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Friday, July 08, 2022

The HINDU Notes – 08th July 2022

12:29

 


📰 Centre to promote dragon fruit cultivation

Plan is to increase cultivation from 3,000 hectares to 50,000 hectares in five years

•Following in the footsteps of the Gujarat and Haryana governments, the Centre has decided to promote the cultivation of dragon fruit, known as a “super fruit” for its health benefits. The Centre feels that considering the cost effectiveness and global demand for the fruit due to its nutritional values, its cultivation can be expanded in India. At present, this exotic fruit is cultivated in 3,000 hectares; the plan is to increase cultivation to 50,000 hectares in five years.

•The Gujarat government recently renamed dragon fruit as kamlam [lotus] and announced an incentive for farmers who cultivate it. The Haryana government also provides a grant for farmers who are ready to plant this exotic fruit variety. The fruit is considered good for diabetic patients, low in calories and high in nutrients like iron, calcium, potassium and zinc. Addressing a national conclave on the fruit here on Thursday, Union Agriculture Secretary Manoj Ahuja said the demand for the fruit is high in domestic and global markets because of its nutritional values.

Win-win situation

•“50,000 hectares in five years is an achievable target. The demand for the fruit will remain. Prices for farmers will also be good. The benefit is that this fruit can be cultivated in degraded and rainfed land,” Mr. Ahuja said. He added that the Centre will assist States in providing good quality planting materials to farmers.

•Talking to The Hindu on the sidelines of the conclave, he said the Centre can also provide specific target-based help to States and farmers under the Mission for Integrated Development of Horticulture (MIDH). “Processing infrastructure can also be developed with the help of the Food Processing Ministry. Its cultivation will be beneficial for farmers and consumers. It is a win-win situation for all,” he added.

•According to the authorities, and the Indian Council of Agriculture Research, the fruit plant doesn’t need much water and can be cultivated on dry land, too. Horticulture Commissioner Prabhat Kumar told The Hindu that dragon fruit is now sold at a price of ₹400 per kg and the effort is to make it available to consumers for ₹100 per kg.

📰 A community and a health issue of concern
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IAS Parliament Mainstorming 2022 Environment & Geography PDF

07:28

IAS Parliament Mainstorming 2022 Environment & Geography PDF

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IAS Parliament Mainstorming 2022 Social Issues PDF

07:24

IAS Parliament Mainstorming 2022 Social Issues PDF

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THE HINDU NEWSPAPER IMPORTANT ARTICLES 08.07.2022

07:17
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Thursday, July 07, 2022

The HINDU Notes – 07th July 2022

12:32

 


📰 Understanding the all-time high in India’s trade deficit

After a year of record exports, why have India’s exports moderated in the first quarter?

•The chasm between exports and imports has widened in the first quarter of this year, with the cumulative trade deficit already hitting $70 billion, translating into an average of $23.3 billion a month. 

•While Russia’s conflict with Ukraine has propped up commodity prices globally, the spill over effects of runaway inflation are hurting global growth prospects as well as trade demand. The ‘lacklustre’ exports in June reflect an underlying slowdown in external demand.

•India is not alone as even super-exporter Germany recorded its first trade deficit in 30 years this May, albeit a minor one.

•The story so far: Having crossed a record $400 billion mark in 2021-22, India’s exports have moderated in the first quarter of this year, with May and June clocking upticks of 20.6% and 16.8%, respectively, slowing from a 30.7% rise in April. Sequentially too, overall goods exports declined for the third month in a row in June, even as imports continued to rise sharply, triggering fresh peaks for India’s monthly trade deficit.

How has the merchandise trade balance changed in recent months?

•While India’s exports were surging last year, imports were rising too, according to the Ministry of Commerce. Total goods exports in 2021-22 amounted to $422 billion, up sharply from the pre-COVID levels of $313 billion in 2019-20. This was the highest ever export number, and marked the first time in years that an official export target ($400 billion) was not only met, but surpassed. Imports hit a fresh high of $613 billion, compared to $394 billion in the pandemic affected previous year and $475 billion before that. The trade deficit thus stood at $191 billion, nearly double of 2020-21.

•The chasm between exports and imports has widened in the first quarter of this year, with the cumulative trade deficit already hitting $70 billion, translating into an average of $23.3 billion a month. By contrast, the previous highest monthly trade deficit was $22.9 billion in November 2021. That record has been surpassed significantly in the past two months, with the deficit hitting $24.3 billion in May and peaking to a new high of $25.6 billion in June. Economists reckoned the deficit was higher on a seasonally adjusted basis, with Nomura analysts estimating that it stood at $25.8 billion in May and widened to $29.9 billion in June. Economists at HSBC Securities and Capital Markets (India) pegged the trade deficit even higher in seasonally adjusted terms, at $31 billion from $26 billion in May.

•In value terms, imports jumped for the fifth month in a row to a fresh record of $63.6 billion in June, 51% over the same month a year ago and 6.9% higher than May’s tally, which in turn was 7.3% over the value of April’s inbound shipments. On the other hand, exports slid 2.6% from May’s $38.9 billion to $37.9 billion in June.

What is driving up imports and denting exports?

•While Russia’s continuing conflict with Ukraine since late February this year has propped up commodity prices globally, the spill over effects of runaway inflation are hurting global growth prospects as well as trade demand. The ‘lacklustre’ exports in June reflect an underlying slowdown in external demand, with weakness seen in exports of engineering products, chemicals, pharmaceuticals, cotton yarn and plastic products, Nomura said in a note. Outbound shipments for these four categories, part of India’s top ten exports, contracted. While petroleum exports were still up a sharp 98% from June 2021, they were $0.7 billion lower than May 2022 levels. And though exports of readymade garments, electronics and rice remained healthy, non-oil exports fell for the second successive month in June on a seasonally adjusted basis, HSBC cautioned in a note on Tuesday. “…We find that in volume terms, low-skill exports like agriculture and textiles have weakened more than high skill exports like engineering goods and pharma,” said its chief economist Pranjul Bhandari (along with co-authors).

•Imports, on the other hand, have literally been fuelled by energy sources — oil and coal, with the former driven by higher prices and the latter driven by India’s domestic coal supply crunch compelling power producers to import more each passing month. The volatility in financial markets and the sharp inflation have also driven up imports of gold — considered a safe haven and hedge against price rise. Coal imports were up 242% in June, gold by 170% (after a dazzling 789% uptick in May), and crude oil imports grew over 94%. But non-oil, non-gold imports (also known as core imports) also grew by a robust 31.7% in June — spurred by higher inflows of plastics, chemicals, electronics and vegetable oils. While higher prices are feeding a large part of the increase in headline imports, import volumes are also growing in line with steady domestic demand, Nomura analysts argued.

What will determine the trade trajectory through the rest of the year?

•With several developed economies expected to fall into recession over this year, the dip in exports could accelerate in coming months. The fresh taxes and restrictions imposed on petroleum exports could weaken outbound volumes further, while Indians’ appetite for gold may not be dented much by the higher import duties levied by the Centre last week. Oil and gold prices may have corrected a bit recently, but still remain significantly high. Moreover, coal imports will only surge further as Coal India’s production levels slide through the monsoon. The weakening rupee will continue to make imports costlier while slowing exports may not be able to capitalise enough on it. Indian exporters don’t expect a change in the narrative till the war in Europe abates, along with the high volatility in commodity prices. Economists at Nomura and HSBC expect ‘record high trade deficits’ to remain the norm for India, for now. But India is not alone, and can perhaps, take solace from the fact that even super-exporter Germany recorded its first trade deficit in 30 years this May, albeit a minor one.

📰 Taking stock of five years of GST

Findings show that it has lowered inflation of food items and raised inflation of non-food items

•The monumental indirect tax reform, the Goods and Services Tax (GST), has completed five years in existence. Before the implementation, it was said that it would be a boon to the economy in terms of higher revenue buoyancy, lower inflation, higher revenue, higher growth, and so on. On the completion of GST’s five years, it makes sense to ask what happened to inflation.

•During the 12 months preceding GST implementation, the Consumer Price Index (CPI) inflation was 3.66%, while it increased to 4.24% post-GST in the next 12 months. However, India is not alone in witnessing higher inflation. A similar pattern was observed in Australia, New Zealand, and Canada. An Australian Competition and Consumer Commission study showed that GST initially increases inflation.

•Based on the actual inflation numbers, one can conclude that GST had an inflationary impact on India. But this is not the correct approach to understand whether GST raised inflation in India. Before we systematically examine this issue, let us understand how GST can affect prices.

Understanding the mechanism

•In theory, implementing GST should not lead to a change in overall inflation. The revenue-neutral rate (RNR) is calculated so that it would not cause higher inflation. But revenue neutrality does not mean that prices would not go up or down in the economy. This is because the weight of goods in the consumption basket and their contributions to indirect tax collections are not the same. For example, food and drinks (which comprise 46% of the CPI index), rent, and clothing are all significant parts of the CPI basket that are either not taxed or taxed at low rates.

•Importantly, the effect of GST on the prices of certain goods and services depends on the structure and design of taxation, such as the level of exemptions, the rate structure of GST, the weight of goods and services in the CPI basket, the tax base, the efficiency of the administrative machinery, and so on.

•The RBI, in a 2017 report, showed that about half of the groups of items that GST covers are not in the CPI basket. This study found headline inflation might rise by ten basis points only. So, the effect of GST on prices was expected to be small. Finally, prior to the GST implementation, it was expected that prices would go down because GST harmonises indirect tax rates and eliminates the cascading effect. Thus, whether GST has any effect depends on how different factors affect each other.

•So, how can we ascertain whether GST has had an inflationary impact in India? To answer this, we turn to statistical modelling, which will give us a precise and neat estimate of the causal impact of an intervention. In a nutshell, this model uses pre-intervention data (before July 2017) to train the data to estimate the counterfactual estimates of inflation. A counterfactual estimate is nothing but an estimate of inflation if the intervention (in this case, GST) had not occurred. Then the causal estimate would be the difference between the actual and the counterfactual trends. The outcome variable chosen is retail inflation (CPI).

•Our statistical results provide us with an interesting picture of the impact of GST on price levels. First, we look into the overall price index (CPI). Here, the actual CPI growth in the study period is 4.61%, whereas the counterfactual estimate of inflation is 3.24%. This implies that without the GST implementation, the CPI inflation would have been 3.24%. This indicates that with the implementation of GST, CPI increased by 1.37 percentage points (pp). Second, we also find that CPI core inflation (which strips off volatile components such as food and fuel from the headline inflation) increased by 1.04pp in the post-GST period (actual inflation was 4.57%, counterfactual inflation was 3.53%).

•Third, GST is found to have a significant positive impact on inflation of commodity groups such as paan, tobacco and intoxicants, clothing and footwear, housing, and miscellaneous sectors (mainly consisting of services).

•In the case of non-exempted food and beverages, implementation of GST is found to have a negative impact of 4.42% on price levels.

Rise in inflation post GST

•The rise in inflation post-GST implementation could be due to the rise in the tax rate of some goods and services, the inclusion of business activities that were not taxed earlier, or the market structure. The average weighted GST rate was designed to be neutral, so it might not have contributed much to the observed higher inflation. Coverage of business activities under GST not taxed earlier would result in higher prices since the firms would pass on the cost to the consumers. Although the informal sector suffered following GST implementation, many firms have jumped to the tax net to take advantage of input tax credit and escape from the punishing reverse charge mechanism.

•There is another possibility which would cause higher inflation after the GST implementation. Textbook microeconomics teaches us that market competition leads to lower prices. And when market power increases, prices increase, and profit follows. As Nobel Prize-winning economist Joseph Stiglitz opined, rising market power is bad for the economy as it raises economic inefficiency and lowers the economy’s resiliency. Further, taking advantage of market power, it is possible that most firms would have passed the taxes to end consumers, resulting in a cost-push inflationary impact of the GST.

•Our statistical exercises provide conclusive proof that GST implementation has had an inflationary impact on the Indian economy. Let us recall that prices of petroleum products increased significantly, which might have contributed to the rise in CPI after the GST implementation.

•To summarise, our statistical results suggest that GST implementation has resulted in a decrease in inflation of food items and raised inflation of non-food items such as CPI, paan, tobacco and intoxicants, clothing and footwear, housing, miscellaneous, and non-exempted food and beverages.

•Our analysis suggests that prior to GST implementation, market concentration measured by various indicators was rising, suggesting an oligopolistic market structure. This determines whether the benefits of GST are passed down to the consumers or not. However, withpa the existence of market power, firms’ price includes a significant mark-up over marginal costs. Our results point out the possibility of profiteering in select segments after GST. To pre-empt this possibility, the government set up National Anti-profiteering Authority (NAA) to ensure companies did not use GST as an excuse to raise prices.

•Our findings suggest that NAA should monitor the prices of critical or essential goods and services to see the price impact of GST. Similarly, the Competition Commission of India should observe anti-competitive producer behaviour that hurts consumers via excessive price increases. These measures may ensure that producers do not take advantage of the GST.

📰 India-EU: global dynamics
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IAS Parliament Mainstorming 2022 Polity & Governance PDF

08:20

IAS Parliament Mainstorming 2022 Polity & Governance PDF

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THE HINDU NEWSPAPER IMPORTANT ARTICLES 07.07.2022

08:14
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Wednesday, July 06, 2022

The HINDU Notes – 06th July 2022

12:45

 


📰 Centre asks States to boost paddy sowing

There has been a 27% fall in the sown area to 43.45 lakh hectares till July 1 this season, show data

•The Centre has asked the State governments to take steps to increase the sowing of paddy in the wake of reports that the sown area has shrunk.

•At a conference of State Food Ministers on food and nutrition security of India here on Tuesday, Union Minister of Food and Public Distribution Piyush Goyal said the international demand for rice and wheat had increased, and asked the States to increase the sowing of paddy in this kharif season.

•The Centre’s data say that paddy has been sown on 43.45 lakh hectares till July 1, which is 27.05% less than the 59.56 lakh hectares during the corresponding period of 2021. “We request the States to increase the sowing of rice,” Mr. Goyal said. He added that when wheat sowing began in October during the rabi season, the States should increase the sowing as demand for wheat had increased globally.

•Meanwhile, the Uttar Pradesh and Gujarat governments urged the Centre not to supply wheat in place of rice. Gujarat Food Minister Nareshbhai Patel and Uttar Pradesh’s Minister of State for Food & Civil Supplies Satish Chandra Sharma urged the Centre to reconsider the decision to replace wheat with rice. “In areas like Saurashtra, people prefer wheat to rice. The Centre has assured us they will consider replacing rice with ragi and other millets,” Mr. Patel told The Hindu. Kerala Food Minister G.R. Anil said the State had requested increased rice allocation.

•The meeting discussed nutritional safety, particularly on fortified rice. Mr. Anil said though Kerala was ready to distribute fortified rice through its public distribution outlets, the State preferred indigenous varieties of rice which naturally contained nutrients. “We have asked the government to consider such varieties of rice rather than going for fortified rice,” he added.

•Mr. Goyal pulled up the States for not submitting their food Bills to the Centre. He said some States had submitted Bills since 2004 and said all Bills must be cleared by August 15. States such as Bihar, Punjab and Uttar Pradesh cited delays in audit clearance. Mr. Goyal offered them assistance in taking up the matter with the Comptroller and Auditor-General. He criticised States such as Telangana, West Bengal and Rajasthan which did not send Ministers to the conference.

NFSA ranking

•Odisha secured the first rank for the implementation of the National Food Security Act (NFSA). Uttar Pradesh and Andhra Pradesh stood second and third, respectively, in the index prepared by the Centre, which was released by Mr. Goyal. Among the special category States, Tripura secured the first rank. Himachal Pradesh and Sikkim stood at the second and third positions.

•Mr. Goyal said the ranking would lead to a healthy competition among the States. The Centre would launch a similar ranking for procurement too. “The Index denotes only the efficiency of TPDS operations, it does not reflect the level of hunger, if any, or malnutrition, or both, in a particular State or Union Territory,” the index report said.

•The findings showed that most States fared well in digitisation, Aadhaar seeding, and e-POS installation. “However, States and Union Territories can improve their performance in a few areas. Exercises such as conducting and documenting social audits thoroughly and operationalising functions of State food commissions across States and Union Territories will further bolster the true spirit of the Act,” the report added.

📰 The rush to overhaul education
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UN Ocean Conference: 198 countries adopt Lisbon Declaration

12:26

What is the News?

At the UN Ocean Conference 2022, all 198 members of the United Nations unanimously adopted the Lisbon Declaration on ocean conservation. 

What is the UN Ocean Conference?

The oceans cover 70% of the Earth’s surface, are the planet’s largest biosphere and are home to up to 80% of all life in the world. 

It generates 50% of the oxygen human need, absorbs 25% of all carbon dioxide emissions and captures 90% of the additional heat generated from those emissions. 

It is not just ‘the lungs of the planet’ but also its largest carbon sink – a vital buffer against the impacts of climate change.

Sustainable Development Goal 14: Life Below Water

It was adopted in 2015. It is an integral aspect of the 2030 Agenda for Sustainable Development and its set of 17 transformative goals.

Goal 14 stresses the need to conserve and sustainably use the world’s oceans, seas and marine resources.

What is the aim of the Lisbon Declaration?
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GS SCORE Mains 2022 Sampoorna: Contemporary Issues of International Relations PDF

08:06

GS SCORE Mains 2022 Sampoorna: Contemporary Issues of International Relations PDF

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