Why is it essential to contain domestic inflation?

(GS-III: Indian Economy and related issues)

In News:

According to former RBI Governor C Rangarajan, containing domestic inflation is critical to halting the rupee depreciation.

Details:

Inflation: It is a rise in prices, which can be translated as the decline of purchasing power over time.

Depreciation: It reduces the value of a country’s currency when compared with the currency of other countries (say $, measured by an exchange rate of the local currency wrt $).

The value of the currency and its depreciation:

The current account (export and import of goods and services) and capital account (inflow and outflow of funds) in the balance of payments are important elements to determine the value of the currency.

The value of a currency can be strong despite the high current account deficit because there is enough capital flowing from outside into the country.

Therefore, the supply of foreign currency increases not because of trade but because of the decision to invest or because of the decision to keep deposits in the country.

The main reason for the rupee depreciating in its value (against the dollar) is because of the capital account – the outflow of funds and the lack of funds coming from outside.

That is because the US Fed, with a view to controlling inflation in the US, really raised the rate of interest. Therefore, investors find the US more attractive.

Impact of depreciation of rupees:

An undervalued currency is better because it is more attractive for exports and reduces the current account deficit.

It discourages imports because the imported goods become more expensive (due to the reduction in the value of the rupee) and which leads to rising inflation.

Because India imports more than exports, the steady deterioration in the value of the rupee is not helping the economy.

So long as inflation in India is higher than the inflation in other countries, the value of the rupee will continue to depreciate.

Steps to be taken to stabilise the rupee’s exchange rate:

Must reduce inflation rate: The RBI and the government must work together to keep the inflation rate in the margins set under the inflation targeting scheme (4+/-2%).

Raising the rate of interest: It helps to control inflation while also having an impact on the value of the rupee.

Challenges ahead for India:

• Poor outlook for exports: This is mainly due to the global slowdown driven by the confluence of stubbornly high inflation, rising borrowing costs and geopolitical tensions.
• Rising risks of stagflation: Stagflation is a period when slow economic growth and joblessness coincide with rising inflation.

Some relief for the Indian economy: Resilient domestic demand and a revived investment cycle will propel the economy’s growth and create more jobs in the coming months.

Illegal wildlife trade has implications for ecosystem function and resilience

In News:

As per the United Nations Office on Drugs and Crime (UNODC), “Illegal Wildlife Trade and Climate Change: Joining the dots” Illegal wildlife trade (IWT), poses a grave risk to several plants, animals and fungi species globally, thus impacting the ecosystem functions and processes.

Details:

IWT had implications “for ecosystem function and resilience, including to the persistence of carbon stocks”.

Examples given by UNODC:

Sheesham (Timber, least concern) have some of the highest wood densities in all commercial trees, which is why they are trafficked globally, but they are important to long‐term carbon sequestration and storage.

Ecosystem Engineers:

African forest elephants (Critically Endangered) reduce above‐ground carbon through grazing and disturbance.

Rhinoceros (Near Threatened) affect the carbon cycle through soil compaction and disturbance (bioturbation). In grassland ecosystems, these factors are likely key controls on fires.

Pangolins’ (Critically Endangered) diet consists of social insects such as termites and ants, the populations of which they regulate. Notably, termites are vital decomposers, but that process also results in an estimated 1‐3% of natural global annual emissions.

T N Seshan – the man who changed the face of Indian Elections

(GS-IV: Application of Ethics/Governance)

In News:

The Supreme Court, mooting the idea of including the Chief Justice of India in the selection process for the Chief Election Commissioner, has said a person like former CEC, the late T N Seshan, “happens once in a while”.

T N Seshan’s contributions:

Electoral Reforms:

His strict commandments were – no bribing or intimidating voters, no distribution of liquor during the elections, no use of official machinery for campaigning, no appealing to voters’ caste or communal feelings, no use of religious places for campaigns, and no use of loudspeakers without prior written permission.

He also enforced the Model Code of Conduct, strictly monitored limits on poll expenses, and cracked down on several malpractices like wall graffiti.

The issuance of Voter IDs for all eligible voters came into being under his strict watch.

Ethical Values:

• Integrity: He was instrumental in rooting out many of the corrupt and unfair practices followed by political parties during elections in India.
• Transparency and Accountability: his ideas and philosophies were inclined towards transparent and accountable governance.
• Leadership Qualities: He did not bow in front of corrupt politicians and worked towards the betterment of society.

He was awarded the Ramon Magsaysay award in 1996 for his resolute actions to bring order, fairness, and integrity to elections in India, the world’s largest democracy.