📋 Group Discussion (GD) Analysis Guide: Should Governments Create National Digital Currencies to Reduce Financial Exclusion?

🌐 Introduction to the Topic

Opening Context: Financial exclusion remains a pressing global issue, with approximately 1.4 billion people unbanked. The emergence of digital currencies has sparked debates on whether governments should introduce their own digital currencies to enhance financial inclusion.

Topic Background: National digital currencies, or central bank digital currencies (CBDCs), are digital forms of a country’s fiat currency, managed and issued by central banks. Countries like China and the Bahamas have pioneered CBDCs, showcasing their potential for increasing access to formal financial systems.

📊 Quick Facts and Key Statistics

• 🌍 Unbanked Population: Approximately 1.4 billion globally, with about 130 million in India—highlighting the potential reach of digital currencies.
• 💳 Bahamas’ Sand Dollar: World’s first CBDC launched in 2020, targeting 90% coverage in remote areas.
• 📈 Digital Payment Adoption: Over 11.5 billion UPI transactions in India monthly – reflects the appetite for digital solutions.
• 📚 Financial Literacy Gap: 47% of adults globally lack financial literacy – a significant barrier to CBDC adoption.
• 🌐 Global CBDC Projects: 130 countries exploring CBDCs (IMF, 2024) – signifies a worldwide shift.

🤝 Stakeholders and Their Roles

• 🏛️ Government and Central Banks: Issue and regulate the currency, ensure stability, and promote adoption.
• 💻 Tech Companies: Provide infrastructure for secure and scalable CBDC platforms.
• 👥 Citizens: End-users whose adoption will determine success.
• 🌐 Global Organizations (e.g., IMF, World Bank): Offer guidelines and frameworks for implementation.

🏆 Achievements and Challenges

✨ Achievements:

• 📈 Financial Inclusion: The Sand Dollar in the Bahamas demonstrated increased access for rural populations.
• 💸 Cost Reduction: CBDCs reduce dependency on cash, saving printing and logistical costs.
• 🚀 Innovation in Payments: CBDCs enable instantaneous, low-cost cross-border transfers.
• 🔍 Transparency: Digital records can curb tax evasion and fraud.

⚠️ Challenges:

• 🔒 Cybersecurity Risks: Cases like the 2022 AIIMS cyberattack highlight vulnerabilities.
• 📚 Digital Literacy Gaps: Low awareness and tech skills in underserved areas can hinder adoption.
• 🛡️ Privacy Concerns: Fear of surveillance and misuse of transaction data.

🌍 Global Comparisons:

• 🇨🇳 China’s Digital Yuan: Covers over 260 million users but faces privacy concerns.
• 🇳🇬 Nigeria’s eNaira: Adoption lagged due to mistrust and lack of infrastructure.

Case Study: India’s UPI system has laid a strong foundation for potential CBDC success.

💬 Structured Arguments for Discussion

Supporting Stance: “Governments issuing CBDCs can democratize financial systems and enhance access for marginalized groups.”

Opposing Stance: “Introducing CBDCs without addressing infrastructure gaps could widen financial inequalities.”

Balanced Perspective: “CBDCs have transformative potential but must be accompanied by robust literacy and privacy safeguards.”

🗣️ Effective Discussion Approaches

✨ Opening Approaches:

• 📊 “With approximately 1.4 billion unbanked globally and about 130 million in India, CBDCs present a pathway to financial inclusion.”
• 📉 “While the Sand Dollar improved access in remote Bahamas, Nigeria’s eNaira faced adoption hurdles.”
• ❓ “Should privacy concerns outweigh the benefits of CBDCs in achieving financial inclusion?”

🔄 Counter-Argument Handling:

• 💡 Acknowledge cybersecurity concerns, propose blockchain-based safeguards.
• 💡 Highlight successful models like the Sand Dollar to counter skepticism.

📑 Strategic Analysis of Strengths and Weaknesses

• ✔️ Strengths: Reduces cash dependency, enhances transaction transparency.
• ❌ Weaknesses: Requires robust digital infrastructure, vulnerable to cyberattacks.
• 📈 Opportunities: Global leadership in financial innovation, integration with fintech for growth.
• ⚠️ Threats: Privacy backlash, inequitable access due to literacy gaps.

🎓 Connecting with B-School Applications

• 📚 Real-World Applications: CBDCs as a focus area for operations and fintech innovation, opportunities in public policy internships on financial inclusion.
• 🧩 Sample Interview Questions:
  • 💭 “How can India ensure privacy while implementing CBDCs?”
  • 💭 “What lessons can India learn from the eNaira and Digital Yuan experiences?”
• 💡 Insights for Students:
  • 📖 Integrate CBDC themes into fintech projects.
  • 📖 Analyze case studies of successful and failed implementations.