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DAILY CURRENT AFFAIRS, 29 JULY 2025

INDEX OF INDUSTRIAL PRODUCTION (IIP)

 

1. Context

Data on the Index of Industrial Production (IIP), released by the Ministry of Commerce and Industry, showed the index last witnessed worse growth numbers in August 2024. The mining and quarrying sector contracted 8.7% in June 2025, its worst performance since August 2020. The manufacturing sector grew at a 5-month high of 3.9% in June 2025.

2. About the Index of Industrial Production (IIP)

  • The Index of Industrial Production (IIP) is a macroeconomic indicator that measures the changes in the volume of production of a basket of industrial goods over some time.
  • It is a composite index that reflects the performance of the industrial sector of an economy.
  • The IIP is compiled and released by the Central Statistical Organisation (CSO) in India.
  • The IIP is calculated using a Laspeyres index formula, which means that the weights assigned to different industries are based on their relative importance in a base year. The current base year for the IIP is 2011-12.
  • The eight core sector industries represent about 40% of the weight of items that are included in the IIP.
  • The eight core industries are Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement and Fertilizers.
  • It covers 407 item groups included into 3 categories viz. Manufacturing, Mining and Electricity.
  • The IIP is a useful tool for assessing the health of the industrial sector and the overall economy.
  • It is used by policymakers, businesses, and investors to track trends in industrial production and make informed decisions.

3. Significance of IIP

The IIP is a significant economic indicator that provides insights into the following aspects

  • The IIP reflects the growth or decline of the industrial sector, which is a major contributor to overall economic growth.
  • The IIP measures the level of industrial activity, indicating the production volume of various industries.
  • The IIP serves as a guide for policymakers to assess the effectiveness of economic policies and make informed decisions.
  • Businesses use the IIP to assess market conditions, make production plans, and evaluate investment opportunities.
  • The IIP influences investor sentiment as it reflects the overall health of the industrial sector.

4. Service Sector and IIP

  • The IIP does not include the service sector. It focuses on the production of goods in the industrial sector, such as manufacturing, mining, and electricity.
  • The service sector is measured by a separate index, the Index of Services Production (ISP).
  • The IIP data is released monthly by the Central Statistical Organisation (CSO) in India.
  • The data is released with a lag of six weeks, allowing for the collection and compilation of information from various industries.

5. Users of IIP Data

The IIP data is used by a wide range of stakeholders, including:

  • Government agencies and central banks use the IIP to assess economic conditions and formulate policies.
  • Companies use the IIP to evaluate market trends, make production decisions, and assess investment opportunities.
  • Investors use the IIP to gauge the health of the industrial sector and make investment decisions.
  • Economic analysts and researchers use the IIP to study economic trends and develop forecasts.
  • The IIP is widely reported in the media and is of interest to the general public as an indicator of economic performance.

6. Manufacturing Drives Industrial Production Growth

  • Factory output gained on the back of a 9.3 per cent increase in manufacturing, which accounts for 77.6 per cent of the weight of the IIP (Index of Industrial Production).
  • Manufacturing output had grown by 5 per cent in July and had contracted by 0.5 per cent in August 2022.
  • In absolute terms, it improved to 143.5 in August from 141.8 in July and 131.3 in the year-ago period.
  • As per the IIP data, seven of the 23 sectors in manufacturing registered a contraction in August, with furniture, apparel, and computer and electronics among the significant non-performers.
  • Among the performing sectors, fabricated metal products, electrical equipment and basic metals fared better.
  • Garments and chemicals witnessed negative growth. This can be attributed to lower growth in exports as these two are export-dependent.
  • The electronics industry also witnessed negative growth, which again can be linked to existing high stocks and lower export demand.
  • In terms of the use-based industries, consumer durables output returned to positive territory for the second time this fiscal with 5.7 per cent growth in August, reflecting a pickup in consumption demand.
  • However, it came on the back of a 4.4 per cent contraction in consumer durables output in the year-ago period.
  • Primary, infrastructure/ construction, and capital goods recorded double-digit growth rates in August at 12.4 per cent, 14.9 per cent and 12.6 per cent, respectively.
 
For Prelims: The Index of Industrial Production (IIP), Central Statistical Organisation, 
For Mains: 
1. Discuss the significance of the Index of Industrial Production (IIP) as an economic indicator and its role in assessing the health of the industrial sector and the overall economy. (250 Words)
 
 
 Previous Year Questions
 
1. In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries? (UPSC CSE 2012)
1. Cement
2. Fertilizers
3. Natural gas
4. Refinery products
5. Textiles
Select the correct answer using the codes given below:
A. 1 and 5 only       B. 2, 3 and 4 only           C. 1, 2, 3 and 4 only         D. 1, 2, 3, 4 and 5
 
Answer: C
 
 
Source: indianexpress
 
 

PRESIDENTIAL REFERENCE

 
 
 
1. Context
 
The States of Tamil Nadu and Kerala urged the Supreme Court on Monday to dismiss the Presidential Reference seeking clarity on whether judiciary can fix timelines for the President and the Governors to clear State Bills, saying it is a ruse to make the top court sit in appeal of its own authoritative pronouncement in the Tamil Nadu Governor case.
 
2. Historical context of presidential reference
 

The Supreme Court's advisory role, as outlined in Article 143, traces its origins to the Government of India Act of 1935. This act granted the Governor-General the authority to seek the opinion of the federal court on significant legal matters.

A comparable feature exists in the Canadian Constitution, where the Supreme Court of Canada is empowered to give advisory opinions on legal issues referred by either the federal or provincial governments. In contrast, the U.S. Supreme Court has consistently refused to issue advisory opinions to the executive branch, adhering strictly to the principle of separation of powers embedded in the American Constitution

Under Article 143 of the Constitution, the President has the authority to seek the Supreme Court’s opinion on any legal or factual issue deemed to be of public significance. This referral is made based on the advice of the Union Council of Ministers. According to Article 145, such matters must be examined by a bench comprising at least five judges of the Supreme Court.

Following the hearing, the Court may deliver its opinion as it deems appropriate. While the opinion is not legally binding on the President and does not set a judicial precedent, it holds considerable persuasive value. Consequently, it is generally respected and adhered to by both the executive and the judiciary

3. Past instances

 

  • Since 1950, approximately fifteen presidential references have been made to the Supreme Court, excluding the most recent one. Below are brief summaries of some notable opinions delivered by the Court in response to these references.
  • The first such reference came in the Delhi Laws Act case (1951), where the Court outlined the concept of delegated legislation, allowing the legislature to delegate certain law-making powers to the executive for efficient law implementation.
  • In the Kerala Education Bill case (1958), the Court established the principle of harmonious interpretation between Fundamental Rights and the Directive Principles of State Policy, while also clarifying the constitutional safeguards for minority-run educational institutions under Article 30.
  • In the Berubari Union case (1960), the Court held that any transfer or acquisition of Indian territory requires a constitutional amendment as per Article 368. The Keshav Singh case (1965) addressed the scope of legislative powers and privileges.
  • In the Presidential Election case (1974), the Court ruled that elections for the President must proceed even if there are vacancies in the electoral college due to the dissolution of state assemblies.
  • The Special Courts Bill reference (1978) was particularly important, as the Court clarified that it can choose not to respond to a reference, that the questions posed must be clear and precise, and that the judiciary must not intrude into Parliament's domain when giving its opinion.
  • The Third Judges case (1998) resulted in a comprehensive set of guidelines shaping the collegium system for appointing judges to the higher judiciary.
  • Although the Supreme Court is not bound to respond to every reference, it has declined to provide an opinion on only one occasion — in 1993, concerning the Ram Janmabhoomi dispute

 

 4. Current reference

 

  • The current presidential reference stems from a recent Supreme Court ruling that established specific timelines for the President and State Governors to act on Bills passed by State legislatures.
  • In that judgment, the Court also asserted that the decisions made by the President and Governors regarding such Bills are open to judicial scrutiny. This reference has posed 14 key questions, mainly focusing on the interpretation of Articles 200 and 201 of the Constitution.
  • The central government has raised concerns about whether courts can impose timelines when the Constitution itself does not prescribe any. It also questions whether the actions of the President and Governors, taken before a Bill becomes law, can be subjected to judicial review. Additionally, the reference seeks clarity on the scope of the Supreme Court’s powers under Article 142.
  • This legal dispute has largely been driven by political tensions between the Union government and Opposition-led State governments. In its judgment, the Supreme Court had referred to the timelines mentioned in a Ministry of Home Affairs Office Memorandum concerning the President's assent to Bills.
  • Notably, in the Cauvery dispute reference (1992), the Court had stated that, in an advisory capacity, it does not have the authority to review its previous rulings.
  • Nevertheless, a definitive opinion in the present case is expected to bring clarity to important constitutional questions, thereby aiding in the effective functioning of federalism and democratic governance
 
5. Way Forward
 
The advisory jurisdiction of the Supreme Court under Article 143 plays a vital role in clarifying complex constitutional questions and ensuring the smooth functioning of India's democratic framework. While not binding, the Court’s opinions carry significant persuasive authority and are generally respected by both the executive and judiciary. Historical references, from the Delhi Laws Act case to the Third Judges case, have helped shape important legal doctrines on delegated legislation, federalism, judicial appointments, and legislative privileges
 
For Prelims: Article 143, Supreme Court's advisory jurisdiction
 
For Mains: General Studies II - Indian Polity & Governance
 
 
 
Previous Year Questions
 
Prelims

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

Answer: D

2. With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following? (UPSC CSE 2019)
(a) The decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.

(b) The Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.
(c) In the event of a grave financial crisis in the country, the President of India can declare a Financial Emergency without the counsel from the Cabinet.
(d) State Legislatures cannot make laws on certain matters without the concurrence of the Union Legislature.

Answer: B

3. 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
 
4. Consider the following statements about Electoral Bond Scheme 2018: (RPSC RAS Prelims 2018)
(A) The aim of this scheme is to bring about transparency in the funding process of political parties.
(B) Only the political parties recognized by the Election Commission which secured not less than one per cent of the votes polled in the last general election to the House of People or the Legislative Assembly of the State shall be eligible to receive the Electoral Bonds.
(C) Electoral Bonds shall be valid for fifteen calendar days from the date of issue.
(D) The Electoral Bond deposited by an eligible political party in its account shall be credited on the same day.
Which of the above statements are correct?
1.  Only (A) and (B)     
2.  (A), (B), (C) and (D)
3. Only (B), (C) and (D)
4. Only (A), (C) and (D)
Answer: 2
 
5. With reference to the PM CARES Fund, consider the following statements: (AFCAT 27 2022)
I. The amount collected by it directly goes to the Consolidated Fund of India.
II. It can avail donations from the foreign contribution and donations to fund can also avail 100% tax exemption.
Which of the above statements is/are correct?
A. I only            B. II only           C. Both I and II        D. Neither I nor II
 
Answer: B
 
6. The Prime Minister's National Relief Fund is operated by which one of the following bodies?  (CDS 2019)
A. The Prime Minister's Office (PMO)
B. The National Disaster Management Authority
C. The Ministry of Finance
D. The National Development Council (NDC)
Answer: A

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)

2. Discuss the role of the Election Commission of India in the light of the evolution of the Model Code of Conduct. ( UPSC 2022)

 
Source: The Hindu
 

NISAR

1. Context 

The Indian Space Research Organisation (ISRO) is planning to launch the NISAR satellite from Sriharikota on July 30 onboard a GSLV Mk-II rocket. ‘NISAR’ stands for NASA-ISRO Synthetic Aperture Radar and is a joint mission of the two space agencies. It is a sophisticated earth-observation satellite designed to study changes on the earth’s surface in fine detail, covering earthquakes, volcanoes, ecosystems, ice sheets, farmland, floods, and landslides

2. Necessity of NISAR

  • NISAR marks a significant milestone as the first large-scale Earth observation mission to use dual-frequency radar technology.
  • This capability enables it to detect ground changes with unmatched precision, regardless of whether it's day or night, and in all weather conditions—including through clouds, smoke, or dense vegetation.
  • Weighing about three tonnes and costing over $1.5 billion, NISAR ranks among the most expensive Earth-monitoring satellites ever launched.
  • The Earth’s landscape is constantly undergoing transformation due to natural phenomena, human interventions, and climate variations. Observing these changes from space provides essential insights for scientists, policymakers, and emergency response teams.
  • In response to this need, NASA and ISRO have joined forces on a mission that not only serves global monitoring goals but also ensures ISRO has reliable access to high-resolution data customized for Indian requirements.
  • The mission targets six key scientific and practical domains: geophysical processes of the solid Earth, ecosystem dynamics, glacial and ice-sheet monitoring, coastal and marine systems, disaster management, and a variety of other applications such as monitoring groundwater levels, oil deposits, and infrastructure like dams and levees.
  • Although the mission is officially planned to last three years, it has been engineered for a minimum lifespan of five years. Importantly, its open-data policy ensures that most of the data captured by NISAR will be made publicly available within hours of collection

3. How does NISAR work?

  • Once launched, NISAR will be positioned in a sun-synchronous polar orbit, circling the Earth at an altitude of 747 kilometers with an orbital inclination of 98.4º. Unlike conventional satellites that capture images, NISAR will utilize synthetic aperture radar (SAR) technology, which sends radar pulses toward the Earth's surface and then measures the return time and phase shift of the reflected signals.
  • The resolution of radar imaging improves with larger antenna sizes—known as aperture—but deploying physically large antennas in space is unfeasible. SAR overcomes this limitation by simulating a large antenna.
  • As the satellite advances in its orbit, it emits repeated radar pulses and collects their echoes, which are later processed to reconstruct an image as if a giant antenna had captured them all at once—thus earning the term "synthetic aperture."
  • NISAR will feature two radar systems: an L-band SAR operating at 1.257 GHz that penetrates vegetation and soil layers to detect subsurface changes and land deformations, and an S-band SAR at 3.2 GHz designed for observing finer surface details such as vegetation types and water bodies.
  • Globally, the satellite will mainly operate using the L-band radar, which aligns with NASA’s scientific objectives. However, over India, ISRO will routinely utilize the S-band radar for targeted observations.
  • These S-band acquisitions are tailored to India's specific needs, such as biomass estimation, soil moisture monitoring, and filtering out ionospheric interference, which are crucial for sectors like agriculture, forestry, and disaster response.
  • Both space agencies aim to coordinate radar operations efficiently so that simultaneous use of both radars is possible over the Indian subcontinent, reducing data conflicts.
  • In radar systems, polarisation refers to the orientation of the electric field in the radar wave. SAR can both send and receive horizontally or vertically polarised signals. Using various combinations of these allows NISAR to distinguish between different surface compositions such as snow, soil, crops, or forests.
  • NISAR’s radar system will cover a wide area with a swath width of 240 km, thanks to a SweepSAR design. This approach uses a beam transmission system that, upon signal return, employs multiple smaller apertures that steer electronically to create scanning beams sweeping across the satellite’s ground path.
  • This scan-on-receive method enables large-area coverage without sacrificing image clarity.
  • The mission will deliver spatial resolutions ranging from 3 to 10 meters and vertical accuracy down to a few centimeters. This high level of detail is suitable for tracking urban land subsidence or other subtle ground movements. Each point on the Earth’s surface will be revisited every 12 days.
  • NISAR is equipped with a massive 12-meter-wide mesh reflector antenna, enabling it to generate annual biomass maps at a resolution of 1 hectare and quarterly maps distinguishing between cultivated and fallow farmland.
  • It will also provide detailed floodplain maps and, in emergencies, can generate ‘damage proxy maps’ within five hours of data capture.
  • However, there are some limitations. Due to the satellite’s orbital geometry, certain data acquisition modes may not achieve full global coverage. At latitudes above 60º, NISAR will skip every other observation due to overlapping orbits.
  • Furthermore, around 10% of Earth’s surface may not be covered from both ascending and descending passes within a given 12-day cycle
Another important component of the satellite is its large 39-foot stationary antenna reflector.
Made of a gold-plated wire mesh, the reflector will be used to focus " the radar signals emitted and received by the upward-facing feed on the instrument structure".

 

 
 
4. How was NISAR built?
 
  • When NASA and ISRO agreed to collaborate on the NISAR project, both agencies committed to contributing equally in terms of funding, technology, and expertise.
  • ISRO was responsible for providing the I-3K satellite bus — the core spacecraft framework that handles system commands, propulsion, orientation, and includes solar panels capable of generating 4 kW of power.
  • In addition, ISRO delivered the complete S-band radar electronics system, a high-speed Ka-band communication unit, and a steerable high-gain antenna. The development of the S-band radar components was carried out at the Space Applications Centre in Ahmedabad.
  • On the other hand, NASA’s primary input was the L-band synthetic aperture radar system. This was developed at the Jet Propulsion Laboratory (JPL), which supplied all related radio-frequency components, a 12-meter radar antenna, a 9-meter carbon fiber boom, and the structural assembly that supports both radar units.
  • NASA also provided the L-band feed array and avionics systems, including a solid-state recorder with large data capacity, a GPS system, autonomous data management tools, and a Ka-band communication unit.
  • After integration of the radar payloads at JPL, the spacecraft was sent to ISRO’s Satellite Centre in Bengaluru for final assembly. Once fully tested, NISAR will be launched aboard ISRO’s GSLV Mk-II rocket from the spaceport in Sriharikota, with ISRO overseeing the entire launch sequence.
  • While the overall mission will be coordinated through NASA's Mission Operations Center at JPL, routine flight control and monitoring will be managed by ISRO’s Telemetry, Tracking and Command Network (ISTRAC) in Bengaluru.
  • After deployment into orbit, the bulk of the mission’s data—approximately 3 terabytes daily—will be transmitted through NASA’s Near Earth Network ground stations located in Alaska, Norway’s Svalbard, and Punta Arenas in Chile.
  • These facilities will work in conjunction with ISRO’s data reception stations in Shadnagar and Antarctica. Once the raw data are received, India’s National Remote Sensing Centre (NRSC) will process and distribute mission outputs tailored for Indian applications, in a workflow that parallels NASA’s global data distribution system

5. The Mission

  • Once launched into space, NISAR will observe subtle changes in Earth's surfaces, helping researchers better understand the causes and consequences of such phenomena.
  • It will spot warning signs of natural disasters, such as volcanic eruptions, earthquakes and landslides.
  • The satellite will also measure groundwater levels, track flow rates of glaciers and ice sheets and monitor the planet's forest and agricultural regions, which can improve our understanding of carbon exchange.
By using synthetic aperture radar (SAR), NISAR will produce high-resolution images.
SAR is capable of penetrating clouds and can collect data day and night regardless of the weather conditions. The instrument's imaging Swath the width of the strip of data collected along the length of the orbit track is greater than 150 miles (240 kilometres), which allows it to image the entire Earth in 12 days.
 
  • NISAR is expected to be launched in January 2024 from Satish Dhawan Space Centre into a near-polar orbit.
  • The satellite will operate for a minimum of three years.
  • NASA requires the L-band radar for its global science operations for at least three years.
  • Meanwhile, ISRO will utilise the S-band radar for a minimum of five years.

For Prelims & Mains

For Prelims:  NISAR (NASA-ISRO Synthetic Aperture Radar), Satish Dhawan Space Centre,  Earth-observation satellite, Jet Propulsion Laboratory, L-band and S-band synthetic aperture radar, GPS, GSLV launch system and spacecraft, 
For Mains:
1. What is NISAR and Explain its benefits (250 Words)
 
Source: The Hindu
 
 

RENEWABLE ENERGY

 

 

1. Context

THE WORLD added about 582 gigawatts (GW) of renewable energy capacity in 2024, representing an increase of 15% over the previous year, according to a new report by the International Renewable Energy Association (IRENA). This was the largest annual increase in renewable energy capacity in any single year.

2. Why use Renewable energy

  • Today we primarily use fossil fuels to heat and power our homes and fuel our cars. 
  • It’s convenient to use coal, oil, and natural gas for meeting our energy needs, but we have a limited supply of these fuels on Earth. 
  • We’re using them much more rapidly than they are being created. Eventually, they will run out. 
  • And because of safety concerns and waste disposal problems, the United States will retire much of its nuclear capacity by 2020. 
  • In the meantime, the nation’s energy needs are expected to grow by 33 per cent during the next 20 years. 
  • Renewable energy can help fill the gap
  • Even if we had an unlimited supply of fossil fuels, using renewable energy is better for the environment. 
  • We often call renewable energy technologies “clean” or “green” because they produce few if any pollutants. 
  • Burning fossil fuels, however, sends greenhouse gases into the atmosphere, trapping the sun’s heat and contributing to global warming. 
  • Climate scientists generally agree that the Earth’s average temperature has risen in the past century. 
  • If this trend continues, sea levels will rise, and scientists predict that floods, heat waves, droughts, and other extreme weather conditions could occur more often. 
  • Other pollutants are released into the air, soil, and water when fossil fuels are burned. 
  • These pollutants take a dramatic toll on the environment—and humans. 
  • Air pollution contributes to diseases like asthma. 
  • Acid rain from sulfur dioxide and nitrogen oxides harms plants and fish. Nitrogen oxides also contribute to smog.
  • Renewable energy will also help us develop energy independence and security. 
  • Replacing some of our petroleum with fuels made from plant matter, for example, could save money and strengthen our energy security. 
  • Renewable energy is plentiful, and the technologies are improving all the time. 
  • There are many ways to use renewable energy. 
  • Most of us already use renewable energy in our daily lives.
 

2.1.Hydropower 

  • Hydropower is our most mature and largest source of renewable power, producing about 10 per cent of the nation’s electricity. 
  • Existing hydropower capacity is about 77,000 megawatts (MW). Hydropower plants convert the energy in flowing water into electricity. 
  • The most common form of hydropower uses a dam on a river to retain a large reservoir of water. Water is released through turbines to generate power.
  •  “Run of the river” systems, however, divert water from the river and direct it through a pipeline to a turbine. 
  • Hydropower plants produce no air emissions but can affect water quality and wildlife habitats. 
 

2.2.Bioenergy 

  • Bioenergy is the energy derived from biomass (organic matter), such as plants. If you’ve ever burned wood in a fireplace or campfire, you’ve used bioenergy. 
  • But we don’t get all of our biomass resources directly from trees or other plants. 
  • Many industries, such as those involved in construction or the processing of agricultural products, can create large quantities of unused or residual biomass, which can serve as a bioenergy source. 
 

2.3.Geothermal Energy 

  • The Earth’s core, 4,000 miles below the surface, can reach temperatures of 9000° F. 
  • This heat—geothermal energy—flows outward from the core, heating the surrounding area, which can form underground reservoirs of hot water and steam. 
  • These reservoirs can be tapped for a variety of uses, such as to generate electricity or heat buildings. 
  • By using geothermal heat pumps (GHPs), we can even take advantage of the shallow ground’s stable temperature for heating and cooling buildings. 
 

2.4.Solar Energy 

  • Solar technologies tap directly into the infinite power of the sun and use that energy to produce heat, light, and power.
 

2.5. Wind Energy 

  • For hundreds of years, people have used windmills to harness the wind’s energy. 
  • Today’s wind turbines, which operate differently from windmills, are a much more efficient technology. 
  • Wind turbine technology may look simple: the wind spins turbine blades around a central hub; the hub is connected to a shaft, which powers a generator to make electricity. 
  • However, turbines are highly sophisticated power systems that capture the wind’s energy using new blade designs or airfoils. 
  • Modern, mechanical drive systems, combined with advanced generators, convert that energy into electricity. 
  • Wind turbines that provide electricity to the utility grid range in size from 50 kW to 6 
  • Wind energy has been the fastest growing source of energy since 1990.
 

2.6.Ocean Energy 

  • The ocean can produce two types of energy: thermal energy from the sun’s heat, and mechanical energy from the tides and waves. 
  • Ocean thermal energy can be used for many applications, including electricity generation. 
  • Electricity conversion systems use either the warm surface water or boil the seawater to turn a turbine, which activates a generator. 
  • The electricity conversion of both tidal and wave energy usually involves mechanical devices. 
  • A dam is typically used to convert tidal energy into electricity by forcing the water through turbines and activating a generator. 
  • Meanwhile, wave energy uses mechanical power to directly activate a generator or to transfer to a working fluid, water, or air, which then drives a turbine/generator.

2.7.Hydrogen 

  • Hydrogen is high in energy, yet its use as a fuel produces water as the only emission. 
  • Hydrogen is the universe’s most abundant element and also its simplest. 
  • A hydrogen atom consists of only one proton and one electron. 
  • Despite its abundance and simplicity, it doesn’t occur naturally as a gas on the Earth. 
  • Today, industry produces more than 4 trillion cubic feet of hydrogen annually. 
  • Most of this hydrogen is produced through a process called reforming, which involves the application of heat to separate hydrogen from carbon. Researchers are developing highly efficient, advanced reformers to produce hydrogen from natural gas for what’s called Proton Exchange Membrane fuel cells.
 

3. Steps were taken by the government to promote Renewable energy

The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020.

 

3.1.Distribution of prominent renewable energy Hubs

  • Rajasthan
  • Gujarat
  • Andhra Pradesh
  • Karnataka
  • Telangana
  • Tamil Nadu

3.2.Steps taken

  • Permitting Foreign Direct Investment (FDI) up to 100 per cent under the automatic route,
  • Waiver of Inter-State Transmission System (ISTS) charges for inter-state sale of solar and wind power for projects to be commissioned by 30th June 2025,
  • Declaration of trajectory for Renewable Purchase Obligation (RPO) up to the year 2022,
  • Setting up of Ultra Mega Renewable Energy Parks to provide land and transmission to RE developers on a plug-and-play basis,
  • Schemes such as Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), Solar Rooftop Phase II, 12000 MW CPSU Scheme Phase II, etc,
  • Laying of new transmission lines and creating new sub-station capacity under the Green Energy Corridor Scheme for evacuation of renewable power,
  • Setting up of Project Development Cell for attracting and facilitating investments,
  • Standard Bidding Guidelines for tariff-based competitive bidding process for procurement of Power from Grid Connected Solar PV and Wind Projects.
4. Employment Generation
 
  • Deployment of large-scale renewable energy (RE) has the potential to create numerous employment opportunities in rural India in the coming decades. By 2030, it is projected that the clean-energy sectors could provide jobs for around one million individuals in the country.
  • However, the expansion of RE may have significant impacts on communities reliant on the land, involving changes in land use, modifications to ecosystems, shifts in livelihoods, and overall effects on land productivity.
  • As India progresses in scaling up RE, striking a balance between these interests may result in project commissioning delays, contributing to a waning interest among developers in RE tenders.
  • In 2020, wind developers, facing setbacks such as delays in land allocation, sought to terminate power-purchase agreements for approximately 565 MW wind capacity signed with the Solar Energy Corporation of India (SECI), prompting a decline in developers' enthusiasm for RE projects. Commissioning delays not only pose substantial financial risks but also jeopardize the reputation of RE developers.
  • In the pursuit of responsible RE deployment and the enhancement of communities in and around project sites, many developers actively support local development activities and community-led programs through corporate social responsibility (CSR) initiatives.
  • As an illustration, Tata Power Solar has established integrated vocational training programs for women and youth in multiple project sites.
  • Given the pivotal role of project developers in interacting with communities during land acquisition, construction, and operational phases, they play a crucial role in driving responsible practices. Additionally, regulators and investors prioritize assessing the responsible practices of new projects.
  • To encourage all developers to contribute to the rapidly growing RE ecosystem and promote responsible practices, two essential prerequisites need to be addressed
5. Way forward
 
The push for responsible energy is not to create new barriers for developers but is with the benefit of hindsight, that energy projects have externalities that must be addressed at the outset before they become entrenched. Responsible RE will strengthen the renewable ecosystem in India, and address roadblocks in siting, public acceptance and find the right synergy between energy security, society and the environment
 
 
 
Source: The Hindu
 
 

CARBON BORDER ADJUSTMENT MECHANISM (CBAM)

 

1. Context

India’s efforts to secure a concession for its small and medium enterprises under the UK’s Carbon Border Adjustment Mechanism (CBAM) did not materialise, as the text of the India-UK Free Trade Agreement (FTA) released on Thursday made no mention of a resolution on the contentious issue.

2. What is a carbon trading platform?

A carbon trading platform, also known as a carbon market or emissions trading platform, is a financial marketplace where organizations and entities can buy and sell carbon credits or emissions allowances. The primary goal of carbon trading platforms is to reduce greenhouse gas emissions and combat climate change by creating economic incentives for entities to reduce their carbon emissions.

Here's how a carbon trading platform typically works:

  • Emissions Allowances: Governments or regulatory bodies set an overall cap on the total amount of greenhouse gas emissions that are allowed within a specific jurisdiction or sector. This cap is typically established to limit emissions and reduce environmental impact.
  • Allocation of Allowances: Under the cap-and-trade system, emissions allowances are distributed or allocated to participating entities, often based on historical emissions or other criteria. These allowances represent the right to emit a specific amount of greenhouse gases.
  • Buying and Selling: Entities that emit fewer greenhouse gases than their allocated allowances can sell their excess allowances to those who exceed their allocated limits. This creates a market for emissions allowances.
  • Carbon Credits: In addition to emissions allowances, carbon trading platforms may also involve the trading of carbon credits. Carbon credits are typically generated by activities that result in emissions reductions or removals, such as reforestation, renewable energy projects, or energy efficiency initiatives. These credits can be sold to entities looking to offset their emissions.
  • Price Determination: The price of emissions allowances or carbon credits is determined by supply and demand in the carbon market. As emissions reduction targets become stricter or as entities seek to voluntarily reduce their carbon footprint, the price of carbon credits can fluctuate.
  • Compliance and Offset: Some carbon trading platforms are mandatory and designed to help entities comply with government emissions reduction targets or regulations. Others are voluntary and allow organizations to offset their emissions voluntarily.
  • Transparency and Verification: To ensure the integrity of the carbon market, transactions are often subject to rigorous monitoring, reporting, and verification processes. Independent third parties may verify emissions reductions and the validity of carbon credits.
  • Environmental Benefits: Carbon trading platforms aim to incentivize emissions reductions, promote the transition to cleaner technologies, and fund projects that have positive environmental impacts.

One of the most well-known carbon trading platforms is the European Union Emissions Trading System (EU ETS), which operates in the European Union and covers various industries, including energy production, manufacturing, and aviation. Other countries and regions have also established their own carbon trading systems to address emissions reduction goals.

Overall, carbon trading platforms play a crucial role in the global effort to combat climate change by putting a price on carbon emissions and encouraging businesses and governments to reduce their environmental impact.

3. What are Carbon Credits?

Carbon credits, also known as carbon offsets or emission reduction credits, are a key component of carbon trading and cap-and-trade systems aimed at mitigating climate change. They represent a measurable reduction in greenhouse gas emissions or the removal of carbon dioxide (CO2) equivalent from the atmosphere. Carbon credits are typically measured in metric tons of CO2 or its equivalent in other greenhouse gases, such as methane (CH4) or nitrous oxide (N2O).

Here's how carbon credits work:

  • Emission Reduction or Removal: Carbon credits are generated through activities or projects that either reduce greenhouse gas emissions (e.g., by using cleaner energy sources or improving energy efficiency) or remove carbon dioxide from the atmosphere (e.g., through reforestation or afforestation projects).
  • Measurement and Verification: The reduction or removal of emissions must be accurately measured and verified according to established standards and methodologies. Independent third-party organizations often perform this verification to ensure the credibility of the carbon credits.
  • Issuance: Once the emissions reduction or removal has been verified, carbon credits are issued. Each carbon credit represents one metric ton of CO2 or its equivalent that has been prevented from entering the atmosphere or removed from it.
  • Trading and Sale: Carbon credits can be bought and sold on carbon markets or through specialized trading platforms. Entities that have exceeded their emissions limits or wish to voluntarily offset their emissions can purchase these credits to compensate for their own emissions.
  • Compliance and Voluntary Markets: Carbon credits serve different purposes in different markets. In compliance markets, entities purchase credits to comply with emissions reduction regulations or obligations set by governments or regulatory bodies. In voluntary markets, organizations and individuals purchase credits as a means of voluntarily offsetting their carbon footprint.
  • Environmental Benefits: The purchase of carbon credits helps fund emissions reduction projects and activities that have positive environmental and climate benefits. These may include renewable energy projects, energy efficiency initiatives, afforestation, reforestation, methane capture from landfills, and more.
  • Additionality: One key principle in carbon credit generation is "additionality," which means that the emissions reductions or removals achieved by a project must be above and beyond what would have occurred in the absence of the project. This ensures that credits represent real and additional climate action.
  • Sustainability and Co-Benefits: Many carbon credit projects are designed not only to reduce emissions but also to provide social, economic, or environmental co-benefits to local communities, such as job creation, biodiversity conservation, or improved air and water quality.

It's important to note that the carbon credit market is subject to various standards and regulations to maintain transparency, integrity, and credibility. Independent organizations and registries play a role in verifying and tracking the issuance and retirement of carbon credits to prevent double counting and ensure that the emissions reductions are genuine.

Carbon credits are a tool for addressing climate change by incentivizing emissions reductions and supporting projects that contribute to a more sustainable and low-carbon future. They are used by governments, businesses, and individuals to take action against climate change and reduce their carbon footprint.

4. Carbon Trading and Carbon Credit

Carbon trading and carbon credits are closely related concepts within the broader framework of climate change mitigation strategies. They are instrumental in addressing the issue of greenhouse gas emissions and climate change. Here's a detailed explanation of both terms:

Carbon Trading:

  • Definition: Carbon trading, also known as emissions trading or cap-and-trade, is a market-based approach to reduce greenhouse gas emissions. It allows entities, such as companies or countries, to buy and sell emissions allowances, effectively putting a price on carbon emissions.
  • How It Works: Under a carbon trading system, a regulatory authority or government sets an overall cap on the total amount of greenhouse gas emissions allowed within a specific jurisdiction or sector. This cap is often progressively reduced over time to achieve emissions reduction targets.
  • Emissions Allowances: Entities subject to the cap are allocated a certain number of emissions allowances, which represent the right to emit a specific amount of greenhouse gases. These allowances are often distributed based on historical emissions, with the goal of gradually reducing emissions over time.
  • Trading of Allowances: Entities that emit less than their allocated allowances can sell their surplus allowances to entities that exceed their limits. This creates a market for emissions allowances, and the price of allowances is determined by supply and demand.
  • Compliance and Penalties: Entities are required to surrender a number of allowances equal to their actual emissions at the end of a compliance period. Failure to do so results in penalties. Entities that reduce emissions below their allowances can profit by selling their excess allowances.
  • Environmental Goals: Carbon trading aims to achieve emissions reduction goals cost-effectively by allowing entities to find the most efficient ways to reduce emissions, either by reducing emissions directly or by purchasing allowances from others.
  • Types of Markets: Carbon trading can occur in both compliance markets, where entities are legally obligated to participate, and voluntary markets, where entities choose to offset their emissions voluntarily.

Carbon Credits:

  • Definition: Carbon credits, also known as carbon offsets or emission reduction credits, represent a quantified reduction in greenhouse gas emissions or the removal of carbon dioxide (CO2) equivalent from the atmosphere.
  • Generation: Carbon credits are generated through specific activities or projects that reduce emissions or remove carbon from the atmosphere. These activities can include renewable energy projects, energy efficiency initiatives, reforestation, methane capture from landfills, and more.
  • Measurement and Verification: To ensure the credibility of carbon credits, the reduction or removal of emissions must be accurately measured and independently verified according to established standards and methodologies.
  • Sale and Use: Carbon credits can be bought and sold on carbon markets. Entities that wish to offset their emissions can purchase these credits to compensate for their own emissions, effectively balancing their carbon footprint.
  • Environmental Benefits: The purchase of carbon credits helps fund projects that have positive environmental and climate benefits. These projects contribute to emissions reduction, biodiversity conservation, sustainable development, and more

5. Difference between ‘Net Zero’ and ‘Carbon Neutral’

"Net Zero" and "Carbon Neutral" are related but distinct concepts in the context of addressing climate change and reducing greenhouse gas emissions. They both aim to achieve a balance between the amount of greenhouse gases emitted and the amount removed or offset, but they do so in slightly different ways. Here's the difference between the two terms:

Net Zero Carbon Neutral
  • Definition: Net zero, short for "net-zero emissions," refers to the state where the total greenhouse gas emissions produced are fully balanced by the removal of an equivalent amount of greenhouse gases from the atmosphere. In other words, the net effect of emissions is zero.
Definition: Carbon neutrality, also known as "climate neutrality" or "carbon neutrality," means that an entity (e.g., a company, event, or country) has balanced its carbon emissions with an equivalent amount of carbon emissions reductions or removals, typically within a specific timeframe.
Emissions Reduction: Achieving net zero requires a significant reduction in greenhouse gas emissions. Organizations, governments, or individuals commit to reducing their emissions as much as possible through various measures, such as transitioning to renewable energy, improving energy efficiency, and adopting sustainable practices. Scope: Carbon neutrality specifically focuses on balancing carbon dioxide (CO2) emissions. While other greenhouse gases may be considered, the primary emphasis is on achieving neutrality for CO2 emissions.
Carbon Removal: To reach net zero, any remaining emissions that cannot be eliminated through reduction measures are offset by activities that remove an equivalent amount of carbon dioxide from the atmosphere. This can include activities like afforestation (planting trees), reforestation, carbon capture and storage (CCS), and investment in carbon removal technologies. Achievement: Achieving carbon neutrality can be accomplished through a combination of emissions reduction measures (e.g., using renewable energy, improving energy efficiency) and purchasing carbon offsets or credits to compensate for any remaining emissions.
Scope: Net zero encompasses all greenhouse gases, not just carbon dioxide (CO2). It accounts for emissions of methane (CH4), nitrous oxide (N2O), and other greenhouse gases as well. Timeliness: Carbon neutrality can be achieved on an annual basis, and it may not necessarily involve a long-term commitment to zero emissions.
Long-Term Goal: Net zero is often seen as a long-term goal, with organizations and countries committing to achieve it by a specific target year, such as 2050. Application: Carbon neutrality is a term commonly used by businesses, events, and individuals to describe their efforts to reduce and offset carbon emissions. It is a practical approach for organizations looking to take immediate action to reduce their carbon footprint.
 
 
For Prelims: Carbon credits, carbon neutral, Carbon Border Adjustment Mechanism (CBAM), Net Zero’, ‘Carbon Neutral’, and the European Union Emissions Trading System (EU ETS).
For Mains: 1. Explain the concept of the Carbon Border Adjustment Tax (CBAT) and its objectives in the context of climate change mitigation. Discuss the potential benefits and challenges associated with its implementation. (250 words)
2. What are the key principles and mechanisms underlying the proposed Carbon Border Adjustment Tax (CBAT) policies in various regions? Analyze how CBATs can influence international trade and environmental sustainability. (250 Words).
 

 

Previous Year Questions

1.Which of the following adopted a law on data protection and privacy for its citizens known as ‘General Data Protection Regulation’ in April, 2016 and started implementation of it from 25th May, 2018? (UPSC CSE 2019)

(a) Australia
(b) Canada
(c) The European Union
(d) The United States of America

Answer: (c)

2.‘Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and (UPSC CSE 2017)

(a) European Union
(b) Gulf Cooperation Council
(c) Organization for Economic Cooperation and Development
(d) Shanghai Cooperation Organization

Answer: (a)

 
 
 

INDIA - MALDIVES

 
 
1. Context
 India is proud to be the most trusted friend of the Maldives, Prime Minister Narendra Modi said Friday after announcing a Rs 4,850-crore line of credit to the island nation.
 
2. What is hydrography?

Hydrography is the scientific study and mapping of bodies of water, including oceans, seas, lakes, rivers, and other waterways, along with the surrounding coastal areas. It involves measuring and describing various features of these water bodies, such as their depths, tides, currents, shorelines, and the physical characteristics of the seabed or riverbed.

The main goals of hydrography include:

Nautical charting: Creating detailed maps or charts used for navigation by ships and vessels. These charts display water depths, underwater obstructions, currents, and other relevant information critical for safe maritime navigation.

Understanding water bodies: Studying the physical properties, topography, and bathymetry (the underwater equivalent of topography) of oceans, seas, and inland water bodies to comprehend their features and variations.

Environmental management: Monitoring and managing water resources, coastal zones, and underwater habitats for environmental conservation and sustainable use.

Hydrographers use various tools and techniques, including sonar, satellites, depth soundings, and geographic information systems (GIS), to collect and analyze data about water bodies. This data is crucial for creating accurate and up-to-date navigational charts, understanding changes in sea level or coastal erosion, conducting marine research, supporting offshore activities like oil and gas exploration, and ensuring safe and efficient maritime transportation.

3. India's Expertise on Hydrography

India has been steadily expanding its expertise in hydrography over the years. The country's hydrographic expertise and capabilities have been developed primarily through its navy and specialized hydrographic agencies.

India has actively participated in the International Hydrographic Organization (IHO) since 1955. The Indian Naval Hydrographic Department (INHD) originated in 1874 in Kolkata and serves as the central authority for hydrographic surveys.

Operating a fleet of contemporary survey vessels developed within the country, the INHD collaborates with various nations in the Indian Ocean Region as well as African and East Asian countries like Mauritius, Seychelles, Tanzania, Maldives, Mozambique, Vietnam, Myanmar, Kenya, and Sri Lanka.

Over time, the INHD's role has expanded due to the increasingly global nature of hydrography and its recognized potential in enhancing maritime diplomacy as a significant force multiplier. The National Institute of Hydrography, a part of the INHD, has provided training to personnel from 39 different countries

Here are some key points about India's expertise in hydrography:

Indian Naval Hydrographic Department (INHD): The Indian Navy operates the INHD, which is responsible for conducting hydrographic surveys, charting coastal and navigational waters, and producing nautical charts. It plays a critical role in ensuring safe navigation for both military and civilian vessels in Indian waters.

Hydrographic Surveys: India has been actively conducting hydrographic surveys in its territorial waters, including along the coastline, ports, and harbors, to gather data on water depths, currents, and navigational hazards. These surveys contribute to updating nautical charts and ensuring safe maritime navigation.

International Collaboration: India collaborates with various international hydrographic organizations and partners to exchange hydrographic data, techniques, and best practices. This collaboration helps in improving the accuracy and coverage of hydrographic surveys and charts.

Modernization Efforts: India has been investing in modernizing its hydrographic capabilities by acquiring advanced survey vessels, employing state-of-the-art surveying equipment, and leveraging technology for data collection, processing, and chart production.

Training and Education: India offers training programs in hydrography to personnel from its navy and other relevant agencies. These programs focus on equipping individuals with the necessary skills and knowledge required for conducting hydrographic surveys and producing accurate nautical charts

4.Significance of 2019 MoU 

  • The Memorandum of Understanding (MoU) was signed in June 2019 during Prime Minister Narendra Modi's visit to the Maldives. This marked Mr. Modi's second trip to the Maldives following his attendance at President Solih's inauguration in 2018.
  • Prior to the MoU, President Solih and the Maldivian Democratic Party (MDP) had achieved a significant victory in the general elections.
  • Both neighboring nations, supported by strong public mandates, pledged to collaborate closely on developmental, defense, and maritime security matters. The initial Joint Commission on Hydrography convened in the Maldives in September 2019.
  • Subsequent to this agreement, the Maldives National Defence Force (MNDF) and the Indian Navy conducted joint hydrographic surveys in 2021, 2022, and 2023
5. Recent Controversary
  • While President Muizzu hasn't explicitly addressed the MoU regarding the joint hydrographic survey, a high-ranking official informed the Maldivian media that the decision aligned with the current administration's commitment to cancel any agreements with foreign entities that jeopardize the national security of the Maldives.
  • The official emphasized the importance of enhancing the Maldivian military's capabilities to safeguard national sovereignty, advocating for independent surveillance and monitoring of the country's waters without involvement from foreign parties. Mohamed Firzul, Under Secretary for Public Policy, conveyed this message during a media briefing.
  • This stance seemed consistent with Mr. Muizzu's overarching election promises, which included the removal of Indian troops and a focus on "restoring the Maldives's sovereignty." Upon assuming office, President Muizzu's initial official announcements echoed the key demand of the 'India Out' campaign, spearheaded by former President Abdulla Yameen

6. History of India-Maldives ties

  • The relationship between India and the Maldives dates back centuries, rooted in cultural, historical, and geographical connections. Here's an overview of the history of their ties:
  • India and the Maldives share historical connections through trade, cultural exchanges, and interactions that span centuries. There's evidence of Indian cultural influence in the Maldives, particularly in language, religion, and traditions.
  • The Maldives gained independence from British protection in 1965. Since then, India and the Maldives have maintained diplomatic relations, focusing on areas like trade, defense cooperation, education, and cultural exchanges.
  • Over the years, India has played a significant role in assisting the Maldives in defense and security matters. This includes providing training to Maldivian defense personnel, conducting joint military exercises, and offering assistance during times of crisis or natural disasters.
  • Both countries have collaborated on various regional and international platforms, such as the South Asian Association for Regional Cooperation (SAARC) and the Indian Ocean Rim Association (IORA), to address common challenges and promote regional cooperation.
  • India has been involved in several developmental projects in the Maldives, including infrastructure development, healthcare, education, and capacity building. Economic cooperation and assistance have been integral aspects of the bilateral relationship.
  • Despite the historically close ties, there have been instances of strained relations between India and the Maldives, particularly during political transitions in the Maldives that led to uncertainties in bilateral relations. However, efforts have been made to address and overcome such challenges.
  • In recent years, the two countries have focused on enhancing cooperation in various sectors, including maritime security, counter-terrorism, trade, tourism, and people-to-people exchanges. Efforts are ongoing to strengthen these ties through mutual cooperation and understanding

7. What does this mean for India-Maldives ties?

Based on recent events, it seems that New Delhi is set to encounter a challenging period in its partnership with Male. Maldives, a participant in the Colombo Security Conclave, an effort to bolster maritime security in the Indian Ocean involving India, Sri Lanka, and Mauritius, took a notable step by skipping the latest high-level meeting of the Conclave held in Mauritius earlier this month. This decision coincided with the visit of Maldivian Vice-President Hussain Mohamed Latheef to China, where he participated in the China-Indian Ocean Region Forum on Development Cooperation, expressing the Maldives' interest in exploring new avenues of collaboration with China.

Additionally, India's Ministry of External Affairs (MEA) responded to the termination of the joint hydrographic initiative with India by emphasizing New Delhi's belief in the potential benefits of neighbouring countries leveraging India's expertise. Observers are keen to see how India manages the complex dynamics with its southern neighbour amidst these developments

 

 

Previous Year Questions

1. Which one of the following pairs of islands is separated from each other by the ‘Ten Degree Channel’? (UPSC CSE 2014)

(a) Andaman and Nicobar
(b) Nicobar and Sumatra
(c) Maldives and Lakshadweep
(d) Sumatra and Java

Answer: (a)

Mains

1. What do you understand by ‘The String of Pearls’? How does it impact India? Briefly outline the steps taken by India to counter this. (UPSC CSE GS II 2013)

2. Discuss the political developments in the Maldives in the last two years. Should they be of any cause for concern to India? (UPSC CSE GS II 2013)

Source: The Hindu

 

INFLATION

 
 
1. Context
 
 
India’s annual retail food inflation rate fell to minus 1.06% in June, the lowest since January 2019. But consumers continue to feel the pinch from high prices on some items.
 
 
2. What is Inflation?
  • It is the rise in prices of goods and services within a particular economy wherein consumers' purchasing power decreases, and the value of the cash holdings erodes.
  • In India, the Ministry of Statistics and Programme Implementation (MoSPI) measures inflation.
  • Some causes that lead to inflation are demand increases, reduction in supply, demand-supply gap, excess circulation of money, increase in input costs, devaluation of the currency, and rise in wages, among others.
 

3. How is Food Inflation measured in India?

Food inflation in India is measured using various indices and indicators. The primary indices used to measure food inflation in India include the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Both indices provide insights into the overall price movements of goods and services, including food items, but they differ in terms of their coverage and methodology.

Consumer Price Index (CPI)

  • The CPI is a key indicator used by the Government of India and the Reserve Bank of India (RBI) to monitor inflation, including food inflation.
  • The CPI measures the average change over time in the prices paid by urban and rural consumers for a basket of goods and services, including food items, housing, clothing, transportation, and more.
  • Within the CPI, food and beverages form a significant component, and food inflation is specifically derived from the changes in food prices within the CPI basket.
  • The CPI is released monthly by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation.

Wholesale Price Index (WPI)

  • The WPI is another important index that tracks price changes at the wholesale level for a selected group of commodities, including food products, manufactured goods, fuel, and more.
  • The WPI measures price changes from the perspective of producers and wholesalers, providing insights into inflationary pressures in the production and distribution stages.
  • Food articles, such as cereals, pulses, vegetables, fruits, and edible oils, are included in the WPI basket for monitoring food inflation.
  • The WPI is released weekly by the Office of Economic Adviser under the Ministry of Commerce and Industry.

In addition to these indices, other indicators such as the Food Sub-Index within the CPI and specific price indices for essential food items (like vegetables, pulses, and cereals) are also used to gauge food inflation more accurately. The RBI closely monitors food inflation trends as part of its monetary policy framework to make informed decisions regarding interest rates and economic stability. Overall, the combination of CPI, WPI, and specific food-related indices provides a comprehensive assessment of food inflation in India.

 

4. Headline and Core Inflation

Inflation is a key economic indicator that measures the rate at which prices of goods and services rise over time. In India, two important measures of inflation are headline inflation and core inflation.

  • Headline Inflation: Headline inflation refers to the overall rate of inflation in an economy, taking into account the price changes across all goods and services included in the consumer basket. It reflects the broad-based movement in prices, including food, fuel, housing, transportation, and other essential and non-essential items. Headline inflation is typically measured using indices such as the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Fluctuations in headline inflation can be influenced by various factors, including changes in global commodity prices, government policies, supply chain disruptions, and demand-side pressures.
  • Core Inflation: Core inflation, on the other hand, excludes volatile items such as food and energy from the basket of goods used to calculate inflation. By excluding these volatile components, core inflation provides a more stable measure of underlying inflationary trends in the economy. Core inflation is often considered a better gauge of long-term inflationary pressures and helps policymakers in making informed decisions regarding monetary policy. The Reserve Bank of India (RBI), for example, closely monitors core inflation to assess the underlying inflationary trends and formulate appropriate monetary policy responses.

Understanding the distinction between headline and core inflation is essential for policymakers, businesses, and consumers alike. While headline inflation provides a comprehensive view of overall price movements, core inflation offers insights into the underlying inflationary pressures, helping to distinguish between temporary fluctuations and sustained inflation trends. By closely monitoring both measures of inflation, policymakers can effectively manage inflationary risks and maintain price stability, contributing to sustainable economic growth and stability.

 

5. Monetary Policy Committee (MPC)

The Monetary Policy Committee (MPC) is a crucial institutional framework established by the Reserve Bank of India (RBI) to formulate and implement monetary policy decisions in India. 

Role

  • Formulating Monetary Policy: The primary role of the MPC is to formulate and implement monetary policy in India. This includes setting the key policy interest rates, such as the repo rate, reverse repo rate, and marginal standing facility (MSF) rate, to achieve the objectives of price stability and economic growth.
  • Targeting Inflation: The MPC's main objective is to maintain price stability, which is primarily achieved by targeting a specific inflation rate. In India, the RBI has adopted a flexible inflation targeting framework, where the MPC aims to keep the Consumer Price Index (CPI) inflation within a specified target range over the medium term. Currently, the inflation target is set at 4% with a tolerance band of +/- 2%.
  • Evaluating Economic Conditions: The MPC assesses various economic indicators, such as GDP growth, inflation expectations, fiscal policy measures, global economic developments, and financial market conditions, to make informed decisions about monetary policy.
  • Communication: The MPC communicates its monetary policy decisions, rationale, and outlook for the economy through periodic press releases, statements, and the publication of meeting minutes. This transparency enhances predictability and credibility in monetary policy.

Composition

  • Members: The MPC consists of six members, including three members nominated by the Government of India and three members from the Reserve Bank of India. The Governor of the RBI serves as the ex-officio Chairperson of the MPC.
  • Appointment: The members of the MPC are appointed by the Central Government based on their expertise and experience in economics, banking, finance, or related fields. The RBI Governor and Deputy Governor (in charge of monetary policy) are automatic members of the MPC.
  • Voting Rights: Each member of the MPC, including the RBI Governor, has one vote in the decision-making process. Decisions are made by a majority vote, with the Governor having the casting vote in case of a tie.
  • Terms: Members of the MPC serve fixed terms, typically for four years, with eligibility for reappointment. This ensures continuity and stability in monetary policy formulation.

 

6. The Way Forward

By implementing the measures and fostering collaborative efforts among policymakers, regulators, and stakeholders, India can effectively manage inflationary pressures, maintain price stability, and promote sustainable economic growth and development.

 

For Prelims: Inflation, MPC, CPI, WPI, food Inflation, RBI, Headline inflation, Core inflation

For Mains: 
 1. Explain the concept of inflation and its impact on an economy. Discuss the various causes of inflation and the measures that can be taken to control it, with specific reference to India. (250 Words)
2. What are the challenges and opportunities associated with managing inflation in India? Evaluate the effectiveness of recent policy measures in addressing inflationary pressures and maintaining price stability. Suggest strategies for sustainable economic growth while managing inflation risks. (250 Words)
 
 
Previous Year Questions
 
1. Consider the following statements:  (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct? 
A. 1 and 2 only    B.  2 and 3 only     C. 1 and 3 only     D. 1, 2 and 3
 
 
2. Concerning the Indian economy, consider the following: (UPSC 2015)
  1. Bank rate
  2. Open Market Operations
  3. Public debt
  4. Public revenue

Which of the above is/are component(s) of Monetary Policy?

(a) 1 only   (b) 2, 3 and 4    (c) 1 and 2     (d) 1, 3 and 4

 

3. An increase in Bank Rate generally indicates: (UPSC 2013)

(a) Market rate of interest is likely to fall.
(b) Central bank is no longer making loans to commercial banks.
(c) Central bank is following an easy money policy.
(d) Central bank is following a tight money policy.
 

4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 

1. It decides the RBI's benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

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

 
5. Read the following passage and answer the question that follows. Your answers to these items should be based on the passage only.
Policymakers and media have placed the blame for skyrocketing food prices on a variety of factors, including high fuel prices, bad weather in key food producing countries, and the diversion of land to non-food production. Increased emphasis, however, has been placed on a surge in demand for food from the most populous emerging economics. It seems highly probable that mass consumption in these countries could be well poised to create a food crisis.
With reference to the above passage, the following assumptions have been made: (UPSC 2021)
1. Oil producing countries are one of the reasons for high food prices.
2. If there is a food crisis in the world in the near future, it will be in the emerging economies. Which of the above assumptions is/are valid?
A. 1 only        B. 2 only           C. Both 1 and 2         D.  Neither 1 nor 2
 
 
6. 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
 
 
7. 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
 
 
8. With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (UPSC 2016)
1. The Agreement was signed by all the member countries of the UN and it will go into effect in 2017
2. The Agreement aims to limit greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2°C or even 1.5°C above pre-industrial levels.
3. Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.
Select the correct answer using the code given below:
A. 1 and 3 only     B.  2 only        C. 2 and 3 only        D. 1, 2 and 3
 
Answers: 1-C, 2-C, 3-D, 4-A, 5-D, 6-B, 6-C, 7-B
Source: The Indian Express
 

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