RBI Digital Currency

“Introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23.” FM Nirmala Sitharaman announced during her budget 2022 speech. Apart from RBI, Central Banks of Singapore, Thailand, Sweden, England, Canada, Venezuela, Uruguay, and a few other countries have been working towards implementing respective Central-bank-backed digital currencies.

It was a big leap in human civilisation to move away from the barter system towards a centralised monetary system, which has started with Gold and other kinds of coins had moved on to gold-backed legal tenders, and finally evolved into a Fiat currency. Rather than equivalent gold holding, a Fiat currency is backed by full faith and credit of the issuing government of the Reserve Bank or Central Bank of the country. Transactions in these Fiat currencies happen in physical notes and coins form or via a bank account, for on paper or digital transactions. A CBDC is in the token form of Rupee. It is an electronic record of the country’s official currency and can prove to be crucial towards goals of financial inclusion. Transactions of a CBDC do not necessarily need one to have a bank account.

Financial inclusion is critical for strengthening the abilities of the poor to tap all opportunities to come out of poverty, and to a vast majority in India, the middle class, to fruitfully utilise nurturing ecosystem of entrepreneurship and skill development in their chosen domain. The zero balance requirement concept for bank accounts opened under Prime Minister Jan Dhan Yojna has been critical in bringing banking services to millions of unbanked Indians. RBI-Digital-Currency will be truly a shot in the arm to the efforts of bringing the unbanked into the financial system. As FM noted, the added benefit of the CBDC would be simplifying the implementation of monetary and fiscal policies and a more efficient and cheaper currency management system.

 

Planning for a VUCA World?

VUCA had become part of our lexicon for quite some time, but Covid has brought it to the realisation that the world has truly become volatile, uncertain, complex and ambiguous. In this context, the National response mechanism for short term crisis management, as well as long term strategy formulation, is under scrutiny across the globe. The traditional sequence of problem formulation, detailed planning and bureaucratic way of implementing the steps was put to test, and it failed miserably during the pandemic. What worked though, can be termed as Agile model, where a corridor with feedback based course correction mechanism is the target instead of a rigid set goal.

Indian Economy has shown strong resilience and has bounced back from the crisis of COVID-19, yet the recovery has not been uniform across all sectors of the economy and definitely not across demographics. Various courses have been completed without even meeting teachers, trainers, peer groups, research target groups etc. Poor families who have lost a working member are going to need help from younger members, esp. young girl child to take care of chores at the cost of going to school.

To add to the micro-economic level issues, the pandemic induced shifts in technology, supply-chain dynamics, and generic consumption pattern changes are increasing the uncertainty.

What is of help though is the feasibility of real-time or near real-time feedback mechanism using the latest tech developments. This is where the emphasis on reinforcing the digital economy is critical as done in Budget 2022. Starting from Digital University to ease the learning of basic skills to advanced technologies, to the concept of using satellites to ascertain the extent of rural vs urban inhabitants, agri vs other usage of the land, environmental impact of infrastructure development and other activities, almost an end-to-end use cases have been identified for deeper engagement of citizenry. An important aspect is to keep a learning attitude and positive mindset to encourage one and all to strive for a better future.

 

Fifth Industrial Revolution (5IR) Preparedness

One of the three key goals identified by the government during the budget 2022 is promoting digital economy & fintech, technology enabled development, energy transition, and climate action. To protect the interests of future generations and prepare them for upcoming global challenges, achieving these tech and sustainability goals is vital. The novel concept of Digital University is to provide world-class quality universal education with personalised learning experience at each Indian’s doorsteps. This collaborative University will be built on a networked hub-spoke model and content will be available in different Indian languages and ICT formats.

 

On education, training and skilling front, there are plans to develop quality e-content by the teachers as well as content in all spoken languages for delivery via internet, mobile phones, TV and radio through ‘Digital Teachers’. A DESH-Stack e- portal for on-line training and search facilities for jobs and entrepreneurial opportunities is to be launched.

In Agri and Allied domain, the focus is on preparing farmers for digital and hi-tech services, where a scheme in PPP mode as well as NABARD led co-investment model fund is to be launched for engaging all stakeholders meaningfully. For tech enabled operations management like crop assessment, digitization of land records, spraying of insecticides, and nutrients, discussions around ‘Kisan Drones’ is a very important step. With the Beating Retreat 1000 drone show and now with Kisan Drones, the government has shown willingness to put aside apprehensions of this evolving technology and embrace it to leap forward in large scale aerial survey and delivery. Drone-As-A-Service (DrAAS) is being envisaged across multiple sectors.

To build on key learnings of COVID pandemic handling, an open platform for the National Digital Health Ecosystem, consisting of digital registries of health providers and health facilities, unique health identity, consent framework, and universal access to health facilities is to be rolled out. Further, as the pandemic has accentuated mental health problems in people of all ages, to better the access to quality mental health counselling and care services, a ‘National Tele Mental Health Programme’ is to be launched. This will include a network of 23 tele-mental health centres of excellence, with NIMHANS being the nodal centre and International Institute of Information Technology-Bangalore (IIITB) providing technology support.

To reduce damaging effects of red tape by enhancing transparency and to reduce delays in payments, a completely paperless, end-to-end online e-Bill System is to be launched for use by all central ministries for procurements. Digitally signed bills can be submitted and tracked in this system online.

To continue the bolstering of digital payments in the country, financial support for the digital payment ecosystem announced in the previous Budget will continue in 2022-23. Further, 75 districts are going to get Digital Banking Units (DBUs) by Scheduled Commercial Banks for enhancing and promoting digital Banking experience. As talks have been on to introduce Digital Rupee, using blockchain and other technologies, this has now been confirmed to be issued by RBI starting 2022-23. This will lead to a more efficient and cheaper currency management system in the country. The newly proposed flat tax rate of 30% on virtual digital assets is a step towards acknowledging them and bringing the discussions mainstream.

These budgetary provisions are going to fuel the discussion and development of systems, processes and capabilities for combining humans and machines in the workplace. As 5IR is set to put an individual at the front and centre of the production process, it is imperative that India prepares its young to reap demographic dividends.