Current Affairs – 15 December 2021

WPI Inflation

Indian Express

GS 3: Economy

Context:

  • Wholesale inflation, based on the Wholesale Price Index, jumped to 14.23 per cent in November from 12.54 per cent in October (on a year-on-year basis), primarily due to rise in food prices especially of vegetables, and minerals and petroleum products, data released by the Ministry of Commerce & Industry.
  • This is the highest level of wholesale inflation in the 2011-12 series and eighth consecutive month in which it has stayed at double-digit level.

About:

  • Retail inflation also had shown a spike to a three-month high of 4.91 per cent despite a cut in excise duty on fuels.
  • The wide gap between WPI and CPI inflation reflects the price pressures on the inputs side, which are expected to pass through to the retail level in the coming months.
  • Inflation rates at both wholesale and retail levels are showing a rising trend. The WPI grew 12.54 per cent during October, while the WPI for September was revised to 11.80 per cent from 10.66 per cent. The WPI inflation rate in November 2020 was at 2.29 per cent.
  • The retail inflation print for October was at 4.48 per cent and 6.93 per cent in November 2020. It is, however, within the 4+/-2 per cent targeted range of the Reserve Bank of India.

Factors behind the uptick:

  • High food, fuel and commodity prices along with supply-side bottlenecks are reflected in the inflation rates at both retail and wholesale level.
  • A sharp surge in primary articles inflation was mainly responsible for taking the wholesale inflation to record levels.
  • Within primary articles, food articles inflation jumped to 4.88 per cent in November from negative 1.69 per cent a month ago. At retail level, food inflation increased to 1.87 per cent in November from 0.85 per cent a month ago.
  • Inflation in crude petroleum at the wholesale level inched further to 91.74 per cent in November 2021. As a result, fuel and power inflation remained firm at 39.81 per cent in November 2021.
  • Consequently, inflation in seven groups namely, textiles, paper & chemicals, rubber & plastics, basic metals, fabricated metals and furniture has been in double-digits now for six successive months, with textiles, paper and chemicals touching a new record high in November 2021.
  • Inflation of commodities such as health, fuel and light, and transport and communications, has turned structural and supply shortages are further aiding higher inflation, which cannot be termed as transitory.
  • Core inflation — the non-food, non-fuel inflation component — jumped to a five-month high.
  • Input price pressures and supply-side shortages are pushing up prices at the consumer level and going ahead may further impact demand.
  • The risks from the new Omicron variant are also expected to create upside risks for global commodity prices.
  • The trend of surging inflation metrics has political repercussions, especially given the assembly elections next year.

Inference:

  • Both core and manufacturing inflation stayed over 11% for the fifth successive month at wholesale level.
  • The surge in the core index with a perceptible uptick across the sub-groups shows the pervasive commodity and input price pressures.
  • This is reflective of manufacturers passing on the higher input costs to their output prices. Fuel continues to push up input cost pressure, despite the cuts.
  • An upward surge in the WPI print indicates inflationary pressure in the economy and vice versa.

Gap between WPI and CPI inflation

  • Despite not being a policy tool, the surge in the WPI is a cause of worry.
  • Between the wholesale price and the retail price, the difference essentially is the former only tracks basic prices devoid of transportation cost, taxes and the retail margin etc. And that WPI pertains to only goods, not services.
  • So, the WPI basically captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator (the ratio of the value of goods an economy produces in a particular year at current prices to that of prices that prevailed during the base year).

Conclusion:

  • RBI would be keeping a close watch on the inflation level but may focus on growth in the next monetary policy review in February 2022. The RBI had kept its key policy rates unchanged in its monetary policy review recently.
  • Although WPI numbers are not the RBI’s main metric for the purpose of setting monetary policy, the sharp spike could dissuade the Monetary Policy Committee from looking at rate cuts well into the future. More disruptions could translate into higher inflationary expectations.
  • With the rupee continuing to weaken against the U.S. dollar, policymakers also face the challenge of contending with imported inflation including the landed cost of crude oil shipments. The onus is clearly on the Centre to deepen the fuel tax cuts and address other supply-side issues to prevent inflation from hurting the recovery.

 

ADB Pares India’s 2021-22 Growth Hopes to 9.7%

The Hindu

GS 3: Economy

Context:

  • The Asian Development Bank (ADB) has marginally lowered its growth projection for the Indian economy to 9.7% in 2021-22, from 10% estimated in September.

About:

  • The bank has cited the lower than expected 8.4% growth in the July to September quarter and expects supply chain factors such as chip shortages and rising semiconductor prices to continue to suppress growth.
  • This was evident in a double-digit contraction in motor vehicle sales in October and in GST e-way bills generated in November.
  • In India, a strong 20.1% growth rebound in Q1 of fiscal year 2021 (FY2021, ending 31 March 2022) was followed in Q2 by growth moderation to 8.4%, marginally below expectations as a chip shortage hindered the production and sale of automobiles and many electronic goods.
  • In April, the ADB had projected an 11% growth for India in 2021-22. The bank has retained its forecast for 2022-23, when it expects growth to moderate to 7.5% ‘as domestic demand normalises’.
  • It expects inflation to rise in India from an average of 5.5% for the full year estimated earlier, to 5.6%.
  • South Asia’s GDP forecast has been lowered to 8.6% from 8.8% in September, due to the moderation in India’s growth estimate and the slower than anticipated growth in manufacturing.
  • Other economies in South Asia have gained from higher global demand and rebounding domestic activity.

 

Issue Aadhaar, Voter Cards to Sex Workers

The Hindu

GS 2: laws for protection and betterment of vulnerable sections, Fundamental Rights

Context:

  • The Supreme Court directed States and Union Territories to immediately start the process of issuing voter ID cards, Aadhaar and ration cards to sex workers across the country.
  • A Bench said every person is guaranteed their fundamental rights irrespective of vocation.

About:

  • The fundamental rights are guaranteed to every citizen of the country irrespective of his/her vocation. There is a bounden duty on the government to provide basic amenities to the citizens of the country.
  • The Central government, State governments and other authorities are directed to commence the process of issuance of ration cards, voter ID cards and Aadhaar cards immediately.
  • The court found that its directions a decade ago to provide sex workers with ration cards have not been complied with yet.
  • Right to food has been recognised as a human right under Article 21 of the Constitution of India. Though, there is some improvement in the situation caused by COVID-19 pandemic, the constitutional obligation on the State governments and Union Territories to provide basic amenities to the citizens of this country takes into its fold that the sex workers are entitled for being provided dry ration.

  • The court directed that authorities can take assistance from the National AIDS Control Organisation (NACO) and State AIDS control societies, which would in turn prepare a list of sex workers after verifying the information provided to them by the community-based organisations.

 

Land, Water Resources are at Breaking Point : Report

DTE

GS 3: Conservation

Context:

  • Recently, the report, titled The State of the world’s land and water resources for food and agriculture (SOLAW 2021), was released according to which human pressure on land, soils and freshwater have intensified, pushing these resources to their production limits.
  • Climate change has increased pressure on rain-fed and irrigation production over and above the environmental consequences of decades of unsustainable use.

About:

  • Grassland and shrub-covered areas have declined by 191 million hectares over two decades, to 3,196 million ha in 2019, and converted to cropland.
  • Cropland increased 4 per cent (63 million hectares) between 2000 and 2019. Growth in arable land, mainly for irrigated crops, doubled, while that for rain-fed cropping increased by only 2.6% over the same time period.
  • Population increases have meant agricultural land available per capita for crops and animal husbandry declined by 20% between 2000 and 2017 to 0.19 ha /capita in 2017.
  • Human-induced land degradation primarily affects cropland. Although cropland covers only 13% of the global land cover classes (11,477 million ha), degraded cropland accounts for 29% of all degraded areas.
  • Almost a third of rain-fed cropland and nearly a half of irrigated land are subject to human-induced land degradation.
  • Soil salinity is estimated to take up 1.5 million ha of cropland out of production each year.
  • The rapid growth of cities had a significant impact on land and water resources; in 2018, 55% of the world’s population were urban dwellers. This meant encroachment on good agricultural land.
  • There is little room for expanding the area of productive land, yet 98 per cent of food is grown on land.
  • Most pressures on the world’s land, soil and water resources are from agriculture.
  • There has been an increase in use of chemical (non-organic) inputs; uptake of farm mechanisation; and overall impact of higher mono-cropping and grazing intensities are concentrated on a diminishing stock of agricultural land.
  • They, in turn, produce a set of externalities that spill over into other sectors, degrading land and polluting surface water and groundwater resources.
  • The overall change in the per capita distribution of freshwater resources is consistent with population growth. Between 2000 and 2018, the decline in global per capita internal renewable water resources (IRWR) was about 20%.

Land degradation is reversible:

  • By 2050, agriculture will need to produce almost 50% more food, livestock fodder and biofuel than in 2012 to satisfy global demand and keep on track to achieve “zero hunger” by 2030.
  • Remedial land management is possible but only under-much reformed land and water governance that can take remediation to scale and distribute benefits to those who depend on stable, long-term access to productive land and freshwater.
  • Advances in agricultural research have broadened the technical palette for land and water management.
  • Rapid improvements in information technology offer the prospect of digital democracy. However, to apply solutions at scale, land and water governance will need adjustment to make advances inclusive and to provide support to farmers for innovation.