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.

• 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 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

 

Source: The Hindu

 

MONETARY POLICY COMMITTEE (MPC)

 

 

1. Context

 

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on 7th June 2024 decided to keep the repo rate unchanged at 6.5%.

 

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

• 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

 

 

 

 

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.

 

 

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) Bank rate Open Market Operations Public debt Public revenue 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

 

JAMES WEBB SPACE TELESCOPE (JWST)

 

 

 

1. Context

 

NASA’s James Webb Space Telescope (JWST) has spotted the earliest-known galaxy, one that is surprisingly bright and big considering it formed during the universe’s infancy — at only 2% its current age. The discovery was made by an international team of astronomers, who used JWST to observe galaxies as part of the JWST Advanced Deep Extragalactic Survey (JADES) program.

 

2. What do we know about the galaxy?

 

This galaxy, called JADES-GS-z14-0, measures about 1,700-light years across. A light year is the distance light travels in a year, which is 9.5 trillion km. The galaxy has a mass equivalent to 500 million stars the size of our Sun and is rapidly forming new stars — about 20 every year.

 

Until now, the earliest-known galaxy dated to about 320 million years after the Big Bang, as announced by the JADES team last year.

 

“It is significantly larger than other galaxies that the JADES team has measured at these distances, and it’s going to be challenging to understand just how something this large could form in only a few hundred million years,” Hainline said.

 

Source: BBC

 

3. Why is the galaxy so bright?

 

Three main hypotheses have been proposed to explain the brightness of early galaxies. The first suggested that supermassive black holes in these galaxies were consuming large amounts of material. However, this idea seems unlikely based on new findings, as the observed light is spread over a larger area than would be expected from black holes alone.

 

Astrophysicist and study co-author Francesco D’Eugenio from the Kavli Institute for Cosmology at the University of Cambridge noted that it is still uncertain whether the other hypotheses—that these galaxies contain more stars than anticipated or that the stars are inherently brighter than those found today—will be supported by further research.

 

4. Features of James Webb Space Telescope

 

The James Webb Space Telescope (JWST) boasts several advanced features that make it a groundbreaking instrument for astronomical observations:

• Large Primary Mirror:

  • The JWST's primary mirror is larger than the Hubble Space Telescope's mirror. This large mirror allows for greater light-gathering capability, enabling the telescope to observe faint and distant objects.

• Infrared Observations:

  • JWST is primarily an infrared telescope, designed to observe the universe in the near-infrared (0.6 to 5 micrometers) and mid-infrared (5 to 28.5 micrometers) wavelengths. This capability is crucial for studying the early universe, star formation, and the atmospheres of exoplanets.

• Advanced Instruments:

  • The telescope is equipped with four main scientific instruments:
    • NIRCam (Near-Infrared Camera): Captures images in near-infrared light.
    • NIRSpec (Near-Infrared Spectrograph): Performs spectroscopy in the near-infrared range.
    • MIRI (Mid-Infrared Instrument): Observes in the mid-infrared spectrum, providing both imaging and spectroscopy.
    • FGS/NIRISS (Fine Guidance Sensor and Near-Infrared Imager and Slitless Spectrograph): Aids in precise pointing and provides additional imaging and spectroscopic capabilities.

• Sunshield:

  • JWST features a large, multi-layered sunshield the size of a tennis court. This sunshield protects the telescope's instruments from the heat and light of the Sun, Earth, and Moon, keeping them at extremely low temperatures necessary for infrared observations.

• Location:

  • The telescope orbits at the second Lagrange point (L2), approximately 1.5 million kilometers (about 1 million miles) from Earth. This stable location allows for uninterrupted observations and a clear view of the cosmos without the interference of Earth's atmosphere.

• Deployment and Folding Design:

  • Due to its large size, JWST was designed to be folded to fit into the rocket for launch. It then undergoes a complex unfolding process in space, including the deployment of its mirror and sunshield.

These features collectively make JWST a powerful tool for advancing our understanding of the universe, from the earliest galaxies to the potential for life on other planets.

Source: BBC

5. Way Forward

JWST, which by peering across vast cosmic distances is looking way back in time, observed the galaxy as it existed about 290 million years after the Big Bang event that initiated the universe roughly 13.8 billion years ago, the researchers said. This period spanning the universe’s first few hundred million years is called cosmic dawn

 

Previous Year Questions   Mains PYQ:   Q. Launched on 25th December, 2021, James Webb Space Telescope has been much in the news since then. What are its unique features which make it superior to its predecessor Space Telescopes? What are the key goals of this mission? What potential benefits does it hold for the human race? (2022)

 

Source: Indian Express

H5N2

 

 

1. Context

The World Health Organization (WHO) on June 5 2024 confirmed the death of a 59-year-old man in Mexico caused by a strain of bird flu called H5N2, which was never recorded in humans before. The man, who died on April 24, had no history of exposure to poultry or other animals, raising significant concerns about the virus’s transmission. 

 

2. Avian Influenza

Avian influenza, commonly known as bird flu, is a viral infection that primarily affects birds. Avian influenza is a zoonotic disease, meaning it can spread from animals to humans. Certain subtypes of the virus infect humans, leading to severe respiratory illnesses. 

Symptoms of avian influenza in humans are similar to those of regular flu and can include: Fever, cough, sore throat, muscle aches, and severe respiratory distress in advanced cases.

3. Avian Influenza Type A Viruses

• Type A viruses are classified based on two proteins on their surfaces – Hemagglutinin (HA) and Neuraminidase (NA). There are about 18 HA subtypes and 11 NA subtypes.
• Several combinations of these two proteins are possible e.g., H5N1, H7N2, H9N6, H17N10, H18N11, etc.
• All known subtypes of influenza A viruses can infect birds, except subtypes H17N10 and H18N11, which have only been found in bats.
• The most notable of these subtypes is H5N1, which has been responsible for numerous human infections and fatalities in the past.

4. Avian Influenza and Human Transmission

The recent incident in Mexico raises significant concerns as the person affected had no identified contact with infected animals. This suggests a possible shift in the virus's capacity to transmit to humans without direct interaction with poultry implying a deviation from the traditional mode of transmission, where humans contract the virus through exposure to poultry. It indicates a new level of transmission or virulence of the virus that was not previously observed in the region.

 

Human infections with avian influenza viruses are not unprecedented yet rare, the potential for the virus to adapt and spread among humans is a serious public health concern. The H5N1 subtype, in particular, has caused human fatalities since it was first identified in humans in 1997. However, each new case, especially one without direct animal contact, underscores the importance of continuous monitoring and preparedness.

 

5. WHO Response

The WHO has emphasized the need for heightened vigilance and preventive measures to reduce the risk of infection.

The Mexico case serves as a reminder of the ongoing need for global health systems to remain alert to the threats posed by zoonotic diseases and to ensure rapid response mechanisms are in place to prevent widespread outbreaks.

6. Key Recommendations

Enhanced measures include:

a) Avoiding high-risk environments like live animal markets  and contact with sick or dead birds;

b) Prompt reporting of sick animals and consuming only thoroughly cooked poultry products

c) Ensuring practice of good hand hygiene and prompt medical care to individuals exposed to infected birds or environments

d) Implementing robust surveillance systems to detect and respond to new cases promptly.

 

7. Related Initiatives

i) India's self-declaration of freedom from Highly Pathogenic Avian Influenza (HPAI) has been approved by World Organisation for Animal Health (WOAH) in specific poultry compartments which follows a "detect and cull" policy as outlined in the National Action Plan for Prevention, Control, and Containment of Avian Influenza (revised - 2021).

ii) The Global Influenza Surveillance and Response System (GISRS), The Pandemic Influenza Preparedness (PIP) framework by World Health Organization (WHO). 

 

 

For Prelims:  Avian influenza H5N2, Avian influenza H5N1, Bird Flu, Hemagglutinin (HA) and Neuraminidase (NA), influenza A viruses, Genomic surveillance, Pathogens, and Viruses.   For Mains: 1.Discuss the impact of the H5N2 Avian Influenza virus on public health. What measures can be implemented at national and international levels to mitigate the spread of avian influenza viruses and minimize their impact on both poultry production and human health?

 

 

 

Previous Year Questions 1. H1N1 virus is sometimes mentioned in the news with reference to which one of the following diseases? (UPSC 2015) A. AIDS B.  Bird flu C.  Dengue D.  Swine flu Answer: D 2. Consider the following statements : (UPSC 2010) 1. Every individual in the population is an equally susceptible host for Swine Flu. 2. Antibiotics have no role in the primary treatment of Swine Flu. 3. To prevent the future spread of Swine Flu in the epidemic area, the swine (pigs) must all be culled. Which of the statements given above is/are correct? A. 1 and 2 only B. 2 only C. 2 and 3 only D. 1, 2 and 3 Answer: A 3. Which of the following statements is/are correct? (UPSC 2013) 1. Viruses lack enzymes necessary for the generation of energy. 2. Viruses can be cultured in any synthetic medium. 3. Viruses are transmitted from one organism to another by biological vectors only. Select the correct answer using the codes given below. A. 1 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3 Answer: A  4. Which of the following statements is/are correct? Viruses can infect (UPSC 2016) Bacteria Fungi Plants Select the correct answer using the code given below: (a) 1 and 2 only (b) 3 only  (c) 1 and 3 only (d) 1, 2 and 3 Ans: (d)

 

Source -  Indian Express