VIASACADEMY | IAS Online Coaching | upsc live classes

India CPI Inflation Rate 2020

Why in News

Recently, the inflation data for the month of August 2020 was released. The inflation data includes retail inflation and wholesale inflation data.

  • The retail inflation is measured by the Consumer Price Index (CPI).
  • The wholesale price-based inflation is measured by Wholesale Price Index (WPI).

Key Points

  • Retail inflation growth across the country eased to 6.69 per cent in the month of August, the data released by the Ministry of Statistics & Programme Implementation (MoSPI) showed.

    The retail inflation which is measured by the Consumer Price Index (CPI) for the month of July was also revised to 6.73 per cent from 6.93 per cent. Last month too, the government had revised the CPI data for June to 6.23 per cent from 6.09 per cent.

    Prior to June’s data, the government had not released the headline retail inflation data in April and May. However, in April, it had revised the CPI data for the month of March to 5.84 per cent from 5.91 per cent.

    The retail inflation has grown beyond the Reserve Bank of India’s (RBI) upper margin of 6 per cent. The government has mandated the Indian central bank to keep inflation within the range of 4 per cent with a margin of 2 per cent on either side.

    The central bank in its bi-monthly monetary policy meeting last month had kept its key interest rates on hold even as it vowed to keep policy sufficiently loose to help revive the coronavirus-battered economy.

    The Consumer Food Price Index (CFPI) or the inflation in the food basket eased to 9.05 per cent in the month of August. Also, the CFPI for July was revised to 9.27 per cent from 9.62 per cent, the data revealed.

    The growth in retail inflation was primarily due to a rise in meat and fish prices that saw a 16.50 per cent on-year rise in August. Apart from meat and fish segment, the pulses and products segment saw a rise of 14.44 per cent, while that of oils and fats rose 12.45 per cent and spices prices gained 12.34 per cent. The vegetables segment also witnessed a rise of 11.41 per cent.

Inflation

  • Inflation refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc.
  • Inflation measures the average price change in a basket of commodities and services over time.
  • Inflation is indicative of the decrease in the purchasing power of a unit of a country’s currency. This could ultimately lead to a deceleration in economic growth.
  • However, a moderate level of inflation is required in the economy to ensure that production is promoted.
  • In India, inflation is primarily measured by two main indices — WPI (Wholesale Price Index) and CPI (Consumer Price Index) which measure wholesale and retail-level price changes, respectively.

Consumer Price Index

  • It measures price changes from the perspective of a retail buyer. It is released by the National Statistical Office (NSO).
  • The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use.
  • The CPI has several sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.
  • Four types of CPI are as follows:
    • CPI for Industrial Workers (IW).
    • CPI for Agricultural Labourer (AL).
    • CPI for Rural Labourer (RL).
    • CPI (Rural/Urban/Combined).
    • Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the National Statistical Office (NSO) in the Ministry of Statistics and Programme Implementation.
  • Base Year for CPI is 2012.
  • The Monetary Policy Committee (MPC) uses CPI data to control inflation.

Wholesale Price Index

  • It measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses.
  • Published by the Office of Economic Adviser, Ministry of Commerce and Industry.
  • It is the most widely used inflation indicator in India.
  • Major criticism for this index is that the general public does not buy products at wholesale price.
  • The base year of All-India WPI has been revised from 2004-05 to 2011-12 in 2017.

CPI vs. WPI

  • WPI, tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.
  • WPI does not capture changes in the prices of services, which CPI does.
  • In April 2014, the RBI had adopted the CPI as its key measure of inflation.

India’s Position Shift on Taliban

India has signaled a shift in its position on engaging with the Taliban by participating in the commencement ceremony of Intra-Afghan talks between the Afghanistan government and the Taliban in Doha, Qatar.

Key Points

  • The Indian presence at the Intra-Afghan peace talks indicates that it has changed its position given the ground reality in Afghanistan and the changing power structure in Afghanistan.
  • USA's withdrawal has given Pakistan a major role to play in Afghanistan directly or indirectly through its proxies.
  • However, some experts were of the opinion that India chose to attend the ceremony because the Afghan government was also at the table.
  • India still does not recognise the Taliban.

Background:

  • The USA signed a deal with the Taliban that paved the way towards a full withdrawal of USA troops from Afghanistan and also represent a step towards ending the 18-year-war in Afghanistan.
  • The peace deal was expected to kick-off two processes- a phased withdrawal of US troops and an ‘intra-Afghan’ dialogue.
  • The deal is a fundamental step to deliver a comprehensive and permanent ceasefire and the future political roadmap for the Afghanistan peace process.
  • India’s Interests in Afghanistan:
    • India has a major stake in the stability of Afghanistan. India has invested considerable resources in Afghanistan's development. E.g. the Afghan Parliament, the Zaranj-Delaram Highway, Afghanistan-India Friendship Dam (Salma Dam) among others.
    • Afghanistan is the gateway to Central Asia.

  • Issues Involved:
    • India is concerned about the Taliban’s links with Pakistan’s ISI and efforts by the latter to use the Haqqani network to target India’s interests in Afghanistan.
      • India’s Afghanistan policy continues to be assessed vis-a-vis Pakistan, which opposes any security role for India in Afghanistan and sees India’s presence there as detrimental to its interests.
    • Taliban also has link with Jaish-e-Muhammad (JeM) and Laskar-e-Toiba (LeT) who are behind various terrorist activities against India.
    • India still does not recognise the Taliban. However, if it considers the option of entering into direct talks with the Taliban, it would constitute a major departure from its consistent policy of dealing only with recognised governments.

Way Forward

  • India needs to re-evaluate its decisions and be more omnidirectional in its approach to deal with all forces that are central to the future of Afghanistan.
  • The changing political and security situation requires India to be more open to adapting its maximalist position and starting a dialogue with the Taliban.

Global Innovation Index 2020

Why in news 
Global Innovation Index (GII) 2020 was recently released. 
Released by: World Intellectual Property Organization (WIPO).
Key takeaways 
India’s rank: 48th
India has climbed 4 spots. 
With this, India ranked in the top 50 countries for the first time in the Global Innovation Index.
World’s most-innovative economies: (1) Switzerland, (2) Sweden, (3) USA, (4) UK and (5) Netherlands.
India ranks in the top 15 in indicators such as ICT services exports, government online services, graduates in science and engineering and R&D-intensive global companies.
India is the lower middle-income economy with the highest innovation due to universities like IIT Delhi and Bombay, IIS Bengaluru and other top scientific publications.
How are countries analysed
A total of 131 countries were analysed under the GII before arriving at the rankings. The metrics include institutions, human capital and research, infrastructure, market sophistication and business sophistication, knowledge and technology outputs and creative outputs. Meanwhile, an official statement said WIPO had also accepted India as one of the leading innovation achievers of 2019 in the central and southern Asian region, as it has shown a consistent improvement in its innovation ranking for the last five years. "The consistent improvement in the global innovation index rankings is owing to the immense knowledge capital, the vibrant startup ecosystem, and the amazing work done by the public & private research organization," the GII statement said. It further said bodies like the Department of Science and Technology, Department of Biotechnology and Department of Space have played a pivotal role in enriching the national innovation ecosystem
Niti Aayog's contribution
The GII statement mentioned that Niti Aayog has been working tirelessly to ensure optimisation of national efforts in this direction by bringing policy-led innovation in different areas such as electric vehicles, biotechnology, nanotechnology, space and alternative energy sources.
India Innovation Index
The India Innovation Index, which was released last year by Niti Aayog, has been widely accepted as a major step in the direction of decentralisation of innovation across all states of the country, the GII statement said. "The call for Aatma Nirbhar Bharat by the Prime Minister could only be realized if India punches above its weight class and compete with global superpowers in developing scientific interventions. "It is time that India brings a paradigm shift and aims to be in the top 25 countries in the next global innovation index rankings," it added.