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With inflation continuing to remain sticky, the Reserve Bank of India Friday increased the repo rate by 50 basis points (bps) – the fourth rate-hike since May this year – to 5.90 per cent, with analysts expecting further monetary tightening in the coming months.
The central bank also lowered the growth forecast to 7 per cent for the current financial year from 7.2 per cent in August on concerns over ‘bleak’ global economic outlook, but retained its retail inflation forecast at 6.7 per cent.
Reacting to the RBI move, the benchmark government bond yield ended at 7.39 per cent, after closing at 7.34 per cent. The stock markets bounced after seven straight sessions of decline with the BSE Sensex jumping 1,016.96 points (1.80 per cent) to close at 57,426.92.
In May, the RBI had hiked the repo rate (the rate at which the RBI lends money to banks to meet their short-term funding needs) by 40 bps. With Friday’s action – the third 50 bps hike in a trot – the RBI’s Monetary Policy Committee effected a 190-bps increase in the last five months since May. A basis point is one hundredth of one percentage point.
The six-member MPC, headed by the RBI Governor Shaktikanta Das, also decided to remain “focused on withdrawal of accommodation” to ensure that inflation remains within the target going forward, while supporting growth.
The Monetary Policy Framework Agreement between the RBI and the government requires the central bank to keep inflation within the 4 per cent plus/minus 2 per cent band.
The MPC was of the view that persistence of high inflation necessitates further calibrated withdrawal of monetary accommodation to restrain broadening of price pressures, anchor inflation expectations and contain the second-round effects.
Accordingly, the MPC decided to increase the policy repo rate by 50 basis points to 5.9 per cent and to remain focused on withdrawal of accommodation, while supporting growth,” RBI Governor Shaktikanta Das said while announcing the monetary policy.
The 50 bps-hike, in line with market expectations, will result in higher borrowing cost for the new and existing customers of housing and auto loans.
The immediate impact will be for borrowers with loans linked to the external benchmark linked lending rate (EBLR). For customers in the marginal cost of funds-based lending rate (MCLR) regime, the resetting of rates will happen with a lag.
When asked whether the MPC’s decision will continue to target inflation even as the rupee faces volatility after the US Federal Reserve announced a 75 bp rate hike and hinted at more hikes in future, Das said domestic factors will always be the guiding force.
To better track PLI claims, Govt floats digital platforms for data sharing (Page no. 1)
(GS Paper 3, Economy)
In a move to tighten the incentive disbursal system under the government’s flagship incentive schemes for electric vehicles, the Heavy Industries Ministry is moving from a paper-based subsidy claims mechanism to a new digital platform that will track the value addition achieved by a vehicle manufacturer using domestically produced inputs from equipment manufacturers.
Under this new platform, starting October 1, an IT-enabled system based on Application Programming Interface or API, would be leveraged to ensure that data pertaining to the net value addition achieved during the manufacturing process would automatically be fed into the Ministry’s portal from the vehicle manufacturers’ enterprise resource planning (ERP) systems.
This will enable traceability of equipment and inputs with their complete digital footprint. ERP is an application software that organisations use to manage business activities.
Currently, companies file this in the physical format to claim incentives under the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India (FAME) scheme and other flagship schemes such as the Productivity-Linked Incentive (PLI).
“This (digital system) will not just bring in transparency but also be the next level in ease of doing business and will save a lot of hassle for companies that have to file it in physical form as on date,” ArunGoel, Secretary, Ministry of Heavy Industries told The Indian Express.
This is significant since the government’s revenue intelligence agency had flagged a discrepancy in the process related to claims made by some two-wheeler manufacturers who allegedly violated localisation norms while availing of subsidies under the electric vehicle promotion scheme.
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Preventive detention serious invasion of personal liberty: SC (Page no. 8)
(GS Paper 2, Polity and Governance)
Underlining that “preventive detention is a serious invasion of personal liberty”, the Supreme Court on Friday ruled that safeguards laid down in the Constitution and laws authorising detention “must” therefore “be strictly adhered to”.
A bench of Chief Justice of India U ULalit, and Justices Ravindra Bhat and J B Pardiwala said this while quashing the detention of a person under the Prevention of Illicit Traffic in NDPS Act-1988.
The judgment came on an appeal filed by the detenue, Sushanta Kumar Banik, challenging the June 1, 2022 Tripura HC order dismissing his petition challenging the legality and validity of the detention order passed by the Tripura government on November 12, 2021.
The bench referred to the 1982 SC decision in the ‘Ashok Kumar vs Delhi administration’ case which said “preventive detention is devised to afford protection to society.
The object is not to punish a man for having done something but to intercept before he does it and to prevent him from doing”, and added that “in view of the above object of the preventive detention, it becomes very imperative on the part of the detaining authority as well as the executing authorities to remain vigilant and keep their eyes skinned but not to turn a blind eye in passing the detention order at the earliest from the date of the proposal and executing the detention order because any indifferent attitude on the part of the detaining authority or executing authority would defeat the very purpose of the preventive action and turn the detention order as a dead letter and frustrate the entire proceedings”.
It added that “preventive detention is a serious invasion of personal liberty and the normal methods open to a person charged with commission of any offence to disprove the charge or to prove his innocence at the trial are not available to the person preventively”.
The bench pointed out that its previous decisions go to indicate that “if there is unreasonable delay between the date of the order of detention and actual arrest of the detenue and in the same manner from the date of the proposal and passing of the order of detention, such delay unless satisfactorily explained throws a considerable doubt on the genuineness of the requisite subjective satisfaction of the detaining authority in passing the detention order and consequently render the detention order bad and invalid because the ‘live and proximate link’ between the grounds of detention and the purpose of detention is snapped in arresting the detenue”.
It added that in the instant case, “circumstances indicate that the detaining authority after the receipt of the proposal from the sponsoring authority was indifferent in passing the order of detention with greater promptitude. The ‘live and proximate link’ between grounds of detention and purpose of detention stood snapped in arresting the detenue… the delay has not been explained in any manner”.
Editorial Page
RBI’s playbook (Page no. 12)
(GS Paper 3, Economy)
As expected, the members of the monetary policy committee have voted to increase the repo rate by 50 basis points to 5.9 per cent. One member voted for a more moderate increase of 35 basis points.
The stance of the policy continues to be (as in the August meeting) “focused on withdrawal of accommodation”, indicating the continuing primacy of moderating inflation (price stability) and hence further rate hikes.
The average CPI inflation forecast has been retained at 6.7 per cent for 2022-23, with risks evenly balanced (higher rice and pulses and lower oil and metals prices).
However, the GDP growth forecast has come down to 7 per cent (from the earlier assessment of 7.2 per cent) after the slightly weaker than expected first quarter print of 13.5 per cent.
Monetary policy is now entering a phase that will require a coordinated approach of interest rates, liquidity and exchange rate responses as RBI’s decision making will operate in the “impossible trinity of open economy macroeconomics” — that is, the inability to independently determine domestic interest rates when the exchange rate is market determined and the capital account is open.
India’s external “financial conditions” are likely to remain tight in the foreseeable future. The US Federal Reserve will continue to raise its policy rate in a methodical manner to tame inflation, as strong aggregate demand is reinforced by a tight labour market.
The current view on the extent of further Fed rate hikes is likely to be understated, since monetary policy transmission is relatively weak in the US — it has a large home loan stock largely priced at long-term fixed interest rates and hence relatively insensitive to policy rate changes. Hence, it is reasonable to assume that the dollar will remain strong in the near future.
Europe, in contrast, is having to resort to various fiscal and administrative measures to mitigate the impact of soaring energy prices on household consumption. Some central banks have responded by warning of more aggressive tightening to offset these expansionary fiscal measures.
In addition, China’s growth slowdown — due to various structural weaknesses and policy restrictions — is reflected in a depreciating currency, which is also likely to have an impact on other Asian emerging markets exchange rates.
What does this imply for monetary policy in India? One, that MPC actions will still be determined by domestic inflation, growth and broader financial conditions.
However, second order effects from the global policy spillovers and the broader expected economic slowdown are bound to influence domestic conditions through financial, commodities and trade channels.
India’s aggregate demand (hence the growth momentum) remains surprisingly resilient, even after cumulative repo rate hikes of 140 bps since early May (excluding this hike).
Direct tax collections remain strong, indicating inter alia corporate financials’ strength. GST collections (as well as trends in e-way bills) suggest strong economic activity.
Let The Land Heal (Page no. 12)
(GS Paper 3, Agriculture)
As usual, I am awake, while it’s dark outside. Soon the birds begin chirping, one can identify pigeons, magpie robins, parrots, tailorbirds, crows, babblers and partridges.
Their chirping ushers in the dawn. I step out, the sky is brighter, and the air is fresh. Blissful it seems, till I look down to find a dead bee on the floor and then there are more and some more. I flinch for a moment. Deep down, I would have hoped otherwise, but I half expected it.
It always happens after we spray Profenofos, an organophosphate insecticide. When every measure to stop the pests fails, it’s the extremely toxic weapon of last resort. It also affects brain development in humans, particularly children.
In Land Healer, Jack Fiennes writes that we’ve been brought up to classify anything that competes with our crops as vermin, pest or weed. Farmers have spent careers killing things they don’t need. That is what pesticides do.
They are indiscriminately applied to the crop, not because they are needed but because we are trying to prevent pests and diseases from reaching a point where they become impossible to control.
Decades of lack of quality farm advisory services and staff shortages across states have compelled farmers to become risk averse. That has resulted in pests and diseases developing resistance to the existing applications, requiring stronger, more toxic responses every passing year.
Considering the genetic altering impact on the human body and biodiversity loss, reduction in pesticide usage should have become a national priority long ago. Going by past experience,
I am only cautiously optimistic of government delivery, but nevertheless am proposing four interventions that will reduce farm chemical input usage by a third, to begin with.
One, the business model of the farm chemical input industry must transform to become a service industry: A few years ago on a visit to Sargodha in Pakistan, I was pleasantly surprised to witness a Syngenta franchise selling its brand of farm chemicals.
It also offered services to get farms sprayed, ensuring lesser input application. In India, shopkeepers sell farm chemical inputs from multiple companies, and their business model — like any other business — rewards shopkeepers with higher margins for increasing sales.
Idea Page
Swachhbharat next steps (Page no. 13)
(GS Paper 2, Polity and Governance)
As we celebrate the 75th anniversary of India’s independence, much can be said about the progress the country has made in achieving the Sustainable Development Goals (SDG) concerning sanitation.
The concept of sanitation in the Indian context has been around since the Indus Valley civilisation. However, till 2014, sanitation coverage in India was as low as 39 per cent.
Around 55 crore people in rural areas were without a toilet facility before 2014 and this severely affected the health and dignity of our people, especially women and children.
The greatest and perhaps most significant impact of poor sanitation is on health. Exposure to contaminated drinking water and food with pathogen-laden human waste is a major cause of diarrhoea and can cause cholera, trachoma, intestinal worms, etc, leading to the “stunting” of huge swathes of our children.
Poor hygiene and waste management practices also impact the environment with untreated sewage flowing directly into water bodies and affecting coastal and marine ecosystems, contaminating soil and air, and exposing millions to disease.
Finally, poor sanitary practices impact the economy adversely.
A study by the World Bank states that the absence of toilets and conventional sanitation costs India 6.4 per cent of its GDP in 2006.
The economic impact of poor sanitation for India is at least $38.5 billion every year under health, education, access time and tourism.
The launch of the Swachh Bharat Mission (SBM) by the Prime Minister on October 2, 2014, had a unique goal — to achieve universal sanitation coverage and to make the country Open Defecation Free (ODF).
By offering financial incentives for building household toilets, as well as community toilets for slums and migrant populations, the government gave a huge fillip to the toilet infrastructure.
To bring changes to the age-old idea that toilets in the home were unclean, the government ran several programmes with the participation of the private sector and NGOs to educate the population on the benefits of ODF in what is acclaimed as one of the largest behaviour change programmes in the world. From 2014 to 2020, more than 10 crore toilets were constructed. The country declared itself ODF on October 2, 2019.
The second phase of the project, which commenced in 2020 and is expected to run till 2025, has set even more ambitious targets — sustaining the achievements of phase 1 and ensuring that treatment of both liquid and solid waste is achieved through the help of technology and private sector engagement.
Explained Page
India-US ties: Depth & nuance (Page no. 15)
(GS Paper 2, International Relations)
With United States Secretary of State Antony J Blinken by his side, External Affairs Minister S Jaishankar declared in Washington DC this week, “I am very bullish about the [Indo-US] relationship.”
Only the previous day, Jaishankar had remarked that the US decision to provide a $450-million sustenance package for Pakistan’s aging F-16 fleet was “not fooling anybody”.
It would appear that Jaishankar had had a change of heart within 24 hours. In fact, such divergences are now routine in the deepening bilateral relationship.
So with Jaishankar listening, Blinken said it was Washington’s “obligation” to provide military equipment to ensure that Pakistan’s F-16s are kept capable to deal with “clear terrorist threats” from al-Qaeda and the Islamic State.
Blinken offered some perspective too: “I think no two countries have a greater ability…opportunity and responsibility to try to shape the future of this century than the United States and India… [But] that doesn’t mean that we don’t have differences.
We do, and we will. But it also means that because of the depth and quality of the dialogue we have, we talk about everything and work closely together on how we can advance the agenda that we have in common.”
This nuance is not unknown to those who have been associated with the evolution of the relationship over the past two decades.
But as the countries navigate choppy geopolitical waters in the aftermath of the Russian invasion of Ukraine, the relationship is being put through a “stress test”, many analysts say.
Following the nuclear tests of May 1998, as much of the western world came down heavily on India, Prime Minister Atal Bihari Vajpayee wrote to President Bill Clinton, putting China in the frame.
We have an overt nuclear weapon state on our borders, a state which committed armed aggression against India in 1962. Although our relations with that country have improved in the last decade or so, an atmosphere of distrust persists mainly due to the unresolved border problem.
5G services to be rolled out today; how will your experience change? (Page no. 15)
(GS Paper 3, Science and Technology)
Beginning Saturday, India will get 5G mobile services — almost five years after the country took its first steps towards the launch of the next generation of mobile telephony.
Prime Minister Narendra Modi will launch 5G in select cities on October 1, while inaugurating the sixth edition of India Mobile Congress in New Delhi.
In 2017, the government had set up a high-level forum comprising representatives from the industry, academia, government and regulators to evaluate and approve the country’s roadmap for rolling out 5G.
The main agenda of this forum was to keep India’s roadmap for 5G aligned with the global standards so as to prevent the lack of homogeneity in global telecom networks that was witnessed in services up till 4G.
The forum, headed by Stanford University’s Professor AJ Paulraj submitted its report in 2018 and suggested focus on areas including spectrum policy, regulatory policy, application and use-case labs for developing locally-tailored solutions.
And while research and development for 5G applications continued, the government started allocating spectrum to telecom operators to conduct trials.
By 2019, the telecom department and the sector regulator TRAI started considerations on spectrum pricing. In August this year, the government concluded auctioning of 5G spectrum — in what was one of the final steps towards launching the services.
While the government has not specified the cities that the PM will first launch 5G services in, telecom operators have revealed how they plan to roll out 5G services on their network. Reliance Jio, which was the top spender at this year’s 5G spectrum auctions bidding an amount of more than Rs 88,000 crore, said in August that it will roll out high-speed mobile internet services on its 5G network by Diwali in metro cities like Delhi, Mumbai, Chennai and Kolkata by Diwali this year.
Bharti Airtel which was the second highest spender in the auction has said that 5G will be available on its network in all urban parts of the country by the end of 2023. Also, the company said that 5G will be available in towns and key rural areas by March 2024.
The Ministry of Communications said in a statement: “5G can unleash new economic opportunities and societal benefits giving it the potential for being a transformational force for Indian society.
The cumulative economic impact of 5G on India is expected to reach $450 billion by 2035.” For consumers, 5G could have benefits owing to the superior Internet speed and low latency it promises over 4G.
In heart of Bandhavgarh Tiger Reserve ,ASI report ancient Buddhist finds (Page no. 15)
(GS Paper 1, Art and Culture)
The Archaeological Survey of India (ASI) (September 28), reported 26 Buddhist caves in Madhya Pradesh’s Bandhavgarh Tiger Reserve, after a month-long exploration conducted this summer. Besides the caves, which date back to the 2nd-5th century BCE, other archaeological remains of the Mahayana sect of Buddhism, such as chaitya-shaped doors and cells containing stone beds, were also reported by the ASI team.
The exploration was conducted between May 20 and June 26 this year by the ASI’s newly formed Jabalpur Circle, under the direction of its Superintending Archaeologist, ShivakantBajpai and a dozen team members including archaeologists, archaeological analysts, photographers and forest guards. The team covered nearly 170 sq km within the reserve’s core area.
In the exploration, remarkable archaeological remains came to light, adding a new chapter in the history of Baghelkhand,” said the ASI. Baghelkhand, which is said to derive its name from the Vaghela Rajput kings of the 14th century, covers the northeastern regions of Madhya Pradesh, and a small area of southeastern Uttar Pradesh.
The 26 caves that were found are associated with the Mahayana sect of Buddhism, ASI said, adding that these date back to the same time as the Ajanta caves in Aurangabad, a UNESCO World Heritage Site.
Besides the caves, the team also found the remains of 26 temples, twomathas, two stupas, 46 idols and sculptures, 26 fragments and 19 water bodies, according to the report signed by Bajpai.
It also mentioned a Buddhist pillar fragment containing a miniature stupa carving, dating to the 2nd-3rd century CE, and 24 Brahmi inscriptions from the 2nd-5th century CE.
The temples are from more recent times — the Kalachuri period (9th-11th century), while the water bodies range between 2nd-15th centuries CE. The report says that the places Kaushami, Mathura, Pavata (Parvata), Vejabharada and Sapatanaairikaaare mentioned in the Brahmini inscriptions, while the inscribed names of kings include Shri Bhimsena, Maharaja Pothasiri and Bhattadeva.
This was the first phase of the current exploration by ASI, which covered the expanse of the Tala Range. In the coming phases, the ASI will survey the remaining ranges of the Bandhavgarh forest, Khitauli and Magadhi. Tala, Khitauli and Magadhi comprise the three main zones of the national park, which together cover an area of 716 km.
Bandhavgarhwas declared a national park in 1968 and became a tiger reserve in 1993. The ASI stated that explorations in the region had been undertaken for the first time since 1938, under the command of ASI archaeologist NP Chakravarty.