📰 PM Modi holds bilateral meetings with Nordic leaders
Blue economy, clean energy, IT and innovation discussed
•Prime Minister Narendra Modi on Wednesday held a series of bilateral meetings with his counterparts from Norway, Sweden, Iceland and Finland during which he discussed with them ways to further deepen bilateral ties and also exchanged views on regional and global developments.
•Mr. Modi, who arrived here 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 during which the two leaders took stock of the full range of bilateral relations.
•"Had a productive meeting with PM @jonasgahrstore of Norway. 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.
•This was the first meeting between the two leaders.
•"Both Prime Ministers reviewed the ongoing activities in bilateral relations and discussed future areas of cooperation," the Ministry of External Affairs (MEA) said.
•Discussions also took place on regional and global developments. As members of the UN Security Council, India and Norway have been engaging with each other in the UN on global issues of mutual interest, it said.
•Mr. Modi's visit comes amid the Ukraine crisis, which has united much of Europe against Russia.
•"Both leaders discussed the potential for deepening engagement in areas like Blue Economy, renewable energy, green hydrogen, solar and wind projects, green shipping, fisheries, water management, rainwater harvesting, space cooperation, long term Infrastructure investment, health and culture," the MEA said.
•Mr. Modi also had a "wonderful meeting" with Swedish counterpart Magdalena Andersson during which they discussed ways to deepen bilateral ties and the progress in the Joint Action Plan. This was the first meeting between the two leaders.
•"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.
•The two leaders held extensive talks on further diversifying the India-Sweden friendship, the Prime Minister's Office said.
•During the meeting, the two leaders took stock of the progress in the Joint Action Plan and also appreciated the expanding scope of the jointly launched LeadIT initiative, MEA spokesperson Arindam Bagchi said.
•During the 2018 visit of Prime Minister Modi to Sweden, the two sides adopted a wide-ranging Joint Action Plan to take forward a wide range of initiatives in defence, trade and investment, renewable energy, smart cities, women’s skill development, space and science and healthcare etc. The two sides had also signed a Joint Innovation Partnership.
•"Discussions also took place on regional and global developments," the MEA said, adding that the two leaders expressed satisfaction at the progress made by the LeadIT initiative.
•This was an India-Sweden joint global initiative to set up a Leadership Group on Industry Transition (LeadIT) in September 2019 at the UN Climate Action Summit to help guide the world’s heaviest greenhouse gas emitting industries towards the low-carbon economy. Its membership has now grown to 35, with 16 countries and 19 companies.
•"Both leaders also discussed possibilities of deepening cooperation in areas like innovation, climate technology, climate action, green hydrogen, space, defence, civil aviation, Arctic, polar research, sustainable mining and trade and economic ties," it added.
•In a separate meeting, Mr. Modi held talks with Iceland Prime Minister Katrin Jakobsdottir and discussed ways to further strengthen economic cooperation especially in the sectors of geothermal energy, Blue Economy, Arctic, renewable energy, fisheries, food processing, education including digital universities, and culture, the MEA said.
•Discussions also took place on regional and global developments, it added.
•"Glad to have met PM @katrinjak. We discussed India-Iceland relations, particularly our shared collaboration in healthcare, renewable energy, fisheries and more," Mr. Modi tweeted.
•Mr. Modi lauded Jakobsdottir's personal efforts at promoting gender equality and briefed her on India's advances on the issue, the MEA said.
•Discussions also took place on expediting the India-European Free Trade Association (EFTA) trade negotiations.
•Mr. Modi also met his Finnish counterpart Sanna Marin and discussed ways to further cement bilateral ties in trade, investment, technology and other sectors.
•"Today’s meeting with Finland @MarinSanna was very fruitful. There is immense potential in expanding the India-Finland digital partnership, trade partnership and investment linkages. We also discussed ways to deepen cultural ties between our nations," Mr. Modi tweeted.
•This was the first in-person meeting between the two leaders.
•They discussed opportunities to expand cooperation in the fields of new and emerging technologies like AI, quantum computing, future mobile technologies, clean technologies and smart grids, the MEA said.
•Mr. Modi invited Finnish companies to partner with Indian companies and take advantage of the enormous opportunities that the Indian market presents, particularly in telecom infrastructure and digital transformations.
•Discussions also took place on regional and global developments, and on greater cooperation in international organisations.
•India's trade with Nordic countries stands at over USD 5 billion (2020-21).
Its verdicts on loudspeakers were aimed to protect citizens from becoming ‘forced audience’ to noise
•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 communal 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.
Nuisance to neighbours
•The apex 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.
•On the use of loudspeakers in religious practices, the apex 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.
📰 President has no role to play in Perarivalan’s plea, says Supreme Court
Governor had no authority to transfer mercy plea: Bench
•The Supreme Court on Wednesday 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 have to follow Constitution’
•“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 addressed 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”.
‘There cannot be any discrimination’
•“He wants to be released. He has suffered prison for over 30 years. We have passed judgments in the past in favour of life convicts who have served over 20 years of their sentence... There cannot be any discrimination in this case whatever be the magnitude of the crime... Basically, he wants to be free. He has acquired several educational qualifications in prison. He has shown good conduct. He has also acquired several diseases due to the long years in prison... We are not asking you for his release... If you are not willing to consider these aspects, we will consider ordering his release,” Justice Rao told the Centre.
•The court also asked why the Centre had to speak for the Governor.
•“Why are you interested? The State has asked for his release and the Governor is bound by the State Council’s advice under Article 161. The President has no role under Article 161. In case the Governor has a different opinion, he has to send it back to the State,” Justice Rao told the Centre.
•The Council of Ministers of Tamil Nadu had recommended Perarivalan’s release way back in September 9, 2018.
•Senior advocate Rakesh Dwivedi, for Tamil Nadu, argued that the prospect of the court waiting for the President’s decision on the mercy plea, as put forward by the Centre, was “completely absurd”. Mr. Dwivedi, along with Tamil Nadu Additional Advocate General Amit Anand Tiwari and advocate Joseph Aristotle, said federalism would go for a toss if that was allowed by the court.
Two distinct powers of mercy
•Mr. Dwivedi stated that the President and Governor exercised two distinct powers of mercy under Articles 72 and 161, respectively. The former exercised his power under the aid and advice of the Council of Ministers at the Centre while the latter depended on the State Council of Ministers.
•Senior advocate Gopal Sankaranarayanan and advocate Prabu Ramasubramanian, for Perarivalan, said the Governor had in the past, before referring the mercy plea to the President, never denied his responsibility to take a decision in the case.
•“Instead, everytime he [Governor] came up with an excuse not to decide,” Mr. Sankaranarayanan submitted.
•Mr. Nataraj objected to the tone of the argument, saying the Governor was not a party in the case.
•Mr. Sankaranarayanan reacted, “I thank my friend for pointing out this fact. The Governor is not made a party in the case because the advice of the State government is binding on him”.
•Mr. Nataraj said a convict could not criticise the Governor for his actions.
•Mr. Sankaranarayanan retorted, “I am a citizen. I still have rights. You cannot say I cannot criticise the President or the Governor... I will criticise”.
•The court asked whether the Centre had placed on record the referral order of the Governor.
•When the Centre did not come up with the document in court, the Bench posted the case for next Tuesday.
‘He is interested only in his liberty’
•Justice Rao said, “We are not going to wait for the President to take a decision... Our point is whether the Governor could have referred the file under Article 161 to the President at all... You produce the file. We will keep this on Tuesday at 2 p.m. We are going to decide and close this matter... He [Perarivalan] is interested only in his liberty”.
📰 India’s position on the World Press Freedom Index
On what indicators are countries ranked in the index? Which countries have improved their ranking?
•The story so far: India’s ranking in the 2022 World Press Freedom Index has fallen to 150 out of 180 countries, according to the latest report released by the global media watchdog, Reporters Without Borders (RSF). In last year’s report, India was ranked 142. The top three positions for countries with the highest press freedom were taken by the Nordic trio of Norway (a score of 92.65), Denmark (90.27) and Sweden (88.84).
What is RSF and what’s the objective of this Index?
•RSF is an international NGO whose self-proclaimed aim is to defend and promote media freedom. Headquartered in Paris, it has consultative status with the United Nations. The objective of the World Press Freedom Index, which it releases every year, “is to compare the level of press freedom enjoyed by journalists and media in 180 countries and territories” in the previous calendar year. The RSF defines press freedom as “the ability of journalists as individuals and collectives to select, produce, and disseminate news in the public interest independent of political, economic, legal, and social interference and in the absence of threats to their physical and mental safety.”
What is the methodology used by RSF to assess and rank countries?
•Countries are ranked after being assigned a score ranging from 0 to 100, with 100 representing the highest possible level of press freedom and 0 the worst. The scoring has two components: a quantitative one, that tallies abuses against journalists and media outlets, and a qualitative analysis based on the responses of press freedom specialists (journalists, researchers, human rights defenders) to an RSF questionnaire.
•Countries are evaluated on five contextual indicators: political context, legal framework, economic context, socio-cultural context, and safety. For instance, the political context indicator considers, among other things, “the degree of support for the media in their role of holding politicians and government to account in the public interest”. A ‘subsidiary score’ ranging from 0 to 100 is calculated for each indicator, and all the subsidiary scores together contribute to the ‘global score’. India, which had a global score of 53.44 in the 2021 Index, could muster only 41 this time.
What are the findings with regard to world press freedom?
•In terms of global trends, the report flags a “two-fold increase in polarisation amplified by information chaos — that is, media polarisation fuelling divisions within countries, as well as polarisation between countries at the international level.” It notes that “within democratic societies, divisions are growing” due to the spread of “opinion media” modelled on Fox News, and the rise of “disinformation circuits” amplified by how social media functions.
•While singling out Moldova (40th) and Bulgaria (91st) for drastic improvements in press freedom “thanks to a government change”, it has classified the situation in 28 countries including Russia (155) and Belarus (153), as “very bad”. The world’s 10 worst countries for press freedom include Myanmar (176th), China (175), Turkmenistan (177th), Iran (178th), Eritrea (179th) and North Korea (180th).
What does the Index say about India?
•The report states that in India, “the violence against journalists, the politically partisan media and the concentration of media ownership all demonstrate that press freedom is in crisis”. Describing India as “one of the world’s most dangerous countries for the media”, the report notes that “journalists are exposed to all kinds of physical violence including police violence, ambushes by political activists, and deadly reprisals by criminal groups or corrupt local officials.” It highlights that “supporters of Hindutva, the ideology that spawned the Hindu far-right, wage all-out online attacks on any views that conflict with their thinking.”
What are the report’s observations on India under various indicators?
•Under ‘political context’, it states: “Originally a product of the anti-colonial movement, the Indian press used to be seen as fairly progressive but things changed radically in the mid-2010s, when Narendra Modi became prime minister and engineered a spectacular rapprochement between his party, the BJP, and the big families dominating the media.” It highlights that “very early on, Modi took a critical stance vis-à-vis journalists, seeing them as 'intermediaries' polluting the direct relationship between himself and his supporters.”
•With regard to ‘legal framework’, the report notes that “Indian law is protective in theory but charges of defamation, sedition, contempt of court and endangering national security are increasingly used against journalists critical of the government”. Under ‘economic context’, the report, describing Indian media as a “colossus with a feet of clay”, points out that “media outlets largely depend on advertising contracts with local and regional governments” and “at the national level, the central government has seen that it can exploit this to impose its own narrative, and is now spending more than ₹130 billion (5 billion euros) a year on ads in the print and online media alone. “Finally, on the socio-cultural indicators of press freedom, the report, noting that “the enormous diversity of Indian society is barely reflected in the mainstream media,” states that “for the most part, only Hindu men from upper castes hold senior positions in journalism or are media executives ¬— a bias that is reflected in media content.”
📰 FSSAI’s star ratings for food products may mislead consumers: experts
Experts say IIM-Ahmedabad study is flawed in ‘design and interpretation’
•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, warned experts who have called for the need to “insulate” policy making from the influence of the food industry.
•In a meeting in February, the FSSAI decided that when it prepares its 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[s] system, which are like a movie rating system and are of no use,” said K. Srinath Reddy, president, Public Health Foundation of India (PHFI), at a press conference.
•Professor Reddy urged that the FSSAI must “reconsider” its decision.
•He also said that the system being proposed by the food regulator was “devious” as it misleads 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). Experts argue that this is divorced from science as the presence of high quantities of sugar can’t be offset by the so-called positive ingredients.
•Dr. Reddy 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, among others.
•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 held to take policy decisions.
•In the February meeting, out of the total 26 external participants, there were 17 representatives from the industry, including from Dabur, Nestle, Hindustan Unilever Limited and PepsiCo.
•Dr. Reddy also said that the IIM-Ahmedabad based study on which FSSAI had based its decision was flawed in “design and interpretation” and should not form the basis of policy making
•Ashim Sanyal of Consumer Voice said that the health star rating system will defeat the seven-year-long fight for safeguarding consumer interests and helping them make informed decisions to exercise their right to healthy choices.
•The FoPL issue is being discussed by the regulator since 2014, when it first set up an expert committee to prescribe a suitable format following a Delhi High Court order which was hearing a public interest petition seeking a ban on the sale of junk food in and around schools.
📰 In the time of war: On India’s ties with Europe without upsetting Russia
India will have to find a way of building ties with Europe without upsetting Russia
•Prime Minister Narendra Modi’s three-nation visit to Europe comes at a time when the continent is facing its biggest security crisis since the end of the Cold War. In Germany, Mr. Modi and Chancellor Olaf Scholz reiterated the partnership between the two countries. Berlin has also announced €10 billion for bilateral cooperation. In Copenhagen, Mr. Modi attended the India-Nordic summit with leaders of Denmark, Norway, Sweden, Finland, and Iceland. In the last leg, the Prime Minister held talks in Paris with French President Emmanuel Macron, who was re-elected recently. While bilateral issues are at the centre of these meetings, the elephant in the room is the Russian invasion of Ukraine. Mr. Modi’s trip comes a few days after the President of the European Commission, Ursula von Der Leyen, visited India. New Delhi’s neutral position on the war has triggered both criticism and engagement from the West. India has seen several high-profile visits from the West, with some top officials pressing New Delhi to cut back on trade with Russia, a traditional strategic partner. Among the Nordic five, Sweden and Finland are now considering dropping their decades-long neutrality and seeking NATO membership.
•In Germany, however, both sides showed pragmatism over the Ukraine question. Germany, like India, has deep economic ties with Russia — if for India it is about defence supplies, for Germany, it is for almost 40% of its gas import requirements. While the Russian aggression has prompted Germany to raise its defence spending and join the western sanctions regime, it has been reluctant in sending weapons to Kyiv, compared to other NATO members in Eastern Europe. While Mr. Scholz urged Russian President Vladimir Putin to “stop this senseless murder and withdraw your troops”, Mr. Modi’s response was more measured. He said that no party could emerge victorious and that dialogue was the only way out. India and Germany also unveiled the contours of the next level of their partnership. Germany has said India is its “central partner” in Asia and that close cooperation would continue to expand. Europe is expected to take a more securitised approach to foreign policy from now, given the direction of the Ukraine conflict. In the post-Cold War world when Europe witnessed relative stability, India managed to build strong ties with both the West and Russia. But that era of multi-directional partnerships is facing its strongest test now with the West seeking to “weaken” Russia and Moscow warning of a new world war. The challenge before New Delhi is to build a stronger strategic future with Europe without immediately disrupting its complex but vital partnership with an increasingly isolated, angry Russia.
📰 The workers hit the hardest
Women and salaried workers have been affected the most by the pandemic in India
•According to the Centre for Monitoring Indian Economy (CMIE)’s Consumer Pyramids Household Survey, employment in India fell from 408.9 million in 2019-20 to 387.2 million in 2020-21 and then recovered to 401.8 million in 2021-22.
•Evidently, the recovery in 2021-22 was inadequate. Employment was still 1.7%, or 7 million short of the employment level of the pre-pandemic year of 2019-20. But this overstates the impact of the pandemic. Employment was on a declining trend even before the pandemic: it was falling at the rate of about 0.31% per annum. If that trend had continued uninterrupted by the pandemic, employment would have fallen by about 2.5 million from 408.9 million in 2019-20 to 406.3 million in 2021-22. And so, the hit to employment that can be attributed to the shock of the pandemic is about 4.5 million jobs.
•This loss of 4.5 million jobs because of the pandemic is the more lasting net impact. The immediate impact was much bigger. Nearly 78 million jobs were lost during the quarter of June 2020, which roughly coincides with the first wave of COVID-19. Similarly, 13 million jobs were lost during the second wave during the quarter of June 2021. Most jobs lost during lockdowns or other mobility restrictions are of the informal kinds. These come back when the restrictions on mobility are lifted.
•If the economy expands by about 7.5% in 2022-23, we expect about 6 million jobs to come back. That would still leave a deficit of a million even as many more get added to the working age population and the labour force.
•As India struggles to generate the jobs it requires to engage all the additional people who enter the labour force in a year, the count of the unemployed and those out of the labour force keeps rising. In 2021-22, the unemployed who were actively seeking work but were unable to find any were estimated at 33 million. This was higher than the pre-pandemic levels.
•The 7 million jobs lost over the two years since the COVID-19 outbreak is unevenly distributed, so it may be difficult to cover most of this loss anytime soon.
Working from home
•It has been seen in the past that women suffer job losses disproportionately during economic shocks. The phenomenon repeated itself during the pandemic. Women accounted for less than 11% of all jobs in 2019-20, but they accounted for nearly 52% of the 7 million job losses since then. In urban India, it was worse: women accounted for only 9% of total employment but accounted for a massive 76% of the job losses. The impact of this is a sharp fall in the labour participation of women. The female labour force participation rate among urban women was abysmally low at 9.4% in 2019-20 and fell to 7% in 2021-22.
•Hopes that working from home would facilitate women to join the labour force in large numbers have been belied. Working from home with the rest of the family also at home made it harder for women compared to the hardship of commuting to work. It has been difficult to raise women’s participation in the labour force and offer appropriate jobs in adequate numbers to aspiring women. It would be difficult to cover the 3.6 million loss of employment among women during the pandemic.
•Working from home also does not help those who have to necessarily go to work for a living as well, such as small traders/vendors and daily wage labourers, The immediate impact of the lockdowns and other restrictions on mobility was very severe on them. The earnings of these people depend entirely upon their ability to reach markets and trade their goods or services for daily earnings. They account for the largest share of employment in India. Before the pandemic, in 2019-20, about 131 million or 32% of the total employment was in this form..
•In April 2020, when India was subjected to the most stringent lockdown, 79 million small traders and daily wage labourers lost employment. By July 2020, most of them were back to work. The lockdowns demonstrated both the vulnerability and the flexibility of this category of workers. They could enter and exit the labour markets with ease. Employment in the form of small traders and daily wage labourers was declining at the rate of 9.3%. In the two years of the pandemic, this rate of fall fell to 2.4% per annum.
•The pandemic has reversed a trend of rising entrepreneurs. The count of entrepreneurs who, like small traders and daily wage labourers, also have the freedom to work when conditions permit has also come down – from 78 million in 2019-20 to 75 million in 2021-22. This fall of about 1% is in sharp contrast to the 13% per annum growth in entrepreneurs before the pandemic. It is possible that the lockdowns dealt a fatal blow to the younger enterprises that had entered the markets only recently. But we expect entrepreneurship to rise again principally because of a lack of salaried jobs.
•The biggest relative fall in employment is in the category of salaried employees (6.8%). About 5.9 million salaried employees have lost employment in the two years of the pandemic. Unlike daily wage labourers, small traders and entrepreneurs, salaried employees cannot go back to work at will. A loss of a salaried job in hand can be regained only if an appropriate new job is found. But except for a few high-skill jobs, finding a new salaried job is difficult. Investments into new large enterprises make this task particularly difficult. A salaried job is also the most coveted form of employment. But juntil the investment cycle restarts, it may be difficult to see any uptick in salaried jobs. Employing women and providing salaried jobs are the two big challenges that the pandemic has posed that are going to be difficult to tackle soon.
📰 Inflation control needs another model
Lasting inflation control would require placing agricultural production on a steady footing
•Inflation is back as a talking point in the public arena, some would say belatedly, for wholesale price inflation has been in the double digits for over 12 months. India’s official measure of inflation, the rate of change of the consumer price index, has now breached the Reserve Bank of India (RBI)’s upper target of 6% for three months continuously. At the conclusion of the April meeting, the Monetary Policy Committee had already warned that the focus will henceforth be on inflation. Yesterday it raised the repo rate somewhat sooner than was expected by the market.
•It may appear contradictory to ask whether the RBI’s stated policy of ‘inflation targeting’, implemented through changes in the interest rate, can control inflation, but we show here why that would be justified.
Discourse on inflation
•The discourse on inflation engaged in by the western central banks, which has been adopted in toto by their Indian counterpart, is so abstruse that it is not understood even by many economists. So, we begin with an explainer.
•The starting point of this discourse is that inflation reflects an excess of output over its ‘natural’ level. Inflation targeting refers to the policy of controlling inflation by raising the interest rate over which the central bank has control, i.e. the rate at which it lends to commercial banks, the so-called ‘repo rate’. This, it is argued, will induce firms to stay their investment plans and reduce inventories, lowering production. As economy-wide output declines, becoming equal to the natural level of output, inflation will cease. This story does not just legitimise a policy of output contraction for inflation but sees it as optimal. The natural level of output itself is the productive counterpart of the natural level of employment, the level that obtains in a freely functioning labour market. So, at the natural level of output, the economy is deemed to be at full employment.
•It is left unstated, but salient in the context, that the natural level of output is unobservable. Hence inflation as a reflection of an “overheating” economy is something that must be taken on trust. Surely it is disturbing that India’s official model of inflation control is based on so unscientific a foundation. At least, the view of inflation that had ruled the central banks of the west before they adopted inflation targeting was based on something tangible, namely, the growth of the money supply.
•Not surprisingly for a theory based on an unobservable variable, the proposition that inflation is due to an overheating economy fares poorly when put to a statistical test for India. We are not aware of a single demonstration of the empirical validity of the model of inflation presented in the RBI report of 2014, which recommended a move to inflation targeting. On the other hand, in our published research, we explain inflation in India in terms of the movement of the prices of agricultural goods and, to a lesser extent, imported oil. The implication of this finding is damaging for the claim that monetary policy can control inflation, for neither the price of agricultural goods nor that of imported oil is under the central bank’s control. The only route by which monetary policy can, in principle, control inflation is by curbing the growth of non-agricultural output, which would in turn lower the growth of demand for agricultural goods. As the demand for agricultural goods slows, so will inflation, but this comes at the cost of output and employment. At least, this is the theory. Whether this takes place in practice depends upon the extent to which changes in the repo rate are transmitted to commercial bank lending rates.
Agricultural goods prices
•The implication for the policymaker that inflation is driven by agricultural goods prices, as is the case in India presently, is that the focus should be on increasing the supply of these goods. This could be a win-win solution, for as agricultural production grows faster, the economy expands without inflation. Ideally, food prices should decline, for the consequent rise in demand for other goods will propel the economy forward. But the product mix of agriculture becomes relevant here. Growing per capita income in India has shifted the average consumption basket towards foods rich in minerals, such as fruits and vegetables, and protein, such as milk and meat. But the expansion of the supply of these foods has been lower than the growth in demand for them. So a concerted drive to increase the supply of food other than rice and wheat holds the key. There was a time when the leadership of the RBI understood this, but now its leadership appears unwilling to acknowledge native wisdom.
•Increasing agricultural supply at steady if not declining prices is not going to be easy for political reasons. The States have not shown themselves to be particularly sensitive to the charge that they do little to ensure a supply of cheap food for the rest of the country, or even themselves in some cases. When they do produce surpluses, their only concern is that these be procured by the central government at the highest price. The stances of the leaders of wheat-producing northern States and rice-producing southern ones reflect this. Under these circumstances, a nation-wide project for producing food cheaply remains a distant dream. Now that the farm laws have been repealed, it is the time to initiate a discussion on how such a project can be taken forward. Costly food threatens the health of the population, as people economise on their food intake, and holds back the economy, as only a small part of a household’s budget can be spent on non-agricultural goods.
•Monetary policy manouvres, typified by the RBI’s raising of the repo rate yesterday, is not an efficient solution for an agricultural price-driven inflation. Any lasting inflation control would require placing agricultural production on a steady footing, with continuously rising productivity. This would require a re-orientation of farm policy. Since the time of the Green Revolution, the focus has been on raising output, that too of the superior cereals. The inflation caused by continuously raising procurement prices for these crops and slow growth elsewhere in the food-producing sector has been swept under the carpet. The time has come to end this folly. Till then, inflation targeting by a committee accountable to no one will remain a charade.
