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  • Public opinion cannot influence jurisprudence

    op-ed snap | Polity | Mains Paper 2: Comparison Of The Indian Constitutional Scheme With That Of Other Countries,Executive & Judiciary,Seperation Of Power

    Context

    On May 5, 2022, the current affairs site politico.com obtained the draft opinion of Justice Samuel Alito, apparently speaking for the majority of the judges of the Supreme Court of the United States (SCOTUS) overruling Roe v Wade (1973) and Planned Parenthood v Casey (1992). These two previously decided cases enable women in the US to access abortions, albeit with some restrictions.

    Background of the US Supreme Court

    • SCOTUS was established on March 4, 1789.
    • The almost 225-year-old court, founded to interpret the American constitution that was adopted in 1789, has a long history of being an ideologically divided court, hearing deeply contentious political issues.
    • Within both the polity and law in the US, no issue is as emotive and divisive as matters related to abortion.
    • At present there is the 6-3 divide in the SCOTUS, with the conservatives constituting the majority.
    • Paying attention to the public opinion: Conservative judges also frame the regulation of abortion as a state legislative rights issue, giving enormous weight to the apparent public opinion within those states.

    Paying attention to the public opinion

    • In the draft opinion that was leaked, after being circulated to the other eight judges of SCOTUS, Justice Alito writes “We hold that Roe and Casey must be overruled,” adding, “it is time to heed the Constitution and return the issue of abortion to the people’s elected representatives.
    • Here is how the issue is initially framed: Legislatures in states must be able to adopt laws on abortion as they see fit.
    • The justification offered is in the context of the legitimacy of such laws being made by the will of the people, through their representatives.
    •  Justice Alito clearly sees this an issue for the legislature to decide based on the will of the voters.

    Why public opinion is not a legitimate parameter for adjudicating issues of rights

    • Against the separation of power: Across jurisdictions, in the constitutional scheme of separation of powers, the executive, legislature and judiciary are expected to play different roles.
    • The executive to govern using the rule of law, the legislature to make law and the judiciary to ensure that those laws are in consonance with constitutional values.
    • The introduction of public opinion and deference to the legislature as a valid basis for adjudication by constitutional courts leads to extraordinary conclusions.
    • The virtue of constitutional courts is that they are expected to be insulated from public opinion.
    • In that regard, they are freed from the vagaries of the will of the voters and enjoy the quiet introspection and justification through legal reasoning that the law creates space for.

    Conclusion

    The notion that constitutional courts should take  the will of voters into account is at odds with the understanding of courts elsewhere, like in India.

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  • J&K – The issues around the state

    With delimitation over, a look at the slate for J&K

    op-ed snap | Polity | Mains Paper 2: Federalism,Governance, Transparency & Accountability, Citizens Charters

    Context

    Fresh delimitation was necessary for Jammu and Kashmir since the State had been divided into two Union Territories and elections could only be held under the Jammu and Kashmir Reorganisation Act, 2019.

    Issues with the report of the Delimitation Commission

    • The central question of why Jammu has gained six Assembly seats and the Valley only one has been brushed under general remarks on methodology with no explanation of how that methodology was applied.
    • Nor does it explain why Jammu’s Muslim-majority seats now comprise less than a quarter of the province’s total seats, though Muslims comprise over a third of the province’s population.
    • The commission’s recommendations further complicate the issue.
    • They propose that the President nominate Pandit migrants to two Assembly seats — why is there no reference to Pandits who remain in the Valley?
    • Indeed, the only overarching guideline which the report does describe in some detail is the commission’s desire to match the boundaries of Assembly and parliamentary constituencies.
    • Most of these questions were addressed to the commission during its consultation phase.
    •  By choosing not to do so they lost a valuable opportunity to display transparency and dispel suspicion of bias.

    Way forward

    • The only hope for a peace process in Jammu and Kashmir is if there is a clean election, statehood is speedily restored, and the new Assembly determines whether or in which form special status is required. 
    • The better option is to hold elections for existing constituencies and let the new assembly approve or query the delimitation report.
    • In fact, the commission itself proposed that the report be placed before the legislative assembly, a recommendation that makes sense only if new delimitation comes into force after and not before elections.
    • Urgent as elections are, attention to fundamental freedoms is even more important.

    Conclusion

    The peace process in Jammu and Kashmir needs to address the concerns of the people related to the restoration of statehood, and clean elections.

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  • Civil Services Reforms

    Actions that corrode the steel frame of India

    op-ed snap | Governance | Mains Paper 2: Civil Service

    Context

    A letter war between two sets of retired public officials (civil servants, judges and army officers), concerning the prevailing political and social situation in the country, has been widely reported in the media.

    Role of civil service

    • It is the police and magistracy, judicial courts and other regulatory agencies — not politicians — which have been authorised and empowered by law to take preventive action against potential troublemakers, enforce the laws relating to criminal, economic and other offences, and maintain public order.
    • In mature democracies, self-respecting public officials normally discharge their constitutional and legal responsibilities with honesty, integrity and their own conscience, firmly resisting the dictates of the vested interests.

    Deterioration in the standard of civil service

    • The deterioration in standards was very visible during the National Emergency declared in 1975.
    • The civil services, like other institutions including the judiciary, just caved in; the trend might have accelerated over the years.
    • Now, no one even talks of civil service neutrality.
    • Earlier, during communal or caste riots, the Administration focused on quelling the disturbances and restoring peace in the affected locality, without ever favouring one group over the other.
    • Now, there are allegations of local officers taking sides in a conflict.
    • A civil servant’s pliant and submissive behaviour means an end to civil service neutrality and the norms and values that this trait demands, does not seem to bother either the political or bureaucratic leadership.
    • Despite the protection and safeguards in Article 311 of the Constitution, politicians could have a civil servant placed in an inconvenient position or even punish him.

    Norms and values associated with a civil servant

    • Norms: The norms that define neutrality are: independence of thought and action; honest and objective advice; candour and ,‘speaking truth to power’.
    • Values: Associated with these norms are the personal values that a civil servant cherishes or ought to cherish, namely, self-respect, integrity, professional pride and dignity.
    • All these together contribute to the enhancement of the quality of administration that benefits society and the people.

    Conclusion

    Constitutional morality is not a natural sentiment,” wrote B.R. Ambedkar, the architect of the Constitution and added, “It has to be cultivated. We must realise that our people have yet to learn it. Democracy in India is only a top dressing on an Indian soil which is essentially undemocratic.”

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  • Monsoon Updates

    What is Onset of Monsoon?

    | Enviro & Biodiversity | Mains Paper 1: Geographical Features & Their Location

    The monsoon is slated to make its earliest arrival in 13 years over Kerala, informs the India Meteorological Department (IMD).

    What does the “Onset of Monsoon” mean?

    • The onset of the monsoon over Kerala marks the beginning of the four-month, June to September southwest monsoon season over India.
    • It brings more than 70 per cent of the country’s annual rainfall.
    • It marks a significant transition in the large-scale atmospheric and ocean circulations in the Indo-Pacific region.
    • The IMD announces it only after certain newly defined and measurable parameters, adopted in 2016, are met.
    • The onset is a significant day in India’s economic calendar.

    How does IMD predict the monsoon?

    • Broadly, the IMD checks for the consistency of rainfall over a defined geography, its intensity, and wind speed:
    1. Rainfall: The IMD declares the onset of the monsoon if at least 60% of 14 designated meteorological stations in Kerala and Lakshadweep record at least 2.5 mm of rain for two consecutive days at any time after May 10.
    2. Wind field: The depth of westerlies should be upto 600 hectopascal (1 hPa is equal to 1 millibar of pressure) in the area bound by the equator to 10ºN latitude, and from longitude 55ºE to 80ºE. The zonal wind speed over the area bound by 5-10ºN latitude and 70-80ºE longitude should be of the order of 15-20 knots (28-37 kph) at 925 hPa.
    3. Heat: The INSAT-derived Outgoing Longwave Radiation (OLR) value (a measure of the energy emitted to space by the Earth’s surface, oceans, and atmosphere) should be below 200 watt per sq m (wm2) in the box confined by 5-10ºN latitude and 70-75ºE latitude.
    • The onset is not officially declared until the prescribed conditions (above) are met.

    Factors considered by IMD

    • The IMD uses a specialised model that forecasts the arrival dates within a four-day window.
    • It uses six predictors:
    1. Minimum temperatures over northwest India
    2. Pre-monsoon rainfall peak over south Peninsula
    3. Outgoing long-wave radiation (OLR) over the South China Sea
    4. Lower tropospheric zonal wind over the southeast Indian Ocean
    5. Upper tropospheric zonal wind over the east equatorial Indian Ocean, and
    6. OLR over the southwest Pacific region

    Where is the early arrival noticed?

    • The monsoon’s arrival over India is marked by rain over south Andaman Sea, which then advances north-westwards across the Bay of Bengal.
    • In general, the Andaman and Nicobar Islands start receiving monsoon rainfall between May 15 and May 20 every year.
    • And it usually starts raining along the Kerala coast in the last week of May.

    Does an early onset foretell a good monsoon?

    • No, it does not — just as a delay does not foretell a poor monsoon.
    • The onset is just an event that happens during the progress of the monsoon over the Indian subcontinent.
    • A delay of a few days, or perhaps the monsoon arriving a few days early, has no bearing on the quality or amount of rainfall, or its regional distribution across the country.

    Back2Basics: Long Period Average (LPA)

    • The IMD predicts a “normal”, “below normal”, or “above normal” monsoon in relation to a benchmark “long period average” (LPA).
    • The LPA of rainfall is the rainfall recorded over a particular region for a given interval (like month or season) average over a long period like 30 years, 50 years, etc.
    • LPA refers to the average rainfall recorded from June to September for the entire country, the amount of rain that falls every year varies from region to region and from month to month.
    • The IMD’s prediction of a normal monsoon is based on the LPA of the 1971-2020 period, during which India received 87 cm of rain for the entire country on average.
    • It has in the past calculated the LPA at 88 cm for the 1961-2010 period, and at 89 cm for the period 1951-2000.

    Why LPA is needed?

    • The IMD records rainfall data at more than 2,400 locations and 3,500 rain-gauge stations.
    • Because annual rainfall can vary greatly not just from region to region and from month to month, but also from year to year within a particular region or month.
    • An LPA is needed to smooth out trends so that a reasonably accurate prediction can be made.
    • A 50-year LPA covers for large variations in either direction caused by freak years of unusually high or low rainfall, as well as for the periodic drought years.
    • It also takes into account the increasingly common extreme weather events caused by climate change.

    Range of normal rainfall

    The IMD maintains five rainfall distribution categories on an all-India scale. These are:

    1. Normal or near normal, when the percentage departure of actual rainfall is +/-10% of LPA, that is, between 96-104% of LPA;
    2. Below normal, when departure of actual rainfall is less than 10% of LPA, that is 90-96% of LPA;
    3. Above normal, when actual rainfall is 104-110% of LPA;
    4. Deficient, when departure of actual rainfall is less than 90% of LPA; and
    5. Excess, when the departure of actual rainfall is more than 110% of LPA.

    Also read

    Various terms related to Indian Monsoon

     

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  • Russian Invasion of Ukraine: Global Implications

    From neutral to NATO: Why Finland joining the alliance matters

    IOCR | International Relations | Mains Paper 2: Important International Institutions

    Earlier reluctant, Finland is now hurtling to join NATO making a monumental shift for a nation with a long history of wartime neutrality and staying out of military alliances.

    What is NATO?

    • NATO is a military alliance established by the North Atlantic Treaty (also called the Washington Treaty) of April 4, 1949.
    • It sought to create a counterweight to Soviet armies stationed in Central and Eastern Europe after World War II.
    • Its original members were Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the United Kingdom, and the United States.
    • NATO has spread a web of partners, namely Egypt, Israel, Sweden, Austria, Switzerland and Finland.

    Why was it founded?

    Ans. Communist sweep in Europe post-WWII and rise of Soviet dominance

    • After World War II in 1945, Western Europe was economically exhausted and militarily weak, and newly powerful communist parties had arisen in France and Italy.
    • By contrast, the Soviet Union had emerged from the war with its armies dominating all the states of central and Eastern Europe.
    • By 1948 communists under Moscow’s sponsorship had consolidated their control of the governments of those countries and suppressed all non-communist political activity.
    • What became known as the Iron Curtain, a term popularized by Winston Churchill, had descended over central and Eastern Europe.

    Ideology of NATO

    • NATO ensures that the security of its European member countries is inseparably linked to that of its North American member countries.
    • It commits the Allies to democracy, individual liberty and the rule of law, as well as to the peaceful resolution of disputes.
    • It also provides a unique forum for dialogue and cooperation across the Atlantic.

    What is Article 5?

    • Article 5 was a key part of the 1949 North Atlantic Treaty, or Washington Treaty, and was meant to offer a collective defence against a potential invasion of Western Europe.
    • It states: (NATO members) will assist the party or parties so attacked by taking forthwith, individually and in concert with the other parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.
    • However, since then, it has only been invoked once, soon after the 9/11 attack in the United States.

    Why Finland wishes to join now?

    • The country, so far, has stayed away from joining such alliances as it always wanted to maintain cordial relations with its neighbour Russia.
    • For a long time, the idea of not joining NATO or getting too close to the West was a matter of survival for the Finns.
    • However, the change in perception and overwhelming support to join NATO came about following the Russian invasion of Ukraine.
    • NATO membership would strengthen the country’s security and defence system.

    Was this a long time coming?

    • For Finns, events in Ukraine bring a haunting sense of familiarity.
    • The Soviets had invaded Finland in late 1939 and despite the Finnish army putting up fierce resistance for more than three months, they ended up losing 10 per cent of their territory.
    • The country adopted to stay non-aligned during the cold war years.
    • However, insecurities started growing since Russia annexed Crimea in 2014 as Finland brought back conscription and military spending went up.

    What about Sweden?

    • Sweden is likely to apply for membership after Finland’s final call.
    • If Finland joins, Sweden will be the only Nordic non-member of NATO.
    • Now, unlike Finland, whose policy stance was a matter of survival, Sweden has been opposed to joining the organisation for ideological reasons.

    What would a membership mean and will it benefit NATO as well?

    • NATO has shown eagerness about Finland and Sweden’s memberships.
    • Usually, becoming an official NATO member can take up to a year as it requires the approval of all existing member states.
    • Finland’s geographical location plays in its favour as once it becomes a member, the length of borders Russia shares with NATO would double.
    • This would also strengthen the alliance’s position in the Baltic Sea.

    How have Russia and other countries reacted?

    • Russia’s foreign ministry has said that they will be forced to take military steps if the membership materialises.
    • Russia has warned that this may prompt Moscow to deploy nuclear weapons in Kaliningrad, the Russian exclave between Poland and Lithuania.

     

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  • Historical and Archaeological Findings in News

    Iron in Tamil Nadu 4,200 years ago: A new dating and its significance

    Prelims Only | History | Mains Paper 1: Arts & Culture

    Carbon dating of excavated finds in Tamil Nadu pushes evidence of iron being used in India back to 4,200 years ago, the Tamil Nadu government announced this week on the basis of an archaeological report.

    What is the news?

    • Before this, the earliest evidence of iron use was from 1900-2000 BCE for the country, and from 1500 BCE for Tamil Nadu.
    • The latest evidence dates the findings from Tamil Nadu to 2172 BCE! Much older.
    • The results of dating, used accelerator mass spectroscopy.

    Where were these objects found?

    • The excavations are from Mayiladumparai near Krishnagiri in Tamil Nadu, about 100 km south of Bengaluru.
    • Mayiladumparai is an important site with cultural material dating back between the Microlithic (30,000 BCE) and Early Historic (600 BCE) ages.
    • The site is situated in the midst of several archaeological sites such as Togarapalli, Gangavaram, Sandur, Vedarthattakkal, Guttur, Gidlur, Sappamutlu and Kappalavadi.

    Outcome: Varying span of Iron Age

    • The dates when humans entered the Iron Age vary from one region of the world to another.
    • In India, too, the date has been revised with successive findings over the decades.

    When the Iron Age is considered in India?

    • In 1979, use of iron was traced to 1300 BCE at Ahar in Rajasthan. This is what we have been reading in NCERTs.
    • Later, samples at Bukkasagara in Karnataka, indicating iron production, were dated back to 1530 BCE.
    • The date was subsequently pushed back to 1700-1800 BCE with excavations finding evidence of iron smelting at Raipura in the Mid-Ganga valley.
    • It was then to 1900-2000 BCE based on investigations in sites at Malhar near Varanasi and Brahmagiri in North Karnataka.
    • A series of dating results on finds from various parts in India have shown evidence of iron-ore technology before 1800 BCE.
    • Before the latest discovery, the earliest evidence of iron use for Tamil Nadu was from Thelunganur and Mangadu near Mettur, dating back to 1500 BCE.

    Historical significance

    • Iron is not known to have been used in the Indus Valley, from where the use of copper in India is said to have originated (1500 BCE).
    • But non-availability of copper for technological and mass exploitation forced other regions to remain in the Stone Age.
    • When iron technology was invented, it led to the production of agricultural tools and weapons, leading to production required for a civilisation ahead of economic and cultural progress.
    • While useful tools were made out of copper, these were brittle and not as strong as iron tools would be.
    • With the latest evidence tracing our Iron Age to 2000 BCE from 1500 BC, we can assume that our cultural seeds were laid in 2000 BCE.
    • And the benefit of socio-economic changes and massive production triggered by the iron technology gave its first fruit around 600 BCE — the Tamil Brahmi scripts.

    Culture and politics

    • The Tamil Brahmi scripts were once believed to have originated around 300 BCE, until a landmark finding in 2019 pushed the date back to 600 BCE.
    • This dating narrowed the gap between the Indus Valley civilisation and Tamilagam/South India’s Sangam Age.
    • This, and the latest findings, are politically significant.
    • The dating of the scripts, based on excavations from sites including Keeladi near Madurai, became controversial when the ASI did not go for advanced carbon dating tests.

     

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  • Digital India Initiatives

    [pib] NITI Aayog launches National Data & Analytics Platform (NDAP)

    | Governance | Mains Paper 2: E-Governance

    NITI Aayog has launched the NDAP for open public use.

    Note: This portal has much useful data. We can use these to substantiate our answers in mains exam.

    What is NDAP?

    • The platform aims to democratize access to public government data by making data accessible, interoperable, interactive, and available on a user-friendly platform.
    • It hosts foundational datasets from various government agencies, presents them coherently, and provides tools for analytics and visualization.
    • NDAP follows a use-case-based approach to ensure that the datasets hosted on the platform are tailored to the needs of data users from government, academia, journalism, civil society, and the private sector.
    • All datasets are standardized to a common schema, which makes it easy to merge datasets and do cross-sectoral analysis.

    Types of datasets available

    1. Internal & External Affairs
    2. Agriculture, Fisheries and Animal Husbandry
    3. Socio-Economic development
    4. Power & Natural Resources
    5. Industries
    6. Finance
    7. Health
    8. Human Resources Development
    9. Science and Technology
    10. Consumer Affairs
    11. Transport
    12. Housing
    13. Culture and Tourism
    14. Communications

    Why need such data?

    • The rise of data and digital technologies are rapidly transforming economies and societies, with enormous implications for governments’ daily operations.
    • NDAP is a critical milestone – which aims to aid India’s progress by promoting data-driven disclosure, decision making and ensuring the availability of data connecting till the last mile.

     

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  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    What is INSACOG?

    Prelims Only | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    The PM has announced that the Indian SARS-CoV-2 Genomics Consortium (INSACOG) would be extended to India’s neighbouring countries.

    What is INSACOG?

    • INSACOG was established in December 2020 as a joint initiative of the Union Health Ministry of Health and Department of Biotechnology (DBT).
    • It aims to expand the whole-genome sequencing of SARS-CoV-2, the coronavirus that causes the Covid-19 disease, across India with the aim of understanding how the virus spreads and evolves.
    • It functions under the Ministry of Science and Technology with the Council for Scientific & Industrial Research (CSIR) and Indian Council of Medical Research (ICMR).

    Composition of INSACOG

    • INSACOG started out with the participation of 10 national research laboratories of the central government, and gradually expanded to a network of 38 labs.
    • It now includes private labs operating on a hub-and-spoke model.
    • These works to monitor genomic variations in SARS-CoV-2 by a sentinel sequencing effort which is facilitated by the National Centre for Disease Control (NCDC).
    • It now involves the Central Surveillance Unit (CSU) under the central government’s Integrated Disease Surveillance Programme (IDSP).

    Working of the INSACOG

    • The data from the genome sequencing laboratories is analysed as per the field data trends to study the linkages, if any, between the genomic variants and epidemiological trends.
    • INSACOG helps to understand super spreader events and outbreaks, and strengthen public health interventions across the country to help break chains of transmission.
    • Linking this data with IDSP data and the patient’s symptoms helps to better understand viral infection dynamics, and trends of morbidity and mortality.
    • The data can be linked with host genomics, immunology, clinical outcomes, and risk factors for a more comprehensive outlook.
    • Sequencing assumes added significance as the incidence of reinfections and vaccine breakthroughs increases.

     

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  • Freedom of Speech – Defamation, Sedition, etc.

    Sedition law

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary,Governance, Transparency & Accountability, Citizens Charters

    Context

    On May 11, the Supreme Court directed the Union government and the states to refrain from using the law of sedition and keep all previous cases under 124A in abeyance till the matter is reconsidered in a comprehensive way.

    Data on Section 124A and UAPA about pendency and conviction rates

    • The data on draconian laws like 124A or UAPA exposes their untenability.
    • According to the National Crime Records Bureau data, a total of 156 cases of sedition were pending in 2017.
    • In that year, only 27 cases could be disposed of at the police level by withdrawing the case or submitting a chargesheet.
    • In courts, out of the 58 cases on trial, only one conviction could be obtained and the pendency rate for the cases of sedition was close to 90 per cent.
    • The number of cases increased in 2020, the year for which the latest NCRB data is available, but with the same results.
    • Of the total 230 cases registered, only 23 were chargesheeted.
    • Pendency in court reached close to 95 per cent for the sedition cases in 2020.
    • The abysmally low rate of conviction and disposal of these cases make it clear that these charges are slapped with very flimsy or no evidence to intimidate or harass those who question the government’s fiat.
    • The picture is no different for the UAPA.
    • Cases under it have increased by about 75 per cent between 2017-2020.
    • A total of 4,827 UAPA cases were pending in 2020 —of them, only 398 could be chargesheeted in that year.
    • The pendency rate in court remained 95 per cent, indicating harassment and violation of the right to life and liberty for a great number of people who are suffering because of the diabolical prison conditions in India.

    Recommendations and measures

    • A consultation paper on sedition circulated by the Law Commission of India on August 30, 2018, found many issues that need addressing around the working of Section 124A.
    • Most recently, on May 11, the Supreme Court directed the Union government and the states to refrain from using the law of sedition.

    Conclusion

    Dissent, criticism and differences of opinion are vital for the functioning of any democracy. The witch-hunting of those who question the government of the day reminds us of medieval times and totalitarian rulers. It is time we usher in an era of free speech. For that, the sedition law must go.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Monetary policy alone won’t bring down inflation

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Context

    The Reserve Bank of India (RBI) last week raised both policy rates and cut back liquidity in a surprise inter-meeting decision. The forcefulness and urgency of the policy shift have been seen as a signal of the RBI’s renewed commitment to fighting inflation via aggressive monetary tightening in the coming months.

    How do higher inflation rates slow inflation?

    • It is true that a large swathe of the global economy is in the throes of runaway inflation and that in many of these economies tightening monetary and fiscal policies is the right response.
    • Initial conditions: But initial conditions matter as do the specific drivers of inflation.
    •  There are typically three ways in which higher inflation rate slows inflation.

    1] Lowering inflationary expectations

    • Suppose one believes that because a central bank has not tightened enough, future inflation will be higher.
    • In that case, the obvious response is to bring forward future consumption and investment to the present, thereby adding to demand and fueling current inflation further.
    • So, in principle, the central bank by credibly committing to bringing down inflation through aggressive current actions can bring down expectations of future inflation. 
    • It won’t work in India: This is a very potent conduit of monetary transmission in developed markets, where there is a wide variety of inflation-hedging instruments, as well as in some emerging markets — Brazil, for instance —where inflation-indexation is widespread.
    • However, there is little empirical evidence that this channel works in India, even weakly.

    2] Exchange rate channel

    • Higher interest rates attract foreign capital that appreciates the currency, lowering import prices and, in turn, inflation.
    • Again, this is a powerful mechanism in Latin America and Central Europe, where bond flows — that are sensitive to interest rate differential —dominate capital movements and the import content of the consumer basket is large.
    • Will it work in India? This is not the case in India and, in any event, for this to work it would require extreme rate hikes in the country, given the anticipated aggressive tightening by the US Fed.

    3] Curbing credit growth

    • Raising both the cost of borrowing as well as its availability (for example, by increasing the cash reserve ratio) reduces credit growth, lowering demand, GDP growth and, eventually, inflation.
    • It works well in India: This is the credit transmission by which higher interest rates dampen inflation and it works well in India.
    • How much of today’s price increase is credit-driven? Even a cursory glance at bank balance sheets would suggest that credit growth is just treading water.
    • Having recovered from being negative in mid-2021, real credit growth is running just around 2 per cent.

    Comparison with inflation-monetary policy dynamics of 2010-11

    • Back then, real GDP growth was clocking over 10 per cent per quarter, nominal credit growth 20-25 per cent, and real credit growth over 10 per cent.
    • Inflation was unambiguously driven by an overheated economy and fueled by runaway credit.
    • In the event, the RBI assessed the drivers of inflation to be originating from the supply side — higher food and commodity prices — and moved at a glacial pace, such that even after 12 rate hikes inflation remained in double digits for much of that period.
    • Faced with a potential US Fed tightening in 2013, India found itself in a near-crisis situation.
    • Today things are different. Much of the inflation is driven by global food and commodity prices.
    • Despite the languishing private demand, core inflation remains high.
    •  But this has been the case for much of the last two years, strongly suggesting that the domestic supply chain disruptions in manufacturing and services, especially at the informal level, haven’t been repaired fully.
    • The reason why firms locate in the informal sector in the first place is because of lower transaction costs, so when parts of the supply chain shift to the higher-cost formal sector, it shows up as inflation during the transition before increased scale of production and efficiency bring down the cost over time.
    • None of these factors is affected much by higher lending rates. 
    • So the burden of taming inflation by tightening monetary policy will fall largely on lower credit.
    • There is clearly a case to remove the extraordinary monetary support provided during the pandemic.

    Conclusion

    The RBI had misread the drivers of inflation badly in 2010-11. Hopefully, it won’t repeat that mistake this time.

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