Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
What is 9 PM brief?
- GS PAPER 1
- Ancient Buddhist site found in Amaravati {Art and Culture}
- The ghosts of Sykes-Picot {History}
- Have we lost the dowry battle? {Society}
- GS PAPER 2
- SBI begins merger with associate banks {Economy}
- ‘No profiteering at the cost of farmer {Judiciary}
- Chabahar tops agenda of Modi’s visit to Iran {Foreign Policy}
- Decisions of the people, by the people, for the people {Society}
- Why Brazil matters {Foreign Policy}
- Israel-Palestine peace conference postponed {Foreign Policy}
- Now, a ‘tatkal’ system to expedite patent examination {IPR}
- Rural India is hungry for digital tools { Governance}
- Geospatial Bill: India upset as Pak. moves UN {Foreign Policy}
- GS PAPER 3
- N.K. Singh to head panel to review FRBM Act {Economy}
- India suffers from huge gender pay gap, says report {Economy}
- Unhappy augury {Economy}
GS PAPER 1
[1] Ancient Buddhist site found in Amaravati
News:
- Assisted by residents of Vaikuntapuram, located in the Amaravati region, Dr. Reddy, who is also CEO of the Cultural Centre of Vijayawada, conducted a search which yielded three mounds studded with brickbats and pottery in red colour.
- The mounds were formed on huge boulders on which a brick-built stupa was raised.
- The bricks, used in the construction of stupas and viharas measuring 60x30x8 cm and 58x28x7 cm, invariably belonged to the Satavahana era (1st Century B.C.).
- Huge fragments of terracotta and brick tiles used to cover chaityas and viharas were also found.
- Further excavations revealed that the Buddhist monks relied for drinking water mainly on two tanks spread in an extent of half-an-acre and two rock-cut cisterns.
Relic casket found
- Villagers said a few years ago, treasure-hunters dug up at the centre of the stupa and found a relic casket with a gold leaf, which was later handed over to the then Collector of Guntur.
- The Buddhist remains like stupas, chaityas and viharas yielded on Vaikuntapuram hill show that Buddhism existed from 1st Century B.C. to the 5th Century AD, but later the region came under the influence of Saivism in the Vishnukundins era, and under Vaishnavites between the 13th and 17th centuries AD.
[2] The ghosts of Sykes-Picot + Sykes-Picot pact haunts efforts to end Syrian civil war
History:
- One hundred years ago on Monday, Britain and France signed a secret agreement carving out “spheres of influence” that ultimately created the modern Western Asia.
- West Asia lies in tatters.
- Parts of the border between Iraq and Syria have been virtually erased by the Islamic State.
- Syria itself is divided among multiple groups.
- Iraq’s government has no control over at least a fourth of its territory.
- Iraqi Kurdistan, an autonomous region, has demanded freedom from Baghdad.
- The Syrian Kurdistan region is being run by the Kurds themselves for the first time in several decades.
- The regional map is fractured in many more ways.
What triggered this crisis?
- Part of the blame lies with a century-old agreement between Britain and France that is viewed as the source of the modern map of West Asia.
- When the British and French signed the Sykes-Picot pact a century ago — on May 16, 1916 — to divide the huge land mass of the Ottoman Empire between themselves, their primary concern was to retain their colonial interests.
- In the process, the map prepared by diplomats Mark Sykes and François Georges-Picot ignored local identities, leaving several ethnic and social contradictions unaddressed.
- Out of the ruins of the Ottoman Empire, the British ultimately obtained mandates over Palestine and Iraq; the French got what is now Syria. Areas experiencing some of the hardest-fought battles now, like Mosul, were attached to the Kingdom of Iraq.
- Even when actual boundaries were identified after the First World War, the focus was on colonial and regional interests, not on the political preferences of the people.
- Against this background, it may not be a coincidence that over the years the most powerful political ideologies that emerged from the region directly or indirectly challenged the Sykes-Picot system.
- Both Nasserism and Baathism sought to transcend the territorial nationalist boundaries.
- Egypt and Syria even went ahead to declare a United Arab Republic, an experiment that collapsed after the 1961 coup in Damascus.
- And now, even Abu Bakr al-Baghdadi, the leader of the IS, calls for an end to the “Sykes-Picot conspiracy”.
Decentralisation of power
- When the State Department offered up a senior official to preview the talks for reporters here on Monday afternoon, the official insisted that splitting up the country was not under discussion.
- He allowed for the possibility of a form of decentralisation in which different groups — the Kurds, Mr. Assad’s government and the opposition — receive some autonomy. But the goal, he said, was an intact Syria.
The modern map of the region may not bear any great resemblance to the original lines drawn by Sykes and Picot. What matters more now than the actual Sykes-Picot map is the legacy of the agreement: foreign interventions.
- From the colonial carve-up to the Iraq war or the fight against the IS, foreign involvement in the region continues, and often exacerbates the crises rather than solving them.
- Equally problematic has been the failure of West Asia’s leaders to live up to the challenges of their respective states.
- Over the years, they resisted reform and ran largely oppressive systems rooted in social conservatism and patronage.
- They showed no interest in tackling the problems the Sykes-Picot pact failed to address, such as the Kurdish question.
- Their authoritarianism simply sharpened the social contradictions in their states, while intra-regional rivalries made peace elusive.
- The rise of the IS is a result of these external and internal problems.
- If the Iraq war unleashed sectarian and jihadist demons, they found a battlefield in Syria where President Bashar al-Assad’s dictatorship triggered a civil war, which was in turn worsened by his regional rivals.
- Both the interventionists from abroad and the warring dictators at home should rethink their approaches. Else, the ghosts of Sykes-Picot will continue to haunt West Asia.
- For Earlier article click here
[3] Have we lost the dowry battle?
National Crime Records Bureau (NCRB) data shows a rising graph in the number of dowry cases registered:
- 9,038 for 2012
- 10,709 for 2013
- 10,050 for 2014
Men’s rights activists will tell you this is proof of the law’s misuse. And even the Supreme Court has pointed out in 2014 that section 498A has “dubious pride of place amongst the provisions that are used as weapons rather than shield by disgruntled wives”.
What is the extent of that misuse?
- It’s hard to say.
- Sometimes a case is filed and it is completely cooked up—a crime which, under the Indian Penal Code, is punishable by up to six months in jail. At other times, the complaint may be genuine but there is an out-of-court settlement or mediation, leading to that complaint being withdrawn.
More telling perhaps is another set of data, the one on dowry deaths: 8,233 in 2012; 8,083 in 2013; 8,455 in 2014.
That’s more than 23 women killed a day, one per hour, for dowry.
Why this isn’t a public emergency baffles me. Why this isn’t a leading social crusade with government and non-governmental organizations is inexplicable.
- The Narendra Modi government has launched a slew of laudable social missions, from Swachh Bharat Abhiyan to Beti Bachao Beti Padhao (BBBP).
- And while BBBP’s desperately needed aim is to reverse the decline in child sex ratio, a pan-national programme such as this one could easily accommodate a strong anti-dowry message.
- After all, it doesn’t take reams of academic research to understand the link between dowry and declining sex ratio.
- A study by data journalism website IndiaSpend finds that states with the highest dowry deaths between 2005 and 2010 reported the greatest decrease in child sex ratio for the same period. For instance, in Uttar Pradesh, the state with the highest increase in dowry deaths (from 1,564 in 2005 to 2,217 in 2010), there was a corresponding decline in child sex ratio, from 916 girls for every 1,000 boys in 2001 to 899 girls for every 1,000 boys in 2011.
- Simply put: The dowry market makes girls a bad investment .
Wedding gift:
- Dowry, or to use its more acceptable euphemism, wedding ‘gift’, is now so ingrained in our cultural beliefs that, in Tamil Nadu, the All India Anna Dravida Munnetra Kazhagam manifesto promises eight grams of gold for every wedding and there is not even a flutter of protest from either activists or opposition parties.
- Some ads of different brands on the tv, shows that no marriage is complete without gold. Ads are not obligated to push social messaging. But the consumerist trend percolates down.
- There are those who argue that a voluntary ‘gift’ of gold or a motorcycle or a flat or a fridge is not dowry but mummy–papa’s thoughtful gesture to help a young couple get started in life.
- This is an extremely grey line.
- At what point does a ‘gift’ cease to be voluntary if it is dictated by either an outright demand, a not-so-subtle suggestion or even social pressure and ‘custom’?
Conclusion:
- Nearly 60 years after the Dowry Prohibition Act of 1961, we need to ask why there is more, not less dowry; why the big fat Indian wedding has got bigger and fatter.
- But perhaps the real tragedy about dowry is not that it continues to blight our lives.
- The real tragedy is that we no longer seem to believe that this is a fight worth having.
- Perhaps there is an unspoken admission that this is a battle we have already lost.
GS PAPER 2
[1] SBI begins merger with associate banks + SBI sets merger process with five associates rolling
News:
- The State Bank of India (SBI), has kick-started the process of merging its five associate banks with itself at one go.
- The merger is expected to be completed by the end of the current financial year.
- The SBI board, discussed the issue, and also explored the possibility to merge Bharatiya Mahila Bank.
- The merger will make it a bigger bank.
- It will bring in a lot of efficiencies.
- Now there are a lot of overlaps. These can be taken out.
5 associate banks:
- State Bank of Bikaner & Jaipur
- State Bank of Hyderabad
- State Bank of Mysore
- State Bank of Patiala
- State Bank of Travancore
Road ahead:
- A proposal seeking an ‘in principle’ approval to start negotiations with associate banks will be submitted to the Central government.
- As all the associates are on the same technology platform, integration of the systems will not be an issue.
- The merged entity will have one-fourth of the deposit and loan market, as the SBI’s market share will increase from 17 per cent to 22.5-23 per cent, while the total business of the merged entity will be over Rs. 35 lakh crore.
- The SBI’s staff strength will increase by 35-49 per cent while branch network will increase by 6,000. At present, the SBI alone has more than 15,000 branches in the country.
- The merger move comes after the government announced a road map for bank consolidation during the budget.
- This was required to build size, seen as necessary to fund the huge infrastructure financing needs of the country. No bank in India features in the top 50 banks of the world in terms of size.
- The SBI will have to create and expand its present structure to ensure smooth operations of the merged entity.
[2] ‘No profiteering at the cost of farmer
Issue
- Land rights of the farmers.
Context
- Supreme Court in a judgment has exposed how the Haryana government violated guaranteed fundamental rights of equality and right to property and life by transferring the titles of over 250 acres of land acquired from farmers in Rohtak to a private builder.
Guidelines given by the Supreme Court
- SC has forbidden the government from using its powers of compulsory land acquisition to strip poor farmers of their livelihood only to transfer such land to private builders to feed their business interests.
- If the law allows the State to take land for housing needs, the State itself has to keep the title or dispose of land consistent with Article 14 after completion of acquisition.
- If after initiation of acquisition, process is not to be completed, land must revert to the owner and not to anyone else directly or indirectly/
- If land is transferred to the builder, it amounts to transfer of resources of the poor for the benefit of the rich.
- It amounts to permitting profiteering at the cost of livelihood and existence of a farmer.
- Noting that acquisition of land is a “serious matter,” the apex court held that even the plight of investors in plots and flats on the land in question came secondary to the concern of the farmers.
[3] Chabahar tops agenda of Modi’s visit to Iran
News
- Prime Minister Narendra Modi will travel to Iran and Afghanistan.
Agenda of the Visits
- Both visits — in what India considers its “extended neighbourhood” — will focus on infrastructure development.
- The Chabahar port development project will top Mr. Modi’s agenda in Iran.
- Then, next agenda will be agreeing on a channel for repayment of $6.5 billion in unpaid dues from India to appropriate corresponding banks in Iran.
- Then he will visit Afghanistan to inaugurate the $300-million Salma dam and hydroelectric power plant, known as the Afghanistan-India friendship dam.
- Mr. Modi’s visits will complete the triangle as he is expected to sign the trilateral trade treaty with Iran and Afghanistan for Chabahar.
Implications of the Visits
- Mr. Modi’s visit to Iran is a rare stand-alone visit indicating that India hopes to fast-track ties and build on the alternative route for trade with Afghanistan and Central Asia.
[4] Decisions of the people, by the people, for the people
News:
- People’s objections, from Chhattisgarh to Odisha, against large development projects.
- On March 16, five Adivasi villages in Raigarh, Chhattisgarh, unanimously refused to allow the plans of South Eastern Coalfields Limited (SECL), a subsidiary of India’s public sector coal mining giant Coal India Limited (CIL), to mine their forests.
Democracy:
- A system of government by the whole population or all the eligible members of a state, typically through elected representatives.
- Democracy Greek origin (‘ demos ’ and ‘ kratia ’, or power of the people).
- Unlike the representative form that most countries have adopted, these events point more to a direct form in which people on the ground have the primary power of decision-making.
Villages:
- Pelma
- Jaridih
- Sakta
- Urba
- Maduadumar
Other decisions taken at various levels:
- On March 23, the Kamanda gram sabha of Kalta G.P in Koida Tehsil of Sundargarh district in Odisha unanimously decided not to give its land for the Rungta Mines proposed by the Industrial Infrastructure Development Corporation of Orissa Limited (IDCOL).
- On May 4, the National Green Tribunal directed that before clearance can be given the Kashang hydroelectric project (to be built by the State-owned body Himachal Pradesh Power Corporation Ltd. or HPPCL), the proposal be placed for approval before the Lippa village gram sabha in Kinnaur district of Himachal Pradesh. The 1,200 residents of Lippa have been waging a seven-year struggle against the project.
- On May 6, the Supreme Court rejected a petition by the Odisha Mining Corporation seeking the reconvening of gram sabhas in the Niyamgiri hills to consider a mining proposal that the sabhas had rejected in 2013. The court observed that the conclusion of the gram sabhas at that time was to reject the mining, and the petitioner would have to approach an appropriate forum if it wanted to challenge this.
What is the implication of these decisions taken at various levels?
- The spirit of the 73rd and 74th Amendments to the Constitution was to move towards more direct deémocracy in villages and cities.
- However, though over two decades old, these have hardly been implemented.
- Notable exceptions are where communities have taken power into their own hands
- Some instances of tribal self-rule in central India
- The partial measures of State governments like Nagaland with its ‘communitisation’ law, providing greater powers over departmental budgets to village councils
- Kerala with its experiment in people’s’ planning.
- Generally, the eminent domain status of the government has been used to override local objections.
- Development decisions are top-down, and communities or citizens have no significant financial and legal powers.
- Among the first instances when the power of a community to provide or withhold consent for a development project was recognised was in the case of the Vedanta corporation proposal to mine in the Niyamgiri hills. In its order of April 2013, the Supreme Court directed the government to hold gram sabha meetings to ascertain the opinion of the Dongria Kondh Adivasis living there.
- All 12 gram sabhas rejected the project, forcing the Union Ministry of Environment and Forests (MoEF) to withdraw permission for mining.
- Loath to give up a lucrative deal, the State government launched a fresh bid to overturn this by approaching the Supreme Court again in early 2016 (through its Odisha Mining Corporation).
- It had, meanwhile, done everything possible to scare the Adivasis into submission through regular harassment (including imprisonment and killing of tribal members) by armed police forces.
- The Adivasis have stood firm in the face of this repression, and the Supreme Court’s recent decision is a vindication of their campaign.
Community’s consent
- Some of these decisions have also belatedly brought out the real implications of the Forest Rights Act of 2006, so far poorly implemented in most parts of India.
- The Act provides for recognition of the rights of communities to govern, use, and conserve forests they have traditionally managed and used, reversing 200 years of colonial and postcolonial history in which the state had taken over control of forests.
- Logically such a right should mean that any activity in a community-governed forest should be subject to consent by the community, in recognition of which the MoEF issued a circular in 2009, requiring such consent for diversion of forests for development projects.
- In one way or the other, most of the above assertions or decisions are linked to such powers under the Forest Rights Act, coupled with constitutional guarantees and other laws such as the Panchayats (Extension to Scheduled Areas) Act, 1996 or PESA.
Free and prior informed consent’ (FPIC)
- The principle of ‘free and prior informed consent’ (FPIC), enshrined in international agreements for some years, was reiterated most strongly in the recent UN Declaration on the Rights of Indigenous Peoples.
- India has not yet brought this into its legislative framework, other than in partial forms such as the circular under the Forest Rights Act and the long-forgotten PESA.
- The events of March to May provide an occasion for people’s’ movements to press for FPIC to be incorporated as a central tenet of all development and welfare planning.
- Widespread mobilisation on this is necessary because the Central government is otherwise on an overdrive to dilute hard-fought rights of freedom of speech and dissent, access to information, and decentralised decision-making.
Conclusion:
- Beyond FPIC, deeper democratic reforms would help ordinary people get political, economic, and legal powers through grassroots collectives that enable them to take decisions affecting their lives.
- Such direct or radical democracy needs to be the fulcrum on which more representative institutions at larger scales would operate, downwardly accountable through various mechanisms.
- Accompanying it would be alternative pathways of human well-being including forms of economic activity that are ecologically sustainable, directly in the control of people rather than the state or corporations, more locally self-reliant and less dependent on fragile global webs of exchange.
- Many initiatives in India are already proving the viability of such pathways.
- Such a democracy will look very different from the partial, rather lame, form we have today.
- Free and prior informed consent should be incorporated as a central tenet of all development and welfare planning.
[5] Why Brazil matters
Issue
- Impact of Brazilian political crisis on world politics.
Strength of Brazil
- Brazil built alliances of developing states with a distinctively independent Third World line that emphasised South-South cooperation with strong undertones of anti-Americanism.
- Brazil became recognised as a key participant in the G-20, which helped its nationals to be elected to important international assignments .
- José Graziano da Silva become Director-General of the Food and Agriculture Organisation and Roberto Azevêdo became Director-General of the World Trade Organisation.
- When the New Development Bank, a Chinese initiative to challenge the supremacy of the West-dominated World Bank and international financial institutions, was set up for the BRICS (Brazil, Russia, India, China and South Africa), Brazil was an essential participant as it was in the India-Brazil-South Africa (IBSA) group for South-South cooperation and the Brazil-South Africa-India-China (BASIC) combine for climate change.
- These developments were satisfying and provided support to countries such as India, Russia and China — whose footprints in Latin America were yet to grow to optimal levels.
Political crisis
- But with the leadership crisis first in South Africa and now in Brazil, the efficacy of BRICS, IBSA and BASIC has become uncertain.
- Brazil’s economy is in decline, threatening the PT’s success in bringing the poor into the new middle class cohort.
- The reality is that while there are problems regarding the removal of a President ahead of his/her term, the current political crisis in Brazil looks highly partisan and lacks total legitimacy.
- Whatever the shape of the government in Brasilia after the Silva-Rousseff years, it may hold together for the remaining two years of Ms. Rousseff’s term, but will have lost lustre and international influence.
Impact of Brazilian political crisis on world politics
- The impact of the Brazilian political crisis on global politics has been damaging because the world needs the contribution of the region’s largest country.
- Geographically and politically, Brazil has to be the axis around which its predominantly Spanish-speaking neighbours must turn and coordinate their policies.
- Without Brazil’s input, the political and economic issues confronting the whole subcontinent will become much harder to resolve.
Reaction of India
- Russia, China and India have strengthened their politico-economic bilateral relations with Brazil considerably in recent years, and will be fearful of what the future may hold.
- Perhaps it is prudent for India not to express any opinion publicly, since Ms. Rousseff has none of the charisma or mass popularity of Mr. Silva, though she will probably drag him down with her.
- Expressions of sympathy in any event are not likely to be of any avail, and the other members of groups like BRICS, BASIC and IBSA will have to wait for a successor leader to emerge from the PT — one who has an unimpeachable record of public service and a similar proactive attitude towards Third World solidarity.
- The wait may prove to be a long one.
[6] Israel-Palestine peace conference postponed
News
- A conference on the peace process between Israelis and Palestinians, due to be in Paris, has been postponed.
- French Foreign Minister presented the French peace initiative to Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmud Abbas.
Response from different quarters
- France has received support from the Palestinians but objections from Israel.
- Israel questioned French “impartiality” after Paris voted in favour of making Palestine a UNESCO member five years ago.
- Hamas spokesman said that announcement of the delay was further evidence of the failure of the peace settlement option and the project of [Palestinian President] Mahmud Abbas.
Hamas
- Hamas is a Palestinian Sunni-Islamic fundamentalist organization.
- It has a social service wing, Dawah, and a military wing, the Izz ad-Din al-Qassam Brigades, and, since 2007, has been the governing authority of the Gaza Strip.
[7] Now, a ‘tatkal’ system to expedite patent examination
What happened?
- The government has amended rules and introduced several measures including a system similar to ‘tatkal’, to expedite examination of patent applications by start-ups as well as entities choosing India for the first filing of patent.
Why this move?
- There are around 2.37 lakh patent applications pending in the country.
- The government is aiming to bring down the time period for initial examination of patent applications from the present 5-7 years to 18 months by March 2018.
- The move is to popularise India as a patent filing hub so that more companies file applications in India. Now many applications for the initial examination are filed abroad, in places like Europe, the US or Japan.
- Government has also announced the National Intellectual Property Rights (IPR) Policy to push IPRs as a marketable financial asset and economic tool, promote innovation and entrepreneurship/start-ups, while protecting public interest.
Expedited examination
- Under the ‘tatkal’-like system applicants can opt for the ‘expedited examination’- route on the grounds that they have chosen India as the competent International Searching Authority or International Preliminary Examining Authority in the corresponding international application, and file their applications first in India.
- The ‘expedited examination’-route is also available to all entities that qualify as a start-up as per the definition for start-up provided in the Patent Rules.
- The applications for this route have to be filed only electronically.
[8] Rural India is hungry for digital tools
Issue
- There is a huge market in rural India for refurbished digital devices.
Key Points:-
- Rural India is hungry for digital devices as much as anybody else is.
- Villagers know what is useful for them and what isn’t.
- The threshold of their affordability for digital devices varies from Rs.50 to Rs.5,000, and under this everything should be available—whether it’s a computer, hard disk, pen drive or a mobile phone.
- Villagers want to spend money on digital devices as a tool for learning, for children’s growth and for entertainment.
- Also, people don’t want to buy anything without the promise and availability of after-sales support.
- There is a huge market in rural India for refurbished digital devices.
[9] Geospatial Bill: India upset as Pak. moves UN
What happened?
- Pakistan has raised objections to the Geospatial Information Regulation Bill, 2016.
Geospatial Information Regulation Bill, 2016
- Refer earlier article, A licence to kill innovation.
Objections of Pakistan
- Pakistan has written to the UN Secretary General raising “serious concerns” over the draft Bill, specifically criticising the depiction of Jammu and Kashmir in the bill as “incorrect and legally untenable”.
- It has asked the world body to uphold its resolutions and urge India to stop such acts which are in “violation of international law.”
Response of Indian Government
- The proposed bill is an entirely internal legislative matter of India, since the whole of the State of J&K is an integral part of India. Pakistan or any other party has no locus standi in the matter.
- India does not take cognisance of Pakistan’s objection.
- We will take suggestions of citizens and various stakeholders before finalisation.
- But it is the duty of the government [to ensure] that India’s map is depicted properly
GS PAPER 3
[1] N.K. Singh to head panel to review FRBM Act
What happened?
- The government has announced the constitution of a panel under Former Revenue Secretary and Rajya Sabha MP N.K. Singh to review the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.
Considerations before the Panel
- It will consider the possibility of replacing absolute fiscal deficit targets with a target range that may be adjusted in line with the overall credit trends in the economy.
- The Committee is also tasked with examining the need and feasibility of aligning the fiscal expansion or contraction with credit contraction or expansion respectively in the economy.
[2] India suffers from huge gender pay gap, says report
Gender pay gap
- A new global report shows that the figure for India stands as high as 27 per cent, where men earned a median gross hourly salary of Rs. 288.68, while women earned Rs, 207.85 per hour.
- IT services sector has a huge gender pay gap of 34 per cent.
- A sector-wise analysis shows the gender pay gap was highest in manufacturing sector (34.9 per cent) and lowest in the BFSI and Transport, logistics, communication, equally standing at 17.7 per cent.
Reason:
- According to the report, some of the reasons behind gender pay gap could be the preference for male employees over female employees, preference for promotion of male employees to supervisory positions and career breaks of women due to parenthood duties and other socio-cultural factors.
Conclusion:
- Needless to say, the situation is far from desired in India, especially when the country is gearing towards inclusive development
- There was a strong need to create equal opportunities for all, particularly women, who were key contributors in the job market.
[3] Unhappy augury
Issue
- Analysis of the recently released data of Wholesale price index (WPI) inflation.
What is WPI and CPI?
Consumer Price Index (CPI) vs Wholesale Price Index (WPI)
Analysis of the data
- The WPI inflation for April has come in at 0.3 per cent.
- It has broken the 17 month-long stretch of being in negative territory.
- It can be said that a little inflation is a good thing for the economy as it incentivises production.
- But it should be seen from a different perspective.
The Other Perspective
- It might be the signal of a more widespread hardening of prices in the economy.
- If it is really the case, then the RBI might shut the door on further interest rate cuts.
- The prime drivers of the WPI increase are food articles and pulses are the main culprit.
- Worse, now there is double-digit inflation in the prices of potato and sugar as well.
- The increase in prices of these food articles is, in turn, largely driven by supply-side constraints as well as the mismanagement of the food economy.
- Back-to-back droughts have taken their toll on rural productivity.
- Arbitrary and ill-timed government interventions along with inadequate focus on creating buffer stocks have made things worse.
- Moreover, an increase in the WPI, driven by food prices, will in due course lead to an increase in the consumer price index or retail inflation, the metric the RBI bases its decisions on.
- A rise in the WPI is also likely to push down the real GDP growth data.
- That’s because real GDP is calculated by adjusting nominal GDP growth for inflation.
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