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  • SC tests phones for Pegasus Spyware

    The Supreme Court has said its technical committee had so far received and tested 29 mobile devices suspected to be infected by Pegasus malware.

    Why in news?

    • It was alleged that the government used the Israel-based spyware to snoop on journalists, parliamentarians, prominent citizens and even court staff.

    What is Pegasus?

    • Pegasus is a spyware developed by NSO Group, an Israeli surveillance firm that helps spies hack into phones.
    • In 2019, when WhatsApp sued the firm in a U.S. court, the matter came to light.
    • In July 2021, Amnesty International, along with 13 media outlets across the globe released a report on how the spyware was used to snoop hundreds of individuals, including Indians.
    • While the NSO claims its spyware is sold only to governments, none of the nations have come forward to accept the claims.

    Threats created by Pegasus

    • What makes Pegasus really dangerous is that it spares no aspect of a person’s identity.
    • It makes older techniques of spying seem relatively harmless.
    • It can intercept every call and SMS, read every email and monitor each messaging app.
    • Pegasus can also control the phone’s camera and microphone and has access to the device’s location data.
    • The app advertises that it can carry out “file retrieval”, which means it could access any document that a target might have stored on their phone.

    Dysfunctions created

    • Privacy breach: The very existence of a surveillance system, whether under a provision of law or without it, impacts the right to privacy under Article 21 and the exercise of free speech under Article 19.
    • Curbing Dissent: It reflects a disturbing trend with regard to the use of hacking software against dissidents and adversaries. In 2019 also, Pegasus software was used to hack into HR & Dalit activists.
    • Individual safety: In the absence of privacy, the safety of journalists, especially those whose work criticizes the government, and the personal safety of their sources is jeopardised.
    • Self-Censorship: Consistent fear over espionage may grapple individuals. This may impact their ability to express, receive and discuss such ideas.
    • State-sponsored mass surveillance: The spyware coupled with AI can manipulate digital content in users’ smartphones. This in turn can polarize their opinion by the distant controllers.
    • National security: The potential misuse or proliferation has the same, if not more, ramifications as advanced nuclear technology falling into the wrong hands.

    Snooping in India:  A Legality check

    For Pegasus-like spyware to be used lawfully, the government would have to invoke both the IT Act and the Telegraph Act. Communication surveillance in India takes place primarily under two laws:

    1. Telegraph Act, 1885: It deals with interception of calls.
    2. Information Technology Act, 2000: It was enacted to deal with surveillance of all electronic communication, following the Supreme Court’s intervention in 1996.

    Cyber security safeguards in India

    • National Cyber Security Policy: The policy was developed in 2013 to build secure and resilient cyberspace for India’s citizens and businesses.
    • Indian Computer Emergency Response Team (CERT-In): The CERT-In is responsible for incident responses including analysis, forecasts, and alerts on cybersecurity issues and breaches.
    • Indian Cyber Crime Coordination Centre (I4C): The Central Government has rolled out a scheme for the establishment of the I4C to handle issues related to cybercrime in the country in a comprehensive and coordinated manner.
    • Budapest Convention: There also exists Budapest Convention on Cybercrime. However, India is not a signatory to this convention.

    Issues over government involvement

    • It is worth asking why the government would need to hack phones and install spyware when existing laws already offer impunity for surveillance.
    • In the absence of parliamentary or judicial oversight, electronic surveillance gives the executive the power to influence both the subject of surveillance and all classes of individuals, resulting in a chilling effect on free speech.

    Way forward

    • The security of a device becomes one of the fundamental bedrock of maintaining user trust as society becomes more and more digitized.
    • Constituting an independent high-level inquiry with credible members and experts that can restore confidence and conduct its proceedings transparently.
    • The need for judicial oversight over surveillance systems in general, and judicial investigation into the Pegasus hacking, in particular, is very essential.

    Conclusion

    • We must recognize that national security starts with securing the smartphones of every single Indian by embracing technologies such as encryption rather than deploying spyware.
    • This is a core part of our fundamental right to privacy.
    • This intrusion by spyware is not merely an infringement of the rights of the citizens of the country but also a worrying development for India’s national security apparatus.

     

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  • Project WARDEC: India’s upcoming AI-powered Wargame Centre

    The Army Training Command signed a memorandum of understanding (MoU) with Gandhinagar-based Rashtriya Raksha University (RRU) to develop a ‘Wargame Research and Development Centre (WARDEC)’ in New Delhi.

    What is Project WARDEC?

    • The project ‘WARDEC’ will be a first-of-its-kind simulation-based training centre in India that will use artificial intelligence (AI) to design virtual reality war-games.
    • The Wargame Research and Development Centre will be used by the Army to train its soldiers and test their strategies through “metaverse-enabled gameplay”.
    • The wargame models will be designed to prepare for wars as well as counter-terror and counter-insurgency operations.

    Where will the centre come up and when?

    • The centre will come up in a military zone in New Delhi, confirmed RRU officials privy to the development.
    • The RRU will join hands with Tech Mahindra to develop the centre in the coming three to four months.
    • The RRU, an institute under the Ministry of Home Affairs (MHA), specialises in national security and policing.
    • Located in Gandhinagar’s Lavad village, it is an “institute of national importance” – a status granted to it by an Act of Parliament.

    How will these simulation exercises play out?

    • Soldiers will test their skills in the metaverse where their surroundings will be simulated using a combination of virtual reality (VR) and augmented reality (AR).
    • In metaverse, the players will get a realistic experience of the actual situation.
    • If a weapon weighing 5 kg drops or the air pressure falls, they will feel it like anyone would in a live situation, real-time.
    • The game would play out player versus player, player versus computer or even computer versus computer.

    How will the centre help the Army?

    • The Army intends to use the war-game centre to train its officers in military strategies.
    • Indian Army will provide data to set the backdrop of the gameplay, so that participants get a realistic experience.
    • In Army, it is often said that the enemy can ambush you from 361 directions, where 360 sides are around the soldier, and one is above in case there is an airdrop.
    • So, wargame simulation helps the Army think of all possible scenarios.

    What promise does AI-based wargame simulation hold?

    • Apart from the armed forces, the BSF, CRPF, CISF, ITBP and SSB can also use the metaverse-enabled simulation exercises for better training.
    • The use of AI can provide a totally immersive training experience as it can simulate a battlefield close to reality and map several eventualities in the probable event of a war.

    How many countries use such wargaming drills?

    • Since the 9/11 attacks, use of information technology-enabled wargaming is preferred by several countries like the US, Israel, the UK to prepare for possibilities in case of terror attacks or war.
    • In March 2014, several world leaders, including former German chancellor Angela Merkel, former US president Barack Obama and Chinese president Xi Jinping had played a war simulation game.
    • It was during the Hague Summit about how to react in case of a nuclear attack.
    • In that case, the target of the nuclear attack was a fictional country named Brinia.

     

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  • States have equal powers to make GST-related Laws: SC

    The Supreme Court has held that Union and State legislatures have equal, simultaneous and unique powers to make laws on Goods and Services Tax (GST) and the recommendations of the GST Council are not binding on them.

    What is the case?

    • The apex court’s decision came while confirming a Gujarat High Court ruling that the Centre cannot levy Integrated Goods and Services Tax (IGST) on ocean freight from Indian importers.

    Key takeaways of the Judgment

    • The recommendations of the GST Council are the product of a collaborative dialogue involving the Union and the States.
    • They are recommendatory in nature. They only have a persuasive value.
    • To regard them as binding would disrupt fiscal federalism when both the Union and the States are conferred equal power to legislate on GST.

    Basis of the Judgment

    • The court emphasised that Article 246A of the Constitution gives the States power to make laws with respect to GST.
    • It treats the Union and the States as “equal units”.
    • It confers a simultaneous power (on Union and States) for enacting laws on GST.
    • Article 279A, in constituting the GST Council, envisions that neither the Centre nor the States are actually dependent on the other.

    What are the articles added/modified to the Constitution by the GST Act?

    (1) Article 246A: Special Provision for GST

    • This Article was newly inserted to give power to the Parliament and the respective State/Union Legislatures to make laws on GST respectively imposed by each of them.
    • However, the Parliament of India is given the exclusive power to make laws with respect to inter-state supplies.
    • The IGST Act deals with inter-state supplies. Thus, the power to make laws under the IGST Act will rest exclusively with the Parliament.
    • Further, the article excludes the following products from the scope of GST until a date recommended by the GST Council:
    1. Petroleum Crude
    2. High-Speed Diesel
    3. Motor Spirit
    4. Natural Gas
    5. Aviation Turbine Fuel

    (2) Article 269A: Levy and Collection of GST for Inter-State Supply

    • While Article 246A gives the Parliament the exclusive power to make laws with respect to inter-state supplies.
    • The manner of distribution of revenue from such supplies between the Centre and the State is covered in Article 269A.
    • It allows the GST Council to frame rules in this regard. Import of goods or services will also be called as inter-state supplies.
    • This gives the Central Government the power to levy IGST on import transactions.
    • Import of goods was subject to Countervailing Duty (CVD) in the earlier scheme of taxation.
    • IGST levy helps a taxpayer to avail the credit of IGST paid on import along the supply chain, which was not possible before.

    (3) Article 279A: GST Council

    • This Article gives power to the President to constitute a joint forum of the Centre and States called the GST Council.
    • The GST Council is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of GST in India.

    (4) Article 286: Restrictions on Tax Imposition

    • This was an existing article which restricted states from passing any law that allowed them to collect tax on sale or purchase of goods either outside the state or in the case of import transactions.
    • It was further amended to restrict the passing of any laws in case of services too.
    • Further, the term ‘supply’ replaces ‘sale or purchase’.

    (5) Article 366: Addition of Important definitions

    Article 366 was an existing article amended to include the following definitions:

    1. GST means the tax on supply of goods, services or both. It is important to note that the supply of alcoholic liquor for human consumption is excluded from the purview of GST.
    2. Services refer to anything other than goods.
    3. State includes Union Territory with legislature.

    Back2Basics: GST Council

    • The GST Council is a federal body that aims to bring together states and the Centre on a common platform for the nationwide rollout of the indirect tax reform.
    • It is an apex member committee to modify, reconcile or to procure any law or regulation based on the context of goods and services tax in India.
    • The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
    • The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation.

    How is the GST Council structured?

    • The GST is governed by the GST Council. Article 279 (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of the Article 279A.
    • According to the article, the GST Council will be a joint forum for the Centre and the States. It consists of the following members:
    1. The Union Finance Minister will be the Chairperson
    2. As a member, the Union Minister of State will be in charge of Revenue of Finance
    3. The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.

    Terms of reference

    • Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as the goods and services will be subject or exempted from the Goods and Services Tax.
    • They lay down GST laws, principles that govern the following:
    1. Place of Supply
    2. Threshold limits
    3. GST rates on goods and services
    4. Special rates for raising additional resources during a natural calamity or disaster
    5. Special GST rates for certain States

     

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  • Ethanol blend in petrol to be raised to 20% in 3 years

    The Union Cabinet has approved amendments to the National Policy on Biofuels, 2018, to advance the date by which fuel companies have to increase the percentage of ethanol in petrol to 20%, from 2030 to 2025.

    What is the news?

    • The policy to introduce 20% ethanol in petrol will take effect from April 1, 2023.

    Why such move?

    • A 2021 report by the NITI Aayog said that 20% ethanol blending by 2025 could accrue immense benefits such as:
    1. Saving ₹30,000 crore of foreign exchange per year
    2. Increased energy security
    3. Lowered carbon emissions
    4. Better air quality
    5. Self-reliance
    6. Better use of damaged foodgrains
    7. Increase farmers’ incomes and investment opportunities

    What is the present status of ethanol blending in India?

    • India achieved 9.45% ethanol blending as on March 13, 2022, according to the Ministry of Petroleum and Natural Gas.
    • The Centre projects that this will reach 10% by the end of financial year 2022.
    • The government first announced its plans of advancing the 20% blending target in December 2020.

    Why is it so difficult to raise the blending?

    • A 10% blending of petrol does not require major changes to engines.
    • But a 20% blend could require some changes and may even drive up the prices of vehicles.
    • A greater percentage of blending could also mean more land being diverted for water-intensive crops such as sugar cane, which the government currently subsidises.

    Back2Basics: Ethanol Blended Petrol (EBP) Programme

    • EBP programme was launched in January, 2003 for supply of 5% ethanol blended petrol.
    • The programme sought to promote the use of alternative and environment-friendly fuels and to reduce import dependency for energy requirements.
    • OMCs are advised to continue according to priority of ethanol from 1) sugarcane juice/sugar/sugar syrup, 2) B-heavy molasses 3) C-heavy molasses and 4) damaged food grains/other sources.
    • At present, this programme has been extended to the whole of India except UTs of Andaman Nicobar and Lakshadweep islands with effect from 01st April 2019 wherein OMCs sell petrol blended with ethanol up to 10%.

    Also read:

    [RSTV ARCHIVE] Ethanol Blending: Significance & Road Ahead

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  • Places in news: Sela Tunnel

    The strategically-significant Sela Tunnel project in Arunachal Pradesh is nearing completion well before the deadline.

    What is Sela Tunnel Project?

    • The Sela Tunnel is the longest bi-lane road tunnel in the world.
    • The total length of the project, including the tunnels, the approach and the link roads, will be around 12 km.
    • The tunnel is being constructed by the Border Roads Organisation at an altitude of 13,800ft near the Indo-China border.
    • It is being built on the 317km long Balipara-Charduar-Tawang (BCT) road which connects West Kameng, East Kameng and Tawang districts of Arunachal Pradesh to the rest of the country.

    Why is the project important?

    • All-weather connectivity to Tawang and other forward areas in the sector will be the most important advantage that the project promises.
    • At the moment, Sela pass stays closed for a few winter months.
    • The project will provide a new alignment on the axis towards the LAC, and allow movement of military and civil vehicles all through the year.

    Significance of the tunnel

    • China is undertaking massive infrastructure development and troop build-up in the Rest of Arunachal Pradesh (RALP) area.
    • In military parlance, the RALP is an area in Arunachal Pradesh other than the Kameng area.
    • Other than the Kameng area consisting of East and West Kameng districts, the rest of the State is referred to by the Army as the RALP.

     

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  • What is Sudden Infant Death Syndrome (SIDS)?

    A team of scientists from Australia have found that babies at risk of the mysterious Sudden Infant Death Syndrome, or SIDS, generally have low levels of an enzyme called butyrylcholinesterase (BChE) in their blood.

    What is SIDS?

    • Sudden Infant Death Syndrome refers to the sudden and unexpected death of an otherwise healthy infant under the age of one, generally while they are sleeping.
    • Most SIDS-related deaths occur in infants between the age of 1-4 months.
    • According to the NHS website, parents can reduce the risk of SIDS by not smoking while pregnant or after the baby is born and ensuring that the baby is placed on their back when they sleep.
    • Some health experts have said that it is associated with issues in the part of an infant’s brain that controls breathing and waking up.

    Prevalence of SIDS

    • SIDS, also known as ‘cot death’, has claimed the lives of thousands of children across the West.
    • US estimates that about 3,400 babies die suddenly and unexpectedly every year.
    • Meanwhile, the United Kingdom reports about 200 such deaths annually.

    What does the new study say?

    • The study assessed whether there was something inherently different in babies that succumbed to SIDS.
    • The researchers compared dried blood samples from 655 healthy babies, 26 babies who died due to SIDS and 41 babies who died of other causes.
    • The team found that around nine of ten babies who died from SIDS had lower levels of BChE enzymes than the babies in the other two groups.

    What is the BChE (Butyrylcholinesterase) enzyme responsible for?

    • These enzymes are responsible for sending out signals that make a baby wake up, turn her head, or gasp for breath.
    • It is part of the autonomic system, and controls function like blood pressure and breathing.

     

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  • Biological Diversity (Amendment) Bill, 2021

    What is issue:

    A senior parliamentarian has expressed concern over the Biological Diversity (Amendment) Bill, 2021, which is in the final stages of consultations in the Joint Parliamentary Committee.

    Biological Diversity Act (BDA), 2002: 

    • The BDA, 2002 was enacted for the conservation of biological diversity and fair, equitable sharing of the monetary benefits from the commercial use of biological resources and traditional knowledge.
    • The main intent of this legislation is to protect India’s rich biodiversity and associated knowledge against their use by foreign individuals.
    • It seeks to check biopiracy, protect biological diversity and local growers through a three-tier structure of central and state boards and local committees.
    • The Act provides for setting up of a National Biodiversity Authority (NBA), State Biodiversity Boards (SBBs) and Biodiversity Management Committees (BMCs) in local bodies.
    • The NBA will enjoy the power of a civil court.

    What are the proposed Amendments?

    The amendment bill seeks to reduce the pressure on wild medicinal plants by encouraging the cultivation of medicinal plants and Decriminalizes certain offences.

    • Biological resources sharing: Exempts Ayush practitioners from intimating biodiversity boards for accessing biological resources or knowledge (Vaids and Hakims)
    • Research promotion: Facilitates fast-tracking of research, simplify the patent application process
    • Bring in foreign investment: Seeks to bring more foreign investments in biological resources, research, patent and commercial utilisation, without compromising the national interest

    Need for the Amendment

    • Simplifying process: Concerns were raised by Ayush medicine, seed, industry and research sectors urging the government to simplify, streamline the profession.
    • Easing compliance: They urged govt to reduce the compliance burden to provide for a conducive environment for collaborative research and investments.
    • Access and Benefit-sharing: It also sought to simplify the patent application process, widen the scope of access and benefit-sharing with local communities.
    • Exemptions: Ayush practitioners have been exempted from the ambit of the Act, a huge move because the Ayush industry benefits greatly from biological resources in India.
    • Certain offences: Violations of the law related to benefit-sharing with communities, which are currently treated as criminal offences and are non-bailable, have been proposed to be made civil offences.
    • Imbibing Nagoya Protocol: This bill provides to reconcile the domestic law with free prior informed consent requirements of the 2010 Nayogya Protocol on ABS.

    Criticisms of the bill

    • No consultation: The bill has been introduced without seeking public comments as required under the pre-legislative consultative policy.
    • No profit-sharing: There are ambiguous provisions in the proposed amendment to protect, conserve or increase the stake of local communities in the sustainable use and conservation of biodiversity.
    • Commercialization: Activists say that the amendments were done to “solely benefit” the AYUSH Ministry.
    • Loopholes to Biopiracy: The Bill would mean AYUSH manufacturing companies would no longer need to take approvals.
    • Ignoring Bio-utilization: The bill has excluded the term Bio-utilization which is an important element in the Act.  Leaving out bio utilization would leave out an array of activities like characterization, incentivisation and bioassay which are undertaken with commercial motive.
    • Exotic plants cultivation: The bill also exempts cultivated medicinal plants from the purview of the Act but it is practically impossible to detect which plants are cultivated and which are from the wild.
    • De-licensing: This provision could allow large companies to evade the requirement for prior approval or share the benefit with local communities.
  • India’s Total Factor Productivity (TFP)

    India’s total factor productivity (TFP) growth has seen a moderate decline compared to the global experience, though it remains above that of emerging markets and developing economies, according to a recent report.

    What is Total factor productivity (TFP)?

    • Productivity levels measure the relationship between total products or output, and inputs or factors of production employed.
    • Labour productivity is a measure of total output divided by the units of labour employed in the process of production.
    • However, TFP is a measure of total output divided by a weighted average of inputs; i.e., labour and capital.
    • Improvements in TFP bring down production costs, raise output levels, and lead to a higher gross domestic product.
    • While total productivity measures all-inclusive productivity, TFP is a measure of production efficiency.

    How has India fared thus far?

    • A recent Reserve Bank of India (RBI) report points to a moderate decline in TFP growth compared to the global experience.
    • TFP growth rate for India during the 2010-2019 period was approximately 2.2%, as against -0.3% for emerging markets and developing economies.
    • During the pandemic, the TFP for India declined by 2.9% in 2020 and marginally improved by 0.1% in 2021.
    • In 2022, TFP growth rate is projected to increase to 2%.
    • As per estimates, TFP growth contributed to 30% of India’s GDP growth during 2010-2018.
    • It was largely driven by public administration, quality education and social works.

    What has been the TFP trend across the world?

    • Global productivity growth has witnessed a prolonged slowdown since 2010, with the deceleration sharper in emerging and developing economies.
    • This is ascribed to a weakening investment climate, and lower employment growth levels in developed economies, among others.
    • TFP growth for the world economy was 0.7% in 2021 and may shrink by 0.5% in 2022.

    What are the ways to improve TFP?

    • India’s initiatives around skill development and the new education policy are steps in the right direction, since they focus on boosting manpower employability.
    • Quality education, better healthcare, nurturing of innovation, introduction of efficient technology and processes in domestic companies and reduction in misallocation of resources can help improve TFP levels.
    • Though the country’s ranking in the Global Innovation Index, 2021 has improved to 46, it still has some distance to go.

    How can the industry improve productivity?

    • Improved TFP minimizes per-unit cost facilitating the horizontal expansion of consumption demand, thereby improving the standard of living.
    • Employers have fortunately started acknowledging the fact that manpower is an essential component in profit earnings.
    • Today, the focus has shifted to retaining talent, which is limited in supply.
    • This positive transformation seen after the pandemic needs to be further extended.

     

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  • Highlights of the Seoul Forest Declaration

    The participants from 141 countries gathered in person and online at the 15th World Forestry Congress in Seoul, Republic of Korea adopted the Seoul Forest Declaration.

    Seoul Forest Declaration

    • Shared responsibility: The Declaration urges that responsibility for forests should be shared and integrated across institutions, sectors and stakeholders.
    • Increased investment: Investment in forest and landscape restoration globally needs to triple by 2030 to meet internationally agreed commitments and targets on restoring degraded land.
    • Moving towards circular economy: One of the key takeaways was the importance of moving towards a circular bioeconomy and climate neutrality.
    • Innovative green financing mechanisms: To upscale investment in forest conservation, restoration and sustainable use, and highlighted the potential of sustainably produced wood as a renewable, recyclable and versatile material.
    • Decision-making: It urged the continued development and use of emerging innovative technologies and mechanisms to enable evidence-based forest and landscape decision-making.

    Other takeaways

    • Close cooperation among nations is needed to address challenges that transcend political boundaries.
    • This was strengthened at the Congress by the launch of new partnerships such as the:
    1. Assuring the Future of Forests with Integrated Risk Management (AFFIRM) Mechanism and
    2. Sustaining an Abundance of Forest Ecosystems (SAFE) Initiative

    Back2Basics: World Forestry Congress

    • The first World Forestry Congress first held in Rome in 1926. After that, it is held about every six years by the UN-FAO.
    • In 1954, FAO was entrusted with supporting Congress preparations in close cooperation with the host country and proudly continues to do so today. .
    • It has been providing a forum for inclusive discussion on the key challenges and way forward for the forestry sector.

     

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  • Explained: Repo Rate in India

    Earlier this month, the RBI, in a surprise move decided unanimously to raise the “policy repo rate by 40 basis points to 4.40%, with immediate effect”.

    What is the Repo Rate?

    • The repo rate is one of several direct and indirect instruments that are used by the RBI for implementing monetary policy.
    • Specifically, the RBI defines the repo rate as the fixed interest rate at which it provides overnight liquidity to banks against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
    • In other words, when banks have short-term requirements for funds, they can place government securities that they hold with the central bank and borrow money against these securities at the repo rate.
    • Since this is the rate of interest that the RBI charges commercial banks such as SBI and ICICI Bank when it lends them money, it serves as a key benchmark for the lenders to in turn price the loans they offer to their borrowers.

    Why is the repo rate such a crucial monetary tool?

    • According to Investopedia, when government central banks repurchase securities from commercial lenders, they do so at a discounted rate that is known as the repo rate.
    • The repo rate system allows central banks to control the money supply within economies by increasing or decreasing the availability of funds.

    How does the repo rate work?

    • Besides the direct loan pricing relationship, the repo rate also functions as a monetary tool by helping to regulate the availability of liquidity or funds in the banking system.
    • For instance, when the repo rate is decreased, banks may find an incentive to sell securities back to the government in return for cash.
    • This increases the money supply available to the general economy.
    • Conversely, when the repo rate is increased, lenders would end up thinking twice before borrowing from the central bank at the repo window thus, reducing the availability of money supply in the economy.
    • Since inflation is caused by more money chasing the same quantity of goods and services available in an economy, central banks tend to target regulation of money supply as a means to slow inflation.

    What impact can a repo rate change have on inflation?

    • Inflation can broadly be: mainly demand driven price gains, or a result of supply side factors.
    • This in turn push up the costs of inputs used by producers of goods and providers of services.
    • It is thus spurring inflation, or most often caused by a combination of both demand and supply side pressures.
    • Changes to the repo rate to influence interest rates and the availability of money supply primarily work only on the demand side.
    • It makes credit more expensive and savings more attractive and therefore dissuading consumption.
    • However, they do little to address the supply side factors, be it the high price of commodities such as crude oil or metals or imported food items such as edible oils.

     

    Try this PYQ:

    Q.If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?

    1. Cut and optimize the Statutory Liquidity Ratio
    2. Increase the Marginal Standing Facility Rate
    3. Cut the Bank Rate and Repo Rate

    Select the correct answer using the code given below:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”dqr429v2pr” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

     

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