News & Editorial Analysis 10 February 2023
The Hindu News Analysis
1 – Asphyxiation:
GS II Topic Health related issues
Reports state that on February 9, 2023, seven workers at the Ambati Subbanna Oil Mill in the Peddapuram hamlet in the Kakinada district asphyxiated to death while attempting to remove oil sludge from an edible oil ship. Five of them reside in the Paderu agency in the Alluri Sitarama Raju District.
According to Peddapuram DSP Sunkara Murali Mohan, the deceased have been identified as Mecchangi Krishna, Mecchangi Narasinga, Mecchangi Sagar, Kuratadu Jambu Raju, and Kurra Rama Rao of the Paderu agency, as well as Kattamuri Jagaeesh, and Prasad of the Kakinada district.
Breathing problems or a lack of oxygen in the air can both cause asphyxia, a serious condition that is brought on by a lack of oxygen in the blood.
The National Action Plan of the Ministry of Social Justice and Empowerment includes the Prohibition of Employment as Manual Scavengers and their Rehabilitation (Amendment) Bill, 2020.
The Plan intends to cover un-sewered areas and update the existing sewage infrastructure. Additionally, it establishes a system for managing septage and faecal sludge for the treatment and transportation of faecal sludge, mechanised septic tank cleaning, and the provision of sanitation response units with help lines for local governments.
The following significant changes are made by the Bill:
Mechanized Cleaning: The legislation that is being discussed would completely automate sewage cleaning, increase worker security, and provide compensation in the event of an accident.
Penalty: The Bill proposes toughening the law forbidding manual scavenging by increasing the fine and lengthening the jail term.
The current penalty for employing anyone to do risky sewer and septic tank cleaning on behalf of another person or organisation is up to five years in prison, a fine of up to Rs. 5 lakh, or both.
Money: The money will be delivered directly to the sanitation workers rather than to municipalities or contractors to purchase the equipment.
Safaimitra Suraksha Initiative’s Obstacle:
The challenge was launched on World Toilet Day in 243 major cities (19th November).
Goal: Promote mechanical septic tank and sewer cleaning while avoiding risky cleaning techniques.
All states were given this “challenge” by the federal government to automate sewage cleaning by April 2021; in the event that someone had to enter a sewer line due to an unanticipated emergency, the proper safety gear, such as oxygen tanks, had to be made available.
State capitals, urban local governments, and smart cities are also eligible to participate.
Reward: Three subcategories of cities—those having a population of more than 10 lakhs, 3–10 lakhs, and less than 3 lakhs—will get awards. 52 crores of rupees will be awarded to the top cities across all categories.
About Manual Scavenging:
Manual scavenging is defined as “the removal of human waste from public streets and dry latrines, cleaning septic tanks, gutters, and sewers.”
631 people have died nationwide in the last ten years while cleaning septic tanks and sewers, according to the National Commission for Safai Karamcharis (NCSK).
2019 was the highest number of deaths from manual scavenging in the prior five years. 110 workers who were cleaning septic tanks and sewers perished.
This is an increase of 61% from 2018, when there were 68 such deaths recorded.
Despite the development of many automated methods, human interaction in the sewage cleaning process still happens.
With 29,923 individuals, Uttar Pradesh has the highest rate of manual scavenging of any Indian State, according data acquired in 2018.
Manual scavenging is common because:
The state governments’ persistent refusal to accept that the practise continues under their control has been the subject of several independent research.
Issue brought on by outsourcing: Local governments frequently hire private businesses to clean their sewage systems. But many of these shady business owners neglect to maintain complete records of their sanitation staff.
In case after case involving asphyxiated workers, these contractors have denied any involvement with the deceased employees.
Caste, class, and financial inequities serve as the practice’s driving forces in society.
It has to do with the Indian caste system, where those from the ‘lower castes’ are expected to perform these tasks.
Despite the fact that manual scavenging is now against the law as a kind of employment, shame and discrimination still surround it.
Finding alternative forms of income is difficult for persons who have been released from manual scavenging due to the stigma and prejudice associated with it.
The construction and maintenance of unclean latrines, as well as the hiring of anybody to conduct risky manual scavenging work or clean septic tanks and sewers, are prohibited by the Prohibition of Employment as Manual Scavengers and Their Rehabilitation Act of 2013.
For those who have been classified as manual scavengers by a Municipality, it also provides rehabilitation techniques.
A 2014 Supreme Court decision mandated that the government identify each individual who passed away while working on sewage systems since 1993 and provide their families with Rs. 10 lakh in compensation.
The Indian government passed the Employment of Manual Scavengers and Construction of Dry Latrines (Prohibition) Act in 1993, making it unlawful to employ manual scavengers to construct dry toilets and clean dry latrines by hand (that do not operate with a flush).
The Prevention of Atrocities Act was implemented for sanitation workers in 1989; almost 90% of manual scavengers belonged to the Scheduled Caste. This was a pivotal moment in the freeing of manual labourers from rigidly prescribed traditional jobs.
Article 21 of the Constitution guarantees both “Life with Dignity” and the “Right to Life.”
How to Proceed:
Identification: States must correctly count the personnel involved in removing harmful sludge.
The 15th Finance Commission made a strong argument for combating manual scavenging by naming the Swachh Bharat Mission as a top priority area and providing cash for smart cities and urban development.
Social Sentiment: Recognizing the social stigma attached to manual scavenging is the first step, followed by understanding how and why it is still deeply rooted in the caste system.
A rigorous law is necessary because it will guarantee that the rights of these workers are upheld and that state institutions are compelled by law to provide hygienic services.
2 – Mangroves:
GS III Topic Environmental Conservation
A seven-kilometer undersea tunnel will be constructed for the bullet train project in an effort to preserve around 12 hectares of mangrove trees in Thane Creek, Maharashtra. This will increase the cost of construction for the 21-km section of the Mumbai-Ahmedabad High Speed Rail Corridor project from Bandra Kurla Complex Station to Shilphata from $100 crore to $10,000 crore.
The cost of building an underground tube increased by a factor of 100. But as a senior National High Speed Rail Corporation Ltd. official stated, we are guarding the mangroves in the stream, which cover about 12 hectares.
A mangrove is a small tree or shrub that develops in salty sediments, typically below water, along coastlines.
Both the trees and plants in the mangrove swamp and the surrounding area can be referred to as “mangroves.”
Mangroves are among the flowering trees found in the families Rhizophoraceae, Acanthaceae, Lythraceae, Combretaceae, and Arecaceae.
Attributes of mangroves:
They can survive in environments with low oxygen levels and high salt concentrations.
Low oxygen: Any plant’s subterranean tissue needs oxygen to breathe. However, the soil in a mangrove environment has little or no oxygen.
The root system of the mangrove as a result absorbs oxygen from the surrounding air.
For this function, mangroves grow special roots known as pneumatophores, or breathing roots.
These roots’ many openings allow oxygen to reach their subterranean tissues.
Environment at Extremes Survival: Because the roots of mangrove trees are submerged in water, they can withstand conditions that would quickly kill most other plants, such as hot, muddy, and salty conditions.
Similar to desert plants, mangroves store fresh water in their large, succulent leaves.
The waxy coating on the leaves traps in moisture and lowers evaporation.
Because they are viviparous, their seeds grow while still attached to the parent tree. Once the seed has germinated, it grows into a propagule.
The adult propagule is transported to a new position after entering the water, where it finally establishes roots in a solid surface.
Mangroves are only found close to protected beaches in tropical or subtropical latitudes since they are unable to withstand subfreezing temperatures.
They all possess the unique capacity to thrive in salted soil that is within the range of the tides.
Approximately 1,50,000 square kilometres of mangroves cover the entire planet.
Asia is where the majority of mangroves are found in the world.
South Asia contains 6.8% of the world’s mangrove cover.
India is responsible for 45.8% of the mangrove cover in the area.
Mangroves in India:
Coverage: As of 2019, 4,975 sq km, or 0.15% of the country’s total land area, were covered by mangroves in India, according to the India State of Forest Report.
The Andaman and Nicobar Islands, Gujarat, and West Bengal have the largest percentages of total area covered by mangroves.
In West Bengal, notably in the Sundarbans, is the largest mangrove forest in the world. It is included in the UNESCO World Heritage List.
The jungle is home to the Royal Bengal tigers, estuarine crocodiles, and Gangetic dolphins.
The second-largest mangrove forest in India is called the Bhitarkanika Mangroves, and it is situated in the state of Odisha. It is made up of the deltas of the Brahmani and Baitarani rivers.
It is one of the most significant Ramsar wetlands in India.
The Godavari-Krishna Mangroves in Andhra Pradesh are situated between the states of Tamil Nadu and Odisha.
The deltas of the Ganges, Mahanadi, Krishna, Godavari, and Cauvery rivers all have mangrove forests.
Mangroves cover the backwaters of Kerala in great numbers.
In Pichavaram, Tamil Nadu, a sizable body of water is covered in mangrove plants. It is home to several aquatic bird species.
West Bengal has 42.45% of India’s mangrove cover, the A&N Islands have 12.39%, and Gujarat has 23.66%.
How crucial mangroves are:
Mangroves play a significant part in the tertiary digestion of waste, aiding in the creation and preservation of the soil. This contributes to ecological stabilisation.
They provide protection against cyclones.
They considerably aid in the development of new land, stabilisation of mud banks, and dispersion of wind, tidal, and wave energy.
Tides and mangroves: The trees’ intricate root systems enable them to resist the daily rise and fall of the tides.
The majority of mangroves experience two daily floods.
The shoreline is shielded by mangrove trees from erosion brought on by storm surges, currents, waves, and tides.
Water filtration: Mangroves improve the water’s quality by capturing nutrients from runoff that may otherwise cause hazardous algal blooms offshore.
The ability of mangrove trees to purify the water is crucial for preserving the wellness and clarity of coral reefs and seagrass environments.
Blue carbon is stored in mangroves, which account for less than 2% of marine ecosystems but 10-15% of carbon burial.
Elder trees and decaying leaves carry the stored carbon to the ocean floor, where it is buried in the soil.
This buried carbon is frequently referred to as “blue carbon” because it is deposited underwater in coastal ecosystems like mangrove forests, seagrass beds, and salt marshes.
Supporting Biodiversity: A staggering array of creatures, some of which are unique to mangrove forests, can be found in the mangrove ecosystem.
There are habitats and safety for a wide range of flora, including birds, fish, insects, mammals, and plants.
Mangroves are at danger from:
Commercialization of Coastal Areas: Aquaculture, coastal development, rice and palm oil farming, and industrial activities are swiftly replacing these salt-tolerant trees and the ecosystems they support.
Mangroves are vanishing three to five times more quickly than the global loss of forest cover as a result of infrastructure development, urbanisation, and agricultural land conversion, according to UNESCO.
The area occupied by mangroves has shrunk by half during the last 40 years. Less than 1% of tropical woods are mangroves.
Shrimp Farms: The growth of shrimp farms is responsible for at least 35% of the overall reduction in mangrove forests.
Due to the rising demand for shrimp in China, Japan, Europe, and the US in recent years, shrimp farming has gained popularity.
Temperature-Related Issues: Freezing temperatures, even for a brief time, can kill several mangrove species. A ten-degree temperature fluctuation over a brief period of time is sufficient stress to kill the plant.
Mangroves are rooted in soil that has a considerable oxygen deficit, which is problematic for plants.
Mangrove roots cannot easily collect oxygen from gases trapped in the soil around them since they are flooded with water up to twice each day in addition to having their roots underground. Most plants can easily do this.
Excessive Human Involvement: When the sea level changed, mangroves were able to go deeper inland, but in many places now, human development has turned into a barrier that limits how far a mangrove forest may move.
Mangroves are frequently harmed by oil spills.
Conservation of mangroves:
Because mangroves are part of Biosphere Reserves, World Heritage sites, and UNESCO Global Geoparks, mangrove ecosystems around the world are better known, managed, and safeguarded.
In order to better the conservation, responsible management, and sustainable use of mangroves, the International Society for Mangrove Ecosystem (ISME), a non-governmental organisation, was established in 1990.
Blue Carbon Initiative: The International Blue Carbon Initiative attempts to lessen climate change by conserving and rehabilitating coastal and marine habitats.
Intergovernmental Oceanographic Commission (IOC) is coordinated by Conservation International (CI), IUCN, and UNESCO (IOC-UNESCO).
In order to encourage sustainable management and protection of mangrove ecosystems, UNESCO recognises July 26 as International Day for the Conservation of the Mangrove Ecosystem.
The “Mangroves for the Future (MFF)” initiative was created by the IUCN and UNDP to encourage financial support for the preservation of coastal ecosystems.
Among the members are Bangladesh, Cambodia, India, Indonesia, Maldives, Myanmar, Pakistan, Seychelles, Sri Lanka, Thailand, and Vietnam.
National Mangrove Committee: In order to provide direction for the growth and preservation of mangroves, the Indian government established the National Mangrove Committee in 1976
3 – NDRF:
GS II Topic Statutory and Non-Statutory Bodies
In Turkey’s earthquake-devastated Gaziantep, personnel of the National Disaster Response Force (NDRF) on Thursday saved a six-year-old child.
Union Home Minister Amit Shah lauded the NDRF for its rescue efforts in a tweet, writing: “Under the leadership of PM @narendramodi, we are committed to making @NDRFHQ the world’s premier disaster response force. #OperationDost”.
The State Government of India is in charge of disaster management. The Ministry of Home Affairs is the “Nodal Ministry” for handling natural disasters in the federal government (MHA).
The Central Government is in charge of providing aid and assistance to the affected state in the event of “calamities of severe nature,” including the deployment of Armed Forces, Central Paramilitary Forces, the National Disaster Response Force (NDRF), and any other communication, air, and other resources that are available and necessary upon the State’s request.
The National Disaster Response Force (NDRF) Raising Day is held annually on January 19. Since the formation of the Force in 2006, the personnel have contributed significantly to the country’s disaster management and community DRR awareness (DRR).
The level of international discussion and debate on disaster preparedness and response reached its pinnacle in the middle of the 1990s and persisted for the following 10 years.
Two of the more notable and important ones were the UN’s endorsement of the Hyogo Framework for Action (2005) and the Yokohama Strategy Plan (1994).
During that time, India had some of its deadliest natural disasters, including the Orissa Super Cyclone, the Gujarat Earthquake, and the Indian Ocean Tsunami (1999). (2004).
This sequence of events, and the global environment, underscored the need for a comprehensive disaster management plan. As a result, on December 26, 2005, the Disaster Management Act was passed. The National Disaster Management Authority (NDMA) was created with the aim of developing the policies, strategies, and standards for disaster management.
In accordance with the Disaster Management Act, the National Disaster Response Force (NDRF) will be created to offer specialised assistance in the event of natural and man-made disasters.
As a result, in 2006, there were 8 Battalions in the NDRF.
The NDRF currently consists of 15 Battalions, each with 1149 personnel.
Initially, members of the NDRF were also dispatched on routine law enforcement tasks. At a meeting between the NDMA and the Prime Minister on October 25, 2007, it was acknowledged and agreed upon that the NDRF needed to become a committed force.
India’s leading disaster management organisation is the National Disaster Management Authority (NDMA). The chairman of the NDMA is the Prime Minister.
The NDRF’s top official goes by the title of Director General. The NDRF’s Director Generals are IPS-deputed officers from Indian police forces. The director general is a three-star officer.
The National Disaster Response Force now has 15 battalions from the BSF, CISF, CRPF, ITBP, SSB, and Assam Rifles.
A total of 45 people, including dog squads, engineers, technicians, and electricians, make up each of the 18 professional search and rescue teams that make up each battalion.
1149 troops make up the whole strength of each battalion.
The equipment and instruction required to respond to both man-made and natural tragedies are available to all 15 battalions.
Battalions are another unit that is equipped and trained for CBRN (chemical, biological, radiological, and nuclear) emergencies.
These NDRF battalions are dispersed over 16 different locations across the country in order to reduce the response time for their deployment to disaster zones and take into account the country’s risk profile.
Among the responsibilities of the National Disaster Response Force:
The National Hazard Response Force’s mission is to create an all-encompassing, pro-active, multi-hazard, technologically driven disaster management plan that would make India safer and more resilient to disasters.
To do this, a culture of preparedness, mitigation, and planning for emergencies must be created in order to provide a quick and effective reaction.
Among other things, this national goal seeks to develop a culture of readiness among all stakeholders.
By conducting highly skilled rescue and relief operations, regular and intensive training and retraining, familiarisation exercises within the respective NDRF Battalions’ areas of responsibility, and conducting mock drills and joint exercises with the various stakeholders, the NDRF has demonstrated its significance in achieving this vision.
The National Disaster Response Force (NDRF), in addition to the professionalism shown during rescue operations in floods, cyclones, and collapsed structures search and rescue (CSSR) operations, has developed significant expertise in dealing with CBRN (Chemical, Biological, Radiological, and Nuclear) challenges.
Additionally, the NDRF has participated in missions abroad, notably those related to the Japan tsunami in 2011 and the Nepal earthquake in 2015.
National Disaster Response Fund:
The National Disaster Response Fund (NDRF), created under Section 46 of the Disaster Management Act of 2005, supplements the State Disaster Response Fund (SDRF) of a State in the case of a major disaster if there are insufficient funds in SDRF.
It is kept in the “Public Account” of the Indian government as reserve money with no interest.
Spending from it does not require approval from the Parliament.
State Disaster Response Fund:
The State Disaster Response Fund (SDRF), established under Section 48 (1) (a) of the Disaster Management Act of 2005, is the main source of funding available to State Governments for responses to declared disasters.
The Central Government contributes 75% and 90%, respectively, of the SDRF allocation for general category States/UTs and special category States/UTs (NE States, Sikkim, Uttarakhand, Himachal Pradesh, Jammu, and Kashmir).
The annual Central contribution is split into two equal payments, as recommended by the Finance Commission.
Only costs involved in providing victims with emergency assistance may be paid by SDRF
4 – Bru Tribe:
GS III Topic Demography of India
In its Thursday-released tribal-focused manifesto, the BJP pledged support for the Tripura Tribal Areas Autonomous District Council. In the next hotly contested Tripura Assembly elections, the tribal vote will be crucial (TTAADC). This statement, which guarantees a “historic permanent answer in a time-bound method” to the desire for a tribal state, makes similar claims to those made by the TIPRA Motha.
The BJP’s Sankalp Patra, which was released with one week till the elections, features 24 primary promises in addition to countless additional commitments. It calls for “23-e abar, BJP Sarkar (BJP government again in 2023)” and promotes the DTH paradigm, which stands for “development, transformation, and harmony.”
The majority of the Bru or Reang population, who are native to Northeast India, live in Tripura, Mizoram, and Assam. In Tripura, they are recognised as a Particularly Vulnerable Tribal Group.
In Mizoram, they have been under attack from groups who do not consider them to be locals. Over 37,000 Brus from the Mizoram districts of Mamit, Kolasib, and Lunglei sought asylum in relief camps in Tripura as a result of ethnic clashes in 1997.
Since then, 32,000 people have continued to live in six relief camps in North Tripura, while 5,000 people have relocated to Mizoram over the course of eight phases.
Community representatives from the Bru camps secured an arrangement with the federal government and the two state governments in June 2018 that would allow for the return of refugees to Mizoram. However, the majority of campers disapproved of the terms of the agreement.
The people living in the camp claim that the agreement does not guarantee their safety in Mizoram.
The Home Ministry directed the suspension of ration supply to relief camps in October 2019 in an effort to speed up the completion of the repatriation of refugees to Mizoram. Malnutrition, according to civil society organisations, was a factor in at least six refugee deaths.
A new pact is proposed:
According to the provisions of the 2018 agreement, the Bru tribal people would have relocated to Mizoram, but under the terms of the revised agreement, they will instead relocate to Tripura.
The parties concerned in the dispute believe that the Center would present them with a package worth Rs 600 crore, which will comprise parcels of land for each Bru family of 2,500 square feet and agricultural land.
Free rations and Rs 5,000 each month for the next two years for each family.
On Tripura’s voter list would be tribal members of the Bru tribe
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The Hindu Editorial Analysis
The Lessons From A Court Appointment Drama:
The appointment of L. Victoria Gowri to the Madras High Court was contentious. After the collegium nominated her for the job, a petition objecting to her nomination as a judge was submitted to the Supreme Court (SC) on the grounds that she had allegedly used “hate speech” against religious minorities.
New information was accepted by the SC collegium, which is chaired by the Chief Justice of India (CJI), but nothing could be done about it because the nomination process had already ended. A last-ditch judicial challenge to stop it was rejected by two additional Supreme Court justices.
The opacity problem:
A recent verbal battle between the higher judiciary and the political leadership has focused on who has the ability to choose judges for the High Courts and the Supreme Court of India. Under the “collegium system,” which was established as a result of a 1993 Supreme Court judgement, the three senior-most Supreme Court judges make recommendations for appointments to High Courts (known as “The Second Judges Case”). The government is technically compelled to accept recommendations, even though it is permitted to make comments and ask for a reconsideration.
The discussion brings to light several persisting structural problems with the selection of judges. The first problem is opacity. Even though the specific processes vary, they are all open to the public, according to comparisons made between the collegium’s operation and judging nominations in other democracies like the US, South Africa, or Kenya. The public in each of these jurisdictions is already aware of the names of the judicial candidates before the official commencement of the selection process.
In such a situation, facts would inexorably come to light and be made known to the selecting bodies, including Ms. Victoria Gowri’s statements. The selection authorities would evaluate them given that these jurisdictions demand that judicial applicants provide answers. The discussion would be place in public, and the candidate would be questioned about the remarks as well as their justification and connection to her judicial philosophy. At the end of the process, the selecting body would make the choice.
However, in India, upon the collegium’s selection, the candidate’s identity is effectively made public. The selection procedure is conducted behind closed doors with participation from both the collegium and the government (through the Intelligence Bureau).
The government can easily withhold pertinent information from the collegium when it approves of a particular candidate, so this not only has transparency costs but also asymmetrical costs as well (in fact, this is the only possible inference from the CJI’s observations about the allegations of hate speech).
This results in circumstances like the one we’re in right now, where the choice has already been made when a candidate’s name first comes to public attention, allowing the public to notify the collegium of important facts.
Another unfavourable outcome of this is that the government can move the process along fast after choosing a candidate because it still has the power to make formal appointments (as happened in the present case). In other situations, the government may also employ a pocket veto (which it has also done with respect to the Madras High Court, by refusing to appoint a judge in the teeth of an express direction by the collegium).
The second issue is directly connected to the initial issue. After a collegium recommendation has been issued, there is only one way to overturn it: in court. There are a variety of issues that arise because the collegium, which comprises of the three (or five) senior-most Supreme Court members, must be challenged in front of their own junior colleagues (and these colleagues will be assigned the case by the CJI, who is himself the head of the collegium).
Although all administrative actions are subject to judicial review and the collegium technically acts as an administrative body in recommending a name, the problem with judges being asked to preside over their own senior colleagues is immediately apparent.
South Africa as an illustration:
This is not required. Take South Africa as an example, where the judicial appointments panel’s procedures are currently under judicial review and the commission has been instructed by the courts to make its deliberations public.
Although the appointment process in South Africa is not perfect, it does contain a system of checks and balances that is based on the guiding principles of transparency and publicity. There must be some level of separation between the court and the judicial appointments commission in order to allow for a check and a remedial mechanism in the event of mistakes and errors.
However, when the Supreme Court, which serves as the body for judicial review, the collegium, and the CJI’s office are all essentially the same while attempting to carry out multiple tasks that are unique from one another, correction becomes extremely difficult.
Eligibility versus suitability:
In addition, the judges contended that the only factor they could consider in the judicial review of L. Victoria Gowri was her eligibility, not her fitness. This is the proper approach, leaving aside the problem of whether alleged hate speech is a matter of eligibility or suitability, provided that the issue of suitability was fully taken into account during the selection process.
Because the procedures are secret and it is the only other party, the government has the potential to sway the information used to determine “suitability.” This brings up the issue of the collegium’s problematic structural opacity and how it benefits the political executive once more.
Once the collegium has made its choice and the names have been made public, the question of “suitability” has also been resolved (allowing for the disclosure of additional information). How profoundly this undermines judicial independence ought to be obvious.
The root of the problem:
For the reasons outlined above, it was evident that there would be no going back after the collegium’s proposal was issued, regardless of the preferences and objectives of the individual actors involved. The court’s decision to reject Ms. Victoria Gowri’s appointment challenge served as a warning of impending failure.
But taking a step back from the particular actors in this drama, it’s important to recognise that the underlying cause of the issue is the design of our judicial nomination process. Because it asymmetrically favours the political executive, the current system is ineffective both in theory and in practise.
We require a judicial nomination process that genuinely safeguards judicial independence from presidential control.
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The Indian Express Editorial Analysis
Reading RBI’s Policy Review:
The Monetary Policy Committee recently voted 4-2 to increase the policy repo rate by 25 basis points, to 6.5 percent (MPC). Even though this rise is less significant than the previous 35–50 bps strong hikes, it was necessary to raise the interest rate in order to bring inflation back to the desired 4% level.
The two main focuses of monetary policy in an economy are money supply and cost (interest rates).
The MPC of the RBI meets every two months to assess the state of monetary activity. In order to reduce price volatility while maintaining a reasonable inflation rate, the MPC may alter the repo rate, which is the interest rate at which the RBI loans to commercial banks, during these sessions.
An essential analysis of monetary policy:
The most recent monetary policy review was important for a variety of reasons.
One is that it followed the Union Budget, the most important declaration of fiscal policy for the year, in its announcement.
As a result of the allegations made against the Adani Group by Hindenburg Research and the resulting volatility in the price of Adani’s stock, it occurred at a time when the Indian stock market was already unsteady.
Three: At the moment, central banks throughout the world are either slowing down the rate of increase in interest rates or possibly considering discontinuing monetary tightening.
Finally, as this was the last review of the current fiscal year (2022-23), it provided a wonderful opportunity to understand how the RBI expected the Indian economy to develop in the subsequent fiscal year (2023-24), for which the Budget has just been unveiled.
The choice of the repo rate and the “stance” of the policy are the two halves of any monetary policy.
Changes in the repo rate have an effect on the entire economy by determining whether loans for homes, cars, or businesses will be more expensive or less expensive, but the policy positions of the MPC members reveal the members’ views on the inflation and economic growth outlook.
As retail inflation has been beyond the RBI’s comfort zone of 2% to 6% for 10 of the past 12 months, the position has been concentrated on “removing stimulus to ensure that inflation remains within the target ducing forward, while sustaining growth.”
The MPC’s opinion that inflation has slowed down more swiftly than anticipated was reflected in the MPC’s decision to raise the repo rate by 25 basis points, which was less than the rate’s previous rises of 50 and 35 bps.
It also implied that the current cycle of interest rate increases in India, which began in May of last year following a retail inflation peak of almost 8% in April 2022, may be coming to an end.
According to RBI Governor Shaktikanta Das, consumer price inflation in India went below the upper tolerance limit (i.e. 6%) for the months of November and December 2022.
On the increase, the MPC is split:
The rise was rejected by the government-nominated MPC members Ashima Goyal and Jayanth Varma by a vote of 4-2 in favour.
In fact, it was thought that since inflation is falling more swiftly than expected, the RBI should delay raising rates. It was widely recommended that the RBI postpone interest rate rises until it was obvious how previous rate increases had hurt the economy and left some room for growth.
It was predicted that the RBI would take a “neutral” stance, which would indicate that it no longer wants to formally raise interest rates and would instead prefer to see how things play out.
But in this instance, the MPC once more opted to maintain the status quo.
Simply put, the RBI’s decision to come out as more “hawkish” startled many (i.e., concerned more about rising inflation than the deceleration in economic growth).
Why RBI took a hardline stance:
The answer may lie in the RBI’s forecasts for inflation and economic growth in India for the ensuing fiscal year. The RBI expects India’s GDP to grow by 6.4% in FY24, however the rate of expansion would gradually slow throughout the year.
“Real GDP growth for 2023–24 is estimated at 6.4% with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6.0%, and Q4 at 5.8%,” the MPC’s policy statement reads.
From the 7% growth rate it is projected to achieve in the current fiscal year and the 8.7% growth rate it attained in the previous fiscal year, India’s growth rate would decline somewhat to 6.4% from those levels. But most experts who expected the RBI to stop raising interest rates think that GDP growth will barely, if at all, reach 6%.
Although the RBI does not place a high premium on India’s GDP growth, its inflation outlook is more positive than is usually thought.
Retail inflation is expected to be 5.3% through 2023–2024, and it won’t go below 5% in any of the next four quarters, according to the RBI.
The RBI is nonetheless concerned about the core inflation rate (or the rate of inflation when prices of food and fuel are taken out of the calculation).
It is clear that the effects of higher food and gasoline costs have permeated the rest of the economy because core inflation is currently hovering around 6%.
Bringing down high core inflation often takes longer than lowering headline inflation because the cost of food and fuel can fall as fast as it can increase.
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