The Aakhya Weekly #19 | The Rupee Goes Online
The Aakhya Weekly #19 | The Rupee Goes Online
In Focus: India’s own CBDC in the works
While introducing the Union Budget in February 2022, Finance Minister, Nirmala Sitharaman announced the making of the digital rupee, India’s very own Central Bank Digital Currency (CBDC). In the backdrop of a burgeoning private cryptocurrencies market, the government has taken its first steps towards making CBDC a reality, to shore up India’s centralised monetary and financial ecosystem. The Reserve Bank of India (RBI) published a concept note on October 7 to raise awareness and familiarise the public with CBDC and its workings. Following this release, the RBI is also expected to release a policy paper in the month of December.
With the tremendous success of Unified Payments Interface (UPI) in the country, digital transactions have grown exponentially over the last few years. However, developing and promoting the use of CBDC brings with it a host of challenges. Pressing issues include: (a) operational costs involved in physical cash management; (b) risks associated with cross-border payments; and (c) a lack of accessibility. The RBI is exploring two broad types of CBDCs - retail and wholesale - to complement the existing currency regime in India. As explained in the concept note, retail CBDC can “provide access to safe money for payment and settlement” whereas wholesale CBDC has the potential to “transform the settlement systems for financial transactions and make them more efficient and secure.” Other considerations include (i) an account or token based form; (ii) direct, indirect or hybrid models for issuance and management; (iii) remunerated or non-remunerated instrument of design; and (iv) degree of anonymity.
In light of such challenges, the RBI is in no hurry to rush the process, and is currently working towards a phased implementation strategy, starting with building a prototype, testing, evaluating, and launching a series of pilots before ultimately finalising the design.
So far, 11 countries have launched CBDCs across the globe, and 80 other countries have their CBDC initiatives and projects underway. The launch of CBDC in India holds promise to benefit the public and expand the existing financial system, making it a juggernaut in its own right. For more insight, read this article, as well as the official note published by the RBI.
Top Stories of the Week
Hardeep Singh Puri’s visit to the US Boosts India-US Green Energy Partnership
The Union Petroleum and Natural Gas Minister, Hardeep Singh Puri discussed the steps his Ministry has taken up to speed up exploration and production activities in India during a keynote speech he gave to business executives in Houston. In his speech he mentioned that areas such as petrochemicals, biofuels and green hydrogen can see greater collaboration between India and the United States. The two countries, signed four MOUs that will see Indian and US companies coming together and working.
With the goal of transitioning to green hydrogen and becoming a leader in this space, Hardeep Singh Puri launched the Offshore Bid Round offering 26 oil blocks, covering 2.3 lakh Sq. Km. With the bidding round open, Puri assured investors of transparency, ease of doing business, and efficiency. In his keynote address, Puri also emphasised on the importance Coal Bed Methane in increasing India’s domestic production and reducing the country’s import burden.
CCI gives nod for Zee-Sony merger
The Competition Commission of India (CCI) has conditionally approved the proposed merger between Zee Entertainment Enterprises Ltd and Sony Pictures Entertainment Inc, while asking the parties to ensure that there is no abuse of dominant position. The deal was cleared with certain modifications, although these modifications have not been publicly disclosed. Both companies have said that they will comply with the regulator’s directives and will not charge excess fees from advertisers and DTH providers for a fixed period.
The combined entity following the merger will boast 70+ channels, two OTT streaming services (Zee5 and SonyLiv) and two film studios, making it the largest entertainment network in India.
Auto aggregators banned in Bengaluru
The Karnataka transport department has declared auto rickshaw aggregation services, offered by companies such as Ola, Uber and Rapido, illegal in the city of Bengaluru. The department has claimed that such services are outside the scope of the licenses that had been issued under the On-Demand Transport Technology Act, 2016, which only cover four-wheeled taxis. The move was triggered by recent price hikes by aggregators, taking their fares well above the rates set by the Government. Transport Minister B Sriramulu has also directed officials to confiscate any rickshaws that are plying through aggregators.
At the moment, aggregators are expected not to shut auto rickshaw operations in the city. However, they have slashed rates in response the Government’s move.
This Week in Policy
Macroeconomics and Taxation
India’s services PMI fell to a six month low of 54.3 in September, from 57.2 in August, while India’s manufacturing PMI contracted to 55.1 in September, from 58.2 in August. Any reading over 50, however, indicates overall growth.
Retail inflation for the month of September 2023 has accelerated to 7.41%, from 7% the previous month, owing to food inflation hitting a 22 month high of 8.6%. Meanwhile, India’s Index of Industrial Production for the month of August 2023 saw a contraction of 0.8%.
The Finance Ministry begins the process of preparing its budget for the year 2023-2024.
Agriculture and FMCG
NITI Aayog to launch pilot project to provide telemedicine services for livestock health and safety in wake of growing concerns over outbreak of lumpy skin disease (LSD)
In a major boost to rabi prospects this year, average water level in 143 major reservoirs in the country is up 9% on year, and 16% more than the last 10 years’ average.
Kharif paddy procurement by the Food Corporation of India (FCI) and state government agencies off to brisk start with 1.72 million tonnes (mt) of the cereal purchased from farmers, 58% higher than a year ago.
Healthcare
The Government has classified various medicines as narcotics and psychotropic substances, thereby preventing their sale over-the-counter. These include the pain-relief drug isotonitazene, diphenidine, which is used to treat neurotoxic injuries, clonazolam, which is used to control seizures in epilepsy patients, anti-anxiety drug diclazepam and sedative flubromazolam.
The Union Health Ministry has launched the Tele Mental Health Assistance and Networking Across States (Tele-MANAS), a 24x7 tele-service for mental health concerns. NIMHANS shall serve as the nodal centre for Tele-MANAS, with IIT Bombay providing technical support.
Foreign affairs
Indian and Chinese foreign ministries held consultations on bilateral ties ahead of the 20th National Congress of the Communist Party of China, which could see President Xi Jinping returning for a third term.
India and Australia are set to expand diplomatic footprints, with Australia reaffirming its commitment to open a Consulate-General in Bengaluru and India planning to open an additional consulate in Australia.
Technology, Media and Telecommunications
TRAI has extended the deadline for submission of written replies by stakeholders to the Draft Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems)(Fourth Amendment) Regulations 2022, to 4 November 2022.
The Department of Telecommunications has clarified that it intends to regulate only OTT communications services under the Telecom Bill, and not other OTT services like broadcasting and e-commerce.
New data protection bill likely to ease up on data localisation norms, says Rajeev Chandrasekhar - a big change from the old PDP Bill
MeitY has directed smartphone makers to ensure that all phones priced above Rs. 10,000 will be 5G-enabled
International trade and commerce
India-UK FTA talks hit stumbling block ahead of proposed Diwali deadline; data localisation, opening Govt tenders to UK companies are key issues causing the deadlock
Big Indian lenders are avoiding the direct rupee trade mechanism with Russia for fear of being hit by Western sanctions
Banking, Finance and Insurance
Sebi mulling relaxations in the commodity derivatives trading framework to boost liquidity and increase investor participation - looking at how market-wide position limits are calculated for commodity derivatives contracts.
Number of new appeals filed against Sebi before the Securities Appellate Tribunal (SAT) rose to 780 at the end of FY22, 43% higher than the previous year - a reflection of increasing supervision of governance issues by the regulator.
Manufacturing
Expected to be launched by December this year, the central government is likely to notify another Production Linked Incentive (PLI) scheme for more advanced EV battery technologies.
Retail and e-commerce
Food Safety and Standards Authority of India (FSSAI) issues an order stating the need of registration for exporting milk, meat products for foreign food investors.
The Department of Promotion of Industry and Internal Trade (DPIIT) under the Commerce and Industry Ministry framing a national e-commerce policy. It is expected to formalise once Open Network for Digital Commerce (ONDC) stabilises. [link]
Logistics
Ministry of Commerce and Industry releases the Logistics Ease Across Different States (LEADS) report 2022, marking one successful year of PM GatiShakti.
On 13th October 2022, Prime Minister Modi launched the country’s fourth Vande Bharat Express train in Himachal Pradesh’s Una. Set to run six days a week, the train accelerates to 100 km per hour, cutting the Chandigarh-Delhi route to under 3 hours.
Sustainability
Number of crop fires reported out of Punjab are at a three-year low, suggests data from the Indian Agricultural Research Institute (IARI). Only 320 fires have been reported this year, as opposed to 620 and 1,935 in 2021 and 2020 respectively.
To boost laggard pace of rooftop solar deployment, Delhi govt planning subsidy boost for raising temporary structures on rooftops to install solar panels.
Upcoming Events
MSME India Business Convention
October 15 | Leela Ambience Convention Hotel, Delhi
Industry Live is organising the 2nd edition of the MSME India Business Convention on 15th October at the Leela Ambience Convention Hotel, Delhi. MSME’s are the backbone of India’s economy and ambitions to become a $5 trillion economy soon. The conclave will bring together celebrated leaders, industry veterans, government enterprises, and think tanks under one roof to discuss the ever changing and evolving outlooks and growth opportunities that the future holds in store for the MSME sector. Anna Roy, Sr. Advisor, NITI Aayog, will also be present amongst the speakers. More Information | Registration Link
Pathways for Global Partnership in Green Energy
October 17-19 | The Ashok, New Delhi
CII, in partnership with the Ministry of New & Renewable Energy (MNRE), Government of India is organising the 3rd edition of the International Conference & Exhibition on ‘Pathways for Global Partnership in Green Energy: Powering Aatmanirbhar Bharat & the World’ from October 17-19th at The Ashok, New Delhi. While Aatmanirbhar Bharat or self-reliant India focuses on elevating domestic manufacturing capabilities and reinforce net-zero targets, tackling climate change requires extensive global cooperation. The conference aims to bring stakeholders to a common platform to move the renewable needle forward in India and across the globe. More Information | Registration Link
3rd CII Public Health Summit 2022
October 19 | India Habitat Centre, New Delhi
CII is organising the 3rd edition of Public Health Summit 2022 on October 19th at the India Habitat Centre, New Delhi with the aim of developing partnerships at all levels and across different sectors to improve public health outcomes. The summit will bring decision-makers, professionals from different sectors, non-governmental organizations and private organizations/industries together to establish population health and wellbeing through different innovative solutions and comprehensive health promotion. More Information | Registration Link
A Few Good Reads
Finshots explains why Bernanke, Diamond and Dybvig won this years Nobel Prize in Economic Sciences.
Daniel Klein discusses the ambiguity around the term “populism”.
Timothy Snyder discusses possible ends to the Russia-Ukraine conflict and the threat of nuclear war.
Moushumi Das Gupta gives a tour of the PMO.
Sam Glover looks at the world of superforecasters, a group trying to master the art of predicting future events, backed by the British Government among others.
Tweets of the Week
Kunal Singh examines developments in India-US relationships in this thread:
A thread on the use of cloth by menstruating women:
Akshat Shrivastava recaps Credit Suisse’s ongoing woes:
Key Notifications
TRAI extends time to receive comments on ‘Draft Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) (Fourth Amendment) Regulations, 2022 up to 4th November, 2022 for written comments. Counter comments must be filed by 18th November, 2022. Comments and counter-comments may be sent to advbcs-2[at]trai[dot]gov[dot]in and jtadv-bcs[at]trai[dot]gov[dot]in.
Central Government approves and notifies the ‘Credit Guarantee Scheme for Startups (CGSS)’ for the purpose of providing credit guarantees to loans extended by Member Institutions (MIs) to finance eligible borrowers.
UP releases draft for Industrial Investment and Employment Promotion Policy 2022.