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What is TVS-2M Nuclear Fuel?
Russia has supplied the first batches of more reliable and cost-efficient nuclear fuel over the existing one, the TVS-2M nuclear fuel, to India for the Kudankulam Nuclear Power Plant (KNPP).

What is TVS-2M Nuclear Fuel?
- The TVS-2M FAs contain gadolinium-oxide which is mixed with U-235 enrichments.
- The core does not contain BARs (Burnable Absorbers Rods).
How are they prepared?
- Once the uranium is enriched, it is ready to be converted into nuclear fuel.
- At a nuclear fuel fabrication facility, the UF6, in solid form, is heated to gaseous form, and then the UF6 gas is chemically processed to form uranium dioxide (UO2) powder.
- The powder is then compressed and formed into small ceramic fuel pellets.
- The pellets are stacked and sealed into long metal tubes that are about 1 centimetre in diameter to form fuel rods.
- The fuel rods are then bundled together to make up a fuel assembly.
- Depending on the reactor type, each fuel assembly has about 179 to 264 fuel rods.
- A typical reactor core holds 121 to 193 fuel assemblies.
Benefits offered
- TVS-2M fuel assemblies have a number of advantages making them more reliable and cost-efficient.
- The new fuel has increased uranium capacity – one TVS-2M assembly contains 7.6% more fuel material as compared to UTVS.
- Besides, the special feature of the Kudankulam fuel in particular is the new generation anti-debris filter ADF-2, efficiently protecting fuel assemblies.
- Once the new TVS-2 M fuel is used in the next refuelling, the reactor will start operations with an 18-month fuel cycle.
- It means the reactor, which has to be stopped for every 12 months for removing the spent fuel and inserting the fresh fuel bundles and allied maintenance, will have to be stopped for every 18 months.
Back2Basics: India-Russia Energy Cooperation
- The Soviet Union supplied India with nuclear reactors and fuel when India was denied technologies and was hit with sanctions from the West for its refusal to sign the nuclear non-proliferation treaty (NPT).
- In 1988, the Soviet Union agreed, allegedly without an official deal, to build two nuclear reactors at Kudankulam in Tamil Nadu. The deal was made official in 1992.
- In 2000, Russia and India signed another secret MoU, to cooperate on “peaceful uses” of nuclear energy, and for Russia to supply India with low-enriched uranium fuel for the Tarapur reactor in Maharashtra.
- In 2009, the two countries entered into a major nuclear deal, with Russia agreeing to install four nuclear reactors at Kudankulam in Tamil Nadu, and one in West Bengal.
- Two units at Kudankulam are currently operational, and the third and fourth units are being prepared for installation.
- Russia is also aiding with the ongoing construction of the fifth and sixth units.
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June 11, 2022
What is IN-SPACe?
The Prime Minister inaugurated the headquarters of the Indian National Space Promotion and Authorisation Centre (IN-SPACe) at Bopal, Ahmedabad.

What is IN-SPACe?
- The establishment of IN-SPACe was announced in June 2020.
- It is an autonomous and single window nodal agency in the Department of Space for the promotion, encouragement and regulation of space activities of both government and private entities.
- It also facilitates the usage of ISRO facilities by private entities.
- It comprises technical experts for space activities along with safety expert, academic experts and legal and strategic experts from other departments.
- It also comprises members from PMO and MEA of Government of India.
Roles and Responsibilities
- Space activities including building of launch vehicles and satellites and providing space based services as per the definition of space activities.
- Sharing of space infrastructure and premises under the control of ISRO with due considerations to on-going activities.
- Establishment of temporary facilities within premises under ISRO control based on safety norms and feasibility assessment
How is it different from ANTRIX?
- Antrix Corporation Limited (ACL), Bengaluru is a wholly-owned Government of India Company under the administrative control of the Department of Space.
- It is as a marketing arm of ISRO for promotion and commercial exploitation of space products, technical consultancy services and transfer of technologies developed by ISRO.
- Antrix is engaged in providing Space products and services to international customers worldwide.
What about New Space India Limited (NSIL)?
- It functions under the administrative control of the Department of Space (DOS).
- It aims to commercially exploit the research and development work of ISRO Centres and constituent units of DOS.
- The NSIL would enable Indian Industries to scale up high-technology manufacturing and production base for meeting the growing needs of the Indian space program.
- It would further spur the growth of Indian Industries in the space sector.
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June 11, 2022
India is not the fastest growing big economy
Context

The Provisional Estimates of Annual National Income in 2021-22 just released show that GDP grew 8.7% in real terms and 19.5% in nominal terms (including inflation). It makes India the fastest growing major economy in the world.

What data implies
- Just 1.51% larger: Provisional Estimates of Annual National Income in 2021-22 also indicate that, the real economy is 1.51% larger than it was in 2019-20, just before the novel coronavirus pandemic hit the world.
- In nominal terms it is higher by 17.9%.
- Inflation: These numbers imply that the rate of inflation was 10.8% in 2021-22 and 16.4% between the two years, 2019-20 and 2021-22.
- Almost no growth: This picture implies almost no growth and high inflation since the pre-pandemic year.
- So, the tag of the fastest growing economy means little.
- Quarterly growth rate: The quarter to quarter growth currently may give some indication of the present rate of growth.
- In 2020-21, the quarterly rate of growth increased through the year.
- In 2021-22, the rate of growth has been slowing down.
- Of course in 2020-21, the COVID-19 lockdown had a severe impact in Q1 (-23.8%); after that the rate of growth picked up.
- In 2021-22, the rate of growth in Q1 had to sharply rise (20.3%).
- Ignoring the outliers in Q1, growth rates in 2021-22 have sequentially petered out in subsequent quarters: 8.4%, 5.4% and 4.1%.
- Going forward, while the lockdown in China is over, the war-related impact is likely to persist since there is no end in sight.
- Thus, price rise and impact on production are likely to persist.
Issues with the data
- The issue is about correctness of data.
- The annual estimates given now are provisional since complete data are not available for 2021-22.
- There is a greater problem with quarterly estimates since very limited data are available for estimating it.
- No data for Q1 of 2020-21: The first issue is that during 2020-21, due to the pandemic, full data could not be collected for Q1.
- No data for agriculture: Further, for agriculture, quarterly data assumes that the targets are achieved.
- Agriculture is a part of the unorganised sector.
- Very little data are available for it but for agriculture — neither for the quarter nor for the year.
- It is simply assumed that the limited data available for the organised sector can be used to act as a proxy.
- The non-agriculture unorganised sector is represented by the organised sector.
- Changes in non-agriculture unorganised: The method using the organised sector to proxy the unorganised non-agriculture sector may have been acceptable before demonetisation (2016) but is not correct since then.
- The reason is that the unorganised non-agriculture sector suffered far more than the organised sector and more so during the waves of the pandemic.
- Shift in demand to the organised sector: Large parts of the unorganised non-agriculture sector have experienced a shift in demand to the organised sector since they produce similar things.
- This introduces large errors in GDP estimates since official agencies do not estimate this shift.
- All that is known is that the Micro, Small and Medium Enterprises (MSME) sector has faced closures and failures.
- If GDP data are incorrect, data on its components — private consumption and investment — must also be incorrect.
- Further, the ratios themselves would have been impacted by the shock of the lockdown and the decline of the unorganised sectors.
- Private consumption data is suspect since according to the data given by the Reserve Bank of India which largely captures the organised sector, consumer confidence throughout 2021-22 was way below its pre-pandemic level of 104 achieved in January 2020.
- In brief, neither the total nor the ratios are correct.
Possible corrections
- In the best possible scenario, assume that the organised sector (55% of GDP) and agriculture (14% of GDP) are growing at the official rate of growth of 8.2% and 3%, respectively.
- Then, they would contribute 4.93% to GDP growth.
- The non-agriculture unorganised component is declining for two reasons: first, the closure of units and the second the shift in demand to the organised sector.
- Even if 5% of the units have closed down this year and 5% of the demand has shifted to the organised sector, the unorganised sector would have declined by about 10%; the contribution of this component to GDP growth would be -3.1%.
Conclusion

Clearly, recovery is incomplete and India is not the fastest growing big economy of the world.

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June 11, 2022
Indian Patent Regime vs. US norms
The US Trade Representative (USTR) said in a report released last month that India was one of the most challenging major economies as far as IP protection and enforcement is concerned.

What is the news?
- US has decided to retain India on its Priority Watch List along with six other countries —Argentina, Chile, China, Indonesia, Russia and Venezuela.
What is a Patent?
- A patent is an exclusive set of rights granted for an invention, which may be a product or process that provides a new way of doing something or offers a new technical solution to a problem.
Indian Patent Regime: A Backgrounder
- Indian patents are governed by the Indian Patent Act of 1970.
- India has gradually aligned itself with international regimes pertaining to intellectual property rights.
- It became a party to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement following its membership to the World Trade Organisation on January 1, 1995.
- An interesting point is that the original Indian Patents Act did not grant patent protection to pharmaceutical products to ensure that medicines were available at a low price.
- Patent protection of pharmaceuticals were re-introduced after the 2005 amendment to comply with TRIPS.
Various agreements
- India is also a signatory to several IPR related conventions, including the Berne Convention, which governs copyright.
- It is signatory to the Budapest Treaty, the Paris Convention for the Protection of Industrial Property, and the Patent Cooperation Treaty (PCT), all of which govern various patent-related matters.
Issues raised about India
- Among the issues raised in the report are:
1. India’s inconsistencies regarding patent protection
2. Concerns about what can be patented
3. Waiting time for obtaining patents
4. Burdensome reporting requirements and
5. Doubts about data safety
6. Trademark counterfeiting and secrets
- India had undertaken an intellectual property review exercise last year, where a Parliamentary Standing Committee examined this subject.
Contention of the US: Patents Evergreening
- One of the main points of contention between India and the U.S. has been Article 3(d) of the Indian Patent Act.
- Section 3 deals with what does not qualify as an invention under the Act, and Section 3(d) in particular excludes the mere discovery of a new form of a known substance.
- Section 3(d) prevents the mere discovery of any new property or new use for a known substance from being patented as an invention unless it enhances the efficacy of the substance repetitive.
- This prevents, what is known as “Evergreening” of patents.
- According to the Committee’s report, Section 3(d) allows for “generic competition by patenting only novel and genuine inventions.”
TRIPS and the Doha Declaration
- The Doha Declaration on the TRIPS Agreement and Public Health was adopted on November 14, 2021, by the WTO member states.
- This declaration recognises the gravity of public health problems affecting developing and least developed nations.
- It recognises that “intellectual property protection is important for the development of new medicines,” and acknowledges concerns about its effects on prices.
- It is interpreted and implemented as a right to protect public health and, in particular, to promote access to medicines for all.
Key provisions of Doha Agreement
- Compulsory licences can be invoked by a state in public interest, allowing companies apart from the patent owner to produce a patented product without consent.
- It concluded that India must not compromise on the patentability criteria under Section 3(d).
- It said that this ensures the growth of generic drug makers and the public’s access to affordable medicines.
- It indicated that India should resolve its differences with the US regarding the disqualification of incremental inventions through bilateral dialogue.
Positive steps taken by India
- The USTR report highlighted some positive steps taken by India in the recent past.
- India has accession to the World Intellectual Property Organisation (WIPO) Performances and Phonograms Treaty and WIPO Copyright Treaty, collectively known as the WIPO Internet Treaties, in 2018 and the Nice Agreement in 2019.
Back2Basics: Intellectual Properties
- IP is protected in law by, for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create.
- By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.
Types of IP:

(1) Copyright
- Copyright is a legal term used to describe the rights that creators have over their literary and artistic works.
- Works covered by copyright range from books, music, paintings, sculpture and films, to computer programs, databases, advertisements, maps and technical drawings.
(2) Patents

Discussed above

(3) Trademarks
- A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises.
- Trademarks date back to ancient times when artisans used to put their signature or “mark” on their products.
(4) Geographical Indications
- Geographical indications and appellations of origin are signs used on goods that have a specific geographical origin and possess qualities, a reputation or characteristics that are essentially attributable to that place of origin.
- Most commonly, a geographical indication includes the name of the place of origin of the goods.
(5) Trade secrets
- Trade secrets are IP rights on confidential information which may be sold or licensed.
- The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.
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June 10, 2022
What are Fast Radio Bursts (FRB)?
In a paper published in Nature, astronomers have reported a fast radio burst (FRB) whose characteristics are different from almost all other FRBs previously detected.

Such news makes us think about alien and extraterrestrial life at the first. Do not get carried away with such thoughts. Its simply a space based phenomena.

Fast Radio Burst (FRB)
- FRBs are super intense, millisecond-long bursts of radio waves produced by unidentified sources in the distant cosmos.
- They were first discovered in 2007 when scientists combed through archival pulsar data.
- Pulsars refer to spherical, compact objects in the universe, which are about the size of a large city but contain more mass than the sun.
- They often look like flickering stars but are not stars.
Why in news?
- The new study in Nature describes FRB 20190520B, first discovered in 2019.
- What makes it different is that unlike many other FRBs, it emits frequent, repeating bursts of radio waves.
- And between bursts, it constantly emits weaker radio waves.
- FRB 190520B is co-located with a compact, persistent radio source and associated with a dwarf host galaxy of high specific star formation.
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June 10, 2022
Rhino reintroduction a hit in Assam Reserves
The one-horned rhinos of western Assam’s Manas National Park, bordering Bhutan, are expected to have high life expectancy and significant growth in population, the 14th Assam rhino estimation census has revealed.

Indian Rhino
- The Indian rhinoceros also called the greater one-horned rhinoceros and great Indian rhinoceros is a rhinoceros native to the Indian subcontinent.
- It is listed as Vulnerable on the IUCN Red List and Schedule I animal in the Wildlife Protection Act, 1972.
- It once ranged across the entire northern part of the Indian Subcontinent, along the Indus, Ganges and Brahmaputra River basins, from Pakistan to the Indian-Myanmar border.
- Poaching for rhinoceros horn became the single most important reason for the decline of the Indian rhino.
Why in news?
- The 14th Rhino Population Estimation / Census in Kaziranga National Park counted at least 2613 rhinos including calves, a jump of exactly 200 rhinos since the last census conducted in 2018.
- Then at least 2413 Rhinos were counted in the national park.
Threats to Rhinos
- Ground rhino horn is used in traditional Chinese medicine to cure a range of ailments, from cancer to hangovers, and also as an aphrodisiac.
- In Vietnam, possessing a rhino horn is considered a status symbol.
- Due to demand in these countries, poaching pressure on rhinos is ever persistent against which one cannot let the guard down.
Various protection moves
- A rhino reintroduction programme under the Indian Rhino Vision 2020 was started in 2006.
- This entailed the translocation of rhinos from Kaziranga National Park and Pobitora Wildlife Sanctuary besides orphans hand-reared at the Centre for Wildlife Rehabilitation and Conservation at Kaziranga.
Try this PYQ:

Q. Consider the following statements:
1. Asiatic lion is naturally found in India only.
2. Double-humped camel is naturally found in India only.
3. One-horned rhinoceros is naturally found in India only.
Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

[wpdiscuz-feedback id=”n97ipqb1qb” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

(Note: Comment feature is not available on the app.)
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June 10, 2022
Next-Generation Corvettes for Indian Navy
The Defence Acquisition Council (DAC) has given the Acceptance of Necessity (AoN) for the procurement of next-generation Corvettes for the Indian Navy at an approximate cost of Rs 36,000 crore.

What is a Corvette?
- A Corvette is the smallest class of naval ships and it falls below the warship class of a frigate.
- These are highly agile ships and are categorised as missile boats, anti-submarine ships, coastal patrol crafts and fast attack naval vessels.
- The word corvette itself is derived from French and Dutch origin.
- During World War II, the term Corvette was used to describe vessels which had anti-submarine roles assigned to them.
- Modern Corvettes can go up to 2,000 tons in displacement which helps in keeping them agile.
What kind of Corvettes does the Indian Navy possess?
- The Indian Navy at present has the Kamorta Class Corvettes, which are also known as Project 28.
- These ships have an anti-submarine role and are manufactured at Garden Reach Shipbuilders and Engineers in Kolkata.
- The four Kamorta Class Corvettes that the Indian Navy possesses are named INS Kamorta, INS Kadmatt, INS Kiltan and INS Kavaratti.
- The first of these was commissioned in 2014 and the last one in 2020.
What new capabilities will the new generation Corvettes have?
- The next-generation Corvettes will be manufactured for various roles like surveillance missions, escort operations, deterrence, surface action group operations, search and attack and coastal defence.
- It is worth noting that these roles will be in addition to the anti-submarine roles being already performed by the existing Corvettes in the Navy.
- Corvettes will be constructed based on new in-house design of the Indian Navy using latest technology of ship buildings.
- They would contribute to further the government’s initiative of Security and Growth for all in the region (SAGAR).
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June 9, 2022
Dostarlimab: The New Wonder Cancer Drug
A trial on 18 colorectal cancer patients in the US found that cancer could be treated without chemotherapy or surgery. The world is sitting up and taking note of Dostarlimab, which has been called a wonder drug.

What is Dostarlimab?
- Dostarlimab is an experimental drug. It contains laboratory-produced molecules.
- It acts as substitute antibodies. It is sold under the brand name Jemperli.
- It was approved for medical use in the United States and the European Union in 2021.
- Its side-effects include vomiting, joint pain, itching, rash, fever etc.
What are the findings?
- The trial showed that immunotherapy alone – without any chemotherapy, radiotherapy, or surgery that have been staples of cancer treatment.
- It could completely cure the patients with a particular kind of rectal cancer called ‘mismatch repair deficient’ cancer”.
- All 12 patients had completed the treatment and were followed for six to 25 months after.
- No cases of progression or recurrence had been reported during the follow-up.
- The response too was rapid, with symptoms resolving in 81% of the patients within nine weeks of starting the therapy.
Is Dostarlimab actually very effective?
- Dostarlimab is not a new drug but a combination of drugs that are already approved for use in immunotherapy.
- There is a possibility that Dostarlimab may improve the outcome and survival rate in rectal cancer patients but to say it as a magic drug for cancer is completely going overboard.
How does this drug cure?
- PD1 is a protein that regulates immune function and can sometimes keep T cells from killing cancer cells.
- The therapy in the trial used PD1 blockades, allowing T cells to kill cancer cells.
- ‘Mismatch repair deficient’ cancer is most common among colorectal, gastrointestinal, and endometrial cancers.
- Patients suffering from this condition lack the genes to correct typos in the DNA that occur naturally while cells make copies.
- Immunotherapy belongs to a category called PD1 blockades that are now recommended for the treatment of such cancers rather than chemotherapy or radiotherapy.
Will Indian patients get access to the drug?
- At present, Indian doctors seem to be generally wary of prescribing Dostarlimab for their patients.
- Experts have termed as optimistic the findings of an ongoing trial—a group of rectal cancer patients showed no signs of a tumour after taking the drug for six months.
- None of the participants reported any severe side-effects either.
- Yet, doctors say they want to assess the duration of the response.
What do we know about the clinical trial?
- Cancer was treated in all the patients and could not be detected by physical examination, endoscopy, positron emission tomography, or magnetic resonance imaging.
- Thus, there is a thought that cancer can be treated without chemotherapy or surgery.
Is it too early to celebrate?
- Cancer specialists said initial signals show how precision medicine is building the future but they need to test more patients from different areas and other types of cancers.
- The combination of drugs was administered to a small number of patients and for a specific type of cancer.
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June 9, 2022
RBI plans to link Credit Cards with UPI
The RBI has proposed to allow the linking of credit cards with the Unified Payments Interface (UPI).

Integrating Credit Cards to UPI
- The integration will first begin with the indigenous RuPay credit cards.
- Both the RuPay network and UPI are managed by the same organisation – the National Payments Corporation of India (NPCI).
What is UPI?
- UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
- The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.
Why such move?
- The linkage of UPI and credit cards could possibly result in credit card usage zooming up in India given UPI’s widespread adoption.
- The integration also opens up avenues to build credit on UPI through credit cards in India, where in the last few years, a number of startups like Slice, Uni, One etc. have emerged.
- The move could also be a push to increase adoption by banking on UPI’s large user base.
- So far, UPI could only be linked to debit cards and bank accounts.
- This will provide additional convenience to the users and enhance the scope of digital payments.
What could be the hurdles?
- There are some regulatory areas that would have to be addressed before the linkage happens.
- For instance, it is not clear how the Merchant Discount Rate (MDR) will be applied to UPI transactions done through credit cards.
- UPI and RuPay attract zero-MDR, meaning that no charges are applied to these transactions, which is a key reason behind the prolific adoption of UPI both by users and merchants.
- The norm has faced pushback from the payments industry.
- It has argued that it limits the aggregators’ ability to invest in and maintain the financial infrastructure of the payment ecosystem that they have built.
- Applicability of zero-MDR on UPI could also be a reason why other card networks such as Visa and Mastercard may not have been onboarded to UPI for credit cards yet.
Note: MDR is a fee that a merchant is charged by their issuing bank for accepting payments from their customers via credit and debit cards.

What is the big picture?
- UPI has become the most inclusive mode of payment in India with over 26 crore unique users and five crore merchants on the platform.
- The progress of UPI in recent years has been unparalleled.
- Many other countries are engaged with us in adopting similar methods in their countries.
- In May, UPI processed 5.95 billion transactions worth over Rs 10 trillion, a record high since its launch in 2016.
- NPCI is looking to soon process a billion transactions a day.
Try this PYQ from CSP 2017:

Q.Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news?

(a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank

(b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services

(c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards

(d) The incentive is given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards

[wpdiscuz-feedback id=”jap9mp9zh2″ question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

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June 9, 2022
Monetary tightening and its impact on growth
Context

A rate hike in the monetary policy committee’s June meeting was a foregone conclusion after the spike in inflation and an off-cycle surprise interest rate hike on May 4.

Reasons fast forwarding of interest rate hike
- 1] Broad based inflation: A confluence of factors has pushed inflation higher and made it persistent and broad-based.
- 2] Policy rates are still negative: Even with this hike, the repo rate, the signalling tool for bank interest rates, is still below pre-pandemic levels.
- The real policy rate (repo rate less expected inflation) remains negative and has some distance to cover before it reaches positive territory — where the RBI would like to see it.
- 3] Lag in effect: Monetary policy impacts growth, and thereafter, inflation with a lag.
- To control inflation, the RBI needed to act faster by front loading rate hikes.
- 4] Elevated inflation expectations: The risk of inflation expectations getting unmoored had risen.
- Household and business inflation expectations remain elevated, as indicated by the RBI’s inflation expectations survey of households.
- 5] Interest rate hike in the US: The aggressive stance of the US Federal Reserve and ensuing tightening financial conditions.
- India is better placed today than in 2013 to face the Fed’s actions with a stronger forex shield.
How US Fed’s actions affect India?
- India is not insulated.
- Capital outflow: The headwinds now are stronger than in 2013 and we have seen net capital outflows since October 2021.
- S&P Global expects the US federal funds rate to be hiked to 3-3.25 per cent in 2023, higher than the pre-pandemic level, and highest since early 2008.
- Despite a strong forex hoard, the RBI has had to deploy monetary policy to mute the impact of the Fed’s actions.
Inflation and its impact
- Upward pressure on food inflation: The pressure on food inflation has increased owing to the impact of the freak heatwave on wheat, tomatoes and mangoes, which is driving prices higher.
- This is on top of rising input costs for agricultural production, the global surge in food prices and the expected sharper than usual rise in minimum support price.
- Fuel inflation will remain high, duty cuts notwithstanding, as global crude prices remain volatile at elevated levels.
- Core inflation, the barometer of demand, is a complex story.
- Goods (despite only partial pass-through of input costs) are witnessing higher inflation than services.
- That’s because services faced tighter restrictions during the Covid-19 waves, restricting their consumption and the pricing power of providers as well.
- Service categories that are mostly regulated, such as public transport, railways, water and education, have over 50 per cent weight in core services.
- However, prices of discretionary services such as airlines, cinema, lodging and other entertainment are rising.
- Transportation-related services have seen the sharpest rise in the past six months due to fuel price increases.
- Impact on the poor: For those at the bottom of the pyramid, high inflation hits harder because energy and food are a big chunk of their consumption basket.
Growth prospects
- S&P Global has recently cut the growth outlook for major economies for 2022 — that of the US to 2.4 per cent from 3.2 per cent, for Eurozone to 2.7 per cent from 3.3 per cent earlier, and for China to 4.2 per cent from 4.9 per cent.
- This will hurt exports which are very sensitive to global demand.
Monetary policy actions
- Not all aspects of supply-driven inflation can be addressed via monetary policy.
- So the authorities are complementing monetary policy actions by using the limited fiscal space to cut duties and extend subsidies to the vulnerable.
Conclusion

Monetary tightening impacts growth with a lag of at least 3-4 quarters and the fact that real interest rates are negative and borrowing rates still below pre-pandemic levels, implies monetary policy is unlikely to be growth-restrictive for this year.

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June 9, 2022