Note4Students
From UPSC perspective, the following things are important :
Prelims level: WPI and CPI, MPC inflation targeting framework etc
Mains level: Paper 3- Role of MPC and inflation targeting issue
The article analyses the challenge faced by the Monetary Policy Committee in wake of a pandemic where falling growth is accompanied by the rising inflation.
Dilemma with inflation targetting in pandemic
- After the RBI’s adoption of a flexible inflation targeting framework from August 2020, it became even more focused on anchoring inflation and inflation expectations than ever before.
- But the COVID pandemic has created a dilemma for the RBI.
- Higher-than-anticipated inflation compelled the monetary policy committee (MPC) to hold policy rates despite the contraction in April-June GDP by 23.9 per cent.
CPI vs. WPI: Which should be focused for inflation targeting?
- Inflation-targeting framework based on one narrow nominal consumer price index (CPI) has highlighted the challenges of conducting monetary policy in a severe growth shock scenario.
- Inflation targeting is particularly challenging if it coincides with a sharp increase in headline CPI inflation as in the current period.
- The current framework has led to an excessive and obsessive emphasis on point CPI estimates, at the cost of ignoring other indicators.
- WPI core inflation, which essentially represents the manufacturing sector, is below 1 per cent but this does not find much mention.
- This is strange because ultimately, the GDP deflator is calculated using both CPI and WPI inflation, with the latter having a greater weight.
- This should be taken into consideration, while reviewing the existing monetary policy framework.
- Given the composition of the current CPI basket, RBI’s monetary policy actions can at best impact only 41.35 per cent of the overall items.
- Food and beverages, fuel items, gold and silver tobacco/intoxicants are items over which the RBI does not have any control.[58.65 per cent of the overall items]
This is a different time
- In normal times, a sustained increase in food and fuel prices can lead to a generalised increase in prices.
- But this argument is not valid in the current context where a large number of people have lost their jobs or have seen fall in incomes.
- In the current context, higher food and fuel prices would lead to reduction in expenditure on discretionary items.
- So there will be only a relative shift in prices, without any fear of a generalised spiral, as households will not be in any position to demand higher wages to compensate for the increase in prices of food and fuel items.
- Given the amount of slack in the economy, a scenario of sustained generalised increase in prices seems unlikely over the next 6-9 months.
How to measure the success of inflation targeting
- The CPI inflation targeting framework has helped to reduce inflation expectations during FY17-FY21 on average (9.3 per cent) compared to the previous period of FY12- FY16 (12.8 per cent).
- However, the gap between inflation expectations and actual CPI inflation has remained unchanged at 5.1 per cent during these two periods.
- The success of the inflation-targeting framework should not only be judged by the actual CPI inflation trend, but also in terms of gap between the two.
How RBI performed without inflation targeting framework in the past
- Even without any formal inflation-targeting framework, India had successfully managed to keep inflation low during FY02-FY06.
- The RBI’s stance then was based on a multiple-indicator approach to conduct monetary policy.
- First factor that made it possible was the increase in minimum support prices of food-grains was kept below 3 per cent on average.
- Second factor was the composition of growth which was better during this period with investment growth surpassing consumption growth by several percentage points.
- It is for this reason that CPI inflation remained contained at 4 per cent on average during this period even with 7 per cent real GDP growth.
Risk of structural increase in inflation
- In the current cycle, investment growth is likely to be impacted more severely than consumption growth.
- Given the acute weakness in the demand side of the economy, persistent problems in the real estate sector, continued deleveraging of the NBFC sector and significant job losses structural increase in inflation is limited.
What should be the policy response
- The scope for rate cuts remains dim in the near-term.
- But the RBI to remain active with a host of unconventional measures, which will likely include more proactive bond purchases to ensure that market interest rates do not rise significantly due to fiscal and market borrowing-related concerns.
Conclusion
Given the prevailing unholy mix of growth and inflation, it is tempting to categorise India’s economic situation as one of “stagflation”. But, in our view, it is too early to conclude decisively on this matter, given the fluid nature of things.
Back2Basics: Inflation expectations
- Inflation expectations are what people expect future inflation to be, and they matter because these expectations actually affect people’s behavior.
- If people expect inflation to be lower and they act on those beliefs, they could, in fact, cause inflation to be lower.
- If businesses expect lower inflation, they may raise prices at a slower rate; they don’t want the prices of their items to look too out of line with those of their competitors.
- If workers expect lower inflation, they may ask for smaller wage increases.
- The combination of businesses and workers acting in this manner will result in the economy experiencing lower inflation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Provision in labour codes
Mains level: Paper 2- Provisions for gig workers and platform workers in the labour codes
The article examines the provision made for the platform workers and the gig workers in the labour codes passed by the Parliament recently and explains the issues with it.
Context
- The three new labour codes passed by Parliament recently acknowledge platform and gig workers as new occupational categories in the making.
Definition issue
- The specific issues of working in factories, the duration of time needed on a factory floor, and associated issues are recognised as the parameters for defining an ideal worker.
- The Code on Wages, 2019, tries to expand this idea by using ‘wages’ as the primary definition of who an ‘employee’ is.
- Yet, the terms ‘gig worker’, ‘platform worker’ and ‘gig economy’ not defined with in connection with their wages.
- The new Code on Social Security allows a platform worker to be defined by their vulnerability — not their labour, nor the vulnerabilities of platform work.
Issues with the code
- Since the laws are prescriptive, what is written within them creates the limits to what rights can be demanded, and how these rights can be demanded.
- Platform delivery people can claim benefits, but not labour rights.
- This distinction makes them beneficiaries of State programmes.
- This does not allow them to go to court to demand better and stable pay, or regulate the algorithms that assign the tasks.
- This also means that the government or courts cannot pull up platform companies for lapses[ ex. choice of pay, work hours etc].
Benefits with no guarantee
- In the Code on Social Security, 2020, platform workers are now eligible for benefits like maternity benefits, life and disability cover, old age protection, provident fund, employment injury benefits, and so on.
- None of these are secure benefits.
- This means that from time to time, the Central government can formulate welfare schemes that cover these aspects of personal and work security, but they are not guaranteed.
- Actualising these benefits will depend on the political will at the Central and State government-levels and how unions elicit political support.
- The language in the Code is open enough to imply that platform companies can be called upon to contribute either solely or with the government.
Consider the question “What are the provisions for gig workers and platform workers in the new labour code? What are the issues with the provision?”
Conclusion
The ‘platform worker’ identity has the potential to grow in power and scope, but it will be mediated by politicians, election years, rates of under-employment, and large, investment- heavy technology companies that are notorious for not complying with local laws.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: H-1B term
Mains level: Paper 2- H-1B visa issue
Trump administration’s two moves on the visa could have implication for both India and corporate America. It needs to be seen whether the situations will remain the same after the Presidential elections in the U.S.
Context
- The U.S. President announced a hike in the salaries for those arriving in the U.S. on H-1B or skilled-worker visas.
Implications for India
- This hike is expected to cut visa applications by around 33%.
- Trump administration has in its earlier executive actions banned the issuance of new skilled worker visas and new green cards.
- India’s export of services to the U.S. is estimated to be at $29.6 billion in 2018, 4.9% more than in 2017, and 134% more than 2008 levels.
- The U.S. has been issuing 85,000 H-1B visas annually, of which 20,000 are given to graduate students and 65,000 to private sector applicants, approximately 70% of which are granted to Indian nationals.
- The visa issuance ban, combined with the mandatory salary floor soon to be instituted, will seriously hit U.S. imports of services from India.
Criticism of the move
- A federal judge in the Northern District of California blocked the enforcement of the new visa ban, ruling that the President “exceeded his authority” under the U.S. Constitution.
- Google CEO hit out at the ban, saying, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”
Consider the question “What makes the H-1B visa important for India? What are the implications of the recent rise in the salary floor by the U.S. for the visa on India?”
Conclusion
While the ban and floor limit on salary come in the election milieu, India should prepare for the after election scenario.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Right to Protest
Mains level: Right to Protest and restrictions over it
The Supreme Court has found the indefinite “occupation” of a public road by the Shaheen Bagh protestors unacceptable.
Right to Protest
- The right to protest is the manifestation of the right to freedom of assembly, the right to freedom of association, and the right to freedom of speech.
- The Constitution of India provides the right of freedom, given in Article 19 with the view of guaranteeing individual rights that were considered vital by the framers of the constitution.
- The Right to protest peacefully is enshrined in Article 19(1) (a) guarantees the freedom of speech and expression; Article 19(1) (b) assures citizens the right to assemble peaceably and without arms.
- Article 19(2) imposes reasonable restrictions on the right to assemble peaceably and without arms.
What did the Court say?
- The court said the protest, considered an iconic dissent mounted by mothers, children and senior citizens of Shaheen Bagh against the Citizenship (Amendment) Act, became inconvenient to commuters.
- The judgment upheld the right to peaceful protest against the law but made it unequivocally clear that public ways and public spaces cannot be occupied, and that too indefinitely.
- Democracy and dissent go hand in hand, but then the demonstrations expressing dissent have to be in designated places alone.
- The present case was not even one of the protests taking place in an undesignated area but was a blockage of a public way which caused grave inconvenience to commuters.
Reasonable restrictions do exist in practice
- Fundamental rights do not live in isolation. The right of the protester has to be balanced with the right of the commuter. They have to co-exist in mutual respect.
- The court held it was entirely the responsibility of the administration to prevent encroachments in public spaces.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRISPR, Cas9
Mains level: Gene Editing
French-American duo Emmanuelle Charpentier and Jennifer Doudna have been awarded the 2020 Nobel Prize for the chemistry of CRISPR, which allows scientists to ‘cut-paste’ inside a genetic sequence.
Try this PYQ:
Q.What is Cas9 protein that is often mentioned in news?
(a) A molecular scissors used in targeted gene editing
(b) A biosensor used in the accurate detection of pathogens in patients
(c) A gene that makes plants pest-resistant
(d) A herbicidal substance synthesized in genetically modified crops
The CRISPR technology
- The CRISPR is an acronym for Clustered Regularly Interspaced Short Palindromic Repeats, developed in the year 2012
- CRISPR has made gene editing very easy and simple, and at the same time extremely efficient.
- The technology works in a simple way — it locates the specific area in the genetic sequence which has been diagnosed to be the cause of the problem, cuts it out, and replaces it with a new and correct sequence that no longer causes the problem.
- The technology replicates a natural defence mechanism in some bacteria that use a similar method to protect itself from virus attacks.
Working of CRISPR
- An RNA molecule is programmed to locate the particular problematic sequence on the DNA strand.
- A special protein called Cas9, often described in popular literature as ‘genetic scissor’, is used to break and remove the problematic sequence.
- A DNA strand, when broken, has a natural tendency to repair itself. But the auto-repair mechanism can lead to the re-growth of a problematic sequence.
- Scientists intervene during this auto-repair process by supplying the desired sequence of genetic codes, which replaces the original sequence.
- It is like cutting a portion of a long zipper somewhere in between and replacing that portion with a fresh segment.
- Because the entire process is programmable, it has a remarkable efficiency and has already brought almost miraculous results.
Uses of CRISPR
- There are a whole lot of diseases and disorders, including some forms of cancer, that are caused by an undesired genetic mutation.
- These can all be fixed with this technology. There are vast applications elsewhere as well. Genetic sequences of disease-causing organisms can be altered to make them ineffective.
- Genes of plants can be edited to make them withstand pests, or improve their tolerance to drought or temperature.
Ethical concerns
- In November 2018, a Chinese researcher in Shenzen created an international sensation with his claim that he had altered the genes of a human embryo that eventually resulted in the birth of twin baby girls.
- This was the first documented case of a ‘designer babies’ being produced using the new gene-editing tools like CRISPR.
- What made matters worse was that the gene-editing was probably done without any regulatory permission or oversight.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Mascerene High, Global Warming Hiatus (GWH)
Mains level: Impact of global warming on Indian Monsoon
A new study on variability in the Mascarene High (MH) in the Southern Indian Ocean during global warming hiatus (GWH) has revealed that the region experienced significantly increased sea surface temperature (SST) during this period (1998-2016).
Try this PYQ:
Q.With reference to Ocean Mean Temperature (OMT), which of the following statements is/are correct? (CSP 2020)
- OMT is measured upto a depth of 26 degree Celsius isotherm which is 129 meters in the south-western Indian Ocean during January-March.
- OMT collected during January-March can be used in assessing whether the amount of rainfall in monsoon will be less or more than a certain long-term mean.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
What is Global Warming Hiatus (GWH)?
- A global warming hiatus is referred to a global warming pause, or a global warming slowdown, which is a period of relatively little change in globally averaged surface temperatures.
- The hiatus, however, can result in an increase in the SST.
What is Mascarene High (MH)?
- The Mascarene High (MH) is a semi-permanent subtropical high-pressure zone in the South Indian Ocean.
- It is also called the Indian Ocean subtropical high, which is a high-pressure area located between 20° to 35° South latitude and 40° to 90° East longitude.
- It is a region from where the cross-equatorial winds blow to India.
- It has been named after the Mascarene Islands, in the Indian Ocean east of Madagascar consisting of the islands belonging to Mauritius as well as the French Réunion Islands.
- Apart from its large influence on African and Australian weather patterns, it also helps in driving the inter-hemispheric circulation between the Indian Ocean in the south and subcontinental landmass in the north.
Role of MH
- The warming in SST due to global warming has resulted in a decrease in the pressure gradient between the MH and the Indian landmass.
- This in turn suppressed the intensity of low-level cross-equatorial winds over the western Indian Ocean affecting the onset of the monsoon over the Indian subcontinent and rainfall over East Asia.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Stockholm Convention, POPS
Mains level: POPs: Its threats and regulatory measures
The Union Cabinet has approved the Ratification of seven chemicals listed under the Stockholm Convention on Persistent Organic Pollutants (POPs).
Stockholm Convention
- It is a global treaty to protect human health and environment from POPs, which are identified chemical substances that persist in the environment, bio-accumulate in living organisms, adversely affect human health/ environment and have the property of long-range environmental transport (LRET).
Key Provisions: The provisions of the Convention require each party to:
- Prohibit and/or eliminate the production and use, as well as the import and export, of the intentionally, produced POPs that are listed in Annex A to the Convention
- Restrict the production and use, as well as the import and export, of the intentionally, produced POPs that are listed in Annex B to the Convention
- Reduce or eliminate releases from unintentionally produced POPs that are listed in Annex C to the Convention
- Ensure that stockpiles and wastes consisting of, containing or contaminated with POPs are managed safely and in an environmentally sound manner
Do you know?
The Global Environment Facility (GEF) serves as a financial mechanism for the following conventions:
- Convention on Biological Diversity (CBD)
- United Nations Framework Convention on Climate Change (UNFCCC)
- UN Convention to Combat Desertification (UNCCD)
- Stockholm Convention on Persistent Organic Pollutants (POPs)
- Minamata Convention on Mercury
What are POPs?
- Persistent organic pollutants (POPs), sometimes known as “forever chemicals” are organic compounds that are resistant to environmental degradation through chemical, biological, and photolytic processes.
- Because of their persistence, POPs bioaccumulate with potential adverse impacts on human health and the environment.
- Many POPs are currently or were in the past used as pesticides, solvents, pharmaceuticals, and industrial chemicals.
- Although some POPs arise naturally (e.g from volcanoes), most are man-made via total synthesis.
Threats of POPs
- Exposure to POPs can lead to cancer, damage to central & peripheral nervous systems, diseases of the immune system, reproductive disorders and interference with normal infant and child development.
India’s actions on POPs till now
- The MoEFCC had notified the ‘Regulation of Persistent Organic Pollutants Rules, on March 5, 2018, under the provisions of Environment (Protection) Act, 1986.
- The regulation prohibited the manufacture, trade, use, import and export seven chemicals which were already listed as POPs under Stockholm Convention-
- Chlordecone
- Hexabromobiphenyl
- Hexabromodiphenyl ether and Heptabromodiphenylether (Commercial octa-BDE)
- Tetrabromodiphenyl ether and Pentabromodiphenyl ether (Commercial Penta-BDE)
- Pentachlorobenzene
- Hexabromocyclododecane and
- Hexachlorobutadiene
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kasturi Cotton Brand
Mains level: Not Much
Now India’s premium Cotton would be known as ‘Kasturi Cotton’ in the world cotton trade.
Kasturi Cotton
- It is the first-ever Brand and Logo for Indian Cotton on Second World Cotton Day.
- The Kasturi Cotton brand will represent Whiteness, Brightness, Softness, Purity, Luster, Uniqueness and Indianness.
Do you know?
- Cotton is one of the principal commercial crops of India and it provides livelihood to about 6.00 million cotton farmers.
- India is the 2nd largest cotton producer and the largest consumer of cotton in the world.
- India produces about 6.00 Million tons of cotton every year which is about 23% of the world cotton.
- India produces about 51% of the total organic cotton production of the world, which demonstrates India’s effort towards sustainability.
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