Oil rises as OPEC+ agree to deep cuts, U.S. stockpiles fall
OPEC+ agreed to its deepest cuts to production since the 2020 COVID pandemic, despite a tight market and opposition to cuts from the United States and others.
Reasons for the cut in production:
Fear of Recession: The 2 million-barrel-per-day (BPD) cut from OPEC+ could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago.
Rising US interest rates: mean less investment available
Stronger Dollars: means less return for petroleum-producing countries.
It would become costlier for petroleum-dependent countries including India.
Fear of rising inflation
BOP crisis may escalate for import-dependent countries with low foreign exchanges e.g. Sri Lanka
However, the real impact of a large cut would be smaller, given that some of the members are failing to reach their output quotas.
Opposition to the move:
The US will have the midterm congressional election and Joe Biden wanted US gasoline prices to be low.
Import-dependent developing and developed countries want the prices to be low to sustain economic recovery
The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organization, created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela and headquartered in Vienna, Austria
Mandate: To manage the supply of oil, set the price of oil in the world market, and avoid fluctuations that might affect the economies of both producing and purchasing countries.
Its membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
The non-OPEC countries which export crude oil are termed OPEC plus countries. E.g. Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
India is the world’s third-largest consumer of crude with 35 million barrels per day (mbpd), behind the US (21.2mbpd) and China (15.1mbpd).
India imports nearly 85% of its total crude oil consumption every year.
India’s own production has been below 700,000 barrels per day for a long time.
Iraq remains the largest supplier of Oil for India.
Indian Strategic Petroleum Reserves Ltd (ISPRL),has constructed three strategic petroleum reserves in huge underground rock caverns at Visakhapatnam (1.33 MMT) on the East Coast, and at Mangaluru (1.5MMT) and Padur (2.5 MMT) on the West Coast.
The trilemma has come under focus recently as the U.S. Federal Reserve has been raising interest rates to fight rising prices.
The impossible trinity, or the trilemma, refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders at the same time.
According to economists, any economy can choose to pursue only two out of the three policy options noted above simultaneously in the long run. The idea was proposed independently by Canadian economist Robert Mundell and British economist Marcus Fleming in the early 1960s.
As capital is largely free to move across borders with ease, the choice before policymakers is between maintaining a fixed exchange rate and pursuing an independent monetary policy.
if a country’s policymakers want their currency to appreciate, or become stronger, against foreign currencies, they cannot achieve this goal and maintain the external strength of the currency over a considerable period of time without adopting a tight domestic monetary policy stance which will weaken domestic demand.
On the other hand, if policymakers of a country choose to pursue independent monetary policy, they may not be able to maintain the foreign exchange value of their currency at the desired peg.
The Reserve Bank of India may also face the dilemma of choosing between maintaining the value of the rupee and holding on to its monetary policy independence. As the U.S. Federal Reserve has raised interest rates, there has been increasing pressure on the rupee, which has depreciated almost 10% against the U.S. dollar this year.
Report on Sustainable finance submitted to IFSCA
An expert committee headed by former environment and forest secretary C K Mishra has submitted a report on sustainable finance suggesting the development of a carbon market.
Some of the recommendations:
What is Sustainable Finance?
Sustainable finance or green finance is the set of financial regulations, standards, norms and products that pursue an environmental objective, and in particular to facilitate the energy transition.
IFSCA (est. in 2020) is a unified authority for the development and regulation of financial products, financial services and financial institutions in the Interxcnational Financial Services Centre (IFSC) in India.
Headquarters in GIFT City, Gandhinagar (Gujarat).
At present, it is the only international financial services centre in India.
Main objective: Develop a strong global connection and focus on the needs of the Indian economy as well as serve as an international financial platform for the entire region and the global economy as a whole.
The criterion for SC status
(GS-II: Parliament-Structure, functioning and conduct of business, institutions and bodies for the protection of vulnerable sections of society etc)
The Supreme Court has sought the position of the government on a petition challenging the Constitution (Scheduled Castes) Order of 1950 and including Dalit Christian under SC.
Who is included in the Constitution Order of 1950?
The Constitution (Scheduled Castes) Order of 1950: recognised only Hindus as SCs.
Amendment 1956 and 1990:
Both amendments were aided by the reports of:
Union government: In 2019 rejected the possibility of including Dalit Christians as members of SCs.
Imperial Order of 1936: Classified a list of the Depressed Classes and specifically excluded “Indian Christians” from it.
Why are Dalit Christians excluded?
The practice of “untouchability: It was a feature of the Hindu religion and its branches, not Islam or Christianity.
The Registrar General of India: It had cautioned the government that SC status is meant for communities suffering from social disabilities arising out of the practice of untouchability.
A mandate in rules for inclusion: It was framed in 1999 and requires RGI approval.
Amendment to include Buddhist converts as SCs was passed in 1990.
Clause (2) of Article 341 for inclusion: Dalits who converted to Islam or Christianity belonged to different caste groups, as a result of which they cannot be categorised as a “single ethnic group(required for inclusion)”.
Case for inclusion:
Several Independent Commission reports: They have documented the existence of caste and caste inequalities among Indian Christians and Indian Muslims.
Casteism: Even in Sikhism and Buddhism, casteism is not present and yet they have been included as SCs.
Advocate representing Dalit Christian bodies: Empirical evidence did not exist for including Sikh or Buddhist converts either and yet they were included as SCs.
Registrar General of India:
Established in 1949 under the Ministry of Home Affairs.
To develop a systematic collection of statistics on the size of the population, its growth, etc.
Later, this office was also entrusted with the responsibility of implementing of Registration of Births and Deaths Act, 1969 in the country.
It arranges, conducts and analyses the results of the demographic surveys of India including the Census of India and Linguistic Survey of India.