulated by the country’s central bank.
- This central authority has the power to issue, manage, and oversee the circulation of CBDCs.
Secure and Traceable: CBDC transactions are highly secure and traceable.
- They are recorded on a centralized ledger maintained by the central bank, ensuring transparency and accountability.
Monetary Policy Tool: Central banks can use CBDCs as a tool for implementing monetary policy.
- They can adjust interest rates, control money supply, and influence economic conditions by issuing or withdrawing CBDCs.
Cross-Border Transactions: CBDCs can facilitate cross-border transactions by reducing the need for intermediaries and currency conversion.
- This can make international trade and payments more efficient.
Financial Inclusion: CBDCs have the potential to improve financial inclusion by providing a digital payment solution accessible to all citizens, including those without access to traditional banking services.