Editorial 1 : Dal-Roti Inflation
Introduction: Reserve Bank of India (RBI) Governor Shaktikanta Das, last week, said that headline consumer price index (CPI) inflation remains vulnerable to “recurring and overlapping food price shocks”.
What Is Inflation?
- Inflation is a rise in prices, which can be translated as the decline of purchasing power over time.
- The rate at which purchasing power drops can be reflected in the average price increase of a basket of selected goods and services over some period of time.
- The rise in prices, which is often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.
What is CPI?
- Consumer Price Index (CPI) is one of the price indices used to measure the change in the retail prices of goods and services consumed by a defined population group in a given area.
- The CPI basket covers a wide range of items which consists of 448 items in rural and 460 items in urban basket. Thus, this large basket of goods and services represents the cost of living or the utility derived by the consumers at a given level of their income, prices and tastes.
- It is an important economic indicator and is widely considered as a barometer of inflation, a tool for monitoring price stability and as a deflator in the national accounts.
- The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation compiles CPI separately for rural, urban, and combined sectors on a monthly basis.
Headline Inflation
- Headline inflation is the raw inflation figure reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics.
- Headline inflation is not adjusted to remove highly volatile figures, including those that can shift regardless of economic conditions.
- Headline inflation is often closely related to shifts in the cost of living, which provides useful information to consumers within the marketplace.
- The headline figure is not adjusted for seasonality or for the often-volatile elements of food and energy prices, which are removed in the core Consumer Price Index (CPI).
Core Inflation
- Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors.
- This measure of inflation excludes these items because their prices are much more volatile.
- It is most often calculated using the consumer price index (CPI), which is a measure of prices for goods and services.
Present status of inflation
- The latest CPI numbers for October show overall annual retail inflation at 4.87 per cent, falling for a third successive month from 7.44 per cent in July.
- Moreover, “core” CPI inflation, which excludes price rise in food and fuel, was at a 43-month-low of 4.28 per cent in October.
- And given negative fuel and light inflation (minus 0.39 per cent), it is food prices that are the problem.
- At 6.61 per cent, food inflation was higher than the general CPI inflation. Within food, however, there are volatile components such as vegetables, that are prone to seasonal supply shocks, translating into high inflation as seen for tomato in July-August and for onion more recently.
- These often self-correct with fresh crop arrivals; vegetable inflation has already plunged, from 37.4 to 2.7 per cent between July and October.
Cause for concerns to RBI and government
- It’s the more sticky components of food inflation that should really worry the RBI and the government ahead of next year’s national elections.
- These specially pertain to cereals and pulses — in other words, dal-roti. Retail cereal inflation, at 10.65 per cent, has been ruling at double-digits for 14 consecutive months since September 2022.
- It has been similarly so for five months in pulses, with the current inflation of 18.79 per cent the highest since August 2016.
- This clearly has to do with a not-too-great monsoon.
- With the post-monsoon season (October-December) rainfall turning out 26 per cent below normal so far and El Niño’s effects projected to last through the spring and beyond, one shouldn’t place too much hope on the rabi crop either.
Government’s effort and way forward
- The Narendra Modi government has managed the just-about comfortable wheat and rice stocks with the Food Corporation of India well, by restoring the original 5 kg/person/month quota for ration cardholders (from 10 kg during the Covid period) and stepping-up open market sales to cool prices.
- It must do more to augment supplies by scrapping the 40 per cent import duty on wheat and also those on yellow/white peas and chana (chickpea), now at 50-60 per cent.
Conclusion: Cutting tariffs may encounter farmer opposition, but double-digit dal-roti inflation should be a greater government concern — both economic and political.
Editorial 2 : Arms and the man and AI
Introduction: At the beginning of this month, the UN General Assembly voted to urge the international community to address the challenges presented by lethal autonomous weapons and requested the UN Secretary-General to produce a report taking into account the views of governments and civil society groups.
Regulations on AI is gaining traction across world
- Like all major technological advances, artificial intelligence poses major challenges to the world in developing responsible use in civil and military domains.
- While the discussion on promoting and regulating the civilian use of AI has gained much ground in recent years, the discourse on military uses has begun to gain international traction.
- There is a growing global sentiment, on the one hand, for a severe limitation of the military applications of AI, especially autonomous weapons that can operate without human control.
- On the other hand, major powers are already investing heavily in the accelerated development of greater autonomy, based on AI, for weapons systems.
UNGA resolution to address the challenges of lethal autonomous weapons
- 164 in favour, five against, and eight abstentions
- This is the first time a UN resolution has addressed this issue; the question of autonomous weapons will be taken up again in the next annual session of the UNGA in September 2024.
- This marked the culmination of an important phase in the campaign by human rights and arms control activists to ban autonomous weapons.
- They argue that “killer robots” violate the basic principles of international laws of war and raise fundamental ethical questions about human-machine relationships in the use of force.
What does the voting of major power to the UNGA resolution signify?
- The major military powers did not vote along similar lines on the resolution.
- The US and its allies all voted for the resolution; China abstained, and India voted against.
How USA is developing its military strength using AI
- This summer, the US sent out a naval squadron of four uncrewed ships to sail across the Pacific — from the American West Coast to Japan.
- During their transit, the ships interacted with crewed US warships operating in the Pacific.
- The US Navy has ambitious plans to build 150 uncrewed ships in the years ahead.
- The US Navy, Air Force and Army, which are acquiring several drone systems, are experimenting with combined operations with manned and unmanned systems.
- The Pentagon is also developing new institutions to fully integrate AI into defence management.
- The Chief of its Digital and Artificial Intelligence Office, set up last year, is responsible for the acceleration of the Pentagon’s “adoption of data, analytics, and artificial intelligence (AI) to generate decision advantage from the boardroom to the battlefield”.
- Earlier this month, US deputy secretary of defence, Kathleen Hicks, explained the new initiative for the Indo-Pacific, called the Replicator, to develop and deploy thousands of unmanned systems across all domains within the next two years.
- Two assumptions underline the Replicator initiative.
- One is that the US can’t match, one-to-one, China’s military advantage in mass – more men, more ships, and more missiles. What it needs instead is innovation, the capacity to outthink China and develop capabilities and doctrines that can counter PLA’s advantages.
- The other assumption is that building many small, cheap, and easily replicated autonomous systems is the right innovation to deal with China’s growing military power.
How China is modernising its military?
- Beijing has put AI at the centre of building an “intelligentised” PLA.
- It is deploying AI for various functions from inventory management, maintenance, and logistics and in developing unmanned systems for a full range of functions, including reconnaissance, surveillance, and combat.
- China’s massive industrial capacity and the state power to direct resources means it can turn out autonomous weapons faster than the US.
How USA can outwit China?
- The success of America’s asymmetric strategy, then, rests on staying well ahead of China in the development of AI and its integration into armed forces.
- The US is also trying to slow down China’s AI progress by controlling the export of high-end chips and the equipment to make them.
- It is also strengthening its technology partnerships with allies to race ahead of China.
How India comes into picture in USA-China AI war?
- For India, the negative vote at the UNGA on autonomous weapons is part of an unfolding pragmatic turn in the engagement with global issues.
- India is signalling a balanced approach to national security, ethics, and global governance in engaging with the military applications of AI.
- Given the massive military imbalance with China and the kind of challenges Delhi confronts from Beijing in both the Himalayan and maritime frontiers, AI should necessarily be an important part of India’s national defence plans.
What is way forward for India?
- To take full advantage of the US partnership in a leading sector like AI, Delhi must invest in its national capabilities.
- This is not just about building a few drone systems, but investing big in the core AI sciences, developing the full range of technological capabilities, operational military doctrines, and the institutions to effectively integrate AI into Indian defence management and armed forces.
Conclusion: India had limited success in the past in developing global governance of emerging technologies. With growing technological capabilities today, it can have a bigger say in global outcomes by working with like-minded countries on the responsible military use of AI and ensuring that humans remain in the loop when using of autonomous weapons.