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The Hindu Analysis Free PDF Download

Date: 22 October 2020

Potholes on the digital payment superhighway

  • Digital payments have found strong ground, especially in India.
  • The growth of digital payments is going to be phenomenal, supported by banks and Fin-Tech
  • There is a long and interesting history behind the evolution of digital payments in India, piloted by the Reserve Bank of India (RBI).
  • A major thrust toward large value payments was effected through the Real Time Gross Settlement System, or RTGS, launched by the RBI in March 2004.
  • The RBI introduced National Electronic Funds Transfer, or NEFT and bulk debits and credits to support retail payments around the same time.
  • Now, NEFT is available round the clock and RTGS will follow from December 2020 — only a few countries have achieved this.
  • Such historical changes brought about by the RBI triggered major changes in the corporate and capital market transactions as well.
  • Today, the Securities and Exchange Board of India (SEBI), the market regulator, is contemplating a T+1 settlement (T is for transaction date) because the underlying consideration of the sale proceeds of the shares get exchanged very fast under the payments system.
  • This is expected to attract more international capital into the Indian market, in turn broadening and deepening the financial market.
  • The sterling contribution of this robust payment system, especially retail payments, was seeded and reinforced with the setting up of the National Payments Corporation of India (NPCI) by 10 lead banks at the instance of the RBI in 2009.
  • The idea for this umbrella retail payments institution emerged in the vision document on payments system, 2005-08 released by RBI in 2005.
  • The setting up of such an umbrella organisation to build a super highway for digital payments has a strong appeal which was well-appreciated by Dr. Y.V. Reddy, the then RBI Governor.

  • Unified Payments Interface (UPI) and Immediate Payment Service (IMPS), is well recognised by central banks in many other countries.
  • The Bank for International Settlements’s endorsement of the NPCI model in 2019 is a major accolade.
  • If the NPCI has gained such a rare distinction in just 10 years of its successful and path breaking journey, we should be proud to preserve this precious jewel.
  • In Budget 2020-21, the government prescribed zero Merchant Discount Rate (MDR), the rate merchants pay to scheme providers, for RuPay and UPI, both NPCI products, to popularise digital payments benefitting both customers and merchants.
  • For reasons unknown, the government left out other providers of digital payment products from this MDR prescription, which is unjustified and had adverse effects.
  • A factor which needs to be reckoned is the float funds digital payments allow (cash withdrawal is a drain on the banking system), which is a source of sizeable income for banks.
  • The RBI will do well to study and arrive at a rational structure of pricing including MDR (possibly also penalty on default by customer), given that the digital payment system is like a national superhighway, for which the government has a crucial role to play in protecting consumers against exploitation.

Plug Into Taiwan (ToI)

  • India is looking to start discussions for a trade deal with Taiwan.
  • Chinese foreign ministry has asked New Delhi to be prudent while dealing with Taipei and reiterated its so-called ‘One China’ principle which sees Taiwan as part of China.
  • This is coming from a country that has shown scant regard for the sovereign interests of other countries.

  • The reality is Taiwan today is a free and independent democracy, and an Asian economic dynamo.
  • Trade between India and Taiwan grew 18% to $7.2 billion in 2019, but there is much headroom for growth.
  • Taiwan is a powerhouse in semiconductors that serve as the backbone of today’s modern economies.
  • Taiwanese companies are well-integrated into global supply chains, bringing high standards of production and logistics to the table.
  • Taiwanese companies also do a lot of business in China – which is precisely why it’s hypocritical of Beijing to object to a trade deal between New Delhi and Taipei.
  • Taiwanese companies are looking to relocate out of China.
  • Taiwan’s New Southbound Policy that is looking to enhance its connections with 18 countries, including India.
  • Taiwan’s expertise in hardware and India’s in software are a perfect fit.
  • Taiwanese investments in technology can kickstart a tech manufacturing revolution in India.
  • With China breathing down both India’s and Taiwan’s necks, there is additional incentive to create alternative supply chains and cut out Beijing.
  • India-Taiwan ties are a win-win. China’s objections should be ignored.

Vaccine First (ToI)

  • Government’s ambitious plan to leverage the National Digital Health Mission to ensure a robust vaccine delivery system raises some concerns.
  • On first glance, it may look as if NDHM’s convenience as a central repository for citizens’ medical history makes it a ready fit for tracking vaccine delivery and patient outcomes
  • It’s a fledgling system launched some months ago – on August 15 – on a pilot basis in six Union territories.
  • In contrast, the Covid vaccination effort for just the first phase could involve a whopping 30 crore across the country.
  • NDHM wouldn’t be able to scale up this rapidly.
  • The massive vaccine delivery effort needed to stop Covid-19 can’t be allowed to be held back because of glitches in the supporting IT network.
  • NDHM can, without doubt, be useful in public healthcare.
  • It could give doctors a patient’s medical history, avoid needless repeat tests or procedures and generate digitised health data for research purposes.
  • The Union health ministry has clarified that possessing a digital health ID, NDHM’s unique identifier, will not be mandatory to get vaccinated.
  • Other identification cards will be accepted too.
  • Data collection from vaccinated individuals is indeed important and must be pursued as a voluntary exercise.
  • Ongoing upgradation of the electronic Vaccine Intelligence Network system used by the Universal Immunisation Programme to track routine immunisation, vaccine stocks and cold chain storage can serve the official data reporting needs without putting the burden on citizens.
  • Let’s keep the design simple, supple and flexible.

A crucial season

  • Prime Minister Narendra Modi has appealed against weakening the fight during the annual season of festivals.
  • Over the past six months, numerous individual events have enabled the infection to explode and spread.
  • Kerala has experienced a wave blamed on lax behaviour during Onam.
  • States, anxious to present a picture of near-normality to boost economic activity, highlight recoveries over risk, and people are lowering their guard.
  • Mr. Modi has suggested that the fight must not weaken until there is a vaccine, and experts and WHO want countries to learn to live with an endemic virus.
  • In India, the reality is that even as of October 21, the official death toll in a day stood at 717, a not so inconsequential number, and there were 7.4 lakh active cases.
  • In parallel, the Centre should launch policy reform to transform a predominantly commercialised health system into one providing universal coverage.
  • COVID-19 has meant double jeopardy — a loss of income on the one hand and a steep rise in health insurance premiums on the other, after insurers were asked to provide cover for more conditions.
  • The Centre says it has a communication strategy centred around the theme of safety until March next year.

In West Asia, it’s a bleak future amid America fading

  • When the United Arab Emirates and Bahrain signed normalisation agreements with Israel in September, under the mediation of the United States, American President Donald Trump hailed it as a “new dawn in the Middle East”.
  • The so-called ‘Abraham Accords’, which saw the first normalisation between Israel and Arab countries in 26 years, was a rare diplomatic victory for Mr. Trump.
  • It was rare because most of the President’s other big foreign policy bets were either disastrous or inconclusive.
  • The U.S.-Taliban deal is largely seen as American capitulation to the Afghan insurgents;
  • The outreach to North Korea failed to produce any result;
  • The maximum pressure campaign on Iran seems to have backfired;
  • The promise to fetch “the deal of the century” between the Israelis and the Palestinians was a non-starter;
  • The trade war with China failed to produce any structural shift in the way China does business while tensions between the two countries rocketed.
  • It was evident during the Barack Obama years that the U.S. had overstretched itself in West Asia and North Africa, a region America has deeply engaged with since President Dwight D. Eisenhower’s time.
  • The U.S. had been stuck in an unwinnable war in Iraq.
  • In Syria, it was checkmated by the Russians.
  • Its intervention in Libya turned out to be disastrous.
  • Iran continued to be defiant despite threats and sanctions.
  • Israel was uncontrollable.
  • The Arab allies were upset.
  • When Mr. Trump came to office, he wanted to undo Mr. Obama’s policy legacy.
  • Iran responded with multiple cuts on the U.S. and allied interests in the region — from targeting Saudi oil facilities and cargo ships in the Strait of Hormuz to launching rocket attacks at American troops in Iraq
  • Less than a year after the assassination of Soleimani, the U.S., faced with continuing rocket attacks by Iran-backed Shia rebels in Iraq, is contemplating shutting down the American Embassy in Baghdad, besides withdrawing most troops from Iraq.
  • The Trump administration’s open embrace of Israel — the decision to move the American Embassy to Jerusalem, recognition of Israel’s annexation of the Golan Heights and the go-head to its annexation of Jewish settlements in the West Bank — sharpened the geopolitical contradictions in the region, instead of bringing peace.
  • This offers new avenues to Turkey, which under President Recep Tayyip Erdoğan, seeks to re-establish its influence in the region, and Iran, which uses the Palestinian cause to drive public opinion in the Muslim world across the Shia-Sunni divide.


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    • Venkataraman, a 1950 batch officer, had served as chief secretary, Orissa, and then as secretary, Ministry of Tourism and Civil Aviation, New Delhi. Besides his career as an IAS officer, he had a passion for Chola art and history that he had inherited from his father S.R. Balasubrahmanyam. He had co-authored a book ‘Later Chola Temples’ with his father.
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