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21st July Current Affairs

Central Bank Digital Currency

(GS-III: Awareness in the fields of IT, Space, Computers)

In News:

RBI is in the process of implementing the CBDC in a phased manner for wholesale and retail segments.

Benefits:

For social benefits and other targeted payments in a country

CBDCs could be used for faster cross-border remittance payments.

Inclusive development: universal access attributes of a CBDC could also include an offline payment functionality, thus helping bridge the digital divide.

Instant lending to micro, small, and medium enterprises (MSMEs)in India can be possible with the help of CBDC.

Need for CBDC:

An official digital currency would reduce the cost of currency management while enabling real-time payments without any inter-bank settlement.

Need to reduce cost: India has a high currency-to-GDP ratio. It adds to the cost of printing, transporting and storing paper currency.

About CBDC:

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.

CBDC is not comparable with private virtual currencies or cryptocurrencies. It will be a sovereign-backed digital currency.

Recent steps towards CBDC:

The introduction of CBDC was announced in the Union Budget 2022-23.

Government amended section of the RBI Act, 1934 through the Finance Bill 2022.

India’s official digital currency is likely to debut by early 2023

Challenges in rolling out National Digital Currency:

  1. Potential cybersecurity threat.
  2. Lack of digital literacy of the population.
  3. Issue with regulation, tracking investment and purchase, taxing individuals, etc.
  4. Threat to Privacy: The digital currency must collect certain basic information about an individual so that the person can prove that he’s the holder of that digital currency.

SC Garg Committee recommendations (2019):

Ban anybody who mines, holds, transacts or deals with cryptocurrencies in any form.

It recommends a jail term of one to 10 years for exchange or trading in digital currency.

It proposed a monetary penalty of up to three times the loss caused to the exchequer or gains made by the cryptocurrency user whichever is higher.

However, the panel said that the government should keep an open mind on the potential issuance of cryptocurrencies by the Reserve Bank of India.

What Government should do to regulate Cryptocurrency:

Enact consumer protection measures like payment guarantee, and dispute resolution. For this, Cryptocurrency based businesses can be tested in the regulatory sandboxes e.g. RBI’s regulatory sandbox for Banks

Regulation of digital currency exchanges and administrators.

  • 2020: the EU Commission has officially released the Proposal for a Regulation on Markets in Crypto-assets (“MiCA”).
  • Banning cryptocurrencies might drive crypto transactions underground

Awareness: Government should make the public aware of cryptocurrency and its threat

Allow framework for taxing the digital currency transaction to avoid tax evasion

Transactions: For now countries should ban retail cryptocurrency transactions or be used as financial instruments (e.g. China, Belgium) or cryptocurrency transactions between banks

NASSCOM: It says that government should work towards developing a risk-based framework to regulate and monitor cryptocurrencies and tokens.

The creation of Central Bank Digital Currency (CBDC) will be a positive step: can better control the money supply (and volatility) and also help in quick financial disbursal of budgeted sums based on smart contract

Creating a cryptocurrency ecosystem by improving financial literacy, improving cybersecurity, and digital penetration

Global governance through UN or Financial Stability Boards to allow cross-border regulation and a transparent system of digital currency.

National Child Labour Project (NCLP) Scheme

In News:

No data has been obtained for child labour under the NCLP scheme in the country.

Reason: Drying up of funds under NCLP, after its merger with Samagra Siksha Abhiyan

About National Child Labour Project (NCLP) Scheme 2007:

Children in the age group of 9-14 years, are enrolled in the NCLP Special Training Centres, where they are provided with bridge education, vocational training, stipend, mid-day meal, health care, etc. before being mainstreamed into the formal education system.

Definition: “Child labour” is defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development.

Last year, a study by UNDP and Coca-cola company said that there is still ambiguity in the definition of child labour.

Other provisions related to child labour in India:

Provisions of Child Labour (Prohibition and Regulation) Amendment Act, 2016: employment of children below the age of 14 years in any commercial enterprise is illegal. However, it allows child labour in “family or family enterprises”.

Article 23: Prohibition of traffic in human beings and forced labour.

Article 24: No child below the age of fourteen years shall be employed in work in any factory or mine or engaged in any other hazardous employment.

Juvenile Justice (Care and Protection of Children) Act 2015:It includes the working child in the category of children in need of care and protection, without any limitation of age or type of occupation.

Platform for Effective Enforcement for No Child Labour (PENCIL) Portal 2017: for effective implementation of the NCLP scheme

International commitment: India has ratified the International Labour Organizations Convention (ILO) no 138 (minimum age for employment) and Convention no 182(worst forms of child labour).

Landlord Port Model

In News:

Jawaharlal Nehru Port (JNP) has become the first major 100% landlord port in India, having all berths being operated on the PPP model.

Details:

Landlord model:  In this model, the publicly governed port authority (owner) acts as a regulatory body and as a landlord while private companies carry out all other port operations. In return, the landlord gets a share of the revenue from the private entity.

Previously,  the government proposed to set up a major port at Vadhavan (India’s 13th major port) near Dahanu in Maharashtra based on the landlord model.

About JNP:

JNP (Mumbai) is one of the leading container ports in the country and is ranked 26th among the top 100 global ports (as per Lloyds List Top 100 Ports 2021 Report).

JNPCT is presently handling 9000 TEUs capacity vessels and with the up-gradation, it can handle 12200 TEUs capacity vessels.

Currently, India has 12 major ports– Deendayal (erstwhile Kandla), Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), VO Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia).

Minimum Support Price

In News:

Panel on MSP, natural farming setup (this is in continuation to the previous article)

Details:

The MSP is the rate at which the government buys grains from farmers. This helps farmers bear the price volatility and ensure a basic minimum income.

How is MSP fixed?

The Centre announces the MSP (which is not legally guaranteed) for 22 mandated crops (and Fair & Remunerative Price, or FRP, for sugarcane) on the basis of the recommendations of the CACP.

Crops included are:

14 Kharif crops (paddy, jowar, bajra, maize, ragi, tur/arhar, moong, urad, groundnut, soya bean, sunflower, sesamum, nigerseed, cotton)

Six are rabi crops (wheat, barley, gram, Masur/lentil, rapeseed and mustard, and safflower)

Two are commercial crops (jute and copra)

The CACP takes into account various factors including demand and supply; cost of production; market trends; a minimum 50% margin over the cost of production; and likely implications of MSP on consumers.

The CACP calculates three types of costs — A2, A2+FL and C2 — for each mandated crop for different states. (based on Swaminathan Committee recommendations)

A2: is the actual paid-out cost incurred by a farmer

A2+FL: the actual paid-out cost plus the value of family labour

C2: it includes A2+FL + Rental Value of Own Land

CACP eventually recommends — and the government announces — MSP on the basis of A2+FL. Protesting farmers have been demanding MSP based on C2, besides a legal guarantee.