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Type: op-ed snap

  • 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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Pubic opinion and jurisprudence

    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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Delimitation for Jammu and Kashmir Assembly

    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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 311

    Mains level: Paper 2- Civil Service reforms

    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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  • Freedom of Speech – Defamation, Sedition, etc.

    Sedition law

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 19

    Mains level: Paper 2- Misuse of sedition law

    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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Impact of rate hike on inflation

    Mains level: Paper 3- Effectiveness of monetary policy in dealing with the inflation

    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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  • Citizenship and diversity of India

    op-ed snap | Trivia | Mains Paper 1: Diversity Of India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 351

    Mains level: Paper 1- Diversity and complexity of India

    Context

    Given the diversity and complexity of India, the only constitutionally valid common denominator is citizenship.

    Social security

    • An eminent sociologist and former president of the International Sociological Association, T.K. Oommen, has written extensively on the concept of social security.
    • Evolution of nation: He says the principal challenges to the evolution of a nation lie in minimising disparity, eradicating discrimination, and avoiding alienation.
    • Excluded groups in our society: He has listed nine categories of socially and/or politically and/or excluded groups in our society: “Dalits, Adivasis, OBCs, cultural minorities — both religious and linguistic, women, refugees-foreigners-outsiders, people [of] Northeast India, the poor and the disabled”.
    • Sources of exclusion in India: He has suggested that “the three sources of exclusion in India — stratification, heterogeneity and hierarchy — create intersectionality.”
    • This insecurity manifests itself in genocide, culturocide and ecocide and in its absence, a society may be conceptualised as secure.
    • The Indian polity, he says, “has the most elaborate set of identities based on class, religion, gender, caste, region, language and their intersectionalities as well as consequent permutations and combinations.
    • Citizenship as a common denominator: Given the diversity and complexity of India, the only constitutionally valid common denominator is citizenship.
    • This is the point at which fraternity can and should be practiced among equals.
    • Prof. Oommen opines that it is “only through the conflation of state and nation” can our Republic be considered a nation.

    Conclusion

    Cultural monoism and secularism are insufficient, Prof. Oommen says; instead, “the idea of conceptualizing India as a multicultural polity is more amenable than a secular India.” The sheet anchor of this has to be citizenship.

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  • Women empowerment issues – Jobs,Reservation and education

    MTP Act 2021

    op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters,Health & Education,Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Termination of pregnancy as an unconditional right

    Context

    The issue of abortion is in the news again, internationally.

    Criminal law provisions related to termination of pregnancy

    • Under the general criminal law of the country, i.e. the Indian Penal Code, voluntarily causing a woman with child to miscarry is an offence attracting a jail term of up to three years or fine or both, unless it was done in good faith where the purpose was to save the life of the pregnant woman.
    • A pregnant woman causing herself to miscarry is also an offender under this provision apart from the person causing the miscarriage, which in most cases would be a medical practitioner.

    Background of the MTP Act

    • In 1971, after a lot of deliberation, the Medical Termination of Pregnancy (MTP) Act was enacted.
    • This law is an exception to the IPC provisions above.
    • Who, when, where, why and by whom? The law sets out the rules — of when, who, where, why and by whom — for accessing an MTP.
    •  This law has been amended twice since, the most recent set of amendments being in the year 2021 which has, to some extent, expanded the scope of the law.
    • The law does not recognise and/or acknowledge the right of a pregnant person to decide on the discontinuation of a pregnancy.
    • The law provides for a set of reasons based on which an MTP can be accessed.

    Reasons allowed for MTP

    • Reasons: The continuation of the pregnancy would involve a risk to the life of the pregnant woman or result in grave injury to her physical or mental health.
    • The law explains that if the pregnancy is as a result of rape or failure of contraceptive used by the pregnant woman or her partner to limit the number of children or to prevent a pregnancy, the anguish caused by the continuation of such a pregnancy would be considered to be a grave injury to the mental health of the pregnant woman.
    • The other reason for seeking an MTP is the substantial risk that if the child was born, it would suffer from any serious physical or mental abnormality.
    •  A pregnant person cannot ask for a termination of pregnancy without fitting in one of the reasons set out in the law.
    • Gestational age of pregnancy: The other set of limitations that the law provides is the gestational age of the pregnancy.
    • The pregnancy can be terminated for any of the above reasons, on the opinion of a single registered medical practitioner up to 20 weeks of the gestational age.
    • From 20 weeks up to 24 weeks, the opinion of two registered medical practitioners is required.
    • Any decision for termination of pregnancy beyond 24 weeks gestational age, only on the ground of foetal abnormalities can be taken by a Medical Board as set up in each State, as per the law.
    • The law, as an exception to all that is stated above, also provides that where it is immediately necessary to save the life of the pregnant woman, the pregnancy can be terminated at any time by a single registered medical practitioner.

    Issues with the MTP Act provisions

    • While India legalised access to abortion in certain circumstances much before most of the world did the same, unfortunately, even in 2020 we decided to remain in the logic of 1971.
    • Right to health and right to life: By the time the amendments to the MTP Act were tabled before the Lok Sabha in 2020, a number of cases came before the courts.
    • In these cases, the courts had articulated the right of a pregnant woman to decide on the continuation of her pregnancy as a part of her right to health and right to life, and therefore non-negotiable.
    • Violation of right to privacy: In right to privacy judgment of the Supreme Court of India it was held that the decision making by a pregnant person on whether to continue a pregnancy or not is part of such a person’s right to privacy as well and, therefore, the right to life.
    • The standards set out in this judgment were also not incorporated in the amendments being drafted.
    • Not in sync with central laws: The new law is not in sync with other central laws such as the laws on persons with disabilities, on mental health and on transgender persons, to name a few.
    • In conflict with other laws: The amendments also did not make any attempts to iron out the conflations between the MTP Act and the Protection of Children from Sexual Offences (POCSO) Act or the Drugs and Cosmetics Act, to name a few.

    Conclusion

    While access to abortion has been available under the legal regime in the country, there is a long road ahead before it is recognised as a right of a person having the capacity to become pregnant to decide, unconditionally, whether a pregnancy is to be continued or not.

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  • Women Safety Issues – Marital Rape, Domestic Violence, Swadhar, Nirbhaya Fund, etc.

    Marital Rape

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary,Parliament & State Legislatures

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Marital rape

    Context

    On May 10, 2022, a two-judge bench of the Delhi High Court gave a split ruling on marital rape, thus ensuring a future hearing in the Supreme Court.

    Why rape and marriage were seen as mutually exclusive

    • The concepts of rape and marriage were seen as mutually exclusive – they could not be brought together.
    • Across the world, and till very recently, marriage has been explicitly treated as being outside the purview of rape.
    • Even in the Western countries that we associate with the more “advanced” practices of gender equality, marital rape was treated as an exception to the crime of rape till the early 1990s.
    • In the absence of a universal definition, several scholars take marriage to be an institution where a man and a woman live together, have sexual relations and engage in cooperative economic activity.
    • Link between marriage and property: Others have emphasised the link between marriage and property.
    • The dominant form of marriage in the modern West became quite distinctly patriarchal, visible in late 18th-century British law, for instance, whereby a wife became the property of her husband upon marriage.
    • Husbands, therefore, had the right to access their wives sexually, without the question of coercion or consent being on the horizon in the first place.
    • As property, wives had to be protected from the (illegal) sexual access of other men, and here too, their consent was irrelevant.

    Introduction of marital rape

    • If what distinguishes the relationship of husband and wife from other relations between men and women is the legitimate expectation of sexual relations, then the introduction of marital rape signals the entry of a new and equally legitimate expectation: A wife’s consent to sexual relations is essential, and in this, she is no different from other women.
    • Husbands no longer enjoy unquestioned rights over the bodies of their wives — this is what it means for a wife to be a person with bodily integrity.

    Conclusion

    It is strange, indeed, that most parts of the world, India included, became modern while continuing to believe that wives are the property of husbands.

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  • Policy Wise: India’s Power Sector

    Power crisis in India

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Lesson from the power shortage crisis

    Context

    The power crisis has taken us by surprise. The question in everyone’s mind is: where did we go wrong? And who slipped up?

    Responsibilities in supply chain

    • Under the Electricity Act, it is the responsibility of the Distribution Licensee/Company (Discom) to provide reliable quality and round-the-clock electricity to all consumers to meet full demand.
    • To do so, they enter into contracts with a number of generating companies in order to ensure adequate supply.
    • These Discoms work under the oversight of the State Electricity Regulatory Commissions.

    Suggestions

    1] Dealing with the challenge of demand prediction

    • Qualitative transformation in demand: With higher incomes and the consequent increase in the use of air-conditioners and other electrical appliances, the nature of electricity demand is undergoing a qualitative transformation with rising daily and seasonal peaks, and spikes on very hot or cold days.
    • While demand prediction is inherently uncertain, the questions to ask are whether Discoms have been making and updating their demand growth projections and scenarios over the medium term with adequate supply arrangements in a robust manner.
    • This needs to become central to the regulatory process.
    • Ensuring reliable supply to meet unanticipated peaks, as have occurred now, requires making supply arrangements with reserve margins that are adequate.
    • The Regulatory Commissions need to provide for such expensive peaking power arrangements in the tariffs they approve.
    • It is also time to move towards separate peaking power procurement contracts in addition to the present system of long-term thermal power contracts.

    2] Demand-based time of day rates of electricity

    • A transition to demand-based time of day rates of electricity for generators as well as consumers would help.
    • These should be brought in by the Regulatory Commissions.
    • Flattening of demand curve: Peak demand moderation and flattening of the demand curve through a change in consumer behaviour is feasible with smart meters.
    • But this would take place only with a strong price signal, a large differential in peak and off-peak rates.

    3] Subsidies and politics

    • Free supply of electricity to farmers and households up to a specified level is not a problem as long as State governments pay for it as provided in the Act, and the Regulatory Commissions do not at the same time act from a political point of view and shy away from determining cost-reflective tariffs.
    • While the problem of delayed payments by Discoms is getting highlighted and needs to be resolved with a sense of urgency, the coal supply problem is not due to this.
    • Coal India needs to create capacities to rapidly ramp up production; and the Railways need to carry larger quantities of coal when demand surges, as has happened now.
    • Imported coal and gas generated electricity: There is idle but expensive generating capacity available — about 15-20 GW of gas-based power plants which can run on imported liquefied natural gas, and 6 GW-8 GW of thermal plants which can run on imported coal.
    • Consumers who are willing to pay more could be kept free of power cuts with purchase and supply of more expensive electricity generated from imported coal and gas.
    • To improve reliability, Discoms, with the approval of the Regulatory Commissions, need to go in for bids for storage.

    Conclusion

    A lesson is that demand growth projections and supply arrangements need to become central to the regulatory process.

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  • Monetary Policy Committee Notifications

    Control inflation by acting on liquidity

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CRR

    Mains level: Paper 3- Dealing with inflation challenge through liquidity measures

    Context

    The recent action of the Reserve Bank of India (RBI) to raise the repo rate by 40 basis points and cash reserve ratio (CRR) by 50 basis points is a recognition of the serious situation with respect to inflation in our country and the resolve to tackle inflation.

    Inflation in India and role of government expenditure

    • India’s CPI inflation has been fluctuating around a high level.
    • As early as October 2020, it had hit a peak of 7.61%.
    • It had remained at a high level of over 6% since April 2020.
    • It did come down after December 2020 but has started rising significantly from January 2022.
    • On the other hand, the Wholesale Price Index (WPI) inflation had remained in double digits since April 2021. The GDP implicit price deflator-based inflation rate for 2021-22 is 9.6%.
    • Even though the RBI’s mandate is with respect to CPI inflation, policymakers cannot ignore the behaviour of other price indices.
    • After the advent of COVID-19, the major concern of policymakers all over the world was to revive demand.
    • Keynesian prescription: This was sought to be achieved by raising government expenditure.
    • Thus, the expansion in government expenditure did not immediately result in increased production in countries where the lockdown was taken seriously.
    • However, the Keynesian multiplier does not work when there are supply constraints as in developing countries.
    • That is why the multiplier operates in nominal terms rather than in real terms in such countries.
    • Something similar has happened in the present case where the supply constraint came from a non-mobility of factors of production.
    • Nevertheless, the prescription of enhanced government expenditure is still valid under the present circumstances.
    • Perhaps the increase in output could happen with a lag and also with the relaxation of restrictions.

    Role of monetary policy

    • Why lover money multiplier rate? Initially, the focus of monetary policy in India has been to keep the interest rate low and increase the availability of liquidity through various channels, some of which have been newly introduced.
    • However, the growth rate of money was below the growth rate in reserve money.
    • This is because of lower credit growth which also depends on business sentiment and investment climate.
    • Thus the money multiplier is lower than usual.
    • The Government’s borrowing programme which was larger went through smoothly, thanks to abundant liquidity.
    • Even as the economy picked up steam in 2021-22, inflation also became an issue, this is a worldwide phenomenon.
    • In India too there is a shift in monetary policy.

    Analysing the cause of inflation

    • While discussing inflation, analysts focus almost exclusively on the increases in the prices of individual commodities such as crude oil as the primary cause of inflation.
    • General price level: Supply disruptions due to domestic or external factors may explain the behaviour of individual prices but not the general price level which is what inflation is about.
    • Given a budget constraint, there will only be an adjustment of relative prices.
    • Besides the fact that any cost-push increase in one commodity may get generalised, it is the adjustment that happens at the macro level which becomes critical.
    • It is the adjustment in the macro level of liquidity that sustains inflation.

    Inflation and growth

    • The possible trade-off between inflation and growth has a long history in economic literature.
    • The Phillip’s curve has been analysed theoretically and empirically.
    • Tobin called the Phillip’s curve a ‘cruel dilemma’ because it suggested that full employment was not compatible with price stability. 
    • The critical question flowing from these discussions on trade-off is whether cost-push factors can by themselves generate inflation.
    • In the current situation, it is sometimes argued that inflation will come down, if some part of the increase in crude prices is absorbed by the government. 
    • If the additional burden borne by the government (through loss of revenue) is not offset by expenditures, the overall deficit will widen.
    • The borrowing programme will increase and additional liquidity support may be required.

    Concomitant decisions on CRR and repo rate

    • These are concomitant decisions. Central banks cannot order interest rates.
    • For a rise in the interest rate to stick, appropriate actions must be taken to contract liquidity.
    • That is what the rise in CRR will do.
    • In the absence of a rise in CRR, liquidity will have to be sucked by open market operations.

    Conclusion

    Beyond a point, inflation itself can hinder growth. Negative real rates of interest on savings are not conducive to growth. If we want to control inflation, action on liquidity is very much needed with a concomitant rise in the interest rate on deposits and loans.

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