1) Dizzying climb: On retail inflation.
Inflation must not be allowed to pose a threat to macro-economic stability.
GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
- The statistics department showed that food inflation fell to a 20-month low of 1.89% as vegetable prices slumped 15.84% last month. Retail inflation in rural and urban India stood at 3.23% and 5.06%, respectively.
- The latest retail inflation, the Consumer Price Index (CPI) rose by 4.06% in January, marking a deceleration for a second straight month to a 16-month low. However Inflation must not be allowed to pose a threat to macro-economic stability.
What is Retail Inflation?
- Retail inflation means the increase in prices of certain products or commodities compared to a base price. In India, retail inflation is linked to Consumer Price Index.
- When goods and services cost more than the CPI will rise over a period of time. If the CPI drops, that means there is deflation, or a steady reduction in the prices of goods and services.
It’s justifying the central bank’s accommodative monetary policy:
- Inflation appears to have cooled after having stayed stubbornly stuck above the Reserve Bank of India’s upper tolerance threshold of 6% for six months through November, helped by an appreciable softening in food prices.
- The Reserve Bank of India (RBI) in its latest monetary policy statement had said with the larger-than-anticipated deflation in vegetable prices in December bringing down headline inflation closer to the target, it is likely that the food inflation trajectory will shape the near-term outlook
- the Consumer Food Price Index reflected a gain of a mere 1.89% last month as vegetable prices saw a disinflation of 15.8% and cereal prices eased considerably for a second month in the wake of kharif crop arrivals.
- The RBI in its monetary policy statement this month, cited “the bumper kharif crop, rising prospects of a good rabi harvest, larger winter arrivals of key vegetables and softer egg and poultry demand on avian flu fears” as factors that augured well for the months ahead.
- The central bank was mindful of the risks too, especially with regard to food costs where the latest data had brought to the fore concerns over the prices of pulses and edible oils.
- While inflation in pulses and products was at 13.4%, that for oils and fats stood at 19.7%. Eggs and meat and fish two other key sources of protein both posted double-digit rates of 12.9% and 12.5%, respectively, with price gains in the former barely registering any telling impact from the avian flu outbreak.
What are the main causes of inflation?
- Inflation is a sustained rise in the general price level. Inflation can come from both the demand and the supply-side of an economy.
- It is two type, Demand-pull inflation and Cost-push inflation depend up on aggregate demand (AD and the aggregate Supply (AS) side of an economy.
- Demand-pull inflation occurs when aggregate demand (AD)is growing at an unsustainable rate leading to increased pressure on scarce resources and a positive output gap ,When there is excess demand, producers can raise their prices and achieve bigger profit margins
- Cost-push inflation occurs when firms respond to rising costs by increasing prices in order to protect their profit margins like, increase in the prices of raw materials, caused by wage increases, higher indirect taxes, Monopoly employers/profit-push inflation etc.
The worry/Challenge is the trend in input costs for multiple sectors:
- The base effect beginning to wane inflation moderated by more than 100 basis points in February 2020 to 6.58% before slowing to 5.84% in March the outlook is far from reassuring.
- The particular worry is the trend in input costs (Cost-push inflation) for multiple sectors in the real economy, including manufacturing.
- Which include from automobile manufacturers to builders, rising raw material costs are beginning to force them to pass on the impact to the end consumers, and this at a time when demand is still to gain a firm footing,
- The latest IHS Market India Manufacturing Purchasing Managers’ Index (PMI) points to the sharpest increase in purchasing costs for more than two years as ‘a lingering supply-side squeeze’ fanned inflationary pressures and manufacturers raised their product prices at the fastest pace in over a year.
- To the mix the unrelenting and dizzying climb in transportation fuel prices to newer and newer record highs in recent days and the outlook for inflation becomes distinctly darker.
- Diesel, the main fuel for freight carriage, has now exceeded ?80 per litre and is bound to feed into prices of almost everything being transported across distances from fresh produce to intermediate and finished industrial goods.
- With banks still flush with liquidity, policymakers need to maintain a strict vigil to keep inflation from resurging and posing a threat to macro-economic stability.
- The experience with successfully maintaining price stability and the gains in credibility for monetary policy since the institution of the inflation targeting framework, barring the COVID-19 period, needs to be reinforced in the coming years.
- The outlook for core inflation is likely to be impacted by further easing in supply chains; however, broad-based escalation in cost-push pressures in services and manufacturing prices due to increase in industrial raw material prices could impart upward pressure
2) Effecting a social rise, starting a political experiment.
In the DKV issue, it is unique for a community to highlight the need for social advancement in order to be delisted.
GS-1: Social empowerment, communalism, regionalism & secularism.
GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
- The Government of India tabled the Constitution (Scheduled Castes) Order (Amendment) Bill 2021 that seeks to give effect to a long-standing political demand to group seven Scheduled Caste subsects in Tamil Nadu under the heritage name ‘Devendrakula Velalar’ (DKV).
- The subsects include Devendrakulathan, Kadaiyan (excluding the coastal areas of Tirunelveli, Thoothukudi, Ramanathapuram, Pudukottai, Thanjavur, Tiruvarur and Nagapattinam districts), Kalladi, Kudumban, Pallan, Pannadi and Vathiriyan.
- These subsects have a predominant presence in south Tamil Nadu, which is a communally sensitive region. it is unique for a community to highlight the need for social advancement in order to be delisted.
The rationale demand:
- The Caste-based political parties and organisations, spearheading the demand, feel that shedding individual Dalit caste tags would help in the social advancement of the community.
- Their argument is that existing caste names were being used more in a derogatory sense to belittle the community.
- The DKVs, they insist, were prosperous wetland owners, and not oppressed sections, socially or economically. Besides, these seven Scheduled Caste subsects share similarities, culturally
- The demand for such grouping has its genesis in latter day British India when these subsects were included under the Scheduled Castes on the basis of their economic conditions.
- The voices remained feeble for long, only gaining traction in the 1990s with the emergence of influential community leaders such as K. Krishnasamy (founder, Puthiya Tamilagam) and John Pandian (founder, Tamizhaga Makkal Munnetra Kazhagam).
- Caste clashes between the Mukkulathors, an Other Backward Classes (OBC) community, and the Pallars, in the latter half of 1990s over the naming of districts and transport corporations after community leaders, led to a community consolidation.
- The community leaders placed an unusual additional demand — to delist the seven subsects from the Scheduled Castes arguing that being in the Schedule, instead of being a facilitator, served as a detriment to social advancement.
A political risk:
- The twin demands “subsects under a common title” rise by many local leaders, of grouping and exclusion from the Scheduled Castes list.
- Delisting and shuffling of castes from one reserved social class to another was fraught with political and administrative risks.
- It could not only disturb the internal sharing of the communal reservation quota pool by existing castes, but also invite objections from other communities or spur political demands for similar reclassification.
- As per Census 2011, the seven subsects constitute about 17.07% of the Scheduled Castes. In the southern districts, the concentration of their population in many constituencies would be far greater.
Steps to a review:
- The committee headed by S. Sumathi, report, “Devendrakula Velalar – Cultural and Social Patterns of Seven Sub-Communities”, was not made public, but it favoured a grouping of the subsects.
- The second committee headed by Hans Raj Verma, IAS, to make recommendations on the demand. Significantly, the government had eliminated the Vathiriyan caste from the purview of the panel as there was opposition from the community to being classified under DKV.
- In the midst of electioneering in December 2020, he announced that he would write to the Centre to classify the seven subsects (including Vathiriyan) as DKV following the Verma panel recommendation.
Amendment of Constitution (Scheduled Castes) Order, 1950:
- In accordance with the provisions of clause (1) of article 341 of the Constitution, six Presidential Orders were issued specifying Scheduled Castes in respect of various States and Union territories.
- The State Government of Tamil Nadu has proposed certain modifications in the list of Scheduled Castes, by way of grouping of seven castes, which presently exist therein as separate castes:
- It is also proposed to consequentially omit the redundant entries from the said list in view of the aforementioned grouping.
- The Registrar General of India has conveyed concurrence to the proposed.
- In order to give effect to the above changes, it is necessary to amend the Constitution (Scheduled Castes) Order, 1950 in respect of the State of Tamil Nadu.
The Picking up the gauntlet:
- The social advancement of the seven subsects including their demand to be delisted from the Scheduled Castes.
- Claiming entitlement for the exclusive use of the ‘Upper cast’ title, they see the demand for use of the same title by the Dalit subsects as “identity theft” and “cultural misappropriation”.
- They claim that the use of the ‘Upper cast’ (Vellalar) title by the subsects was a modern day inclusion by community leaders and not a historic practice.
- Its traditional stronghold, due to their backing of the DKV classification demand , for political gain not for subsects empowerment.
The Dalit concerns:
- Among the Dalits too, opinion is divided on the grouping of subsects under a common title.
- There are apprehensions that over time, this could trigger arguments as to which of the larger groups is numerically stronger, thereby clouding the larger Dalit cause.
- This section argues that Dalits as such cannot be treated as a homogeneous group considering the differences within in terms of social status and geographical identity.
- It is indeed unique for Devendrakula Velalar’ (DKV) community to have placed social advancement as priority to be delisted from the Scheduled Castes forgoing the concessions it offers.
- This would be a precedent for using anthropological study for social grouping in Tamil Nadu. Politically, though, this would remain a trapeze walk.