MONETARY POLICY COMMITTEE (MPC)
1. Context
The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) Thursday left the repo rate — the rate at which the RBI lends to banks — unchanged at 6.5 per cent for the sixth time in a row as uncertainty over food inflation continues to pose a threat to inflation
2. What is Monetary policy?
Monetary policy refers to the actions and strategies undertaken by a country's central bank to control and regulate the supply of money, credit availability, and interest rates in an economy. Its primary goal is to achieve specific economic objectives, such as price stability, full employment, and sustainable economic growth.
Central banks use various tools to implement monetary policy, including:
Interest Rates: Adjusting the interest rates at which banks lend to each other (known as the federal funds rate in the United States) influences borrowing and spending in the economy.
Open Market Operations: Buying or selling government securities in the open market to regulate the money supply. When a central bank buys securities, it injects money into the system, and when it sells them, it reduces the money supply.
Reserve Requirements: Mandating the amount of reserves banks must hold, affecting their ability to lend money.
By influencing the availability and cost of money, central banks aim to stabilize prices, control inflation, encourage or discourage borrowing and spending, and promote economic growth. However, the effectiveness of monetary policy can be influenced by various factors such as global economic conditions, fiscal policies, and market expectations.
3.What is the primary objective of the monetary policy?
The primary objective of monetary policy typically revolves around maintaining price stability or controlling inflation within an economy. Central banks often set an inflation target, aiming to keep it at a moderate and steady level. Stable prices help in fostering confidence in the economy, encouraging investment, and ensuring that the value of money remains relatively constant over time.
However, while controlling inflation is often the primary goal, central banks might also consider other objectives, such as:
Full Employment: Some central banks have a secondary objective of supporting maximum employment or reducing unemployment rates.
Economic Growth: Encouraging sustainable economic growth by managing interest rates and credit availability to stimulate or cool down economic activity.
Exchange Rate Stability: In some cases, maintaining stable exchange rates might be an important consideration, especially for countries with open economies heavily reliant on international trade.
These additional objectives can vary depending on the economic conditions, priorities of the government, and the central bank's mandate. Nonetheless, ensuring price stability is typically the fundamental goal of most monetary policies, as it forms the basis for a healthy and growing economy.
4. Monetary Policy Committee (MPC)
- In line with the amended RBI Act, 1934, Section 45ZB grants authority to the central government to establish a six-member Monetary Policy Committee (MPC) responsible for determining the policy interest rate aimed at achieving the inflation target.
- The inaugural MPC was formed on September 29, 2016. Section 45ZB stipulates that "the Monetary Policy Committee will ascertain the Policy Rate necessary to meet the inflation target" and that "the decisions made by the Monetary Policy Committee will be obligatory for the Bank."
- According to Section 45ZB, the MPC comprises the RBI Governor as the ex officio chairperson, the Deputy Governor overseeing monetary policy, a Bank official nominated by the Central Board, and three individuals appointed by the central government.
- The individuals chosen by the central government must possess "capabilities, ethical standing, expertise, and experience in economics, banking, finance, or monetary policy" (Section 45ZC)
5.Monetary Policy Committe and Inflation
3. Reasons for Presenting the white paper
4. What is its objective?
- The Monetary Policy Committee (MPC) plays a crucial role in managing inflation through its decisions on the policy interest rate.
- When inflation is too high, the MPC might decide to increase the policy interest rate. This action aims to make borrowing more expensive, which can reduce spending and investment in the economy.
- As a result, it could help decrease demand for goods and services, potentially curbing inflation.
- Conversely, when inflation is too low or the economy needs a boost, the MPC might decrease the policy interest rate.
- This move makes borrowing cheaper, encouraging businesses and individuals to spend and invest more, thus stimulating economic activity and potentially raising inflation closer to the target level.
- The MPC's goal is to use the policy interest rate as a tool to steer inflation toward a target set by the government or central bank.
- By monitoring economic indicators and assessing the current and expected inflation levels, the MPC makes informed decisions to maintain price stability within the economy
6. Way forward
With more than half of the current financial year witnessing positive developments in the economy, the full financial year should conclude as projected with a strong growth performance and macroeconomic stability. Yet risks on the downside persist. Inflation is one of them that has kept both the government and the RBI on high alert. Financial flows in the external sector also need constant monitoring as they impact the value of rupee and the balance of payments. A fuller transmission of the monetary policy may also temper domestic demand
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For Prelims: Economic and Social Development
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
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Previous Year Questions
1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4 Answer: C 3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall. (b) Central bank is no longer making loans to commercial banks. (c) Central bank is following an easy money policy. (d) Central bank is following a tight money policy. Answer: (d) 4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only Answer: A |
Source: Indianexpress
UNIFORM CIVIL CODE (UCC)
1. Context
Uttarakhand Chief Minister Pushkar Singh Dhami tabled the Uniform Civil Code (UCC) Bill in the state Assembly on Tuesday. This came after the state-appointed committee led by retired Supreme Court judge Justice Ranjana P Desai submitted its draft on February 2 2024.
2. 22nd law commission on UCC
- Underlining that the Uniform Civil Code is “neither necessary nor desirable at this stage”, the 21st Law Commission of India, in 2018, argued for reform of family laws of every religion through amendments and codification of certain aspects so as to make them gender-just
- In its ‘Consultation Paper on Family Law Reforms’, the Law Commission took a stand in favour of “equality ‘within communities’ between men and women” (personal law reform), “rather than ‘equality between’ communities” (UCC)
- According to the 22nd Law Commission Cultural diversity cannot be compromised to the extent that our urge for uniformity itself becomes a reason for threat to the territorial integrity of the nation
- women must be guaranteed their freedom of faith without any compromise on their right to equality
3. What is the Uniform Civil Code
- A UCC would provide for one law for the entire country, applicable to all religious communities, in their personal matters such as marriage, divorce, inheritance, adoption etc
- Currently, Indian personal law is fairly complex, with each religion adhering to its own specific laws
- Separate laws govern Hindus including Sikhs, Jains and Buddhist, Muslims, Christians, and followers of other religions
- Moreover, there is diversity even within communities. All Hindus of the country are not governed by one law, nor are all Muslims or all Christians
- For instance, in the Northeast, there are more than 200 tribes with their own varied customary laws
- The Constitution itself protects local customs in Nagaland. Similar protections are enjoyed by Meghalaya and Mizoram. Even reformed Hindu law, in spite of codification, protects customary practices
- The exception to this rule is the state of Goa, where all religions have a common law regarding marriages, divorces, and adoption
4. Constitution on UCC
- Article 44 of the Constitution lays down that the state shall endeavour to secure a UCC for citizens throughout the territory of India
- Article 44 is among the Directive Principles of State Policy. Directive Principles are not enforceable by court, but are supposed to inform and guide governance
- However, in some senses, Article 44 is unique in this manner. While Article 44 uses the words “state shall endeavour”, other Articles in the ‘Directive Principles’ chapter use words such as “in particular strive”; “shall in particular direct its policy”; “shall be obligation of the state
- The phrase “by suitable legislation” is absent in Article 44. All this implies that the duty of the state is greater in other directive principles than in Article 44
5. Uniform Code for Personal Law
Article 25 lays down an individual’s fundamental right to religion; Article 26(b) upholds the right of each religious denomination or any section thereof to “manage its own affairs in matters of religion”
Article 29 defines the right to conserve distinctive culture
An individual’s freedom of religion under Article 25 is subject to “public order, health, morality” and other provisions relating to fundamental rights, but a group’s freedom under Article 26 has not been subjected to other fundamental rights
6. Way forward
Over the next 30 days, the Law Commission will receive views of the public and stakeholders
The notice said the stakeholders concerned are at liberty to make submissions in the form of consultation/discussion/working papers on any of the issues pertaining to the UCC to the Member Secretary, Law Commission of India
After reviewing the submissions, the Law Commission will again make observations/recommendations regarding a UCC, which may or may not differ from the previous Commission’s observations
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For Prelims: Unifrom Civil Code (UCC), DPSP, Fundamental rights, Law Commission
For Mains: 1. What is the Uniform Civil Code? What are the challenges in implementing a Uniform Civil Code in a diverse country like India?
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Source: indianexpress
DEATH SENTENCE
1.Context
A Chinese court ordered a suspended death sentence for China-born Australian writer Yang Hengjun on Monday (February 5), over charges of espionage. The sentence means that after two years of jail time, his punishment will be converted into lifetime imprisonment. Yang has been under Chinese authorities’ detention since 2019.
2.Background
- Death sentence/Capital punishment, also known as the death penalty, is a state-sanctioned practice of killing a person as a punishment for a crime.
- The sentence order that an offender is to be punished in such a manner is known as a death sentence, and the act of carrying out the sentence is known as an execution.
- While the standard applied by the judiciary is that of the rarest of rare principles (however subjective or Judge-centric it may be in its application), the standard applied by the executive in granting commutation is not known.
- In Shankar Kisanrao Khade v. State of Maharashtra (‘Khade’), the Supreme Court of India, while dealing with an appeal on the issue of death sentence, expressed its concern with the lack of a coherent and consistent purpose and basis for awarding death and granting clemency.
3.History of the death penalty in India
- An early attempt at the abolition of the death penalty took place in pre-independent India when Shri Gaya Prasad Singh attempted to introduce a Bill abolishing the death penalty for IPC offences in 1931.
- However, this was defeated Around the same time, in March 1931, following the execution of Bhagat Singh, Sukhdev and Rajguru by the British government, the Congress moved a resolution in its Karachi session, which included a demand for the abolition of the death penalty.
- India’s Constituent Assembly Debates between 1947 and 1949 also raised questions about the judge-centric nature of the death penalty, arbitrariness in imposition, its discriminatory impact on people living in poverty, and the possibility of error.
- Pandit Thakur Das Bhargava complained regarding the errors associated with the death penalty.
- Dr Ambedkar was personally in favour of abolition.
4.Legal backing associated with the death penalty
- The IPC prescribed six punishments that could be imposed under the law, including death.
- In 1955, the Parliament repealed Section 367(5), CrPC 1898, significantly altering the position of the death sentence.
- The Code of Criminal Procedure was reenacted in 1973 (‘CrPC’), and several changes were made.
5.Constitutional and judicial opinions on the Death penalty
- In Jagmohan Singh v. State of U. P., the Supreme Court found that the death penalty was a permissible punishment, and did not violate the Constitution.
- In 1979, the case of Rajendra Prasad v. State of Uttar Pradesh (‘Rajendra Prasad’) discussed what the “special reasons” for imposing the death sentence could be.
- A Constitution Bench of the Supreme Court in the case of Triveniben v. the State of Gujarat considered the question and held that only executive delay, and not judicial delay, may be considered relevant in an Article 21 challenge.
- In Bachan Singh, the Court adopted the ‘rarest of rare’ guideline for the imposition of the death penalty, saying that reasons to impose or not impose the death penalty must include the circumstances of the crime and the criminal.
- Justice Bhagwati (17th Chief Justice of India) in his dissenting opinion found the death penalty necessarily arbitrary, discriminatory and capricious.
6.Criticism against the Death penalty
- Major arguments against the death penalty focus on its inhumanity, lack of deterrent effect, continuing racial and economic biases, and irreversibility.
- Proponents argue that it represents just retribution for certain crimes, deters crime, protects society, and preserves the moral order.
- Death penalty violates Articles 14, 19 and 21 of the Constitution of India.
- It was argued that since the death sentence extinguishes, along with life, all the freedoms guaranteed under Article 19(1) (a) to (g), it was an unreasonable denial of these freedoms and not in the interests of the public.
- The discretion vested in judges in deciding to impose a death sentence was uncontrolled and unguided and violated Article 14.
- Provisions of the law did not provide a procedure for the consideration of circumstances crucial for choosing between capital punishment and imprisonment for life, it violated Article 21.
- The decision of the US Supreme Court in Furman v. Georgia in which the death penalty was declared to be unconstitutional as being cruel and unusual punishment was also placed before the Constitution Bench.
- Irreversibility, fallibility, and that the punishment is necessarily cruel, inhuman and degrading a life whose purity is beyond the law.
7.Conclusion
- A real and abiding concern for the dignity of human life postulates resistance to taking a life through the law's instrumentality.
- That ought not to be done save in the rarest of rare cases when the alternative option is unquestionably foreclosed.
- “Section 364A cannot be dubbed as so outrageously disproportionate to the nature of the offence as to call for the same being declared unconstitutional”, death sentences would only be awarded in the rarest of rare cases.
- The Court did not address the question of whether the death sentence was an appropriate punishment for a non-homicide offence or applicable international law standards on this issue.
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Top 10 Countries that Conducted the Most Executions in 2021 (Amnesty International)
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For Prelims & Mains
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For Prelims: Death Sentence,
For Mains: Compare the death penalty in India with other countries (250 words)
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KUNO NATIONAL PARK
1.Context
Wildlife officials in Madhya Pradesh’s Kuno National park are ecstatic about the birth of seven cheetah cubs in January this year.
Four cubs were born to the Namibian Cheetah Jwala and three to Asha. The seven newborns, and another 10-month-old female born to Jwala, are the future of Project Cheetah, an ambitious venture to re-introduce Cheetahs to India. After seven adult cheetahs and three cubs died last year, the births have raised hopes that the cheetahs may be acclimating to Indian conditions
2.Background
Kuno National Park is a national park and Wildlife Sanctuary in Madhya Pradesh, India. It derives its name from Kuno River
It was established in 1981 as a wildlife sanctuary with an initial area of 344.686 km² in the Sheopur and Morena districts. In 2018, it was given the status of a national park
This area which has become a National Park today started out as a sanctuary of about 350 sq. kms. And was in shape of a leaf with Kuno river forming the main centre spine. This river not only helps in keeping a constant water supply in the area and irrigating the forest from inside out but also gave this protected area its name
3.History of Kuno National Park
- Kuno National Park / Kuno Wildlife Division and the surrounding area has historically been rich with wildlife.This area was known to be a dense forest in ancient times as well
- One of the gazette of Gwalior princely state of year 1902, records that the Mughal Emperor Akbar while returning from Malwa region captured a big herd of elephants in the forests near Shivpuri in the year 1564
- Abul fazal also mentioned this fact that Lions were found in this region and the last Lion in this region is known to be shot near to city of Guna in the year 1872.
- In the year 1904 Lord Curzon was invited for hunting by the then His Highness Madhavrao Scindia,the Ist, King of Gwalior
- Lord Curzon was so much impressed with the forest of valley of Kuno that he immediately suggested the King to bring Lions from Junaghad, Gir and released in the forest
- King Scindia started working on it with the audacity suitable to a Maharaja and tried collaborating on his level, with the Nawab of Junaghad
- Later Lord Curzon even presented the King with a letter addressed to the ruler of Abisinia (Current Ethopia) so that some lions from there could be brought to Kuno
- A Persian expert named D.M. Zaal was made in charge of this project by the King and in 1905 , this project was allocated Rs. 1 lakh budget in that year.
4. Significance of Kuno National Park
- The area surrounding Kuno river has been rich in biodiversity since ancient times. Its importance can be reflected in the 30,000-year-old cave paintings in nearby Pahargarh depicting multiple wild animals.
- Biogeographically this area falls under the Kathiawar-Gir dry deciduous forest eco-region and the forest types found in this area include the Northern tropical dry deciduous forest, Southern tropical dry deciduous forest, Dry Savannah forest & grassland, Tropical riverine forest
- It is equally rich in the faunal species and thus provide a rare amalgamation of various favourable factors for wildlife
- The significance of this area is strengthened by the fact that because of its aptness on various parameters Wildlife Institute of India chose this as the most suitable location for Lion Reintroduction Program in its study
- Government of Madhya Pradesh revised the status of this area, ameliorating it to become a National Park with 748.761 square km as the core and 557.278 buffer area as the buffer in December 2018
- This upgradation of Kuno Sanctuary to Kuno National Park further cements it’s importance in the field of Wildlife Conservation in Central Indian Landscape.
5.Biodiversity of Kuno
- Thus Kuno National Park’s forest area is mainly dominated by Kardhai, Salai, Khair trees among mostly mixed forests, this also helps it in having a variety of species of flora and fauna. In all, a total of 123 species of trees , 71 species of shrubs , 32 species of climbers and exotic species and 34 species of bamboos and grasses are found in Kuno National Park
- Kuno has one of the most unique combination of forest and vegetation in entire Madhya Pradesh and adjoining areas which can only be seen to be believed
The forests of Kuno National Park are broadly classified into the following types:
- “Southern Tropical Dry Deciduous Forest”
- Southern Tropical Very Dry Teak Forest
- Northern Tropical Dry Deciduous Forest
- Northern Dry Mixed Deciduous Forest
- Northern Tropical Dry Deciduous Scrub
- Northern Tropical Thorn Forest
- Ravine Thorn Forest
- Zizyphus Scrub
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Kuno National Park which is mainly dominated by Kardhai, Salai, Khair trees among the mixed forests, supports a vide variety of both floral and faunal species. It has a rich biodiversity having a total of 123 species of trees , 71 species of shrubs , 32 species of climbers & exotic species, 34 species of bamboos and grasses, 33 species of mammals, 206 species of birds, 14 species of fishes, 33 species of reptiles and 10 species of amphibians. Such a high number of both floral and faunal species make it one of the most biodiverse areas of Central Indian Landscape.
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6.Why Kuno is best for Cheeta re-introduction
The Kuno National Park has diverse habitats conducive for lions and cheetahs constituted by
- Open woodlands,
- Savanna,
- Dry deciduous forests.
- Evergreen riverine forests
Forest grass species are common in valley habitats while plateau tops had shorter grasses
Kuno National Park is part of a large forested landscape constituted by the Sheopur-Shivpuri forests covering an area of -6800 sq. km.
The density of leopards in Kuno National Park is 8.9 per 100 sq. km
7.About Kuno river
The Kuno River is one of the main tributaries of the Chambal River
It flows through the Kuno National Park from south to north, draining the other rivulets and Tributaries into Chambal River in Morena at MP-Rajasthan border
It is 180 km long and originates from the Shivpuri Plateau
Source: Indianexpress
REPO RATE
1. Context
Recently, The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) left the repo rate at which the RBI lends to banks unchanged at 6.5 per cent for the sixth time in a row as uncertainty over food inflation continues to pose an inflation threat.
2. About the Repo rate
- The repo rate, short for repurchase rate, is the rate at which the central bank of a country (such as the Reserve Bank of India in India) lends money to commercial banks for a short-term period, typically overnight. It is one of the key tools used by central banks to control monetary policy and regulate the economy.
- When the central bank wants to stimulate economic growth, it may lower the repo rate. This makes it cheaper for commercial banks to borrow money, which in turn encourages them to lend more to businesses and consumers, stimulating spending and investment. Conversely, when the central bank wants to control inflation or cool down an overheated economy, it may raise the repo rate. This makes borrowing more expensive, which can help reduce spending and inflationary pressures.
- The repo rate also influences other interest rates in the economy, such as lending rates for consumers and businesses, as well as rates on savings and deposits. Therefore, changes in the repo rate have wide-ranging implications for the overall economy.
- The repo rate in India is 6.50%. This rate has been unchanged since February 8, 2023, after a series of hikes throughout 2022 to combat inflation.
3. What is the Cash Reserve Ratio (CRR) Rate?
- The Cash Reserve Ratio (CRR) is the portion of a bank's deposits that it is required to maintain as reserves with the central bank, such as the Reserve Bank of India (RBI) in India. It is expressed as a percentage of a bank's total deposits.
- The CRR rate is set by the central bank as part of its monetary policy tools to regulate the money supply in the economy. By adjusting the CRR rate, the central bank can influence the amount of money available for lending by commercial banks.
- When the CRR rate is increased, banks are required to hold a higher proportion of their deposits as reserves with the central bank, which reduces the amount of money available for lending. Conversely, when the CRR rate is decreased, banks have more funds available for lending, which can stimulate borrowing and economic activity.
- The primary objective of adjusting the CRR rate is to control inflation, manage liquidity in the banking system, and ensure the stability of the financial system.
4. How this move will impact the overall Economy?
Changes in repo rate and CRR affect various aspects of the economy, including:
- When the central bank increases the CRR rate, banks are required to hold a larger portion of their deposits as reserves, reducing the amount of money available for lending. This can lead to a decrease in liquidity in the banking system, making it more difficult for businesses and individuals to access credit. Conversely, a decrease in the CRR rate can increase liquidity in the banking system, making credit more readily available.
- Changes in the CRR rate can also influence interest rates in the economy. When the CRR rate is increased, banks may raise their lending rates to compensate for the higher cost of holding reserves. This can lead to higher borrowing costs for businesses and consumers, potentially dampening investment and spending. Conversely, a decrease in the CRR rate can lead to lower lending rates, stimulating borrowing and economic activity.
- The CRR rate is one of the tools used by the central bank to control inflation. By adjusting the amount of money available for lending, changes in the CRR rate can impact aggregate demand in the economy. A decrease in the CRR rate can stimulate borrowing and spending, potentially leading to increased demand and inflationary pressures. Conversely, an increase in the CRR rate can reduce borrowing and spending, helping to control inflation.
- Changes in the CRR rate can have implications for overall economic growth. Higher CRR rates can reduce the availability of credit, which may slow down investment and consumption spending, leading to lower economic growth. Conversely, lower CRR rates can stimulate borrowing and spending, potentially boosting economic activity.
5. About the Monetary Policy Framework
A monetary policy framework is the overall structure and set of guidelines that a central bank like the Reserve Bank of India (RBI) uses to achieve its economic objectives. It defines the tools, targets, and communication strategies employed to manage the money supply and influence interest rates, ultimately affecting inflation and economic growth.
Objectives
- Maintaining low and stable inflation is typically the primary objective.
- Balancing price stability with promoting economic growth is crucial.
- Ensuring a stable and efficient financial system is also important.
Instruments
- Repo rate influences the cost of borrowing for banks and indirectly impacts interest rates in the economy.
- CRR affects the amount of money banks have available for lending, influencing the money supply.
- Open market operations The central bank can buy or sell government securities to inject or drain money from the economy.
Targets
- This framework sets a specific inflation target and uses monetary policy tools to achieve it. India currently follows a flexible inflation-targeting framework.
- This framework aims to maintain a stable exchange rate, but India does not currently follow this approach.
Communication
- The central bank clearly communicates its policy decisions and rationale to the public and market participants to ensure transparency and manage expectations.
Benefits of a clear framework
- It helps the public understand how the central bank makes monetary policy decisions.
- It holds the central bank accountable for achieving its objectives.
- It allows businesses and individuals to make informed economic decisions based on expected monetary policy actions.
India's Monetary Policy Framework
- India currently follows a flexible inflation targeting framework, with a target of 4% inflation ± 2%.
- The RBI uses a variety of instruments, including the repo rate and CRR, to achieve this target.
- The RBI regularly communicates its policy decisions and rationale through press releases, speeches, and its website.
6. The Way Forward
The RBI's decision to maintain the repo rate highlights its cautious approach to balancing inflation control with economic growth. Analyzing the potential implications within the context of broader monetary policy objectives can help us understand the impact on various economic actors and sectors.
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For Prelims: Repo rate, RBI, Inflation, Monetary Policy Committee, Cash Reserve Ratio For Mains: 1. Examine the impact of the RBI's repo rate decision on various sectors of the Indian economy, such as agriculture, manufacturing, and small and medium enterprises. How can the government mitigate the negative consequences on vulnerable sections of the population? (250 Words)
2. In a globalized world where economic policies are interconnected, how can India collaborate with other countries to address macroeconomic challenges such as inflation and exchange rate volatility? (250 Words)
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Previous Year Questions 1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4
3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall.
(b) Central bank is no longer making loans to commercial banks.
(c) Central bank is following an easy money policy.
(d) Central bank is following a tight money policy.
4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only
5. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (UPSC 2020) (1) Cut and optimize the Statutory Liquidity Ratio
(2) Increase the Marginal Standing Facility Rate
(3) Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below: A. 1 and 2 only B. 2 only C. 1 and 3 only D. 1, 2 and 3
6. 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
7. 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
Answers: 1-C, -C, 3-D, 4-A, 5-B, 6-C, 7-A
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Source: The Indian Express
WHITE PAPER
1. Context
Recently, Finance Minister Nirmala Sitharaman unveiled a "white paper" on the Indian economy in Parliament. The report, compiled by the Ministry of Finance, primarily juxtaposes the economic governance performance over a decade under the Congress-led UPA administrations (from 2004-05 to 2013-14) with that under the BJP-led NDA governments (from 2014-15 to 2023-24).
2. About white paper
- A white paper traditionally offers detailed insights into a particular subject, often aiming to inform the public about an issue and propose potential solutions.
- While governments commonly utilize white papers, such as one addressing black money, to shed light on a problem and suggest remedies, what was introduced in Parliament differs in nature.
- Rather than a conventional white paper, it serves as a comparative analysis of the economic performances of two distinct administrations across various metrics.
- A true white paper on the economy would have provided a comprehensive assessment of India's economic state in 2014 when the current government assumed office.
3. Reasons for Presenting the white paper
- The rationale behind presenting the white paper after a decade is elucidated within the document.
- It highlights the government's decision to abstain from releasing a white paper during the initial phase, as it could have potentially fostered a negative narrative and undermined confidence, including that of investors.
- Instead, the focus was on instilling hope among the populace, enticing both domestic and international investments, and garnering backing for imperative reforms.
4. What is its objective?
The white paper has four main objectives outlined:
- To enlighten the public about the magnitude and nature of the governance, economic, and fiscal challenges inherited by the government upon assuming office in 2014.
- To provide insights into the policies and actions undertaken by the government to revitalize the economy since 2014.
- To foster a broader and more informed discourse on the significance of national interest and fiscal responsibility in governance decisions, prioritizing them over political expediency.
- To echo the Prime Minister's call, made during last year's Independence Day address, urging a collective commitment to national development by embracing new aspirations, consciousness, and resolutions, amidst the vast array of possibilities and opportunities opening up for the country.
5. Important assertions in the White Paper
The 58-page white paper is structured into three main sections. Part 1 delves into the macroeconomic landscape during the 10-year tenure of the UPA administration. Part 2 presents an analysis of the current status of various corruption scandals associated with the UPA government. Part 3 outlines the strategies and actions undertaken by the NDA to rejuvenate the economy.
Key assertions in the white paper include:
UPA's Rule (2004-2014)
- The government inherited a robust economy poised for further reforms but allowed it to stagnate over 10 years.
- The administration abandoned economic reform initiatives.
- In the aftermath of the 2008 Global Financial Crisis, the government prioritized sustaining high economic growth at any cost, resulting in significant deterioration of macroeconomic fundamentals. Notably, high inflation, a substantial fiscal deficit, and a prevalent prevalence of bad loans in the banking sector hindered economic progress.
- Despite heavy borrowing from the market, the government allocated funds inefficiently, leading to a decline in capital expenditure as a proportion of total expenditure, thereby impeding infrastructure development and exacerbating logistical challenges.
- Health expenditure by Indian households witnessed minimal improvement.
- Policy paralysis hindered defence preparedness, resulting in chronic shortages of combat-ready equipment and ammunition.
- The tenure was marred by policy missteps and scandals, such as opaque auctions of public resources (coal and telecom spectrum) and controversies surrounding retrospective taxation.
NDA's Performance (2014-2024)
- The improvements achieved under the government, utilizing data from sources like the International Monetary Fund demonstrate lower average headline inflation.
- It also showcases the enhanced outcomes of various schemes, such as increased toilet construction and greater financial inclusion through expanded bank account access.
6. Challenges in Comparing India's Economic Performance
- Assessing the performance of an economy spanning two decades, even when consecutive, presents considerable challenges due to the multitude of factors influencing both the economy and its measurement.
- A significant contributing factor to the stark contrast in domestic inflation between the latter years of the UPA and the initial years of the NDA was the fluctuating cost of crude oil. During FY12 to FY14, crude oil prices ranged between $111 and $105 per barrel, before plummeting to $84 in FY15 and further to $46 in FY16.
- Aggregate data suggests that India experienced superior GDP growth and lower fiscal deficits.
- While the government can boast of genuine accomplishments such as the implementation of GST and IBC, the white paper overlooks critical economic shortcomings. Notably, it fails to address pressing issues like unemployment, despite evidence from the government's Periodic Labour Force Survey indicating a 45-year high in unemployment during 2017-18.
- Furthermore, there is no mention of the absence of formal poverty measurement since 2011 or the failure to conduct the decadal Census, the first such lapse since 1881. Surprisingly, the white paper analyzing two decades of the Indian economy lacks even a single chart depicting GDP growth over this period.
7. The Way Forward
The white paper serves as a comprehensive analysis of India's economic landscape over two distinct administrations, shedding light on achievements, challenges, and areas for improvement. Its insights contribute to informed policy discussions and decision-making processes for the nation's future economic development.
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For Prelims: White Paper, inflation, corruption, GDP, Periodic Labour Force Survey
For Mains:
1. How can India improve its data collection and analysis methods to ensure more accurate and comprehensive economic assessments? Discuss the importance of conducting the decadal Census in this context. (250 Words)
2. "Economic growth alone is not enough for true national development." Discuss this statement in the context of India's recent economic record and suggest policy directions for inclusive and sustainable development. (250 Words)
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Source: The Indian Express
