GS PAPER II NEWS

India-European Union FTA

Why in News

As India and the European Union (EU) prepare to resume formal negotiations for a proposed Free Trade Agreement (FTA) after a gap of eight years, both the parties could focus on “low-hanging fruit” first, before switching to contentious matters that had hampered talks earlier.

Key Points

  • The idea is to first try and forge consensus where it’s easy to achieve this. Even if both the sides can hammer out an early-harvest deal before a full-fledged FTA, that would be an encouraging sign.
  • Government officials are also studying the EU’s recent investment agreement with China and its FTA with Vietnam for meaningful negotiations.
  • After 16 rounds of talks between 2007 and 2013, formal negotiations for the FTA were stuck over stark differences, as the EU insisted that India scrap or slash hefty import duties on sensitive products such as automobiles, alcoholic beverages and cheese, among others.
  • India’s demand included greater access to the EU market for its skilled professionals, which the bloc was reluctant to accede to. Since its pull-out of the Beijing-dominated RCEP trade negotiations in November 2019, India has been seeking to expedite talks with key economies. But it has made it clear that any such agreement will have to be “fair” and “balanced”.
  • Since 2013, though, the situation has changed dramatically with Brexit, and the attractiveness of the EU as a large market has somewhat eroded. Nevertheless, it still remains an important export destination for India.
  • The EU, including the UK, was India’s largest destination (as a bloc) in FY20, with a 17% share in the country’s overall exports. Importantly, the UK accounted for 16% of India’s $53.7-billion exports to the EU in FY20.
  • The need for innovative solutions to break any potential logjam on critical issues highlighted at a virtual interaction organized by the Trade Promotion Council of India.

India-European Union Relations

  • Relations between the European Union and the Republic of India are currently defined by the 1994 EU-India Cooperation Agreement.
  • The EU is a significant trade partner for India and the two sides have been attempting to negotiate a free trade deal since 2007.
  • Indo-EU bilateral trade stood at US$104.3 billion in the financial year 2018–19.
  • The EU is India’s largest trading partner and India is the EU’s 9th largest trading partner with 2.4% of the EU’s overall trade.
  • India’s exports to the EU also grew steadily from €22.6 billion in 2006 to €45.82 billion in 2018, with the largest sectors being engineering goods, pharmaceuticals, gems and jewellery, other manufactured goods and chemicals.

Free-Trade Agreement

  • A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them.
  • Under a free trade policy, goods and services can be bought and sold across international borders with negligible government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

GS PAPER II

GS PAPER II Food schemes for migrant labourers

Why in News

The Centre informed the Supreme Court that the states and Union Territories have purchased nearly 3.7 lakh tones of foodgrains at concessional rates from the Food Corporation of India under ‘National Food Security Act’.

Key Points

  • The Supreme Court asked the centre about the explanation of how the food will reach to the migrant labourers without ration card.
  • The centre has placed its record details about the schemes that feed the migrants, poor and badly affected people by COVD-19 pandemic.
  • Besides the purchase of grain by the states and the UTs under the ‘Open Market Sales Schemes (OMSS)’ in 2021-22.
  • NGOs and charitable organisations purchased 421 tons of food commodities. They run kitchens for non-card migrant and poor peoples.
  • The Union of India committed to making sufficient foodgrains available to the states at highly subsidized prices under the government schemes to tide over difficulty of food security during current crisis.

National Food Security Act (NFSA)

  • It was enacted in 2013 by an Act of the Parliament.
  • The National Food Security Act 2013 aims to provide subsidized food grains to the needy one.
  • It includes the Midday Meal Scheme, Integrated Child Development Services scheme and the Public Distribution System.
  • The act also recognizes maternity entitlements.
  • The Midday Meal Scheme and the Integrated Child Development Services Scheme are universal in nature whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).

Open Market Sales Schemes (OMSS)

  • OMSS is the selling of food grains by Government at predetermined prices in the open market.
  • It enhances the supply of grains during the lean season and thereby to moderate the general open market prices especially in the deficit regions.
  • For transparency in operations, the Corporation has switched over to e- auction for sale under Open Market Sale Scheme (Domestic).

GS PAPER II

North Atlantic Treaty Organization (NATO)

Why in News

NATO leaders declared China a constant security challenge and stated that the Chinese are working to undermine global order, a message in sync with the USA President’s efforts to get allies to speak out with a more unified voice against China’s trade, military and human rights practices.

Key Points

  • In a summit statement, the leaders said that China’s goals and “assertive behaviour present systemic challenges to the rules-based international order and to areas relevant to alliance security.”
  • The new Brussels communiqué states plainly that the NATO nations “will engage China with a view to defending the security interests of the alliance.” But as the USA President faced with the G-7 communiqué, some allies bristled at the NATO effort to speak out on China.
  • The alliance also updated Article 5 to offer greater clarity on how the alliance should react to major cyber-attacks — a matter of growing concern amid hacks targeting the U.S. government and businesses around the globe by Russia-based hackers.
  • Beyond extending the potential use of the Article 5 mutual defence clause to space, the leaders also broadened the definition of what might constitute such an attack in cyberspace, in a warning to any adversary that might use constant low-level attacks as a tactics.

North Atlantic Treaty Organization (NATO)

  • North Atlantic Treaty Organization (NATO) is a military alliance established by the North Atlantic Treaty, which is also called the Washington Treaty.
  • It was established on 4th April, 1949, which sought to create a counterweight to Soviet armies stationed in central and Eastern Europe after World War II.
  • Originally, it was established with Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, the United Kingdom, and the United States.
  • Later, the organization joined by the following countries:
  • Greece and Turkey (1952); West Germany (1955; from 1990 as Germany); Spain (1982); the Czech Republic, Hungary, and Poland (1999); Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia (2004); Albania and Croatia (2009); Montenegro (2017); and North Macedonia (2020).
  • France withdrew from the integrated military command of NATO in 1966 but remained a member of the organization; it resumed its position in NATO’s military command in 2009.
  • The heart of NATO is expressed in Article 5 of the North Atlantic Treaty, in which the signatory members agree that: an armed attack against one or more of them in Europe or North America shall be considered an attack against them all; and consequently they agree that, if such an armed attack occurs, each of them, in exercise of the right of individual or collective self-defense recognized by Article 51 of the Charter of the United Nations, will assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.
  • NATO invoked Article 5 in 2001 for the first time, after the September 11 attacks by the Saudi Arabian millionaire Osama bin Laden destroyed the World Trade Center in New York City.

GS PAPER II

UN ‘High-Level Dialogue on Desertification, Land degradation and Drought’

Why in News

The Prime Minister of India delivered a keynote address at the UN “High-Level Dialogue on Desertification, Land Degradation and Drought” via video conference.

Highlights of the UN ‘High-Level Dialogues

  • The Prime Minister spoke at the Opening Segment in his capacity as the President of the 14th Session of the Conference of Parties of United Nations Convention to Combat Desertification (UNCCD).
  • Terming land as the fundamental building block for supporting all lives and livelihoods, Prime Minister called for reduction of the tremendous pressure on land and its resources.
  • The Prime Minister listed steps taken by India to deal with the land degradation issue. India has taken the lead to highlight land degradation issues at international forums.
  • The Delhi Declaration of 2019 called for better access and stewardship over land, and emphasised gender-sensitive transformative projects.
  • In India, over the last 10 years, around 3 million hectares of forest cover has been added. This has enhanced the combined forest cover to almost one-fourth of the country’s total area.
  • India is on track to achieve its national commitment of Land degradation neutrality.
  • India is also working towards restoring 26 million hectares of degraded land by 2030. This would contribute to India’s commitment to achieve an additional carbon sink of 2.5 to 3 billion tonnes of carbon dioxide equivalent.
  • The Prime Minister gave example of the Banni region in Rann of Kutch in Gujarat to illustrate how restoration of land can start a virtuous cycle of good soil health, increased land productivity, food security and improved livelihoods.
  • In Banni region, land restoration was done by developing grasslands, which helped in achieving land degradation neutrality.
  • It also supports pastoral activities and livelihood by promoting animal husbandry.
  • In the spirit of South-South cooperation, India is assisting fellow developing countries to develop land restoration strategies.
  • A Centre of Excellence is being set up in India to promote a scientific approach towards land degradation issues.
  • It is mankind’s collective responsibility to reverse the damage to land caused by human activity.

United Nations Convention to Combat Desertification (UNCCD)

  • The United Nations Convention to Combat Desertification (UNCCD) is a Convention to combat desertification and mitigate the effects of drought through national action programs that incorporate long-term strategies supported by international cooperation and partnership arrangements.
  • The United Nations Convention to Combat Desertification (UNCCD) was adopted in 1994, is the sole legally binding international agreement linking environment and development to sustainable land management.
  • It addresses specifically the arid, semi-arid, and dry sub-humid areas, known as the drylands, where some of the most vulnerable ecosystems and peoples can be found.
  • Parties to the Convention meet in Conferences of the Parties (COPs) every two years, as well as in technical meetings throughout the year, to advance the aims and ambitions of the Convention and achieve progress in its implementation.
  • To help publicise the Convention, 2006 was declared “International Year of Deserts and Desertification” but debates have ensued regarding how effective the International Year was in practice.

GS PAPER III

Wholesale Price Index (WPI)-based inflation

Why in News

The Wholesale Price-based Inflation accelerated to a record 12.94% in May, on account of rising prices of crude oil, manufactured goods and a low base of last year.

Key Points

  • In May 2021, WPI inflation declined up to 3.37% and in April 2021, WPI inflation hit double digit at 10.49%.
  • This is the fifth consecutive month of uptick seen in the Wholesale Price Index (WPI)-based inflation.
  • The annual rate of inflation on monthly WPI basis was 12.94 per cent for May 2021 as compared to (-) 3.37 per cent in May 2020.
  • The high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared to the corresponding month of 2020.
  • Inflation in fuel and power basket spiked to 37.61% during May, against 20.94% in April, amid hardening of global commodity prices.
  • In manufactured products, inflation stood at 10.83% in May, against 9.01% in the previous month.
  • Inflation in food articles eased marginally to 4.31% in May, even as onion prices spiked.
  • Inflation in onion stood at 23.24 per cent in May, against (-) 19.72 per cent in April.
  • The core-WPI inflation (manufactured non-food products) hardened sharply to a series-high 10 per cent in May 2021, with a broad-based uptrend across most sub-sectors.
  • The continued rise in global crude oil prices, a weaker rupee and the upward revision in domestic fuel prices remain risk factors for the upcoming WPI print.
  • RBI pegged retail inflation at 5.1 per cent in this fiscal ending March 2022, with upside risks from higher commodity prices and re-emergence of higher supply constraints amidst the current phase of lockdowns.

Inflation

  • In a simple sentence, inflation is the decline in the purchasing power of currency over a duration time.
  • The price of goods and services rises with the falling purchasing power and it measures the average price change in a basket of commodities and services over time.
  • It is measured in percentage.
  • Inflation is measured by a central government authority, which is in charge of adopting measures to ensure the smooth running of the economy.
  • In India, the Ministry of Statistics and Programme Implementation measures inflation.

Types of Inflation

  • Inflation is classified into three types:
  • Demand-Pull inflation:
  • It occurs when an increase in the supply of money and credit stimulates overall demand for goods and services in an economy to increase more rapidly than the economy’s production capacity.
  • This increases demand and leads to price rises.
  • Cost-Push inflation:
  • It is a result of the increase in prices working through the production process inputs.
  • When additions to the supply of money and credit are channelled into commodity or other asset markets and especially when this is accompanied by a negative economic shock to the supply of key commodity, costs for all kind of intermediate goods rise.
  • Built-In inflation:
  • As the price of goods and services rises, workers and others come to expect that they will continue to rise in the future at a similar rate and demand more costs/wages to maintain their standard of living.
  • Their increased wages result in higher cost of goods and services, and this wage-price spiral continues as one factor induces the other and vice-versa.

Impact of Inflation

  • The purchasing power of a currency unit decreases as the commodities and services get dearer.
  • It also impacts the cost of living in a country. When inflation is high, the cost of living gets higher as well, which ultimately leads to a deceleration in economic growth.
  • A certain level of inflation is required in the economy to ensure that expenditure is promoted and hoarding money through savings is demotivated.
  • As money generally loses its value over time, it is important for people to invest the money. Investing ensures the economic growth of a country.

Causes of Inflation

  • The main causes of inflation in India are:
  • High demand and low production or supply of multiple commodities create a demand-supply gap, which leads to a hike in prices.
  • Excess circulation of money leads to inflation as money loses its purchasing power.
  • With people having more money, they also tend to spend more, which causes increased demand.
  • Spurt in production prices of certain commodities also causes inflation as the price of the final product increases. This is called cost-push inflation.
  • Increase in the prices of goods and services is also a factor to consider as the involved labour also expects and demands more costs/wages to maintain their cost of living.