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‘’Paper 4 GS-IV, Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Inclusive growth and issues arising from it.

Why you don’t feel the record-low inflation

   You should know:

  • The data shows that the inflation rate, measured by the Consumer Price Index was 2.2% for May 2017, slipping from a 3% reading for April which everyone thought was the rock-bottom.
  • The food component of the index actually deflated by 1.1%.
  • Looking back at the history of the CPI, we find that India has registered CPI inflation of less than 5% only in 12 months in 20 years.

   Why we don’t feel it?

  • There are three reasons why your personal experience with price rise may not gel with the official reading.
  • Where you live:
  • This is because the All-India CPI Combined is compiled by collecting town and village-level data on the prices of goods and services across States and then aggregating them.
  • All States and Union Territories do not get equal weighting in the total. The weights are decided by the consumption expenditure within each State relative to the all-India consumption basket.
  • This is why, in May 2017, CPI inflation at J&K (6.3%), Delhi (5.1%) and Himachal Pradesh (4.7%) ruled at many times the all-India reading of 2.2%.
  • Consumption basket:
  • In order to arrive at a CPI General Index that is representative of both India and Bharat, the statistics office assigns different weights to the different products and services.
  • These weights are derived from the actual spending patterns of rural and urban households as captured by the NSSO’s ground-level survey of expenditure patterns across India. The latest such survey was the 68th round conducted over 2011-12.
  • Because the majority of Indian households belong to lower-income strata, the CPI General Index thus carries a far higher weight to products than services.
  • Services often witness higher price rise than products in the Indian context.
  • But more affluent households will tend to spend a far lower proportion of their income on food and essentials and make a higher allocation to non-essentials and services.
  • One-off’s:
  • The official CPI print captures the point-to-point change in the index in the latest month, compared to the same month last year. This makes the number susceptible to distortions from one-off factors both in the base month and in the current one.
  • Inflation has moderated of late, but for most middle class folk, it is likely to be higher than 2.2%.

   Source: Indian Express

 

‘’Paper 3-GS-II, Topic: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

China-led AIIB touts ‘green’ growth

   Insights:

  • Leaders of the China-backed Asian Infrastructure Investment Bank touted its growing membership and commitment to sustainable development at its annual meeting, even as environmental groups were disappointed by its openness to investing in coal projects.
  • The AIIB has 80 member countries.
  • AIIB was set up to help meet the estimated $26 trillion need for infrastructure spending in Asia through 2030, while also demonstrating that a China-led institution can meet international standards for best practice.
  • The United States and Japan, both members of the Manila-based Asian Development Bank (ADB), have not joined the AIIB.
  • The AIIB has pledged to use its investments to help members fulfill their commitments to the Paris climate accord, which the United States is withdrawing from under President Donald Trump.
  • AIIB will not consider proposals if we are concerned about the environmental and reputational impact.
  • But the bank did get pushback from environmental groups about its commitment to being green, with several NGOs saying they were disappointed the bank’s new energy industry strategy, adopted on June 15, left the door open for coal sector investment.
  • In the energy strategy,
  • A statement that says up front the purpose of the energy strategy is to help countries meet their commitments under the Paris agreement, with ‘we’re going to finance coal projects’.
  • Other groups saw improvement over the last year in how the bank engages with NGOs. AIIB thought this was a really interesting opportunity to see if this new institution can foster a race to the top in terms of creating strong sustainable credit practices, or foster a race to the bottom.

    Source: Times of India