RBI surprises with 40 bps rate increase, amid inflation ‘alarm’ #GS3 #Economy
The Reserve Bank of India (RBI), in a sudden move on Wednesday, raised the repo rate by 40 basis points (bps) to 4.4% citing inflation that was globally “rising alarmingly and spreading fast”. The repo rate increase was the first since August 2018.
In an unscheduled announcement, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) had in an off-cycle meeting reviewed the latest economic developments including the impact of the war in Ukraine and decided to increase the policy interest rates in a bid to curb accelerating inflation.
“As the war draws on and sanctions and retaliatory actions intensify, shortages, volatility in commodity and financial markets, supply dislocations and, most alarmingly, persistent and spreading inflationary pressures are becoming more acute with every passing day,” Mr. Das noted.
Observing that domestic inflation in April was also expected to be elevated, he said, “The MPC judged that the inflation outlook warrants an appropriate and timely response… to ensure that the second-round effects of supply side shocks on the economy are contained and long-term inflation expectations are kept firmly anchored”.
The MPC, however, retained its ‘accommodative’ policy stance even as it focuses on withdrawal of accommodation to keep inflation within the target range while supporting growth. As part of the withdrawal of accommodation, the RBI also raised the Cash Reserve Ratio (CRR) by 50 basis points to 4.5% with effect from May 21 so as to drain surplus liquidity of about Rs. 87,000 crore.
Asserting that the fundamentals of the Indian economy remained strong, Mr. Das said, “Our monetary policy actions… will strengthen and consolidate the medium-term growth prospects of the economy”.
He pointed out that sustained high inflation “inevitably hurts savings, investment, competitiveness and output growth”. As part of the increases, the standing deposit facility (SDF) rate would become 4.15% and the marginal standing facility (MSF) and bank rate would be at 4.65%.
“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%,” the MPC noted.
President has no role to play in Perarivalan’s plea, says SC #GS2 #Governance
The Supreme Court disagreed with the Central government’s suggestion that the court should wait till the President took a call on Rajiv Gandhi assassination case convict A.G. Perarivalan’s mercy plea referred to him by the Tamil Nadu Governor for a decision.
A Bench of Justices L. Nageswara Rao and B.R. Gavai said the Centre had missed the obvious question posed by the court by a mile. The pertinent question was whether the Governor had, in the first place, the authority to refer the mercy plea to the President.
Under Article 161 of the Constitution, the Governor was bound by the aid and advice given by the Tamil Nadu Council of Ministers in September 2018 to the Governor to release Perarivalan, who has already served over 30 years of his life sentence. The Governor prima facie had no authority to transfer the mercy plea to the President. There was no role for the President here under the Constitution, the court told Additional Solicitor General K.M. Nataraj, for the Centre.
“We cannot shut our eyes to something that is happening against the Constitution. We have to follow our Bible — the Constitution of India,” Justice Rao told the Centre. Justice Gavai said no authority, however high, could put a spoke in the working of the Constitution.
Mr. Nataraj urged the court, “The file has been referred by the Governor to the President. If the President refers it (mercy plea) back to the Governor, there is no need to discuss this issue at all… The President himself will decide if the Governor could have referred the file to him or not. Leave it to the President to take a call on whether to pardon or reject or send the file back to the Governor…”.
Justice Rao shot back, “We thought it was our duty to interpret the law and not the President’s… The question whether the Governor was right in referring the State Cabinet’s wish to the President, instead of exercising his duty under Article 161, has to be decided by the court”.
Justice Gavai said there had been ample time for the Centre to return the mercy plea file to the Governor. Mr. Nataraj said, “No, it was only recently the file came to us”.
Justice Gavai told Mr. Nataraj, “The Governor decided to send the file to the President on January 27, 2021… It is May 5, 2022 today… And you are saying it came to you only ‘recently’? This is a matter concerning personal liberty”. Mr. Nataraj persisted, “The man is out on bail”. Justice Rao reminded the Centre, “But he has a Damocles’ sword hanging over him”. The court said Perarivalan was not interested in these “finer questions of law”.
J&K delimitation panel award likely to be notified today #GS2 #Governance
After over two years since it was appointed, the Delimitation Commission for Jammu and Kashmir is likely to make its award public on Thursday, according to officials aware of the development.
The number of constituencies and their boundaries is likely to be made public through a Gazette notification on Thursday morning, an official said. The completion of the delimitation exercise would pave the way for elections in Jammu and Kashmir, the first since the erstwhile State was split into two Union Territories and its special status under Article 370 of the Constitution withdrawn in August 2019.
The term of the commission, headed by Justice Ranjana Prakash Desai (retd.) and including Chief Election Commissioner Sushil Chandra as a member, is set to end on Friday, after two extensions — first from March 6, 2021 to March 6 this year and then for two months till May 6.
Appointed on March 6, 2020, the commission was tasked with redrawing the boundaries of Assembly constituencies in Jammu and Kashmir and increasing the number of seats from 83 to 90. In its draft report, the commission proposed increasing six seats in Jammu region and one in Kashmir.
The commission had published its draft report, seeking public objections and suggestions, on March 14, and then visited Jammu and Kashmir in April to hold consultations.
The National Conference, whose three MPs are associate members of the Delimitation Commission, had rejected the panel’s draft reports, raising concerns over the variation in population across seats and the creation of “islands” where parts of a constituency are completely cut off from the rest of it.
The NC also questioned the validity of the delimitation exercise, which is being carried out under the Jammu and Kashmir Reorganisation Act, 2019, a challenge to which is pending in the Supreme Court.
Modi holds bilateral talks with Nordic leaders #GS2 #IR
Prime Minister Narendra Modi on Wednesday held a series of bilateral meetings with his counterparts from Norway, Sweden, Iceland and Finland. Later, he departed for Paris, where he is to meet French President Emmanuel Macron.
Mr. Modi, who arrived at Copenhagen on Tuesday from Berlin on the second leg of his visit to three European nations, met the four Nordic leaders on the sidelines of the second India-Nordic Summit in the Danish capital.
He began his day by meeting Norwegian counterpart Jonas Gahr Store. “Our talks included furthering cooperation in sectors such as the blue economy, clean energy, space, healthcare and more. Norway is a key pillar of India’s recently announced Arctic Policy,” Mr. Modi tweeted. Mr. Modi also had a meeting with Swedish counterpart Magdalena Andersson.
“We discussed ways to deepen bilateral cooperation in key sectors like security, IT, research and innovation. Strong ties between our nations will benefit our people,” Mr. Modi tweeted. In a separate meeting, Mr. Modi held talks with Iceland Prime Minister Katrin Jakobsdottir.
Mr. Modi lauded Ms. Jakobsdottir’s personal efforts at promoting gender equality and briefed her on India’s advances on the issue, the External Affairs Ministry said. Mr. Modi also met his Finnish counterpart Sanna Marin and discussed ways to further cement bilateral ties in trade, investment, technology, culture and other sectors. India’s trade with Nordic countries stands at over $5 billion (2020-21).
Highest sex ratio at birth in Ladakh #GS2 #Governance
Ladakh recorded the highest sex ratio at birth in the country in 2020, followed by Arunachal Pradesh, Andaman and Nicobar Islands, Tripura and Kerala, according to the annual report on Vital Statistics based on 2020 Civil Registration System report.
“Highest Sex Ratio at Birth (SRB) based on registered events has been reported by Ladakh (1,104) followed by Arunachal Pradesh (1,011), A&N Islands (984), Tripura (974), and Kerala (969),” the report released by the Registrar-General of India on Tuesday said. Sex ratio at birth is the number of females per thousand males.
The lowest sex ratio was reported by Manipur (880), followed by Dadra and Nagar Haveli and Daman and Diu (898), Gujarat (909), Haryana (916) and Madhya Pradesh (921).
In 2019, the highest sex ratio at birth was reported by Arunachal Pradesh (1,024), followed by Nagaland (1,001), Mizoram (975) and A&N Islands (965), and the lowest sex ratio was reported by Gujarat (901), Assam (903), Madhya Pradesh (905) and Jammu & Kashmir (909).
The report said that the requisite information from Maharashtra, Sikkim, Uttar Pradesh and Delhi on sex ratio was “not available.” They had not provided the said data to the RGI in 2019 as well.
“The Sex Ratio at birth of registered events is an important indicator to map the sex differential of the population at the beginning of their life. The sex ratio at birth has been calculated after deducting the delayed registration of more than one year for the year 2020,” the report said.
None of the States or UTs have recorded sex ratio below 880. The report noted that 1,43,379 infant deaths were registered in 2020 and the share of rural areas was only 23.4%, while that of urban area was 76.6% in total registered infant deaths. “Non-registration of infant deaths in rural areas was a cause of concern,” it stated.
SC is loud and clear on noise pollution #GS3 #Environment
The Supreme Court judgments which govern the use of loudspeakers were intended to protect citizens from becoming “forced audience” to noise.
Recent days have seen tensions rise over the use of loudspeakers in temples and mosques.
However, the court, while interpreting the law on the use of loudspeakers in 2005, had made it clear that it was not concerned with “any religion or religious practices”.
The court had made it clear that its judgments regulating the use of loudspeakers and timings were based on the legal principle that “freedom from noise pollution is a part of the right to life under Article 21 of the Constitution”.
“Noise interferes with the fundamental right of citizens to live in peace and to protect themselves against forced audience… We are not concerned with any religion or religious practices; we are concerned only with the fundamental right of the citizens and the people to protect themselves against noise pollution and forced audiences,” the court had made its intentions clear in its 2005 judgments.
The top court had made it clear that nobody, whatever be the religion or purpose, “can claim a right to create noise even in his own premises which would travel beyond his precincts and cause nuisance to neighbours or others”. “No one can claim a fundamental right to create noise by amplifying the sound of his speech with the help of loudspeakers,” the court explained.
‘Not a must’
On the use of loudspeakers in religious practices, the top court, in one of the judgments, reproduced parts of a newspaper column which said the objective of any religion was not to force anyone to listen to its expressions of faith. The court had said the logic that loudspeakers were not a must to spread religious devotion appealed to it.
Star rating for food may mislead buyers’ #GS3 #SnT
The nutrition labelling system for food packets recommended by the Food Safety and Standards Authority of India (FSSAI) will not only fail to enable consumers to make healthy choices but also mislead them about their nutritional value, warn experts who have called for the need to “insulate” policy-making from the influence of the food industry.
At a meeting in February, the FSSAI decided that when preparing the draft regulations for a Front of Package Labelling (FoPL) system, it will propose the health star rating system, which rates the overall nutritional profile of packaged food and assigns it a rating from half a star to five stars.
The decision was based on an Indian Institute of Management (IIM), Ahmedabad study commissioned by the FSSAI. The move has upset public health experts who favour the warning label system such as a black-and-white stop symbol used in Chile or the red warning symbol in Israel for each of the three ingredients — salt, sugar and fat.
“Warning signs educate consumers about harmful ingredients present in a food product and help them make healthy choices. They also give a repetitive educational message so that even for domestic cooking or buying street food that warning bell goes off. This educational component of a properly constructed warning system is missing in the health star [rating] system, which are like a movie rating system and are of no use,” K. Srinath Reddy, president, Public Health Foundation of India (PHFI), said at a press conference.
He said that the system being proposed by the food regulator was “devious” as it misled consumers about a product’s nutrition profile.
Under the health star rating system, an algorithm assigns a product a certain number of stars based on “positive” components (fibre, protein, and fruit, vegetable, nut and legume content) balanced against other components (energy, sugars, sodium, and saturated fat). He was launching a position statement endorsed by 21 organisations, including the Centre for Science and Environment, Consumer Voice, Cuts International, Indian Academy of Paediatrics, and the PHFI.
In the statement, the 21 organisations have demanded that warning labels should be made mandatory when the draft regulation is made public for stakeholder consultations; that “decisions on public health issues should be made without any conflicts of interest even at a consultative level”; and that while interactions with the food industry may happen on different platforms, they should not be part of meetings on policy decisions.
In the February meeting, of the 26 external participants, 17 were from the industry, including Dabur, Nestle, Hindustan Unilever and PepsiCo. Educational component of a properly constructed warning system is missing in the health star system.
RBI move sends stocks into downward spiral #GS3 #Economy
The sudden decision of the Reserve Bank of India (RBI) to raise interest rates with immediate effect on Wednesday caused a major sell-off in equities. The last time the repo rate was increased was in August 2018. The off-cycle announcement on Wednesday caught investors by surprise.
The S&P BSE Sensex fell 1.306.96 points, or 2.29%, to 55,669. The top losers were Bajaj Finance (4.29%), Bajaj Finserv (4.18%), Titan (4.11%), IndusInd Bank (3.98%) and HDFC Bank (3.34%). The NSE Nifty-50 index too dropped 2.29% to 16,677.60. “The surprising RBI event in the latter half [of the day] led to sharp correction across the markets. Nifty not only breached its important supports, but it ended well in the red below 16,700,” Ruchit Jain, lead research, 5paisa.com, said.
Mitul Shah, head of Research, Reliance Securities, said: “For equities, inflation remains a key overhang”. “Trend in global stock markets, the movement of the rupee and of crude oil prices will dictate the market trend in the near-term.
Growth to be in range of 7-8.5%: CEA #GS3 #Economy
Chief Economic Adviser V. Anantha Nageswaran on Wednesday said India’s growth is expected to be in the range of 7-8.5% given the global uncertainties. The International Monetary Fund recently lowered its growth forecast to 8.2% which is higher than 7.2% by the RBI.
“The range of outcomes is fairly wide. Wider than it could ever be and that makes decision making all the more hazardous. Lots of luck is needed to get it right,” he said. As per the Economic Survey, India’s economy is expected to grow by 8-8.5% in the fiscal beginning April 1.
‘States’ off-balance sheet borrowings at decadal high’ #GS3 #Economy
States have done off-balance-sheet borrowings through various entities in FY22, resulting in a 1 percentage point increase in such hidden loans to 4.5% of GSDP, according to a report on Wednesday.
The report by ratings agency Crisil, based on an analysis of 11 States accounting for three-quarters of GSDP, warned this will impact the badly-needed capital-expansion measures by the States as resources will be ploughed to service debt.
The Indian economy has revived to touch the pre-COVID levels after one year of a decline in the GDP due to the impact of the COVID-19 pandemic. Policymakers are betting on capital expansion to accelerate the revival through various measures. The Centre has been trying to decrease its hidden borrowings and show a truer picture of the finances for the last few years.
“These borrowings have been raised by entities owned by States, which also guarantee the loans. Around 4-5% of the revenue of States will go towards servicing such guarantee obligations this fiscal, partially reducing the ability of State governments to fund capital expenditure,” the agency said.
The rating agency attributed this behaviour by the States to constrained revenue growth due to the pandemic-induced slowdown, and increasing revenue expenditure. These two reasons have led to their fiscal deficits rising to close to 4% of GSDP, well above the historical level of 2-3% seen earlier in the last decade, it added. Such borrowing will hit badly-needed capital-expansion measures by the States, it says