Editorial 1 : Acceleration foretold.
Context: If inflation is not tamed, there is risk to consumption and growth
Introduction
- November’s resurgence in headline retail inflation, while clearly not unexpected after the RBI just last week predicted a likely ‘uptick’, is a stark reminder of the risks volatile food prices pose.
Rise in Consumer price index
- While the National Statistical Office’s provisional reading of headline inflation shows the Consumer Price Index rose by 5.55% year-on-year to a three-month high, from October’s 4.87%, food price gains measured by the Consumer Food Price Index accelerated by a steep 209 basis points to 8.7% last month.
|
Consumer Price Index (CPI)
- A comprehensive tool for estimating price changes in a basket of goods and services that is representative of consumption expenditure in an economy is the Consumer Price Index.
- One of the most significant economic statistics, it provides an estimate of the cost of living and is typically based on the weighted average of commodity prices.
- The amount of inflation during a given period, or the rise in the prices of a representative basket of consumed goods, is indicated by the percentage change in this index over time.
- Four kinds of CPI are as follows:
- CPI for Industrial Workers (IW).
- CPI for Agricultural Labourer (AL).
- CPI for Rural Labourer (RL).
- CPI (Rural/Urban/Combined).
- The first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the NSO in the Ministry of Statistics and Programme Implementation.
- Consumer Food Price Inflation is a specific measure of inflation that focuses exclusively on the price changes of food items in a consumer's basket of goods and services.
- It calculates the rate at which the prices of food products consumed by the average household are increasing over time.
- CFPI is a sub-component of the broader Consumer Price Index (CPI).
|
What caused the rise?
- Propelling the upsurge in food prices were cereals and vegetables, constituents of the ‘food and beverages’ subgroup, that logged 10.3% and 17.7% inflation, respectively.
- Cereals, that account for almost one-tenth of the CPI and logged double-digit inflation for a 15th straight month, also saw a month-on-month acceleration in inflation with rice, wheat, and the coarse cereal of jowar, a rural hinterland staple, all registering palpable sequential price gains.
- Vegetable prices were back on a boil with the year-on-year inflation rate surging by almost 15 percentage points from October’s 2.8%.
- While price gains in the perishable tomato swung from two straight months of sizeable deflation to a more than 11% year-on-year rate of inflation last month, the extent of increase could be truly gauged from the fact that prices surged a steep 41% from the preceding month’s levels, as per data aggregated on the Centre for Monitoring Indian Economy’s website.
- And the key masala essentials of ginger and garlic registered more than 100% rates of inflation for the seventh and third months, respectively.
The biggest source of concern
- From the TOP or tomato, onion and potato triumvirate of India’s most widely consumed vegetables, onion prices remained the biggest source of concern as year-on-year inflation ballooned to 86%, from October’s 42% pace, and the sequential pace swelled to 48%.
- With reports that inclement weather and depleting groundwater are likely to cause a near 25% shortfall in onion output during the key rabi season, the outlook for prices of the nutrient-dense bulb moderating in the near future appears bleak, the government’s move to impose a ban on its exports notwithstanding.
Other things
- Only potato prices, which continued to remain in deflationary territory, offered some respite. Pulses and sugar are other areas of concern, with the first witnessing more than 20% inflation and the sweetener also experiencing an uptick in the pace of price gains to 6.55%.
- With sugar production also expected to take a hit due to lower rainfall, the number of supply-related challenges policymakers face to rein in price gains is rising.
Conclusion
- With the RBI having opted to refrain from raising rates for now, the onus is squarely on the government to help temper inflation, or risk suffering an erosion in broader consumption and economic growth.
Editorial 2 : A time-honoured connect that will help bridge the Gulf.
Context: Oman has a pivotal role to play in India seeking deeper engagement and collaboration in West Asia.
Introduction
- The Sultan of Oman, Sultan Haitham bin Tarik, is visiting India from December 16 on a state visit. This is his first visit to India after taking over in January 2020 following the passing of Sultan Qaboos.
- The Prime Minister, Narendra Modi, had visited Oman in February 2018 in his first visit to Oman as Prime Minister. In what proved to be a landmark visit, key agreements on trade, defence and security were agreed upon, making it a milestone in diplomatic relations between India and Oman.
Geography of Oman.
- Oman is the closest neighbour to India in the Arabian Gulf region.
- With key Omani ports abutting the coastline along the Arabian Sea as well as the Gulf of Oman leading into the Persian Gulf and towards the Gulf of Aden, Oman’s location is of utmost strategic importance to India. Along with Saudi Arabia and the United Arab Emirates (UAE), Oman completes the trio of key strategic partners of India in the Gulf region.
Strong connection with India
- The ruling family of Oman has always had a strong connection with India. Sultan Qaboos was always favourably disposed towards India and invited Indian companies and professionals to undertake projects apart from sourcing supplies from India. At the people-to-people level too, India and Oman enjoy close ties. There is a large Indian community of almost seven lakh people which has contributed to the constantly evolving vibrant relations.
During the Cold war era, and thereafter.
- During the Cold War era, and even thereafter, when the Arab world was largely ambivalent towards India and was often soft and supportive of Pakistan, it was Oman which kept its doors open to India. In a conflict-prone region, Oman has always been an island of peace.
- It has pursued a foreign policy which is based on the twin strands of moderation and mediation, including a policy of deliberate neutrality in dealing with regional issues and conflicts.
- It has carefully balanced its close relations with the western powers and the Gulf Cooperation Council (GCC) countries, with a pragmatic approach to neighbouring Iran, maintaining that the Straits of Hormuz will not be closed.
- Even during the Persian Gulf crisis in 2019, when the United States and Iran were on the brink of a military conflict, it was Oman which played a key role in diffusing tensions.
- Oman’s key role in the Iran nuclear deal in July 2015 is well documented and acknowledged too. During the GCC-Qatar diplomatic stand-off, Oman refused to join Saudi Arabia and other countries in breaking diplomatic ties with Qatar in June 2017.
- Much before the Abraham Accords were signed between Israel, the UAE and Bahrain in September 2020, Israeli Prime Minister Benjamin Netanyahu had made a surprise visit to Oman in October 2018, once again confirming the importance of Oman in the region.
India-Oman strategic partnership
- Oman is a crucial pillar of India’s West Asia policy, with their multi-faceted engagement increasingly taking on a more strategic shape in recent decades.
- The India-Oman strategic partnership was signed during Prime Minister Manmohan Singh’s visit to Oman in November 2008 and is based on twin pillars of mutual trust and shared interests. Oman was one of the few countries to have been invited by India to its G-20 presidency as a guest nation earlier this year.
Key pillars
-
- Defence and security engagement form a key pillar of this strategic partnership and are governed by a memorandum of understanding (MoU) signed in 2005.
- Oman is the first Gulf country with which all the three wings of India’s defence forces hold joint exercises. Since 2012-13, an Indian naval ship has remained on duty in the Gulf of Oman for anti-piracy operations.
- During the Persian Gulf crisis in June 2019, the Indian Navy launched ‘Operation Sankalp’ to ensure the safe passage of Indian flagged ships which most often operated off the coast of Oman.
- The MoU on Duqm Port during Mr. Modi’s visit is a historic landmark in our security cooperation, providing basing facilities, Operational Turn Round and other logistics facilities to Indian naval ships operating in the region.
- Trade and commerce forms yet another important pillar of engagement. Bilateral trade during FY2022-23 reached $12.388 billion. There are over 6,000 India-Oman joint ventures in Oman, with an estimated investment of over $7.5 billion.
- India was the second largest market for Oman’s crude oil exports for the year 2022 after China. In October 2022, India and Oman launched the Rupay debit card in Oman, a key footprint of India’s initiative of promoting digital public infrastructure (DPI) in the world.
Looking forward to increased engagement.
-
- India and Oman are looking forward to increased engagement in strategic areas such as space cooperation — an MoU on this was signed during Mr. Modi’s visit.
- The possibility of an agreement on joint exploration of rare earth metals, vital to modern electronic equipment, could add strength to the partnership.
- The proposed India-Middle East-Europe Connectivity Corridor (IMEEC) infrastructure project to link India to Europe across West Asia could also see Oman playing an important role.
- There is a proposal from the South Asia Gas Enterprise (SAGE), a private consortium based in India, to lay a 1,400 km long deep-sea pipeline from Oman to India for the transfer of gas. With IMEEC too looking at similar undersea connectivity, there could be convergence on it with Oman in the future.
India’s gateway to West Asia
- The list of convergence and shared interests is thus long and limitless. As a part of its broader global outlook and its outreach in the extended neighbourhood, India is seeking deeper engagement and collaboration in West Asia, of which Oman is an important pillar.
- Security challenges in the region have a ripple effect in India and, therefore, any instability in the region has a direct bearing on the safety and security of millions of Indians working there, India’s energy security and its steadily growing trade relations.
- Apart from being India’s oldest strategic partner in the region and closest neighbour, Oman is an integral part of all important groupings in the region; the GCC, the Organisation of Islamic Cooperation, the Arab League.
- Its ability to manage rival ideologies and power games in the region makes it vitally important to India.
Conclusion
- Both countries consider themselves as ambassadors of peace and enjoy goodwill across ideologies in the world. Oman is, therefore, India’s gateway to West Asia. And with the ongoing Israel-Hamas war testing the region to its limits, the visit of Oman’s Sultan is timely and very important for India and the region.