August 09 Current events

RBI holds rates, MPC splits on stance

Context:

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept interest rates on hold for the seventh straight time.

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Monetary Policy, Inflation)

Dimensions of the Article:

1. About the recent Monetary Policy Committee’s decisions
2. Inflation target hiked by the MPC
3. Back to Basics: What is the MPC?

About the recent Monetary Policy Committee’s decisions

• The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday kept the key policy rate — Repo rate, or the RBI’s lending rate to banks — unchanged at four per cent for the seventh time in a row.
• The MPC has also kept the reverse repo rate — RBI’s borrowing rate from banks — unchanged at 3.35 per cent.
• The MPC has also raised the inflation target for fiscal 2001-22 but maintained the growth forecast at 9.5 per cent (pegged Q1 growth at 21.4% followed by 7.3% in Q2, 6.3% in Q3 and 6.1% in Q4).
• The six-member MPC panel, headed by RBI Governor voted in favour keeping key policy rates unchanged and decided to continue with an accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward.
• The RBI panel says the nascent and hesitant recovery in the economy — which faced rough weather due to the Covid second wave and lockdowns in states — needs to be nurtured through fiscal, monetary and sectoral policy levers.
• Elevated inflation level and delayed recovery in the economy would have prompted the panel to keep rates steady. Interest rates in the banking system are expected to remain stable in the next couple of months.
• Although RBI retained its policy stance, it raised the amount of variable rate reverse repo (VRRR) auctions by ₹2 trillion to drain excess liquidity from the banking system.
• The RBI Governor said that these enhanced VRRR auctions should not be misread as a reversal of the accommodative policy stance as the amount absorbed after the fixed rate reverse repo is expected to remain more than Rs. 4 trillion at the end of September 2021.

Inflation target hiked by the MPC

• The RBI panel has hiked the inflation target for fiscal 2021-22 to 5.7 per cent from 5.1 per cent projected earlier.
• Although the target is below the RBI’s upper band of inflation target of 6 per cent, input prices are rising across manufacturing and services sectors and weak demand and efforts towards cost cutting are tempering the pass-through to output prices.
• With crude oil prices at elevated levels, a calibrated reduction of the indirect tax component of pump prices by the Centre and states can help to substantially lessen cost pressures.
• The combination of elevated prices of industrial raw materials, high pump prices of petrol and diesel with their second-round effects, and logistics costs continue to impinge adversely on cost conditions for manufacturing and services, although weak demand conditions are tempering the pass-through to output prices and core inflation.

Back to Basics: What is the MPC?

The Monetary Policy Committee (MPC) is the body of the RBI, headed by the Governor, responsible for taking the important monetary policy decisions about setting the repo rate. Repo rate is ‘the policy instrument’ in monetary policy that helps to realize the set inflation target by the RBI (at present 4%).

Membership of the MPC

• The Monetary Policy Committee (MPC) is formed under the RBI with six members.
• Three of the members are from the RBI while the other three members are appointed by the government.
• Members from the RBI are the Governor who is the chairman of the MPC, a Deputy Governor and one officer of the RBI.
• The government members are appointed by the Centre on the recommendations of a search-cum-selection committee which is to be headed by the Cabinet Secretary.

Objectives of the MPC

• Monetary Policy was implemented with an initiative to provide reasonable price stability, high employment, and a faster economic growth rate. The major four objectives of the Monetary Policy are mentioned below:
  1. To stabilize the business cycle.
  2. To provide reasonable price stability.
  3. To provide faster economic growth.
  4. Exchange Rate Stability.

• Average inflation overshooting the upper tolerance level or remaining below the lower tolerance level for any three consecutive quarters constitutes a failure to achieve the inflation target.
• In such an event, the Reserve Bank of India (RBI) is required to send a report to the Centre, stating the reasons for the failure to achieve the inflation target, the remedial actions it proposes to initiate, and an estimate of the time-period within which it expects to achieve the inflation target through the corrective steps proposed.

India, China pull back troops from Gogra

Context:

India and China have undertaken disengagement from Gogra area of Eastern Ladakh following an agreement at the 12th round of Corps Commander talks.

Relevance:

GS-II: International Relations (India’s Neighbors, Foreign Policies affecting India’s Interests), Prelims, GS-I: Geography (Maps)

Dimensions of the Article:

1. About Current Disengagement between India and China
2. Understanding these locations and their importance

About Current Disengagement between India and China

• The agreement on Patrolling Point (PP)17A (Gogra post) was reached but China is not inclined to move back from PP15 (Hot Springs area); it continues to insist that it is holding its own side of the Line of Actual Control (LAC).
• Both sides agreed to resolve these remaining issues in an expeditious manner in accordance with the existing agreements and protocols and maintain the momentum of dialogue and negotiations.
• They also agreed that in the interim they will continue their effective efforts in ensuring stability along the LAC in the Western sector and jointly maintain peace and tranquility.
• Along the LAC between India and China, Indian Army has been given certain locations that its troops have access to patrol the area under its control. These points are known as patrolling points, or PPs, and are decided by the China Study Group (CSG).
• Barring certain areas, like Depsang Plains, these patrolling points are on the LAC, and troops access these points to assert their control over the territory.

Understanding these locations and their importance

• Hot Springs is just north of the Chang Chenmo river and Gogra Post is east of the point where the river takes a hairpin bend coming southeast from Galwan Valley and turning southwest.
• The area is north of the Karakoram Range of mountains, which lies north of the Pangong Tso lake, and south east of Galwan Valley.
• The area lies close to Kongka Pass, one of the main passes, which, according to China, marks the boundary between India and China.
• India’s claim of the international boundary lies significantly east, as it includes the entire Aksai Chin area as well.
• Hot Springs and Gogra Post are close to the boundary between two of the most historically disturbed provinces (Xinjiang and Tibet) of China.

Equitable food system and Zero Hunger goal

Context:

According to a recent report by the United Nations, the goal of achieving Sustainable Development Goals (SDG) 2 i.e., ‘Zero Hunger’ has been hit in the wake of the novel coronavirus disease (Covid-19) pandemic.

According to a United Nations’ report on the Food System, today’s food systems are heavily afflicted by power imbalances and inequality, and do not work for most women.

Relevance:

GS-II: Social Justice and Governance (Issues related to Hunger and Poverty, Government Policies and Interventions), GS-III: Indian Economy. Agriculture (Food Security, Types of Resources)

Dimensions of the Article:

1. About the U.N. report on Inequitable Food System
2. Report on ‘Zero Hunger’ SDG and the Pandemic
3. Way Forwards

About the U.N. report on Inequitable Food System

• Food systems are a complex web of activities involving production, processing, handling, preparation, storage, distribution, marketing, access, purchase, consumption, food loss and waste, as well as the outputs of these activities, including social, economic and environmental outcomes.
• Women farmers are disproportionately more affected by climate change and land degradation as they are less likely than men to receive key information on climate and agricultural information that would allow them to plan for climate concerns.
• Rural women accounting for nearly half the agricultural workforce in developing countries, face discrimination. They have very little land rights, face difficulties obtaining ownership, do not have access to credit and are engaged in unpaid work.
• Though indigenous women play a crucial role in eradicating hunger and malnutrition, they face high levels of obesity and are more susceptible to chronic diseases due to limitations in the recognition and exercise of rights that have hampered their access to equitable systems of food.
• Rural women were among the worst affected among the food insecure population of 821 million (as of 2017). As many as 31 African countries depended on external food aid till 2019.
• Migration among youths over the course of urban transition have had impacts on the gendered nature of economic roles. Such migration has entailed a growing gap between the location of food production and food consumption.
• A 2020 UN report had hinted how epidemics can significantly reduce women’s economic and livelihood activities, increasing poverty rates and exacerbating food insecurity.

Report on ‘Zero Hunger’ SDG and the Pandemic

• Food security does not only rely on food availability, but also on food access. Hence, if food security and poverty can be seen as part of the same battle, reduction of poverty should not only be sought through lower food prices but also through higher income.
• Environmental health through a more sustainable agriculture also establishes a link between SDG2 (Zero Hunger) and SDG 3 (good health and well-being).
• Gender inequality makes several women food insecure because female workers hold a substantial share of the agricultural workforce, but face difficulties in accessing land, livestock, education, extension and financial services.

Way Forwards

• The U.N. has called for more such independent, social systems at the national as well as the regional level to strengthen institutional architecture and make decision-making processes related to food systems more inclusive.
• The U.N. urged the systems to adopt policies that eliminate barriers in access to fundamental services, ensuring, for example, the right to food, shelter and health.
• The U.N. stressed that inequitable systems and structures that enable and exacerbate inequalities for food systems workers and consumers be dismantled and governments, businesses, and organizations be held accountable for ensuring equitable livelihoods.
• Facilitating new investment, research and innovation for sustainable agriculture while reducing food waste and losses at the same time will go a long way towards attaining SDG -2.
• Changing our consumption patterns to leverage considerable benefits on SDG outcomes by relieving pressure on natural resources and fostering the health benefits.

Abanindranath Tagore’s 150th Birth anniversary

Context:

Year-long celebrations marking 150 years of Abanindranath Tagore will kick off in August 2021, with a host of online workshops and talks paying tributes to the leading light of the Bengal School of Art.

Relevance:

Prelims, GS-I: Art and Culture

Dimensions of the Article:

1. Abanindranath Tagore

Abanindranath Tagore

• Abanindranath Tagore was the principal artist and creator of ‘Indian Society of Oriental Art’ and the first major exponent of swadeshi values in Indian art.
• He was the First Indian artist to gain international recognition.
• He founded the influential Bengal school of art, which led to the development of modern Indian painting.
• Abarindranath Tagore was a nephew of the poet Rabindranath Tagore.
• Popularly known as ‘Aban Thakur’, his books Rajkahini, Budo Angla, Nalak, and Ksheerer Putul are landmarks in Bengali language children’s literature.
• Tagore sought to modernize Moghul and Rajput styles in order to counter the influence of Western models of art, as taught in Art Schools under the British Raj and developed the Indian style of painting, later known as Bengal school of art.
• His work was very successful and was eventually accepted and promoted as a national Indian style within British art institutions under the epithet of Indian Society of Oriental Art.