DAILY NEWS ANALYSIS

Recently, the Reserve Bank of India (RBI) announced that it would directly regulate entities facilitating cross border payment transactions.

• Payment Aggregators – Entities that enable e-commerce sites and merchants to accept various instruments from customers to complete their payment obligations without the need for the merchants to create their own systems.
• Payment Aggregator-Cross Border (PA-CB) – Entities that facilitate cross-border online payments for import and export of permissible goods and services.
• Categories of PA-CB
  • Export-only PA-CB
  • Import-only PA-CB
  • Export and import PA-CB

New RBI regulation

• Authorised Dealer (AD) Category-I banks – They do not require separate approval for PA-CB activity.
• Existing Non-banks providing PA-CB services – They must apply to the RBI for authorisation by April 30, 2024 and must register with the Financial Intelligence Unit-India (FIU-IND).
• They shall have a minimum net worth of Rs. 15 crore at the time of applying and Rs. 25 crore by March 31, 2026.

Net worth is the value of the assets a corporation owns, minus the liabilities they owe.

• New non-bank PA-CBs – They should have a minimum net worth of Rs 15 crore at the time of applying and Rs. 25 crore by the end of the 3^rd financial year of authorisation.
• Other conditions – The maximum value per unit of goods / services sold/purchased shall be Rs. 25, 00,000.
• If the per unit goods/ services imported exceeds Rs 2.5 lakh, then the PA-CB concerned must undertake due diligence of the buyer.
• Customer due diligence should be undertaken by the merchant.
• Proceeds from the Export Collection Account (ECA) shall be settled only in the account of such merchants.

The National Aeronautics and Space Administration’s (NASA) Lucy spacecraft is on an epic 6-billion-kilometre-long journey to study the Jupiter Trojan asteroids.

• Discovery - It was discovered in 1999 by the LINEAR survey, and recently identified as a potential fly-by target for the Lucy mission.
• Orbit - It orbits the Sun in the main belt of asteroids between the orbits of Mars and Jupiter.
• Width - It is less than 1 kilometre wide.
• Composition - Dinkinesh is an S-type asteroid, i.e., it is composed mainly of silicates and some metal.
• Instrument - The observations were made by Lucy’s high-resolution camera, the Lucy Long Range Reconnaissance Imager ( L’LORRI instrument ).
• Dinkinesh will be the first asteroid that Lucy will visit on its 12-year-long journey.

Lucy Spacecraft

• Lucy mission was launched on October, 2021.
• Agency – NASA, U.S.
• Aim - To observe the Jupiter Trojan asteroids (huge group of small bodies that orbit the Sun in two “swarms.”)
• Lucy will first fly by Dinkinesh and another asteroid in the main belt called Donaldjohnson in 2025.
• WISE - NASA’s Wide-field Infrared Survey Explorer (WISE) is supporting the flyby.
• It provides updated estimates of the asteroid’s size and albedo – a measurement of surface reflectivity that could help scientists better understand the nature of some near-Earth objects.

Economic Survey 2023-24 acknowledged the concept of reverse flipping and this trend has been gaining attention in the recent years.

What is reverse flipping?

• Flipping- The process of transferring the entire ownership of an Indian company to an overseas entity, accompanied by a transfer of intellectual property rights and data owned by the Indian company.
• It transforms an Indian company into a 100% subsidiary of a foreign entity, with the founders and investors retaining the same ownership via the foreign entity, having swapped all shares.
• The Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022 clarify that the flipping culture has been acknowledged by the Reserve Bank of India (RBI).
• Reasons for flipping
  • Taxation benefits
  • Ease of setting up in places like Singapore, the US
  • Ease of attracting foreign capital

• Reverse flipping - It is the trend of overseas start-ups shifting their domicile to India and listing on Indian stock exchanges.
• Reasons for reverse flipping to India
  • India’s favourable economic policies (tax breaks, funding assistance)
  • Expanding domestic market
  • Growing investor confidence in the country's start-up ecosystem
  • Institutional support (International Financial Services Centres Authority (IFSCA) has constituted an expert committee to formulate a roadmap to ‘Onshore the Indian innovation to GIFT IFSC’)

How significant is the reverse flipping scenario for India?

• Start-up hub- Reverse flipping underscores the belief in India’s potential as a global start-up hub.
• Ease of doing business- Reverse flipping is due to access to deeper pools of venture capital, favourable tax regimes, better intellectual property protection and favourable government policies.
• India’s economic growth- India is the world’s 5^th largest economy by GDP and is expected to become the 3^rd largest economy by 2030.
• This presents a significant opportunity for overseas start-ups looking to expand into new market.
• Skill capital- As per ILO, India has the world’s largest youth population with 66% of the population under the age of 35 making India an attractive market for a skilled and talented workforce.
• Effective corporate governance- The listing process on the Indian stock exchange is relatively cost-effective making it an attractive option for overseas start-ups with limited sources.
• Consumerism- The overseas start-ups can tap into growing Indian consumer market as they have brand recognition and goodwill in India, a competitive advantage over Indian start-ups.
• Expansion- Overseas start-ups can find synergies with Indian companies leading to partnerships, joint ventures, and acquisitions which help them to expand their reach in India.

How to accelerate the reverse flipping?

The Economic Survey 2023-24 has suggested the following measures.

• Simplifying multiple layers of tax and uncertainty due to tax litigation
• Simplifying procedures for capital flows. Many countries such as US and Singapore, have easier corporate laws with lesser restrictions on the inflow and outflow of capital
• Facilitating improved partnerships with private entities to develop best practices and state-of-the-art start-up mentorship platforms
• Exploring the incubation and funding landscape for start-ups in emerging fields like social innovation and impact investment

Interconnected Disaster Risk Report 2023, released by the academic arm of United Nations, reveals that 21 of the 37 world’s aquifers are depleting faster than they can be replenished.

What does the report reveal about the groundwater crisis?

Around 30% of the world’s fresh water is stored as groundwater

• Groundwater – It is an essential freshwater resource stored in underground reservoirs called “aquifers”.
• Groundwater depletion can be defined as the prolonged withdrawal of groundwater from an aquifer in quantities exceeding average annual replenishment, leading to a persistent decline in groundwater levels and volumes.
• Findings - Over 2 billion people rely on groundwater as an essential supply of drinking water.
• The regions where groundwater depletion is most severe include parts of India, north-eastern China, western US, Mexico, Iran, Saudi Arabia and parts of Northern Africa.
• India pumps up the most groundwater globally, mainly for irrigation, domestic and industrial uses.
• Some areas in the Indo-Gangetic basin region have already passed the groundwater depletion tipping point.
• In Punjab and Haryana, groundwater exploitation is reported with 78% of wells in Punjab are overexploited and the region will face critically low groundwater availability in 2025.
• 70% of groundwater withdrawals are used for agricultural purpose.
• As per the report, agricultural intensification is a major factor pushing us towards groundwater depletion risk.

What are the causes of groundwater depletion?

• Agricultural intensification- Groundwater has been used extensively in arid regions like Saudi Arabia, India (Punjab) to grow crops such as wheat and rice, leading to depletion of aquifers.
• Lack of planning- Groundwater is a limited and essential resource, but poor management of river systems and groundwater resources leads to overreliance, depletion and exploitation.
• Lack of data- Absence of data favours the practice of over extraction since it makes sustainable water management efforts more difficult to develop and monitor.
• Policy paralysis - There is a link between power subsidies and excessive groundwater extraction in some States.
• High Temperature- Hot temperatures will reduce the moisture available for recharging aquifers, especially in hard rock regions, further aggravating the depletion.

What are the impacts of groundwater depletion?

• Livelihood loss- It reduces crop yields and affects farming livelihoods who depend on groundwater for irrigation.
• Migration- Groundwater depletion exacerbates water conflicts in arid regions, such as the Sahel and Sahara, thereby causing migration or displacement.
• Health issues- Reduction in cooling effect of groundwater on land and atmosphere, and increase in humidity and wet-bulb temperatures in the air can increase the risk of unbearable heat-related illnesses.
• Food and water insecurity- It threatens food and water security for both exporting and importing countries that rely on groundwater for crop production.
• Biodiversity loss- It affects the survival of endemic species in aquifers and increase the likelihood of extinctions.
• Effect on environment - It also reduces river base flow and wetland health.

Composite Water Management Index (CWMI): NITI Aayog Weighs Discontinuing Key Water Report Launched 5 Years Ago

The Composite Water Management Index(CWMI) has been a pivotal tool in India, serving as a significant barometer for assessing states' efficacy in water management.However, recent developments have raised queries regarding its future, casting doubts on its continuity.

The Composite Water Management Index (CWMI) is launched by NITI Aayogto provide an annual snapshot of the water sector status and water management performance of the states and union territories (UTs) in India.

Genesis and Evolution of the Report:Launched in June 2018 by Niti Aayog, the CWMI's debut edition spotlighted India's water challenges, rating states based on 28 parameters, utilizing data from 2015-16 and 2016-17. The second edition launched in August 2019 was for 2017-18.

The report was a result of collaborative efforts between NITI Aayog and three key ministries: Water Resources, Drinking Water & Sanitation, and Rural Development.

Themes and Indicators:

The Index comprises nine themes (each having an attached weight) with 28 different indicators.

• • • Source augmentation and restoration of waterbodies
    • Source augmentation (Groundwater)
    • Major and medium irrigation — Supply side management
    • Watershed development — Supply side management
    • Participatory irrigation practices — Demand side management
    • Sustainable on - farm water use practices — Demand side management
    • Rural drinking water
    • Urban water supply and sanitation
    • Policy and governance

Delay in Subsequent Editions:

The NITI Aayog attributed delays in the third and fourth rounds of the CWMI to the unavailability of updated data caused by the Covid-19 pandemic.Considerations were made to combine rounds 3.0, 4.0, 5.0, and 6.0 to cover the years 2021-22 and 2022-23, while contemplating extending data coverage to the district level.

What is the Status of Water Resources in India?

The net amount of water that can be used in India in a year is estimated at 1,121 billion cubic meters (bcm). However, the data published by the Ministry of Water Resources shows that the total water demand will be 1,093 bcm in 2025 and 1,447 bcm in 2050.

• • This means that there will be a major water shortage in India within 10 years.

As per the Falkenmark Water Index(used for measuring water scarcity throughout the world), wherever the amount of water available per capita is below 1,700 cubic meters in a year, there is water scarcity.Going by this index, almost 76% of people are already living with water scarcity in India.

• Bangladesh PM Sheikh Hasina’s daughter, Saima Wazed, was nominated as the next Regional Director for the World Health Organization’s South-East Asia region recently.
• The nomination will be submitted to the WHO Executive Board during its 154th session, which is scheduled to take place on January 22-27 in Geneva, Switzerland.
• WHO Regional Committee for South-East Asia Region (SEARO) Member countries

Bangladesh, Bhutan, DPR (North) Korea, India, Indonesia, Maldives, Nepal, Sri Lanka, Thailand, and Timor-Leste, Myanmar.

• It was a 100 million megaton blast that occurred 66 million years ago.
• It was caused by an asteroid or comet that crashed into Earth off the coast of Mexico.

The impact generated a core of superheated plasma that was over 10,000 degrees, wiped out 75% of all species on Earth, created a 2-year cloud of dust that caused an extreme and abrupt shift in climate.

• The explosion of a star, a supernova recorded in the year 1,054 AD led to the creation of the Crab Nebula, a supernova remnant.
• Now, the James Webb Space Telescope has looked at the nebula that is located 65,000 light-years away in the constellation Taurus, revealing exquisite new details.

The Crab Nebula is one of the brightest supernova remnants in the sky, is also known as Messier 1 (M1).

• Quality Council of India (QCI) in collaboration with the United Nations Forum on Sustainability Standards (UNFSS) hosted the ICSTS in New Delhi recently.
• Sustainability Standards are special rules that guarantee the products you buy do not hurt the environment and the people that make them.

Standards are considered a market-based tool to transform production, global supply chains and consumption patterns into more sustainable ones.

• Indian Air Force recently inducted 153 women Agniveervayu into its non-officer cadre for the 1^st time.
• Agniveervayu (Women) is a group of female soldiers in the Indian Air Force (IAF).
• Agniveers are cadets appointed to the Army wings under the Agnipath scheme, a short-term service youth recruitment.
• Agniveers are recruited for a period of 4 years, with the option to extend their service for an additional 4 years.

After completing their service, 25% of Agniveers will be selected to join the regular military as permanent soldiers.