1. Fleeting cheer| Fiscal measures should ensure overall consumption demand does not weaken
Context: The latest GDP estimates expectedly show that national output rebounded in Q1 of the current fiscal from the record contraction in April-June 2020, when the pandemic’s onset and the lockdown gutted the economy.
National Statistical Office data show GDP expanded 20.1% from a year earlier, as every one of the eight industries spanning the broad agriculture, manufacturing and services categories posted positive growth.
And gross value added, which aggregates output from all the eight sectors, grew by 18.8%.
The high growth is because of the base effect since the Q1-2020 saw a contraction of 24%.
Condition of the economy:
The second COVID-19 wave extracted a significant toll is evident.
With the exceptions of electricity and other utility services and the non-contact intensive services grouping of financial, real estate and professional services, all other six industries posted double-digit quarter-on-quarter contractions.
On the expenditures front, private consumption spending flattered to deceive, posting year-on-year growth of 19.3% but still shrinking by 17.4% from the preceding three months.
And most disconcertingly, government consumption expenditure, which has invariably in the past helped shore up the economy, contracted 4.8% from a year earlier and 7.6% from the previous quarter.
Restrictions removed: Most States have gradually eased their localised second wave restrictions.
Exports have been one of the bright spots as the U.S. and other western economies have ramped up vaccinations and posted economic recoveries that have underpinned demand for goods and services from India.
Manufacturing has surged almost 50% year-on-year to be just under ₹24,000 crore short of the April-June 2019 output level. Manufacturing Purchasing Managers’ Index from IHS Markit, whose August release shows the sector experienced a second straight month of increase in production.
Conclusion: With monsoon rains in deficit, agricultural output and wider rural consumption also face a likely downturn. Policy makers must remain laser focused on expediting vaccination coverage and taking fiscal measures to ensure overall consumption demand does not weaken any further.
Expected Question: What are the determining factor of Gross Domestic Product(GDP) of a nation? Analyse the role of exports in this regard. (250 words)
2. India must commit to net zero emissions| The country will need to take a stand on climate change action or risk being cast globally as an outlier
Context: With over 50% of the global economy already committed to net zero emissions by 2050 — and China committing to be so before 2060 — there is a pressure on India to take a similar pledge too.
The United Nations Climate Change Conference (COP26) in November in Glasgow is shaping up to be the most important climate meeting since the Paris Agreement in 2015.
It is squarely focused on supercharging global ambition and action on climate change, as all countries agreed to do in the historic Paris Agreement, by declaring their net zero emissions.
Over 100 countries have already committed to net zero emissions by 2050, with more expected at COP26. However, India may withhold any such commitment.
Impact on Global Scale:
Intergovernmental Panel on Climate Change (IPCC) report unequivocal on the need for urgent and stronger responses.
Events around the world underline the point — towns washed away in Germany, subways turned into storm water drains in China, forests fried in the United States & Turkey and so many more lives lost to flooding in India.
Reasons of India withholding such a commitment
Perhaps this is negotiating tactics.
Forcing world to fulfil $100bn per year commitment.
India is only country on track to achieve INDCs.
Importance of these targets for India:
India faces harmful impacts related to sea level rise, heat stress, drought, water stress and flooding, biodiversity and natural disasters.
India naturally seeks stronger influence globally: Being an outlier on the global challenge facing our generation does not support this aim. India is already the third largest emitter in the world, and is set to be the largest as the United States, China, and the European Union are all now signed up to net zero.
Diplomatic necessity: This applies not just to key relationships like with the U.S., where President Joe Biden’s administration is mainstreaming climate action into its economic, foreign and security policy, but also with much of the Group of 77 (G77) states, who are increasingly concerned to see climate action, and in multilateral groupings such as the United Nations and ASEAN-APEC.
No longer a trade-off: There is no longer a trade-off between reducing emissions and economic growth. Solar energy costs have fallen 90% in recent years, providing the cheapest electricity in India ever seen. For example, agricultural policy that does not consider adaptive approaches to maximise productivity in the face of increased flooding and drought due to climate change is derelict.
For Businesses: to take advantage of the massive opportunities arising as the global economy shifts to net zero emissions.
Investment Opportunities: Last year, investors injected over $500 billion into climate transition. Worldwide, a number of major companies that have put in place a target of reaching net zero emissions by 2050 has more than trebled in the past year.
In just the energy sector alone, an estimated $1.6 to $3.8 trillion of investment is required every year until 2050. China gets this, which is why it is investing heavily in gaining an advantage in the technologies of the new economy, be it renewable energy and storage, electric and hydrogen transport, low emissions industry, green cities or sustainable agriculture.
It is set to significantly exceed its Paris Agreement commitment of reducing the emissions intensity of its GDP by 33-35% below 2005 levels by 2030, providing ready room for higher ambition.
India is impressing the world with its leading roll-out of renewable energy and target for 450GW by 2030, linked to its leadership on the International Solar Alliance and recent national hydrogen strategy.
Indian corporates are also stepping up, with the Tata Group winning awards on sustainability, Mahindra committing to net zero by 2040 and Reliance by 2035.
Conclusion: Thus the idea of net zero emission for all is surely not a way to achieve climate Justice. Justice can only be when those who are bigger emitters per capita today and have contributed more in the past to the historic emissions, must pay more.
Expected Question: Enumerate the reasons preventing India from announcing the net zero emissions target despite global pressures (150 Words)