• Trigger Event: Terror attack in Uri
• India held an outreach summit with BIMSTEC leaders alongside the BRICS summit in Goa.
• Some BIMSTEC countries backed India's call for boycotting the SAARC summit in Islamabad (November 2016).
• India declared victory in isolating Pakistan after the SAARC summit was postponed.
• India believed SAARC's potential was under-utilized due to Pakistan's lack of response and obstructionist approach.
• At the 2014 SAARC summit in Kathmandu, Modi emphasized realizing opportunities through SAARC or outside it, among all or some member countries.

6. Challenges faced by BIMSTEC

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

 

PARIS AGREEMENT

1. Context

The average global temperature between July 2023 and June 2024 was the highest on record, according to the European Union’s Copernicus Climate Change Service’s latest bulletin

2. What is Paris Agreement?

• Paris Agreement is a multinational agreement that was signed as part of the UNFCCC with the intention of reducing and mitigating greenhouse gas emissions.
• 196 nations ratified the climate change agreement at the Conference of the Parties (COP 21) in Paris in December 2015. It is an international agreement that is binding on all parties involved.
• Achieving the long-term temperature goal was the purpose of the Paris Climate Accord. To attain a world without greenhouse gas emissions by the middle of the century, nations strive to peak global greenhouse gas emissions as soon as possible.
• The Paris Climate Accord's major objective is to keep global warming well below 2° Celsius and ideally below 1.5° Celsius in comparison to pre-industrial levels.
• The Paris Agreement is a watershed moment in the multilateral climate change process because it brings all nations together for the first time in a binding agreement to undertake ambitious efforts to combat climate change and adapt to its effects.

3. COP21

• To keep the rise in the average world temperature to well under 2°C above pre-industrial levels. To continue making efforts to keep global warming to 1.5°C over pre-industrial levels, knowing that doing so would greatly lessen the dangers and effects of climate change.
• The Agreement also mentions achieving the global peaking of emissions by the middle of the century while taking into account the fact that developing nation Parties will have a longer peaking period.

4. What are NDCs

• At the Conference of the Parties (COP21) of the U.N. Framework Convention on Climate Change (UNFCCC), which took place in Paris in December 2015, nations from all over the world pledged to establish a new global climate agreement by that time.
• In advance of a new international agreement, nations have committed to publicly state their Intended Nationally Determined Contributions or the climate activities they plan to take after 2020.
• The 2015 agreement's ambitious goals and whether the world is put on a course toward a low-carbon, climate-resilient future will be largely determined by the INDCs.
• The Intended Nationally Determined Contribution (INDC) of India has also been submitted to the United Nations Framework Convention on Climate Change.
• Countries communicate actions they will take to reduce greenhouse gas emissions to meet the Paris Agreement's goals in their NDCs.
• Countries also communicate actions they will take to build resilience to adapt to the effects of rising temperatures in their NDCs.

Image Source: The Hindu

5. Highlights of the report on the performance of the Paris Agreement

• After the signing of the Agreement, the last eight years (2015-2022) have consecutively been the warmest years on record globally.
• The situation could have been far worse if the La Nina weather event had not occurred in the past three years, which has a cooling effect on the weather system.
• Globally updated Nationally Determined Contributions (NDCs) to limit global warming to 1.5 degrees Celsius have failed even to achieve a 2-degree Celsius target.
• The Paris Agreement has not been able to equitably phase out fossil fuels predominantly responsible for the climate crisis.
• Neither the NDCs nor the disaster risk reduction and climate risk management plans are in place to combat climate-induced extreme weather phenomena.

6. A series of climate records fell over in 2022, the report showed. 

• Global mean temperature rising: The global mean temperature in 2022 was 1.15°C, ranging from 1.02°C to 1.28°C above the 1850–1900 average. This was the highest on record for the past eight years. The value is about 0.2°C higher than the statistic before 2015. The pre-industrialisation era is considered a benchmark as there was no significant anthropogenic emission at the time.
• Record melting of Antarctica ice: Sea ice in Antarctica dropped to an all-time low, 1.92 million square kilometres, on February 25, 2022. This was almost a million sq km below the mean of the last three decades till 2020. 
• Greenhouse gases surged: The levels of three major greenhouse gases — carbon dioxide, methane, and nitrous oxide — continued to increase in 2022. The data shows that growth rates of all three gases have increased around 20 per cent compared to 2011-15 levels.
• Sea level rise doubled: Global mean sea level continued to rise in 2022. It has doubled to 4.62 millimetres per year during 2013–2022 from 2.27 mm recorded in the first decade of the satellite record (1993–2002). The rate of increase quickened after 2015. Ocean heat content, which measures this gain in energy, reached a new observed record.
• Record thinning of glaciers: Long-term observational data is available for glaciers, which were found to have thinned over 1.3 metres between October 2021 and October 2022. The loss is much larger than before. The cumulative thickness loss since 1970 amounts to almost 30 metres.
• More than half of the oceans saw marine heatwaves in 2022:  Despite continuing La Nina conditions, 58 per cent of the ocean surface experienced at least one marine heatwave during 2022. 
• Heatwaves killed 15,000 in Europe: Record-breaking heatwaves affected China and Europe during the summer, with excess deaths associated with the heat in Europe exceeding 15000. Casualties were reported across Spain, Germany, the United Kingdom, France and Portugal.
• 1,600 suffered deaths from weather extremes in India: India suffered from significant flooding at various stages during monsoon, particularly in the northeast in June, with over 700 deaths reported from flooding and landslides and a further 900 from lightning.

For Prelims: Paris Agreement, Conference of the Parties (COP 21), World Meteorological Organization (WMO), UNFCCC, Nationally Determined Contributions (NDCs). For Mains: 1. Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference? (UPSC 2021)

 

Previous year Question 1. With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (UPSC 2016) 1. The Agreement was signed by all the member countries of the UN and it will go into effect in 2017. 2. The Agreement aims to limit greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2°C or even 1.5°C above pre-industrial levels. 3. Developed countries acknowledged their historical responsibility for global warming and committed to donate $1000 billion a year from 2020 to help developing countries cope with climate change.   Select the correct answer using the code given below A. 1 and 3 only B.  2 only C.  2 and 3 only D.  1, 2 and 3 Answer: B   2. The term ‘Intended Nationally Determined Contributions’ is sometimes seen in the news in the context of ( UPSC 2016) A. pledges made by the European countries to rehabilitate refugees from the war-affected Middle East B. plan of action outlined by the countries of the world to combat climate change C. capital contributed by the member countries in the establishment of the Asian Infrastructure Investment Bank D. plan of action outlined by the countries of the world regarding Sustainable Development Goals Answer: B

Source: Down to Earth

ELECTRIC VEHICLES

1. Context

The Uttar Pradesh government waived off registration fees for strong hybrid and plug-in hybrid electric vehicles (EVs) on July 5, joining Tamil Nadu and Chandigarh in offering incentives for cleaner alternatives to petrol and diesel vehicles.

2. What are Electric Vehicles?

• An E-vehicle or Electric Vehicle is one that needs an electric motor to generate power and function instead of an internal-combustion engine that generates power by burning a mix of gases and fuel.
• Electric Vehicles have a battery that can be charged by an electric supply.
• This electric energy is used to run the motor. There is a hybrid electric vehicle as well, which means a combination of an electric motor and a combustion engine.

3. Types of Electric Vehicles

• Plug-in electric – Such Electric Vehicles run purely on electricity, and it is powered when it is plugged in to charge. They don’t produce emissions like petrol or diesel.
• Plug-in hybrid – Their primary source of power is electricity, but these vehicles also have a fuel engine. These cars produce emissions only when they run on fuel engines but not when they run on electricity.
• Hybrid-electric – These Electric Vehicles primarily run on petrol or diesel, but they’re also fitted with an electric battery. One can charge the battery through regenerative braking. It comes with a button that lets you switch from using a fuel engine to using an electric battery (EV mode.)
• Fuel Cell Electric Vehicles (FCEVs)– these vehicles use a highly efficient electrochemical process to convert hydrogen into electricity, and it powers the electric motor.

4. Initiatives by the Government

The government has set a target of 30% new sales of electric vehicles and two-wheelers by 2030. The government is working towards it by following the initiative and various government schemes.

National Electric Mobility Mission Plan (NEMMP)

• It is a road map/document for India’s fuel security by promoting and faster adoption of electric vehicles in India with the initial allocation of Rs 75 crore. The ambition is to have around 6 million vehicles on the road by 2020.
• This plan is for affordable and environmentally friendly transportation in the country and to achieve automotive leadership in global manufacturing.

Faster Adoption and Manufacturing of (hybrid and) electric vehicles (FAME)

• The scheme was announced by the government in 2015 with the objective of market creation and developing a manufacturing ecosystem with sustainable development.
• It is formulated by the Department of Heavy Industry, having 4 key areas- technology creation, demand creation, pilot projects, and infrastructure related to charging.

Faster Adoption and Manufacturing of (hybrid and) electric vehicles (FAME) II

• Based on the result and experience of phase I of the scheme, phase II was launched with an allocation of Rs 10000 Crore over three years, recently approved by the cabinet.
• This scheme vision a holistic approach to the EV industry, including infrastructure for charging, manufacturing of batteries, market creation, public demand, and push for EVs in public transport.
• It also offers incentives to the manufacturer of electric vehicles and their components.
• It enables the creation of charging infrastructure in selected cities and major highways at an interval of 25 km.

5. Electric Vehicle Policy, 2020

Electric Vehicle Policy 2020 has been announced by the Delhi Government, where it put emphasis on the replacement of two-wheelers, shared vehicles, public transport, and private four-wheelers with Electric Vehicles. Some of the Features of EV Policy 2020 are given below:

• As per Electric Vehicle Policy, the focus is given to e-mobility, which includes e-buses and e-autos.
• The government has decided to give low-interest loans so that people can purchase Electric Vehicles easily.
• The main goal of the E-Vehicle Policy in India is to reduce pollution and curb health issues in Delhi.
• State EV Fund will be introduced for the expenditure of EV Policy.

6. Challenges in promoting Battery Electric Vehicle (BEV) Adoption

• Subsidy Limitations: In contrast to countries like Norway, where extensive subsidies have spurred BEV adoption, India's subsidy structure primarily benefits the middle or upper middle classes. This inequality raises concerns about the effectiveness and fairness of upfront purchase subsidies, which tend to benefit those who can afford BEVs.
• Charging Network: Investing in comprehensive charging infrastructure is crucial for driving BEV adoption. Countries like Norway and China have seen success by expanding public charging stations while providing purchase subsidies. However, India's charging infrastructure remains insufficient, particularly for two- and three-wheelers, which dominate the vehicle mix. Adapting charging strategies to accommodate different vehicle types and power requirements is essential for promoting widespread adoption.
• Electricity Source: India's reliance on coal-fired thermal plants for electricity generation poses a challenge to the potential environmental benefits of BEVs. While EVs may reduce tailpipe emissions, continued reliance on thermal plants contributes to pollution. Shifting towards renewable energy sources is necessary to mitigate these concerns and achieve cleaner electric mobility.
• Limited Access to the Global Lithium Value Chain: India's heavy reliance on imports for lithium-ion batteries raises concerns about supply chain vulnerabilities. The concentration of global lithium production and key battery components in a handful of countries creates dependency risks. Diversification of the country's battery technology and exploring alternative options to lithium-ion batteries is crucial for long-term sustainability.
• Technology Agnostic Approach: While BEVs have gained traction in the two-wheeler and three-wheeler segments, the four-wheeler segment lags behind. Governments must adopt a technology-agnostic approach that encourages the adoption of various electrification technologies, including hybrids and fuel-cell vehicles. Such an approach promotes innovation, fosters competition, and allows manufacturers to meet emissions objectives irrespective of technology.
• Exploring Alternative Technologies: Hybrids serve as an intermediate step toward full electrification, offering improved fuel efficiency without relying solely on charging infrastructure. Additionally, exploring flex-fuel vehicles running on multiple fuel types, fuel cell electric vehicles, hydrogen internal combustion engine vehicles, and synthetic fuels can provide alternative options for reducing emissions and promoting sustainable mobility.

For Prelims: Electric Vehicles, Fuel Cell Electric Vehicles (FCEVs), Electric Vehicle Policy, 2020, National Electric Mobility Mission Plan (NEMMP), Faster Adoption and Manufacturing of (hybrid and) electric vehicles (FAME), Global Lithium Value Chain. For Mains: 1. Analyze the challenges and opportunities in promoting the adoption of electric vehicles (EVs) in developing countries like India. Discuss the key factors that hinder EV penetration and propose strategies to overcome them.(250 Words)

 

 

Previous year Question 1. Which of the following Indian States/Union Territories launched Electric Vehicle Policy on 7th August 2020? (UPPSC 2020) A. Madhya Pradesh B. Uttar Pradesh C. Delhi D. Tamil Nadu Answer: C

Source: The Indian Express

EUROPEAN FREE TRADE ASSOCIATION (EFTA)

 

 

1. Context

 

 

Commerce and industry minister Piyush Goyal will visit Switzerland to take forward a $ 100 billion investment commitment for India made by the four-nation European Free Trade Association (EFTA) under a bilateral free trade agreement (FTA).

 

 

 2. About European Free Trade Association

 

The European Free Trade Association (EFTA) is an intergovernmental organization that aims to facilitate free trade and economic cooperation among its member states. EFTA was established on May 3, 1960, as an alternative trade bloc to the European Economic Community (EEC), which later evolved into the European Union (EU). The founding members of EFTA were Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom.

The key aspects of EFTA

EFTA comprises four member countries: Iceland, Liechtenstein, Norway, and Switzerland. The organization has experienced changes in membership over the years, with some countries joining or leaving.

• EFTA's primary objectives include promoting free trade and economic cooperation among its member states. It aims to facilitate the reduction or elimination of barriers to trade in goods and services, enhance economic relations, and foster mutual understanding and collaboration in various economic sectors.
• While EFTA is a distinct organization, its member states often have close economic ties with the European Union. EFTA countries have developed various agreements and arrangements with the EU to facilitate trade and economic cooperation. However, EFTA member states are not part of the EU Customs Union or the EU Single Market.
• EFTA has engaged in numerous free trade agreements (FTAs) with countries and regions around the world. These agreements aim to reduce or eliminate tariffs and other trade barriers, promoting the flow of goods and services. EFTA countries have FTAs with countries in Europe, Asia, Africa, and South America.
• The EFTA Surveillance Authority oversees the application of EFTA's rules in its member states. It monitors compliance with agreements, including ensuring that competition rules and other regulations are adhered to by member countries.
• The EFTA Court serves as the judicial body for the EFTA states. It handles disputes related to the interpretation and application of EFTA law. The court's decisions contribute to the legal framework of EFTA's trade and economic agreements.
• Over the years, EFTA has seen changes in its membership. Some countries have joined, while others have left. Accession to EFTA involves negotiations and the fulfillment of certain criteria, reflecting the organization's commitment to free trade and economic cooperation.
• EFTA member countries have diverse and developed economies. They are known for their high living standards, economic stability, and competitiveness. The organization provides a platform for these countries to collaborate and engage in trade with partners around the world.
• While trade is a central focus, EFTA member states also collaborate in other areas, including research and development, innovation, and cultural exchanges. The organization serves as a forum for discussing and addressing various economic and policy issues.

Main Goals of EFTA

• To promote free trade and economic integration among its member states.
• To strengthen member states' economies and improve their competitiveness on the global market.
• To cooperate with other countries and international organizations to further liberalize trade and promote economic development.

Institutional Structure

• The EFTA Council is the organization's highest governing body, consisting of representatives from each member state. It meets regularly to discuss and decide on important matters related to EFTA's objectives and activities.
• The EFTA Secretariat, based in Geneva, Switzerland, provides administrative support and facilitates communication among member states.
• EFTA actively engages in negotiations and establishes free trade agreements (FTAs) with various countries and regions outside the organization, contributing to the expansion of economic cooperation.

Current Status of EFTA

• Despite not being part of the EU, EFTA members maintain close economic ties with the EU through a series of bilateral agreements.
• They participate in the European Single Market and are part of the Schengen Area, allowing for the free movement of goods, services, capital, and people.
• EFTA remains an important economic player in Europe, with a combined GDP of over €1 trillion and a population of over 13 million.

 

Benefits of EFTA Membership

• EFTA's free trade agreements and common market have led to a significant increase in trade and investment between member states and their trading partners.
• EFTA's focus on free trade and economic cooperation has helped to stimulate economic growth in member states.
• By cooperating on research and development, innovation, and education, EFTA member states have become more competitive in the global market.
• EFTA membership has contributed to a higher standard of living and greater prosperity for the citizens of member states.

 

Challenges for EFTA

• The EU remains EFTA's largest trading partner, but it also poses a significant challenge. The EU's larger size and economic power give it an advantage in negotiations, and some EFTA businesses have expressed concerns about being at a disadvantage compared to their EU counterparts.
• With the ongoing integration of the EU, EFTA needs to ensure that it remains relevant and attractive to potential members and trading partners. The association needs to continue to find ways to differentiate itself from the EU and to offer unique benefits to its members.
• The global economy is constantly evolving, and EFTA needs to be able to adapt to these changes. The association needs to focus on emerging markets and new technologies to ensure that its members remain competitive in the long term.

 

3. The Way Forward

 

EFTA remains a vital economic force in Europe. The association is well-positioned to continue to prosper in the coming years, thanks to its strong member states, its focus on free trade and economic cooperation, and its adaptability. By continuing to adapt to the changing global economy and by finding ways to differentiate itself from the EU, EFTA can ensure that it remains a relevant and successful organization for its members in the years to come.

 

 

For Prelims: European Union, free trade, European Free Trade Association, European Economic Community   For Mains:  1. Examine the impact of Switzerland's policy on tariff-free entry for all industrial goods on India's potential gains from the ongoing India-EFTA Free Trade Agreement negotiations. (250 Words) 2. Discuss the strategies and opportunities for EFTA to remain relevant, differentiate itself, and adapt to the evolving global economy. (250 Words)

Source: The Indian Express