2. About the UN Convention on Combating Desertification (UNCCD)

The UN Convention to Combat Desertification (UNCCD) is a global agreement addressing desertification, land degradation, and drought. It was adopted in 1994 and entered into force in 1996. The Convention focuses on the sustainable management and restoration of land in arid, semi-arid, and dry sub-humid areas, which are particularly vulnerable to desertification and degradation.

The function of the UNCCD

The primary function of the UN Convention to Combat Desertification (UNCCD) is to address land degradation and desertification, particularly in drylands (arid, semi-arid and dry sub-humid areas). It focuses on promoting sustainable land management practices to combat land degradation and desertification and mitigate the effects of drought.

• The UNCCD helps countries develop and implement national action programs tailored to address their specific challenges related to land degradation and desertification.
• The convention promotes scientific cooperation and knowledge sharing among countries. This facilitates the exchange of best practices in sustainable land management techniques.
• The UNCCD works to facilitate access to financial resources for affected countries. This allows them to implement the necessary programs and projects to combat land degradation.
• The UNCCD plays a significant role in raising public awareness about the importance of healthy land**. This fosters a global understanding of the environmental, social, and economic consequences of desertification and land degradation.

3. What are COPs?

COP stands for Conference of the Parties. It's a supreme decision-making body established by an international treaty, typically focusing on environmental issues.  Review the implementation of the convention or treaty they represent and make decisions necessary to promote its effectiveness. All member states (or "Parties") to the convention come together as representatives at COPs. This allows for a collaborative and inclusive approach to addressing global challenges.

1. COP to the United Nations Framework Convention on Climate Change (UNFCCC)  is the annual conference where countries discuss and negotiate actions to address climate change. (e.g. COP27 refers to the 27th Conference of the Parties)
2. COP to the Convention on Biological Diversity (CBD) focuses on issues related to biodiversity and the conservation of biological resources.
3. COP to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) regulates international trade in endangered species to ensure their survival.

COPs play a critical role in international environmental governance. They provide a platform for countries to:

• Share best practices and knowledge
• Address emerging environmental challenges
• Strengthen international cooperation
• Make progress towards achieving the goals of the convention

4. The causes of extreme weather events

Extreme weather events can have various causes, often influenced by natural processes and human activities. The key factors contributing to extreme weather events include

Climate Change

• Climate change, driven primarily by human activities such as burning fossil fuels and deforestation, is altering weather patterns worldwide.
• Rising global temperatures lead to more frequent and intense heatwaves, droughts, and wildfires, as well as changes in precipitation patterns, including heavier rainfall and increased frequency of intense storms.

Natural Climate Variability

• Natural climate cycles, such as El Niño-Southern Oscillation (ENSO), North Atlantic Oscillation (NAO), and Pacific Decadal Oscillation (PDO), can influence weather patterns on regional and global scales.
• Variations in ocean temperatures, atmospheric pressure systems, and wind patterns associated with these climate oscillations can lead to extreme weather events, including heatwaves, floods, and hurricanes.

• Atmospheric circulation patterns, such as jet streams and atmospheric rivers, play a crucial role in shaping weather systems and influencing the distribution of precipitation and temperature.
• Changes in these circulation patterns, caused by factors like sea surface temperatures, land surface characteristics, and topographic features, can result in prolonged periods of extreme weather, such as droughts or heavy rainfall.

Topography and Geography

• Local topography and geographic features can contribute to the occurrence of extreme weather events. For example, mountain ranges can enhance orographic lifting, leading to heavy rainfall and flooding on windward slopes and dry conditions on leeward slopes.
• Coastal regions are susceptible to tropical cyclones, storm surges, and coastal flooding, particularly in areas prone to sea level rise and land subsidence.

Land Use and Land Cover Changes

• Human activities such as urbanization, deforestation, and agriculture can alter local weather patterns and exacerbate the risk of extreme weather events.
• Urban heat island effect, where urban areas experience higher temperatures compared to surrounding rural areas, can intensify heatwaves and exacerbate air pollution.
• Deforestation can disrupt local hydrological cycles, leading to changes in precipitation patterns, soil moisture levels, and runoff characteristics, which can increase the likelihood of floods and landslides.

Air Pollution

• Air pollution, particularly from industrial emissions, vehicle exhaust, and biomass burning, can influence weather and climate by affecting cloud formation, atmospheric stability, and the distribution of heat and moisture.
• Aerosols and pollutants can interact with clouds and precipitation, altering their properties and influencing precipitation patterns, intensity, and duration.

5. The effects of extreme weather events on the Economy

Extreme weather events can have significant economic impacts, affecting various sectors of the economy and leading to direct and indirect costs. 

Infrastructure Damage

• Extreme weather events such as hurricanes, floods, and storms can cause extensive damage to infrastructure, including roads, bridges, buildings, and utilities.
• Repairing and rebuilding infrastructure can entail significant costs for governments, businesses, and households, diverting resources from other priorities and investments.

• Droughts, heatwaves, floods, and severe storms can damage crops, reduce yields, and destroy livestock, leading to agricultural losses.
• Crop failures and livestock losses can result in reduced agricultural output, lower incomes for farmers, higher food prices, and disruptions in supply chains, impacting both agricultural producers and consumers.

Disruption of Business Operations:

• Extreme weather events can disrupt business operations, leading to production delays, supply chain interruptions, and temporary closures.
• Businesses may incur additional costs for repairing damaged facilities, replacing equipment, and meeting insurance deductibles, as well as lost revenue from decreased sales and customer demand.

Impact on Tourism and Recreation:

• Extreme weather events can affect tourism and recreational activities, particularly in areas prone to natural disasters or seasonal weather extremes.
• Beach closures, damage to tourist attractions, and transportation disruptions can deter visitors, leading to reduced tourism revenues and employment opportunities in affected regions.

Healthcare Costs

• Extreme heatwaves, wildfires, and air pollution events can increase healthcare costs by exacerbating respiratory and cardiovascular conditions, heat-related illnesses, and injuries.
• Hospitals and healthcare facilities may experience higher demand for medical services, emergency room visits, and hospitalizations during extreme weather events, straining healthcare resources and budgets.

Insurance and Financial Losses

• Insurance companies may face significant payouts for property damage, crop losses, business interruptions, and liability claims resulting from extreme weather events.
• Reinsurance costs may rise in response to increased frequency and severity of weather-related losses, leading to higher premiums for policyholders and reinsurers.

Loss of Life and Human Suffering

• Extreme weather events can result in loss of life, injuries, displacement, and psychological trauma for affected individuals and communities.
• Human suffering and loss of productivity can have long-term social and economic consequences, including increased healthcare costs, reduced workforce participation, and loss of human capital.

6. Way Forward

The international community can work towards achieving the goals of the UNCCD and safeguarding land resources for current and future generations. Collaboration, innovation, and collective action are essential to combat desertification, preserve ecosystems, and promote sustainable development worldwide.

GOODS AND SERVICE TAX (GST)

 

 

1. Context

 

Over the past seven years, since the introduction of the Goods and Services Tax (GST), there have been no significant increases in GST rates on harmful products such as tobacco and sugar-sweetened beverages, except for two minor hikes in National Calamity Contingent Duties (NCCD) on tobacco

 

2. What is the Goods and Services Tax (GST)?

• The Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services at each stage of the production and distribution chain. It is a comprehensive indirect tax that aims to replace multiple indirect taxes imposed by the central and state governments in India.
• GST is designed to simplify the tax structure, eliminate the cascading effect of taxes, and create a unified national market. Under the GST system, both goods and services are taxed at multiple rates based on the nature of the product or service. The tax is collected at each stage of the supply chain, and businesses are allowed to claim a credit for the taxes paid on their inputs.
• The GST system in India came into effect on July 1, 2017, replacing a complex tax structure that included central excise duty, service tax, and state-level taxes like VAT (Value Added Tax), among others. The GST Council, consisting of representatives from the central and state governments, is responsible for making decisions on various aspects of GST, including tax rates and rules.
• GST is intended to create a more transparent and efficient tax system, reduce tax evasion, and promote economic growth by fostering a seamless flow of goods and services across the country. It has a significant impact on businesses, as they need to comply with the new tax regulations and maintain detailed records of their transactions for GST filing

3.Goods and Services Tax (GST) and 101st Amendment Act, 2016

The Goods and Services Tax (GST) in India was introduced through the 101st Amendment Act of 2016. This constitutional amendment was a crucial step in the implementation of GST, which aimed to create a unified and comprehensive indirect tax system across the country.

Here are some key points related to the 101st Amendment Act and GST:

 

• The 101st Amendment Act was enacted to amend the Constitution of India to pave the way for the introduction of the Goods and Services Tax.
• It added a new article, Article 246A, which confers concurrent powers to both the central and state governments to levy and collect GST
• The amendment led to the creation of the GST Council, a constitutional body consisting of representatives from the central and state governments. The council is responsible for making recommendations on GST rates, exemptions, and other related issues
• The amendment introduced a dual GST structure, where both the central government and the state governments have the power to levy and collect GST on the supply of goods and services
• For inter-state transactions, the 101st Amendment Act provides that the central government would levy and collect the Integrated Goods and Services Tax (IGST), which would be a sum total of the central and state GST
• The amendment also included a provision for compensating states for any revenue loss they might incur due to the implementation of GST for a period of five years

The 101st Amendment Act was a critical legislative step that provided the constitutional framework for the implementation of GST in India. It addressed the need for a unified tax system, simplifying the tax structure and promoting a common market across the country. The subsequent establishment of the GST Council has played a pivotal role in the ongoing management and evolution of the GST system in India

 

4. What are the different types of Goods and Services Tax (GST)?

In India, the Goods and Services Tax (GST) is structured into different tax rates based on the nature of the goods and services. As of my last knowledge update in January 2022, the GST rates are divided into multiple slabs. It's important to note that tax rates may be subject to changes, and new amendments could have been introduced since then. As of my last update, the GST rates are as follows:

• Nil Rate:

  • Some goods and services are categorized under the nil rate, meaning they attract a 0% GST. This implies that no tax is levied on the supply of these goods or services.

• 5% Rate:

  • This is a lower rate, applicable to essential goods such as certain food items, medical supplies, and other basic necessities.

• 12% Rate:

  • Goods and services falling in this category attract a 12% GST rate. Items such as mobile phones, processed foods, and certain services fall under this slab.

• 18% Rate:

  • A higher rate of 18% is applicable to goods and services such as electronic items, capital goods, and various services.

• 28% Rate:

  • The highest GST rate of 28% is applied to luxury items, automobiles, and certain goods and services that are considered non-essential or fall into the luxury category.

• Compensation Cess:

  • In addition to the above rates, some specific goods attract a compensation cess, which is levied to compensate the states for any revenue loss during the transition to GST. This is often applied to items like tobacco and luxury cars.

• Zero Rate:

  • Certain categories of goods and services may be specified as "zero-rated," which means they are effectively taxed at 0%. This is different from the nil rate, as it allows businesses to claim input tax credit on inputs, capital goods, and input services.

• Exempt Supplies:

  • Some goods and services may be exempt from GST altogether. This means that they are not subject to any GST, and businesses cannot claim input tax credit on related inputs

 

5.Central GST (CGST), State GST (SGST), Union territory GST (UTGST) and Integrated GST (IGST)

 

 

Subject	Central GST (CGST)	State GST (SGST)	Union Territory GST (UTGST)	Integrated GST (IGST)
Levied by	Central Government	Respective State Governments	Union Territory Administrations	Central Government (on inter-state transactions)
Applicability	On intra-state supplies (within the same state)	On intra-state supplies (within the same state)	On intra-union territory supplies (within the same union territory)	On inter-state supplies (across states or union territories)
Rate Determination	Determined by the Central Government	Determined by the Respective State Government	Determined by the Union Territory Administration	IGST rate is a sum of CGST and SGST rates
Revenue Collection	Collected by the Central Government	Collected by the Respective State Government	Collected by the Union Territory Administration	Collected by the Central Government (on inter-state transactions)
Utilization of Revenue	Shared between Central and State Governments	Retained by the Respective State Government	Retained by the Union Territory Administration	Shared between Central and State Governments
Purpose	Part of the dual GST structure, meant to cover central taxes	Part of the dual GST structure, meant to cover state taxes	Applicable in union territories for intra-territory supplies	Applied to regulate and tax inter-state supplies
Input Tax Credit (ITC)	ITC available for CGST paid on inputs and services	ITC available for SGST paid on inputs and services	ITC available for UTGST paid on inputs and services	ITC available for both CGST and SGST paid on inputs
Tax Jurisdiction	Applies within a particular state	Applies within a particular state	Applies within a particular union territory	Applies to transactions across states and union territories
GSTN Portal for Filing Returns	Central GSTN portal	State-specific GSTN portals	UTGSTN portal	Integrated GSTN portal

 

 

6.What are the benefits of Goods and Services Tax (GST) in India?

 

The Goods and Services Tax (GST) in India was implemented with the aim of bringing about significant reforms in the indirect tax structure. Several benefits have been associated with the introduction of GST.

 

Here are some key advantages:

 

• GST replaced multiple indirect taxes levied by the central and state governments, simplifying the tax structure. This streamlined system reduces the complexity of compliance for businesses
• GST eliminates the cascading effect of taxes, where taxes are levied on top of other taxes. With a seamless credit mechanism, businesses can claim input tax credit on the taxes paid on their purchases, leading to a more transparent and efficient system
• GST has facilitated the creation of a common national market by harmonizing tax rates and regulations across states. This has reduced trade barriers and promoted the free flow of goods and services throughout the country
• The GST system has incorporated technology-driven processes, including electronic filing and real-time reporting, making it harder for businesses to evade taxes. This has contributed to increased tax compliance
• The input tax credit mechanism under GST benefits manufacturers, as they can claim credits for taxes paid on raw materials and input services. This has a positive impact on the cost of production and enhances the competitiveness of Indian goods in the international market
• GST brings transparency to the taxation system. The online filing of returns and the availability of transaction-level data make it easier for tax authorities to monitor and track transactions, reducing the scope for corruption
• GST has replaced a complex system of filing multiple tax returns with a more straightforward mechanism. Businesses now need to file fewer returns, reducing the compliance burden
• The implementation of GST has contributed to an improvement in the ease of doing business in India. The unified tax system has made it simpler for businesses to operate across states and has reduced the paperwork and bureaucratic hurdles associated with tax compliance
• GST has led to the harmonization of tax rates across states and union territories, minimizing the tax rate disparities that existed earlier. This creates a more predictable tax environment for businesses

7.Goods and Services Tax (GST)-Issues and Challenge

 

• Despite the intention to simplify the tax structure, the multi-tiered rate system (0%, 5%, 12%, 18%, and 28%) and the inclusion of cess on certain goods have introduced complexity. The classification of goods and services under different tax slabs can be challenging, leading to disputes and confusion
• The successful implementation of GST relies heavily on technology. Issues such as technical glitches on the GSTN (Goods and Services Tax Network) portal, especially during the initial phases, have caused difficulties for businesses in filing returns and complying with regulations
• The compliance requirements for businesses under GST, including multiple returns filing, have been perceived as burdensome. Smaller businesses, in particular, may find it challenging to adapt to the new system and comply with the various provisions
• The transition from the previous tax regime to GST posed challenges, especially for businesses in terms of understanding the new tax structure, reconfiguring accounting systems, and ensuring a smooth transition of credits from the old tax system to the GST system
• The classification of certain goods and services into specific tax slabs has been a source of contention. Ambiguities in classification have led to disputes and litigations, with businesses seeking clarity on the applicable tax rates
• The implementation of GST has increased compliance costs for businesses due to the need for sophisticated IT infrastructure, the hiring of tax professionals, and efforts to ensure accurate reporting and filing
• Challenges related to availing and matching input tax credits have been reported. Timely matching of credits and resolving discrepancies can be cumbersome, leading to concerns about the seamless flow of credit across the supply chain
• The anti-profiteering provisions were introduced to ensure that businesses pass on the benefits of reduced tax rates to consumers. However, the implementation of anti-profiteering measures has been criticized for its complexity and potential for disputes
• The periodic changes in the GST return filing system have created challenges for businesses in adapting their processes. Delays and complexities in return filing can affect working capital management

8.Goods and Services Tax Council (GST Council)

 

The Goods and Services Tax Council (GST Council) is a constitutional body in India that makes recommendations on the Goods and Services Tax (GST). It was established under the Constitution (122nd Amendment) Act, 2016, which introduced the GST in India

The GST Council consists of the following members:

• The Union Finance Minister, who is the Chairperson of the Council.
• The Union Minister of State in charge of revenue or any other Minister of State nominated by the Union Government.
• One Minister from each state, nominated by the Governor of that state.
• The Chief Secretary of each state, ex-officio.
• If the President, on the recommendation of the Council, so directs, one representative of each Union territory which has a legislature, to be nominated by the Lieutenant Governor of that Union territory.
• Three to seven members (other than Ministers) to be nominated by the Union Government, of whom at least one member shall be from the field of economics and another from the field of chartered accountancy, legal affairs or public finance

9. Way forward

 

It's important to note that the composition and structure of the GST Council may evolve over time, and there might have been changes since my last update in January 2022. To obtain the latest and most accurate information about the GST Council and its members, it is recommended to refer to official government sources or recent announcements by the relevant authorities

 

For Prelims: Economic and Social Development and Indian Polity and Governance For Mains: General Studies II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein General Studies III: Inclusive growth and issues arising from it

 

 

Previous Year Questions   1.Which of the following are true of the Goods and Services Tax (GST) introduced in India in recent times? (UGC Paper II 2020) A. It is a destination tax B. It benefits producing states more C. It benefits consuming states more D. It is a progressive taxation E. It is an umbrella tax to improve ease of doing business Choose the most appropriate answer from the options given below: A.B, D and E only B.A, C and D only C.A, D and E only D.A, C and E only Answer (D)

 

Source: Indianexpress

 

IMPEACHMENT OF A JUDGE

 

 

1.Context

Fifty-five MPs of the Rajya Sabha have submitted a motion, for removing Allahabad High Court Judge, Justice Shekhar Kumar Yadav, to Chairman of the Rajya Sabha.

 

2. Impeachment of a Judge

 

• The impeachment of a judge is a formal process by which a judge is removed from office for misconduct or incapacity. It is a serious matter that requires a high degree of evidence and a rigorous legal process.
• In India, the impeachment process is governed by the Judges Inquiry Act, 1968. The process can be initiated by either the Lok Sabha (lower house of Parliament) or the Rajya Sabha (upper house of Parliament). To initiate the process, a minimum of 100 members of the Lok Sabha or 50 members of the Rajya Sabha must sign a notice.
• Once the notice is received, a motion for impeachment is moved in the respective house. If the motion is passed by a special majority (two-thirds of the members present and voting), the matter is referred to a committee of inquiry. The committee investigates the allegations against the judge and submits a report to the respective house.
• If the committee finds the allegations to be true, the house can pass a resolution for the removal of the judge. The resolution must also be passed by a special majority in the other house. Finally, the President of India issues an order removing the judge from office.
• The impeachment process is a complex and lengthy one. It is designed to ensure that judges are held accountable for their actions, but also to protect them from frivolous or politically motivated attacks

 

3. Procedure for Impeachment

 

• Initiation:

  • A motion must be signed by:
    • 100 Members of Lok Sabha, or
    • 50 Members of Rajya Sabha.
  • The motion is submitted to the Speaker (Lok Sabha) or the Chairman (Rajya Sabha).

• Preliminary Inquiry:

  • The Speaker/Chairman decides whether to admit the motion.
  • If admitted, a three-member committee is constituted to investigate. This committee consists of:
    1. A Supreme Court judge.
    2. A High Court Chief Justice.
    3. A distinguished jurist.

• Investigation by the Committee:

  • The committee examines evidence and determines whether the charges are valid.
  • If charges are proven, the process continues in Parliament.

• Parliamentary Approval:

  • Both Houses of Parliament must approve the motion with a special majority:
    • A majority of the total membership of the House.
    • A majority of not less than two-thirds of members present and voting.

• Presidential Assent:

  • Once both Houses approve, the motion is sent to the President.
  • The President orders the judge's removal.

 

4. Instances of Judge Impeachment Process in India

 

Justice V. Ramaswami (Supreme Court Judge, 1993)

• Allegations:
  Misuse of office, including extravagant spending on official residence and irregularities in financial matters.
• Process:
  • An inquiry committee was set up, which found him guilty of several charges.
  • However, the impeachment motion in the Lok Sabha failed as the Congress Party abstained from voting, preventing the required special majority.
• Outcome:
  Justice Ramaswami was not removed but became the first judge against whom impeachment proceedings were initiated.

Justice Soumitra Sen (Calcutta High Court, 2011)

• Allegations:
  Misappropriation of funds while acting as a court-appointed receiver in 1993, prior to his appointment as a judge.
• Process:
  • An impeachment motion was passed in the Rajya Sabha with a majority.
  • Before the Lok Sabha could vote, Justice Sen resigned, making the impeachment process moot.
• Outcome:
  Justice Sen avoided impeachment by resigning.

Justice Dipak Misra (Chief Justice of India, 2018)

• Allegations:
  Misuse of authority, including irregularities in assigning cases and other charges.
• Process:
  • An impeachment motion was signed by 71 members of the Rajya Sabha and submitted to the Chairman.
  • The Rajya Sabha Chairman, Venkaiah Naidu, rejected the motion, stating it lacked substantial merit.
• Outcome:
  The impeachment did not proceed

 

5. Different Majority rules in the Indian Parliament

 

The Indian Parliament employs various majority rules to ensure that decisions are made with the necessary level of consensus and support. Here are the different types of majorities used:

 

Types of Majority Rules in Indian Parliament:

Simple Majority (50% + 1)

• Most common voting procedure
• Requires more than half of the members present and voting
• Used for:
  • Passing ordinary legislation
  • Routine parliamentary decisions
  • No-confidence motions
  • Most day-to-day parliamentary proceedings

Absolute Majority

• Requires support of more than 50% of the total membership of the house
• Includes members not just present, but the entire strength of the house
• Used for:
  • Passing money bills
  • Confidence motions
  • Electing the Speaker of Lok Sabha
  • Removing the Speaker from office

Special Majority (Special Majority Rules) a) Two-thirds Majority

• Requires support of two-thirds of members present and voting
• Used for:
  • Constitutional amendments
  • Impeachment of President
  • Declaring a national emergency
  • Passing certain critical resolutions

b) Special Majority in Rajya Sabha

• Requires a special majority for certain constitutional amendments
• Needs majority of total membership AND two-thirds of members present and voting

Qualified Majority

• Specific percentage of total membership required
• Often used in specific constitutional provisions
• Typically ranges between 50-66% depending on the specific constitutional requirement

Effective Majority

• Considers actual voting strength after subtracting abstentions
• Relevant in scenarios with multiple parties and complex parliamentary dynamics

Weighted Majority

• Less common, but used in some specific parliamentary procedures
• Gives different weights to votes based on certain predefined criteria

Important Considerations:

• Quorum requirements must be met for voting
• Voting can be by voice vote, division (counted vote), or ballot
• Electronic voting has been introduced in recent years
• Presiding officer has significant discretion in interpreting majority rules

 

 

 

For Prelims:  Article 368 (most amendments, except for a few requiring ratification by states)   For Mains: GS Paper II - Governance, Constitution, and Judiciary

 

Source: The Hindu

 

WHOLESALE PRICE INDEX (WPI)

 

 

1. Context

India’s wholesale prices rose at a three-month low pace of 1.89% in November, easing from October’s 2.4% uptick with food price inflation decelerating to 8.9% from a 25-month high of 11.6% in the previous month, even as manufactured products’ inflation accelerated to 2%

 

2. What is the Wholesale Price Index(WPI)?

The Wholesale Price Index (WPI) is a measure of the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses or retailers. It is one of the key indicators used to measure inflation and economic performance in a country.

WPI tracks the average price changes of goods at the wholesale level, providing insights into inflationary pressures in the economy. It includes various categories of goods such as agricultural products, industrial raw materials, fuel and power, and manufactured goods.

Governments and policymakers use WPI data to monitor inflation trends, formulate monetary and fiscal policies, and assess the overall health of the economy. It serves as a crucial tool for businesses to adjust pricing strategies, forecast costs, and make informed decisions regarding production and investment

3. Importance of WPI

 

The Wholesale Price Index (WPI) holds several significant roles in economic analysis and policymaking:

• WPI is a key indicator used to measure inflationary pressures in the economy. By tracking changes in the prices of goods at the wholesale level, it provides insights into the direction and magnitude of inflation. This data is crucial for policymakers in formulating monetary and fiscal policies to maintain price stability
• WPI serves as a barometer of economic performance, reflecting changes in production costs, input prices, and overall market conditions. Fluctuations in WPI can indicate shifts in supply and demand dynamics, business confidence, and economic activity levels
• Governments and central banks rely on WPI data to formulate and adjust monetary and fiscal policies. By assessing inflationary trends captured by WPI, policymakers can make informed decisions regarding interest rates, money supply, taxation, and government spending to achieve macroeconomic objectives such as price stability, economic growth, and employment generation
• Businesses utilize WPI as a tool for forecasting production costs and adjusting pricing strategies. By monitoring changes in wholesale prices of goods, companies can anticipate future cost pressures, optimize supply chain management, and make pricing decisions to maintain profitability and competitiveness in the market
• WPI data is also crucial for analyzing trends in international trade. Changes in wholesale prices can affect export competitiveness, import demand, and trade balances. Policymakers use WPI information to assess the impact of exchange rate fluctuations, trade policies, and global economic conditions on domestic industries and trade relations

4. What is the Consumer Price Index(CPI)?

 

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is one of the most widely used indicators for tracking inflation and assessing changes in the cost of living over time.

CPI is calculated by collecting price data for a representative sample of goods and services that are typically purchased by urban consumers. The prices of these items are then aggregated and weighted according to their relative importance in the average consumer's expenditure. The resulting index reflects the average price level experienced by consumers

CPI is used by governments, central banks, businesses, and households for various purposes:

• CPI is primarily used to measure inflation, which is the rate at which the general level of prices for goods and services is rising. By tracking changes in the CPI over time, policymakers can gauge the extent of inflationary pressures in the economy and adjust monetary and fiscal policies accordingly
• Many labour contracts, pension plans, and government benefits are indexed to CPI. This means that payments or wages are adjusted periodically based on changes in the CPI to maintain purchasing power and account for changes in the cost of living
• Central banks often use CPI as a key input in their monetary policy decisions. By targeting a specific inflation rate, central banks aim to achieve price stability and support sustainable economic growth. CPI data helps policymakers assess whether monetary policy actions are effectively controlling inflation
• Investors and financial analysts use CPI data to adjust their investment strategies and financial planning. Understanding inflation trends can help investors anticipate changes in interest rates, bond yields, and stock market performance, which in turn influence investment decisions
• CPI data provides insights into consumer behavior and spending patterns. Changes in the prices of specific goods and services reflected in the CPI can affect consumer preferences, purchasing decisions, and overall economic activity

5.What is the distinction between WPI and CPI?

 

Subject	Wholesale Price Index (WPI)	Consumer Price Index (CPI)
Scope of Goods and Services	Measures changes in prices of goods traded in bulk by wholesalers, including raw materials, intermediate goods, and finished goods.	Tracks changes in prices of goods and services purchased by households for consumption, including food, housing, transportation, etc.
Target Audience	Relevant to businesses, policymakers, and analysts involved in production, manufacturing, and trade.	Important for individuals, households, labor unions, and policymakers involved in setting wages, pensions, and social security benefits.
Weighting and Composition	Based on a fixed basket of goods and services weighted according to their relative importance in wholesale trade.	Based on a basket of goods and services representative of urban consumer spending patterns.
Policy Implications	Changes in WPI affect production costs, supply chain management, and business profitability. Used by policymakers to assess inflation trends and formulate industrial and trade policies.	Changes in CPI directly impact the cost of living for households and influence consumer behavior, purchasing power, and welfare. Used by policymakers to adjust wages, social benefits, and taxation policies.

 

6. Way Forward

 

Both WPI and CPI are measures of price levels, they differ in their scope, target audience, composition, and policy implications. WPI focuses on wholesale trade and production costs, while CPI reflects consumer spending patterns and the cost of living for households

 

For Prelims: Consumer Price Index, Wholesale Price Index, Inflation,  retail inflation, Producer Pirce Index, National Statistical Office, OPEC+, Crude oil, Kharif season, Monsoon,  For Mains:  1. Analyse the factors contributing to high food inflation in India in recent months. Discuss the impact of high food inflation on the Indian economy and suggest measures to mitigate it. (250 words) 2. Explain the concept of sticky inflation. What are the various factors that contribute to sticky inflation? Discuss the implications of sticky inflation for the Indian economy. (250 words)

 

 

Previous Year Questions   1. With reference to inflation in India, which of the following statements is correct? (UPSC 2015) A. Controlling the inflation in India is the responsibility of the Government of India only B. The Reserve Bank of India has no role in controlling the inflation C. Decreased money circulation helps in controlling the inflation D. Increased money circulation helps in controlling the inflation   Answer: C   2. With reference to India, consider the following statements: (UPSC 2010) 1. The Wholesale Price Index (WPI) in India is available on a monthly basis only. 2. As compared to Consumer Price Index for Industrial Workers (CPI(IW)), the WPI gives less weight to food articles. Which of the statements given above is/are correct?  A. 1 only       B. 2 only       C. Both 1 and 2          D.  Neither 1 nor 2   Answer: C   3. Consider the following statements: (UPSC 2020) 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI does not capture changes in the prices of services, which CPI does. 3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates. Which of the statements given above is/are correct?  A. 1 and  2 only       B. 2 only       C. 3 only           D. 1, 2 and 3   4. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011) 1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30. 2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change. 3. The food supply chain has structural constraints. Which of the statements given above are correct?  A. 1 and 2 only          B. 2 and 3 only        C. 1 and 3 only          D. 1, 2 and 3   Answer: B     5. The Public Distribution System, which evolved as a system of management of food and distribution of food grains, was relaunched as _______ Public Distribution System in 1997. (SSC JE EE 2021)  A. Evolved         B. Transformed      C. Tested            D. Targeted   Answer: D   6. Under the Antyodaya Anna Yojana, up to what quantity of rice and wheat can be purchased at a subsidised cost? (FCI AG III 2023)  A. 35 kg          B. 40 kg          C. 30 kg           D. 25 kg           E. 50 kg   Answer: A   7. As per the the National Statistical Office (NSO) report released on 7 January 2022, India's Gross domestic product (GDP) is expected to grow at ___________ per cent (in first advance estimates) in the fiscal year 2021-22?  (ESIC UDC 2022)  A. 17.6 per cent     B. 9.5 per cent     C. 11 per cent        D. 9.2 per cent   E. None of the above   Answer: D   8. The main emphasis of OPEC (Organisation of the Petroleum Exporting Countries) is on which of the following? (UKPSC 2016) A. The production of petroleum B. Control over prices of petroleum C. Both (a) and (b) D. None of the above   Answer: C   9. In the context of global oil prices, "Brent crude oil" is frequently referred to in the news. What does this term imply? (UPSC 2011) 1. It is a major classification of crude oil. 2. It is sourced from the North Sea. 3. It does not contain sulfur. Which of the statements given above is/are correct? A. 2 only    B. 1 and 2 only        C. 1 and 3 only         D. 1, 2 and 3   Answer: B   10. The term 'West Texas Intermediate', sometimes found in news, refers to a grade of (UPSC 2020) A. Crude oil   B. Bullion         C. Rare earth elements       D.  Uranium   Answer: C   11. With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements: (UPSC 2019) 1. Area under rice cultivation is the highest. 2. Area under the cultivation of jowar is more than that of oilseeds. 3. Area of cotton cultivation is more than that of sugarcane. 4. Area under sugarcane cultivation has steadily decreased. Which of the statements given above are correct?  A. 1 and 3 only        B.  2, 3 and 4 only        C. 2 and 4 only         D. 1, 2, 3 and 4   Answer: A

 

Source: The Hindu

 

LA NINA

 

 

1. Context

 

While the La Niña was expected to emerge by July this year, it is yet to. The India Meteorological Department now expects a La Niña to set in by late 2024 or early 2025, plus a milder winter due to this delay.

 

 

2. What is La Nina?

 

• La Niña, one phase of the El Niño Southern Oscillation (ENSO), occurs when the Pacific Ocean between Indonesia and South America experiences cooler-than-normal temperatures. In contrast, El Niño marks the warming of this same region.
• Both phases have a profound effect on global atmospheric circulation and weather conditions.
• During La Niña years, India typically experiences normal or above-average monsoon rainfall, while Africa often faces droughts, and hurricane activity in the Atlantic intensifies.
• On the other hand, El Niño tends to bring extreme heat and droughts to India, while increasing rainfall in the southern United States.
• The current decade began with an unusual sequence of three consecutive La Niña events from 2020 to 2022, known as a Triple Dip La Niña, which was followed by an El Niño in 2023.
• Climate change could lead to more frequent and intense La Niña and El Niño events as warming sea and land temperatures destabilize the Pacific's balance.
• This may also lead to more severe La Niña occurrences, which are often associated with harsh winters in India

 

3. La Nina and Winter

 

• The year 2024 stands out as La Niña has not developed as anticipated. Typically, La Niña forms during the monsoon or pre-monsoon seasons, and since 1950, it has only occurred twice between October and December.
• While global forecasts had predicted its emergence during this monsoon season, as of December, there is only a 57% chance of it forming in 2024. Even if it does develop, it is expected to remain weak, though it could still impact global weather patterns.
• The declaration of a La Niña or El Niño event relies on several indices. One key measure is the Oceanic Niño Index (ONI), which compares the three-month average sea surface temperatures in the East-Central Tropical Pacific with the 30-year average.
• If the difference is +0.5ºC or higher, it signifies El Niño, while a difference of –0.5ºC or lower indicates La Niña. At present, the value is approximately –0.3ºC.
• For an event to be officially classified as a full-fledged La Niña or El Niño, the ONI values must cross the respective thresholds for at least five consecutive months

 

4. What is the meteorology?

 

• Southern Indian cities like Bengaluru and Hyderabad are experiencing an unusually cold winter this year, whereas northern India is seeing a delayed winter with above-average temperatures. Some reports attribute the colder conditions in the south to La Niña; however, current ONI values do not support this claim. If La Niña had already developed, northern India would likely be experiencing a colder-than-usual winter as well.
• A 35-year analysis of meteorological data conducted by researchers at the Council on Energy, Environment, and Water in New Delhi shows that while La Niña winters typically bring colder nights compared to El Niño, daytime temperatures tend to be higher.
• Key meteorological factors such as wind speed and the planetary boundary layer height (PBLH) — the lowest part of the atmosphere influenced by interactions between land and air — also change during ENSO phases, which can affect air quality.
• The study found that during La Niña winters, average wind speeds are higher throughout the day. Stronger winds help reduce air pollution by dispersing pollutants. Additionally, the researchers observed that PBLH tends to be slightly lower during La Niña winters.
• If La Niña develops, colder temperatures in northern India could lead to increased biomass burning for heating, exacerbating air pollution.
• However, while a lower PBLH might trap pollutants closer to the ground, stronger winds could help disperse them, potentially improving air quality

 

5. La Nina and Monsoon

 

• Summers during El Niño years tend to be particularly severe, as seen in April this year when India experienced intense and record-breaking heat waves. If La Niña develops and persists into the summer of 2025, it could provide some relief from extreme heat.
• El Niño is also known to disrupt monsoons, with India recording below-average rainfall in at least half of all El Niño years since 1871. However, data since 1980 suggests some changing patterns.
• For instance, both northern and southern India have experienced reduced rainfall during stronger El Niño events, while central India has remained relatively unaffected.
• In contrast, La Niña supports stronger monsoons, as demonstrated by the “normal” to “above-normal” rainfall recorded in the La Niña years of 2020, 2021, and 2022. By comparison, the El Niño year of 2023 saw “below-normal” rainfall.
• Therefore, the formation of a La Niña now or in early 2025, persisting through the monsoon season, would be a positive development

 

For Prelims: El Niño, La Niña, and ENSO   For Mains: GS I - World Geography

 

Source: The Hindu