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  • Status of the Naga Peace Talks

    The annual report of the Ministry of Home Affairs (MHA) released a report on insurgency-related incidents in Nagaland.

    It recently said that the Isak-Muivah faction of the National Socialist Council of Nagaland (NSCN-IM) was involved in 44% of insurgency-related incidents in 2020.

    Why in news?

    • The Union government had, in 2015, signed a framework agreement with the NSCN-IM to find a solution to the Naga political issue.
    • The negotiations are yet to be concluded.

    Who are the Nagas?

    • The term Naga was created by the British for administrative convenience to refer to a group of tribes with similar origins but distinct cultures, dialects, and customs.
    • The Naga tribes are accumulated in Nagaland, Arunachal Pradesh, Manipur, and Myanmar.

    Why did the Naga insurgency begin?

    • Residing in the Naga hills of Assam during the advent of the British and the annexation of Assam in 1820, the Nagas did not consider themselves a part of British India.
    • The British adopted a way of governance over the Nagas that involved keeping in place their traditional ways of life, customs, and laws while putting British administrators at the top.
    • At the time of the withdrawal of the British, insecurity grew among the Naga tribes about the future of their cultural autonomy after India’s independence.
    • This was accompanied by the fear of the entry of “plains people” or “outsiders” into their territory.

    Do you know?

    In a memorandum to the Simon Commission in 1929, representatives of Naga tribes demanded that Nagas be left free after Independence and not be included in the Indian Union.

    Collective actions of the Nagas

    • Above mentioned factors gave rise to the formation of the Naga Hills District Tribal Council in 1945, which was renamed the Naga National Council (NNC) in 1946.
    • Amid uncertainties over the post-independence future of the Nagas, a section of the NNC, led by Naga leader A.Z. Phizo declared the independence of the Nagas on August 14, 1947.
    • The underground insurgency began in the early 1950s when Mr. Phizo founded the Naga Federal Government (NFG) and its armed wing, the Naga Federal Army (NFA).

    Outcome of the then insurgency

    • The Central Government sent the armed forces into Naga areas to curb the insurgency.
    • It imposed the contentious Armed Forces Special Powers Act (AFSPA) which is still in place in parts of Nagaland.
    • The Nagas, led by Mr. Phizo, demanding an independent state outside of India, boycotted the 1952 and 1957 general elections and armed clashes grew.
    • Unlike other groups in the north east which were accepting some form of autonomy under the Constitution, Nagas rejected this in favour of sovereignty.

    Negotiations with the govt

    • Some leaders among the NNC formed their own group to hold discussions with the government, leading to the formation of the State of Nagaland in 1963.
    • This, however, did not satisfy many in the NNC and NFG, who, following years of negotiations with the government, eventually signed the Shillong Accord of 1975, agreeing to surrender arms and accept the Constitution.

    When did the NSCN come into the picture?

    • This signing of the Shillong Accord was not agreeable with many top leaders of the NNC and those operating from Myanmar.
    • A/c to them, the agreement did not address the issue of Naga sovereignty and coerced them to accept the Constitution.
    • Three NNC rebel leaders, formed the National Socialist Council Of Nagaland (NSCN) to continue the armed movement for ‘independence’.

    Again split in NSCN

    • In 1988, after years of infighting and violent clashes along tribal lines and over the main cause of the movement, the NSCN split into two factions.
    • One, led by Mr. Muiwah and Swu called the NSCN-IM and the other, led by Mr. Khaplang called the NSCN-K.
    • The NSCN-IM demanded and continues to demand for ‘Greater Nagaland’ or Nagalim.
    • It wants to extend Nagaland’s borders by including Naga-dominated areas in the neighbouring States of Assam, Manipur and Arunachal Pradesh.
    • The NSCN-IM has now grown to become the most powerful insurgent group, also playing a role in the creation of smaller groups in other States.

    Where do the peace talks stand now?

    • In 1997, the Government of India got the NSCN-IM to sign a ceasefire agreement to begin the holding of talks with the aim of signing a Naga Peace Accord.
    • After this ceasefire, there have been over a hundred rounds of talks spanning over 24 years between the Centre and the insurgent group, while a solution is still awaited.

    Issues of contention

    • Independence celebration: Nagas across Nagaland, Manipur, Assam and Arunachal Pradesh celebrate August 14 as Independence Day. According to Naga historians, Gandhi agreed that the Nagas would celebrate their independence a day ahead of India, on August 14, 1947.
    • Naga flag: In the Naga narrative, passed down generations by word of mouth, the Naga flag was not designed by a mortal but is of divine origin.
    • Secessionist tendencies: A large section of the Nagas still holds dear the idea of the Naga identity and their tribal roots.

    Way ahead

    • The Naga struggle claimed thousands of lives over decades and devastated countless homes, all over the idea of a sovereign Naga nation.
    • If the NSCN (I-M) accedes to economic and political packages alone, without a separate flag and constitution, it remains to be seen whether it will be seen as a solution, or as a defeat.

     

    Also read,

    [Burning Issue] Naga Peace Talks

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  • What is China’s Global Security Initiative?

    Chinese President Xi Jinping last week proposed a “Global Security Initiative” to promote security for all in the globe.

    What is Global Security Initiative?

    • Conceived as a global public good, the initiative seeks to promote world peace and stability by fostering equity and justice among nations.
    • To do this, Xi defined his proposal in six areas:
    1. Stay committed to the vision of common, comprehensive, cooperative and sustainable security, and work together to maintain world peace and security;
    2. Stay committed to respecting the sovereignty and territorial integrity of all countries, uphold non-interference in internal affairs, and respect the independent choices of development paths and social systems made by people in different countries;
    3. Stay committed to abiding by the purposes and principles of the UN Charter, reject the Cold War mentality, oppose unilateralism, and say no to group politics and bloc confrontation;
    4. Stay committed to taking the legitimate security concerns of all countries seriously, uphold the principle of indivisible security, build a balanced, effective and sustainable security architecture, and oppose the pursuit of one’s own security at the cost of others’ security;
    5. Stay committed to peacefully resolving differences and disputes between countries through dialogue and consultation, support all efforts conducive to the peaceful settlement of crises, reject double standards, and oppose the wanton use of unilateral sanctions and long-arm jurisdiction;
    6. Stay committed to maintaining security in both traditional and non-traditional domains, and work together on regional disputes and global challenges such as terrorism, climate change, cybersecurity, and biosecurity.

    It is quite ironic that China has never adhered to any of the above-stated lofty principles and now is preaching them to the world.

    Key propositions made by Xi

    • China opposes the wanton use of unilateral sanctions and long-arm jurisdiction, appearing to refer to Western sanctions.
    • He said “some countries” were “eager to engage in exclusive ‘small circles’ and ‘small groups’”, terms Chinese officials have used previously to describe the Quad and the AUKUS (Australia-U.K.-U.S.) security pact.
    • He firmly opposed the use of the ‘Indo-Pacific’ strategy to divide the region and create a ‘new Cold War’, and the use of military alliances to put together an ‘Asian version of NATO’.
    • According to him, China upholds true spirit of multilateralism.

    A critical assessment of Xi’s speech

    • The idea of a world-encompassing security mechanism sounds like what China’s ancient emperors might have proposed.
    • Diplomats are under pressure to dissect the meaning but are having a hard time: Xi’s speech contained only abstract Chinese words and idioms.
    • One thing is very clear, China always comes out with an excessively large framework that nobody objects to.
    • The idea is that even if countries don’t agree wholeheartedly, at least they can’t fully oppose it.

    Conclusion

    • Chinese criticism of unilateralism, hegemony and double standards is usually aimed at the U.S.
    • Xi envisions a gradually weakening America replaced by a multipolar world in which China is a major player.

     

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  • Keen on lifting AFSPA from NE: PM

    The PM informed that AFSPA could be withdrawn partially from Assam, Manipur and Nagaland (from April 1) due to peaceful conditions since 2014.

    What is the news?

    • The AFSPA will now be applicable fully only in 31 districts and partially in 12 districts of four states in the Northeast Assam, Nagaland, Manipur and Arunachal Pradesh.
    • These four states together comprise 90 districts.
    • The AFSPA was completely withdrawn in Meghalaya in 2018, Tripura in 2015 and Mizoram in the 1980s.

    Immediate reasons for withdrawal

    • The Northeast has lived under the shadow of AFSPA for nearly 60 years, creating a feeling of alienation from the rest of the country.
    • The move is expected to help demilitarise the region; it will lift restrictions of movements through check points and frisking of residents.
    • Years of AFSPA regime has had psychological consequences, trauma and alienation of the people.

    AFSPA: A Backgrounder

    • The AFSPA, 1958 came into force in the context of insurgency in the North-eastern States decades ago.
    • It provides “special power” to the Armed Forces applies to the Army, the Air Force and the Central Paramilitary forces etc.
    • It has been long contested debate whether the “special powers” granted under AFSPA gives total immunity to the armed forces for any action taken by them.

    Armed Forces (Special Powers) Act, 1958

    • Armed Forces Special Powers Act, to put it simply, gives armed forces the power to maintain public order in “disturbed areas.”
    • AFSPA gives armed forces the authority use force or even open fire after giving due warning if they feel a person is in contravention of the law.
    • The Act further provides that if “reasonable suspicion exists”, the armed forces can also arrest a person without warrant; enter or search premises without a warrant; and ban the possession of firearms.

    What are the Special Powers?

    The ‘special powers’ which are spelt out under Section 4 provide that:

    (a) Power to use force, including opening fire, even to the extent of causing death if prohibitory orders banning assembly of five or more persons or carrying arms and weapons, etc are in force in the disturbed area;

    (b) Power to destroy structures used as hide-outs, training camps, or as a place from which attacks are or likely to be launched, etc;

    (c) Power to arrest without warrant and to use force for the purpose;

    (d) Power to enter and search premises without a warrant to make arrest or recovery of hostages, arms and ammunition and stolen property etc.

    What are the Disturbed Areas?

    • A disturbed area is one that is declared by notification under Section 3 of the AFSPA.
    • As per Section 3, it can be invoked in places where “the use of armed forces in aid of the civil power is necessary”.

    Who can declare/notify such areas?

    • The Central Government or the Governor of the State or administrator of the Union Territory can declare the whole or part of the State or Union Territory as a disturbed area.
    • A suitable notification would have to be made in the Official Gazette.

    Presently active ‘Disturbed Areas’

    • AFSPA is currently in force in Assam, Nagaland, Manipur, 3 districts of Arunachal Pradesh, and areas falling within the jurisdiction of 8 police stations in Arunachal Pradesh bordering Assam.
    • In Jammu and Kashmir, a separate law Armed Forces (Jammu and Kashmir) Special Powers Act, 1990 has been in force.

    AFSPA: Is it a License to Kill?

    While the operation of the Section has been controversial in itself, it has attracted much criticism when actions have resulted in the death of civilians.

    • Power to kill: Section 4 of the Act granted officers the authority to “take any action” even to the extent to cause the death.
    • Protection against prosecution: This power is further bolstered by Section 6 which provides that legal can be instituted against the officer, except with the previous sanction of the Central Government.

    Supreme Court’s Observations over AFSPA

    • These extra-judicial killings became the attention of the Supreme Court in 2016.
    • It clarified that the bar under Section 6 would not grant “total immunity” to the officers against any probe into their alleged excesses.
    • The judgment noted that if any death was unjustified, there is no blanket immunity available to the perpetrator(s) of the offense.
    • The Court further noted that if an offense is committed even by Army personnel, there is no concept of absolute immunity from trial by the criminal court constituted under the CrPC.

    Constitutionality of AFSPA

    • Attempts have been made to examine the constitutionality of the Act on the grounds that it is contravention to the:
    1. Right to Life and Personal Liberty (Article 21) and
    2. Federal structure of the Constitution since law and order is a State subject

    Recommendations to repeal AFSPA

    (1) Justice B.P. Jeevan Reddy Commission

    • The 2004 Committee headed by Justice B.P. Jeevan Reddy, the content of which has never officially been revealed by the Government, recommended that AFSPA be repealed.
    • Additionally, it recommended that appropriate provisions be inserted in the Unlawful Activities Prevention Act, 1967 (UAPA) instead.
    • It also recommended that the UAPA be modified to clearly specify the powers of the armed forces and paramilitary forces and grievance cells should be set up in each district where the armed forces are deployed.

    (2) ARC II

    • The Administrative Reforms Commission in its 5th Report on ‘Public Order’ had also recommended that AFSPA be repealed.
    • It recommended adding a new chapter to be added to the Unlawful Activities Prevention Act, 1967.
    • However, the recommendation was considered first and then rejected.

    Other issues with AFSPA

    (1) Sexual Misconduct by Armed Forces

    • The issue of violation of human rights by actions of armed forces came under the consideration of the Committee on Amendments to Criminal Law (popularly known as Justice Verma Committee) set up in 2012.
    • It observed that- in conflict zones, legal protection for women was neglected.

    (2) Autocracy

    • The reality is that there is no evidence of any action being taken against any officer of the armed forces or paramilitary forces for their excesses.

    Caution given by the Supreme Court

    A July 2016 judgment authored by Justice Madan B. Lokur in Extra Judicial Execution Victim Families Association quoted the “Ten Commandments” issued by the Chief of the Army Staff for operations in disturbed areas:

    1. Definite circumstances: The “power to cause death is relatable to maintenance of public order in a disturbed area and is to be exercised under definite circumstances”.
    2. Declaration preconditions: These preconditions include a declaration by a high-level authority that an area is “disturbed”.
    3. Due warning: The officer concerned decides to use deadly force on the opinion that it is “necessary” to maintain public order. But he has to give “due warning” first.
    4. No arbitrary action: The persons against whom the action was taken by the armed forces should have been “acting in contravention of any law or order for the time being in force in the disturbed area”.
    5. Minimal use of force: The armed forces must use only the “minimal force required for effective action against the person/persons acting in contravention of the prohibitory order.”
    6. Empathy with perpetrators: The court said that: the people you are dealing with are your own countrymen. All your conduct must be dictated by this one significant consideration.
    7. People friendliness: The court underscored how the Commandments insist that “operations must be people-friendly, using minimum force and avoiding collateral damage – restrain must be the key”.
    8. Good intelligence: It added that “good intelligence is the key to success”.
    9. Compassion: It exhorted personnel to “be compassionate, help the people and win their hearts and minds. Employ all resources under your command to improve their living conditions”.
    10. Upholding Dharma (Duty): The judgment ended with the final Commandment to “uphold Dharma and take pride in your country and the Army”.

    Conclusion

    • Despite demands by civil society groups and human rights activities, none of the recommendations have not been implemented to date.

     

     

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  • ECGC to seek RBI nod for payment in forex to exporters

    ECGC Ltd., the government enterprise that provides export credit insurance, will soon approach the Reserve Bank of India for approval to deal in foreign currency for the benefit of exporters.

    What is ECGC?

    • ECGC is an acronym for Export Credit Guarantee Corporation of India Ltd.
    • It is a government owned export credit provider.
    • It is under the ownership of Ministry of Commerce and Industry and is based in Mumbai.
    • It provides export credit insurance support to Indian exporters.
    • Its topmost official is designated as Chairman and Managing Director who is a central government civil servant under ITS cadre.
    • The GoI had initially set up Export Risks Insurance Corporation (ERIC) in July 1957.
    • It was transformed into Export Credit and Guarantee Corporation Limited (ECGC) in 1964 and to Export Credit Guarantee Corporation of India in 1983.

    Functions of ECGC

    • ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services as well.
    • It offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.
    • It provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan and advances.

    Facilities by ECGC

    • It offers insurance protection to exporters against payment risks.
    • It provides guidance in export-related activities.
    • It makes available information on different countries with its own credit ratings.
    • It makes it easy to obtain export finance from banks/financial institutions.
    • It assists exporters in recovering bad debt.
    • It provides information on the creditworthiness of overseas buyers.

    Why need export credit insurance?

    • Payments for exports are open to risks even at the best of times.
    • The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world.
    • An outbreak of war or civil war may block or delay payment for goods exported. Ex. Ukraine War.
    • Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. Ex. Sri Lankan Crisis.
    • In addition, the exporters have to face commercial risks of insolvency or protracted the default of buyers.
    • Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.

     

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  • [pib] MSME Sustainable (ZED) Certification Scheme

    The  Union Ministry for Micro, Small and Medium Enterprises has launched the MSME Sustainable (ZED) Certification Scheme.

    MSME Sustainable (ZED) Certification Scheme

    • This Scheme is an extensive drive to enable and facilitate MSMEs adopt Zero Defect Zero Effect (ZED) practices.
    • It aims motivate and incentivize them for ZED Certification while also encouraging them to become MSME Champions.
    • Through the ZED Certification, MSMEs can reduce wastages substantially, increase productivity, enhance environmental consciousness, save energy, optimally use natural resources, expand their markets, etc.

    Components of the scheme

    • Under the Scheme, MSMEs will get subsidy as per the following structure, on the cost of ZED certification:
    1. Micro Enterprises: 80%
    2. Small Enterprises: 60%
    3. Medium Enterprises: 50%
    • There will be an additional subsidy of 10% for the MSMEs owned by Women/SC/ST Entrepreneurs OR MSMEs in NER/Himalayan/LWE/Island territories/aspirational districts.
    • In addition to above, there will be an additional subsidy of 5% for MSMEs which are also a part of the SFURTI OR Micro & Small Enterprises – Cluster Development Programme (MSE-CDP) of the Ministry.
    • Further, a limited purpose joining reward of Rs. 10,000/- will be offered to each MSME once they take the ZED Pledge.

    Back2Basics: Zero Defect Zero Effect Scheme

    • Launched in 2016 by the Ministry of MSME, the ZED scheme is an integrated and comprehensive certification system.
    • The scheme accounts for productivity, quality, pollution mitigation, energy efficiency, financial status, human resource and technological depth including design and IPR in both products and processes.
    • Its mission is to develop and implement the ‘ZED’ culture in India based on the principles of Zero Defect & Zero Effect.
    • ZED principles include:
    1. Zero Defect: Zero non-conformance or non-compliance
    2. Zero Effect: Zero wastage, liquid discharge, solid waste; zero pollution

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  • Tribes in news: Hattis of Himachal Pradesh

    The Centre is set to consider the Himachal Pradesh government’s request for inclusion of the Hatti community in the list of Scheduled Tribes in the state.

    Who are the Hattis?

    • The Hattis are a close-knit community who got their name from their tradition of selling homegrown vegetables, crops, meat and wool etc. at small markets called ‘haat’ in towns.
    • The Hatti community, whose men generally don a distinctive white headgear during ceremonies, is cut off from Sirmaur by two rivers called Giri and Tons.
    • Tons divides it from the Jaunsar Bawar area of Uttarakhand.
    • The Hattis who live in the trans-Giri area and Jaunsar Bawar in Uttarakhand were once part of the royal estate of Sirmaur until Jaunsar Bawar’s separation in 1815.
    • Due to topographical disadvantages, the Hattis living in the Kamrau, Sangrah, and Shilliai areas lag behind in education and employment.

    Societal norms of Hattis

    • The Hattis are governed by a traditional council called Khumbli, which like the khaps of Haryana, decide community matters.
    • The Khumbli’s power has remained unchallenged despite the establishment of the panchayati raj system.
    • The two clans have similar traditions, and inter-marriages are commonplace.
    • There is a fairly rigid caste system among the Hattis — the Bhat and Khash are the upper castes, while the Badhois are below them.
    • Inter-caste marriages have traditionally remained a strict no-no.

    Who are Paharis?

    • The proposal called for the inclusion of the “Paddari tribe”, “Koli” and “Gadda Brahman” communities to be included on the ST list of J&K.
    • The suggestion for the inclusion had come from the commission set up for socially and educationally backward classes in the UT.
    • The J&K delimitation commission has reserved six of the nine Assembly segments in the Pir Panjal Valley for STs.

    Back2Basics: Scheduled Tribes

    The above Article also provides for listing of scheduled tribes State/Union Territory wise and not on an all India basis.

    • The term ‘Scheduled Tribes’ first appeared in the Constitution of India.
    • Article 366 (25) defined scheduled tribes as “such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under Article 342 to be Scheduled Tribes for the purposes of this constitution”.
    • Article 342 prescribes procedure to be followed in the matter of specification of scheduled tribes.

    How are STs notified?

    • As per the current procedure, each proposal for the scheduling of a new community as ST has to originate from the relevant State Government.
    • It is then sent to the Ministry of Tribal Affairs, which sends it to the Office of the Registrar General of India (RGI).
    • Once approved by the Office of the RGI, it is sent to the National Commission for Scheduled Tribes (NCST), and only after its approval is it sent to the Cabinet.

    Status of STs in India

    • The Census 2011 has revealed that there are said to be 705 ethnic groups notified as Scheduled Tribes (STs).
    • Over 10 crore Indians are notified as STs, of which 1.04 crore live in urban areas.
    • The STs constitute 8.6% of the population and 11.3% of the rural population.

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  • The post-pandemic world needs better public schools

    Context

    The pandemic has thrown a harsh light on the vulnerabilities and challenges faced by the world in education. There is an immense learning gap due to existing inequalities.

    Need for investment in learning systems

    • In India, we have to accept that unless we mobilise learning resources and institutions at the government level, the divides will continue to expand and learners will continue to fall between the cracks.
    • Systems have to be put into place to find a variety of methods to equip all learners — privileged, poor, middle-class and alternatively-abled.
    •  The challenge is about returning to school.
    • In wealthier nations, schools have always been the first to open and last to close and citizens have benefited from the public school system.
    • In India, across states, there is a sense of despair due to unemployment and lack of financial resources, which has snowballed due to the pandemic, resulting in greater inequality.
    • Sending children to school, as opposed to keeping them at home, is a huge financial investment, particularly in the private school system.
    • Parents have refrained from sending their children back to school due to a lack of funds.

    Viewing education through government school lens

    • The big shift that we as a nation have to make is viewing education through a government school lens.
    • This will only take place if states provide the opportunity for free, compulsory, neighbourhood education.
    • Radical reforms have to be implemented to restructure government schools and ensure quality.
    • The government, both at the Centre and in the states, should build good-quality primary, middle and high schools and provide facilities that the best private schools have to offer.
    • Online learning is not the way forward: We are subsumed by the myth that technology has expanded potential.
    • The concern is that online learning will create greater inequality, not only in the global South but even in the most well-resourced corners of the planet.
    • Online learning is not the way forward.
    • The UNESCO’s International Commission on the Futures of Education states in its report, “the core commitments that should always be remembered are public education and common good”.
    • It says, “This is not the time to step back and weaken these principles but rather to affirm and reinforce them.”
    • We must take the opportunity to protect and advance public education.
    • We cannot allow the government health system and government education to be opposed to one another. Their synergies must overlap

    Conclusion

    Public education is crucial to societies, communities and individual lives. It is the only thing that will enable us to live with dignity and purpose.

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  • Tackling the inflation

    Context

    Expectations that commodity and oil prices would cool down in 2022 as the pandemic ebbed were belied by the Russia-Ukraine conflict, which exacerbated existing pressures. Fresh lockdowns in China are also extending the pandemic-induced supply-chain bottlenecks.

    Challenges for central banks

    • Systemically important central banks that viewed the consistent uptick in inflation as transitory — caused by post-pandemic supply shocks — are now finding it hard to bottle the genie.
    • Inflation in the time of weak growth: What central banks like even less is having to deal with rising inflation in times of weak growth.
    • Because the primary tool they have to fight it — the interest rate hikecan be recessionary.

    Inflation in India

    • CPI inflation averaged 6.3 per cent in the January-March 2022, above the RBI’s target range of 2-6 per cent.
    • The RBI forecasts inflation for April-June at 6.3 per cent.
    • One more quarter over the 6 per cent mark, and the central bank would owe the government an explanation.
    • Factors driving inflation: Fiscal 2021-In fiscal 2021, inflationary pressures came largely from food and, to some extent, core which excludes fuel and food.
    • Fiscal 2022- In fiscal 2022, crude prices hardened to emerge as the new driver. Core inflation firmed up further.
    • But the drop in food inflation offset this, so overall inflation was lower at 5.5 per cent compared with 6.2 per cent the previous year.

    Understanding inflation in fiscal 2023

    • What makes this fiscal worrying is, all three-fule, food and core are firmly pointing in the same direction — up.
    • Fuel inflation, in double digits for a year now, shows no signs of easing.
    • Energy prices have risen sharply across the board — from crude oil to coal and natural gas.
    • The cut in excise duties on petrol and diesel in November 2021 is insufficient to bring down fuel inflation, in the event crude prices stay above $90 per barrel this fiscal.
    • Food inflation: Food is the most volatile component and biggest mover of CPI inflation, given that it occupies 39 per cent weight in the average consumption basket.  
    • On the positive side, India looks set to enjoy a fourth successive year of normal monsoon and still has good buffer stocks of rice and wheat.
    • What is certain, though, is the rising cost of food production.
    • Prices of fertilisers, pesticides, diesel and animal feed are all surging.
    • Already pricey edible oils are set to get even costlier, with Indonesia’s recent ban on refined palm oil exports adding pressure.
    • No wonder then, food inflation is expected to rise.
    • Core inflation: Core inflation, a barometer of demand pressures, will continue to climb despite an environment of weak demand due to the persistence of supply shocks.
    • For producers, the bump-up in international prices across energy and metal commodities since the war has brought more pain.
    • But a weak and uneven demand recovery means producers had limited ability to pass on cost pressures to consumers.
    • Such pass-through has been partial, at best.
    • For most goods, CPI inflation has been much lower than the corresponding WPI last fiscal.
    • The pattern of recovery is also uneven across different segments, with contact-intensive services lagging formal manufacturing.
    • But contact-based services will catch up sooner or later, as restrictions become a thing of the past.
    • The last time we saw such broad-basing of inflationary pressures was after the Global Financial Crisis.
    • The difference this time around is consumer demand, which remains weak and will limit the extent of pass-through.

    Conclusion

    Forecasting inflation in such uncertain times is fraught with risk. The RBI has predicted ~5.7 per cent consumer inflation this fiscal, while professional forecasters see it at 5.6 per cent. The odds currently favour a higher inflation print, and a rate hike in June.

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