UPSC Essentials: Weekly news express with MCQs— RBI’s surveys to food inflation

Key takeaways

1. Consumer Confidence Survey (CCS)

—The CCS asks people across 19 cities about their current perceptions (vis-à-vis a year ago) and one-year ahead expectations on the general economic situation, employment scenario, overall price situation and own income and spending. The latest round of the survey was conducted from July 07 to July 14, 2022, covering 6,083 responses. Based on the responses, the RBI comes up with two indices: the Current Situation Index (CSI) and the Future Expectations Index (FEI).

— To read either index it is important to first understand that the value of 100 is the neutral level. An index below the 100 mark implies people are pessimistic and a value higher than 100 conveys optimism.

— The CSI has been recovering since falling to a historic low in July last year. However, despite the improvement, the CSI stays firmly in the negative territory — suggesting consumer confidence is still considerably adrift from the neutral territory.

2. Inflation Expectations Survey (IES)

— This is another key survey for the RBI. It tracks people’s expectations of inflation. The biggest worry during phases of rapid inflation is that if inflation is not controlled soon, it can lead to people getting into the habit of expecting high inflation; that, in turn, alters people’s economic behaviour. Often central bank heads can be found saying they want to prevent people’s inflation expectations from becoming “unanchored”.

— This survey provides an answer to whether that is happening in India or not.

— Households’ inflation perception for the current period has moderated by 80 bps to 9.3 per cent in the latest survey round. “Their three months and one-year ahead median inflation expectations also declined by 50 bps and 60 bps, respectively, from the May 2022 round of the survey,” finds the RBI.

3. OBICUS Survey

— OBICUS stands for “Order Books, Inventories and Capacity Utilisation Survey”. This survey covered 765 manufacturing companies in an attempt to provide a snapshot of demand conditions in India’s manufacturing sector from January to March 2022.

— The key variable here is Capacity Utilisation (CU). Here again, the news is heartening. The CU is well above the pre-pandemic level — suggesting India’s aggregate demand is recovering steadily.

Point to ponder: The RBI released the results of seven surveys that it conducts. Each of these surveys throws light on some aspect or the other of the Indian economy-what are they?

1. MCQ:

Demand for a commodity refers to

a) Desire for that commodity
b) Need for that commodity
c) Quantity demanded of that commodity
d) Quantity demanded at a certain price

Why food inflation may ease faster than expected

Syllabus:

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

— The UN Food and Agriculture Organization’s Food Price Index (FPI) averaged 140.9 points in July, 8.6% down from its previous month’s level and marking the steepest monthly drop since October 2008.

Key takeaways

— There were four major supply-side shock drivers of the great global food inflation from around October 2020: weather, pandemic, war and export controls.

— The weather-related shocks included droughts in Ukraine (2020-21) and South America (2021-22), which especially impacted sunflower and soyabean supplies, and the March-April 2022 heat wave that devastated India’s wheat crop.

— The pandemic’s supply-side impact was felt the most in Malaysia’s oil palm plantations, where harvesting of fresh fruit bunches is done mainly by migrant labourers from Indonesia and Bangladesh. As Covid-19 resulted in many of them flying back and no new work permits being issued, output from the world’s second largest palm oil producer and exporter fell.

— The Russo-Ukrainian War led to supply disruptions from the two countries that, in 2019-20 (a non-war, non-drought year), accounted for 28.5 per cent of the world’s wheat, 18.8 per cent of corn, 34.4 per cent of barley and 78.1 per cent of sunflower oil exports.

— Export controls were first imposed by Russia in December 2020, prompted by domestic food inflation fears arising from record hot temperatures. Shortage concerns at home triggered similar actions in palm oil by Indonesia (the world’s No. 1 producer-cum-exporter) and in wheat by India during March-May 2022.

— That perfect storm, from all four shocks coming one after the other within one-and-a-half years, now seems to be receding. Its most obvious symbol is the resumption of exports from Ukraine via the Black Sea. This critical artery of the global agricultural trade was blocked after Russia launched its so-called special military operation. The UN-backed agreement for unblocking of the Black Sea trade route also provides for unimpeded shipments of Russian food and fertilisers. Russia alone is expected to export 40 million tonnes (mt) in 2022-23 (July-June), up from last year’s 33 mt.

— However, it isn’t Ukraine and Russia alone. Indonesia, since late-May, has lifted its ban on palm oil exports. This, even as the US, Brazil, Argentina and Paraguay are set to harvest bumper soyabean crops. Not for nothing, the price sentiment has changed. It’s most visible in edible oils, where roughly 60% of India’s annual consumption requirement is met through imports. In the last three months, the all-India modal (most-quoted) retail price has come down from Rs 175 to Rs 150 per kg for soyabean oil and from Rs 165 to Rs 142.5 for palm oil.

— Global apart, there are domestic reasons for expecting a considerable easing of food inflation.

— The most important is the southwest monsoon. Cumulative rainfall during the current season from June to August 7 has been 5.7 per cent above the historical long-term average for this period. Almost all agriculturally-significant areas – barring Uttar Pradesh, Bihar, Jharkhand and West Bengal – have received good rains so far. The prospects for the coming days seem equally encouraging, with a low-pressure area forming over northwest Bay of Bengal off the Odisha-West Bengal coasts – and another one forecast after mid-August.

— Above average rainfall across the South Peninsula, Central and Northwest India has boosted acreages under most crops this kharif (monsoon) season. The exceptions, as the table shows, are rice (transplanting has taken a hit from deficient rains in the Gangetic Plain states), pulses and groundnut (their area getting diverted to cotton and soyabean that are fetching better prices).

— All in all, there are compelling reasons – global and domestic – for food inflation in India to “trend down”, even if not “drop rapidly”. This is already being seen in edible oils. Increased soyabean and cotton production, courtesy of the monsoon, should improve availability of oil-cakes. These, along with maize, are key ingredients in animal and poultry feed. A good monsoon would also mean more fodder and water for animals, further reducing livestock input costs and inflationary pressures on milk, egg and meat.

— Current water levels in the country’s major reservoirs are 5.9 per cent higher than a year back and 25.1 per cent above their last 10 year’s average storage. If the monsoon delivers reasonably in the second half (August-September), the benefits of groundwater recharge would also flow to the rabi crop. Assuming no fresh setbacks in the Black Sea, the Reserve Bank of India’s monetary policy committee may not have to further hike interest rates.

Point to ponder: What are the global and domestic reasons for food inflation?

2. MCQ:

India has experienced persistent and high food inflation in the recent past. What could be the reasons?

1.The weather-related shocks included droughts in Ukraine (2020-21) and South America (2021-22), which especially impacted sunflower and soyabean supplies, and the March-April 2022 heat wave that devastated India’s wheat crop.

2. Above average rainfall across the South Peninsula, Central and Northwest India.

3. The Russo-Ukrainian War led to supply disruptions from the two countries
Which of the statements given above1 are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

The PESA Act

Syllabus:

Preliminary Examination: Indian Polity and Governance-Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues, etc.

Main Examination: General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

— Aam Aadmi Party (AAP) leader Arvind Kejriwal recently declared a six-point “guarantee” for tribals in Gujarat’s Chhota Udepur district, including the “strict implementation” of the Panchayats (Extension to the Scheduled Areas) Act.

Key takeaways

— This is a legislation that extends the provisions of Panchayats to the Fifth Schedule Areas. These areas have a huge tribal population. This Act is called “The Provisions of the Panchayats (Extension to the Scheduled Areas) Act, 1996” or “PESA”.

— The PESA Act was enacted in 1996 “to provide for the extension of the provisions of Part IX of the Constitution relating to the Panchayats to the Scheduled Areas”.

— Other than Panchayats, Part IX, comprising Articles 243-243ZT of the Constitution, contains provisions relating to Municipalities and Cooperative Societies.

— Under the PESA Act, Scheduled Areas are those referred to in Article 244(1), which says that the provisions of the Fifth Schedule shall apply to the Scheduled Areas and Scheduled Tribes in states other than Assam, Meghalaya, Tripura, and Mizoram. The Fifth Schedule provides for a range of special provisions for these areas.

What is the background of PESA?

— The 73rd constitutional amendment was made in 1992 to promote local self-governance in rural India.

— This amendment gave shape to a three-tier Panchayati Raj Institution that was made into law.

— But its application to the scheduled and tribal areas under Article 243(M) was restricted.

— It was after the Bhuria Committee recommendations in 1995 that PESA Act 1996 came into existence.

— The Parliament enacted the Panchayats (Extension to Scheduled Areas) Act, 1996 (PESA) to extend Part IX of the Constitution with certain modifications and exceptions to the Scheduled V areas.

— It ensured tribal self-rule for people living in scheduled areas of India.

— The following three types of powers have been given to a Gram Sabha under PESA:

(i) Developmental: consultation before land acquisition, prevent land alienation, power to enforce prohibition, prior approval of all developmental projects and control over tribal sub-plan, power to issue utilization certificate for developmental expenditure, selection of beneficiaries of poverty alleviation and other schemes of individual benefits, control over institutions and functionaries of social sectors.

(ii) Dispute resolution as per traditional laws and customs: collective resolution of disputes on the basis of customs, traditional laws and religious beliefs of tribal areas.

(iii) Ownership and management of natural resources: maintaining ownership of local tribal community over water resources, common lands, minor forest produce, minor minerals, etc. as well as effective implementation and monitoring of related laws.

How does PESA Act work?

— The PESA Act was enacted to ensure self-governance through Gram Sabhas (village assemblies) for people living in the Scheduled Areas.

— It recognises the right of tribal communities, who are residents of the Scheduled Areas, to govern themselves through their own systems of self-government, and also acknowledges their traditional rights over natural resources.

— The Act empowers Gram Sabhas to play a key role in approving development plans and controlling all social sectors.

— This includes the processes and personnel who implement policies, exercising control over minor (non-timber) forest resources, minor water bodies and minor minerals, managing local markets, preventing land alienation and regulating intoxicants among other things.

— State governments are expected to amend their respective Panchayati Raj Acts without making any law that would be inconsistent with the mandate of PESA.

— Ten states — Andhra Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and Telangana — have notified Fifth Schedule areas that cover (partially or fully) several districts in each of these states.

— After the PESA Act was enacted, the central Ministry of Panchayati Raj circulated model PESA Rules. So far, six states have notified these Rules, including Gujarat.

Why are rules under PESA important? What topics will be covered?

— PESA rules enable the residents of scheduled areas to strengthen their village-level bodies by transferring power from the government to the gram sabha, a body of all the registered voters of the village.

— The powers of gram sabhas include maintenance of cultural identity and tradition, control over schemes affecting the tribals, and control over natural resources within the area of a village.

— The PESA Act thus enables gram sabhas to maintain a safety net over their rights and surroundings against external or internal conflicts.

— Without proper rules, its implementation is not possible as it is an exercise in decentralising the power from institutionalised structures, back to the village residents.

— The laws, once formed, will give gram sabhas the power to take decisions not only over their customs and traditionally managed resources, but also on the minerals being excavated from their areas.

— The rules state that the gram sabha will have to be kept informed by any and all agencies working in their village, and that the gram sabha has the power to approve or stop the work being done within the village limits.

— The rules also give power to the gram sabhas over management of resources over jal, jangal, zameen (water, forest and land), the three major demands of tribals; minor forest produce; mines and minerals; markets; and human resources.

— The gram sabha would have the powers to monitor and prohibit the manufacturing, transport, sale and consumption of intoxicants within their village limits.

— It also has a duty to maintain peace and resolve conflicts arising in the village, while protecting tribal customs and traditions, and encouraging customs like ghotul.

Which forest produces are termed as Minor Forest Produce?

— “Minor Forest Produce” has been defined in “The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006” which includes all nontimber forest produce of plant origin, including bamboo, brushwood, stumps, cane, tussar, cocoons, honey-wax, lac, tendu leaves, medicinal plants, herbs, roots, tubers, etc.

Point to ponder: Conflict over mining and land rights in tribal areas points to a broader issue — the failure of institutions mandated to protect tribal rights. Comment.

3. MCQ:

Consider the following statements and answer the question below

1. It was after the Virginus Xaxa Committee recommendations in 1995 that PESA Act 1996 came into existence.

2. PESA Act is legislation that extends the provisions of Panchayats to the Fifth Schedule Areas.

3. State governments are expected to amend their respective Panchayati Raj Acts without making any law that would be inconsistent with the mandate of PESA.

Which of the following statements are true?
a) 1 and 2                                       b) 2 and 3
c) Only 2                                        d) 1, 2 and 3

India and NATO

— According to The Indian Express exclusive, away from public glare, New Delhi held its first political dialogue with the North Atlantic Treaty Organisation (NATO) in Brussels on December 12, 2019.

— Attended by senior officials including from the Ministry of External Affairs and the Ministry of Defence, it is learnt that the idea was to ensure that the dialogue was primarily political in character and to avoid making any commitment on military or other bilateral cooperation.
— Accordingly, the Indian delegation essentially attempted to assess cooperation on regional and global issues of mutual interest, The Indian Express has learnt.

What is NATO?

— NATO, or the North Atlantic Treaty Organisation, was set up in 1949 by the US, Canada, and several western European nations to ensure their collective security against the Soviet Union. It was the US’s first peacetime military alliance outside the western hemisphere.

— The official website describes NATO as following:

1. NATO is a political military alliance: “Security in our daily lives is key to our well-being. NATO’s purpose is to guarantee the freedom and security of its members through political and military means.”

2. NATO is committed to collective defence: ” NATO is committed to the principle that an attack against one or several of its members is considered as an attack against all. This is the principle of collective defence, which is enshrined in Article 5 of the Washington Treaty.

— So far, Article 5 has been invoked once – in response to the 9/11 terrorist attacks in the United States in 2001.”

3. NATO has the Trans Atlantic link: NATO is an alliance of countries from Europe and North America. It provides a unique link between these two continents, enabling them to consult and cooperate in the field of defence and security, and conduct multinational crisis-management operations together.

— Thirty countries are members of NATO currently. NATO is headquartered in Brussels, Belgium. The headquarters of the Allied Command Operations is near Mons, also in Belgium.

What is Article 5 of the North Atlantic Treaty?

— Article 5 reads:

“The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all and consequently they agree that, if such an armed attack occurs, each of them, in exercise of the right of individual or collective self-defence recognized by Article 51 of the Charter of the United Nations, will assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.”

— At the end of WW II, as battered European nations started to rebuild their economies, the US, which believed that an economically strong, re-armed, and integrated Europe was critical to prevent the westward expansion of communist USSR, embarked on a programme to supply economic aid to the continent on a massive scale.

— The European Recovery Programme, known as the Marshall Plan after President Harry S Truman’s Secretary of State George C Marshall, promoted the idea of shared interests and cooperation between the US and Europe.

— The USSR declined to participate in the Marshall Plan, and discouraged eastern European states in its sphere of influence from receiving American economic assistance.

— In the 1946-49 Greek Civil War, the US and UK worked to thwart the Soviet-backed communist takeover of Greece.

— The Western nations threw their weight behind Turkey as it stood up to Soviet pressure over control of the Bosporus and Dardanelles Strait (which connect the Black Sea and Sea of Marmara and the Sea of Marmara and Aegean Sea respectively) — and in 1947-48, the US committed itself to containing the communist uprisings in Turkey and Greece.

— In 1948, Stalin’s government sponsored a coup in (erstwhile) Czechoslovakia, which led to the installation of a communist regime in a country sharing borders with both Soviet-controlled East Germany and the pro-West West Germany.

— In 1948-49, the Soviets blockaded West Berlin to force the US, UK, and France to give up their post-war jurisdictions in the country, leading to a major crisis and an 11-month airlift of supplies by Western countries to keep their part of the city going.

— All these events led the US to conclude that an American-European alliance against the USSR was necessary.

— The Europeans too were convinced of the need for a collective security solution, and in March 1948, the UK, France, Belgium, Netherlands and Luxembourg signed the Brussels Treaty of collective defence, which meant that if any of the signatories faced an attack, they would be defended by all the others.

— A few months later, the US Congress passed the Vandenburg Resolution, a landmark action “advising the President to seek US and free world security through support of mutual defence arrangements that operated within the UN Charter but outside the Security Council, where the Soviet veto would thwart collective defence arrangements”.

— The Vandenburg Resolution was the stepping stone to NATO. The US believed the treaty would be more effective if it included, apart from the signatories of the Brussels Treaty, countries of the North Atlantic — Canada, Iceland, Denmark, Norway, Ireland, and Portugal.

— From the American perspective, these countries were the links between the two shores of the Atlantic Ocean, and could help facilitate military action if it was needed.

— The treaty was signed in Washington DC on April 4, 1949. It had 12 signatories initially: the US, UK, Canada, France, Denmark, Belgium, Norway, Portugal, the Netherlands, Italy, Iceland, and Luxembourg.

— Greece and Turkey were admitted in 1952, and the Federal Republic of Germany (West Germany) in 1955. Spain joined in 1982, and in 1999, a decade after the collapse of the USSR, the former Soviet bloc countries of Czech Republic, Hungary, and Poland became part of NATO.

— Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia joined in 2004, Albania and Croatia in 2009, Montenegro in 2017, and North Macedonia in 2020, taking the membership of the alliance to 30.

— Hostility to the USSR was the reason NATO came into being, and in 1955, the Soviet Union signed its own collective defence treaty, known as the Warsaw Pact, with seven eastern European countries — Poland, Czechoslovakia, Albania, Bulgaria, East Germany, Hungary, and Romania.

— The Warsaw Pact collapsed with the end of the Cold War, and was formally declared disbanded in February 1991. Among its signatories, the USSR, Czechoslovakia, and East Germany no longer exist, and the remaining five countries are part of NATO.

— Barring a brief period after the collapse of the Soviet Union, Russia under Putin has been suspicious and insecure about the West. The three Baltic states, now part of NATO, share borders with Russia, and only Belarus and Ukraine among the countries that were once in its sphere of influence are now outside of the western military alliance.

— From the perspective of the Kremlin, keeping a buffer between NATO and Russia along its southern and western border is critical to its security. A hostile Ukraine, protected by NATO’s nuclear umbrella, could potentially have missile launchpads within a few hundred kilometres of Moscow, and cut off Russia’s access to the warm water ports of the Black Sea — it was in part to pre-empt this eventuality that Russia annexed Crimea in 2014.

What are the three alliance of NATO?

— Euro-Atlantic Partnership Council (EAPC) is a 50-nation multilateral forum for dialogue and consultation on political and security-related issues among Allies and partner countries.

— Mediterranean Dialogue is a partnership forum that aims to contribute to security and stability in NATO’s Mediterranean and North African neighbourhood.

— Istanbul Cooperation Initiative (ICI) is a partnership that aims at long-term global and regional security by offering non-NATO countries in the broader Middle East region the opportunity to cooperate with NATO.

— India’s talks with NATO hold significance given that the North Atlantic alliance has been engaging both China and Pakistan in bilateral dialogue. There was a view here that given the role of Beijing and Islamabad in New Delhi’s strategic imperatives, reaching out to NATO would add a key dimension to India’s growing engagement with US and Europe.

— The government, sources said, was of the view that engaging NATO in a political dialogue would provide New Delhi an opportunity to bring about a balance in NATO’s perceptions about the situation in regions and issues of concerns to India.

— In NATO’s view, India, given its geo-strategic position and unique perspectives on various issues, was relevant to international security and can be an important partner in informing the alliance about India’s own region and beyond, the sources said.

— The first dialogue, it is learnt, revealed three critical issues on which India expected only limited common ground with NATO:

i) from NATO’s perspective, it was not China, but Russia whose aggressive actions, continued to be the main threat to Euro-Atlantic security, and that NATO had faced difficulties to convene meetings of NATO-Russia Council due to Russian refusal to place issues such as Ukraine and Intermediate-Range Nuclear Forces Treaty, on the agenda.

ii) Given the divergence among NATO countries, its view on China was seen as mixed; while it did deliberate on China’s rise, the conclusion was that China presented both a challenge and an opportunity.

iii) in Afghanistan, NATO saw the Taliban as a political entity, which was not in line with India’s stance. This was almost two years before the Taliban announced an interim government in Afghanistan in September 2021.

— However, the Indian side felt maritime security as a principal area of conversation in the future, given a substantial common ground with NATO.

— Spanish Foreign Minister José Manuel Albares: ‘NATO must reach out to all countries like India which might be good partners’.

— Ahead of the NATO summit in Madrid on June 28, visiting Spanish Foreign Minister José Manuel Albares on Wednesday said that NATO (North Atlantic Treaty Organisation), which traditionally only looked towards the eastern flank, must also look to the southern flank, and reach out to all those countries that like India, might be good partners, and interested in keeping stability in the world.

— In an exclusive interview to The Indian Express, Albares – who met External Affairs Minister S Jaishankar – when asked about possible discussions between India and the NATO, said, “It is not for me to decide, it is up to the UN Secretary General to decide that. But of course, a dialogue, certainly between NATO and India, is most welcome.”

Point to ponder: A pragmatic engagement with NATO must be an important part of India’s new European orientation, especially amidst the continent’s search for a new role in the Indo-Pacific. Discuss.

(Sources: nato.int)

4. MCQ:

Consider the following statements and answer the question below:

1. Spain and Italy are not the members of NATO.

2. Article 5 of NATO has been invoked only once.

3. NATO was US’s first peacetime military alliance outside the western hemisphere.

Which statements are correct?
a) 1 and 2                                         b) 2 and 3
c) 1 and 3                                         d) only 3

Answers to the MCQs: 1 (d), 2(c), 3(b), 4(b)