Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Food inflation in India
Context
Globally, inflation is now the prime concern of governments, even as there is a speculation that a recession may not be far behind.
Is inflation in India driven by the global factors?
- The Governor of the Reserve Bank of India (RBI) has been reported as saying that there was a “need to recognise global factors in inflation”.
- However, the current inflation in India is, even largely, due to global factors is wrong, and harmful.
- While the price of edible oils and the world price of crude may have risen following the Ukraine war, the impact of this development on overall inflation in India, measured by the rise in the consumer price index, would depend upon their share in the consumption basket of households, which is relatively low.
- For the commodity groups ‘fuel and light’ and ‘fats and oils’, chosen as proxies for the price of imported fuel and edible oils, respectively, inflation has actually been lower in the first five months of 2022 than in the last five months of 2021.
- On the other hand, for the commodity group ‘food and beverages’, it was exactly the reverse, i.e., inflation has been much higher in the more recent period.
- Contribution of domestic factors: The estimated direct contribution of this group to the current inflation dwarfs that of all other groups, establishing conclusively that the inflation is driven by domestic factors.
Inadequacy of monetary policy to address the food-price driven inflation
- Issues with the monetary policy: Starting in May, the repo rate has been raised.
- Raising the interest rate in an attempt to control inflation, implicitly assumes that it reflects economy-wide excess demand.
- Such a diagnosis of the current inflation is belied by the fact that the price of food is rising faster than that of other goods i.e., its relative price has risen.
- So, the excess demand is in the market for foodstuff, and it is this that needs to be eliminated.
- The inadequacy of monetary policy to address food-price-driven inflation has been flagged by economists internationally.
- at the World Economic Forum’s annual meet held at Davos, Switzerland in June, Nobel Laureate Joseph Stiglitz observed that raising interest rates is not going to solve the problem of inflation. It is not going to create more food.
- Jerome Powell is reported stating that even though the Fed’s resolve to fight inflation is unconditional, “a big part of inflation won’t be affected by our tools”.
- This is an acknowledgement that there is only so much a central bank can do when battling inflation driven by the rise in energy and food prices.
Way forward
- Need for supply side interventions: To hold on to the view that inflation in India is due to excess aggregate demand curable by raising interest rates ensures that attention is not paid to the necessary supply-side interventions.
Conclusion
India is suffering from undercurrent of a food price inflation, which, by exacerbating poverty, stands in the way of a more rapid expansion of the economy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Indo-Pacific Ocean Initiative
Mains level: Paper 2- India-Vietnam relations
Context
India and Vietnam are celebrating the 50th anniversary of their diplomatic relations.
India-Vietnam relations background
- Commonalities: India’s relations with Vietnam — some of which is based on a set of historical commonalities — predate any conflict between India and China as well as that between China and Vietnam.
- Political and security engagement: As India pursues its ‘Act East Policy’, Vietnam has become a valuable partner in India’s political and security engagements in the Indo-Pacific region.
Growing convergence between India and Vietnam
- Convergence of strategic and economic interests: Bolstering friendship between the two countries is a natural outcome of a growing convergence of their strategic and economic interests, and also their common vision for peace, prosperity and their people.
- Shared strategic concerns: The two countries are working to address shared strategic concerns (such as energy security and open and secure sea lines of communication), and make policy choices without undue external interference.
- Given India’s broadening economic and strategic interests in the region and Vietnam’s desire for strategic autonomy, both countries will benefit from a stronger bilateral relationship.
- Shared apprehension about China: India and Vietnam face territorial disputes with and shared apprehensions about their common neighbour, China.
- Vietnam is of great strategic importance because its position enables it to control ‘the South China Sea — a true Mediterranean of the Pacific’.
- The maritime domain, therefore, has become an essential element of India and Vietnam cooperation.
- More importantly, India sees an open and stable maritime commons being essential to international trade and prosperity; therefore, it has an interest in protecting the sea lanes.
- There are some other potential areas for New Delhi and Hanoi to further deepen collaboration, such as meaningful academic and cultural collaborations, shipbuilding, maritime connectivity, maritime education and research, coastal engineering, the blue economy, marine habitat conservation, and advance collaboration between maritime security agencies.
Four factors responsible for growing maritime engagement with Vietnam
- 1] Countering China: India’s aspiration to counter an assertive China by strengthening Vietnam’s military power.
- 2] Security sea lines: With India’s increasing trade with East and Southeast Asia, India has begun to recognise the importance of its sea lines of communication beyond its geographical proximity; the South China Sea occupies a significant geostrategic and geo-economic position, resulting in India’s renewed interests in the South China Sea.
- 3] Development in maritime domain: India desires to intensify its presence to track potential developments in the maritime domain that could affect its national interests.
- 4] Naval partnership: The Indian Navy underlines the importance of a forward maritime presence and naval partnership that would be critical to deter potential adversaries.
- India’s maritime strategic interests in the region are well established, including the fact that almost 55% of India’s trade with the Indo-Pacific region passes through the South China Sea.
Strategic and defence cooperation
- Ever since the formal declaration of a strategic partnership in 2007 and Comprehensive Strategic Partnership in 2016, the scope and scale of the India-Vietnam strategic and defence cooperation, particularly in the maritime domain, is deepening with a clear vision, institutional mechanisms.
- The signing of ‘Joint Vision for Defence Cooperation’ and a memorandum of understanding on mutual logistics support in June 2022 has further strengthened mutual defence cooperation.
- Enhancing Vietnam’s defence capabilities: While a U.S.$100 million Defence Line of Credit has been implemented, India has also announced early finalisation of another U.S.$500 million Defence Line of Credit to enhance Vietnam’s defence capability.
- New Delhi has also agreed to expand military training and assist the Vietnam Navy’s strike capabilities.
Cooperation in Indo-Pacific region
- India is willing to take a principled stand on territorial disputes in the hope that it contributes to the stabilisation of the Indo-Pacific.
- Such positions align closely with Vietnam’s stance on the management of the South China Sea disputes.
- The two countries are also engaging in wide-ranging practical cooperation in the maritime domain through a maritime security dialogue, naval exercises, ship visits, Coast Guard cooperation, and training and capacity building.
- Working in various frameworks: Both countries have found mutual convergences on cooperation in the Indo-Pacific region and are synergising their efforts to work in bilateral as well as other sub-regional and multilateral frameworks, such as the Indian Ocean Rim Association (IORA), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Mekong-Ganga Cooperation, ADMM-Plus or the ASEAN Defence Ministers Meeting-Plus.
- Both countries are also looking at collaboration around the seven pillars of the Indo-Pacific Oceans Initiative (IPOI).
Conclusion
The road map agreed upon by the leaders will be helpful in addressing common challenges and decisively navigating towards making an India-Vietnam partnership that helps in stability in the Indo-Pacific.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Rupee-Dollar relation
Mains level: Issues with Rupees depreciation
The RBI is prepared to sell a sixth of its foreign exchange reserves to defend the rupee against a rapid depreciation after it plumbed record lows in recent weeks.
Must read:
[Burning Issue] Global Trade in Rupees
Is there a forex crisis underway?
- And the way in which India has tackled foreign exchange crises over the years has been quite profound.
- A forex crisis can be loosely defined as one where the rupee starts depreciating rapidly or when forex reserves slide precipitously.
- Ever since India’s reforms of 1991-92, the external sector has been liberalized, with even full capital account convertibility being considered at one point.
In the rupee’s context, let’s look at options that have been used in the last three decades or so:
(1) Selling dollars
- The first course of action has been selling dollars in the spot forex market.
- This is fairly straightforward, but has limits as all crises are associated with declining reserves.
- While this money is meant for a rainy day, they may just be less than adequate.
- The idea of RBI selling dollars works well in the currency market, which is kept guessing how much the central bank is willing to sell at any point of time.
(2) NRI deposits
- The second tool used is aimed at garnering non-resident Indian (NRI) deposits.
- It was done in 1998 and 2000 through Resurgent India bonds and India Millennium Deposits, when banks reached out asking NRIs to put in money with attractive interest rates.
- The forex risk was borne by Indian banks.
- This is always a useful way for the country to mobilize a good sum of forex, though the challenge is when the debt has to be redeemed.
- At the time of deposits, the rates tend to be attractive, but once the crisis ends, the same rate cannot be offered on deposit renewals.
- Therefore, the idea has limitations.
(3) Let oil importers buy dollars themselves
- The third option exercised often involves getting oil importing companies to buy dollars directly through a facility extended by a public sector bank.
- Its advantage is that these deals are not in the open and so the market does not witness a large demand for dollars on this account.
- It is more of a sentiment cooling exercise.
(4) Let exporters trade in dollars
- Another tool involves a directive issued for all exporters to mandatorily bring in their dollars on receipt that are needed for future imports.
- This acts against an artificial dollar supply reduction due to exporter hold-backs for profit.
(5) Liberalized Exchange Rate
- The other weapon, once used earlier, is to curb the amount of dollars one can take under the Liberalized Exchange Rate Management System.
- This can be for current account purposes like travel, education, healthcare, etc.
- The amounts are not large, but it sends out a strong signal.
(6) Forward-trade marketing
- Another route used by RBI is to deal in the forward-trade market.
- Its advantage is that a strong signal is sent while controlling volatility, as RBI conducts transactions where only the net amount gets transacted finally.
- It has the same power as spot transactions, but without any significant withdrawal of forex from the system.
(7) Currency swaps
- The other tool in India’s armoury is the concept of swaps.
- This became popular post 2013, when banks collected foreign currency non-resident deposits with a simultaneous swap with RBI, which in effect took on the foreign exchange risk.
- Hence, it was different from earlier bond and deposit schemes.
Most preferred options by the RBI
- Above discussed instruments have been largely direct in nature, with the underlying factors behind demand-supply being managed by the central bank.
- Of late, RBI has gone in for more policy-oriented approaches and the last three measures announced are in this realm.
(8) Allowing banks to work in the NDF market
- First was allowing banks to work in the non-deliverable forwards (NDF) market.
- This is a largely overseas speculative market that has a high potential to influence domestic sentiment on our currency.
- Here, forward transactions take place without real inflows or outflows, with only price differences settled in dollars.
- This was a major pain point in the past, as banks did not have access to this segment.
- By permitting Indian banks to operate here, the rates in this market and in domestic markets have gotten equalized.
(9) Capital account for NRI deposits
- More recently, RBI opened up the capital account on NRI deposits (interest rates than can be offered), external commercial borrowings (amounts that can be raised) and foreign portfolio investments (allowed in lower tenure securities), which has the potential to draw in forex over time.
- Interest in these expanded contours may be limited, but the idea is compelling.
(10) Settlement in Rupees
- RBI’s permission for foreign trade deals to be settled in rupees is quite novel; as India is a net importer, gains can be made if we pay in rupees for imports.
- The conditions placed on the use of surpluses could be a dampener for potential transactions.
- But the idea is innovative and could also be a step towards taking the rupee international in such a delicate situation.
- Clearly, RBI has constantly been exploring ways to address our forex troubles and even newer measures shouldn’t surprise us.
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From UPSC perspective, the following things are important :
Prelims level: Asiatic Cheetah
Mains level: Cheetah reintroduction project
India came one step closer to bringing back the world’s fastest animal, the Cheetah to the country with an agreement signed in New Delhi with Namibia.
Asiatic Cheetah
- Cheetah, the world’s fastest land animal was declared extinct in India in 1952.
- The Asiatic cheetah is classified as a “critically endangered” species by the IUCN Red List, and is believed to survive only in Iran.
- It was expected to be re-introduced into the country after the Supreme Court lifted curbs for its re-introduction.
Distribution of cheetahs in India
- Historically, Asiatic cheetahs had a very wide distribution in India.
- There are authentic reports of their occurrence from as far north as Punjab to Tirunelveli district in southern Tamil Nadu, from Gujarat and Rajasthan in the west to Bengal in the east.
- Most of the records are from a belt extending from Gujarat passing through Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Jharkhand and Odisha.
- There is also a cluster of reports from southern Maharashtra extending to parts of Karnataka, Telangana, Kerala and Tamil Nadu.
- The distribution range of the cheetah was wide and spread all over the subcontinent. They occurred in substantial numbers.
- The cheetah’s habitat was also diverse, favouring the more open habitats: scrub forests, dry grasslands, savannahs and other arid and semi-arid open habitats.
What caused the extinction of cheetahs in India?
- The major reasons for the extinction of the Asiatic cheetah in India:
- Reduced fecundity and high infant mortality in the wild
- Inability to breed in captivity
- Sport hunting and
- Bounty killings
- It is reported that the Mughal Emperor Akbar had kept 1,000 cheetahs in his menagerie and collected as many as 9,000 cats during his half-century reign from 1556 to 1605.
- The cheetah numbers were fast depleting by the end of the 18th century even though their prey base and habitat survived till much later.
- It is recorded that the last cheetahs were shot in India in 1947, but there are credible reports of sightings of the cat till about 1967.
Conservation objectives for their re-introduction
- Based on the available evidence it is difficult to conclude that the decision to introduce the African cheetah in India is based on science.
- Science is being used as a legitimising tool for what seems to be a politically influenced conservation goal.
- This also in turn sidelines conservation priorities, an order of the Supreme Court, socio-economic constraints and academic rigour.
- The issue calls for an open and informed debate.
Issues in re-introduction
- Experts find it difficult whether the African cheetahs would find the sanctuary a favorable climate as far as the abundance of prey is concerned.
- The habitat of cheetahs is needed to support a genetically viable population.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Heat waves
Mains level: Read the attached story
The UK posted its highest temperature ever recorded — crossing 40°C. Parts of France, Spain and Portugal recorded temperatures between 42 and 46 degrees.
Why in news?
- Dozens of towns and regions across Europe reeled under what has been described as a “heat apocalypse”, which has caused widespread devastation this year.
- Wildfires caused by a combination of extreme heat and dry weather have destroyed 19,000 hectares of forest in southwestern France.
What is a Heatwave and when is it declared?
- Heatwaves occur over India between March and June.
- IMD declares a heatwave event when the maximum (day) temperature for a location in the plains crosses 40 degrees Celsius.
- Over the hills, the threshold temperature is 30 degrees Celsius.
How are they formed?
- Heatwaves form when high pressure aloft (3,000–7,600 metres) strengthens and remains over a region for several days up to several weeks.
- This is common in summer (in both Northern and Southern Hemispheres) as the jet stream ‘follows the sun’.
- On the equator side of the jet stream, in the upper layers of the atmosphere, is the high pressure area.
- Summertime weather patterns are generally slower to change than in winter. As a result, this upper level high pressure also moves slowly.
- Under high pressure, the air subsides (sinks) toward the surface, warming and drying adiabatically, inhibiting convection and preventing the formation of clouds.
- Reduction of clouds increases shortwave radiation reaching the surface.
- A low pressure at the surface leads to surface wind from lower latitudes that brings warm air, enhancing the warming.
- Alternatively, the surface winds could blow from the hot continental interior towards the coastal zone, leading to heat waves.
Following criteria are used to declare a heatwave:
To declare heatwave, the below criteria should be met at least in 2 stations in a Meteorological subdivision for at least two consecutive days and it will be declared on the second day.
a) Based on Departure from Normal
- Heat Wave: Departure from normal is 4.5°C to 6.4°C
- Severe Heat Wave: Departure from normal is >6.4°C
b) Based on Actual Maximum Temperature (for plains only)
- Heat Wave: When actual maximum temperature ≥ 45°C
- Severe Heat Wave: When actual maximum temperature ≥47°C
How long can a heatwave spell last?
- A heatwave spell generally lasts for a minimum of four days.
- On some occasions, it can extend up to seven or ten days.
Impact of Heat Waves
- Heat Strokes: The very high temperatures or humid conditions pose an elevated risk of heat stroke or heat exhaustion.
- Healthcare crisis: Effects from extreme heat are also associated with increased hospitalisations and emergency room visits, increased deaths from cardio-respiratory and other diseases, mental health issues, adverse pregnancy and birth outcomes, etc.
- Productivity loss: Extreme heat also lessens worker productivity, especially among the more than 1 billion workers who are exposed to high heat on a regular basis.
- Risk of Wildfires: The heat domes act as fuel to wildfires, which destroys a lot of land area every year in countries like the US.
- Prevents Cloud Formation: The condition also prevents clouds from forming, allowing for more radiation from the sun to hit the ground.
- Effect on Vegetation: The trapping of heat can also damage crops, dry out vegetation and result in
- Increased Energy Demands: The sweltering heat wave also leads to rise in energy demand, especially electricity, leading to pushing up rates.
- Power Related Issues: Heat waves are often high mortality disasters.
- Infrastructure failure: Avoiding heat-related disasters depends on the resilience of the electrical grid, which can fail if electricity demand due to air conditioning use exceeds supply.
What is behind the extreme heat waves in Europe?
Ans. Climate change, but exactly how
- Scientists are near-unanimous that the heat waves are a result of climate change caused by human activity.
- Global temperatures have already risen by more than 1°C , and studies in the UK had shown that a one degree rise in temperature raises the probability of the country witnessing 40°C by ten times.
- The rising global temperature, which this year led to deviations above the normal by as much as 15 degrees in Antarctica, and by more than 3 degrees in the north pole.
Major factor: Changes in old wind patterns
- In the case of the US, the record temperatures are being linked to changes in the jet stream — a narrow band of westerly air currents that circulate several km above the earth’s surface.
- While a conventionally strong jet stream would bring cooler air from the northern Atlantic, in recent years the jet stream has weakened and split into two.
- This has led to intense and more frequent heat waves over parts of the American continent.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Micronesia
Mains level: Not Much
The Federated States of Micronesia is one of the latest places on Earth to experience an outbreak of Covid-19, after two and a half years of successfully protecting itself from the virus.
Where is Micronesia?
- FSM is located in the Western Pacific, in the Micronesia sub-region of Oceania.
- It consists of four island states, Yap, Chuuk, Kosrae and Pohnpei (where the capital Palikir is located), all in the Caroline Islands.
- Also known as the Carolines, it is a scattered archipelago of small islands that are divided between Micronesia and the Republic of Palau.
- FSM is composed of 607 islands and islets with a total land area of 702 square km.
Its geography
- While this area is rather small, the islands stretch across an estimated 2,900 sq. km of sea, giving the nation the 14th largest Exclusive Economic Zone (EEZ) in the world.
- EEZs grant countries special right over marine resources up to 370 km from their coasts.
- The Federated States of Micronesia shares its sea borders with other small island nations and territories in the Micronesia region like Guam, the Republic of Marshall Islands, Palau, Kiribati, and the Mariana Islands.
- Its larger neighbouring states — separated by large swathes of the Pacific Ocean — including the Philippines in the west, Hawaii in the east, Papua New Guinea and Australia to the south, and Japan to the north.
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From UPSC perspective, the following things are important :
Prelims level: Tetrapods
Mains level: Not Much
In Mumbai, the unusual vibrations (like earthquakes), coinciding with high-tide times, were the result of the relocation of tetrapods as part of the ongoing Coastal Road Project (MCRP).
What are tetrapods?
- Tetra pod in Greek means four-legged.
- These are four-legged concrete structures that are placed along coastlines to prevent erosion and water damage.
- Tetrapods were first used in France in the late 1940s to protect the shore from the sea.
- They are typically placed together to form an interlocking but porous barrier that dissipates the power of waves and currents.
- These are large structures, sometimes weighing up to 10 tonnes, and interlocked tetra pods act as a barrier that remains stable against the rocks when buffeted by waves.
- Tetrapods, each weighing about 2 tonnes, were placed along Marine Drive in the late 1990s to break and dissipate waves and maintain the reclaimed shoreline in South Mumbai.
How do we know that the removal of the tetrapods was responsible?
- The BMC has provided vibration monitoring instruments at the site to study the impact of the phenomenon.
- While the corporation has not officially stated that the removal of the tetrapods caused the vibrations, it has agreed to re-install the structures.
- They would be put back over the next two-three days during low tide.
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