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Here are the topics covered for 18 August 2023: Poverty in India, Headline Inflation, Bond Yields, Disinvestment, CAPEX Spending, Heat Action Plan, Minamata Convention, Atmanirbhar Bharat Rojgar Yojana, CPGRAMS Portal, FloodWatch App.
Table of Contents:
GS Paper 1:
- Poverty in India
GS Paper 3:
- Headline Inflation
- Bond Yields
- CAPEX Spending
- Heat Action Plan
- Minamata Convention
Facts for Prelims:
- Atmanirbhar Bharat Rojgar Yojana
- CPGRAMS Portal
- FloodWatch App
GS Paper 1
Poverty in India
- The PM in its recent speech has highlighted the findings of the National Multidimensional Poverty Index (NMPI) i.e., 13.5 crore people have come out of poverty.
- The inaugural edition of the project was launched in 2021, with the objective of breaking down the Global MPI and crafting an India-specific MPI that aligns with global standards.
- The ultimate ambition is to formulate detailed Reform Action Plans, aiming to enhance India’s standing in the Global MPI rankings.
- The NITI Aayog serves as the primary agency for the National MPI, grading States and Union Territories based on their achievements.
- The Official Poverty Line in India is determined by consumption expenditure, denoted in rupees.
- Over the years, committees chaired by D T Lakdawala (1993), Suresh Tendulkar (2009), and C Rangarajan (2014) have delineated subsequent “poverty lines” for the country.
- Specifically, the Rangarajan Committee defined the poverty line as an income of Rs 32 for rural regions and Rs 47 for urban areas. Additionally, the National Sample Survey Office conducted Consumption Expenditure Surveys (CES) every five years.
GS Paper 3
- The Reserve Bank of India (RBI) in its recent article highlighted that the headline inflation is predicted to average well above 6% in the second quarter of FY24.
What is Headline Inflation?
- The Bureau of Labor Statistics releases the raw inflation figure monthly, known as headline inflation, through the Consumer Price Index (CPI).
- Unlike, other measures, headline inflation doesn’t exclude fluctuating numbers (highly volatile figures), even those that change irrespective of the economic landscape.
- This type of inflation typically mirrors changes in living expenses, offering valuable insights to consumers in the market.
- However, it’s worth noting that the headline number doesn’t account for seasonal changes or the frequently unstable prices of food and energy, which are excluded in the core CPI.
What is Core Inflation?
- Core inflation reflects the price variations of goods and services, excluding the food and energy sectors.
- This inflation metric omits these items due to their significantly fluctuating prices.
- Most commonly, the consumer price index (CPI) is used to compute it, serving as a gauge for the prices of goods and services.
More about the news:
- The unprecedented shock to tomato prices spread to the pricing of other vegetables, according to the RBI, which caused the increase in inflation in June and July month of 2023.
- Headline inflation, after reaching a low of 4.3 per cent in May 2023, rose in June and is expected to surge during July-August led by vegetable prices.
- While the vegetable price shock may reverse quickly, possible El Niño weather conditions along with global food prices need to be watched closely against the backdrop of a skewed southwest monsoon so far.
- Despite a strong first quarter, the global recovery is sluggish due to weaker industrial production and trade.
- In the second quarter of 2023–2024, the Indian economy is starting to pick up steam in this challenging global environment.
- Private consumption and fixed investment are domestic drivers that are balancing the drag from the decline in exports.
- The surge in vegetable costs, driven by tomatoes, will put significant upward pressure on the near-term inflation trajectory in the months to come.
- There has been significant improvement in the progress of the monsoon and kharif sowing in July; however, the impact of the uneven rainfall distribution warrants careful monitoring.
- Crude oil prices have firmed up amidst production cuts.
- Manufacturing services and infrastructure firms polled in the Reserve Bank’s enterprise surveys expect input costs to ease but output prices to harden.
- CPI inflation is projected at 5.4 per cent for 2023-24, with Q2 at 6.2 per cent, Q3 at 5.7 per cent and Q4 at 5.2 per cent, with risks evenly balanced. CPI inflation for Q1:2024-25 is projected at 5.2 per cent
- The MPC also decided to keep the policy stance unchanged as ‘Withdrawal of Accommodation’.
Courtesy: The Indian Express
- After the RBI decided to keep its monetary policy stance unchanged, the yields on 10-year benchmark bonds and Treasury Bills rose sharply as retail inflation spiked to 7.44%.
What are Bond Yields?
- There is a certain amount of capital that one shall invest in a bond. The return on that invested capital is the bond yield.
- The bond yield and bond prices are inversely proportional. The bond yield will eventually drop by increasing the bond price.
- If an investor wishes to have a low risk and wants to hedge a mixed portfolio, then the investors must invest in low-yield bonds. On the other hand, if the investor wishes to have a higher risk for a more significant profit, they must opt for high-yield bonds.
- Bond yields and bond prices tell us about the whole economy and inflation.
What are Treasury Bills?
- These are government bonds or debt securities with a maturity of less than a year.
- T- bills are issued to meet short-term mismatches in receipts and expenditures. Bonds of longer maturity are called dated securities.
Reasons for Increase in Yields:
- India’s benchmark 10-year bonds rose to 7.25 per cent from the previous level of 7.20 per cent and T-Bill yields rose by up to 13 basis points. Ten-year bond yields have gone up by 17 basis points in the last month.
- RBI directed banks to maintain an incremental cash reserve ratio (I-CRR) of 10 per cent for banks in order to manage surplus liquidity in the banking system.
- The temporary measure will suck out over Rs 1 lakh crore of excess liquidity from the banking system.
- The retail inflation also saw a big rise amid skyrocketing vegetable prices. A rise in bond yields indicates that there’s upward pressure on interest rates. The rupee fell by 20 basis points to 83.15 against the dollar.
- The liquidity stress in the system is getting reflected in the market after the invocation of the incremental CRR. Surplus liquidity has dried up to just Rs 21,000 crore. This was reflected in the T-Bill auction cut-offs.
- The rise in yields is not restricted to India alone. US yields kept rising after it raised the rate by 25 basis points.
Courtesy: Forbes India
- With the Lok Sabha election approaching, the government has decided to slow down on large disinvestment plans such as its stake sale in IDBI Bank. This could result in a shortfall of Rs 30,000 crore or 60% of the budget estimates for disinvestment of Rs 51,000 crore.
What is Disinvestment?
- Disinvestment means the sale or liquidation of assets by the government, usually Central and state public sector enterprises, projects, or other fixed assets.
- The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs, such as to bridge the revenue shortfall from other regular sources.
- In some cases, disinvestment may be done to privatise assets. However, not all disinvestment is privatisation.
- Some of the benefits of disinvestment are that it can be helpful in the long-term growth of the country; it allows the government and even the company to reduce debt.
- Disinvestment allows a larger share of PSU ownership in the open market, which in turn allows for the development of a strong capital market in India.
Objectives of Disinvestment in India:
- Reducing the fiscal burden on the exchequer
- Improving public finances
- Encouraging private ownership
- Funding growth and development programmes
- Maintaining and promoting competition in the market
- For 2021-22, the government has outlined a bold divestment goal of Rs. 1,75,000 crores.
- This objective will include selling stakes in public enterprises and financial institutions, which includes two state-owned banks and a single insurance firm.
- Necessary legal changes are on the horizon for the LIC IPO, a move seen as a game changer by the government in the insurance domain.
- During her budget address, the finance minister shared plans to privatize the majority of public sector entities, with exclusions only in four key sectors.
- The policy is poised to delineate a definitive direction for both strategic and non-strategic divestments.
- The fiscal year 2021-22 will witness the finalized strategic sales of entities like IDBI Bank, BPCL, Shipping Corporation, Container Corporation, and Neelachal Ispat Nigam Ltd.
- An SPV (Special Purpose Vehicle) will be established to capitalize on land owned by CPSEs, either through sales or alternative uses of idle land.
Courtesy: Financial Express
- The Finance Secretary in his recent statement highlighted the robust pace of capital expenditure by the infrastructure ministries, and the interest-free capex loans to the state government, the Centre will likely spend 60% of the Rs. 10 trillion capex budgets for the current fiscal.
What is Capital Expenditure?
- Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.
- It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividends in future.
- Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:
- Acquiring fixed and intangible assets
- Upgrading an existing asset
- Repairing an existing asset
- Repayment of loan
- Capital expenditure, which leads to the creation of assets is long-term in nature and allows the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency.
- It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
- The fiscal deficit will be reined in at the targeted level of 5.9% of the Gross Domestic Product (GDP) in FY24.
- The Centre has raised the capex target by 36% on-year to Rs 10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 from Rs 7.36 trillion (including Rs 81,200 crore to states) actual spending in FY23, in sync with the public investment-led economic recovery plan.
- The government’s expenditure, especially capex, has been robust with the achievement of about 28% of the annual target in Q1FY24 compared with 23.4% in the year-ago quarter.
- Railways has completed 44% of its annual capex of Rs 2.6 trillion (including Rs 2.4 trillion budget support) in the first four-and-half months of the current financial year.
- If there is additional pressure on prices due to the upcoming festival season, an increased supply in the next two months of many of the seasonal items will cool prices.
- The sharp increase in vegetable prices and elevated inflation in other food categories such as cereals, pulses, spices, and milk have driven the increase in retail inflation.
Heat Action Plan
Courtesy: Hindustan Times
- The Delhi Disaster Management Authority (DDMA) has launched Delhi Heat Action Plan 2023 to ensure the efficient functioning of basic services like hospitals and schools that get disrupted due to heatwaves.
About the Delhi Heat Action Plan 2023:
- The Delhi HAP relies on heat wave forecasts from the India Meteorological Department for the next seven days for issuing colour-coded alerts to the local population.
- A ‘red alert’ will be triggered when the maximum temperature exceeds the normal temperature by at least 6 degrees Celsius.
- An ‘orange alert’ will be issued if the maximum temperature is four to five degrees Celsius above normal, while a ‘yellow alert’ will be given for a departure from normal ranging from 0 to 3.9 degrees Celsius.
- The heat action plan will be implemented in three phases:
- Phase 1 (pre-heat season — February and March) is dedicated to developing early warning systems and a communication plan for issuing alerts to the general public, healthcare professionals, and voluntary groups (caregivers). The focus is on training and capacity-building for these groups.
- In Phase 2 (March to July), “cooling centres”, including temples, public buildings, malls, and temporary night shelters, will be activated to offer outdoor workers, slum communities, and other vulnerable populations access to shaded areas in response to heat alerts.
- Under Phase 3, which will be implemented in the July-September period, cool resting centres will be established in high-risk areas and tree plantation will be undertaken in heat hotspots.
- It recommends creating water points and providing oral rehydration solution (ORS) at construction sites, bus stops, and other public places, especially during events like rallies in the summer.
- Uninterrupted power supply to critical facilities such as hospitals and health centres will be given priority, the night shelters will remain open throughout the day, and large LED display boards will be installed at key locations to share temperature forecasts with the general public.
- 16th August 2023, marks the six years of the Minamata Convention on Mercury.
About Minamata Convention:
- In 2013, the Minamata Convention on Mercury was ratified in Geneva, marking the inaugural global legal agreement aimed at shielding both the environment and human health from the detrimental consequences of mercury.
- The convention is named after the Japanese city of Minamata, which in the 1950s became the epicentre of a neurological ailment resulting from intense mercury contamination, known as Minamata disease.
- The convention was enacted in 2017. As of now, it has 144 member parties and 128 signatories.
- In 2018, India ratified the convention, allowing for the continued utilization of products containing mercury and processes involving mercury compounds until 2025.
- The Convention requires parties to:
- Minimize, and when possible, cease the use and release of mercury in Artisanal and Small-Scale Gold Mining.
- Regulate mercury air emissions from coal-powered power stations and industrial boilers.
- Diminish or eliminate mercury in items such as batteries, switches, lights, cosmetics, pesticides, and dental fillings.
- Oversee the supply and trading of mercury; ensure safer storage and disposal, and develop plans to manage contaminated locations.
Facts for Prelims
Atmanirbhar Bharat Rojgar Yojana (ABYR)
Courtesy: Aatmnirbhar Sena
- The government hasn’t met its employment generation goal in the formal sector under ABRY.
- Introduced in 2020 by the Ministry of Labour & Employment as a component of the Atmanirbhar Bharat package 3.0.
- ABRY’s purpose is to provide incentives to employers for generating new jobs and recovering job losses sustained during the Covid-19 crisis.
- The scheme is designed to alleviate the financial pressures on employers, thus motivating them to employ more individuals.
- The Employees’ Provident Fund Organisation (EPFO) oversees its implementation.
Courtesy: CSC Grow
- CPGRAMS is a 24×7 accessible online platform for citizens to register their grievances with public authorities concerning service delivery issues.
- This unified portal links all Ministries/Departments of the Government of India and the states.
- Crafted by the National Informatics Centre, it falls under the purview of the Department of Administrative Reforms and Public Grievances (DARPG).
- The platform supports 22 scheduled languages in addition to English. However, it does not address issues related to RTI, religious topics, or cases that are subjudice, among others.
- The Central Water Commission (CWC) has launched the mobile application ‘FloodWatch’.
- The objective is to provide real-time flood information and predictions for up to a week through mobile phones.
- The in-house developed app boasts both text and audio broadcast functionalities.
- Users can access information in both English and Hindi.