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Presents
March 2022 Vol 5 Issue 7
Our Best read – ‘Analysis of the Food Delivery Applications Ecosystem in India’ ’
Special Mention – ‘At a Digital Crossroads: How FinTech is Bridging India’s Microfinancing Market Gap’
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INDEX S. No.
Article
Page No.
1
Analysis of the Food Delivery Applications Ecosystem in India
3
2
At a Digital Crossroads: How FinTech is Bridging India’s Microfinancing
12
Market Gap 3
The Indian Fin Tech-An Emerging Sector
22
4
Urban Floods: A Manmade Disaster
25
5
The End of the Dragon’s Golden Days
33
6
Will the war stop or the world? (The impact of Ukrainian war on the South Asian Economies)
37
7
Merger and Acquisition in Healthcare (Pharma) Industry
40
8
Central Bank Digital Currency: A Future of Digital Wallet
48
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Analysis of the Food Delivery Applications Ecosystem in India
By: Aishwarya Saxena (Lucknow University)
Online food ordering is ordering food from a website or other application. On-demand food delivery applications enable the users to view prices, menu, and restaurant reviews. They then deliver the ordered food. The vital part of customers leaning toward on-demand food delivery services is their convenience. The supply and demand must be matched in the best possible way.
HISTORY 1. “Zomato” was founded in July 2008 as a restaurant discovery application. 2. “Swiggy” and “Dunzo” were launched in India in 2014 as food ordering and delivery companies that provide foodservice solutions for restaurants.
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3. Online food ordering business in India witnessed exponential growth in India in 2015. 4. Ola Cabs acquired local operations of food delivery start-up Foodpanda, 5. In 2018, India’s online food ordering sector reported a strong growth rate in the number of daily orders. 6. In 2019, Ola dropped Foodpanda’s food delivery business but continued clouding the restaurants. 7. Zomato acquired Uber Eats in 2020.
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Demand Drivers 1. Encouraging demographics India has a population of over 1.2 billion, with a 50% of the people under the age of 25. Most of the fast-food demand comes from 18-40 years of population.
2. Promising Income and Consumption Level
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According to the World Bank, there has been a staggering 50% increase in per capita income from 2006. Higher disposable income is also a crucial driver for other subcategories of food products.
3. Favourable Lifestyle Changes 92% of nuclear families opt for takeouts to save time and energy that would otherwise go into cooking up a meal at home every week.
4. Rising Number of Working Women Working women spend most of their productive hours commuting and at work; therefore, there is significantly less time to cook full-blown meals at home, all by themselves.
Supply Drivers
1. Expanding Variety of Cuisines The more Indians living in urban areas are willing to experiment with new cuisines, the more will frequency of dining out increases.
2. Rise of Contract Cultivation: Contract cultivation is a binding agreement that guarantees farmers' purchases from giant global companies, provided they agree and supply the preferred crops to the companies.
3. Emerging of Logistics Providers The E-commerce industry, especially couriers and delivery-handling companies on the rise.
4. Extension to Delivery Services in Existing Restaurants: Restaurants can maximize their business output by offering food delivery services. They can all rationalize existing fixed costs and keep their business sustainable.
5. New Trends in the Delivery Sector
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With more people using smartphones increasing access to the Internet, restaurants can fully utilize their maximum potential to reap higher profits.
6. Delivery-dedicated Websites Websites like Swiggy earn commissions on every order, and the benefit to customers is that they can access food websites offerings at just one stop avail discounts and exclusive offers to get maximum value out of their online or mobile app orders.
MARKET FORM: OLIGOPOLY
It is that form of market structure in which a few firms are selling a product so that there is intense competition between them. This market is dominated mainly by two companies, “Swiggy “ and “Zomato ."Other companies include "Fasoos," "Box8," and many more.
Reasons
1. Intense Competition: Firms compete with each other through various sales promotion measures like discounts and advertisement campaigns. Selling cost holds a lot of importance. Television commercials war between ‘Swiggy’ and ‘Zomato’ bears testimony to this fact.
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2. Interdependence: Any action on the part of a firm impacts the other firms too. They react to the change by changing their price, output, product, etc. Therefore, while taking any decision, its impact on the competing firms has to be considered.
3. Nature of the product: In this case, it is a pure oligopoly in which all the companies deliver food to the consumers. They work as facilitators of ordering and delivery of food between the restaurants and the customers.
4. Importance of selling cost: Selling cost is the expenditure incurred by a firm to promote the sale of its product through various sales promotion activities. Examples are television commercials,
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advertisements in newspapers, and many more. They do it to lure away customers from other brands and persuade them to buy this brand.
Swiggy launched advertisement campaigns like " Ghar ka khana aur Saath main Thoda sa Swiggy" "Swiggy Match Day Mania."
5. Barrier to entry: There exist practical barriers to the access of new firms to the industry. In the absence of these barriers, the market will not retain the characteristics of a few sellers in the long run.
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Food delivery mobile apps face some severe issues about logistics: choosing a coverage area, estimating the number of vehicles required, keeping food fresh when delivering to far-off destinations.
Today, Swiggy and Zomato are the two leading food delivery apps with the most market power and share.
ZOMATO Unique Selling Proposition:
1) Entrancing classification of restaurants 2) Dine out booking and customer reviews 3) Exclusive offers for Zomato gold members 4) Zomato originals
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SWIGGY Unique Selling Propositions
1) No minimum order 2) Faster delivery times 3) Exceptional discounts 4) Exclusive offers for Swiggy Pop members.
ARRANGEMENTS DURING COVID 19 (SWIGGY AND ZOMATO) 1) Delivering groceries and other essentials at doorsteps. 2) Swiggy Genie service enabled the customers to pick up and drop to send or receive packages from anywhere across the city. 3) Categorising restaurants based on hygiene and precautions maintained. 4) No contact Delivery 5) Spreading awareness regarding precautions to be taken. 6) Taking all measures to ensure safe food, e.g., regular temperature check.
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CONCLUSION A food delivery market is a form of oligopoly dominated mainly by two firms, 'Swiggy’ and ‘Zomato". They compete with each other through commercial television wars and heavy discounting. It is one of the fastest-growing markets in India with the advent of technology, increase in connectivity, internet coverage, and urbanization in India. Its demand drivers are encouraging demographics, promising income and consumption levels, favorable lifestyle changes, and a rising number of working women. Its supply drivers are expanding a variety of cuisines, upgrading retail formats, the rise of contract cultivation and the emergence of logistic providers, growing delivery dedicated forms, and extension to delivery services in existing restaurants. The structure of home delivery or the takeaways has gained a lot more customers in locations such as malls, offices, and big-party orders for residential complexes. It is estimated to touch $12.53 billion by 2023 due to a high growth rate.
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At a Digital Crossroads: How FinTech is Bridging India’s Microfinancing Market Gap By: Reich Tiamson (Ateneo de Manila University)
Industry Background: Rapidly Accelerating Economy driven by the MSME Sector India is one of the fastest-growing economies in the world, with a GDP of ₹305 trillion and a CAGR of 9.2% expected until 2025. This economic boom is driven primarily by a rapidly expanding service and MSME sector, with a high demand for various business-oriented outsourcing services.
Figures 1 & 2: India’s rapid GDP growth is primarily driven by the MSME sector growth. Breaking this down further by business type, MSMEs make up 30% of total GDP, employing 20% of all workers across all industries. Industry Issue: Critical Financing Gaps in the MSME Space
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Figures 3 & 4: India MSME Contribution to the Economy is limited by Large Addressable Credit Gaps. Despite servicing this large proportion of the population in terms of GDP and employment across all sectors, MSMEs are held back by limited access to finance, with the loan portfolio of MSMEs from conventional finance institutions amounting to only 24% of the total. The International Finance Corporation estimates that the total financing gap for MSMEs in India could be worth nearly 25.8 trillion INR.
Figure 5: Lack of Access to MSME Lending and Microfinancing is a Major Pain Point. It is clear that MSME lending is a critical and underserved need, and a potential major and profitable gap in the market, indicating an evident market opportunity in MSME lending and microfinancing.
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Industry Insight: “It’s not the loans, it’s the banks.” The common belief is that small-to-medium lending is not something that is big in the country. This is incorrect, as the Indian MSME consumer is not, in fact, loan-averse. Rather, in raising capital, MSMEs are often forced to resort to alternative sources of financing their ventures due to structural issues with existing formal financial institutions.
Figures 6 & 7: MSME Credit is largely driven by Informal Borrowing & Credit. Taking a look at the lending space in India, informal loans are prevalent and primarily facilitated either by informal moneylenders or borrowing from interpersonal relations such as close friends or family members. Culturally, because 92.4% of workers earn from the informal economy (IMF, 2019) these informal loans are often an essential element of how these consumers raise capital and transact.
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Figure 8: India MSMEs have Multiple Apprehensions about Traditional Banking Loans. This indicates that the lending gap is not about the fear of borrowing, but rather the fear of borrowing from a bank. Indians have distrusted traditional banking institutions due to their rigorous and lengthy application processes, excessive documentation requirements, high-interest rates, and inflexible loan terms. This lack of easy access to formal financial services drives them into the arms of informal loan scalpers due to their convenience and flexibility despite their predatory interest rates. This credit gap presents a great market opportunity, as this is a market that has not been fully exploited. Industry Landscape and Demographic Segmentation: Increasing MSME Digital Adoption & Fluency
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Figures 9 & 10: India MSMEs are increasingly adopting Digital Technology. The local market is still wide open to addressing this specific need. Changes in consumer trends and behavior have led to a sharp uptick in digital platform adoption in the Indian market. Segmenting the market in terms of size and relative income share, there are two distinct trends. Micro and small enterprises comprise the bulk of the market in terms of people, but medium enterprises dominate in terms of capital and revenue, with micro and small enterprises generally comprising the younger, more digitally savvy demographic, and medium enterprises primarily run by older demographics. Given this market landscape, it is important that financial technology solutions address both segments, presenting medium-sized enterprises the opportunity to digitize and expand their businesses, and giving micro and small enterprises the capacity to get off the ground, scale up, and connect with their consumers. This is a multi-trillion INR market gap that financial technology startups are tailored to fit to serve.
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Industry Penetration Strategy: Facilitating the Digital Transition The biggest difficulty for these startups is convincing consumers that they are a better and more trustworthy option than the banks which they hate and informal loaners which they despise.
Figure 11: Suggested Industry Penetration Strategy through a Digital Platform Lifecycle Model. To tap into this market effectively, financial technology solutions need to ensure that this massive unbanked sector sees them as their friend by addressing these pain points through increased flexibility and accessibility of offerings at reasonable rates and emphasizing this to them with targeted marketing. This entails the creation of an acquisition funnel that is focused on targeted marketing, digital consumer education, and building trust with the key stakeholder in this relationship, the MSME consumer. This can be done through an omnichannel consumer touchpoint strategy, similar to how other digital startups such as Grab and Nykaa have transitioned consumers in emerging markets onto their platforms
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Figure 12: Creation of an end-to-end Indian MSME digital ecosystem This strategy allows more digitally savvy customers to transition directly from consumer touchpoints such as digital advertising onto the digital service platforms, while less digitally savvy customers are directed to physical kiosks or stalls with personnel who can help them build their trust in the product and transition them into the digital ecosystem. Industry Sizing: A Growing & Profitable Market Opportunity
Figures 13 & 14: India MSME Financing Market Players and Current Credit Gap.
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Current FinTech solution providers are the largest non-major banking entities in the MSME lending market, with a commanding 29% market share of the new-to-credit borrower space (Approx. 4.5 trillion INR). However, despite this, there are still roughly 1.8 billion mobile connections in India, and 63 million MSMEs, with an estimated year-on-year growth rate of 18.5% and an existing credit gap of 25.8 trillion INR in the MSME sector. The Indian government expects MSMEs to be worth $2 trillion by 2025, and is relying on MSMEs to provide 40% of total GDP, 60% of exports and generate 50 million new jobs by that time. In order for that to happen, these enterprises need to be given the financial resources to properly scale and thrive. The market is still wide open for further financial technology solution providers to enter the space. Conclusion: Taking the Long View India is at a crossroads of digital development. The Asian region is entering a period of rapid economic growth with India as one of the fastest growing economies in the region. Both national governments and private enterprises continue to deregulate their digital and financial policies, and open their markets, pushing and incentivizing the transition to a digital economy. The internet, smartphone, digital wallets, e-commerce coverage and penetration are continuing to explode. As MSMEs rise to meet the needs of this increasingly digital and asian-centric economic world, the market demand for flexible omni-channel financial institutions and consumer-facing technology solutions will be greater than ever. This is a gap which financial technology solution providers are primed and ready to fill, as the end-to-end digital partner of these MSMEs, ready to facilitate their entry into the formal economy and the digital ecosystem.
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References: Boston Consulting Group (Figures 6, 8, 9, 10, 11, 12, 13) https://media-publications.bcg.com/Credit-Disrupted-Digital-MSME-Lending-in-India.PDF Financial Express (Figure 3) https://www.financialexpress.com/industry/sme/msme-eodb-increasing-msmes-share-in-gdp-to40-by-2025-is-a-herculean-task-aima/2413579/#:~:text=address%20on%20Friday.,Former%20MSME%20Minister%20Nitin%20Gadkari%20in%202020%20had%20set%20a,onli ne%20event%20in%20October%202020. G20 Insights (Figures 1 & 2) https://www.g20-insights.org/policy_briefs/expanding-data-collection-to-streamline-msmemicro-small-and-medium-enterprise-lending/ India Brand Equity Foundation (Figures 4 & 14) https://www.ibef.org/industry/msme.aspx https://www.ibef.org/industry/msme.aspx#:~:text=India%20has%20approximately%206.3%20cr ore,Udyog%20Aadhaar%20Memorandum%20(UAM). International Finance Corporation (Figure 5) https://www.ifc.org/wps/wcm/connect/dcf9d09d-68ad-4e54-b9b7614c143735fb/Financing+India%E2%80%99s+MSMEs++Estimation+of+Debt+Requirement+of+MSMEs+in+India.pdf?MOD=AJPERES&CVID=my3 Cmzl International Monetary Fund https://www.imf.org/-/media/Files/Conferences/2019/7th-statistics-forum/session-iimurthy.ashx#:~:text=There%20are%2092.4%25%20informal%20workers,indicating%20the%20 level%20of%20outsourcing. KR Activism (Figure 7)
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https://www.kractivist.org/why-small-farmers-in-tamil-nadu-borrow-money-at-60-interest/ The Economic Times https://economictimes.indiatimes.com/small-biz/sme-sector/ambition-on-hold-indias-pursuit-of5-trillion-economy-by-2025-will-need-recalibration/articleshow/76992764.cms?from=mdr https://economictimes.indiatimes.com/news/india/indias-growing-data-usage-smartphoneadoption-to-boost-digital-india-initiatives-top-bureaucrat/articleshow/87275402.cms
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The Indian Fin Tech-An Emerging Sector By: Bhavik Malhotra (IIM Lucknow) FinTech is a blend of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. Owning to the continuous GDP growth and popularization of mobile Internet, the fintech market in India is growing at an unprecedented rate, making India one of the fastest-growing fintech markets and a hub for fintech start-ups, ahead of the US Between 2014 and the first half of 2020, India’s fintech start-ups raised more than USD 10 billion in total, involving 692 transactions. the country is ranked the 3rd largest in Unicorns only behind USA and China both in terms of number and value. Digital payments have already scaled up with over 200mn active users. FinTechs firms are now transcending other financial segments including lending, insurance, and wealth management, many in partnerships with incumbent players. The start of a new Digitalisation era It all started with “The JAM Trinity” i.e., Jan Dhan, Aadhar, and Mobile. This has helped to move things in the digital age, making payments and financial transactions go cashless, enabling ease of use and transparency. Key segments In Fintech: a) WealthTech WealthTech comes in response to the convergence between digitalization, the next-gen advances such as AI/ML, big data, and the investment and wealth management sector. Some of the start-ups that saw traction in the recent past and continue to be investor’s preferences are Zerodha, Upstox, and Groww. Due to regulatory changes brought in by SEBI, e-commerce companies such as Paytm and PhonePe are now offering mutual funds and investment options through their apps like Paytm Money and
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PhonePe Wealth services. UPI will act as a key enabler for WealthTech start-ups, it will help them increase their digital footprints by digitalizing their offerings. The WealthTech start-ups can be subclassified into personal finance management, robo-advisors, investment platform, etc. Some other examples include Bank Bazaar, INDwealth, etc.
b) Insurtech The InsurTech landscape in India is quite nascent at this stage. The penetration is quite low around 2.76% in life insurance and 0.93% in non-life insurance compared to the combined global average of 6.5%. ‘Lack of customers’ trust remains the key challenge facing the InsurTech segment. However, the share of web aggregators within digital insurance has been increasing and now originates ~30-40% of digital insurance. The current InsurTech space in India is being dominated by a few new-age insurers like Policy Bazaar, Acko, Digit, and Toffee insurance with their ability to attract and garner popularity among the millennial population. These start-ups are starting to pose a threat to the traditional incumbents by being able to capture a significant portion of the market share in the coming years.
c) Digital Payments Digital payments have been the flag bearer in the Indian FinTech space. We have seen a plethora of innovations in this space in recent times such as the introduction of UPI (Unified Payments Interface), e-wallets initiated by banks, and the BharatQR code. One of the main reasons for traction in digital payments can be attributed to the central government and RBI’s policies and their forward-thinking approach toward bringing the digital revolution to India.
d) Digital Lending Retail digital lending has delivered ~43% CAGR over the past 7 years and reached more than US$160bn in size by 2020.
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Some of the start-ups in the retail lending space are KrazyBee, LazyPay, Zest Money, Simpl, which provide unsecured personal loans “Buy Now Pay Later” is expected to be the next financial revolution and will ride the digital consumption wave. FinTechs and e-commerce players have started offering small-ticket personal loans or short-term credit to monetize their user base—mostly in partnership with banks/NBFCs. This space is highly regulated by the RBI, where all the platforms registered with RBI are categorized as NBFC-P2Ps growth in the country. The country currently has over 19 P2P lenders which have.
e) Neo Banking Neo banks are digital-only banks offering the entire gamut of banking services digitally to their customers. In India, neo banks have partnered with incumbent banks. They provide digital account opening, integration with billing and expense management software, payroll, and automated analytics for SME customers. Razorpay has built SME-focused neo banking platforms offering these value-added services. Similarly, Niyo and Finin are consumer-focused neo banks that provide services such as goalbased investment advice, expense tracking References: 1. Medici India Fintech Report 2020 2. Motilal Oswal- FinTechs – Expanding the growth horizons
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Urban Floods: A Manmade Disaster By: Khushi Jain (Lady Shri Ram College for Women) According to the Federal Emergency Management Agency (FEMA), urban flood is defined as “the inundation of property in a built environment, particularly in more densely populated areas, caused by rain falling on increased amounts of impervious surfaces and overwhelming the capacity of drainage systems.” Apart from being a major issue in many cities of India, urban flooding is a major disaster in many parts of the world. With the help of this article, we will be discussing this problem in detail.
Difference between Urban Flood and Rural Flood The National Disaster Management Authority (NDMA), the apex body for Disaster Management in India differentiates urban flooding from rural flooding in the below-mentioned ways. Development of It is different from rural flooding as urbanization leads to developed catchments which increases the flood peaks from 1.8 to 8 times and flood
Catchments
volumes by up to 6 times.
Quick Speed of It occurs more quickly because of faster flow times. Flooding
Impact
on It causes losses in terms of infrastructure which can have global implications.
Infrastructure
Widespread
The lack of free flow of water can lead to the spread of diseases including
Epidemics
typhoid, cholera, etc.
Urban Floods: The Indian Reality
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The incidence of urban floods has increased manifold in India. Most significant examples include the Mumbai Floods of 2005, Delhi Floods of 2009 and Hyderabad Floods of 2020. The flooding generally reaches its peak during the monsoon. The storm surges in coastal cities cause flooding. Apart from global climate change, the urban heat island effect (the increased absorption and retention of heat by cities as compared to rural areas) increases rainfall over urban areas thereby making them more susceptible to flooding. The ever increasing sea level is particularly threatening to India which has a long coastline of 7,500 km and an estimated 14% of its population living alongside it. This was further reiterated by a 2016 UN report which estimated that 40 million people in India will be at risk from sea-level rise by 2050. Urban floods have life-threatening implications on India making it an urgent issue to be addressed. Hence, it is important to study the reasons behind it.
Reasons behind Urban Floods NDMA defines three causes of urban floods: meteorological, hydrological and human.
Meteorological
This includes: ● Heavy rainfall ● Cyclonic storms ● Thunderstorms ● Small-scale storms ● Heavy Snowfall
Hydrological
This includes: ● Overbank flow channel networks ● Occurrence of high tides
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● Less natural surface infiltration rate ● Presence of impervious cover
Human
This includes: ● Increased urbanisation
Unplanned urbanisation is causing urban floods because of blocking of natural drainage pathways and increased construction activities.
● Outdated drainage systems
Indian cities receive a lot of rainfall and the present drainage system is not able to handle the rainfall.
● Encroachment of lakes
Lakes can store excessive water which the rain brings but due to urbanization, humans are taking over the lakes.
● Increased construction activities
A lot of areas are covered with infrastructure. This reduces the ground’s surface area through which the water can be absorbed.
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● Poor Solid Waste Management System Poor waste management leads to the clogging of drains because of the presence of several impurities thereby leading to the failure of the drainage system. ● Lack of awareness Flood control measures are not widespread and without community participation, it is impossible to remove the threat of urban flood.
Effects of Urban Floods As seen above, various factors cause urban flooding which has life-threatening repercussions which are discussed below.
Effect on Human Life
● Loss of life ● Physical injury ● Mental trauma ● Increased epidemics
Effects on Economy
● Destruction of infrastructure ● Disturbance in industrial production ● Shortage of services and risk of inflation
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Effects on Transportation
● Increased traffic ● Halt in transportation services ● Disruption in internet connectivity ● Disruption in telephonic services
Effects on Environment
● Loss of habitat ● Loss of green cover ● Loss of biodiversity
Way Forward Considering the scale of the problems caused by urban floods, it is important to have proper mitigation strategies.
Building
away
from By using geospatial analysis, we can build away from flood
flood plains
plains thereby reducing the risk of urban floods.
Strategic Use of Land
Flood-prone areas should be used for non-residential purposes. Planting of trees will also prove to be helpful along with the proper implementation of Coastal Regulation Zone Rules.
Wetlands Protection
Wetlands like lakes, tanks, and ponds must be protected as they help in the management of urban flooding by reducing the
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stormwater run-off.
Rainwater Harvesting
Implementation of rainwater harvesting will help in fulfilling the twin purposes of lowering the peak runoff and raising the groundwater table.
National
Disaster The NDMA guidelines for Urban Flood Management in India
Management (NDMA) released in 2010 with the motive of creating a National HydroGuidelines
meteorological Network for providing early warning, using Doppler Weather Radars and maintaining an inventory of current draining systems must be implemented strictly.
Proper development of A proper drainage system must be put into place. Efforts must Urban Drainage System be made to upscale the outdated drains.
Case Study To better comprehend the destruction caused by urban floods, a case study on the Mumbai Floods of 2017 is performed followed by a case study on Mobile Walls of Austria to explain an urban flood management technique. a. Mumbai Floods of 2017
Mumbai floods provide the perfect example to show the impact of urban floods on the lives of people.
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Flooding occurred in Mumbai on 29th August 2017. The city recorded 300mm of rainfall during that day. The event was comparable to the 2005 floods (944mm rainfall on 26th July 2005) in Mumbai. Both the events resulted in water-logging, halting of transport, power cuts and casualties. The cause of the flood was deemed as heavy rainfall. However, that is partially true. Factors including haphazard development projects, outdated drainage systems, blocking of drainages due to wastes, encroachments in the river bed and dumping of garbage in rivers led to this matrix event of an urban flood. Because of these frequent urban floods, a plan to revamp the city's drains began back in 1993 but not enough has been done. There is a need to integrate all the development activities and urban governance to reduce the ill effects of floods.
b. Mobile Walls in Austria
After learning about the experience of Mumbai, we now bring our attention to the engineering of Mobile Walls of Austria that could be a possible solution for Mumbai. In the Austrian municipality of Machland, the engineers erected removable walls capable of holding backwater. This helped in minimizing the damage which the floods were causing in Europe in 2013. In what is essentially a vertical cantilever design, each post was placed in a large concrete and aluminium footing extending 5 meters into the soil foundation. As the immense water weight creates pressure along the wall, the force is carried through the aluminium posts into the much stronger foundation. The ability to simply construct permanent flood walls was ruled out for Machland and a more aesthetic solution was found in removable aluminium walls.
Conclusion Under the present globalised economy, disruption in one city can cause serious complications. Hence, ignoring flooding can prove to be disastrous.
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Moreover, the current pace of urbanization is likely to continue which makes it even more important to have a response mechanism to handle extreme meteorological mishappenings, an adequate water supply, wastewater and stormwater disposal system. There is a strong need to integrate development activities and urban governance to prevent such incidents. Ultimately, it also must be realised that: “ Ideation without Execution is nothing but a Delusion.”
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The End of the Dragon’s Golden Days By: Hardik Agarwal (Shri Ram College of Commerce (SRCC))
China is indeed a land of mystery. Some researchers and economists try hard to define how China exactly works but every time they fail. At a time, when the world was heading towards democracy and the capitalist system, the most populous country in the world was adamant about being a socialist. And it proved all wrong by gaining double-digit GDP growth rates for years and being not only a Manufacturing Hub for the world but also the Research & Development Hub. This century, when some economists predicted that China would be the biggest economy in the coming years, China again did something that shattered all the predictions. Chinese companies have cumulatively lost $1 trillion in Market Value last year. The credit goes to no one but the Chinese Communist Party (CCP)- the same party that once strengthened the Chinese economy and boosted the business sectors. China, for decades, was having a flourishing economy and today it is a leader in many sectors including futuristic industries. Drones, which is expected to be the next big revolution in transportation, is under the control of China with 70% of the consumer drones in the world being manufactured by a single Chinese company, DJI. Moreover, China has already been a pioneer in technologies like AI, Quantum Computing, 5G and Robotics. At a time when the world was struggling with the pandemic, China was the only country churning profits. No doubt, it was the Chinese Business Giants that gave so much supremacy to China. Then, why is China digging its own grave by caging its MNCs? Why is the dragon setting its tail on fire? One of the best reasons explained by analysts is- The ever-increasing fear of the government not to give too much power to any individual or corporation. CCP believes that to stay in power, it must always be at the pinnacle. So, they make sure that no organisation collects data & accumulates wealth more than the government nor does any individual gather a huge fanbase capable of influencing the masses. This explains why Zhao Wei, a popular actress in China, was completely
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erased by the Chinese government from the internet. Similarly, when Jack Ma criticised the government, he went missing for months and his business faced mammoth penalties besides halting Alibaba’s Ant Group IPO worth $35 billion which would have been the world’s largest IPO. All these resulted in Alibaba losing $344 billion (to put this in perspective, the total valuation of the largest company in India, Reliance is $215 billion). In 2007, China had 4 companies on the list of Top10 companies worldwide. This number reduced to 2 in 2020 and 0 in 2021. As China cannot directly call it a crackdown on big companies, it is defining the same with different names. To curb the EdTech industry, China accused them of triggering social inequality by providing extra coaching to those who could afford it. Limiting their power, they were asked to immediately convert into not-for-profit organisations, prohibiting them from raising funds or acquiring other educational firms. Similarly, the gaming industry was crippled when China, the Gaming Industry Capital of the World, barred companies from allowing kids to play video games for more than 3-hours-a-week and stopped approving new games from Aug’21 to be launched in the market. Epic Games announced the withdrawal of Fortnite from the market due to an uncertain future in the country. At a time when gaming companies around the world experienced unparalleled growth due to lockdowns, China’s strict restrictions led to the slowest quarterly growth in 2 years in Tencent- the Chinese tech and gaming giant, making it the world’s worst stock bet.
China is very data sensitive! It doesn’t want any local data to be shared with foreigners, which explains why it doesn’t allow most tech giants to operate in their land. Those who were operating have either left or are planning to leave China due to excessive regulations in recent years. This includes LinkedIn and Yahoo who stopped operating in China in 2021. Moreover, China hates
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when a Chinese company becomes too friendly with any foreign government. That’s the reason why China fined Didi Chuxing under the veil of anti-monopoly laws and removed its app from app stores when the ride-hailing giant was listed on the New York Stock Exchange. Fearing China’s wrath, the company soon announced it would delist itself from the NYSE. While foreign tech giants can withstand the loss of a huge market, domestic Chinese companies are in a tough spot when state control becomes more prevalent. Besides harming local innovations, it will negatively impact the entrepreneurship culture in China. Though China was, for years, practising such crackdowns, they were mostly unnoticeable. But after Covid-19, China became very aggressive which was evident in the form of unethical regulations and intense political statements. When Australia criticised China for spreading Covid19, China stopped importing coal from Australia which backfired, as they started facing a coal crisis. Tesla is known worldwide for its auto-pilot feature in cars. XPeng, a Chinese automotive company stole source codes from Tesla, to which China apparently did nothing. A few months before the incident, China banned the use of Tesla cars in the military citing privacy concerns. China was already in a Trade War with the USA in which both the countries cumulatively lost around $84 billion. After Covid-19 broke out around the world, many countries realised how important it is to have an alternative source. Manufacturers realised the need to move their production facilities out of China which, coupled with attractive schemes by foreign countries, is breaking China’s manufacturing legacy. Japan went on to the extent of giving $536 million to native companies to move out of China. Similarly, the infamous Evergrande crisis is also a disastrous mistake of CCP, who instead of regulating the real-estate sector, provided undue aid to the company. The reason is Hui Yan, the Founder and Chairman of Evergrande, who put the company under a debt pile of more than $300 billion, is a member of CCP. China, over decades, has invested heavily in infrastructure, both inside & outside the country. But many of their projects are economically unviable and add nothing but another loan on the shoulders of China. China is also struggling with the issues of empty houses and towns, popularly termed as ghost cities by the media. Besides, disputed projects like the Belt & Road Initiative and loans to developing countries have forced China to borrow recklessly from private & foreign financial institutions.
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The Quad Alliance between India, Japan, Australia & the US, and the AUKUS pact between Australia, Britain and the US, are aimed at countering China’s aggression and increasing power in geopolitics. Countries that are in the debt trap of China are now realising the importance of selfdependence. Diplomatic boycott of Beijing Winter Olympics 2022 by Australia, America and the UK is also meant at gripping the dragon by its tail. Many countries that once had a soft corner are now despising the dragon. Despite its massive investments and innovations, China may still lose the throne to other developing countries like India if it continues to maintain its authoritarian regime and keep attacking the private sectors. In the end, it only depends on the government of China as to what extent it admits its faults and makes efforts to rectify the same. References:
https://thecritic.co.uk/is-china-heading-for-global-empire-or-soviet-collapse/
https://www.forbes.com/sites/williampesek/2021/07/28/china-triggers-1-trillion-marketmeltdown-and-its-just-getting-started/?sh=14259eea75e8
https://edition.cnn.com/2021/08/04/tech/china-crackdown-tech-education-mic-intlhnk/index.html
https://www.bbc.com/news/business-58579833
https://indiainfrahub.com/2020/commentary/a-model-to-avoid-lessons-from-chineseinfrastructure-investments-for-developing-economies/
Images:
https://www.bloombergquint.com/china/tencent-is-world-s-worst-stock-bet-after-170-billionwipeout
https://newzoo.com/insights/infographics/chinese-games-market-2016/
https://www.ft.com/content/095eb7ac-09ea-4a5c-8253-d8ca2d945614
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Will the war stop or the world? (The impact of Ukrainian war on the South Asian Economies)
By: Abhishek Chauhan and Manya Arora (Symbiosis International University)
The Russia-Ukraine crisis not only corpsed the humanity but also the economy worldwide. This death crisis was not restricted to the demographics of the two borders but had an impact beyond the physical boundaries of the nations i.e., the South Asian economy was also the one bombarded and shattered during the crisis heavily. How?
Well, during the late February of 2022 started the downfall of the economies worldwide post pandemic again. The months of 2020 already led to the deep diving of the graphs because of the deadly virus spread and shrunk the global economy by almost 6%. This contraction was absorbed and vaccinated through various trade routes and international affairs. But the Ukrainian crisis made this positive growth and turned it back with an expected fall of a bigger numerical percentage in the coming year.
As a major importer of the commodities from round the world, the South Asian countries are susceptible to hovering commodity prices, growing inflation, disrupted and disturbed supply chains and rising poverty. The countries such as India, Bangladesh, Sri Lanka and many others who are major importers of the world produce and major part of supply chains and trade, globally are experiencing a bleak growth in their overall monetary cycles.
The increase in inflation has outstripped the recovery of the real economy. The smaller economies like that of Bhutan and Sri Lanka could see larger shorter-term growth contractions than India and Bangladesh. This impact could be wider than before that of the pandemic because the inflation was already a positively growing number in such countries which is now fuelled up further by the similar shock of the war. This unimaginable occurrence has sped up the process of sharp growth in commodity prices. The EIU was already forecasting global inflation of nearly 6% this year, but now that mark is expected to be exceeded, given the huge spikes. This increasing commodity cost
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is another factor further contributing to the rising cost of production and its factors- labour, energy and other required inputs. Southern Asia is already a prime user of fossil fuels and the war has blocked up the ways of importing the same at a lower price. For instance, Brent Crude oil prices breached the $ 100 a barrel barrier, the highest level since 2011 which clearly indicates the streak growth in the pricings. The next question popping up because of the rising prices is Will war in Ukraine hasten the end of fossil fuels?
Not only is the above question open-ended but also, it owns an answer to a further rising problem of the falling industrial growth. The rising fuel prices, the falling competitiveness of cheap labour are the two correlated factors giving birth to poverty. This cycle of monetary crisis is giving rise to chains of multiple problems. The industrial growth in countries stays halted because of the lesser imports and rigorously falling international relationships. The disrupted supply chains impact the countries in ways that we could never imagine because the sector it impacts might feel a smaller one but the ripples of the shockwaves affect the overall country heavily. For a very small explanation- among the two countries at war, Ukraine’s 55 percent of wheat accounts for a major part of imports to Asia. Low- and middle-income countries are important beneficiaries of Ukraine’s wheat while the two countries in tussle own almost half of Bangladesh’s imports and Pakistan’s 39% of wheat imports. The war and disrupted chains of supply are further giving a boost to the cravings of the 67% of world’s hungry people that reside in Asia. “Coming at a time when global food supply chains are already choked due to the pandemic, the Russian invasion of Ukraine will worsen an already dire food security situation.” as per The Diplomat. The statement quoted clearly defines a wider impact of the disturbing supply chains on the Asian and SouthAsian countries.
The hunger of food that is getting rooted up because of the hunger of power is furthermore resulting in loss of not only lives within the two countries involved but also killing the people worldwide financially and physically. The financial deaths because of the lower incomes- higher pay is giving a room for poverty to boom itself up and erode the ongoing lives while the physical deaths are something not to be described further. The economic downfall of South Asia expresses concern
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towards the recently hit recession but also fuels the belief that this impact will be multiplicatively more powerful than the combined recession faced during the pandemic.
This impact would not have a similar picture across every country but have a differential impact. Larger countries in the South Asian boundaries may be the one facing a smaller impact in terms of numerical downfall of economy just as India or Bangladesh which have bigger domestic markets and some fiscal space but the smaller economies like Nepal or Maldives might not be able to sustain the impact. These countries could see higher disruption in their economies. Countries like Pakistan which already are highly dicey in terms of their economic stability are also in dire of contracting. The only way to tackle the growing global uncertainties in the monetary environment is implementing policies- monetary or fiscal, improving the debt management and alleviating the poverty of the poor. Once we see some degree of economic stability, the further requirement of the time would be to boost up the private sector and markets and begin economic reforms to move to low-carbon green growth. The only question that has the eyes glued on itself is- Will the war stop or stop the world? and the answer still rests unanswered.
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Merger and Acquisition in Healthcare (Pharma) Industry By: Somak Chakrabarti (Manipal College of Pharmaceutical Sciences, Manipal)
Abstract Equity investment in the pharmaceutical and healthcare industry has grown exponentially over the last two decades. Since 2010, the value of M&A deals has amounted to over $750 billion. This rate is expected to increase further since the pandemic has necessitated the consolidation of resources to combat it. However, information on M&A deals in the post-pandemic era is limited. The primary goal of this study is to assess the rate of growth in mergers in post covid era and compare it to the previous years. The aim is to assess the impact of covid-19 on M&A in healthcare. The study employs secondary sources in its research. The data was sourced from the internet and a primary analysis was conducted. There was a dramatic rise in the number of mergers and deals in the healthcare and pharmaceutical industry. This explosive growth in the industry has been attributed to increased spending in the markets for pharma. Given the longevity of the pandemic, M&A patterns have seen sharp increases, especially in the pharmaceutical sector as many players sort to outsource some of their activities to smaller companies.
Introduction The Covid-19 pandemic has had divergent effects on the consolidation activity of the healthcare industry. It has accelerated and decelerated its process with varying levels of change. However, it is important to note that the onset of the pandemic serves as a mere disturbance to a phenomenon that has been occurring for almost two decades (Scheffler and Alexander, 2021, p. 1). In the United States, the hospital industry has been consolidating the healthcare market since 2010. Multiple studies have attempted to evaluate how this consolidation affects the quality of healthcare provided to patients. Conceptually, it is expected that any mergers and acquisition is attempted at bolstering service provision (Numerof, 2020, p. 3; Su, 2017, p. 7; Postma and Roos, 2015, p. 3; Fitzpatrick, 2019, p. 3; Cerezo-Espinosa de Los Monteros et al., 2021, p. 2). However, as the studies suggest, the impacts are varied depending on the type of merger or acquisitions drafted. The following paper will present a case for mergers and acquisitions in healthcare before and after the Covid-19 pandemic.
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Although merger and acquisition are used interchangeably, different economic implications surround the two. (Piesse et al., 2013, p. 412; Soundarya, Lavanya, and Hemalatha, 2019, p. 70) define acquisition as an activity by which an acquiring firm takes control of over 50% of the equity of a target firm. On the other hand, a merger involves at least two firms that combine their resources to form a new legal entity (Malik et al., 2014, p. 522; Chui and Ip, 2017, p. 2). Both activities are a key part of maintaining a business and eliminating competition. There are multiple types of acquisitions. The following are the most common: vertical acquisition, horizontal acquisition, conglomerate acquisition, and market extension acquisitions (Herger and Mccorriston, 2016). Vertical acquisition is the most common type of acquisition. It involves purchasing another company by a company that differs in the supply chain level (Kedia, Ravid, and Pons, 2011, p. 845; Kedia, Ravid and Pons, 2009, p. 7). This acquisition is either of a higher or lower company than the acquiring company, hence the vertical reference.
In horizontal acquisition, there is no reference to the supply chain; instead, the companies participating in this activity belong to the same industry (Bhattacharyya and Nain, 2011, p. 97; Brekke, Siciliani and Straume, 2017, p. 1065). They are often aimed at eliminating competition. Conglomerate acquisition occurs when a company buys out another company that deals in a very differentiated industry (Panigrahi, Mansinghka, and Gupta, 2020, p. 127). Market extension acquisition is similar to a horizontal acquisition (Brueller, Carmeli, and Drori, 2014, p. 2). Companies acquire similar-sized but different industry players. The dominant role is to extend markets for other products. Mergers share the same type of traits in their acquisition process. The three main types include horizontal, vertical, and conglomerate.
Historically, pharmaceutical companies have often strived to pursue M&A primarily for value creation (Zweiphenning, 2016, p. 2). (Cooper et al., 2019, p. 2) noted that between 2007 and 2011, hospital mergers and acquisitions saw their overall prices increase by up to 6%. A similar study by (Dafny, Ho, and Lee, 2019, p. 7) over the period between 1996 – and 2012 showed a similar increase in prices by up to 9%. Other studies have also shown similar results (Nazarova, 2018, p. 21; Li and Yu, 2018, p. 4; Bosis and Herrmann, 2019, p. 10). Given the rapid increase in prices and value creation for these hospitals, more industry players became willing to form mergers to maximize profits. A report compiled by (Ascher et al., 2020, p. 3) showed this increase in M&A
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over the years. The report estimated that deals drew since the start of this century amount to over $414 billion as of 2019. In essence, the pharmaceutical M&A has more than doubled since 2005.
Figure 1 Bar Graph shows deal count since 2000. Source (Ascher et al., 2020, p. 21)
Figure 2: Value of the indicated deals over the years. Source (Ascher et al., 2020, p. 21)
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Figure 3: Number of M&A deals in the pharmaceuticals sector from 1995 to 2020. Source (Statista Research Department, 2020) As the world continues to reel over the impact of Covid-19, M&A during the same period saw an unprecedented increase. According to (Landi 2021, p. 1), as of the close of the financial year 2021, there were expected to be more than 3000 transactions involving acquisitions. This presented a 25% increase in comparison to the period before. (Levine, Rao, and Wol, 2021, p. 2) noted that companies that were involved in programmatic acquisition achieved higher in terms of total returns to the shareholders. This was especially true for large public healthcare companies that adopted M&A to deliver higher rates of total returns.
Figure 4: Quarterly value of U.S healthcare M&A transaction for the period leading up to the pandemic Source (Landi, 2021, p. 1)
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One of the primary reasons for the increased M&A activity in the pharmaceutical sector during the covid period is that most of the blockbuster drugs that define the early 2000s are going off patent. Most pharmaceutical companies seek to maintain their returns rates by leveraging on price through mergers (Feldman, 2021, p.1). Another reason for the increased M&A activity is the need for research and development (Richman et al., 2016, p. 788). The covid-19 pandemic has necessitated the consolidation of resources by the creation of contract research organizations mostly led by the pharmaceutical industry to combat it (LaPointe, 2021, p. 5). Most of the administrations across the globe have outsourced the search for Coronavirus vaccine and treatment to pharmaceutical companies. They have since expanded operations to include R&D. 2021 saw some of these ambitions executed; Thermo Fisher, a leading industry in the production of laboratory equipment and Covid-19 test kits, acquired CRO PPD for US$21 billion (Reiss and Deyong, 2021). CRO PPD is a global research organization that provides integrated drug development.
Conclusion All healthcare organizations have at some point held talks over possible acquisitions and mergers with their counterparts. The need to change and evolve their business models is limited to value creation and incentives for their blockbuster drugs going off patent. The last decade saw a steady rise in the number of M&A acquisitions for companies seeking to create value for their services. However, this number was lower compared to the mergers that have been made during the pandemic period. This period saw an increase in the demand for R&D as many pharmaceutical companies rushed to meet deadlines set by management. Given the urgency of the situation, more companies were willing to consolidate their resources to meet deadlines. Multiple types of research have supported the analogy that Mergers improved the overall running of the business and service provision. Merged companies had the best practices and capabilities as compared to those that opted out of the strategy. As we emerge from the crisis, there is a need for all healthcare companies to consolidate some of their activities to provide better services. For example, new trends such as digital adoption and migration have been the highlight of many business models today. The healthcare industry ought to adopt a digital health platform and tool that will make service provision faster and cheaper as they are run from one pool.
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21. A number of global biotech and pharma M&A deals 1985-2020 (2020) Statista. Available at: https://www.statista.com/statistics/965888/number-biotechnology-pharmaceutical-mandadeals/ (Accessed: 21 January 2022). 22. Numerof, R. (2020) Covid-Induced Hospital Consolidation: What Are The Impacts On Consumers,
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Central Bank Digital Currency: A Future of Digital Wallet By: Dhruv Parikh (Narayana Business School)
What is Central Bank Digital Currency: As and when time is evolved on contrary money also evolved like in the ancient India where for the transaction purpose, Barter system was available after that Coins like aluminum and gold coin was used after that Cash and coins followed by NEFT,RTGS,SWIFT and than comes digital wallet and UPI and Now what it was trending is Central Bank digital currency (CBDC). CBDC recently emerged as debatable topic amongst community of people belong to or have some interest in Economics and Finance field .CBDC is an electronic form of country’s currency (In India we can say Digital Rupee, In US-Digital Doller) that citizen can use to make digital payments. CBDC is issued only by central bank of respective country and it is universally accessible. Talking about India in the recent Union Budget presented on 1st February 2022 by our Honorable Finance Minister Nirmala Sitaraman ji also mentioned that central bank, institutions and government are doing research and analysis on introducing a new form of digital money and its impact on country’s Monetary policy and Fiscal policy. Why CBDC is comes in news again and again? As we know that from past many years especially from the covid times Crypto currencies has wider their scope in financial market as crypto’s in India not legal and it was not for the payments of goods and services but Crypto Currencies are available as Investment purpose In India. But when talking about Crypto currencies they do not have any regulator also there is no data set of transaction like who give how many cryptos to whom? So due to this it will create a dark room where no one can able to see each other and there is possibility that Crypto currencies might be use for unethical purpose which in turn harmful for country’s financial, economic and Security purpose. Due to which Central bank was realized that they need to enter in digital currency space otherwise if private players become dominant it will very difficult for central bank to control country’s financial system. Also Crypto market sometimes extremely volatile and due to no regulator for crypto market sometimes investors suffering from massive loss, so to protect the citizen’s money this CBDC concept was evolved. So on contrary while CBDC is legal by Government and regulated by Central Bank meaning anyone can use them for buying good and services. How CBDC Work? Like what we used to for cryptocurrencies a underlying distributed ledger technology to create digital ledger, in simple terms A blockchain technology will help in proper management of CBDC. Also In India Respective filed expert is analyzing pros and cons and all the in and out of Block chain technology so it will be better and protecting version of CBDC in India.
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Types of CBDC: Talking about types of CBDC there is mainly 2 types of CBDC. 1) Retail CBDC: As name suggest Retail CBDC is used by individual person through mobile application or whichever technology will evolved which will denote their balances and transaction history. 2) Wholesale CBDC: Wholesale CBDC is used by financial institutions or for Banks who have deposits in Central bank of a country, it is used for inter organization payments we can say B2B payments. Tier of CBDC: There is two types of Tier in the CBDC system. 1)One tier: In this type there is no role of Commercial banks, account holder need to have account directly with central bank of a country, so by doing this RBI can monitor each and every transaction whenever they want. There is no Middle Institute is involved. It will disrupt the banking system 2)Two Tier:-While talking about two tier there is a involvement of Commercial bank where account holder need to have account with commercial bank as finance intermediary, so it will be not disrupt banking system but Central bank has the authority to monitor all about Digital currency. Advantages of Establishing Digital Currency:1)Monetary policy transmission: It is very easy for Central bank can track how much money is floating in an Economy or a country. 2)Control tax avoiders: In a country like India where too few people is paying tax due to which the income for government is very less by establishing CBDC RBI can watch or track that what is the actual income and expenditure of a person. Help in preventing big scam and big correction in an economy. 3)Protection of Money: In past many years we saw that commercial bank become bankrupt it will result in the people loose their money or their money which they gave to bank and now their value of money become zero. So by establishing CBDC people are aware about that their value of money is safe. 4)RBI is incur around 4000 Crore to 5000 Crore by printing the money and every country central bank also incurring near by value so by issuing CBDC country’s central bank can save the cost. Disadvantages of Establishing CBDC: 1)Raise Privacy issue: As Central bank of a country can monitor each and every transaction it will raise the privacy issue also a strongest security layers failed against hacker due to new innovation in technology also comes with loopholes in the same, so sometimes it might be possible that hacker can steel the data and sell it in dark market. 2)Disrupt Banking system:-If Central bank do not want much more complexity and make it easy for them, they will apply one tier CBDC by doing that there is no more importance is exist for commercial bank it will create more and more unemployment. Suppose even though Central bank
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establish two tier CBDC system in which also Central bank has major role as protection of money is the responsibility of Central bank. Research and development in CBDC:
Currently 87 countries are exploring CBDC some of them already established the CBDC system. Above is the tracking of progress of CBDC in the world. Left hand side are the legends and particularly talking about India is one of the 16 countries who are in development phase.
Conclusion: CBDC become reality soon. Introducing CBDC help in boosting economic growth and platforms for more transparency. It will become one of the main concept in Finance and Economic field and it is a future of Finance. One of the key advantage of CBDC in comparison to Crypto currencies is CBDC have regulator and that is Central bank of the country and every central bank will always take steps which will expand the growth of the country.
Reference 1.
https://www.atlanticcouncil.org/cbdctracker/
2.
https://economictimes.indiatimes.com/topic/central-bank-digital-currencies
3.
https://www.atlanticcouncil.org/cbdctracker/
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