GOVERNOR'S POWER
1. Context
Karnataka Governor Thaawarchand Gehlot sanctioned the investigation and prosecution of Chief Minister Siddaramaiah in a case of alleged corruption in the allotment of land to his wife by the Mysuru Urban Development Authority (MUDA).
2. About Governor
- Part VI of the Constitution deals with the states and lists out the role and responsibility of the Governor of states.
- Article 153 provides for a Governor of every state and is the constitutional head of the state.
- The executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution (Article 154).
- Governor performs the same duties as of President, but as the executive head of a State; the work remains the same as of the office of the President of India.
- A Governor is a nominated head and not an elected representative.
- Dual Role of the Governor as head and representative
- Constitutional head of state; and
- Link between Union and State governments. - His dual role makes him a key functionary in the Indian Constitutional system.
3. Powers of Governor
- Under Article 161 the Governor has the following powers –the power to grant pardons, reprieves, respites, or remissions of punishment; the power to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends.
- The Governor makes all executive decisions on behalf of the state government (Article 166(1)).
- The Governor appoints the Chief Minister and other cabinet members. They serve at the pleasure of the Governor (Article 164).
- He may create rules for the efficient execution of a state government's work and its distribution among the ministers. (Article 166(3))
- He appoints the state's advocate general and determines his tenure and conditions of service.
- He has the authority to recommend to the President the declaration of a state of constitutional emergency.
- He may request from the Chief Minister any information about the administration of the state's affairs, as well as legislative suggestions (Article 167).
- The governor appoints the state election commissioner and establishes his term of office and working conditions (Article 243K).
4. Friction points between the States and Governor
- In recent years. these have been largely about the selection of the party to form a government, the deadline for proving the majority, sitting on Bills, and passing negative remarks on the state administration.
- Kerala’s government was dismissed based on a report by the Governor. Several state governments have been dismissed since then, including 63 through President’s Rule orders issued by Governors between 1971 and 1990.
- Kerala Governor in 2020 turned down a request to summon a special sitting of the Assembly to debate the three central farm laws.
- In 2018 J&K Governor dissolved the Assembly amid indications that various parties were coming together to form the government. This paved the way for the Centre to later bifurcate the state into two Union territories, by considering the Governor as the government.
- In 2019 Maharashtra Governor quietly invited the BJP leader and administered his oath as CM. This government lasted just 80 hours. Six months later, the governor refused to nominate CM to the Legislative Council.
- Following the Karnataka polls in 2018, Governor Vajubhai Vala invited the BJP to form the government and gave B S Yeddyurappa 15 days to prove the majority. Challenged by Congress and JDS in the Supreme Court, it was reduced to three days.
5. Reasons for the friction between the Governor and the state governments
- There is no provision for impeaching the Governor, who is appointed by the President on the Centre's advice. While the Governor has a 5-year tenure, he can remain in office only until the pleasure of the President.
- There are no guidelines for the exercise of the Governor's powers, including for appointing a CM or dissolving the Assembly. There is no limit set for how long a Governor can withhold assent to a Bill.
- According to the Constitutional expert, although the Constituent Assembly envisaged the governor to be apolitical. But the truth is, politicians, become Governors and then resign to fight elections.
- The CM is answerable to the people. But the Governor is answerable to no one except the Centre. This is the fundamental defect in the Constitution.
6. Reforms Suggested
Several Panels, the Administrative Reforms Commission of 1968 and the Sarkaria Commission of 1988 have recommended reforms such as
- selection of the Governor through a panel comprising the PM, the Home Minister, the Lok Sabha Speaker, and the CM.
- Apart from fixing his tenure for five years
- Recommendations have also been made for a provision to impeach the Governor by the Assembly.
For Prelims & Mains
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For Prelims: Governor, Chief Minister, Article 153, Article 154, Article 164, and Article 243K.
For Mains: 1. In the context of friction between the state governments and the Governor explain the role and powers of the Governor and what reforms have been suggested so far to end the tussle between the state governments and the Governor.
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Previous Year Questions
Which of the following are the discretionary powers given to the Governor of a State? (UPSC CSE 2014)
1. Sending a report to the President of India for imposing the President’s rule 2. Appointing the Ministers 3. Reserving certain bills passed by the State Legislature for consideration of the President of India 4. Making the rules to conduct the business of the State Government Select the correct answer using the code given below
A. 1 and 2 Only
B. 1 and 3 Only
C. 2, 3 and 4
D. 1, 2, 3, 4
Answer (B)
2.Which one of the following suggested that the Governor should be an eminent person from outside the State and should be a detached figure without intense political links or should not have taken part in politics in the recent past? (UPSC CSE 2019)
A.First Administrative Reforms Commission (1966)
B.Rajamannar Committee (1969)
C.Sarkaria Commission (1983)
D.National Commission to Review the Working of the Constitution (2000)
Answer (C)
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Source: The Indian Express
NATIONAL INVESTIGATION AGENCY (NIA)
1. Context
The National Investigation Agency (NIA) chargesheeted four accused in the international organ trade racket that was busted by the Kerala Police after a man returning from Iran was detained by immigration officials at the Cochin International Airport in Nedumbassery early this year
2. About National Investigation Agency (NIA)
- The National Investigation Agency (NIA) is a federal counter-terrorism law enforcement agency in India.
- It was established in 2008 after the Mumbai terror attack the same year.
- The NIA is empowered to deal with the investigation of terror-related crimes across states without special permission from the states under written proclamation from the Ministry of Home Affairs.
- The primary mandate of the National Investigation Agency is to investigate and prosecute offences that have national and cross-border implications, specifically focusing on terrorism, insurgency, and other related matters.
- The NIA is headquartered in New Delhi and has 12 regional offices across the country.
- It is headed by a Director General of Police (DGP) rank officer.
- The NIA has a team of highly trained and experienced officers who are experts in counter-terrorism investigations.
- The NIA has been successful in investigating and prosecuting several high-profile terrorism cases, including the 26/11 Mumbai attacks, the 2012 Pune bombing, the 2013 Hyderabad blasts, and the 2014 Pathankot attack.
- The NIA has also played a key role in disrupting terrorist networks and preventing terrorist attacks.
- It has arrested several senior terrorist operatives and seized a large quantity of arms and ammunition.
3. The Changes Made under the NIA (Amendment) Act 2019
The National Investigation Agency (Amendment) Act, 2019, brought significant changes and enhancements to the powers and jurisdiction of the National Investigation Agency (NIA) in India. The amendments aimed to strengthen the agency's ability to combat terrorism and other transnational crimes effectively.
The key changes made under the NIA (Amendment) Act, 2019
- The amendment expanded the jurisdiction of the NIA. Previously, the agency could investigate cases related to terrorism and certain other offences listed in the NIA Act.
- The Act adds new offences to the list of scheduled offences that can be investigated by the NIA. These include
- Cyber terrorism under Section 66-F of the Information Technology Act, 2000
- Human trafficking under Section 370 of the Indian Penal Code, 1860
- Counterfeiting of currency or bank notes under Sections 489C and 489E of the Indian Penal Code, 1860
- Manufacture or sale of prohibited arms or ammunition under Sections 25 and 26 of the Arms Act, 1959
- Offenses under the Explosive Substances Act, 1908
- This extension of jurisdiction gives the NIA greater reach and authority in handling cases with international ramifications.
- The amendment allowed for the establishment of special courts for the trial of NIA cases.
- These courts are designated to expedite the trial process and ensure that cases are heard and disposed of more quickly, particularly in terrorism-related cases.
- The NIA (Amendment) Act introduced provisions for the protection of witnesses.
- It empowers the NIA to request the central government to issue orders for the protection of witnesses.
- Ensuring the safety of witnesses is crucial for the successful prosecution of cases, especially in terrorism-related trials.
- The amended law allows the NIA to seize and attach properties that are believed to be the proceeds of terrorism or used for terrorism-related activities.
- This provision is essential in disrupting the financial networks of terrorist organizations.
- The NIA can now request the central government to seek extradition of individuals involved in terrorism and other offences under the NIA Act.
- This provision facilitates the extradition of accused persons from foreign countries to face trial in India.
- The central government has the authority to designate session courts as NIA Special Courts.
- These courts are responsible for the trial of NIA cases and follow the procedures outlined in the NIA Act.
- The NIA Act includes a schedule listing offences that fall under its jurisdiction.
- The amendment allows for offences in this schedule to be amended by the central government through notification.
- This flexibility allows for the inclusion of new offences based on emerging threats and challenges.
- The NIA (Amendment) Act includes provisions to enhance transparency and accountability in the agency's functioning.
- It mandates the submission of an annual report on its activities to the central government, which is then laid before both houses of Parliament.
4. The Way Forward
The NIA is a vital component of India's counter-terrorism architecture. By taking the necessary steps to improve the NIA's functioning, the government can make the agency more effective in combating terrorism and protecting the country from terrorist threats.
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For Prelims: National Investigation Agency, Terrorism, NIA Act,2008, NIA (Amendment) Act, 2019, the Ministry of Home Affairs, Information Technology Act, 2000, Indian Penal Code, Arms Act 1959, Explosive Substances Act, 1908,
For Mains:
1. "The NIA (Amendment) Act, 2019, introduced provisions for the confiscation of property believed to be connected to terrorism." Analyze the significance of this provision in curbing the financial networks of terrorist organizations and its alignment with international counter-terrorism efforts. (250 Words)
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Previous Year Questions
1. The Stiglitz Commission established by the President of the United Nations General Assembly was in the international news. The commission was supposed to deal with: (UPSC CSE 2010) (a) The challenges posed by the impending global climate change and prepare a road map Answer: B 2. Match List - I with List-II and select the correct answer using the codes given below the lists: (UPPSC 2020) List – I List – II A. Indian Arm Act 1. 1876 B. Royal Title Act 2. 1878 C. Indian High Court Act 3. 1869 D. Indian Divorce Act 4. 1861 A. (A) 2, (B) 3, (C) 1, (D) 4 B. (A) 3, (B) 1, (C) 2, (D) 4 C. (A) 1, (B) 2, (C) 3, (D) 4 D. (A) 2, (B) 1, (C) 4, (D) 3 Answer: D 3. Which one of the following is NOT correctly matched? (UPPSC RO/ARO 2020) A. Prevention of Sedition Meetings Act - 1908
B. Explosive Substances Act - 1908
C. Indian Criminal Law Amendment Act - 1908
D. Newspaper (Incentive to Offence) Act - 1908
Answer: A |
Source: indianexpress
CENTRAL CONSUMER PROTECTION AUTHORITY(CCPA)
1. Context
The Central Consumer Protection Authority (CCPA) has imposed penalty of ₹ 3 lakh for misleading advertisement on Sriram’s IAS. The decision was taken to protect & promote the rights of consumers as a class and ensure that no false or misleading advertisement is made of any goods or services which contravenes the provisions of the Consumer Protection Act, 2019
2. The Consumer Protection Act, 2019-Key Highlights
The Consumer Protection Act of 2019 introduces several key highlights aimed at safeguarding consumer rights and interests:
- This Act provides for the establishment of the CCPA to promote, protect, and enforce consumer rights. The CCPA has the authority to investigate, recall unsafe goods, order discontinuation of unfair trade practices, and impose penalties for misleading advertisements affecting consumers
- The Act enumerates the rights of consumers, including the right to be informed, right to choose, right to be heard, right to seek redressal, and the right to consumer education
- It prohibits unfair trade practices such as false advertising, misleading information, deceptive packaging, and selling goods/services that pose a danger to consumers' lives and safety
- The Act introduces the concept of product liability, holding manufacturers, sellers, and service providers accountable for any harm caused by defective products or deficient services
- The Act establishes Consumer Disputes Redressal Commissions at the district, state, and national levels to expedite the resolution of consumer disputes. These commissions provide simple, speedy, and cost-effective dispute resolution mechanisms
- It includes provisions specifically addressing consumer rights and liabilities related to e-commerce transactions and direct selling, ensuring adequate protection for consumers engaged in online purchases and transactions
- The Act emphasizes the importance of consumer awareness and education through outreach programs, campaigns, and educational initiatives to empower consumers with knowledge about their rights and responsibilities
- The penalties for misleading advertisements, unfair trade practices, and violations of consumer rights have been increased, along with provisions for compensating consumers for any loss or injury suffered due to a defective product or deficient service
3.What is State Consumer Protection Council?
The State Consumer Protection Council (SCPC) is a pivotal body established under the Consumer Protection Act, 1986, and continued under the Consumer Protection Act, 2019, in India. This council operates at the state level and works towards safeguarding consumer rights and promoting their interests within the respective state.
Here's a breakdown of the SCPC's key functions:
Composition:
- Each SCPC is headed by the Minister-in-charge of Consumer Affairs in the state government.
- It includes other official and non-official members representing various interests, such as:
- Members of the state Legislative Assembly
- Representatives from consumer organizations
- Representatives from farmers, manufacturers, traders, and industrialists
- Experts in consumer affairs and law
Responsibilities:
- The SCPC organizes awareness campaigns to educate consumers about their rights and responsibilities. It also disseminates information about consumer laws and redressal mechanisms.
- The SCPC receives and investigates consumer complaints against unfair trade practices, defective goods and services, and misleading advertisements. It can recommend action against businesses violating consumer rights.
- The SCPC advises the state government on matters related to consumer protection. This includes proposing new laws, policies, and initiatives to strengthen consumer rights within the state.
- The SCPC monitors the market for unfair trade practices and emerging consumer issues. It may conduct research and studies to identify and address emerging consumer concerns.
- The SCPC coordinates with the Central Consumer Protection Authority (CCPA) and other consumer protection agencies to ensure effective enforcement of consumer rights across the country
4. What is the Central Consumer Protection Authority?
The Central Consumer Protection Authority (CCPA) is a significant regulatory body established under the Consumer Protection Act, 2019, in India. This authority is designed to protect, promote, and enforce consumer rights more effectively.
The Central Consumer Protection Authority (CCPA) is a quasi-judicial regulatory body established under the Consumer Protection Act, 2019, in India. It plays a pivotal role in promoting, protecting, and enforcing consumer rights at the national level.
Functions:
The CCPA is empowered with a wide range of functions to safeguard consumer interests, including:
- It can investigate unfair trade practices, misleading advertisements, and violations of consumer rights. Additionally, it has the authority to prosecute entities found guilty of such offenses.
- The CCPA can order the recall of unsafe or defective products from the market. It can also direct businesses to issue refunds or replacements for defective products or services.
- The CCPA can impose significant penalties on businesses found indulging in unfair trade practices, misleading advertisements, or violating consumer rights.
- It can file class-action suits on behalf of groups of consumers affected by the same unfair practice.
- The CCPA can issue guidelines and standards for product safety and service quality.
- It can undertake initiatives to raise awareness about consumer rights and educate consumers about redressal mechanisms.
- The CCPA collaborates with State Consumer Protection Councils (SCPCs) to ensure effective consumer protection across the country.
Structure:
The CCPA is headed by a Chief Commissioner and three other Commissioners, all appointed by the Central Government. It also has a team of supporting staff that assists in carrying out its various functions.
5.Way forward
The Committee, therefore, desire that the Central Government should see that the mandates of Section 6(3) and 8 of the Consumer Protection Act, 2019 are fulfilled in each of the states of the North East so that consumers in the region feel assured of their rights and have a sense of belonging with the rest of the country,” the committee said in its report on “Initiatives in the North East in the Field of Consumer Rights Protection”
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For Prelims: Current events of national and international importance
For Mains: General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation
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Previous Year Questions
1. Which of the following statements about the 'Consumer Protection Act 2019' is not true? (UGC NET 2020)
A.It has widened the definition of consumer
B.It provides for E-filing of complaints
C.It establishes Central Consumer Protection Authority
D.It ignores mediation as an alternate disputes resolution mechanism
Answer (D)
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Source: Indanexpress
MONKEYPOX
1. Context
On August 14 2024, the World Health Organization (WHO) declared the mpox outbreak in the Democratic Republic of the Congo and other African countries as a “global health emergency”. WHO Director-General Tedros Adhanom Ghebreyesus made the declaration on the advice of an International Health Regulations (IHR) emergency committee. The WHO had regraded the mpox outbreak to an “acute” grade 3 emergency, according to a report published on August 12. The outbreak, which first started in 2022, has continued unabated with a recent surge in cases reported from around the world
2. What is mpox?
- Mpox, also known as monkeypox, is an uncommon zoonotic disease (a disease transmitted from animals to humans) caused by the monkeypox virus, which is part of the Orthopoxvirus genus within the Poxviridae family.
- This family of viruses also includes those responsible for diseases like smallpox and cowpox.
- The mpox virus spreads to humans through physical contact with an infected person, such as through direct exposure to infected blood, bodily fluids, or lesions on the skin or mucous membranes.
- Additionally, mpox can be transmitted via contact with contaminated objects, bites or scratches from infected animals, or through activities like hunting, handling, or consuming infected animals.
- There are currently two genetic groups, or clades, of mpox: clade I, primarily found in central and eastern Africa, and clade II, which is associated with more cases in western Africa.
- Although the exact source of mpox is still unclear, small mammals such as squirrels and monkeys are believed to be potential carriers
3. Symptoms
- In humans, the mpox virus typically manifests as rashes, which can progress into fluid-filled blisters that may be itchy or painful. Other symptoms include fever, sore throat, headache, muscle aches, back pain, low energy, and swollen lymph nodes.
- Individuals who are infectious can transmit the virus to others until all sores have healed and a new layer of skin has formed.
- Symptoms of mpox generally appear within a week of infection but can start anywhere from 1 to 21 days after exposure.
- The symptoms usually last between 2 to 4 weeks. While most people experience milder symptoms, some may develop more severe illness and require medical care.
- Children, pregnant women, and immunocompromised individuals are at higher risk of contracting the virus
4. Treatment
- At present, there is no specific treatment for mpox. The World Health Organization (WHO) suggests supportive care, such as using medication to manage pain or fever when necessary, but symptoms generally resolve on their own.
- Individuals with mpox are encouraged to stay hydrated, eat well, get sufficient rest, avoid scratching their skin, and care for their rash by cleaning their hands before and after touching lesions, keeping the affected skin dry, and leaving it uncovered.
- An antiviral called tecovirimat, originally developed for smallpox, was approved by the European Medicines Agency in January 2022 for treating mpox under exceptional circumstances, though experience with its use is limited.
- Three vaccines — MVA-BN, LC16, and OrthopoxVac — initially developed for smallpox, are also approved for preventing mpox. However, vaccination is recommended only for individuals at risk, and WHO does not advise mass vaccination against mpox
5. Current Outbreak
- Mpox infections have been reported closer to home, with Pakistan confirming three cases, as announced by the health department of Khyber Pakhtunkhwa province on August 16. Additionally, Sweden recently reported the first case of the clade I variant of mpox outside Africa.
- According to the World Health Organization (WHO), over 15,600 cases and 537 deaths have been recorded this year, with the outbreak impacting 116 countries. The Democratic Republic of the Congo and its neighboring countries have been the hardest hit. In June 2024, 19% of reported cases were in the Americas, while 11% were in Europe.
- The WHO has elevated the global mpox outbreak to an acute grade 3 emergency, the highest level under the WHO Emergency Response Framework. A grade 3 emergency demands a significant to maximum response from the WHO.
- A Public Health Emergency of International Concern (PHEIC) is declared for extraordinary events involving the international spread of disease, potentially necessitating a coordinated global response.
- The PHEIC, the highest alert level issued by the WHO, aims to mobilize immediate international action to prevent the event from escalating into a pandemic
6. Difference between Smallpox, monkeypox, chickenpox
| Characteristic | Smallpox | Chickenpox | Mpox |
| Causative Virus | Variola virus (Orthopoxvirus genus) | Varicella-zoster virus (Herpesvirus family) | Monkeypox virus (Orthopoxvirus genus) |
| Mode of Transmission | Direct contact, respiratory droplets, contaminated objects | Direct contact, respiratory droplets, airborne particles | Direct contact with infected animals or humans, contaminated materials |
| Incubation Period | 7-17 days | 10-21 days | 1-21 days |
| Initial Symptoms | High fever, fatigue, severe headache, back pain | Mild fever, fatigue, headache, body aches | Fever, headache, muscle aches, back pain, swollen lymph nodes |
| Rash Progression | Begins on face and spreads; lesions progress uniformly | Starts on face/trunk, spreads; lesions at different stages | Begins on face and extremities; lesions progress uniformly |
| Lesion Characteristics | Deep, firm, round vesicles; develop into pustules | Superficial, itchy blisters | Fluid-filled blisters; can be itchy or painful |
| Severity | Often severe, high mortality rate (up to 30%) | Generally mild, can be severe in adults | Typically mild to moderate, can be severe in vulnerable populations |
| Complications | Scarring, blindness, arthritis, death | Bacterial infections, pneumonia, encephalitis | Pneumonia, sepsis, encephalitis, death (rare) |
| Vaccine Availability | Yes, smallpox vaccine (eradicated globally) | Yes, Varicella vaccine | Yes, smallpox vaccines (MVA-BN, LC16, OrthopoxVac) for prevention |
| Global Status | Eradicated (last case in 1977) | Common worldwide | Endemic in some regions, outbreaks reported globally |
| Treatment | No specific treatment; supportive care, antiviral (Tecovirimat) for severe cases | Antivirals (Acyclovir), supportive care | Supportive care, Tecovirimat under special circumstances |
7. Way Forward
The recent surge in mpox cases worldwide, including in regions previously unaffected, underscores the urgent need for global vigilance and coordinated public health efforts. The WHO's classification of the outbreak as a grade 3 emergency and the declaration of a Public Health Emergency of International Concern highlight the severity of the situation. While cases have been reported in various countries, with significant impacts in regions like the Democratic Republic of the Congo, the spread to other areas, such as Pakistan and Sweden, signals that mpox remains a global health challenge. It is crucial for governments, healthcare providers, and the public to continue monitoring the situation, promote preventive measures, and ensure preparedness to mitigate the potential for further spread and escalation
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For Prelims: Current events of national and international importance
For Mains: GS III - Science & technology
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Previous Year Questions
1.The term ‘ACE2’ is talked about in the context of (UPSC CSE 2021) (a) genes introduced in the genetically modified plants (b) development of India’s own satellite navigation system (c) radio collars for wildlife tracking (d) spread of viral diseases Answer (d) 1.Which of the following are the reasons for the occurrence of multi-drug resistance in microbial pathogens in India? (UPSC CSE 2019)
Select the correct answer using the code given below. (a) 1 and 2 (b) 2 and 3 only (c) 1, 3 and 4 (d) 2, 3 and 4 Answer (b) Mains 1.Critically examine the role of WHO in providing global health security during the Covid-19 pandemic. (2020) |
Source: The Hindu
CURRENT ACCOUNT SAVINGS ACCOUNT (CASA)
1. Context
A rising and persistent gap between bank deposits and credit growth has led to the worst deposit crunch in two decades. The current and savings accounts (CASA) are banks’ bread-and-butter sources of funding. These are typically very low cost and currently account for 41 per cent of total deposits as against 43 per cent last year
2. What is a Current account Savings account (CASA)?
CASA, which stands for Current Account Savings Account, is a feature provided by banks to encourage customers to deposit their money with them. This type of account blends the advantages of both savings and checking accounts.
Typically, the current account portion of CASA offers little to no interest, while the savings account portion provides a higher-than-average return. CASA accounts are particularly common in Western and Southeast Asian countries.
As a non-term deposit account, CASA is designed to meet the daily banking needs of customers, offering flexibility and convenience for regular transactions
3. How does CASA Work?
CASA integrates the features of both current and savings accounts, allowing funds to be accessed at any time. This flexibility means it generally offers a lower interest rate compared to term deposits. For banks, CASA is a more cost-effective way to raise funds than term deposits, which offer higher interest rates. Financial institutions favor CASA because it contributes to higher profit margins.
CASA Ratio
The CASA Ratio measures the proportion of deposits in current and savings accounts relative to the bank's total deposits. A higher CASA Ratio indicates a greater share of deposits in these accounts and reflects better operational efficiency. In India, this ratio is used as a key metric to assess bank profitability.
CASA Ratio = CASA Deposits / Total Deposits
4. Types of accounts
- Banks primarily offer two types of accounts: term deposits, such as fixed or recurring deposits, and non-term deposits, including current and savings accounts.
- Term deposits are available for a specified duration, during which the bank pays a fixed interest rate, provided the funds are not withdrawn before the maturity date. For instance, if you deposit Rs 10,000 in a fixed deposit for seven years, the bank might offer an interest rate of 12 percent per annum.
- In contrast, current and savings accounts are designed for everyday transactions and remain active for as long as the account holder wishes. These accounts generally offer lower interest rates compared to term deposits, depending on the bank's policies.
- For example, ICICI Bank might offer a 4.0 percent interest rate on a savings account with a cheque book, provided a minimum balance of Rs 10,000 is maintained.
- Due to the lower interest rates associated with CASA accounts, they represent a more economical source of funds for banks. Consequently, financial analysts use the CASA ratio to evaluate a bank's financial health, as it reflects the bank's ability to secure funds at lower borrowing costs
5. Way Forward
A current account does not accrue interest but offers unlimited access to withdrawals and deposits. In contrast, a savings account allows unlimited deposits but limits the number of withdrawals a person can make. Although a savings account earns interest, the rate is typically low, designed to promote saving behavior
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For Prelims: Current events of national and international importance
For Mains: GS III - Indian Economy
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Source: Business Standard
CONSUMER FOOD PRICE INDEX (CFPI)
1. Context
Retail food inflation ruled above 8% for eight straight months from November 2023 to June 2024. That year-on-year increase, in the official consumer food price index (CFPI), fell to 5.4% in July, from 9.4% the month before.
2. What is Food inflation?
Food inflation refers to the rise in the prices of food items over a period of time. This increase in prices can occur due to various factors and has significant implications for both consumers and the economy as a whole.
Food inflation is usually measured using food price indices, which track the changes in prices of a basket of food items over time. In India, for example, food inflation is a significant component of the Consumer Price Index (CPI)
Causes of Food Inflation:
Supply-Side Factors:
- Poor Harvests: Bad weather conditions such as droughts, floods, or other natural disasters can lead to crop failures, reducing the supply of food items and driving up prices.
- Input Costs: Rising costs of inputs like seeds, fertilizers, and fuel can increase the cost of food production, which is then passed on to consumers.
- Supply Chain Disruptions: Issues in transportation, storage, or distribution can reduce the availability of food in markets, leading to price increases
Demand-Side Factors:
- Population Growth: An increasing population leads to higher demand for food, which can drive up prices if the supply doesn't keep pace.
- Income Growth: As incomes rise, especially in developing countries, there is often a shift towards more expensive, protein-rich foods, which can lead to higher demand and prices
3. What is the consumer food price index (CFPI)?
- The Consumer Food Price Index (CFPI) is a specific measure used to track the changes in the prices of food items consumed by households over time. It is a subset of the broader Consumer Price Index (CPI) and is particularly focused on food-related inflation
- The CFPI is designed to measure the average change over time in the prices paid by consumers for a fixed basket of food items. This index helps in understanding food inflation specifically, as opposed to general inflation
- The CFPI is calculated based on the prices of these food items collected from various regions and markets. The prices are then averaged and compared to a base year to determine the percentage change, which reflects food inflation.
- The weights assigned to different food categories in the CFPI are based on their importance in the average consumer’s food consumption basket
- Like the CPI, the CFPI is anchored to a base year, which is periodically updated to reflect changes in consumption patterns and economic conditions. The base year serves as a reference point for measuring price changes
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Components:
In India, the CFPI is released by the Ministry of Statistics and Programme Implementation (MoSPI) as part of the monthly CPI data. It plays a significant role in understanding the dynamics of food inflation in the country, given the large population and significant share of food in household consumption
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4. How is food inflation impacting the overall health of the economy?
Food inflation has a broad impact on the overall health of an economy, influencing both macroeconomic stability and the well-being of individuals. Here’s a detailed analysis of how food inflation affects different aspects of the economy:
Impact on Consumers and Households:
- As food prices rise, households have to spend a larger share of their income on food, leaving less for other essential goods and services. This reduction in purchasing power particularly affects low-income households, leading to decreased overall consumption.
- Higher food prices can push more people into poverty, especially in developing countries where food constitutes a significant portion of household expenditures. This can exacerbate income inequality and social unrest.
- Persistent food inflation can lead to malnutrition and food insecurity, as people may be forced to opt for cheaper, less nutritious food. This has long-term health implications, particularly for children, potentially leading to increased healthcare costs and lower productivity in the future.
Impact on Inflation and Monetary Policy:
- Food inflation is a key driver of overall inflation, particularly in economies where food prices have a significant weight in the Consumer Price Index (CPI). High food inflation can lead to higher headline inflation, affecting economic stability.
- Central banks may respond to rising food inflation by tightening monetary policy (e.g., raising interest rates) to control inflation. While this can help curb inflation, it can also slow down economic growth by increasing borrowing costs and reducing investment.
Impact on Economic Growth:
- As more household income is diverted towards food, there is less spending on other goods and services, which can dampen overall economic growth. This reduction in demand can particularly hurt sectors like retail, entertainment, and durable goods.
- High food prices can lead to increased wage demands as workers seek to maintain their purchasing power. This can raise production costs across various sectors, potentially leading to reduced profitability and lower investment.
- While food inflation might benefit farmers in the short term through higher prices for their produce, it can also lead to higher input costs (e.g., for seeds, fertilizers, and transportation). Additionally, if inflation is driven by supply-side constraints like poor harvests, the overall output of the agricultural sector may decline, harming rural economies.
Impact on Government Fiscal Policy:
- To shield consumers from the effects of rising food prices, governments may increase subsidies on essential food items. While this can provide short-term relief, it can strain public finances and lead to higher fiscal deficits.
- Governments might need to increase spending on social welfare programs, such as food distribution schemes or direct cash transfers, to support vulnerable populations. This can further pressure government budgets.
- Persistent food inflation can lead to public discontent, protests, and political instability, especially in countries where food security is a major issue. Governments may face pressure to intervene in markets, which can sometimes lead to distortions and long-term inefficiencies.
Global Impact:
- Countries that rely heavily on food imports may experience worsening trade balances as food prices rise. This can lead to a depreciation of the national currency, further exacerbating inflation and reducing competitiveness in global markets.
- In an interconnected global economy, food inflation in one country can spill over into others, particularly in regions that share trade links or common agricultural markets.
5. Way Forward
Food inflation is the result of a interplay of supply and demand factors, global influences, and government policies. While some causes, like poor harvests or global price fluctuations, may be temporary, others, such as climate change and structural inefficiencies, are more persistent and challenging to address. Effective management of food inflation requires a multi-faceted approach, involving improvements in agricultural productivity, better supply chain management, and thoughtful government interventions
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For Prelims: Current events of national and international importance
For Mains: GS III - Indian Economy
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Previous Year Questions
1.Consider the following statements: (UPSC CSE 2020)
Which of the statements given above is/are correct? (a) 1 and 2 only Answer (a)
Mains 1.There is also a point of view that Agricultural Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine. (2014) |
Source: Indianexpress
