- Make farming climate proof
- Education, more than wealth, determines women’s marital age
Make farming climate proof
The retail Inflation in January has surprised everyone as it has crossed 6% upper of the Reserve Bank of India (RBI)’s threshold.
GS-III: Indian Economy (Economic Development of India, Macroeconomics, Monetary Policy, Inflation)
Dimensions of the Article:
- Key Points
- Need for making farming more resilient
- Monetary Policy Committee (MPC)
- How is Inflation Controlled?
- What is Inflation targeting?
The retail Inflation in January stood at 6.5%, once again going above the 6% upper limit of the Reserve Bank of India (RBI)’s threshold.
Wheat inflation stood at 25% in January while cereals, as a whole, saw inflation of 16%. %. Things can go in two directions as of now.
Let us consider one of the scenario:
- A bumper wheat crop and a normal monsoon eases cereal prices even as the anticipated weakening of overall economic momentum reduces some pressure on core inflation numbers. Here, economic policy will have to pivot towards growth.
- The only unknown in this scenario is the economic situation and monetary policy direction in advanced economies, especially the US.
What if the things are the other way round?
- A premature heatwave, leads to sub-par yields for wheat, El Nino weakens the monsoon, and hurts the kharif output.
- Cereal prices continue to increase and trigger a wage-price spiral in the economy.
- This can build pressure on the Government can trigger it to bring down food subsidy and may even impact the capex spending in the Budget.
- Any aggressive tightening of interest rates by RBI will only add to the growth problem.
Need for making farming more resilient:
- One cannot neglect the fact that either of the above scenarios are possible.
- A caution on inflation targeting may be relevant here.
- Inflation targeting is hailed as the gold standard of prudent macroeconomic policy where the central bank manages the balance between prices and growth without the government’s intervention.
- However, the cereal price driven inflationary spike shows, is that this is often beyond the abilities of monetary policy. Interest rates, in this specific case, may not be able to deflate demand for cereals.
- As the climate crisis increases uncertainty in agricultural production, India must invest in making its farming more resilient.
- Not doing this can make Inflation targeting ineffective.
Monetary Policy Committee (MPC)
- The Monetary Policy Committee of India is responsible for fixing the benchmark interest rate in India.
- The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
- The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
- They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.
- The Governor of Reserve Bank of India is the chairperson ex officio of the committee.
- The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC which will bring more transparency and accountability in fixing India’s Monetary Policy.
- The monetary policy are published after every meeting with each member explaining his opinions.
- The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
- Key decisions pertaining to benchmark interest rates used to be taken by the Governor of Reserve Bank of India alone prior to the establishment of the committee.
- The Governor of RBI is appointed and can be disqualified by the Government anytime.
How does the MPC target inflation?
- Every two months, the Reserve Bank’s MPC has a review meeting where they discuss the likely inflation and growth estimates over the coming months.
- Based on this review, the MPC targets inflation using the policy rate, or the repo rate. When inflation is higher than the inflation target set by the central bank, then the MPC must increase the repo rate. On the other hand, when the actual inflation is lower than the target, the MPC could decrease the repo rate. The
- MPC looks at consumer price inflation (CPI) as the inflation target that it must keep between 2% and 6%.
How is Inflation Controlled?
There are broadly two ways of controlling inflation in an economy:
- Monetary measures and
- Fiscal measures
- The most important and commonly used method to control inflation is monetary policy of the Central Bank (RBI in India).
- Most central banks use high interest rates as the traditional way to fight or prevent inflation.
Monetary measures used to control inflation include:
- Bank Rate Policy
- Cash Reserve Ratio and
- Open Market Operations.
- Fiscal measures to control inflation include taxation, government expenditure and public borrowings.
- The government can also take some protectionist measures (such as banning the export of essential items such as pulses, cereals and oils to support the domestic consumption, encourage imports by lowering duties on import items etc.).
What is Inflation targeting?
Inflation targeting is basically a monetary policy system wherein the central bank of a country (RBI in India) has a specific target inflation rate for the medium-term and publicizes this rate.
How is Inflation Targeting done?
- Inflation targeting is done by raising or lowering interest rates based on above-target or below-target inflation, respectively.
- The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation.
Advantages of Inflation Targeting
- Inflation targeting allows monetary policy to “focus on domestic considerations and to respond to shocks to the domestic economy”, which is not possible under a fixed-exchange-rate system.
- Transparency is another key benefit of inflation targeting. Central banks in developed countries that have successfully implemented inflation targeting tend to “maintain regular channels of communication with the public”.
- An explicit numerical inflation target increases a central bank’s accountability, and thus it is less likely that the central bank falls prey to the time-inconsistency trap. This accountability is especially significant because even countries with weak institutions can build public support for an independent central bank.
Disadvantages of Inflation Targeting
- There is a propensity of inflation targeting to neglect output shocks by focusing solely on the price level.
- Leading economists argue that inflation targeting would maintain or enhance the transparency associated with a system based on stated targets, while restoring the balance missing from a monetary policy based solely on the goal of price stability, thus neglecting other factors of an economy as well.
-Source: The Hindustan Times
Education, more than wealth, determines women’s marital age
The Assam government is cracking down on child marriage and has registered over 4,000 cases just this year alone.
GS II: Polity and Governance
Dimensions of the Article:
- Education, a key determinant of women’s marital age
- Wealth of a household
- Caste and Location
- Laws Governing Marriage in India
- Schemes/Policies to stop girl child marriage
Education, a key determinant of women’s marital age:
- Data from NFHS5 show that the more educated a woman, the higher her negotiating power about when she wants to get married.
- Interestingly, this is not a recent phenomenon. Data suggest that for decades now, better educated women have had more of a say on when they should get married.
- The recent crackdown of the Assam government on child marriage is a welcoming step, but addressing the root cause of the problem-limited access to education among women-needs to be addressed.
- A recent survey compiled in the following table shows that education has long been a controlling factor in deciding a woman’s marital age.
Wealth of a household:
- The above analysis is not true when it comes to the wealth of the Household.
- It has recently gained relevance as a controlling factor in deciding a woman’s marital age.
- Among older generations, even wealthier families married women at a younger age.
- Though wealth has recently gained relevance, education continues to be the dominant controlling factor of the two.
Caste and Location:
- Caste and location also play a major role.
- As indicated in the Table 2, the median marriage age among SC/ST/OBC women was below 20 even among younger generations, while that of non-SC/ ST/OBC women crossed 20.
- Also, the negotiating power of urban women has improved at a higher pace than that of rural women.
A similar analysis for men as shown in the table 3 and 4 shows that education was not as dominant a factor in pushing up their median marriage age as it was in the case of women.
The median age of marriage among men was above the legal age of 21 across all background characteristics, whereas the median marriage age was below 18 among women across categories.
Laws Governing Marriage in India
Child Marriage Prohibition Act (PCMA)
- The Prohibition of Child Marriage (Amendment) Bill, 2021 was proposed to increase the minimum age of marriage for women from 18 to 21 years.
- The bill has been referred to a parliamentary standing committee and has received three extensions for submission of its report.
Minimum Age of Marriage for Women
- The National Commission for Women (NCW) filed a petition to make the minimum age of marriage for Muslim women equal to that of other religious groups.
- The NCW petition states that the minimum age of marriage for a man is 21 years and for a woman is 18 years under various acts such as the Indian Christian Marriage Act, 1872, Parsi Marriage and Divorce Act, 1936, Special Marriage Act, 1954, and Hindu Marriage Act, 1955.
- The petition points out that under Muslim personal law, persons who have reached puberty, or the age of 15 years, are eligible to get married, while they are still minors.
Supreme Court Request for Government Response
- The Supreme Court asked the government to respond to the NCW petition regarding the minimum age of marriage for Muslim women.
- The NCW and the National Commission for Protection of Child Rights raised the question whether personal law can override statutory provisions of the Protection of Children from Sexual Offences (POCSO) Act and other laws.
Schemes/Policies to stop girl child marriage:
- Sukanya Samriddhi Yojana (SSY) – SSY was started in 2015 to help girls.
- It encourages parents to invest and save money for their daughter’s future education and wedding costs.
- Balika Samriddhi Yojana – The Balika Samriddhi Yojana is another programme run by the central government to help girls from poor families.
- This plan makes sure that girls get into and stay in elementary and secondary schools.
- It tries to help a girl’s child do well in life and gives them a better education.
- Beti Bachao Beti Padhao is the most popular programme for helping girls.
- This plan is a way to honour girls. Its name, Save the Girl Child, Educate the Girl Child, means exactly what it says. It believes in empowering women and making an environment where everyone can do that.
- The goal of this plan is to keep girls safe before and after they are born.
-Source: The Hindu