Whatsapp 93125-11015 For Details
The Reserve Bank of India’s Monetary Policy Committee (MPC) decided unanimously on Thursday to keep the policy repo rate unchanged at 6.50% for the second straight meeting, with Governor Shaktikanta Das stressing that the RBI “will remain watchful and proactive in dealing with emerging risks to price and financial stability”.
Laying out the rationale for the MPC’s decision, Mr. Das stressed that “the best contribution monetary policy could make in helping the economy realise its potential would be by ensuring price stability”.
Headline inflation, however, is still above the target as per the latest data and is expected to remain so according to our projections for 2023-24.
Therefore, close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain.
The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
The rate action this time is obviously a pause. Future action will depend on the evolving situation. The RBI forecast real GDP growth for 2023-24 at 6.5%, and projected CPI inflation for the current fiscal year to average 5.1%.
Editorial
Getting railway safety back on track after Odisha (Page no. 8)
(GS Paper 2, Governance)
There have been innumerable television debates following the train accident involving the 12841 Shalimar-Chennai Coromandel Express, the 12864 Sir M. Visvesvaraya Terminal Bengaluru-Howrah Superfast Express and a goods train at Bahanaga Bazar station in Balasore district, Odisha, on the evening of June 2.
But the key question that many panellists have failed to address convincingly, barring the familiar platitudes, is about how the Indian Railways can work to ensure that such catastrophes are never repeated.
First, a recap of what happened. Broadly, the interlocking of signals and routes through a series of relays and logic gates, ensures that a train is guided by signals to a route amid a maze of railway tracks in a manner that would never cause it to encounter another train, ahead or in the rear. In this case, this interlocking was overridden by manual intervention.
We also have two causes: in the first, it was most likely done by a signal maintainer who has access to the equipment hut or relay room, who may have been cutting corners to expedite his maintenance work so that the running train is not affected.
Or, in the second instance, as the Indian Railways seems to believe, it is the handiwork of ‘a saboteur’ with criminal intention to cause an accident.
The Odisha train accident is now a subject of double investigation; the first, the statutory probe by the Commissioner of Rail Safety, and the second by the Central Bureau of Investigation, which is an unprecedented move by the government. Whatever be the findings, it is not premature to examine the question that has been raised above.
Bridging the growing trust deficit in Manipur (Page no. 8)
(GS Paper 2, Governance)
Manipur, with over 35 communities inhabiting its valleys and hills, has a history of violence and deadly clashes. Ethnic violence has been brewing in the State for some time as mutual suspicion between ethnic groups in the Imphal valley and the hills turned into simmering conflict between the Meiteis and the Kukis, especially after the order of the Manipur High Court on March 27, asking the State to recommend Scheduled Tribe (ST) status to Meiteis.
Before this, the Manipur government had begun a drive to evict tribal villages from reserved forests, which was perceived to be an anti-tribal move, in turn leading to discontent and suspicion among the Kukis and other tribals.
Hundreds of Kuki tribals have been dislodged from their traditional settlement areas without rehabilitation. The Kukis, with 10 MLAs in the 60-member Legislative Assembly, and the Kuki People’s Alliance being a part of the ruling coalition under the Bharatiya Janata Party government in the State, did not make any difference.
This is not to say that the claims made by the Meiteis have no merit. They form 52% of the State’s population but are restricted to 10% of the geographical area, that is the Imphal valley.
While relocating from hill to valley is legal, they cannot shift and relocate themselves (most are Vaishnav Hindus) because of their non-inclusion in the ST category to the hill area — 90% of which is occupied by Nagas and Kukis.
There are some Meiteis who think that their Hindu identity has brought them no political and economic benefits; on the contrary, this has become a liability as they are not treated as STs, and are deprived of the right to occupy 90% of the territory of the State.
Their grouse is not about the deprivation of jobs and political clout as they are disproportionately ahead of the hill people in these matters. The land issue is more crucial for them.
It is worth recalling that the Meiteis have had a chequered history of violence and struggles before integration with India and acquiring the Hindu tag.
They had sought to project a pan-Mongoloid identity, rejected the Bengali script and even tried to revive an old Meitei religion called Sanamahism. They formed several insurgent groups such as the People’s Liberation Army, with bases in Bangladesh and Myanmar.
Opinion
Do production-linked incentives for manufacturing work? (Page no. 9)
(GS Paper 3, Economy)
In a recent note, former Reserve Bank of India (RBI) Governor Raghuram Rajan questioned the success of the production-linked incentive (PLI) scheme in boosting India’s domestic manufacturing and exports.
The PLI scheme was introduced by the Centre in 2020. Lakhs of crores of rupees have been allocated towards subsidising companies that manufacture in India.
The Centre believes that the PLI scheme has boosted the domestic manufacturing sector, but critics have questioned its success.
Globally, nations are trying to capture the markets of others by exporting more than what they import.
So, that is what brings us to the question of defending national markets for protecting employment and incomes in the domestic market, and there can be different strategies for doing that.
Rather than protect large-scale industries, we need to boost the micro sector, which is where the bulk of the employment is, so that we can generate enough demand in the economy.
But unfortunately, what is happening in India is the demand is shifting from the unorganised to the organised sector, because of the various steps that the government has taken.
That has led to the further marginalisation and decline of sectors where employment generation is high. So, in a sense, what we face today is shortage of demand and economic slowdown. And that should be the number one priority to be dealt with.
There are core sectors — sectors that have high externalities or multipliers for other economic activity. If you begin by investing in or developing certain core sectors, it will help in propelling development at large.
In the past, we had the policy of promoting such industries, like machine tools, which was considered as a core sector. In the current context, one could think about the semiconductor industry or the electric vehicles industry as a core sector which will help in fostering industrialiasation. These are the kinds of policies which are found in different countries.
Explainer
Cyclone’s effect on monsoon onset (Page no. 10)
(GS Paper 1, Economy)
The impact of global warming on the monsoons are manifest in its onset, withdrawal, seasonal total rainfall, and extremes. Global warming also affects the cyclones over the Indian Ocean and the typhoons over the northwestern Pacific Ocean.
We are seeing cyclone formations in the pre-monsoon cyclone season, closer to the monsoon onset, arguably due to the influence of a warmer Arctic Ocean on the winds over the Arabian Sea.
The monsoon is of course also affected by the three tropical oceans — Indian, Atlantic, and Pacific; the ‘atmospheric bridge’ from the Arctic; and the oceanic tunnel as well as the atmospheric bridge from the Southern Ocean (a.k.a. the Antarctic Ocean).
A ‘bridge’ refers to two faraway regions interacting in the atmosphere while a ‘tunnel’ refers to two remote oceanic regions connecting within the ocean.
Some cyclones in the North Indian Ocean have had both positive and negative impacts on the onset of the monsoon. Since the circulation of winds around the cyclones is in the anticlockwise direction, the location of the cyclone is critical as far as the cyclone’s impact on the transition of the monsoon trough is concerned.
(The monsoon trough is a low-pressure region that is a characteristic feature of the monsoons.) For example, if a cyclone lies further north in the Bay of Bengal, the back-winds blowing from the southwest to the northeast can pull the monsoon trough forward, and assist in the monsoon’s onset.
Earlier this year, the Bay of Bengal had Cyclone Mocha develop in the first half of May and intensify briefly into a ‘super cyclonic storm’, before weakening rapidly upon landfall. Mocha’s northwest to east trajectory over the Bay was the result of unusual anticyclones (which rotate clockwise) that have been parked over the Arabian Sea and the Bay of Bengal since March. Mocha dissipated on May 15 and the back-winds helped the monsoon set in on time over the Andaman and Nicobar Islands.
What was the requirement for limits on UPI transactions? (Page no. 10)
(GS Paper 3, Economy)
As transactions facilitated by the Unified Payments Interface (UPI) breach record highs, banks have opted for daily limits. These are over and above the already imposed ceilings mandated by the facilitator, the National Payments Corporation of India (NPCI), in 2021. The idea is to sustain the smoother functioning of the payments interface as it continues to acquire popularity.
At present, users can make up to 20 transactions or ₹1 lakh in a single day — either all at once or through the day. For certain specific categories of transactions such as the capital markets, collections (such as bills, among others), insurance and forward inward remittances, the limit is ₹2 lakh.
In December 2021, the limit for the UPI-based ASBA (Application Supported by Blocked Amount) IPO and retail direct schemes was increased to ₹5 lakh for each transaction.
The conversation now revolves around banks and apps coming up with their own guidelines for transactions. For example, state-run lenders Punjab National Bank (PNB) and Bank of Baroda has set its transaction limit at a much lower ₹25,000.
PNB’s daily limit is ₹50,000. As for apps, among others, Google Pay users breach the daily limit if they try to send money more than ten times in a single day across all UPI apps.
As the payments interface looks to expand its footprint (recall the boarding of non-resident accounts having international numbers into the ecosystem) and its growing utility in daily lives, limits would help maintain an essential security infrastructure and its seamless functioning.
This is also important as the interface looks to expand its use-case, as also called for in the proposed pilot project for coin-vending machines with UPI as the facilitator.
News
Not clear if sceptre was presented to Mountbatten, says the head of math in T.N. (Page no. 14)
(GS Paper 1, Culture)
There is no clear information that the Sengol (sceptre), which was installed in the new Parliament building on May 28, was presented to Lord Mountbatten, the last Viceroy of India, before it was handed over to Jawaharlal Nehru on the eve of India’s Independence, the head of the Thiruvavaduthurai Adheenam in Mayiladuthurai district of Tamil Nadu said.
In an interview, Sri La Sri Ambalavana Desika Paramacharya Swamigal, the 24th head of the Thiruvavaduthurai Adheenam, said: “There is no clear information on it. I hear a short film was released in connection with that event. Some say the Sengol was given to Lord Mountbatten. The people who belonged to that period also say the same thing.
His response was to a pointed question on whether the Adheenam had evidence that the Sengol was given to Mountbatten before presenting it to Nehru on August 14, 1947.
Asked if there was documentary evidence to prove that the Sengol was presented only to Nehru and not to Mountbatten, the Swamigal asked, “What was the use in giving the Sengol to Lord Mountbatten? He was after all leaving India by handing all powers.
It was Mr. Nehru who mattered the most on that day.” The Government of India, in May, claimed that the Adheenam had presented a golden sceptre to signify “transfer of power” from Britain to India. Annexure IV presented in a docket shared by the Union government had contained a Tamil transcript on the “Significance of the Sengol” presented by the Thiruvavaduthurai Adheenam.
This transcript, without any source attribution, claimed the sceptre was presented by a delegation deputed by the Adheenam to Mountbatten. It was later purified by sprinkling water from the Ganga and then handed over to Nehru.
On May 26, when asked a representative of the Adheenam about this transcript, he said this was published in special souvenirs in 1947 and 1950 brought out by the Adheenam and was available in its records.
World
U.S., U.K. forge ‘Atlantic Declaration’ to boost ties (Page no. 15)
(GS Paper 2, International Relation)
The United States and Britain announced a new strategic pact as their leaders rededicated the “special relationship” to counter Russia, China and economic instability.
In a White House summit, U.S. President Joe Biden and Prime Minister Rishi Sunak discussed Russia’s invasion of Ukraine and the lightning-fast evolution of artificial intelligence.
But Mr. Sunak came away empty-handed on Britain’s ambitions for a post-Brexit free-trade agreement with Washington, settling instead to tack along with Mr. Biden’s plan to craft a new green economy through vast industrial subsidies.
An “Atlantic Declaration” adopted by the leaders aims to boost industry ties on defense and renewable energy, in the face of growing competition from China.
We face new challenges to international stability — from authoritarian states such as Russia and the People’s Republic of China; disruptive technologies; non-state actors; and transnational challenges like climate change.
Both leaders concurred that the world economy was undergoing the biggest changes since the Industrial Revolution, in part driven by AI, which is bringing doomsday warnings.