Inflation accelerates to 7.41%, highest since April
Retail inflation accelerated to a five month high of 7.41% in September, from 7% in August, as food inflation surged sharply to 8.41% last month — the steepest level in 22 months.
- Economists warned that the latest negative surprise could force the Reserve Bank of India (RBI) to opt for further interest rate increases beyond the widely expected 0.5 percentage point increase in the December monetary policy.
- This is the ninth month in a row that inflation has exceeded the 6% upper tolerance threshold mandated for the RBI and would require it to send an explanation to the government on its inability to achieve the price stability target.
- India’s industrial output contracted 0.8% in August, following the 2.2% growth recorded in the preceding month, while overall factory production shrank 2.3% from July 2022.
What are the Reasons for Increasing Inflation in India Lately?
- Inflation in India cannot be described just as ‘cost-push’. Abundance of liquidity has been an important factor.
- The April Monetary Policy statement talked of a liquidity overhang of the order of ₹8.5 lakh crore.
- Beyond a point, inflation itself can hinder growth. Negative real rates of interest on savings are not conducive to growth. If we want to control inflation, action on liquidity is very much needed with a concomitant rise in the interest rate on deposits and loans.
- The high rate of inflation in March 2022 is primarily due to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, etc. owing to disruption in the global supply chain caused by the Russia-Ukraine conflict.
- On the other hand, the retail inflation rose mainly on account of rising prices of essential food items like ‘oils and fats’, vegetables and protein-rich items such as ‘meat and fish’.
- As per the CPI data, inflation in ‘oils and fats’ in March soared to 18.79% as the geopolitical crisis due to the Russia-Ukraine war pushed edible oil prices higher.
- Ukraine is a major exporter of sunflower oil. In vegetables, inflation quickened to 11.64% in March, while in ‘meat and fish’ the rate of price rise stood at 9.63 compared to February 2022.
- The sharp rise in commodity prices across the world is a major reason behind the inflation spike in India. This is increasing the import cost for some of the crucial consumables, pushing inflation higher.
What is Repo rate & CRR?
Repo rate is the interest charged by the RBI when commercial banks borrow from them by selling their securities to the central bank. Essentially it is the interest charged by the RBI when banks borrow from them – much like commercial banks charge you interest for a car loan or home loan.
Under Cash Reserve Ratio (CRR), the commercial banks have to hold a certain minimum amount of deposit as reserves with the central bank. The percentage of cash required to be kept in reserves as against the bank’s total deposits is called the Cash Reserve Ratio.
What is the Impact of Higher Inflation in India?
- Repo Rate:
- It is expected to push up interest rates in the banking system. Equated Monthly Installments (EMIs) on home, vehicle and other personal and corporate loans are likely to go up.
- Deposit rates, mainly fixed term rates, are also set to rise.
- Consumption and demand can be impacted by the Repo rate hike.
- CRR:
- The hike in CRR will suck out Rs 87,000 crore from the banking system. The lendable resources of banks will come down accordingly.
- It also means the cost of funds will go up and banks’ net interest margins could get adversely impacted.
- Net interest margin (NIM) is a measure of the difference between the interest income earned by a bank or other financial institution and the interest it pays out to its lenders (for example, depositors), relative to the amount of their assets that earn interest.
What are the Challenges in Tackling Increasing Inflation?
- In the current situation, it is argued that inflation will come down, if some part of the increase in crude prices is absorbed by the government. There may be a case for reducing the duties on petroleum products for the simple reason that one segment of the population should not bear excessive burden. The same consideration applies to food prices.
- But to think that it is a magic wand through which inflation can be avoided is wrong. If the additional burden borne by the government (through loss of revenue) is not offset by expenditures, the overall deficit will widen.
- The borrowing programme will increase, and additional liquidity support may be required.
- Central banks cannot order interest rates. For a rise in the interest rate to stick, appropriate actions must be taken to contract liquidity. That is what the rise in CRR will do. In the absence of a rise in CRR, liquidity will have to be sucked by open market operations.
- As the RBI Governor put it in his statement, “Liquidity conditions need to be modulated in line with the policy action and stance to ensure their full and efficient transmission to the rest of the economy.”
What can be done to contain inflation?
- Fuel duty cut:
- Further duty cuts by some amount at least Rs 5 per litre according to expers.
- It can likely lower the inflation by 15-20 bps.
- It Has immediate and secondary impact on electricity, transport cost
- 1% rise in oil (Indian basket) could raise WPI by 8 bps.
- Food Prices:
- Crackdown on supply side if hoarding happens
- Ease import limits on pulses, oil seed
- More duty cuts:
- More duty cuts for edible oil imports is required. However, it was reduced from 19 .25%to 13.75%.
- Buffer stock:
- Prepare to use buffer stock if inflation spills over to cereals
- 1% rise in WPI primary food prices can go up CPI by 48 bps
- Other measures:
- Press for faster growth: 10% higher industrial output can ease retail inflation by 40 bps
- Address supply bottlenecks
- Boost income generating capacity to reduce burden on low income households
Beti Padhao programme revised
The Central government announced the inclusion of skilling girls in non-traditional livelihood (NTL) alternatives in its flagship initiative, broadening the scope of the “Beti Bachao Beti Padhao” scheme.
- The programme will now put more of an emphasis on getting more girls enrolled in secondary school, especially in STEM (Science, Technology, Engineering, and Mathematics) fields. Historically, women have been underrepresented in fields like technology.
- The minister for women’s and children’s development emphasised the significance of coordination amongst many ministries in delivering high-quality education to empower females when announcing the new inclusion in the programme.
- In spite of gender preconceptions, the government has always supported and enabled females to pursue their chosen careers, according to the minister.
- The Ministries of Women and Child Development, Skill Development and Entrepreneurship, and Minority Affairs have signed a Memorandum of Understanding.
- It places a strong emphasis on collaboration between Ministries and Departments to guarantee that teenagers finish their education, develop their skills, and enter the workforce in a variety of vocations, particularly those related to STEM.
Beti Bachao Beti Padhao (BBBP Scheme)
- Beti Bachao Beti Padhao was launched by the Prime Minister on 22 January 2015 in Panipat, Haryana.
- The Beti Bachao Beti Padhao scheme aims to help in addressing the issue of the decline in the child sex ratio throughout the country and to encourage related to the empowerment of women.
The scheme is being implemented by three ministries:
- Ministry of Women and Child Development
- Ministry of Health, Family Welfare
- Ministry of Education
The main objectives of this scheme are:
- Improve the child-sex ratio
- Prevention of gender-biased sex-selective elimination.
- Ensuring the survival & protection of the girl child.
- Ensuring education and participation of the girl child.
- Protecting rights of Girl children.
The scheme is divided into three components:
- advocacy campaigns were launched to address the issue of declining CSR and SBR;
- multi-sectoral interventions were planned and are being implemented in gender-critical districts across the country;
- a financial incentive-linked scheme, the Sukanya Samriddhi scheme, was launched to encourage parents to build a fund for female children.
The scheme outlines measurable outcomes and indicators to monitor progress in these 640 districts. The performance targets are as follows:
- Improve SRB in select gender-critical districts by 2 points per year
- Reduce gender differentials in the under-five child mortality rate metric by 1.5 points per year
- Provide functional toilets for girls in every school in select districts
- Increase first-trimester antenatal care registration by 1% per year
- Improve nutritional status by reducing the number of underweight and anemic girls (under five years of age)
Key beneficiaries under the BBBP initiative are as follows:
Categories | Description |
Primary Segment | Young and newly married couples; pregnant and lactating mothers; and parents |
Secondary Segment | Youth, adolescents (girls and boys), in-laws, medical doctors/ practitioners, private hospitals, nursing homes and diagnostic centers |
Tertiary Segment | Officials, PRIs, frontline workers, women SHGs/collectives, religious leaders, voluntary organizations, media, medical associations, industry associations, and the people at large |
Expansion of the Beti Bachao Beti Padhao scheme
Expanding the mandate of the ‘Beti Bachao Beti Padao’ scheme, the inclusion of the skilling of girls in non-traditional livelihood (NTL) options in its flagship program was announced.
The scheme will now also focus on increasing the enrolment of girls in secondary education, particularly in STEM (Science, Technology, Engineering, Mathematics) subjects.
- Women have been historically under-represented in areas such as technology.
Girls will receive skill training in non-traditional professions through this project, making them torchbearers of a women-led Atmanirbhar Bharat (self-reliant India).
Some of the new aims for the scheme include:
- ensuring a 1% increment in enrolment at the secondary level and skilling of girls and women every year
- raising awareness about safe menstrual hygiene
- promulgating the elimination of child marriages.
- ensuring adolescents complete their education, build skills, and enter the workforce in a diverse range of professions.
A national committee headed by the Secretary, Ministry of Women and Child Development, formed under the larger Mission Shakti mandate, will be the apex committee to review the implementation of the Beti Bachao Beti Padhao scheme at regular intervals with State governments and Union Territory administrations.
OTHER INITIATIVES TO SUPPORT GIRL CHILDREN:
- Sukanya Samriddhi Yojana
- CBSE Udaan Scheme
- National Scheme of Incentives to Girls for Secondary Education
- National Girl Child Day
- Scheme for Adolescent Girls
In 2021, a parliamentary committee on the empowerment of women flagged underutilization of the funds allocated under the BBBP scheme:
- It was found that only 25.13% of the funds had been spent by states and union territories.
- About 80% of those funds were spent on advertisements and campaigns even after existing guidelines on how much each component should be spent.
- The implementation of the scheme did not produce desired results in many states, especially Punjab and Haryana.
Way forward
The BBBP plan has improved key performance metrics mentioned in its aim objectives throughout its first five years of implementation. But the overall performance has not been up to the mark as per CAG reports.
The government intends to conduct a thorough district-level survey to evaluate progress and identify implementation roadblocks in order to advance the program’s success.
With or without the survey, it is evident that more attention is still required for the betterment of the status of girl children.
The BBBP scheme is also a subscheme of Mission Shakti launched for Strengthening Interventions for Women’s Safety, Security and Empowerment.
Next Chief Justice of India
Appointment of CJI:
- As per Article 124(2) of the Constitution the Chief Justice of India (CJI) is appointed by the President.
- Supreme Court in the Second Judges Case (1993) declared that the senior most Judge of Supreme Court must be appointed as the CJI.
Functions of the Chief Justice:
- The Chief Justice is in charge of allocating cases and appointing constitutional benches that deal with key legal issues as Master of the Roster of the Supreme Court.
- CJI delegates all duties to the other justices in line with Article 145 of the Constitution and the Supreme Court Rules of Procedure of 1966.
The CJI is responsible for the following administrative tasks:
- Maintenance of the roster; appointment of court officials;
- Other general and incidental topics concerning the Supreme Court’s supervision and operation.
Qualifications to become a Supreme Court Judge:
- He/she must be an Indian citizen.
- He/she must have served as a judge of a High Court (or High Courts in succession) for at least five years, or he/she must have served as an advocate of a High Court (or High Courts in succession) for at least ten years, or he/she must be a distinguished jurist in the president’s judgment.
- Supreme Court Judges have to retire by the age of 65 years.
NPCI joins hand to expand UPI
European payments services provider Worldline and NPCI International Payments Ltd (NPIL) have entered into a partnership in a move to expand the acceptance of Indian payment means across Europe.
- NPCI International Payments is the international arm of the National Payments Corporation of India (NPCI) — which is the driver of digital payments here in India.
- As part of the partnership, Worldline will bring more convenience for Indian customers in the European markets by allowing merchants’ point-of-sale (POS) systems to accept payments from UPI, as well as RuPay — NPCI’s proprietary card payment network solution.
- This is expected to result in a multitude of customer-related merchant benefits due to an increase in footfall and spending from Indian tourists. Currently, customers from India pay through international card networks.
- Worldline provides us with good coverage of the European markets as well as an advanced and universally applicable solution.
What is UPI?
Unified Payments Interface (UPI) is an instant real-time payment system, allowing users to transfer money on a real-time basis, across multiple bank accounts without revealing details of one’s bank account to the other party.
- UPI is currently the biggest among the National Payments Corporation of India (NPCI) operated systems including National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Aadhaar enabled Payment System (AePS), Bharat Bill Payment System (BBPS), RuPay etc.
- The top UPI apps include PhonePe, Paytm, Google Pay, Amazon Pay and BHIM, the latter being the Government offering.
What is BHIM?
Bharat Interface for Money (BHIM) is India’s digital payment application (app) that works through UPI, a system that powers multiple bank accounts into a single mobile application.
- Developed by National Payments Corporation of India (NPCI).
- Allows real time fund transfer.
- Launched in December, 2016.
The BHIM app has three levels of authentication:
- For one, the app binds with a device’s ID and mobile number.
- Second a user needs to sync whichever bank account (UPI or non-UPI enabled) in order to the conduct transaction.
- Third, when a user sets up the app they are asked to create a pin which is needed to log into the app. The UPI pin, which a user creates with their bank account is needed to go through with the transaction.
Tele-MANAS
Tele Mental Health Assistance and Networking Across States (Tele-MANAS) initiative launched on occasion of World Mental Health Day.
- Tele-MANAS aims to provide free tele-mental health services all over the country, particularly catering to people in remote or under-served areas.
About:
- It’s an initiative of Union Ministry of Health & Family Welfare
- NIMHANS will be the nodal centre while National Health Systems Resource Centre (NHRSC), IIT Bengaluru and IIITB will provide technology support.
- The services will be available 24×7 on Toll Free Number– 14416, allowing callers to select the language of choice for availing services.
- At least One Tele-MANAS Cell to be established in each State/UT.
- Tele-MANAS will be organised in two tier system; Tier 1 comprises of state Tele-MANAS cells which include trained counsellors and mental health specialists. Tier 2 will comprise of specialists at District Mental Health Programme (DMHP)/Medical College resources for physical consultation and/or e-Sanjeevani for audio visual consultation.
- Presently there are 5 regional coordination centres along with 51 State/UT Tele MANAS cells.
- The initial rollout providing basic support and counselling through centralized Interactive Voice Response system (IVRS) is being customized for use across all States and UTs.
- Specialised care is being envisioned through the programme by linking Tele-MANAS with other services like National tele-consultation service, e-Sanjeevani, Ayushman Bharat Digital Mission, mental health professionals, Ayushman Bharat health and wellness centres and emergency psychiatric facilities.
- Eventually, this will include the entire spectrum of mental wellness and illness, and integrate all systems that provide mental health care.
ASAT weapons
India’s anti-satellite (ASAT) test in March 2019 made it the fourth country (after the United States, Russia, and China) to have a demonstrated ASAT capability.
Indian Context:
- India for decades has had a policy against the Weaponization of space, however India had remained concerned about China’s growing space power since its first successful ASAT test in January 2007.
- This pushed India to invest in its own capabilities to deter China.
- Therefore, even states that want to keep their space programmes focused on civilian applications will likely focus on national security considerations under duress.
Concerns:
- A classic security dilemma where all sides end up worse off – As long as certain countries believe they have a legitimate security interest in pursuing an ASAT capability, others will find ways to justify it as well.
- It accentuates regional insecurities rather than diminishing the threats faced by countries.
- China’s increasing tendency to use force, including potentially in outer space, has increased the vulnerabilities not just for the big powers but for India as well.
- ASAT weapons and such systems make other states vulnerable.
- Compared to the Cold War days and the superpower rivalry between the United States and the Soviet Union, the competition now involves many more countries.
- Also, given the much larger dependence on space by all major space powers, including for conventional military operations, the temptations for targeting each other’s space assets are that much higher.
Solutions:
- One fortunate aspect is that ASAT weapons have not been deployed yet by states. They are still in the phase of demonstration of technical feasibility.
- This provides a narrow window of opportunity to prevent deterrence requirements from driving state policy in outer space.
- This necessitates urgent multilateral discussions on ways to reduce tensions, enhance openness and transparency.
- The US decision for a unilateral moratorium on destructive ASAT tests is gaining some interest.
- Acknowledging the dangers of ASAT weapons and making ASAT tests a prime issue in multilateral arms control discussions.
- A limited conversation among the four ASAT powers can be a starting point and a step in the right direction.
- The current Open-Ended Working Group (OEWG) under the UN on reducing space threats through norms, rules, and principles of responsible behaviours could be a platform that might generate such commitments.
Indian ASAT:
- Mission Shakti: On 27 March 2019, India tested an anti-satellite weapon (ASAT).
- The target of the test was a satellite present in a low Earth orbit, which was hit with a kinetic kill vehicle.
- India’s ASAT test hit a target satellite at an altitude of 300 kilometres.
- The ASAT test utilized a modified anti-ballistic missile interceptor code-named Prithvi Defence Vehicle Mark-II which was developed under Project XSV-1.
- The test made India the fourth country after the United States, Russia and China to have tested an ASAT weapon.
- The test sparked concerns regarding the creation of space debris.
Others:
- U.S.: In 2008, US Navy fired RIM-161 Standard Missile 3 ABM weapon at a decaying satellite
- Russia: In 2015, Russia successfully conducted anti-satellite mission known as PL-19 Nudol.
- China: In 2017, China destroyed a satellite called Fengyun-1C with a kinetic kill warhead
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