CONSUMER PRICE INDEX (CPI)
1. Context
2. Consumer Price Index
- The Consumer Price Index (CPI) is a measure of the change in prices of a basket of goods and services that are commonly purchased by consumers. It is the most commonly used measure of inflation.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
3. Wholesale Price Index
- The Wholesale Price Index (WPI) is a measure of the change in prices of goods and services at the wholesale level.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the WPI inflation rate.
- The WPI is calculated for 67 groups of commodities, which are further divided into 225 subgroups.
- The weights of each group and subgroup in the WPI are determined by the value of the goods and services produced in each group and subgroup.
- The WPI inflation rate is an important indicator of inflation at the wholesale level.
- It is used by businesses to make pricing decisions and by the government to set monetary policy.
4. Findings of the Report
4.1. Food inflation
- Food inflation in India remained high in August, at 9.94%. This was driven by rising prices of essential food items, such as cereals, pulses, vegetables, and oils.
- Eleven of the 12 items on the heavyweight food and beverages group of the CPI logged price increases, with oils and fats, the sole item logging a year-on-year decline in prices, posting its first sequential increase in nine months.
- Vegetables provided some relief, with tomatoes leading an appreciable month-on-month deflation of 5.88% in the 19-member basket.
- However, the cooking staples of potatoes and onions were among the seven items that continued to log sequential inflation (2.3% and 12.3%, respectively).
4.2. Monsoon deficit and rising crude oil prices
- The near-term inflation outlook is also made more uncertain by other factors, including a distinct deficit in monsoon rainfall.
- Besides the overall 10% shortfall, sharp regional and temporal anomalies in rain distribution have impacted either the sowing or the quality of produce of several farm items.
- Kharif's sowing of pulses had, as of September 8, recorded an 8.6% shortfall compared with the year-earlier period.
- Another inflation driver, crude oil, has also seen a steady rise in prices as the output cuts by major oil producers of the OPEC+ grouping start to bite.
- The price of India's crude basket had, as of September 12, climbed 7.2% from the average in August to $92.65/barrel, according to official data.
4.3. RBI measures to control inflation
- For the RBI, the latest inflation data further roils its interest rate calculus.
- Unless CPI inflation decelerates by an incredible 250 basis points in September to a 4.33% pace, price gains are certain to substantially overshoot the monetary authority's 6.2% forecast for the July-September quarter, leaving it with few real options to achieve its medium-term price stability goal of 4% inflation.
- As the RBI has been at pains to stress, failure to anchor inflation expectations risks hurting growth.
5. About the sticky Consumer Price Index (CPI)
- The sticky Consumer Price Index (CPI) is a subset of the CPI that includes goods and services that change prices relatively infrequently.
- These goods and services are thought to incorporate expectations about future inflation to a greater degree than prices that change more frequently.
- Some of the items included in the sticky CPI are Rent, Housing costs, Utilities, Education, Healthcare, Transportation, Household furnishings and appliances, Personal insurance, Recreation, and Miscellaneous goods and services.
- The sticky CPI is often used by economists to measure inflation expectations.
- This is because prices of sticky goods and services are less likely to be affected by short-term changes in supply and demand, and are therefore more likely to reflect changes in inflation expectations.
- The sticky CPI is also used by central banks to set monetary policy.
- This is because the central bank wants to make sure that inflation expectations are anchored at a low level.
- If inflation expectations start to rise, the central bank may raise interest rates to bring them back down.
6. How India’s retail inflation is measured?
- India's retail inflation is measured by the Consumer Price Index (CPI), a basket of goods and services commonly purchased by urban households.
- The CPI is calculated by the National Statistical Office (NSO) every month.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular month to those of the same in a base month.
- The base month is usually the previous year's corresponding month. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services, Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living in India.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
7. Calculation of Inflation
- Inflation is the rate at which the prices of goods and services increase over time.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to the prices of the same basket of goods and services in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the inflation rate.
There are two main ways to calculate inflation
The CPI is calculated by the following formula:
CPI = (Cost of a basket of goods and services in current period / Cost of a basket of goods and services in base period) * 100
The PPI is calculated by the following formula:
PPI = (Cost of a basket of goods and services at the wholesale level in the current period / Cost of a basket of goods and services at the wholesale level in the base period) * 100
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For Prelims: Consumer Price Index, Wholesale Price Index, Inflation, retail inflation, Producer Pirce Index, National Statistical Office, OPEC+, Crude oil, Kharif season, Monsoon,
For Mains:
1. Analyse the factors contributing to high food inflation in India in recent months. Discuss the impact of high food inflation on the Indian economy and suggest measures to mitigate it. (250 words)
2. Explain the concept of sticky inflation. What are the various factors that contribute to sticky inflation? Discuss the implications of sticky inflation for the Indian economy. (250 words)
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Previous Year Questions
1. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
Answer: C
2. With reference to India, consider the following statements: (UPSC 2010)
1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.
2. As compared to Consumer Price Index for Industrial Workers (CPI(IW)), the WPI gives less weight to food articles.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: C
3. Consider the following statements: (UPSC 2020)
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
A. 1 and 2 only B. 2 only C. 3 only D. 1, 2 and 3
4. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
5. The Public Distribution System, which evolved as a system of management of food and distribution of food grains, was relaunched as _______ Public Distribution System in 1997. (SSC JE EE 2021)
A. Evolved B. Transformed C. Tested D. Targeted
Answer: D
6. Under the Antyodaya Anna Yojana, up to what quantity of rice and wheat can be purchased at a subsidised cost? (FCI AG III 2023)
A. 35 kg B. 40 kg C. 30 kg D. 25 kg E. 50 kg
Answer: A
7. As per the the National Statistical Office (NSO) report released on 7 January 2022, India's Gross domestic product (GDP) is expected to grow at ___________ per cent (in first advance estimates) in the fiscal year 2021-22? (ESIC UDC 2022)
A. 17.6 per cent B. 9.5 per cent C. 11 per cent D. 9.2 per cent E. None of the above
Answer: D
8. The main emphasis of OPEC (Organisation of the Petroleum Exporting Countries) is on which of the following? (UKPSC 2016)
A. The production of petroleum
B. Control over prices of petroleum
C. Both (a) and (b)
D. None of the above
Answer: C
9. In the context of global oil prices, "Brent crude oil" is frequently referred to in the news. What does this term imply? (UPSC 2011)
1. It is a major classification of crude oil.
2. It is sourced from the North Sea.
3. It does not contain sulfur.
Which of the statements given above is/are correct?
A. 2 only B. 1 and 2 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
10. The term 'West Texas Intermediate', sometimes found in news, refers to a grade of (UPSC 2020)
A. Crude oil B. Bullion C. Rare earth elements D. Uranium
Answer: C
11. With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements: (UPSC 2019)
1. Area under rice cultivation is the highest.
2. Area under the cultivation of jowar is more than that of oilseeds.
3. Area of cotton cultivation is more than that of sugarcane.
4. Area under sugarcane cultivation has steadily decreased.
Which of the statements given above are correct?
A. 1 and 3 only B. 2, 3 and 4 only C. 2 and 4 only D. 1, 2, 3 and 4
Answer: A
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WORLD ECONOMIC FORUM (WEF)
The World Economic Forum (WEF) was founded by Professor Klaus Schwab. He established the organization in 1971, and the first meeting of the WEF took place in Davos, Switzerland, in that same year. Klaus Schwab, a German economist and engineer, envisioned the WEF as a platform where business leaders, politicians, academics, and other stakeholders could come together to discuss and collaborate on global economic issues.
Over the years, the World Economic Forum has grown into a prominent international organization, hosting annual meetings in Davos that attract a diverse group of participants from various sectors. The WEF has played a significant role in fostering dialogue and cooperation among leaders to address global challenges and shape economic policies
3. What is the Purpose of the World Economic Forum (WEF)?
The World Economic Forum (WEF) has several key purposes, and its mission is to improve the state of the world. The organization aims to achieve this mission through various activities and initiatives:
- The WEF provides a platform for leaders from the public and private sectors, academia, and civil society to engage in open and constructive dialogue. The goal is to foster a shared understanding of global challenges and to encourage collaboration in finding innovative solutions
- The WEF seeks to promote cooperation and collaboration among different stakeholders, including governments, businesses, international organizations, and non-governmental organizations, to address global challenges. These challenges include economic issues, social inequality, environmental sustainability, and technological disruptions
- Through its meetings, reports, and initiatives, the WEF aims to shape global agendas by identifying key issues and trends that impact the world economy and society. The organization strives to provide insights and recommendations to inform decision-makers and influence policy development
- The WEF is committed to advancing inclusive and sustainable economic growth. It addresses issues related to social inclusion, gender equality, and environmental stewardship, advocating for policies that benefit a broad spectrum of society
- The WEF emphasizes the importance of collaboration between the public and private sectors. It believes that effective solutions to global challenges often require coordinated efforts and partnerships between governments and businesses
- The WEF serves as a hub for thought leadership, bringing together experts and leaders to share ideas and insights on a wide range of topics. It contributes to shaping intellectual discourse on economic, social, and technological issues
- In addition to its annual meeting in Davos, Switzerland, the WEF organizes regional meetings and initiatives to address specific challenges and opportunities in different parts of the world. This regional engagement helps tailor solutions to local contexts
- The WEF produces reports, research papers, and publications that provide in-depth analysis of global trends and challenges. These publications contribute to the understanding of complex issues and inform discussions among policymakers and business leaders
- The WEF organizes the annual India Economic Summit, which brings together leaders from government, business, academia, and civil society to discuss and collaborate on key issues facing India. The summit focuses on topics such as economic growth, innovation, sustainability, and social development
- The WEF holds regional meetings around the world, and India has been a host for some of these events. These regional meetings provide a platform for addressing specific challenges and opportunities in the Indian context
- The WEF emphasizes public-private cooperation, and it works with Indian leaders and businesses to foster collaboration between the government and private sector. This collaboration aims to address challenges and promote inclusive economic growth
- The WEF publishes the Global Competitiveness Report, which assesses the competitiveness of countries based on various factors. India's performance in these reports is closely watched by policymakers and businesses to understand the country's economic strengths and areas that need improvement
- The WEF engages in various initiatives and partnerships in India. For example, it has been involved in projects related to sustainable development, digital transformation, and healthcare. These initiatives often involve collaboration between different stakeholders to find innovative solutions to complex issues
- The WEF explores the impact of emerging technologies on the global economy, and India, being a major player in the technology and innovation space, is often a focus of discussions. The Fourth Industrial Revolution and the implications of technology on industries and society are common themes in WEF discussions
- Given India's diverse population and socio-economic challenges, the WEF emphasizes the importance of inclusive growth. Discussions often revolve around strategies and policies that can ensure that economic development benefits a broad spectrum of society
- The WEF produces reports and insights specific to India, providing analysis and recommendations on issues ranging from economic development to social inclusion. These reports contribute to informed decision-making by policymakers and business leaders in the country
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Global Competitiveness Report: The WEF's Global Competitiveness Report assesses the competitiveness of countries based on a range of factors, including infrastructure, macroeconomic stability, health, education, innovation, and more. It provides a comprehensive analysis of the global economic landscape.
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Global Risks Report: The Global Risks Report, published annually by the WEF, identifies and analyzes the most significant risks facing the world. It covers economic, environmental, geopolitical, societal, and technological risks, highlighting potential challenges that may impact global stability.
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Global Gender Gap Report: This report assesses gender disparities in various countries, focusing on economic participation, educational attainment, health outcomes, and political empowerment. It aims to raise awareness about gender inequality and provide a basis for addressing these disparities.
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The Future of Jobs Report: The WEF's Future of Jobs Report explores the impact of technological developments, automation, and other trends on the global job market. It examines the skills required for the future and the potential transformations in industries and occupations.
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Global Information Technology Report: This report assesses the state of information and communication technology (ICT) around the world. It examines the readiness of countries to adopt and benefit from ICT, emphasizing its role in driving economic growth and social development.
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Global Enabling Trade Report: Focusing on trade and its facilitation, this report assesses the efficiency and effectiveness of trade policies and infrastructure in various countries. It aims to identify areas for improvement to promote smoother international trade.
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The Human Capital Report: This report evaluates countries based on their investments in human capital, including education and healthcare. It highlights the importance of human capital development for economic growth and competitiveness.
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Inclusive Development Index: The Inclusive Development Index assesses the inclusiveness of economic growth by considering factors such as income inequality, social inclusion, and environmental sustainability. It provides insights into how well countries are translating economic growth into improved well-being for their citizens
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For Prelims: Current events of national and international importance
For Mains: General Studies II:Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
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Previous Year Questions
1.The Global Competitiveness Report is published by the (UPSC CSE 2019)
A.International Monetary Fund
B.United Nations Conference on Trade and Development
C.World Economic Forum
D.World Bank
Answer (C)
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The programme’s goal is to increase rooftop solar installed capacity to 40 GM by March 2026 and it is currently in its second phase. Owing to the scheme, the country’s rooftop solar has increased from 1.8 GW as of March 2019 to 10.4 GW as of November 2023.
2. About the Pradhan Mantri Suryodaya Yojana
The Pradhan Mantri Suryodaya Yojana (PMMSY), also known as the Pradhan Mantri Rooftop Solar Programme, is a government initiative launched in 2024 to promote rooftop solar installations in 1 crore (10 million) Indian households. The scheme aims to empower citizens with self-reliance in energy generation and contribute to India's clean energy transition.
Key Features
- The scheme offers financial assistance in the form of Central Financial Assistance (CFA) to incentivize rooftop solar installations. The CFA covers a significant portion of the upfront cost of the system, making it more affordable for households.
- The scheme is open to all residential consumers, including individual homes, apartments, and housing societies.
- The scheme promotes the involvement of authorized vendors and contractors to ensure quality and safety standards in rooftop solar installations.
- The scheme allows for net metering, where surplus solar energy generated by the system can be fed back to the grid, offsetting the homeowner's electricity bills.
Benefits
- By generating their own electricity, households can significantly reduce their dependence on the grid and save on electricity bills.
- Rooftop solar provides a reliable and independent source of power, especially in areas prone to power outages.
- Solar energy is a clean and renewable resource, contributing to reducing greenhouse gas emissions and mitigating climate change.
- The scheme is expected to create new jobs in the solar installation and maintenance sector, boosting the economy.
3. Rooftop Solar Scheme
The Rooftop Solar Scheme is an initiative undertaken by the Government of India to promote the generation of solar energy at the individual, community, and commercial levels. The scheme encourages the installation of solar panels on rooftops to harness solar energy for electricity generation. It is part of the broader strategy to increase the share of renewable energy in the country's energy mix and reduce dependence on conventional sources.
Key Features and Components
- The government often provides financial incentives, subsidies, or tax benefits to individuals, residential societies, institutions, and businesses to encourage them to install rooftop solar panels. These incentives aim to make the initial investment in solar installations more affordable and economically viable for a broader segment of the population.
- Rooftop solar installations are often connected to the electricity grid, and the concept of net metering is implemented. Net metering allows excess electricity generated by the rooftop solar system to be fed back into the grid, and the consumer receives credits for this surplus energy.
- During periods of lower solar generation (e.g., at night), the consumer can draw electricity from the grid.
- The scheme involves awareness campaigns and capacity-building programs to educate individuals and businesses about the benefits of rooftop solar installations.
- Workshops, training sessions, and informational materials are often provided to promote understanding and adoption.
- The implementation of rooftop solar projects is often carried out in collaboration with distribution companies (Discoms). Discoms may facilitate the process of connecting rooftop solar installations to the grid and handle aspects like metering and billing.
- Rooftop solar installations contribute to decentralized power generation, allowing consumers to generate their own electricity and reduce reliance on centralized power plants.
- The use of rooftop solar helps in reducing greenhouse gas emissions and mitigating the environmental impact associated with conventional electricity generation.
- Rooftop solar solutions can be tailored to the specific needs and capacities of individual consumers, making them suitable for residential, commercial, and industrial applications.
- Various states in India may have their own rooftop solar policies and initiatives aligned with the broader national objectives. The Ministry of New and Renewable Energy (MNRE) is actively involved in promoting rooftop solar installations.
Types of Rooftop Solar Installations
- On-Grid Systems: Connected to the grid, excess electricity generated can be fed back into the grid, and users may receive credits or payments.
- Off-Grid Systems: Not connected to the grid, suitable for areas with no or unreliable grid access. Battery storage is often incorporated to store excess energy.
- Hybrid Systems: Combine solar with other sources like wind or conventional power to ensure a more stable and reliable power supply.
Importance
The Rooftop Solar Scheme is essential for several reasons:
- It contributes to the integration of renewable energy into the power grid, supporting the country's commitment to clean and sustainable energy.
- By generating electricity close to the point of consumption, rooftop solar installations can help reduce transmission and distribution losses.
- Encouraging decentralized power generation enhances energy security by reducing dependence on centralized power sources.
- The growth of the rooftop solar sector contributes to job creation in areas such as installation, maintenance, and manufacturing of solar components.
4. India’s current solar capacity
India's current solar power capacity, as of October 2023, is approximately 60 Gigawatts (GW). India remains the world's fifth-largest solar power producer despite the gap in target achievements. While this is a significant achievement, it falls short of the ambitious targets set by the government:
- 100 GW by 2022 (already missed)
- 300 GW by 2030 (needs considerable acceleration)
Reasons for the gap between current capacity and targets:
- Securing large tracts of land for ground-mounted solar projects can be difficult.
- The existing grid infrastructure needs upgrades to efficiently handle the influx of solar power.
- High upfront costs for setting up solar projects require robust financial mechanisms for both developers and consumers.
- Frequent changes in policies and regulations can create an uncertain investment environment for the solar sector.
5. Reasons for expansion of solar energy important for India
Expanding solar energy in India is crucial for several compelling reasons, impacting all aspects from individual households to the national economy and environment.
- India's energy demand is projected to explode in the coming years due to rapid economic growth and population increase. Traditional fossil fuels are unsustainable and contribute to climate change. Expanding solar helps meet this demand with a clean and abundant renewable resource, reducing dependence on imported oil and coal.
- India currently relies heavily on imported fossil fuels, making it vulnerable to price fluctuations and geopolitical instability. A robust solar infrastructure empowers the country with energy independence, offering greater control and resilience to external factors.
- India is one of the largest emitters of greenhouse gases, and expanding solar energy provides a powerful tool to combat climate change. Generating clean solar power reduces dependence on fossil fuels and cuts down on carbon emissions, contributing to a greener future.
- The solar sector presents immense potential for job creation in manufacturing, installation, maintenance, and related fields. By promoting solar expansion, India can create new livelihoods and boost economic activity, contributing to overall development.
- Rooftop solar programs like Pradhan Mantri Suryodaya Yojana empower households to generate their own electricity, reducing dependence on the grid and lowering electricity bills. This financial independence promotes energy conservation and personal self-reliance.
- India struggles with severe air pollution, and traditional fossil fuels are major contributors. By replacing them with solar, air quality can improve significantly, leading to healthier lives and reduced healthcare costs.
- India's commitment to solar expansion positions it as a leader in clean energy transition, drawing international investments and partnerships. This fosters collaborations on technology development, knowledge sharing, and climate action.
- Solar energy aligns perfectly with the goals of sustainable development. It contributes to energy security, environmental protection, economic growth, and improved health, paving the way for a more sustainable future for generations to come.
6. The Way Forward
India's commitment to solar expansion is vital for sustainable development, environmental protection, and economic growth. The comprehensive approach fosters a greener and more self-reliant future, emphasizing the importance of solar energy for India's progress.
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For Prelims: Pradhan Mantri Suryodaya Yojana, Rooftop Solar Scheme, Solar Energy, Non-Renewable Sources, Net Zero Emissions
For Mains:
1. Critically analyze the Pradhan Mantri Suryodaya Yojana (PMMSY) as a policy tool to promote rooftop solar installation in India. Discuss its strengths, weaknesses, opportunities, and threats (250 Words)
2. Discuss the current status of India's solar capacity, considering achievements and challenges. What measures are essential to bridge the gap between the existing capacity and the ambitious targets set by the government? (250 Words)
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Previous Year Questions 1. With reference to solar power production in India, consider the following statements: (UPSC 2018)
Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Ans: (d) 2. ‘Net metering’ is sometimes seen in the news in the context of promoting the (UPSC 2016) (a) production and use of solar energy by the households/consumers Answers: 1-D, 2-A Mains: 1. India has immense potential of solar energy though there are regional variations in its developments. Elaborate. (UPSC 2020) |
Source: The Indian Express
INCOME INEQUALITY
- Recent findings based on taxpayer data suggest a substantial reduction in India's Gini coefficient, indicating a noteworthy decline in income inequality from 2014-15 to 2022-23. However, a critical analysis reveals potential limitations in the assessment, primarily stemming from the focus on taxpayer data, which excludes a significant portion of income earners.
- While the reported Gini coefficient decline is significant, the reliance on taxpayer data raises concerns. Approximately 80% of income-earners, according to the 2022-23 Periodic Labour Force Survey (PLFS), fall below the minimum taxable threshold of ₹2.5 lakh per annum. This data gap necessitates a more comprehensive examination of income distribution among all earners.
- To address these concerns, an in-depth analysis using PLFS data from 2017-18 and 2022-23 explores changes in income inequality across various employment categories. This includes self-employed individuals, regular wage earners, and casual wage workers. The nuanced findings underscore the need to qualify the overarching conclusion of reduced inequality.
- While the empirical evidence supports the decline in the Gini coefficient, an alarming trend emerges a polarization of incomes. The top 10% of earners have experienced faster income growth compared to the bottom 30%, with this divide being particularly pronounced among self-employed workers.
The Gini coefficient, also known as the Gini index or Gini ratio, is a statistical measure of income inequality within a population or a social group. It ranges from 0 to 1, with 0 representing perfect equality (everyone has the same income) and 1 representing perfect inequality (one person has all the income).
- It captures the concentration of income among individuals or households. A higher Gini coefficient indicates a higher degree of inequality, where a small portion of the population holds a significantly larger share of the total income than the rest.
- The Gini coefficient is calculated based on the Lorenz curve, which graphically depicts the distribution of income in a population. The coefficient itself measures the area between the line of perfect equality and the actual Lorenz curve.
- A Gini coefficient of 0.2 signifies relatively low inequality, while a coefficient of 0.7 suggests a stark difference in income distribution. Values exceeding 0.9 are rare and indicative of extreme inequality.
- The Gini coefficient is widely used by economists, policymakers, and researchers to:
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- Compare income inequality across different countries or regions over time.
- Evaluate the effectiveness of policies aimed at reducing inequality, such as progressive taxation or social welfare programs.
- Analyze the relationship between inequality and other economic and social factors, such as poverty, crime rates, and health outcomes.
It's important to note that the Gini coefficient is just one measure of inequality, and it has certain limitations. It doesn't capture other forms of inequality, such as wealth inequality or access to resources. Additionally, it considers only income distribution within a specific population or group, ignoring potential differences between groups.
4. The Periodic Labour Force Survey (PLFS) on Aggregate Inequality Trends
- The latest iteration of the Periodic Labour Force Survey (PLFS) introduces a noteworthy enhancement by capturing the gross incomes of the self-employed, offering a more comprehensive analysis of income dynamics. However, it's crucial to note that the presented analysis is preliminary and lacks adjustments for potential errors in income reporting, zero-income declarations, or seasonal variations in self-employed incomes, especially in agriculture.
- The scope of the analysis is restricted to individuals earning income from work, excluding unpaid family helpers, a category predominantly comprising women.
- Within the self-employed category, encompassing own-account workers like individual farmers and roadside hawkers, as well as those employing others, the analysis focuses on nominal weekly incomes without adjusting for inflation.
- As indicated in Table 1, the overall Gini coefficient has marginally decreased from 0.4297 in 2017-18 to 0.4197 in 2022-23. A closer look at different employment forms reveals nuanced trends. For regular-wage and casual-wage workers, there's a reduction in Gini coefficients, signalling decreased inequality. Conversely, the Gini coefficient for self-employed workers experiences a modest increase from 0.37 to 0.3765, reflecting a 1.5% rise.
- While overall inequality has declined, a notable observation surfaces: the reduction in inequality among the top income earners surpasses that of the entire population. This suggests a concentrated impact, warranting a more granular examination of the factors contributing to this pattern.
5. About Income Polarization in India
- The Gini coefficient, while providing an overall measure of inequality, may mask underlying shifts in the income distribution. Figure 1 illustrates a discernible pattern of polarization within the Indian economy, revealed through a detailed examination of income growth across different deciles in the two Periodic Labour Force Survey (PLFS) periods.
- Income-earners in the PLFS surveys are categorized into deciles, with the average weekly income estimated for each decile over five years. The annual rate of growth in average weekly incomes for each decile is then charted. While the majority of deciles experience similar growth rates (8%-9%), a pronounced difference emerges between the top 10% and the bottom 30%. The top decile sees an annual income growth of approximately 7.23%, surpassing the bottom 20% and aligning with the third decile. In contrast, the bottom decile exhibits the slowest income growth at around 1.67%.
- The 90/10 ratio, which measures the ratio of incomes between the 90th percentile (top 10%) and the 10th percentile (bottom 10%), serves as a key indicator of polarization. Table 2 indicates an increase in this ratio from 6.7 in 2017-18 to 6.9 in 2022-23, highlighting a widening gap between the highest and lowest income brackets.
- The analysis delves into changes in polarization among different forms of work. Notably, the 90/10 ratio witnesses a significant decline for wage earners, particularly a substantial fall for regular wage workers. In contrast, self-employed individuals experience a marked increase in the 90/10 ratio. In 2022-23, the income of the top 10% of self-employed individuals is 8.3 times that of the bottom 10%, showcasing a substantial rise compared to 2017-18. The primary source of income polarization stems from the growing divergence in incomes among the self-employed.
6. Factors Behind Changing Inequality Trends
- This preliminary analysis offers a glimpse into notable trends, but a more comprehensive investigation is imperative to grasp the intricacies of these changes in inequality dynamics. Despite the need for rigorous scrutiny, we can attempt to provide an initial explanation for the seemingly contradictory shifts observed in the economy.
- The documented surge in women's labour force participation is a key factor contributing to these nuanced changes. However, this increase is notably dominated by low-paid, part-time self-employed work. While households may witness a rise in overall earnings and women actively participating in the workforce, the surge in low-paid self-employment has inadvertently widened the income gap within the self-employed category. This contributes to the observed polarization among income-earners, especially among the self-employed, even as disparities in wage work both regular and casual show a decreasing trend.
- The pronounced income polarization among self-employed individuals, which is not as evident in taxpayer data, can be attributed to the fact that the bottom 10% of earners do not generate sufficient income to fall within the taxable bracket. The reduction in the Gini coefficient, while indicative of an overall decrease in inequality, conceals the underlying process of income divergence. This nuanced understanding reveals that the reduction in inequality is not uniform across the entire population but rather a result of diverging income trajectories.
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For Prelims: Income Inequality, Periodic Labour Force Survey, Gini coefficient, SBI, Gini coefficient
For Mains:
1. Evaluate the effectiveness of current government policies in addressing income inequality and promoting inclusive growth. Suggest specific policy interventions that could be implemented to mitigate income polarization and reduce the gap between the rich and the poor. (250 Words)
2. Discuss the potential long-term consequences of rising income inequality in India, including social unrest, political instability, and economic stagnation. What steps can be taken to mitigate these risks and ensure a more equitable distribution of wealth and opportunity? (250 Words)
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Previous Year Questions
1. Given below are two statements, one is labeled as Assertion (A) and the other as Reason (R). (UPPSC 2019)
Assertion (A): The labour force participation rate is falling sharply in recent years for females in India.
Reason (R): The decline in labour force participation rate is due to improved family income and an increase in education.
Select the correct answer from the codes given below:
Codes:
A. Both (A) and (R) are true and (R) is the correct explanation of (A)
B. Both (A) and (R) are true and (R) is not the correct explanation of (A)
C. (A) is true, but (R) is false
D. (A) is false, but (R) is true
2. Which of the following statements about the employment situation in India according to the periodic Labour Force Survey 2017-18 is/are correct? (UPSC CAPF 2020)
1. Construction sector gave employment to nearly one-tenth of the urban male workforce in India
2. Nearly one-fourth of urban female workers in India were working in the manufacturing sector
3. One-fourth of rural female workers in India were engaged in the agriculture sector
Select the correct answer using the code given below:
A. 2 only B. 1 and 2 only C. 1 and 3 only D. 1, 2 and 3
3. Disguised unemployment generally means (UPSC 2013)
(a) large number of people remain unemployed
4. Assertion (A): Workers - population ratio in India is low in contrast to that in developed countries. Reason (R): Rapid growth of population, low female worker population rate and omission of unpaid family workers lead to low worker-population ratio. Choose the correct answer: (Telangana Police SI Mains 2018) A. (A) is true, but (R) is false.
B. (A) is false, but (R) is true.
C. Both (A) and (R) are true, but (R) is not a correct explanation of (A).
D. Both (A) and (R) are true, but (R) is the correct explanation of (A).
Answers: 1-C, 2-B, 3-C, 4-D Mains1. Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (UPSC 2023) |
HIT-AND-RUN LAWS
West Bengal and Punjab have staged protests against the recent legislation concerning hit-and-run incidents. Section 106 (2) of the Bharatiya Nyaya Sanhita, 2023 (BNS) stipulates a penalty of up to 10 years in jail and a fine for fleeing an accident spot and failing to report the incident to a police officer or a magistrate. This law is in addition to the colonial-era provision on causing death due to rash or negligent acts under Section 304A of the Indian Penal Code, 1860. Protestors are demanding the withdrawal or amendment of Section 106 (2), backed by the threat of a nationwide strike if their demands are not met. They argue that while strict action in hit-and-run cases is necessary, the new law has several flaws that need reconsideration.
2. Protests Erupt Over New Legislation
- The recent enactment of the new law has triggered widespread protests, particularly among truck drivers, creating disruptions across multiple states in India.
- In Maharashtra, the protest escalated significantly, with truck drivers staging roadblocks.
- The situation turned volatile, leading to incidents of stone-pelting that resulted in injuries to police personnel and damage to vehicles.
- Additionally, there are growing concerns about potential fuel shortages as a consequence of the ongoing unrest.
- Chhattisgarh experienced a similar upheaval, as approximately 12,000 private bus drivers initiated a strike. This widespread strike left commuters stranded in major cities and caused panic at petrol pumps due to the disruption in regular transportation services.
- The repercussions of the protests extended to other states like West Bengal, Punjab, and Madhya Pradesh, where normalcy has come to a grinding halt. These regions reported disruptions and standstills, further emphasizing the widespread impact of the protests against the newly introduced legislation.
3. Protesters' Demands and Concerns
- Transporters and commercial drivers have articulated several demands, expressing reservations about the recently enacted legislation on hit-and-run incidents.
- Protesters are particularly concerned that the new law imposes stringent punishment even in cases of unintentional accidents.
- Their primary objection revolves around the severe penalty of 10 years imprisonment and a ₹7 lakh fine for drivers who flee the accident scene without reporting it.
- They argue that such penalties fail to account for the challenging work conditions they face, including long driving hours and difficult road conditions.
- Transporters contend that the prescribed punishment is excessive and does not take into consideration the practical challenges of their profession.
- They highlight factors beyond a driver's control, such as poor visibility due to fog, which may contribute to accidents.
- Additionally, drivers fear mob violence if they stop to assist the injured at accident sites, further fueling their opposition to the law.
- Protesters express a general perception that drivers are often unfairly blamed for accidents, irrespective of the actual circumstances.
- They argue that the punishment outlined by the law is disproportionate and does not align with the realities of road transport and the unpredictable nature of accidents.
- Concerns are raised about the potential misuse of the law by law enforcement agencies to the detriment of drivers.
- Protesters fear that harsh penalties could be leveraged against them unfairly, jeopardizing their livelihoods and tarnishing the reputation of the transport industry as a whole.
- There is a shared apprehension that such stringent measures might dissuade individuals from entering or continuing in the transportation profession.
4. Rationale Behind the New Legislation
- The introduction of the new law is underscored by the alarming figures about road accidents in India, highlighting the imperative need for stringent measures to address the crisis.
- The backdrop of the new legislation is framed by unsettling figures related to road accidents in India. In 2022, the country witnessed the highest count of road crash fatalities, surpassing 1.68 lakh deaths.
- This translates to an average of 462 deaths daily, pointing towards a critical and pervasive issue.
- Despite a global decrease of 5% in road crash deaths, India experienced a concerning year-on-year increase of 12% in road accidents and 9.4% in fatalities in the same year.
- The gravity of the situation is further emphasized by the fact that the country averages 19 deaths every hour due to road accidents, equating to nearly one death every three and a half minutes.
- More than half of all road fatalities occurred on national and State highways, constituting less than 5% of the total road network. This statistic underscores the critical need for interventions, especially on major road arteries.
- Despite possessing only 1% of the world's vehicles, India accounts for approximately 10% of crash-related deaths globally.
- The economic toll is significant, with India incurring an annual loss of 5-7% of its GDP due to road crashes, highlighting the multifaceted impact of the road safety crisis.
5. The Morality Behind the Hit-and-Run Law
The new legislation addressing hit-and-run incidents is underpinned by a fundamental principle, responding to the alarming statistics and societal concerns surrounding road accidents in India.
Expressive Function for Deterrence
The law, reflected in the context of 47,806 recorded hit-and-run incidents resulting in 50,815 deaths in 2022, seeks to serve an expressive function. One key aspect is the deterrence of drivers from engaging in rash and negligent driving practices that may lead to fatalities. The principle here is to emphasize the gravity of the offence and discourage reckless behaviour on the roads through the imposition of stringent punishment.
Positive Obligation and Reporting Duty
On the other side, the law introduces a positive obligation on the part of the offender. If an individual causes death due to rash and negligent driving, attempting to escape legal consequences triggers penalties. The law mandates reporting such incidents to the police or magistrate, and there are provisions to criminalize any omission in fulfilling this duty. This legal duty arises from a legislative intent to translate moral responsibility into a legal obligation, reinforcing accountability towards the victim of a road accident.
Precedents in Motor Vehicle Legislation
This conversion of moral responsibility into a legal duty is not novel in the realm of motor vehicle accidents. For instance, Section 134 of the Motor Vehicles Act, 1988, obliges the driver to take reasonable steps to secure medical attention for the injured, emphasizing the ethical responsibility in the aftermath of an accident. Additionally, the question of whether an offender fled the accident spot has been identified as a significant factor in the framework for motor accident claims, as illustrated by the case of Rajesh Tyagi versus Jaibir Singh (2021) formulated by the Delhi High Court.
6. Assessment of Protests and Legal Misconceptions
The ongoing protests against Section 106 (2) of the Bharatiya Nyaya Sanhita (BNS) have been driven by certain misconceptions, raising questions about the justification of the demonstrations.
Misconceptions Regarding Penalties
Contrary to widely circulated beliefs, Section 106 (2) of the BNS does not explicitly state a fine of ₹7 lakh for fleeing an accident spot. While the section discusses a maximum punishment of 10 years and a fine, the specific amount of ₹7 lakh is not mentioned in the legislation. It is crucial to correct this misinformation to ensure an accurate understanding of the law.
Compensation Provision in Motor Vehicles Act
Section 161 of the Motor Vehicles (Amendment) Act, 2019, plays a role in compensating victims of hit-and-run accidents. The compensation provided for death is ₹2 lakh, and for cases of grievous hurt, it amounts to ₹50,000. Importantly, this compensation is not recoverable from the drivers involved in the accidents, distinguishing it from the penalties outlined in Section 106 (2) of the BNS.
Distinction Between Sub-sections in Section 106
Section 106 of the BNS comprises two sub-sections. Sub-section 1 pertains to cases of rash or negligent driving where reporting the incident to the police results in a punishment of up to five years with a fine. In contrast, Sub-section 2 deals with instances where the driver fails to report the matter and attempts to escape, leading to a more severe punishment of up to 10 years. Notably, despite the increase in the quantum of punishment in Sub-section 2, the offence has not been categorized as non-bailable.
The protests, fueled by certain misconceptions, prompt a critical reassessment of the actual provisions of Section 106 (2) and the necessity for accurate dissemination of legal information.
7. Proposed Revisions for Equitable Treatment
Moving forward, there is a pressing need to review and reconcile Sections 106 (1) and (2) of the Bharatiya Nyaya Sanhita (BNS) to ensure fair treatment for the vast number of truck drivers and individual vehicle drivers across the country.
Challenges with Existing Categorization
The existing categorization under Section 106 (1) of the BNS, offering exceptions for doctors in cases of rash or negligent acts with a punishment of up to two years and a fine, raises concerns about equality and fairness. This limited categorization, while beneficial for doctors, overlooks the varied liability scenarios in other professions, demanding a more inclusive approach.
Contested Nature of Section 106 (2)
Section 106 (2), specifically contested by truck drivers, warrants a reevaluation. One prominent issue is the lack of differentiation between rash and negligent driving, treating them as a single category. To establish a more nuanced and proportionate liability framework, these acts should be treated as distinct, each carrying different degrees of liability. This differentiation is crucial to avoid unjust prejudice against drivers in diverse circumstances.
Consideration of Contributory Factors
Determining liability should involve a comprehensive assessment of contributory factors in negligent acts, including commuter behaviour, road conditions, and lighting. Applying a one-size-fits-all approach under one clause can lead to unfair prejudice against drivers facing varying circumstances. A graded system based on liabilities is proposed to address these concerns.
Differentiated Scales for Penalties
Rather than a uniform 10-year imprisonment for all cases, a differentiated scale based on liabilities should be established. This approach would alleviate the apprehensions of drivers and contribute to a more just legal framework. Ambiguities within the clause should be clarified, explicitly stating that Section 106 (2) applies solely in cases of death resulting from an accident. Minor injuries should not be equated with criminal acts, and alternative measures such as community service, license revocation, or mandatory driving retests could be explored for road accidents resulting in less severe injuries.
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For Prelims: Section 106, Bharatiya Nyaya Sanhita, Section 304A, Indian Penal Code, Motor Vehicles Act, 1988
For Mains:
1. To what extent does the new hit-and-run law in India reflect a balance between public safety and individual rights, particularly for drivers? Discuss the underlying moral principles and potential challenges in achieving this balance. (250 Words)
2. Imagine you are a member of a government committee tasked with reviewing the hit-and-run law. Identify specific provisions you would recommend revising or amending, and explain your reasoning. (250 Words)
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Previous Year Questions
1. The Motor Vehicles Act, 1988 states that 'subject to the provisions of Section 18, no person under the age of ______ years shall drive a transport vehicle in any public place'. (SSC GD Constable 2021)
A. 18 B. 20 C. 21 D. 16
2. The main function of Motor Vehicle Act is: (JKSSB 2021)
A. To conduct road investigations
B. To collect tax on fuel
C. To prepare standard specifications and reports
D. To regulate the road traffic in the form of traffic laws, ordinances and regulations
Answers: 1-A, 2-D
Mains
1. We are witnessing increasing instances of sexual violence against women in the country. Despite existing legal provisions against it, the number of such incidences is on the rise. Suggest some innovative measures to tackle this menace. (UPSC 2014) 2. Mob violence is emerging as a serious law and order problem in India. By giving suitable examples, analyze the causes and consequences of such violence. (UPSC 2015) 3. Instances of the President’s delay in commuting death sentences has come under public debate as denial of justice. Should there be a time specified for the President to accept/reject such petitions? Analyse. (UPSC 2014) 4. National Human Rights Commission (NHRC) in India can be most effective when its tasks are adequately supported by other mechanisms that ensure the accountability of a government. In light of above observation assess the role of NHRC as an effective complement to the judiciary and other institutions in promoting and protecting human rights standards. (UPSC 2014) |
ECOWAS
Recent events in Niger, including a coup that ousted President Mohamed Bazoum, have raised concerns globally. Gen. Abdourahmane Tchiani was installed as the new head of state, with President Bazoum expressing alarm over challenging economic conditions. Notably, Niger sought assistance from Russia's Wagner Group, despite its recent fallout with Russian President Vladimir Putin. In response to the crisis, ECOWAS, a regional bloc, is considering various measures, including a potential military intervention.
2. What is ECOWAS?
ECOWAS, also known as CEDEAO, is a regional economic and political union established in 1975 to promote cooperation and integration among its 15 West African member states. These members, with a combined population of around 400 million, include Benin, Burkina Faso, Cape Verde, Côte d'Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal and Togo.
Key Objectives
- ECOWAS aims to create a single, large trading bloc by facilitating the free movement of goods, people, and capital across member states. This includes establishing a common currency and harmonizing policies in areas like industry, transport, telecommunications, energy, finance, and social and cultural matters.
- ECOWAS promotes democratic principles, the rule of law, and good governance within its member states. It has actively condemned recent coups in Mali, Guinea, and Burkina Faso, and suspended these countries from the bloc.
Structure and Leadership
- The highest decision-making body, chaired by the current Head of State and Government of a member state for one year.
- ECOWAS has various institutions like the Commission, Parliament, Community Court of Justice, and specialized agencies to implement its policies and programs.
Challenges
- Recent coups in some member states pose a significant challenge to ECOWAS's goals of stability and good governance.
- Poverty, inequality, and resource scarcity remain major issues in many member states.
- Violent extremism and terrorism threaten regional security and development.
3. ECOWAS's Role in the Region
Beyond its focus on economic integration, ECOWAS has played a crucial role in promoting stability and peace in West Africa. Its efforts have extended beyond just economic cooperation, including:
- ECOWAS established the ECOMOG regional peacekeeping force, which intervened in conflicts like Liberia's civil war and Sierra Leone's coup. This demonstrates its commitment to resolving regional conflicts through collective action.
- ECOWAS has actively supported democratic transitions in member states. Its intervention in The Gambia after the 2017 election refusal to concede by the incumbent president highlights its role in upholding democratic principles.
- ECOWAS works to address the root causes of conflict through initiatives focused on development, good governance, and human rights. This proactive approach aims to prevent conflicts before they erupt.
It's interesting to note that the current coup leader in Niger, Gen. Tchiani, previously served as an ECOWAS peacekeeper himself. This highlights the complex dynamics at play in the region, where individuals with experience in peacekeeping efforts can also become involved in military actions.
4. ECOWAS Response to Niger Crisis
The Economic Community of West African States (ECOWAS) is grappling with the complex situation in Niger, and while a military intervention appears to be under consideration, the regional grouping faces numerous challenges.
Neighboring Support and Military Justifications
Mali and Burkina Faso, both under military juntas, have declared solidarity by sending a delegation to Niger. They emphasize that an attack on Niger would be perceived as an attack on them. The military coups in these neighbouring countries have been justified by pointing to the increasing influence of terrorist forces and security challenges, which, according to military leaders, the civilian establishments were incapable of handling. Criticism has also been directed at Western involvement in addressing these issues.
Terrorist Threat and Humanitarian Concerns
President Omar Alieu Touray of the ECOWAS Commission reported to the UN Security Council that the region witnessed 1,814 incidents of terrorist attacks resulting in 4,593 fatalities from January 1 to June 30, 2023. By the end of April 2023, half a million refugees were recorded in the region, underscoring the severity of the humanitarian crisis.
Economic Sanctions and Foreign Relations
The effectiveness of longstanding economic sanctions imposed by ECOWAS is in doubt, given the low economic growth prospects in the affected countries. France, a former colonizer of Niger, has halted aid following the coup. The presence of over 2,000 troops from France and the US has stirred local discontent, leading to anti-France sentiments expressed through graffiti and slogans.
Internal Struggles for Military Intervention
Internally, launching a military attack poses challenges. Nigeria, a neighbouring country, currently holds the chair of the ECOWAS bloc, with President Bola Ahmed Tinubu leading the call for military intervention. However, the Nigerian Senate has resisted approving Tinubu's request for military deployment, introducing further complexities to the situation. The internal dynamics within ECOWAS may impact the feasibility and nature of any potential intervention.
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For Prelims: ECOWAS, Nigeria, UN Security Council
For Mains:
1. What are the key objectives of ECOWAS, and how does it aim to achieve a single, large trading bloc among its member states? Discuss the challenges it faces in realizing these objectives. (250 Words)
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Previous Year Questions
1. In the recent years Chad, Guinea, Mali and Sudan caught international attention for which one of the following reasons is common to all of them? (upsc 2023) (a) Discovery of rich deposits of rare earth elements 2. Consider the following pairs: (UPSC 2018) Regions sometimes
mentioned in the news Country
1. Catalonia Spain 2. Crimea Hungary 3. Mindanao Philippines 4. Oromia Nigeria Which of the pairs given above are correctly matched? A. 1, 2 and 3 B. 3 and 4 only C. 1 and 3 only D. 2 and 4 only
3. With reference to the "United Nations Credentials Committee", consider the following statements: (UPSC 2022)
1. It is a committee set up by the UN Security Council and works under its supervision.
2. It traditionally meets in March, June and September every year.
3. It assesses the credentials of all UN members before submitting a report to the General Assembly for approval.
Which of the statements given above is/are correct?
A. 3 only B. 1 and 3 C. 2 and 3 D. 1 and 2
4. In the UN Security Council there are: (NTPC 2021)
A. 10 permanent and 10 non-permanent members
B. 5 permanent and 10 non-permanent members
C. 5 permanent and 5 non-permanent members
D. 10 permanent and 5 non-permanent members
Answers:1-D, 2-C, 3-A, 4- B
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