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DAILY CURRENT AFFAIRS, 19 MARCH 2025

CURRENT ACCOUNT DEFICIT

 

1. Context 

India’s goods trade deficit was down to a 42-month low of $14.05 billion as imports of gold, silver and crude dipped in February, show data from the Commerce and Industries Ministry.

2. What is a Current Account Deficit (CAD)?

  • The Current Account Deficit (CAD) refers to a situation where a country's total imports of goods, services, investment incomes, and unilateral transfers exceed its total exports. It represents a deficit or negative balance in the country's current account, which is a component of its balance of payments.
  • CAD reflects a nation's dependence on foreign sources to finance its consumption and investment. A persistent deficit in the current account might indicate that a country is spending more on foreign goods and services than it is earning, leading to increased borrowing from other countries to cover the shortfall.
  • This deficit is not necessarily negative on its own, as it can be financed by foreign investments or borrowing. However, if it becomes unsustainable or grows excessively large, it could pose risks to the country's economic stability, currency value, and overall financial health. Governments often monitor and aim to manage their current account deficits to maintain a healthy balance in their economy.

3. The significance of CAD

  • When the value of the goods and services that a country imports exceed the value of the products it exports, it is called the current account deficit.
  • CAD and the fiscal deficit together make up the twin deficits the enemies of the stock market and investors.
  • If the current account of the country's trade and transactions with other countries show a surplus, that indicates money is flowing into the country, boosting the foreign exchange reserves and the value of the rupee against the dollar.
  • These are factors that will have ramifications on the economy and the stock markets as well as on returns on investments by people.

4. RBI on CAD

  • According to the RBI, the CAD which was at $36.4 billion for the quarter ending September 2022, is expected to moderate in the second half of 2022-23 and remain eminently manageable and within the parameters of viability.
  • CAD for the first half of 2022-23 stood at 3.3. per cent of the GDP.
  • The situation has shown improvement in Q3: 2022-23 as imports moderated in the wake of lower commodity prices, resulting in the narrowing of the merchandise trade deficit.

5. Narrowed Trade deficit 

  • January trade deficit narrowed to $17.7 billion, led by a sharp fall in imports, while exports fell by a smaller amount.
  •  The sharp drop in imports was due to non-oil imports falling, mainly due to a price impact (softening in coal prices from mid-December), likely softening in domestic demand post the festival season (Such as lower imports of transport equipment) and the seasonal impact of the Chinese New Year holidays.
  • On the other hand, after the Rs 26, 000 crore sell-off by foreign portfolio investors in January, FPI outflows have come down to Rs 4, 400 crores in February so far.
  • Workers' remittances went up to $ 30 billion in the April-September 2022 period from $ 25. 48 billion in the same period a year ago.
  • At the same time, gold imports fell to $20 billion from $ 23.9 billion a year ago.

6. Improvement of Capital flow

  • While there is a perception in the markets that capital flows could come under some pressure with China's reopening and any deviations in monetary policy expectations, inflows are expected to increase the economy on the whole as foreign investors are unlikely to keep away from India, which is expected to witness one of the highest growth rates among large economies.
  • At a time when the economies of many developed markets are expected to take a hit, the RBI has projected the GDP growth for the next fiscal (FY2024) at 6.4 per cent and the Union Budget has indicated a capital expenditure of Rs 10 lakh crore (over $120 billion).
  • Moreover, with the rise in interest rates in India after the RBI hiked the repo rate by 250 basis points to 6.50 per cent, non-resident Indian deposits, remittances and FPI investment in debt are expected to rise further.
  • NRI deposits had increased by $3.62 billion to $ 134.49 billion in the April-November period of 2022.
  • Capital flow into India came under pressure in 2022 following the sharp rise in interest rates in the US.
  • While FPIs pulled out Rs 121, 439 crores in 2022, even in the first six weeks of 2023, the FPI flow has been negative and the equity markets have witnessed a net outflow of Rs 32, 887 crores till February 16.
  • While the flow of capital will depend upon the interest rate movement and currency movements vis-a-vis the US dollar, there is optimism among global investors about India.

7. Moderate CAD impact on Market

  • While rising CAD raises concerns among investors as it hurts the currency and thereby the inflow of funds into the markets a notable decline in CAD in January has improved market sentiments.
  • The benchmark Sensex at BSE rose 407 points intraday on Thursday before closing at 61, 319 with a gain of 44 points or 0.07 per cent.
  • CAD is very important for the currency and the value of an economy hinges a lot on the value of its currency thereby, it also supports the equity markets by keeping the fund flow intact.
  • While the numbers for January have come good, experts say this needs to be sustained.

For Prelims & Mains

For Prelims: Current Account Deficit, RBI, Union Budget, GDP, Capital flow, 
For Mains:
1. What is Current Account Deficit? Discuss its significance and impact on the Indian market (250 Words)
 
Previous Year Questions
 

1.Economic growth in country X will necessarily have to occur if (UPSC CSE 2013)

(a) there is technical progress in the world economy

(b) there is population growth in X

(c) there is capital formation in X

(d) the volume of trade grows in the world economy

Answer (c)

Economic growth in country X is not guaranteed by factors such as technical progress in the world economy, population growth, or global trade expansion alone. However, capital formation—which includes investments in physical assets like infrastructure, machinery, and technology—is a direct driver of economic growth.

  • Capital formation increases the productive capacity of an economy by enabling businesses to expand, produce more goods and services, and generate employment.
  • While technical progress (option a) can contribute to growth, it must be adopted and utilized within country X.
  • Population growth (option b) alone does not ensure economic growth unless accompanied by job creation and productivity gains.
  • Increase in world trade volume (option d) may benefit country X but does not necessarily lead to its economic growth unless it actively participates in trade and enhances its competitiveness.

 

Source: The Indian Express

 

COMPTROLLER AUDITOR GENERAL OF INDIA (CGI)

 
 
1.Context
The Supreme Court decided to examine a plea challenging the sole prerogative of the Centre, acting through the President, to appoint the Comptroller and Auditor General of India
 
2. Comptroller and Auditor General of India (CAG)
  • The Comptroller and Auditor General (CAG) of India is a constitutional authority responsible for auditing and overseeing the financial operations of the Government of India and state governments. The role of the CAG is defined in the Constitution of India, primarily in Article 148
  • The Comptroller and Auditor General of India (CAG) plays a pivotal role within the democratic framework, ensuring transparency, accountability, and financial integrity in the government's operations.
  • It actively contributes to upholding the separation of powers between the legislature and executive by verifying that the government's financial activities align with legislative intentions.
  • Through its audit discoveries and recommendations, the CAG advocates for good governance practices, aiding governments in streamlining operations, minimizing inefficiencies, and adhering to financial discipline.
  • In the evolving landscape of India's democracy, the CAG's role becomes increasingly crucial, promoting good governance and safeguarding the interests of the people.
  • Notably, the 73rd and 74th Constitutional amendments represent a significant advancement in India's democratic structure, establishing tiers of self-governance below the state level.
  • The roots of organized local governance in India trace back to the historical "Janpadi and Pancha" system. Looking ahead to independent India, the recommendations of the 1958 Balwant Rai Mehta Committee laid the groundwork for a three-tier structure for rural self-governance, ultimately materializing in the 73rd and 74th amendments.
3. Appointment and Tenure of CAG
  • The President of India appoints the CAG.
  • The appointment is made based on the recommendation of the Prime Minister, who consults with other authorities
  • The President is required to consult with:
    • The Speaker of the Lok Sabha (House of the People).
    • The Vice President, who is also the Chairman of the Rajya Sabha (Council of States).
    • The Leader of the Opposition in the Lok Sabha.
  • The qualifications for the appointment of the CAG are similar to those of a judge of the Supreme Court
  • The CAG holds office for a term of six years from the date they assume office or until they attain the age of 65, whichever is earlier.
  • The CAG can be removed from office only in the manner and on the grounds prescribed for the removal of a judge of the Supreme Court
  • The constitutional provisions related to the appointment of the CAG are primarily outlined in Article 148 of the Indian Constitution
4. Functions and Powers
  • The primary function of the CAG is to audit the accounts related to the revenue and expenditure of the Government of India and state governments
  • The CAG also audits the accounts of bodies and authorities substantially financed by the government
  • The CAG audits the accounts of public sector undertakings and other entities where the government has a substantial financial stake
  • The CAG audits the accounts of various statutory bodies and authorities to ensure compliance with financial regulations and legal requirements
  • The audit reports prepared by the CAG are submitted to the President of India in the case of the central government and to the Governors in the case of state governments.
  • These reports are then laid before each House of Parliament or the State Legislature.
  • The CAG operates independently and is not subject to the control or influence of the executive in the performance of their duties.
  • The CAG has the authority to access all records, books, and documents related to the accounts being audited
5. CAG of India vs CAG of the United Kingdom
 
Subject CAG of India CAG of the United Kingdom
Constitutional Status Constitutional authority Not a constitutional office, part of the National Audit Office (NAO)
Appointment Appointed by the President of India Appointed by the monarch on the advice of the Prime Minister
Independence Independent Emphasizes independence but appointment process may raise questions
Functions Audits government accounts, conducts performance audits Audits central government departments, agencies, and public bodies
Reports Submitted to the President/Governors, laid before Parliament/State Legislatures Reports directly to the UK Parliament
Legal Framework Outlined in the Constitution of India Based on various statutes, operates under the Public Audit Act 2001
Role in Public Accounts Committees (PACs) Plays a crucial role in assisting PACs at central and state levels Supports the UK Parliament's Public Accounts Committee

6.How Independently does the Office of CAG Function?

  • The office of the Comptroller and Auditor General (CAG) is designed to function independently to ensure impartiality and integrity in auditing government expenditures. The independence of the CAG's office is crucial for maintaining transparency, accountability, and public trust in the financial management of the government
  • The CAG is a constitutional authority, and its independence is enshrined in the Constitution of India. This constitutional status provides a strong foundation for the CAG's autonomy.
  • The CAG is appointed by the President of India based on the recommendations of the Prime Minister in consultation with other authorities. The appointment process aims to ensure the CAG's impartiality and independence
  • The CAG holds office for a fixed term of six years or until the age of 65, whichever is earlier. This security of tenure helps insulate the CAG from external pressures
  • The conditions of service of the CAG, once appointed, cannot be varied to their disadvantage. This ensures that the CAG can perform their duties without fear of adverse changes in service conditions
  • The CAG operates independently and is not subject to the control or influence of the executive in the performance of their duties. This separation is crucial for conducting objective and unbiased audits.

7.What is the Public Accounts Committee (PAC)?

  • The Public Accounts Committee (PAC) is a parliamentary committee that plays a crucial role in overseeing government expenditures and ensuring financial accountability.
  • Its primary function is to examine the audit reports prepared by the supreme audit institution (such as the Comptroller and Auditor General, CAG) and to scrutinize the government's financial transactions, policies, and programs.
  • Members of the PAC are typically drawn from the legislature and reflect the political composition of the parliament or legislative body
  • The PAC is headed by a Chairperson, who is usually a member of the opposition party to ensure impartiality.
  • The primary mandate of the PAC is to examine the audit reports produced by the supreme audit institution, which highlights instances of financial irregularities, inefficiencies, or non-compliance with laws and regulations.
  • The PAC scrutinizes government expenditures to ensure that public funds are used efficiently and effectively
  • The PAC often follows up on its recommendations to ensure that the government has taken appropriate actions in response to identified issues
  • The PAC enhances public accountability by holding the government accountable for its financial decisions and ensuring transparency in the use of public funds
  • The PAC plays a critical role in upholding democratic principles by ensuring that public funds are utilized in the best interest of the citizens and that the government is held accountable for its financial decisions

 

For Prelims: Indian Polity and Governance

For Mains: General Studies II: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies

Source: indianexpress

 

WHEAT CROP IN INDIA

 

1. Context

India recorded its warmest February in 124 years this year. The India Meteorological Department has already raised an alarm for March, saying that the month will experience above normal temperatures and more than the usual number of days with heat waves. The period coincides with the beginning of India’s wheat harvest season, and extreme heat poses a grave threat for the country’s second-most consumed crop, after rice

2. Wheat Production

  • The unusual heat of March 2022 led to lower wheat production, as the spike in temperatures happened during the grain formation and filling stage when the kernels were accumulating starch and proteins.
  • That stage determines the size and weight of the harvested grains were cut short with maximum temperatures crossing 35 degrees Celsius by mid-March.
  • While the Agriculture Ministry claimed last year’s wheat output at 107.74 million tonnes (mt) a marginal decline of 1.7% from the all-time-high 109.59 mt of 2020- 21 the private trade estimated the crop to be 10-15% lower at 93-98 mt.
  • This was borne out by the government’s own procurement falling to 18.79 mt, as against 43.34 mt in the previous marketing season, and wholesale wheat inflation crossing 20% year-on-year by December even after a ban on exports. 

3. Why has 2022-23 been different?

  • If 2021-22 was largely wet, with five consecutive months of excess/surplus rain, 2022-23 was quite the opposite.
  • The winter was exceptionally dry, with the four months from November 2022 to February 2023 registering deficient rainfall.
  • February 2023 not only recorded 68.3% below-normal rain, but it was also the hottest ever February in terms of the average maximum temperature, just as March was in 2022.

4. About Wheat Crop

  • Wheat is a Rabi Crop grown between September and December and harvested between February and May.
  • The total area under the crop is about 29.8 million hectares in the country.
  • In 2020, wheat production for India was 107,860 thousand tonnes. Wheat production in India increased from 23,832 thousand tonnes in 1971 to 107,860 thousand tonnes in 2020 growing at an average annual rate of 3.42%.
  • Indian wheat is largely a soft/medium-hard, medium protein, white bread wheat, somewhat similar to U.S. hard white wheat.
  • Durum wheat, often known as pasta wheat or macaroni wheat is also one of the best-quality wheat varieties in India.

5. Major Wheat Producing States

 
Image Source: Farmer's Portal

6. Climate Requirement

  • The wheat crop has wide adaptability. It can be grown not only in the tropical and subtropical zones but also in the temperate zone and the cold tracts of the far north, beyond event the 60-degree north altitude.
  • Wheat can tolerate severe cold and snow and resume growth with the setting in of warm weather in spring. It can be cultivated from sea level to as high as 3300 meters.
  • The best wheat are produced in areas favored with cool, moist weather during the major portion of the growing period followed by dry, warm weather to enable the grain to ripen properly.
  • The optimum temperature range for ideal germination of wheat seed is 20-25 C though the seeds can germinate in the temperature range of 3.5 to 35 c.
  • Rains just after sowing hamper germination and encourage seedling blight. Areas with a warm and damp climate are not suited for wheat growing.
  • During the heading and flowering stages, excessively high or low temperatures and droughts are harmful to wheat.
  • Cloudy weather, with high humidity and low temperatures, is conducive to rust attack.
  • The wheat plant requires about 14-15 C optimum average temperature at the time of ripening. The temperature conditions at the time of grain filling and development are very crucial for yield.
  • Temperatures above 250C during this period tend to depress grain weight.
  • When temperatures are high, too much energy is lost through the process of transpiration by the plants, and the reduced residual energy results in poorer grain formation and lower yields.

7. Soil

  • Wheat is grown in a variety of soils in India. Soils with a clay loam or loam texture, good structure, and moderate water-holding capacity are ideal for wheat cultivation.
  • Care should be taken to avoid very porous and excessively drained oils.
  • Soil should be neutral in its reaction. Heavy soil with good drainage is suitable for wheat cultivation under the conditions.
  • These soils absorb and retain rainwater well. Heavy soils with poor structure and poor drainage are not suitable as wheat is sensitive to water logging.
  • Wheat can be successfully grown on lighter soils provided their water and nutrient holding capacity are improved.

8. Will the rain affect wheat yields?

  • Wheat is sensitive to both heat stress and rain/thunderstorms during the terminal gain filling and ripening period.
  • This is the time when the crop's earheads are heavy with grains.
  • The more weight accumulated from grain-filling, the more vulnerable is the crop to rain.
  • These, when accompanied by high-velocity winds, make the stems prone to "lodging" or bending and even falling flat on the ground.

9. Would wheat prices go up if production falls?

  • It is unlikely because wheat prices at the Chicago Board of Trade futures exchange are now at just over $254 per tonne compared to the $500-plus peaks that were scaled last March.
  • Last year’s failed domestic crop came at a time when global commodity prices were on fire following Russia’s invasion of Ukraine.
  • The world has since overcome the effects of the war. Even in the unlikeliest possibility of India’s wheat output falling to the 2021-22 level or lower, a resurgence of cereal inflation looks improbable.

For Prelims 

For Prelims: Wheat Crop, white bread wheat, Durum wheat, tropical and subtropical zones, Ministry of Agriculture.

Previous year Question

1. Consider the following crops: (UPSC 2013)
1. Cotton
2. Groundnut
3. Rice
4. Wheat
Which of these are Kharif crops?
A. 1 and 4
B. 2 and 3 only
C. 1, 2 and 3
D. 2, 3 and 4
Answer: C
 
Source: The Indian Express
 
 

ELECTION AND VOTING PROCESS

 
 
 
1. Context
 
 
The Election Commission (EC) has invited political parties to discuss strengthening the election process. This is in wake of the allegations of manipulation of electoral rolls during the recently concluded assembly elections and issues raised with respect to duplicate Electoral Photo Identity Card (EPIC) numbers in different States
 

2. The Evolution of the Voting Process

 

  • In the inaugural two general elections of 1952 and 1957, a distinct box was designated for each candidate alongside their election symbol. Voters were required to deposit a blank ballot paper into the box corresponding to the candidate of their choice. Subsequently, starting from the third election, the ballot paper featuring the names of candidates and their symbols was introduced, with voters marking their choice by stamping the candidate's name.
  • The Electronic Voting Machine (EVM) made its debut on a trial basis in 1982 in the Assembly constituency of Paravur, Kerala. Its full deployment across all booths occurred during the Assembly elections of Tamil Nadu, Kerala, Puducherry, and West Bengal in 2001. The Supreme Court, through various judgments, has consistently upheld the validity of utilizing EVMs in elections. By the 2004 general elections to the Lok Sabha, EVMs were operational in all 543 constituencies.
  • In the case of Subramanian Swamy versus the Election Commission of India (2013), the Supreme Court emphasized that a paper trail is an essential prerequisite for ensuring free and fair elections. The 2019 elections witnessed the use of EVMs with 100% Voter Verifiable Paper Audit Trail (VVPAT) coverage in all constituencies.

3. International Voting Practices

 
  • Numerous Western democracies maintain the tradition of utilizing paper ballots for their electoral processes. Countries such as England, France, The Netherlands, and the United States have opted out of Electronic Voting Machines (EVMs) for national or federal elections following trials conducted in the past two decades.
  • In Germany, the nation's Supreme Court declared the use of EVMs in elections unconstitutional in 2009.
  • While some countries like Brazil continue to employ EVMs for their elections, others have chosen not to adopt them.
  • Among our neighbouring countries, Pakistan does not utilize EVMs. Bangladesh experimented with EVMs in a few constituencies in 2018 but reverted to paper ballots for the general elections held in 2024.

 

4. Features of Electronic Voting Machines (EVMs)

 

Electronic Voting Machines (EVMs) offer significant advantages to the electoral process.
  1. They have effectively curbed booth capturing by restricting the rate of vote casting to four votes per minute, thus prolonging the time required for any attempt to stuff false votes.
  2. EVMs have eliminated the issue of invalid votes, which was a common problem with paper ballots and often led to disputes during the counting process.
  3. Considering the substantial size of our electorate, which is close to one billion, the use of EVMs is environmentally friendly as it reduces paper consumption.
  4. EVMs provide administrative convenience for polling officers on election day and have streamlined the counting process, making it faster and more accurate.
  • Several mechanisms are in place to ensure the integrity of the EVM and Voter Verifiable Paper Audit Trial (VVPAT) process. These include the random allocation of EVMs to booths before polls, the conduct of mock polls to verify the accuracy of EVMs and VVPATs before the actual polling begins, and the sharing of the serial numbers of EVMs along with the total votes polled with agents of candidates to verify the count during the vote counting process.
  • Despite these advantages, doubts about the functioning of EVMs have been raised by various political parties and civil society activists over time.
  • The most common allegation is that EVMs are susceptible to hacking due to being electronic devices.
  • The Election Commission of India (ECI) has repeatedly clarified that EVMs are standalone devices, similar to calculators, with no connectivity to external devices, making them immune to external hacking attempts.
  • Currently, the sample size for matching the EVM count with VVPAT slips is five per assembly constituency/segment, which is not based on any scientific criteria and may fail to detect defective EVMs during counting.
  • Moreover, the present process allows for the identification of booth-wise polling behaviour by various parties, which can lead to profiling and intimidation.
 
5. Enhancing Transparency in the Election Process
 
  • In a transparent democracy, every citizen should be able to understand and verify each step of the election process without requiring specialized technical knowledge.
  • The widespread use of Voter Verifiable Paper Audit Trail (VVPAT) has empowered voters to confirm that their votes are accurately recorded.
  • However, to enhance the robustness of the entire process and ensure that votes are accurately counted, several additional measures can be adopted.
  • Instead of the impractical and scientifically unfeasible 100% match of EVM count with VVPAT slips, a more systematic approach can be implemented.
  • Experts suggest dividing each state into larger regions and determining a scientifically sound sample size for matching the EVM count with VVPAT slips.
  • In case of any discrepancy, even in a single instance, the VVPAT slips for the respective region should be fully counted, forming the basis for determining results. This approach would imbue the counting process with statistically significant confidence.
  • Furthermore, to provide additional protection for voters at the booth level, the introduction of "totalizer" machines could be considered. These machines would aggregate votes from 15-20 EVMs before revealing the candidate-wise count, offering a layer of anonymity and security for voters.
 
6. The Way Forward
 
 
By implementing these measures, electoral authorities can enhance transparency, integrity, and public trust in the electoral process, thereby strengthening democracy and upholding the principles of free and fair elections.
 
 
For Prelims: EVMs, VVPATs, Election Commission of India
For Mains: 
1. "In a transparent democracy, every citizen should be able to understand and verify each step of the election process." Elaborate on the significance of the Voter Verifiable Paper Audit Trail (VVPAT) in empowering voters and enhancing electoral transparency. Propose additional steps to further strengthen the electoral process and uphold democratic values. (250 Words)
 
 
Previous Year Questions

1. Consider the following statements: (UPSC 2017)

1. The Election Commission of India is a five-member body.
2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
3. Election Commission resolves the disputes relating to splits/mergers of recognised political parties.

Which of the statements given above is/are correct?

A. 1 and 2 only         B. 2 only      C. 2 and 3 only           D. 3 only

2. Consider the following statements : (UPSC 2021)

1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.
2. In the 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies.
3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.
Which of the statements given above is/are correct?
A. 1 only       B. 2 only       C. 1 and 3         D. 2 and 3
 
3. Consider the following statements : (UPSC CSE 2021)
1. The Montagu-Chelmsford Reforms of 1919 recommended granting voting rights to all women above the age of 21.
2. The Government of India Act of 1935 gave women reserved seats in the legislature.
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

Answers: 1-D, 2-B, 3-B

Mains

1. In the light of recent controversy regarding the use of Electronic Voting Machines (EVM), what are the challenges before the Election Commission of India to ensure the trustworthiness of elections in India? (UPSC 2018)
Source: The Hindu
 

WHOLESALE PRICE INDEX (WPI)

 
 
1. Context

Wholesale price inflation hastened to 2.38% as cost of manufactured food products, among others, increased in February, from 2.31% in the previous month, according to data from Ministry of Commerce and Industry

 

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: B
 
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
 

NATIONAL GREEN TRIBUNAL

 

1. Context

The Supreme Court set aside, in separate judgments , a National Green Tribunal (NGT) order and a Madras High Court decision to halt development activities at Auroville. The decision cited lack of environmental clearance while outlining the need for sustainable development which strike a “golden balance” between the rights to development and clean environment.

2. What is National Green Tribunal (NGT)?

  • The National Green Tribunal (NGT) is a specialized judicial body established in India to handle cases related to environmental protection and conservation.
  • It was established under the National Green Tribunal Act, of  2010, and its primary objective is to effectively and expeditiously address environmental disputes and promote sustainable development.
  • With the establishment of the NGT, India became the third country in the world to set up a specialized environmental tribunal, only after Australia and New Zealand, and the first developing country to do so.
     
  • NGT is mandated to make disposal of applications or appeals finally within 6 months of the filing of the same.
  • The NGT has five places of sittings, New Delhi is the Principal place of sitting, and Bhopal, Pune, Kolkata and Chennai are the other four.

3. Structure of the National Green Tribunal (NGT)

  • Chairperson: The NGT is headed by a full-time Chairperson who is a retired judge of the Supreme Court of India. The Chairperson is responsible for the overall administration and functioning of the tribunal.
  • Judicial Members: The NGT consists of judicial members who are retired judges of either the Supreme Court or a High Court. These members have extensive legal knowledge and experience in handling environmental matters.
  • Expert Members: The tribunal also includes expert members who possess expertise in areas such as environmental science, ecology, hydrology, and forestry. These members provide valuable technical insights and guidance in the resolution of environmental disputes.
  • The NGT is organized into multiple benches located across different regions of India. These benches are responsible for hearing cases specific to their respective jurisdictions. Each bench is headed by a judicial member and consists of one or more expert members, as required.

4. What are the Important Landmark Judgements of NGT?

The National Green Tribunal (NGT) has delivered several landmark judgments that have had a significant impact on environmental protection and conservation in India. Here are some of the important landmark judgments delivered by the NGT:

  • Vardhaman Kaushik v. Union of India (2013): This case dealt with the issue of groundwater depletion due to illegal extraction by industries in Uttar Pradesh. The NGT directed the closure of industries that were extracting groundwater without proper permissions and ordered the payment of compensation for environmental damage caused.
  • Alembic Pharmaceuticals Ltd. v. Rohit Prajapati & Ors. (2014): In this case, the NGT ordered the closure of an industrial unit in Gujarat for releasing untreated effluents into a water body, causing pollution and harm to the environment and public health.
  • M.C. Mehta v. Union of India (2014): The NGT issued a landmark judgment in this case regarding the pollution of the Yamuna River. It directed several measures to clean and rejuvenate the river, including the establishment of sewage treatment plants and the regulation of industries contributing to pollution.
  • Subhash Chandra Sharma v. Union of India (2015): This case focused on the issue of air pollution caused by solid waste burning in open areas. The NGT imposed a ban on burning waste in open spaces and directed municipal authorities to take measures to manage waste effectively.
  • Raghu Nath Sharma v. State of Himachal Pradesh (2016): The NGT ordered the closure of illegal hotels and structures in the eco-sensitive Rohtang Pass area of Himachal Pradesh to protect the fragile Himalayan ecosystem.
  • Yamuna Muktikaran Abhiyan v. Union of India (2017): This case dealt with the rejuvenation of the Yamuna River and led to the NGT issuing directions to clean and restore the river, including measures to prevent encroachments and pollution.
  • M.C. Mehta v. Union of India (2017): The NGT banned the use of disposable plastic in Delhi and the National Capital Region (NCR) and directed authorities to take steps to prevent the use and sale of such plastic.
  • Shailesh Singh v. Hotel Holiday Regency (2019): In this case, the NGT imposed heavy fines on a hotel in Shimla, Himachal Pradesh, for causing air pollution by running diesel generators without proper emission control measures.
  • Subhash Chandran vs. Tamil Nadu Pollution Control Board (2020): This judgment highlighted the importance of safeguarding coastal areas and wetlands from unauthorized construction and development activities, emphasizing the need for stringent environmental norms.
  • In Re: Report by Comptroller and Auditor General of India (2021): The NGT directed the formulation of guidelines for the regulation of groundwater extraction and management to prevent overexploitation and depletion.

5. What is a dissolved oxygen level?

  • Dissolved oxygen (DO) level refers to the concentration of oxygen gas (O2) that is dissolved in a liquid, typically water.
  • It is a crucial parameter in aquatic ecosystems as it directly affects the survival and well-being of aquatic organisms.
  • In natural water bodies like lakes, rivers, and oceans, oxygen dissolves from the atmosphere through processes such as diffusion and aeration.
  • Aquatic plants, algae, and phytoplankton also contribute to the production of oxygen through photosynthesis. However, the level of dissolved oxygen can fluctuate based on various factors, including temperature, altitude, water flow, pollution, and organic matter decomposition.
  • Dissolved oxygen is essential for aquatic organisms because they rely on it for their respiration process, similar to how animals breathe oxygen from the air.
  • Insufficient levels of dissolved oxygen can lead to hypoxia, a condition where organisms are deprived of the oxygen they need to survive. This can result in stress, reduced growth, reproductive issues, and even mortality in aquatic species.

Different species of aquatic organisms have varying tolerance levels for dissolved oxygen. For example:

  • Fish and other aquatic animals often require dissolved oxygen levels between 4 to 6 milligrams per liter (mg/L) to thrive.
  • Some species of fish, insects, and other aquatic organisms can tolerate lower levels of dissolved oxygen, even below 2 mg/L, while others require higher concentrations.

6. What are chemical oxygen demand and biological oxygen demand?

Chemical Oxygen Demand (COD):

  • COD is a measure of the amount of oxygen required to chemically oxidize and break down organic and inorganic substances present in water.
  • It provides an indication of the total amount of pollutants that can be chemically oxidized by a strong oxidizing agent. COD is expressed in milligrams per liter (mg/L) of oxygen consumed.
  • COD is useful in assessing the overall pollution load in a water sample, including both biodegradable and non-biodegradable substances.
  • It is commonly used for industrial wastewater monitoring, as it provides a rapid estimation of the organic content and potential pollution levels. However, COD does not differentiate between different types of pollutants or indicate the potential impact on aquatic life.

Biological Oxygen Demand (BOD):

  • BOD measures the amount of dissolved oxygen consumed by microorganisms (bacteria) during the biological degradation of organic matter in water.
  • It is a key indicator of the level of biodegradable organic pollutants present in water. BOD is expressed in milligrams per liter (mg/L) of oxygen consumed over a specific time period, usually 5 days (BODâ‚…).
  • BOD is particularly important in assessing the impact of organic pollution on aquatic ecosystems.
  • High BOD levels indicate that a water body may have a significant amount of organic pollutants, which can lead to oxygen depletion as microorganisms break down the organic matter. This oxygen depletion, known as hypoxia, can harm aquatic organisms and disrupt the ecological balance of the water body.

Comparing BOD and COD:

  • BOD primarily measures the biologically degradable organic matter and provides information about the potential impact on aquatic life.
  • COD measures both biologically and chemically degradable pollutants, giving an indication of the overall pollution load and oxygen demand.
  • BOD is a more specific and ecologically relevant parameter, but it takes longer to determine (5 days), while COD can be measured more quickly.
For Prelims: National Green Tribunal (NGT), National Green Tribunal Act, of  2010, Dissolved oxygen (DO), Chemical Oxygen demand (COD), and Biological Oxygen Demand (BOD).
For Mains: 1. Discuss the significance of Chemical Oxygen Demand (COD) and Biological Oxygen Demand (BOD) as critical indicators for assessing water pollution and quality. (250 Words)
 

Previous year Question

1. How is the National Green Tribunal (NGT) different from the Central Pollution Control Board (CPCB)? (UPSC 2018)
1. The NGT has been established by an Act whereas the CPCB has been created by the executive order of the Government.
2. The NGT provides environmental justice and helps reduce the burden of litigation in the higher courts whereas the CPCB promotes cleanliness of streams and wells, and aims to improve the quality of air in the country.
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: B
 
2. The National Green Tribunal Act, 2010 was enacted in consonance with which of the following provisions of the Constitution of India? (UPSC 2012)
1. Right of a healthy environment, construed as a part of the Right to life under Article 21
2. Provision of grants for raising the level of administration in the Scheduled Areas for the welfare of Scheduled Tribes under Article 275(1)
3. Powers and functions of Gram Sabha as mentioned under Article 243(A)
Select the correct answer using the codes given below:
A. 1 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A
Source: The Indian Express
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