DAILY MAINS NEWSLETTER FOR UPSC|28 JUN 2021|RaghukulCS

Daily Mains Newsletter For UPSC
| RaghukulCS

28 June 2021 - Monday

Index

Mains Value Addition

Mains Analysis

Topic No

Topic Name

Source

1

New Delhi’s tactical half-measure on Kashmir

The Hindu

2

Will food become costlier?

Indian Express

Mains Value Addition

Future State: On Centre’s J&K outreach

SyllabusGS 3: Internal Security

Analysis: –

  • Political leaders from Jammu and Kashmir (J&K) who attended a meeting called by Prime Minister Narendra Modi on Thursday came away with a sense of optimism: restoration of Statehood is somewhere on the horizon, even if a total reversal of the withdrawal of the special status remains unlikely.
  • The meeting itself was a surprise, and came at a time when expectations of any quick resolution were very low.
  • But the fact that a spectrum of political leaders got the invitation from the Centre without any set pre-conditions had raised hopes of progress.
  • Eventually, the meeting gave reason to Kashmir’s political class to believe in possibilities that did not seem to exist just a week earlier.
  • But restoration of Statehood to J&K, which was reorganised as two Union Territories, should be the first step in the revival of the democratic political process and not the culmination of some elaborate negotiation strategy.
  • Modi described the meeting as an “important step in the ongoing efforts towards a developed and progressive J&K”.

Drones favoured tool of Pakistan-based terror outfits

Syllabus – GS 3: Internal Security

Analysis: –

  • Drones were used for the first time to drop explosive devices, triggering blasts inside the Air Force Station’s technical area in Jammu in the early hours of Sunday.
  • However, over the past two years, drones have been deployed regularly by Pakistan-based outfits to smuggle arms, ammunition and drugs into Indian territory.
  • “The Air Force Station is about 14 km from the border.
  • Although the local police suspect that the drones were flown from across the border, it is yet to be established beyond doubt.
  • High-quality explosives were apparently used,” said an official in the know of the developments.
  • According to government figures, 167 drone sightings were recorded along the border with Pakistan in 2019, and in 2020, there were 77 such sightings.

Mains Analysis

New Delhi’s tactical half-measure on Kashmir

Why in News?

More than a conflict resolution exercise, it is about setting the rules of politics and diplomacy.

Syllabus— GS 2- Centre state relations

________________________________________

Background: –

  • The meeting between the representatives of mainstream political parties in Jammu and Kashmir (J&K) and the central leadership on June 24 was at best a good beginning, and an indication of the shape of unilateral politics in J&K in the months ahead, at worst.
  • More than a conflict resolution exercise, the agenda-less meeting was more about the Bharatiya Janata Party (BJP) government setting the rules of politics in Kashmir and getting them accepted by the mainstream stakeholders in J&K.
  • To that extent, the all-party meeting, a politically clever and a tactically sound half-measure by the BJP-led central government, was definitely not a climbdown by the BJP.

Clever political move

  • Organising the all-party meeting was a clever political move by ruling government for a variety of reasons.
  • The two justifications made by the ruling government for the decisions of 2019 — ushering in a new era of development and prosperity in J&K, and rooting out terrorism from Kashmir
  • This seem to have disappeared from public memory today. There has been little development in the now Union Territory since 2019.
  • Until the India-Pakistan ceasefire of February this year, the security situation in the Kashmir Valley saw no significant improvement despite the double lockdown.
  • As for home-grown insurgency, there is no way to measure anti-India sentiments in the Union Territory given the strict security clampdown and the subsequent double lockdown.
  • Brandishing the absence of violent protests during a double lockdown as a measure of success of the 2019 decisions is methodologically erroneous.
  • The author argues that neither has the removal of special status improved the economic conditions of the general population nor has it been helpful in rooting out Pakistan-sponsored terrorism in the Valley or reducing anti-India feelings there.

Ruling party’s political gains

  • The author claims that the ruling party’s Kashmir grand strategy has hardly been a failure especially since the key objectives of its mission Kashmir were different from the stated ones.
  • By politically reaching out to Kashmir now, New Delhi has lost nothing given that both the Prime Minister and the home minister had stated several times in the past that Statehood would be returned to J&K at an ‘appropriate time’.
  • Statehood versus Article 370 was a carefully thought-out artificial choice made by the ruling government to gain advantage during future negotiations.
  • The offer of Statehood without the reunification of the State or return of special status, New Delhi would have laid down the rules of the game in Kashmir.
  • Therefore, the demands for the restoration of Statehood, and the well-timed and purposefully long-drawn-out negotiations thereof, will bury the mainstream political demand for Article 370.
  • The author further argues that , perhaps most importantly, the real gain for the ruling party is ideological.

Bilateral implications

  • Pakistan, had maintained ever since August 2019 that it would not engage in a dialogue process with India until New Delhi retracts Whether or not ruling party’s political gain vis-à-vis the Kashmiri political parties, and tactical gain over Pakistan will help root out insurgency and terrorism from Kashmir is something we will have to wait and see.
  • the Kashmir decisions of 2019.
  • Pakistan tried to internationalise what it called India’s “annexation” of Kashmir but garnered little support, and increased the heat on the LoC and inside Kashmir, again to no avail.
  • Islamabad’s stated position has evidently changed with the February 2021 ceasefire agreement on the LoC and the backchannel talks preceding it.
  • If New Delhi offers Statehood to J&K, Pakistan might be open to talks with India.
  • By offering to return Statehood to Kashmir and politically burying the issue of J&K’s special status, New Delhi has won a tactical victory over Pakistan without making any real concessions.
  • On the brighter side it has the potential to bring the two sides to the negotiating table on various outstanding bilateral issues.
  • New Delhi has clearly signalled to Pakistan how far it will go on the Kashmir question and how far it will tolerate the menace of terrorism.

The Challenges

  • The ruling government has not politically reached out to the Kashmiri dissidents.
  • It is indicative of the fact that it will want to single-handedly dictate the contours of politics in Jammu and Kashmir.
  • This will be ceding limited space to the mainstream political parties, and little space for either the dissidents or Pakistan.

 

 

Way Forward: –

Whether or not ruling party’s political gain vis-à-vis the Kashmiri political parties, and tactical gain over Pakistan will help root out insurgency and terrorism from Kashmir is something we will have to wait and see.

Question: –

A cursory glance at Jammu and Kashmir’s history would show that New Delhi’s deals with Kashmir’s mainstream politicians routinely found little favour with either the ordinary Kashmiri or the agitating Kashmiri.Discuss.

Will food become costlier?

Why in News?

Recently Brent crude prices crossed the $75-per-barrel psychological level which is highest since Oct 2018.

Syllabus—GS3: Inflation

Trends: India & World

  • The global prices of major agricultural commodities now ruling way above than their levels a year ago.
  • The UN FAO’s World Food Price Index touched 127.1 points in May, the highest since Sept 2011.
  • However, unlike fuel, the increase in global food prices is not getting reflected in Indian market prices.

In May, the Annual consumer food price index (CFPI) inflation in India is at 5% which far lower than the 39.7% year-on-year rise in the FAO-FPI for the same month.

Till 2020 Feb, the CGPI & FAO-FPI inflation rates moved in tandem, but after 2020 March, the Global food inflation crashed due to the COVID-19 pandemic.

However, In India, the Retail food inflation in India hovered around Double-digits till November but eased after, still, global foodprices are recovering.

A look back into the divergence of Inflation between India & World:

Global Scenario:

  • The spike in international food prices from Sept-Oct has been due to:
  • Demand returning with economies unlocking,
  • The above was further aided by Chinese stockpiling for building strategic reserves.
  • Dry Weather-induced production shortfalls in the West.

Indian Case:

  • But for India, has good monsoons in 2019& 2020, making it the only agricultural powerhouse not to have faced serious weather-related issues.
  • So it led to falling of food inflation from Dec with a bumper post-monsoon Kharif crop being harvested & arriving in the markets.
  • In detailed looking into domestic retail food prices break-up,
  • The retail prices have gone up largely in edible oils & pulses which India significantly imports.
  • In the edible oil segment, India imports 13-15 million tonnes every year against domestic production of a mere 7.5-8.5 mt.
  • Similarly in the Pulses case, although domestic output has risen from 15-16 mt to 22-23 mt in the last 5 years & imports have also halved to 2.5-3 mt, they still exert considerable influence on domestic prices.
  • The edible oils & pluses have witnessed the automatic transmission of prices from global to the domestic markets, but the same does not happen with other agri-commodities.
  • The relatively low food inflation in India is attributable to two main factors:
  • The munificent monsoons have endured no supply-side shortages in most crops that are predominantly produced within the country.
  • The collapse of demand from successive COVID-triggered lockdowns.
  • The closure of eateries to function halls led to food demand confined mostly to households.
  • Even that has been impacted due to many households witnessing job & income losses due to economic contraction.

 

The four determinants of future- Food Inflation in India:

  • Indian Food inflation in the coming days will be influenced by the following four key factors
  • The international prices that matter for edible oil & pluses.
  • However, the data shows that the recent peak in global prices of most commodities has reached in May.
  • At same time, edible oil prices fall started witnessing.
  • The most important factor is the Monsoon’s progress.
  • While India received 74% surplus rainfall in May, the Southwest monsoon season itself has recorded 18% above-average precipitation.
  • Which would encourage farmers to expand the production area under edible oil & pulses.
  • The production is a function of both area & yield but a great deal rests on the Southwest monsoon.
  • A 3rd Successive good monsoon will effectively put a lid on food inflation.
  • The extent of fuel cost increases being pass through to consumers.
  • Perhaps in today’s demand-constrained environment, the scope for the above is limited.
  • Because the fuel cost pass through has taken place no by revised upwards the prices paid by consumers but by lowering the prices paid to producers.
  • However, in the event of a general growth & demand revival, there is a likelihood of processors, transporters & farmers passing on the increase in fuel costs to consumers.
  • The final & most important factor is Political will.
  • Though the current regime is hawkish on food inflation in its 1st term which averaged CFPI to just 3.3% during 2014-219.
  • But the same inflation has averaged 7.4% in its 2nd term.
  • With many domestic events on the card, the govts policy aided by the above 3 factors will determine the food inflation in India in the upcoming days.

What are the implications of Rising Inflation on Indian economy?

  • Rising inflation hurts lenders & benefit borrowers.
  • Govt the biggest borrower stands to benefit as high inflation will lower the national debt load in relation to the size of the economy.
  • Recently, the real GDP growth forecast for 2021-22 has lowered from 11% to 9.5%.
  • But our nominal GDP estimate has gone up from 15% to around 16.5% due to rising WPI & CPI at 7.4% & 5.3% respectively.
  • The GDP deflator, which measures the difference between nominal & real GDP, is a weighted average of WPI & CPI.
  • Given that nominal GDP is used as a base for computing the fiscal ratios, all of these get deflated.
  • The value of past debt & debt servicing costs thus gets pared in real terms as inflation rises.
  • In other words, as the gap between growth & interest rate rises, the debt/GDP ratio falls.
  • The mounting inflation reduces purchasing power & hits private consumption also.
  • With income under stress, the impact on consumption can get magnified.
  • Also at present, this inflation is likely to hit private consumption in rural areas more than in urban areas.
  • Overall in May, food CPI at 5% was lower than non-food inflation at 7.1%.
  • This is a continuation of the pattern observed in the past 5 months where food inflation averaged at 3.5% vs. non-food inflation at 6%.
  • Lower food inflation coupled with higher non-food inflation means reduced purchasing power for farmers.
  • The last year favourable conditions for agriculture are now worsening.
  • However, in May, the food inflation is lower in rural areas vis-à-vis urban areas.
  • Last year, in a normal monsoon, a bumper crop & high food inflation in wholesale & retail markets added to rural incomes.
  • At the same, govt support through ramped-up MGNREGA & PM-Kisan allocations & record food procurement also helped in this regard.
  • But this year, even though a normal monsoon is projected but MGNREGA support is budgeted at a lower level & prices trends are not supportive for the rural population.
  • It is to be noted that with a 4% repo rate, the real rate has been negative for over a year.
  • The rising inflation reduces returns on fixed income instruments such as bank deposits that account for over 50% of households financial savings.
  • This impact had induced a shift to risker asset classes like equities that has ramifications for overall financial stability.

Way Forward

  • Inflation trends mainly input prices matter for corporate performance as well.
  • As of now, the producers are bearing a part of the burden of rising input costs, but these would be passed on in greater measure to consumers once demand recovers.
  • Since the onset of a pandemic, RBI with an objective to support growth has not intervened in high inflation.
  • But the current spell of inflation is over a high base & the continuation of the same trends will persuade RBI to focus back on inflation.
  • Hence RBI will have to closely monitor inflation trends & calibrate its policy response.
  • It is high time for RBI to stay on an accommodative stand because it is the need of the hour to consider other supply-side interventions such as cuts in excise rates on petroleum products to soften the inflation blow.
Question: –
The global oil price hike has been passed on to Indian consumers. Will that happen with food too? Currently, food inflation is relatively low in India. A look at factors that could influence what you pay in coming months. Discuss.

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