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Editorials/Opinions Analysis For UPSC 08 October 2022


Editorials/Opinions Analysis For UPSC 08 October 2022


Contents

  1. ‘Everything app’; what is it?
  2. Rising inflation and large USD currency reserves

‘Everything App’; What Is It?


Context

Elon Musk recently tweeted that buying Twitter is a step toward creating X, the all-encompassing app. The concept of a “everything app,” also known as a “super app,” is extremely popular in Asia, and tech companies all over the world are attempting to replicate it.

Relevance

GS Paper 3: Science and Technology

Mains Question

What exactly is the Everything App? What are the issues with this app? Examine the future prospects of apps in human life (150 Words)


Super app

  • A super app, also known as a “everything app” by Musk, provides users with a variety of services such as messaging, social networking, peer-to-peer payments, and e-commerce shopping.
  • In other words, a super app is a platform created by a company that offers a variety of services under one roof.
  • A mall, which allows retail space to various brands and shops across businesses and verticals, is a physical world comparison of a super app.

Some examples of fantastic apps

  • China’s WeChat, which began as a messaging app and has since expanded into payments, shopping, food ordering, and cab services, has become a super app.
  • According to one estimate, it has more than 1 billion monthly users and is a part of daily life in China.
  • Grab, Southeast Asia’s leading super app, provides food delivery, ride-hailing, on-demand package delivery, and financial services and investing.
  • Companies that have a plethora of services and products to offer typically consolidate these offerings into a super app.
  • The concept first appeared in China and Southeast Asia, where internet companies such as WeChat, GoJek, and Grab capitalised on customer traffic on their platforms.

Which Indian companies are creating super apps?

  • The Tata Group will join India’s already crowded super app ecosystem.
  • Currently, Reliance Industries is consolidating various services and offerings under the Jio umbrella.
  • Paytm has also combined services such as payments, ticket bookings, games, online shopping, banking, consumer finance, and so on into a single app.
  • PhonePe, a payment app owned by the Flipkart Group, has partnered with companies such as Ola Cabs, Swiggy, Grofers, AJio, Decathlon, Delhi Metro, booking.com, and others to provide these services from within its own app.

Why do Indian firms want to create super-apps?

  • A country or region becomes super app-ready when its large population uses smartphones first rather than desktops and the ecosystem of apps tailored to local needs has not evolved.
  • India has already become a market where the majority of those accessing the internet for the first time do so via their mobile phones.
  • In addition to increased revenue realisation due to the consolidation of services in one location, such apps provide companies with large swaths of consumer data, which can then be used to learn more about user behaviour.

Superapps cause concern

  • The very idea of a conglomerate attempting to keep a customer within its own ecosystem for most services raises the prospect of a monopoly.
  • This is in addition to privacy concerns in cases where a super app has partnered with third-party service providers.
    • According to experts, the data collected by the master app could be used to train machines in artificial intelligence and predict consumer behaviour even more accurately.
  • It is one of the main reasons why super apps have not taken off in countries such as the United States and the United Kingdom.

Rising Inflation and large USD Currency Reserves


Context

India’s foreign exchange reserves have fallen by $110 billion in the last 13 months as a result of rising inflation, capital outflows, and an appreciating dollar in the foreign exchange market.

Relevance

GS Paper 3:  Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains Question

Investigate the causes of the recent high rate of inflation in the Indian economy. Propose policies to keep inflation within the Reserve Bank of India’s (RBI) tolerance band. (250 Words)


Foreign currency reserves (Forex Reserve)

What exactly is a Forex reserve?

  • Foreign exchange reserves, also known as Forex reserves, are assets held by a central bank or other monetary authority such as foreign currencies, gold reserves, treasury bills, and so on.
    • The Reserve Bank of India (RBI) is the custodian of India’s foreign exchange reserves; it checks balances, influences the foreign exchange rate of its currency, and maintains financial market stability.

Composition of India’s Forex Reserves

  • India’s foreign exchange reserves are divided into four categories:
    • Foreign Currency Holdings
    • Gold
    • SDR
  • The SDR is a type of international reserve asset that the IMF uses for internal accounting purposes.
  • The value of SDR, also known as paper gold, is based on a basket of five currencies: the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
  • Reserve with the International Monetary Fund (also known as reserve tranche position) The difference between the IMF’s holdings of that country’s currency and the country’s IMF-designated quota is known as the reserve tranche position.

Role of the Foreign Exchange Reserve

  • The Foreign Exchange Reserve’s role is to ensure that the RBI has backup funds in the event that their national currency rapidly devalues or becomes completely insolvent.
    • If the value of the rupee falls due to an increase in demand for foreign currency, the RBI sells dollars in the Indian money market to prevent the rupee from depreciating further.
    • A country with a large stock of foreign currency has a positive international image because trading partners can be confident in their payments.
    • A good forex reserve attracts foreign trade and establishes a good reputation with trading partners.

Factors Influencing the Forex Reserve

  • FPI inflows – A higher level of FPI inflows increases the forex reserve.
  • Crude oil price decline – Because India is an oil-importing country, a decline in crude oil prices increases the country’s forex reserves.
  • Import savings – Import reductions increase foreign exchange reserves.
  • FDI inflows – The greater the FDI inflows, the greater the forex reserves.
  • Decrease in gold imports – Gold is a significant component of India’s imports. The decrease in gold imports boosts the currency reserve.
  • Foreign exchange reserves fell to their lowest level since July 2020, marking the ninth week of decline.
  • Forex reserves have fallen from $607 billion at the end of March to $110 billion, down from $642.453 billion on September 3 last year.

Reasons for the drop

  • Rupee defence o The central bank has been selling dollars from the forex kitty to defend the rupee against pressures brought on primarily by global developments.
  • Recently, the rupee fell to a record low of 82.33 per dollar.
    • The rupee is a freely floating currency with a market-determined exchange rate.
    • The Reserve Bank of India intervenes in the market to reduce excessive volatility and anchor expectations.
  • Capital outflows o Capital outflows by foreign portfolio investors are another major reason for the decline in forex reserves (FPIs).
  • FPIs began to withdraw money from Indian markets as the US Federal Reserve tightened monetary policy and raised interest rates.
  • In September, foreign portfolio investors (FPIs) sold Rs 7,643 crore of equity in India.
  • Valuation loss o The valuation loss, which reflected the US dollar’s appreciation against major currencies and the decline in gold prices, also contributed to the decline in foreign exchange reserves.
  • According to the RBI, valuation changes caused by an appreciating US dollar and higher US bond yields accounted for approximately 67% of the decline in reserves during the current fiscal year

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