26 February 2023

• G20 presidency: India's G20 Presidency continued with Finance Ministers' and Central Bank Governors' meeting in Bengaluru (24-25 February). Cryptocurrency global framework and debt restructuring discussed.
• FATF: Russia suspended from the Financial Action Task Force, citing its invasion of Ukraine, arms trading, and malicious cyber activities.
• Payments: UPI recorded over 800 crore transactions in February 2023. NPCI International continued discussions with several countries on UPI adoption.
• Parliament recess: the Budget Session's first leg concluded on 13 February. The second leg would resume on 13 March. Standing Committees were reviewing Demands for Grants.

GS area: International Relations, Economy

The G20 Finance Ministers and Central Bank Governors meeting in Bengaluru on 24-25 February was India's first major multilateral financial event as G20 President:

• Debt restructuring: the G20 Common Framework for debt treatment was discussed. Countries like Zambia, Ghana and Ethiopia are restructuring their sovereign debt. The challenge remains getting China (not a Paris Club member) to participate in coordinated restructuring.
• Cryptocurrency framework: India's G20 Presidency made crypto asset regulation a priority. The FSB (Financial Stability Board) and IMF were tasked to develop a synthesis paper on the risks and regulatory approaches.
• Climate finance: discussions on the Loss and Damage Fund established at COP27 and how developed countries can deliver their $100 billion annual climate finance commitment.
• MDB reform: multilateral development banks like the World Bank and regional development banks were asked to increase their lending capacity by using their balance sheets more efficiently.
• India's G20 theme: "Vasudhaiva Kutumbakam" (the world is one family). The Presidency runs from December 2022 to November 2023.

Static linkage: International Relations (G20, India's multilateral diplomacy, global financial governance).

GS area: International Relations, Governance

The Financial Action Task Force suspended Russia's membership:

• FATF: the Financial Action Task Force is an inter-governmental body founded in 1989 (by the G7). Headquartered in Paris. Sets global standards for anti-money laundering (AML), counter-terrorism financing (CTF) and counter-proliferation financing.
• Members: 39 members including India. India joined FATF in 2010.
• FATF Recommendations: 40 recommendations that member countries must implement. Countries that fail face "greylisting" (enhanced monitoring) or "blacklisting" (call for countermeasures).
• Russia's suspension: FATF suspended Russia's membership citing illegal military aggression against Ukraine, arms trading violations, and malicious cyber activities. Russia remains a member but is barred from participating in meetings and accessing documents.
• India's FATF status: India successfully completed its Mutual Evaluation Report process and moved out of enhanced monitoring. India's performance on AML and CTF was assessed as largely compliant.

Static linkage: International Relations (FATF, anti-money laundering, Russia sanctions).

GS area: Economy (fintech, regulation)

India's G20 Presidency made crypto asset regulation a global priority:

• IMF's position: recommends against granting legal tender status to crypto assets. Recommends strengthening capital controls and international cooperation on taxation.
• Benefits of crypto: faster and cheaper cross-border payments; potential for financial inclusion of unbanked populations.
• Challenges: high volatility, interconnectedness with traditional finance creating systemic risk, potential for tax evasion and sanctions circumvention, energy-intensive proof-of-work mining.
• India's approach: India has not banned crypto but has not granted it legal tender status. Introduced a 30 per cent flat tax on crypto gains and a 1 per cent TDS on crypto transactions in 2022. This discourages trading without banning it.
• FSB synthesis paper: the Financial Stability Board was tasked to produce a comprehensive policy framework paper for crypto assets, to be presented to the G20 leaders' summit in September 2023.

Static linkage: Economy (cryptocurrency, digital assets, financial regulation).

GS area: Economy (digital payments, international relations)

By February 2023, UPI had expanded significantly beyond India's borders:

• UPI-PayNow: India-Singapore P2P payment linkage launched in February 2023.
• UPI in UAE: Unified Payment Interface accepted at select merchant locations in the UAE.
• UPI in Bhutan: Bhutan was among the earliest countries to adopt UPI for cross-border payments with Indian tourists.
• NPCI International: the international subsidiary of NPCI (National Payments Corporation of India) is the vehicle for global UPI expansion.
• Countries in discussion: UK, France, Mauritius, and several Southeast Asian nations.
• G20 context: India used its G20 Presidency to promote digital public infrastructure (DPI) as a model for financial inclusion globally. The India Stack (Aadhaar, UPI, Account Aggregator) was positioned as a replicable model.

Static linkage: Economy (digital payments, UPI, fintech, India's soft power).

GS area: Polity (Parliament)

The Budget Session's first leg (31 January to 13 February 2023) concluded, with the second leg scheduled to begin 13 March 2023:

• Budget Session structure: the Budget Session is typically held in two parts. The first leg (January-February) presents the Budget and passes the Finance Bill for Vote on Account. The second leg (March-May) examines Demands for Grants and passes the full Finance Bill.
• Demands for Grants: each ministry's budget proposals are examined by the relevant Parliamentary Standing Committee during the recess. Committees submit Detailed Demand for Grants reports.
• Vote on Account: Parliament's approval to allow the government to spend from the Consolidated Fund of India before the full budget is passed. The government can draw funds for approximately two months.
• Finance Bill vs Appropriation Bill: the Finance Bill authorises tax changes; the Appropriation Bill formally appropriates funds from the Consolidated Fund for government spending.
• Productivity: the Budget Session's first leg saw disruptions over the Adani controversy, reducing parliamentary productivity.

Static linkage: Polity (Parliament, Budget process, Finance Bill).

• India's IP Index rank: India ranked 42nd among 55 economies in the Global Innovation Policy Center's IP Index. Concerns noted about the dissolution of the Intellectual Property Appellate Board (IPAB) and the resulting workload on High Courts.
• Banjara community: a nomadic/semi-nomadic group denotified in the 1950s. Listed as SC/ST/OBC depending on the state. One of India's largest nomadic communities.
• Solar geoengineering: proposed interventions like stratospheric aerosol injection (mimicking volcanic cooling) and marine cloud brightening (reflecting sunlight). Controversial because of "moral hazard": the availability of a technical fix may reduce pressure to reduce emissions. No international regulatory framework exists.