Exam View: Indian consumer price index (CPI); The food and beverages component; Managing the inflation.

Context: Inflation is coming down. But the overall cereal and products inflation is still at a very uncomfortable level, 13.7 per cent.

Decoding the editorial: Indian consumer price index (CPI)

The consumer price index (CPI) inflation figure for April 2023 has fallen to 4.7 percent, and food price inflation has fallen to even lower, 3.84 percent.

The food and beverages component

• In the Indian CPI, it has a weightage of 45.86 percent, the highest amongst G20 countries.
  • Rice inflation (non-PDS) for April was 11.4 percent.
  • Wheat inflation is still very high at 15.5 percent.
  • The overall cereal and products inflation is still at a very uncomfortable level, 13.7 percent.
  • Managing this component to around 4 percent is critical to taming overall inflation.
  • However, this component of inflation can not be managed only through monetary policy, nor even by fiscal policy.
• It is often triggered by external shocks, such as droughts and breakdown of supply chains.
  • For instance, during the Covid pandemic and the Russia-Ukraine conflict.
  • The brewing El Nino could cause below normal rainfall or even a drought as all droughts since 1947 have been El Nino years, but all El Nino years are not necessarily drought years. There is often a tug of war between the El Nino and Indian Ocean Dipole.
• There is a concern about milk and milk products.
  • Inflation in this category in April was at 8.85 percent.
  • But since it has the highest weight amongst 299 commodities that comprise the CPI basket, its contribution to CPI inflation in April was almost 12 percent, the highest amongst all commodities.
  • Experts give two reasons for this inflation.
    • Due to the lumpy skin disease, the milk production growth rate collapsed to almost zero in FY23 from a normal growth rate of 5 to 6 percent it achieves in a normal year.
    • The fodder price inflation has been very high, between 20 and 30 percent, in recent months.

Managing the inflation: Policy instruments

• Buffer stocking policy
  • Protecting the people: More than 800 million people are getting free rice and/or wheat (5kg/person/month) under the PM-Garib Kalyan Yojana.
  • Managing rice prices: The rice stocks with the Food Corporation of India (FCI) are more than three times the buffer stock norms for rice. The government can tame rice price inflation by unloading 5 million tonnes (MT) of rice from the Central Pool in open market operations.
  • Managing wheat prices: The wheat procurement has been sufficiently good (touching 26MT) to meet the requirements of the public distribution system (PDS) around 22 MT and give some room for open market operations.
• Import policy
  • The policy instrument to use is to lower import duties on fat, which are currently at 40 percent and skimmed milk powder (SMP), which is at 60 percent.
  • Indian prices of SMP and fat (butter) are much higher than the global prices, and therefore, by reducing import duties to say 10 to 15 percent, there would be some imports of fat and SMP.

India needs to focus on cereal and milk inflation, both of which have high weights in CPI.

Source:

https://indianexpress.com/article/opinion/columns/weather-proofing-food-security-8609222/

In News: COP28 president-designate urges oil industry to phase out methane emissions by 2030, eliminate carbon intensity.

About

• COP28 (UAE) President Designate Sultan Ahmed Al Jaber called upon the oil and gas industry to phase out methane emissions by 2030 and align in favour of comprehensive net-zero emission plans by or before 2050. He said that the world continues to use hydrocarbons, and everything possible must be done to “reduce and eventually eliminate its carbon intensity”.
• Methane emissions are among the top causes of global warming and according to International Energy Agency (IEA), fossil fuel operations generate over one-third of all methane emissions from human activity. Thus, action on methane is seen as one of the most effective measures the energy sector can take to mitigate climate change.

About Methane

Methane is the second biggest contributor to global warming after carbon dioxide. It is 84 times more potent than carbon but it does not last as long in the atmosphere before it breaks down. This makes it a critical target for reducing global warming more quickly while simultaneously working to reduce other greenhouse gases (GHGs).

Role of Hydrocarbons in Energy Transition from Methane

• Transition Role: Hydrocarbons can play a transitional role during the shift to new energy systems by providing a reliable and readily available source of energy.
• Existing Infrastructure: The infrastructure for extracting, processing, and distributing hydrocarbons is already established, allowing for a smoother transition to new energy systems.
• Carbon Intensity Reduction: Efforts should focus on minimizing the carbon footprint of hydrocarbons by implementing cleaner technologies and practices throughout the production and consumption processes.
• Bridge Fuel: They can serve as a bridge fuel between high-carbon fossil fuels and cleaner alternatives, helping to meet energy demand while reducing carbon emissions.
• Energy System Stability: Hydrocarbons contribute to maintaining energy system stability during the initial phases of integrating intermittent renewable energy sources.

https://indianexpress.com/article/business/economy/cop28-president-designate-oil-industry-phase-out-methane-emissions-2030-eliminate-carbon-intensity-8602282/

In News: The Shanghai Cooperation Organisation (SCO) has unanimously approved India's proposal for developing digital public infrastructure (DPI) as the preferred approach for deploying digital technology.

About Digital Public Infrastructure (DPI):

• Digital Public Infrastructure (DPI) refers to a set of blocks or platforms developed by private or government agencies with government support such as Aadhaar, UPI etc.,
• It aims to provide essential services in the digital space and facilitate the delivery of public and private services.
• It plays a crucial role in ensuring competition, democratizing technology, and promoting digitally inclusive growth.
• DPI can encompass various components such as identity systems (e.g., Aadhaar), payment systems (e.g., UPI), document storage (e.g., DigiLocker), and digital health platforms (e.g., Cowin).
• India has developed its own DPI called India Stack, which has received positive recognition for its resilience and effectiveness during the COVID-19 pandemic.
• India Stack enables online, paperless, cashless, and privacy-respecting access to a wide range of public and private services.
• DPI frameworks and standards can vary between countries, but the objective is to establish a robust digital infrastructure that supports seamless interactions and interoperability.
• It is considered a valuable investment that benefits individuals, businesses, and the overall society by enhancing digital accessibility and convenience.
• DPI is crucial for ensuring competition, democratizing technology, and achieving digitally inclusive growth among member states.
• The adoption of DPI by member nations of organizations like the Shanghai Cooperation Organisation (SCO) can foster collaboration, knowledge sharing, and mutual benefits in the digital realm.

https://economictimes.indiatimes.com/tech/technology/sco-members-vote-unanimously-to-adopt-indias-proposal-on-dpi/articleshow/100213651.cms

In News: NCB arrests drugs worth Rs 25,000 crore off the coast of Kerala which came from Pakistan cartel.

About Drug Trafficking & NCB:

• The Narcotic Control Bureau (NCB) is an Indian agency responsible for combating drug trafficking and the abuse of illicit substances.
• It works under the Ministry of Home Affairs and plays a crucial role in maintaining law and order related to narcotics in the country.
• The agency is involved in the enforcement of the Narcotic Drugs and Psychotropic Substances (NDPS) Act, which aims to control and regulate drug-related offenses.
• Drug trafficking in India is a significant concern, with the country being a transit point, destination, and producer of illicit drugs.
• India is located in the Golden Crescent region, which encompasses Afghanistan, Iran, and Pakistan region which is known for opium production and the trafficking of heroin and other opioids.
• India also shares drug pockets with the Golden Triangle, comprising Myanmar, Laos, and Thailand which is another major drug-producing and trafficking region in Southeast Asia.
• Drug trafficking routes in India often involve smuggling drugs from the Golden Crescent and the Golden Triangle through neighbouring countries like Pakistan, Nepal, Bangladesh, and Myanmar.
• The commonly trafficked drugs in India include Heroin, opium, cocaine, hashish, synthetic drugs, and prescription medications.
• These states of India are particularly affected by drug trafficking due to their proximity to trafficking routes and international borders.

https://indianexpress.com/article/india/drugs-worth-rs-25000-crore-came-from-pakistan-cartel-officials-8609426/

In news: Ministry of Power encourages industry leaders to set green targets and report cases of non-compliance with Green Energy Open Access Rules.

About Green Energy Open Access Rules, 2022:

• These are a set of regulations implemented by the Indian government to promote the generation, purchase, and consumption of green energy, including energy from Waste-to-Energy plants.
• Under the rule, Green Open Access is available to any consumer, with the transaction limit reduced from 1 MW to 100 kW for green energy, allowing smaller consumers to access renewable power.
• Consumers will have the right to demand and receive green power from Discoms, who are obligated to procure and supply it.
• As per rule, the approval for Green Open Access should be granted within 15 days or else, it will be deemed to have been granted.
• The rule will also provide for the Commercial and industrial consumers to have the option to voluntarily purchase green power.
• A cap on the increase of cross-subsidy surcharges has been imposed, and additional surcharges have been eliminated, encouraging consumers to choose green energy.
• There is a uniform Renewable Purchase Obligation (RPO) for all obligated entities in a distribution licensee area, including Green Hydrogen/Green Ammonia.
• Consumers who consume green power will be awarded Green Certificates and will receive additional facilitation.
• The tariff for green energy is determined by the Appropriate Commission, considering pooled power purchase cost, cross-subsidy charges, and service charges.
• The Ministry of Power has designated Grid Controller of India Limited as the Central Nodal Agency responsible for operating the Green Open Access Registry (GOAR) portal.
• The GOAR portal will serve as a single-window portal for registration and application for Green Energy Open Access, providing participants with information on approvals, rejections etc.
• The rules provide certainty on open access charges, including transmission charges, wheeling charges, cross-subsidy surcharge, banking charges, and other fees and charges.
• Also, the Green Energy Open Access Rules, 2022 are crucial for achieving India's 45% emission reduction target by 2030 in alignment with the NDC goal.

https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=1923863

In News: Experts have warned that freebies culture as seen in Karnataka elections, to fulfil narrow political agendas, would hurt long-term growth and development prospects.

Freebies and associated issues:

Election Freebies are offerings/distribution of irrational freebies from political parties as part of electoral promises. Political parties promise to offer free electricity/water supply, monthly allowance to unemployed, daily wage workers and women as well as gadgets like laptops, smartphones etc. in order to secure the vote of the people.

• Arguments in favour of Freebies:
  • States with lower development metrics, freebies become need/demand-based and also become essential for the upliftment of vulnerable sections.
  • Freebies become essential for fulfilling comparative expectations of people when they see adjoining/other states governed by different parties getting freebies.
• Arguments against freebies:
  • Economic Burden on States: Freebies have an impact on the public exchequer and affect the financial health of the states which have very limited resources in terms of revenue.
  • Political inequity: Freebies distort the level playing field among political parties and lead to political inequity, as parties in power often declare freebies before elections.
  • Inefficient use of resources: Freebies lead to diversion of limited funds from targeted schemes for welfare of the poor to fulfilling of populist demands.

Suggestions to check poll freebies:

• C Rangarajan, former RBI governor, suggested that fiscal deficit limits, especially those relating to states, need to be strictly enforced to curb the “freebie” culture.
• Former chairman of National Statistical Commission, called for action by the Election Commission against such promises.
• Strengthening of financial regulatory institutions to check irrational expenditure, such as CAG.

Source:

https://m.economictimes.com/news/economy/finance/poll-freebies-to-hurt-long-term-growth-say-experts/articleshow/100236680.cms

In News: T P Rajendran committee, constituted by the Centre to study the disputed issue of banning 27 popular pesticides, has said the farming community has expressed concerns over the possible loss to their crops if the pesticides are withdrawn from the market.

About the News:

• Government in 2020 proposed to ban these 27 pesticides (including insecticides, fungicides and herbicides) as they were perceived to be hazardous to humans and animals.
• List of these 27 pesticides was carved out of a more extensive list of 66 pesticides reviewed by the Anupam Varma committee.
• However, T P Rajendran committee’s recommendation may result in reducing the number of banned pesticides from 27 to 3.

Concerns of different stakeholders over Pesticide ban:

• Farmers were apprehensive of the availability of alternative pesticides, which were costlier than the banned ones. They were also of the view that pesticides caused no adverse health problems.
• Panel remarked that the quantity of crops saved from pest damage because of the pesticides was overwhelming as against the adversities to crop pollination.
• Ministry of Chemicals favoured lifting the ban on the grounds that the pesticides industry, mostly composed of MSME, had made substantive investments in plants and machinery to manufacture these pesticides.
• Food ministry said that banning pesticides such as Malathion and Deltamethrin could make foodgrain storage in the country vulnerable to pests and losses.
• The Department of Commerce highlighted the adverse impact of banning pesticides on exports. Of the annual pesticide export worth of 27,000 crore, the share of 27 pesticides was around 8,000-10,000 crore.

Source: 

https://www.business-standard.com/india-news/most-farmers-favoured-lifting-ban-on-27-controversial-pesticides-panel-123051400660_1.html

In News: RBI invited interested Indian companies to participate in Greenwashing TechSprint being organised by Global Financial Innovation Network (GFIN).

About the Global Financial Innovation Network:

• GFIN is a group of over 80 international organisations committed to supporting financial innovation in the interest of consumers and it is currently chaired by the Financial Conduct Authority.
• It was formally launched in 2019 by an international group of financial regulators and related organisations. Over 70 organisations including RBI is its member.
• Function of GFIN:
  • Focus on emergent technology at a cross-sectoral level to identify gaps in the regulatory ecosystem.
  • Act as a surveillance tool to spot issues before they can crystallise and cause harm.
  • Run collaborative data focused activities.
  • Gather insights from global markets and regulators on emerging technology trends and policy

Greenwashing TechSprint:

• Greenwashing refers to marketing an organisation’s product, activities and policies as sustainable and without any harm to the environment or society, despite the case being the opposite.
• With increased marketing of products as green or sustainable exaggerated, misleading or unsubstantiated claims about Environmental, Social and Governance (ESG) credentials damage confidence in these products.
• TechSprint aims to develop a tool or solution that can help regulators and the market to effectively tackle the risks of greenwashing in financial services.
• The virtual TechSprint will be hosted on the FCA’s Digital Sandbox and the move aims to bring together international regulators, firms, and innovators to address sustainable finance as a collective priority.

Source: 

ttps://www.livemint.com/industry/banking/rbi-invites-firms-to-participate-in-greenwashing-techsprint-11683821438499.html

Why in news? Recently, more than 50,000 water bodies have been rejuvenated ahead of schedule under the Mission Amrit Sarovar.

About:

• Mission Amrit Sarovar was launched in 2022 with the objective to develop at least 75 Amrit Sarovar in every district of the country with a view to conserve water for the future.
• To achieve the resolution of rainwater conservation and harvesting through Mission Amrit Sarovar, the Ministry of Rural Development under Government of India, acts as the nodal ministry.
• It aims to construct or renovate the 'Amrit Sarovar' in such a way that they become the centre of local community activities.
• Under this mission, a target was set to build 50 thousand Amrit Sarovar by August 15, 2023, which has been achieved ahead of schedule.

https://newsonair.com/2023/05/11/mission-amrit-sarovar-becomes-a-mass-movement-50071-completed-before-deadline/

Why in news? Recently, SEBI allowed stock exchanges to extend direct market access facility to foreign portfolio investors (FPIs) for participation in Exchange Traded Commodity Derivatives (ETCDs).

About:

• An Exchange Traded Commodity Derivative is a derivative that is listed and traded on a regulated exchange with a commodity being an underlying asset.
  • Derivatives are financial contracts that derive their values from the price fluctuations of their underlying assets such as stocks, currency, bonds, commodities etc.
• Earlier in 2022, SEBI had also allowed FPIs to participate in the ETCDs in order to increase depth and liquidity in the market.

https://m.economictimes.com/markets/stocks/news/sebi-allows-direct-mkt-access-facility-to-fpis-for-participating-in-exchange-traded-commodity-derivatives/articleshow/100137838.cms

Why in news? Punjab has become the first state to implement the 'right to walk'.

About:

• Right to walk make it mandatory for all road-owning agencies, including the NHAI, to provide footpaths and cycle tracks in all future expansion of roads and construction of new ones.
• This can used as solution to reduce deaths related to road accidents.

https://m.timesofindia.com/india/punjab-now-1st-state-to-enforce-right-to-walk/articleshow/100113547.cms

Why in news? Recently, the National Tiger Conservation Authority (NTCA) has approved the relocation of three tigresses from Ranthambore Tiger Reserve (RTR) to Mukundra Hills Tiger Reserve (MHTR) in Kota and Ramgarh Vishdhari Tiger Reserve in Bundi.

About:

• Ranthambore Tiger Reserve lies in the eastern part of Rajasthan (Sawai Madhopur districts) at the junction of the Aravali and Vindhya hill ranges.
• It comprises of the Ranthambore National Park as well as Sawai Mansingh and Keladevi Sanctuaries.
• Forest Type: Tropical dry deciduous, dhak (Flame of forest) is the most common tree.
• Animal Species: Tiger, Hanuman langurs, rhesus macaques, jackals, jungle cats, caracals etc.

National Tiger Conservation Authority (NTCA)

• National Tiger Conservation Authority (NTCA) is a statutory body under the Ministry of Environment, Forests and Climate Change.
• It was established in 2005 following the recommendations of the Tiger Task Force.
• It was constituted under Wildlife (Protection) Act, 1972, for strengthening tiger conservation.

https://m.timesofindia.com/city/jaipur/rbore-tiger-to-be-caged-for-life-in-sajjangarh-bio-park/articleshow/100117337.cms

Why in news? Recently, The Reserve Bank of India (RBI) told banks and other regulated entities to ensure a complete transition away from the London Interbank Offered Rate (LIBOR) from July 1.

About:

• LIBOR is a benchmark interest rate at which major global banks lend to one another in international interbank market for short-term loans.
• It serves short-term loans with maturities from Overnight to 1 year.
• It also acts as a basis for Corporate and Government Bonds, mortgages, student loans, credit cards, derivatives, and other Financial Products.
• It is administered by the Intercontinental Exchange (ICE).
• It is based on five currencies, including the U.S. dollar, the euro, the British pound, the Japanese yen, and the Swiss franc, and serves 7 different maturity periods.

https://m.economictimes.com/markets/stocks/news/rbi-asks-banks-to-ensure-complete-move-away-from-libor-by-july/articleshow/100201603.cms

Why in news? Recently, CCPA has issued orders against the top five e-commerce platforms for selling car seat belt alarm stopper clips.

About:

• Selling of such items is in violation of the Consumer Protection Act (CPA), 2019.

Central Consumer Protection Authority

• Central Consumer Protection Authority (CCPA) promotes, protects, and enforces the rights of consumers.
• CCPA is a regulatory body established in 2020 based on the provisions of the Consumer Protection Act, 2019.
• It functions under the guidelines of The Minister of Consumer Affairs, Food and Public Distribution.
• It regulates matters linked to the violation of consumer rights, unfair trade practices, and misleading advertisements.

https://indianexpress.com/article/india/ccpa-asks-e-commerce-sites-to-stop-selling-car-seat-belt-alarm-stoppers-8606518/