Most Recent The Hindu Editorial | Current Affairs Analysis April 12

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Fleeting relief: On slide in retail inflation  
Food prices still bite even as fresh pressures could weigh on inflation
April 15, 2024

For the first time in five months, India’s retail inflation slid below the 5% mark in March, to 4.85%. While it constituted only a marginal easing from the 5.1% recorded in February, this was the lowest pace of price rise recorded since May 2023. The average inflation of 5% clocked in the final quarter of 2023-24 is not just in line with Reserve Bank of India (RBI) projections but also the slowest in three years. For the full year gone by, consumer price rise averaged 5.4%, as the RBI had forecast — a four-year low. Core inflation, excluding energy and food prices, has been under the 4% mark for four straight months. Quantico Research estimates that overall fuel inflation in India hit a four-year low of -2.7% in March, which was the seventh straight month of disinflation in the segment. No doubt, the ₹2 per litre cuts in petrol and diesel prices and the ₹100 drop in cylinder prices have helped, though the full impact of these pre-poll steps will be seen this month. Amid these pleasant portents, two critical problems persist — food bills remain problematically high, even as overall inflation is rising for rural consumers, already hit by a weak monsoon.


Inflation, as measured by the Consumer Food Price Index, has averaged an alarming 8% through 2023-24, and 8.5% in the January to March quarter. And while some government interventions have helped check a few items’ prices and hopes of a normal monsoon this year could lift some pressure points, perhaps from July onwards, the ongoing heat waves across large parts of the country remain a threat to perishable supplies. Moreover, some key items are seeing deeply entrenched inflation trends — double-digit inflation has now been seen for five months in vegetables, 10 months in pulses and a whopping 22 months in spices. Cereals inflation picked up pace in March, breaking a seven-month moderating streak, while eggs, meat and fish are also seeing spikes. While the RBI expects inflation to cool to 4.5% this year, it is projected at 4.9% for the first quarter. A durable descent to its 4% target that has now been elusive for 54 months, remains tricky. For urban consumers, inflation eased tantalisingly close to the target in March at 4.14%, but it rose in rural India to 5.45% from 5.34% in January and February. While a prolonged phase of high prices is already hurting consumption, the resurgence in crude oil prices to a seven-month high of $90 a barrel this month, faltering hopes of interest rate cuts in the United States and the European Union, and strife-fuelled shipping cost spikes, pose fresh worries on the inflation front in the months to come.

FAQs

  1. What was India’s retail inflation rate in March 2024?
    Ans: India’s retail inflation rate slid below the 5% mark to 4.85% in March 2024.
  2. How does the current inflation rate compare to previous months?
    Ans: The rate of 4.85% represents a marginal easing from 5.1% in February and is the lowest since May 2023.
  3. What has been the average inflation rate for the final quarter of 2023-24?
    Ans: The average inflation rate was 5%, aligning with RBI projections and marking the slowest pace in three years.
  4. What is the significance of core inflation being under 4%?
    Ans: Core inflation, which excludes energy and food prices, has remained under 4% for four consecutive months, indicating stability in non-volatile sectors.
  5. How have fuel prices influenced inflation?
    Ans: Fuel inflation in India reached a four-year low of -2.7% in March, aided by cuts in petrol, diesel, and cylinder prices.
  6. What challenges persist despite the easing of inflation?
    Ans: Food bills remain high, and overall inflation is increasing for rural consumers, compounded by a weak monsoon.
  7. What is the trend in the Consumer Food Price Index?
    Ans: The index has averaged 8% through 2023-24 and 8.5% in the January to March quarter, signaling persistent food price inflation.
  8. Which food items have seen entrenched inflation trends?
    Ans: Vegetables, pulses, and spices have experienced double-digit inflation for several months, indicating deep-rooted price increases.
  9. What is the RBI’s inflation projection for the year?
    Ans: The RBI expects inflation to cool to 4.5% for the year, with a projection of 4.9% for the first quarter.
  10. What external factors could impact inflation in the coming months?
    Ans: The resurgence in crude oil prices, potential interest rate cuts in the US and EU, and increased shipping costs due to global strife could exert upward pressure on inflation.

Breach of convention: On the Ecuador-Mexico tensions 
Ecuador should stay within the limits of international laws 
Ecuador’s raid on April 5

at the Mexico embassy in Quito is a serious violation of the Vienna Convention on diplomatic relations in which nations operate their missions in foreign lands. The raid was to arrest Jorge David Glas, a former Vice-President in the administration of leftist and former President Rafael Correa, who has been sentenced for corruption. Mr. Correa, now living in Belgium, has also been convicted for corruption. Mr. Glas and Mr. Correa says the cases against them are politically motivated. But for Ecuador’s President Daniel Noboa, the cases against the former elites were part of his larger crusade against corruption. Tensions were high between the two countries after Mr. Glas took refuge in the Mexican embassy in Quito in December, a month after Mr. Noboa took office. Last week, Ecuador declared Mexico’s Ambassador Raquel Serur Make as persona non grata after Mexico’s leftist President Andrés Manuel López Obrador’s comments that were critical of Ecuador’s 2023 elections. Mexico also decided to grant asylum to Mr. Glas, which angered Ecuador. It termed the decision illegal as Mr. Glas was facing cases in the country and, soon after, sent armed police officers to the embassy to arrest him, triggering a major diplomatic crisis. Mexico, which says its sovereignty has been breached, has now moved the International Court of Justice in the Netherlands, demanding the expulsion of Ecuador from the UN.
The embassy raid comes at a time when President Noboa is facing increased criticism at home over rising gang violence. He came to power promising to tackle corruption and gang violence. Last year’s presidential election was marred by deadly violence when presidential candidate Fernando Villavicencio was assassinated during the campaign in Quito. Mr. Noboa says he stays committed to fighting gangs and restoring order in Ecuador’s cities, but his approval rating has sunk amid growing violence, especially in the coastal city of Guayaquil, which was overrun by gangs in January. The situation is so bad in Ecuador that during the Easter weekend, the country of 18 million people saw over 100 murders. Critics say Mr. Noboa is using the diplomatic crisis with Mexico to strengthen his political fortunes. But he has merely triggered a new crisis without addressing the actual one.

    Ecuadorians are set to vote in a referendum next week that would give the government increased security powers to fight gang violence. The government has to get its act together in the war against organised violence, but it should do that from within the limits of domestic and international laws. Going rogue inside the embassy of a neighbouring country in the name of fighting corruption is not going to help Ecuador in tackling the myriad challenges it is facing.

    FAQs

    1. What is the Vienna Convention on Diplomatic Relations?
      Ans: The Vienna Convention on Diplomatic Relations is an international treaty that defines a framework for diplomatic relations between independent countries. It establishes the privileges of a diplomatic mission that enable diplomats to perform their function without fear of coercion or harassment by the host country.
    2. Who is Jorge David Glas and what charges is he facing?
      Ans: Jorge David Glas is a former Vice-President of Ecuador who has been sentenced for corruption. He and former President Rafael Correa, who is also convicted of corruption, claim that the charges against them are politically motivated.
    3. What actions did President Daniel Noboa take against corruption?
      Ans: President Daniel Noboa has embarked on a larger crusade against corruption, which included the controversial raid on the Mexican embassy to arrest Jorge Glas, who had sought refuge there.
    4. Why did Ecuador declare Mexico’s Ambassador persona non grata?
      Ans: Ecuador declared Mexico’s Ambassador Raquel Serur Make as persona non grata following critical comments from Mexico’s President Andrés Manuel López Obrador about Ecuador’s 2023 elections.
    5. What was Mexico’s response to Ecuador’s actions?
      Ans: Mexico granted asylum to Jorge Glas, which led to heightened tensions and a diplomatic crisis with Ecuador. Mexico has also moved the International Court of Justice, demanding the expulsion of Ecuador from the UN.
    6. How has gang violence impacted President Noboa’s presidency?
      Ans: Gang violence has been a significant issue during President Noboa’s term, with his approval ratings dropping due to the increasing violence, especially in cities like Guayaquil.
    7. What was the outcome of the last year’s presidential election in Ecuador?
      Ans: The last year’s presidential election was marked by violence, including the assassination of presidential candidate Fernando Villavicencio.
    8. What referendum is set to take place in Ecuador?
      Ans: Ecuadorians are set to vote in a referendum that would give the government increased security powers to combat gang violence.
    9. What criticism is President Noboa facing regarding the diplomatic crisis with Mexico?
      Ans: Critics argue that President Noboa is using the diplomatic crisis with Mexico to divert attention from domestic issues and to strengthen his political position.
    10. What are the implications of the raid on the Mexican embassy for Ecuador’s international relations?
      Ans: The raid on the Mexican embassy is seen as a violation of international law, specifically the Vienna Convention, and has led to international criticism and a potential diplomatic isolation for Ecuador.

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