1. 5 security men killed in Sukma encounter
Over 400 personnel on combing operation attacked in Chhattisgarh; woman among 2 Maoists dead
Five security personnel were killed and more than 12 injured in an encounter with Maoists in Sukma district of Chhattisgarh on Saturday.
Two of the dead were from the Central Reserve Police Force (CRPF). At least three Chhattisgarh police personnel are missing.
The body of a woman Maoist was recovered from the site of encounter, a senior CRPF official said. One more cadre was said to have been killed.
According to the official, a joint team of the Chhattisgarh police comprising the District Reserve Guard (DRG) and the Special Task Force (STF), along with various teams of the CRPF, proceeded for a combing operation in south Bastar on Friday night. The region is said to be a Maoist stronghold.
More than 2,000 security personnel from various camps are said to have joined the operation.
Around Saturday noon, a 400-strong team of security forces came under attack by a People’s Liberation Guerilla Army (PLGA) platoon in the Tarrem area near the Sukma-Bijapur border. The exchange of fire lasted more than three hours.
“From 4 p.m., there has been no firing, but the security forces are still there in the jungle. Till the time every personnel reaches their respective camps, we cannot say that the operation is over,” Director-General of Police, Chhattisgarh, D.M Awasthi told The Hindu. He said at least seven personnel were evacuated by helicopters as they required urgent medical attention.
The deceased CRPF personnel have been identified as constable Babloo Rabha and Somaiya Mandvi.
Left-wing extremism, also known by various other names such as Naxalism and Maoism, is a form of armed insurgency against the State motivated by leftist ideologies. Left-wing extremists are also known as Maoists globally and as Naxalites in India.
- There are several left-wing extremist organisations in the country operating in many areas.
- They reject parliamentary democracy and are aiming at waging an armed revolution against the government.
- They follow extreme violence and also harm innocent civilians in many cases.
- Some groups also engage in parliamentary politics while at the same time, maintain underground cadres. Examples of such groups: Communist Party of India (Marxist-Leninist) Liberation and the Communist Party of India (Marxist-Leninist) Janashakti.
- Traditionally, during the early years of the movement, they handled weapons like bows and arrows, and country-made firearms, but now, they possess sophisticated weapons including rocket launchers and AK rifles.
- The common theme among all the groups is that they are anti-government, and desire a violent mass struggle.
- They try to get the support of the marginalised people in rural areas by espousing their cause and projecting their real and perceived grievances.
- The most important and dangerous among the groups is the Communist Party of India (Maoist)/CPI-M.
- The Maoists derive their ideology from Maoism, a form of communism espoused by Mao Zedong of China.
Maoist Modus Operandi
- The LWE organisations, in pursuit of their stated goal of overthrowing the government, resort to armed violence against anyone they perceive to be their enemy, and this includes innocent civilians also.
- They indulge in murders, abductions, extortions, etc.
- In many instances, they carry out high-profile murders and kidnappings to instil fear in their opponents and civilians.
- In many cases, they get the support of the tribal population in an area since they are seen as deliverers, in a situation where the authorities have failed to provide the basic amenities.
- However, the main sufferers in LWE are chiefly the tribal and poor sections of the population. The Naxals do not hesitate to kill the tribal people themselves if they are suspected of being ‘informers’.
- They routinely indulge in the killing of elected representatives at the local levels, in Panchayats, etc. to desist people from taking part in the democratic process. They also intend to create a vacuum in the low-levels paving the way for their entrenchment in a parallel system of governance there.
- In spite of their violent means and stated rejection of religion, they get sympathy from some sections because they are seen as selfless in the pursuit of ‘delivering justice to the people’.
- In many places where they have dominant control, they collect taxes from the people.
- In LWE parlance, the Naxals seek to ‘liberate’ areas.
- Areas, where they have a dominant position vis-a-vis the State, are called liberated areas or zones.
- In guerilla zones, the Maoists and the government have an ‘equal footing’.
- Places, where the government has the dominant control, are called base areas.
- The Naxal ideology exhorts violence and guerilla warfare as the means to achieve their socio-politico-economic goals. The CPI – Maoist, primarily, wants to usher in a ‘new democratic revolution’ in India.
- The CPI – Maoist is banned under the Unlawful Activities (Prevention) Act.
- An important feature of the LWE is the Front Organisation.
- Most Maoist organisations have front organisations which are led by educated people, who sympathise with the Maoist cause.
- These organisations are important because they help the parent organisation in spreading their agenda, in propaganda and also in recruiting people.
- They help the parent organisations to survive by escaping legal liability.
- They also publish magazines and pamphlets espousing their ideology.
- They serve as a cover for the parent Naxal bodies by sanitising the bloodletting and making them more acceptable to the urban public and the mainstream media.
- They take up issues such as corporate exploitation, human rights violation and tribal displacement.
- Many young people are waylaid by these front organisations. They nurture romantic illusions about the Maoists and their work because of a lack of understanding of their complete ideology.
- Maoism is a form of communism developed by Mao Zedong.
- It is a doctrine to capture State power through a combination of an armed insurgency, mass mobilization and strategic alliances.
- Mao called this process, the ‘Protracted People’s War’, where the emphasis is on ‘military line’ to capture power.
- The Red Corridor is the region in the central, eastern and southern parts of India that experience severe Naxalite–Maoist insurgency.
- The districts affected by this and part of the Corridor are among the poorest in India.
- Most of the region has a high tribal population. The region is also marked by severe caste and economic disparities.
- Roughly, the Corridor stretches from the Indian border with Nepal and extends to the northern fringes of Tamil Nadu.
- The region also has a significantly lower literacy rate compared to the national average.
The Naxal activities have a huge economic impact on the regions they are prominent in. Some of the recent destructive activities which have adversely affected the lives of the people are listed below:
- 316 attacks were carried out on railways, telecom, transmission lines, mines, and steel plants between Jan 2006 and June 2009.
- Human lives lost – it has been estimated that in the last 13 and a half years, approximately 8000 human lives were lost due to violence perpetrated by Naxalites.
- Naxals have destroyed hundreds of roads, bridges, culverts, etc.
- They have destroyed hundreds of mobile towers of BSNL, Airtel, Reliance in Dantewada, Bijapur, Sukma, Gaya, Aurangabad, Daltoganj, Raigad. All these districts are spread over states of the Chhattisgarh, Bihar, Jharkhand and Odisha.
- They have looted money from various banks and the amount goes up to the tune of many millions.
- Businesses and livelihood of local people are badly affected.
- School children have been abducted and many schools and hostels have been blown apart.
- Huge forest lands have been destroyed for setting up their temporary camps.
- The ongoing conflict has affected domestic trade, tourism, industries and agriculture.
- Naxals illegally collect money from Government schemes like Sarva Shiksha Abhiyan, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Public Distribution System (PDS).
LWE – Origins
The origins of the LWE can be traced back to 1967 in the three areas of Naxalbari (from which the term Naxal originates), Phansidewa and Khoribari in West Bengal’s Darjeeling District.
- The initial uprising was led by Charu Majumdar, Kanu Sanyal and Jangal Santhal, who were members of the Communist Party of India (Marxist). The initial uprising was in the form of a peasant revolt.
- Two years later in 1969, the Communist Party of India (Marxist–Leninist) was formed.
- Although originated in West Bengal, the movement spread to the less-developed rural regions of southern and eastern India, in Telangana, Andhra Pradesh, Odisha and Chhattisgarh.
- Today, almost all the Naxal groups trace their origins to the CPI (M-L).
- The Maoist Communist Centre (MCC) was formed in 1975. This group merged with the People’s War Group in 2004, to form the CPI (Maoist).
Factors responsible for the rise of LWE
- The chief reason behind the rise of the movement was the severe lack of development of these regions despite being mineral-rich.
- They were largely tribal belts that were neglected by the government and also by the mainstream media.
- There were gross ineffectiveness and mismanagement in the administrative machinery. Corruption was also rampant leading to misery for the people.
- The alienation and social exclusion of large groups of people led to sections of them feeling a disconnect with the government of the day and also society at large.
- The issue of Jal-Jangal-Jameen (water, forest, land) is at the centre of these revolts initially. Tribal people are routinely exploited for their mineral-rich land. There is illegal encroachment and the forest-dwellers are bereft of rights in their own land.
Such conditions made it ripe for Maoism to take seed. Nevertheless, it should be said that violence leads only to more violence, and no lofty goal can justify the cruelties and inhuman activities conducted by the Maoists.
It is the very same people who were supposed to be the beneficiaries of the Naxalite movement that are the worst-affected by it. No development work by the government is allowed to succeed as it has now become a turf-war between the rebels and the State. Well-intentioned government schemes are not benefiting the tribals and other populace on account of the terrible violence perpetrated by the Naxals.
Regions affected by Naxal violence in India
According to the Home Ministry, the districts affected by LWE are in the states of Telangana, Andhra Pradesh, Chhattisgarh, Bihar, Jharkhand, Odisha, Maharashtra, Odisha, West Bengal and Uttar Pradesh.
However, in the past decade, owing to the severe government crackdown on the Naxalite organisations, and the intense work of the country’s security forces, particularly, the CRPF, the number of incidents of Naxal violence has reduced. The number of people giving up arms and surrendering to the security forces is also on the rise.
Government Measures to Counter Naxal Violence
The government has taken up a holistic approach to tackling the Naxal problem. It has used security-related interventions coupled with developmental measures to root out the violent uprisings.
- The D Bandopadhyay Committee (2006) highlighted the lack of governance, economic, socio-political and cultural discrimination against the tribals as the chief reason for the spread of Naxalism. The Committee recommended tribal-friendly land acquisition and rehabilitation as a means to counter this issue.
- In May 2017, the Government of India allocated Rs 11,000 crores to build road connectivity in 44 districts affected by Maoists activities.
- Under the current Government, by 2018, 1326 km of roads were constructed in Bastar, Rajnandgaon, and Surguja areas, the highly Naxal infested areas of Chhattisgarh.
- 995 bridges were constructed and 138 of them were in the worst affected area – Bastar.
- The annual budget of the Public Works Department in Chhattisgarh was Rs 7795 crores in 2016-17.
- Roads and bridges were constructed in Sukma, another area massively hit by Naxalism.
- Local villagers are being provided with basic facilities like healthcare, education and more employment opportunities.
- Due to developmental activities and choking the funding of Naxalism, there was a spike in surrenders in Jharkhand from 676 in 2014 to 1442 in 2016.
- Operation SAMADHAN
- Samadhan stands for
- S- Smart Leadership,
- A- Aggressive Strategy,
- M- Motivation and Training,
- A- Actionable Intelligence,
- D- Dashboard Based KPIs (Key Performance Indicators) and KRAs (Key Result Areas),
- H- Harnessing Technology,
- A- Action plan for each Theatre,
- N- No access to Financing.
- The policy was initiated in 2015 as a multidimensional approach to tackle LWE.
- The chief objective of the approach is to ensure participatory governance and protection of the rights of the tribal people.
- Police forces in Naxal-affected areas are fortified with more weapons, manpower, helicopters, UAVs (unmanned aerial vehicles), etc. to be more effective in their fight against Naxalism.
- The government is also focussing on building better infrastructure and connectivity in the regions.
- The Maoists take advantage of the weak coordination among states in the inter-state borders and set up bases there. Hence, the government is setting up joint task forces to ensure better coordination and intelligence sharing among the states.
- In the Naxal belt, more fortified police stations are being set up.
- The Indian Army or specialised forces such as the Greyhounds will train the police forces fighting the Naxals.
- It is clear that the Maoists do not want development to take place, which is clear by their targeting schools and communication channels. Whatever their goals, they are now armed insurgency groups intended only to capture power to serve their own interests.
- The government has initiated a host of tribal development schemes aimed at bringing social, economic, cultural and educational inclusion for the tribal population into the mainstream.
- For more on economic empowerment of STs, click on the linked article.
- The government has to tackle certain challenges in dealing with the Naxals. The Naxal groups have frequently lent moral support to insurgent groups in J&K.
- It is also suspected that Pakistan’s ISI is trying to influence these groups through the land border with Nepal. This has serious implications for the country’s security. Proper intelligence inputs coupled with the adequate fortification of security forces should be done.
- Along with these, sufficient and speedy development should be brought about in the worst-affected areas as only this will render the Maoists insignificant. As long as there is disillusionment with the authorities, such elements will always find sympathizers among sections of the people. Hence, to root out the problem in its entirety, proper inclusive development should be ushered in.
Counter Operations by Center or State Government
- Grey Hound Police – The Greyhounds are an elite commando force of Andhra Pradesh created to combat left-wing extremists. It is considered the best anti-Naxalite force in the country. Greyhound is a simple but effective organization and recruits the best of the best from the Andhra Pradesh Police.
- The Force is also known for its guerrilla approach and its functioning in the field, which is near similar to that of the Maoists.
- The commandos of Greyhounds undergo rigorous training and have a strict day-to-day combat regime. Greyhound commandos often exclaim that their strength does not lie in them being a special force with special training, but it lies in the fact that it is more of a guerrilla force than a special force.
- Salwa Judum – So called People’s movement was named Salwa Judum, to mean, “Peace hunt” in the local Gondi tribal dialect. The movement was launched by a few villagers angered by Naxal interference in the local trade of tendu leaves (used for making bidis).
- However, later on, it was alleged that maintaining law and order in Dantewada and Bastar was outsourced to the Salwa Judum cadres, some of them as young as 15–16 years in age. Some 5000 such cadres were made Special Police Officers (SPOs). Poorly trained, ill-equipped, and immature, some of the Salwa Judum cadres themselves looted many tribal villages. It resulted in a civil war-like situation in these regions. Later, Supreme Court ruled that this movement is unconstitutional and only states have the responsibility of maintaining law and order.
- Operation Green Hunt – It was the name used by the Indian media to describe the “all-out offensive” by the government of India’s paramilitary forces and the state’s forces against the Naxalites. The operation is believed to have begun in November 2009 along with five states in the Red Corridor. The attack on the CRPF battalion is said to be in retaliation against this operation.
- Surrender Policy – Naxal-affected states have also announced surrender policies. The Jharkhand government offered Rs 50000 to surrendered Naxalites plus a monthly allowance of Rs.2000, one acre of agricultural land, and educational and health benefits to their children. The Chhattisgarh government offered up to Rs.3 lakh for weapon surrender. The Orissa government announced Rs. 10000 for surrender, Rs.20000 for arms surrender, and Rs 2 lakh of bank loan without interest for two years. But there is no effective intelligence mechanism to identify Naxal cadres . Often, tribal youths surrender as Naxal cadres; many of them even join the Naxal movement to reap these benefits.
2. Reversing a ban
Why has Joe Biden allowed a Trump-era H-1B visa rule to expire and how will it affect Indian workers?
The story so far: Last June, the administration of former President Donald Trump, a Republican, halted the issuance of non-immigrant work visas of several types, including the skilled worker visa, or H-1B. At the time, the White House had stated that the aim of the policy was to stop foreign workers from cornering American jobs during the economic distress and consequent shortage of economic opportunities brought on by the ongoing COVID-19 pandemic. While the original order was valid until December 31, 2020, it was extended by the Trump administration to be valid until March 31, 2021. Now, the 46th and current U.S. President, Democrat Joe Biden, has allowed the ban on H-1B visa issuance to expire, potentially bringing relief to a large number of Indian nationals, especially IT workers who are prospective applicants for the visa.
What was the context for the Trump administration issuing rules tightening immigration policy?
Immigration reforms in favour of protecting U.S. jobs for Americans and favouring legal over undocumented migration was a major policy thrust for Mr. Trump even during his days campaigning for the 2016 presidential election. In April 2020, the final year of Mr. Trump’s term in office, the White House announced a 60-day halt on legal migration, effectively a ban on “green card” issuance. Then came the proclamation of June 22, which was justified by the White House on the grounds that the COVID-19 pandemic “significantly disrupted Americans’ livelihoods”, to the extent that the overall unemployment rate in the country nearly quadrupled between February and May 2020 to a little over 13%. Later, the Trump administration also announced that it would stop issuing visas for incoming students who had enrolled in programmes that were entirely online. Lawsuits filed by top U.S. universities challenging this policy resulted in the White House partially walking back on the new rules.
Was it economics or politics that prompted the ban?
It is unlikely that any significant economic benefits of the skilled-worker visa ban, in terms of protecting U.S. jobs from foreigners, could have been realised during 2020 and early 2021 given the pressures of the COVID-19 pandemic on the U.S. economy. Firstly, the ban did not apply to visa-holders already within the U.S., or those outside the country for whom a valid visa was already issued. Second, given that the ban remained in force only during the pandemic and that there had been a slowdown in economic activity during this period, U.S. firms relying on skilled foreign nationals may have anyway been unable to make new hires. Given this, it is hard to see the Trump White House’s policy as anything other than a political manoeuvre.
Mr. Biden has sought to nudge the broader immigration ethos of the U.S. back towards one that is consistent with Democratic values. In allowing the H-1B visa ban to expire, he is walking a fine line between restoring the inflow of skilled workers into the U.S., a source of productivity-increase for its labour force, and not being seen as overly aggressive in unwinding Trump-era immigration crackdowns. After all, around 74 million people voted for Mr. Trump in the 2020 presidential election, and they will continue to be vocal advocates for a political system that puts ‘America First’, even if their leader no longer occupies the Oval Office.
What was the economic fallout of the visa ban?
Even more than Mr. Biden, it turned out that America Inc., the employers of perhaps millions of non-immigrant foreign workers, from Wall Street to Silicon Valley, was at the vanguard of the backlash against the skilled worker visa ban. For example, Google CEO Sundar Pichai lashed out at the policy, saying at the time of its announcement, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today. Disappointed by today’s proclamation — we’ll continue to stand with immigrants and work to expand opportunity for all.” SpaceX founder and Tesla CEO Elon Musk and Apple CEO Tim Cook posted similar messages on social media.
Until now, the U.S. issued 85,000 H-1B visas annually, of which 20,000 went to graduate students and 65,000 to private sector applicants, and Indian nationals would garner approximately 70% of these. Analysts predicted that around 2,19,000 workers around the world might have been prevented from taking up work in the U.S. as a result of Mr. Trump’s visa ban.
What will be the impact of the ban’s expiry on Indian corporations?
Given that the order banning H-1B visa issuance expired on Thursday, all H-1B applicants will now be in a position to receive a visa and travel to the U.S. to begin or resume work as full-time employees or independent contractors. In time, that will lead to a steady increase in the size of the talent pool available to IT companies with U.S. operations. This would also benefit Indian IT companies with U.S. operations. The opening up of H-1B visa availability is also premised on U.S. diplomatic missions worldwide resuming new visa issuance to appropriately qualified skilled workers.
3. The big push for digital currency in China
How is legal tender issued by the central bank different from payments guaranteed by a third-party operator?
The story so far: China in February launched the latest round of pilot trials of its new digital currency, with reported plans of a major roll-out by the end of the year and ahead of the Winter Olympics in Beijing in February 2022. While several countries have been experimenting with digital currencies, China’s recent trials in several cities have placed it ahead of the curve and offered a look into how a central bank-issued digital tender may impact the world of digital payments.
How does China’s digital currency work?
Officially titled the Digital Currency Electronic Payment (DCEP), the digital RMB (or Renminbi, China’s currency) is, as its name suggests, a digital version of China’s currency. It can be downloaded and exchanged via an application authorised by the People’s Bank of China (PBOC), China’s central bank. China is among a small group of countries that have begun pilot trials; others include Sweden, South Korea and Thailand.
How is it different from an e-wallet?
Unlike an e-wallet such as Paytm in India, or Alipay or WeChat Pay, which are the two dominant apps in China, the Digital RMB does not involve a third party. For users, the experience may broadly feel the same. But from a “legal perspective”, points out Santosh Pai, an Honorary Fellow at the Institute of Chinese Studies (ICS) in New Delhi and a corporate lawyer who researches Chinese regulations, the digital currency is “very, very different”. This is legal tender guaranteed by the central bank, not a payment guaranteed by a third-party operator. There is no third-party transaction, and hence, no transaction fee.
Unlike e-wallets, the digital currency does not require Internet connectivity. The payment is made through Near-field Communication (NFC) technology. Also, unlike non-bank payment platforms that require users to link bank accounts, this can be opened with a personal identification number, Dong Ximiao, a think-tank researcher with the Asian Financial Cooperation Association, told Chinese media, which means “China’s unbanked population could potentially benefit”.
How widely is it being used in China?
Following trials launched last year shortly after the COVID-19 pandemic struck, 4 million transactions worth $300 million had used the Digital RMB, the PBOC said in November. In the latest round of trials in February to coincide with the Chinese New Year holiday, Beijing distributed around $1.5 million of the currency to residents via a lottery, with “virtual red envelopes” worth 200 RMB each (around $30) sent to each resident.
Shenzhen and Suzhou were other cities that distributed currency as part of pilot trials, which the Ministry of Commerce said will be expanded in coming months, with a wider roll-out expected before the Winter Olympics.
What are the reasons behind the push?
The trials coincided with moves by Chinese regulators to tame some of its Internet giants, including Alibaba, which is behind Alipay, and Tencent, which owns WeChat Pay. “While digital payment platforms have helped to facilitate commerce in China, they have placed much of the country’s money into the hands of a few technology companies,” said a recent report from the Center for Strategic and International Studies (CSIS). “In the fourth quarter of 2019, Alibaba controlled 55.1% of the market for mobile payments in China. Tencent controlled another 38.9%.”
A “key objective of China’s sovereign digital currency” was “to maintain financial stability should ‘something happen’ to Alipay and WeChat Pay,” Mu Changchun, the director-general of the PBOC’s digital currency institute, was quoted as saying by the South China Morning Post. Chinese regulators have also warily viewed the rise of cryptocurrencies.
The central bank-issued digital RMB will turn the logic of decentralised cryptocurrencies on its head, without the privacy and anonymity they offer, by giving regulators complete control over transactions. There are global motivations as well. “Beyond China’s borders, DCEP could help facilitate the internationalisation of the renminbi,” the CSIS report said.
Crypto-Currency or Digital Currency
- A crypto-currency is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database.
- It uses strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.
- It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
- Crypto-currencies typically use decentralized control as opposed to centralized digital currency and central banking systems.
Hues over the Bill
- The past year has seen a surge in the number of cryptocurrency investors in India and in trading volumes.
- Crypto-currency exchanges such as CoinDCX and Coinswitch Kuber have also raised early-stage funding for their operations.
- The bill may spark an end to the nascent crypto-currency industry in the country.
What were the provisions of 2019 Bill?
Definition of cryptocurrencies:
The 2019 Bill defined cryptocurrency as any information, code, number or token, generated through cryptographic means or otherwise, which has a digital representation of value and has utility in business activity, or acts as a store of value or a unit of account.
- The 2019 Bill bans the use of cryptocurrency as legal tender or currency.
- It also prohibits mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency.
- Mining is an activity aimed at creating a cryptocurrency and/or validating cryptocurrency transactions between a buyer and a seller.
In particular, the use of cryptocurrency was prohibited for:
- use as a medium of exchange, store of value or unit of account,
- use as a payment system,
- providing services such as registering, trading, selling or clearing of cryptocurrency to individuals,
- trading it with other currencies,
- issuing financial products related to it,
- using it as a basis of credit,
- issuing it as a means of raising funds, and
- issuing it as a means for investment.
Why the govt wants to ban cryptocurrencies?
Cryptocurrencies pose risks to consumers. They do not have any sovereign guarantee and hence are not legal tender.
Their speculative nature also makes them highly volatile. For instance, the value of Bitcoin fell from USD 20,000 in December 2017 to USD 3,800 in November 2018.
Risk in security
A user loses access to their cryptocurrency if they lose their private key (unlike traditional digital banking accounts, this password cannot be reset).
In some cases, these private keys are stored by technical service providers (cryptocurrency exchanges or wallets), which are prone to malware or hacking.
Cryptocurrencies are more vulnerable to criminal activity and money laundering. They provide greater anonymity than other payment methods since the public keys engaging in a transaction cannot be directly linked to an individual.
A central bank cannot regulate the supply of cryptocurrencies in the economy. This could pose a risk to the financial stability of the country if their use becomes widespread.
Since validating transactions is energy-intensive, it may have adverse consequences for the country’s energy security (the total electricity use of bitcoin mining, in 2018, was equivalent to that of mid-sized economies such as Switzerland).
4. Maintaining the inflation target at 4%
What are the implications of the Finance Ministry’s decision for monetary policy and is this approach necessary?
The story so far: On the last day of the financial year 2020-21, the Finance Ministry announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%. This is the retail inflation target that will drive the country’s monetary policy framework and influence its decision to raise, hold or lower interest rates.
Why is this important?
India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17. Many developed countries had adopted an inflation-rate focus as an anchor for policy formulation for interest rates rather than past fixations with metrics like the currency exchange rate or controlling money supply growth. Emerging economies have also been gradually adopting this approach. In adopting a target for a period of five years, the central bank has the visibility and the time to smoothly alter and adjust its policies in order to attain the targeted inflation levels over the medium term, rather than seek to achieve it every month.
What is the rate of consumer price inflation?
Terming India’s inflation trends “worrisome”, Moody’s Analytics recently pointed out that volatile food prices and rising oil prices had already driven India’s consumer price index (CPI)-based inflation past the 6% tolerance threshold several times in 2020 and that core inflation trends were rising again.
Retail inflation has remained below 6% since December 2020. However, it accelerated from 4.1% in January 2021 to 5% in February. D.K. Srivastava, chief policy adviser at Ernst and Young India, reckoned that core CPI inflation also increased to a 78-month high of 6.1% in February 2021.
While inflation headwinds remain, especially with oil prices staying high, there was some speculation that the Central government, whose topmost priority now is to revive growth in the COVID-19 pandemic-battered economy, may ease up on the inflation target by a percentage point or two. This would have given the Reserve Bank of India (RBI) more room to cut interest rates even if inflation was a tad higher. That the government has desisted from doing this and left the inflation target untouched has been welcomed by economists who believe that the new framework has worked reasonably well in keeping inflation in check over the last five years. They attribute the few recent instances when the upper target was breached to the exceptional nature of the COVID-19 shock.
What is the RBI’s position on this?
The RBI had, in recent months, sought a continuance of the 4% target with the flexible tolerance limits of 2%. The 6% upper limit, it argued, is consistent with global experience in countries that have a large share of food items in their consumer price inflation indices. Accepting inflation levels beyond 6% would hurt the country’s growth prospects, the central bank had asserted.
Why should this concern consumers?
Suppose the inflation target were to be raised to 5% with a 2% tolerance band above and below it, for consumers, that would have meant that the central bank’s monetary policy and the government’s fiscal stance may not have necessarily reacted to arrest inflation pressures even if retail price rise trends would shoot past 6%.
For instance, the central bank has been perhaps the only major national institution to have made a pitch for both the Centre and the States to cut the high taxes they levy on fuels that have led to pump prices for petrol crossing ₹100 a litre in some districts. As high oil prices spur retail inflation higher, the central bank is unhappy as its own credibility comes under a cloud if the target is breached. If the upper threshold for the inflation target were raised to 7%, the central bank may not have felt the need to seek tax cuts (yet). Thus, the inflation target makes the central bank a perennial champion for consumers vis-à-vis fiscal policies that, directly or indirectly, drive retail prices up.
5. How Asian desert dust enhances Indian summer monsoon
Dust swarms can influence moisture transport, increase precipitation, rainfall
Carl Sagan once described Earth as a ‘small speck of dust’, a seemingly insignificant tiny particle. But dust has incredible power: it is known to influence monsoons, hurricanes and even fertilize rainforests. A new study now details how dust coming from the deserts in the West, Central and East Asia plays an important role in the Indian Summer Monsoon.
The researchers also explain how the Indian Summer Monsoon has a reverse effect and can increase the winds in West Asia to produce yet more dust.
Dust swarms from the desert when lifted by strong winds can absorb solar radiation and become hot. This can cause heating of the atmosphere, change the air pressure, wind circulation patterns, influence moisture transport and increase precipitation and rainfall. A strong monsoon can also transport air to West Asia and again pick up a lot of dust. The researchers say this is a positive feedback loop.
Lead author Qinjian Jin, lecturer and academic program associate at the University of Kansas explains a new hypothesis formulated by the team to The Hindu. “Not just the dust from the Middle East [West Asia], we think the Iranian Plateau also influences the Indian Summer Monsoon. The hot air over the Iranian Plateau can heat the atmosphere over the plateau, strengthen the circulation over the deserts of the Arabian Peninsula and increase dust emission from the Middle East [West Asia].”
He explains how deserts across the globe play important roles in monsoons. “The dust aerosols from deserts in West China such as the Taklamakan desert and the Gobi Desert can be transported eastward to eastern China and can influence the East Asia summer monsoon. And in the southwest United States, we have some small deserts that influence the North African monsoon..”
When asked if anthropogenic dust from vehicles, mining, construction can influence monsoons, he explained: “Some studies have found that the anthropogenic aerosols emitted from the Indian subcontinent can decrease summer monsoon precipitation, while others found that absorbing aerosols such as dust can strengthen the monsoon circulation. However, in our study, we use the carbon model to simulate the impact of anthropogenic aerosols on India and our results showed that they can strengthen Indian summer monsoon rainfall.” The findings were recently published in Earth-Science Reviews.
Why study dust?
But why is it important to study dust? Many studies have shown that the dust emission scheme is extremely sensitive to climate change and the team writes that understanding these mechanisms and effects of dust will help understand our monsoon systems in the face of global climate change.
The team has now planned to study the minor components of desert dust aerosols. “We used to think that dust from deserts across the globe will have the same components, but we now know that different deserts have different chemical compositions and this can influence the dust’s properties. For example, we think that dust from the Middle East [West Asia] has more absorbing ability of solar radiation than dust from North Africa and this difference in absorbing ability might influence monsoon systems,” adds Dr. Jin. “We have also planned to use high spatial resolution remote sensing to identify source regions and create a better dust emission map. I would also like to study new drying lakes and how dust from them can also play a role in the monsoons.”