Indian Express EXPLAINED _ Current Affairs for UPSC _ July 2021, Week-3

  • Stagflation - Philips curve (Economy)
  • Lightning mechanism (Science & technology)
  • Europe's Climate Agenda (Environment)
  • Europe’s Climate Agenda (Environment)
Description

Current Affairs: Inflation, GDP and unemployment: How India compares with Asian peers.   | July Explained

UPSC Syllabus: Prelims: Inflation and Economic growth rates  , Mains:  Inclusive growth

Sub Theme:  stagflation | Economic growth | UPSC

The article has compared India's economy with the other peer developing economies of Asia-Pacific during the pandemic.

  1. High rates of inflation:

Current, retail inflation in the country has overshot above the government mandated limit of 6% which is much higher compared to the other Asian economies in the region.

Reasons for present high inflation are:

  1. High fuel and food inflation which together have a weight of more than 50% in CPI.
  2. Increased prices of commodities such as metals etc.
  3. Disruption in supply chain which gradually flows to the end consumer. The supply chain disruptions such as Global Chip Shortage, increase in global freight rates.
  4. High level of taxation on retail fuel by government to keep welfare measures going in the face of pandemic.
  5. Base effect: Last year, during this time crude prices went very low. However, today international crude prices are close to $70 per barrel. This has led to base effects in inflation.
  1. Contraction of GDP:

India's economy contracted by 7.6% last year due to the pandemic. However, this contraction was much larger in the Indian economy as compared to the other Asian economies.

  1. Employment Scenario:
    1. India's Labour Force Participation Rate (LFPR) contracted from 42.6% to 39.6% during the pandemic.

Labour Force Participation Rate captures the percentage of people who are in the working age group who want to participate in the workforce.

India's LFPR is already low compared to the Asian economies and further contraction of India's LFPR is not a welcome sign.

  • Low LFPR means lowers overall productivity and wellbeing because fewer people are making themselves available for economic activity.
  • High dependency ratio and more burden on the persons working
  • Low level of skill development and low female participation in workforce.
  • This is not a good signal if we want to harness our demographic dividend.
  1. High Unemployment Rate

India's unemployment rate is high despite India's low LFPR. This means, that even when only 40 persons in the working age group are looking for work, our economy is still not able to generate jobs for all.

  1. Absolute employment level

Absolute number of people employed in the economy has reduced by 5% than before the pandemic. Thus, the number of jobs in the economy has reduced by 22 million.

These numbers are more salient as mere recovery in GDP does not amount to recovery in jobs.

What is Stagflation?

Stagflation is a combination of two economic terms 'Stagnation' and 'Inflation'. It implies an economic scenario which denotes simultaneous existence of low GDP growth rates, high rate of inflation and high rate of unemployment within an economy.

Traditionally, the nature of relationship between Inflation and Unemployment was explained through the 'Philips Curve'. According to this conventional view, there is an inverse relationship between Inflation and Unemployment i.e. as the rate of inflation increases, the rate of unemployment decreases and vice-versa.

This was formulated on an assumption that higher economic growth is accompanied by increase in the prices of the goods and services leading to higher inflation. At the same time, as the economy grows, more employment opportunities are created leading to decrease in the unemployment. Thus, the Philips curve postulates that the increase in inflation translates into lower level of unemployment.

However, this view put forth through the Philips curve has been proven wrong on account of number of reasons. Firstly, as the rate of inflation increases, the unemployment within an economy may reduce only to a certain level and beyond that level, the unemployment level remains constant. This is referred to as Natural rate of unemployment and it is a combination of structural and frictional unemployment.

(Structural unemployment refers to unemployment which is caused due to mismatch between the skill set of the workers and the demand of the job wherein the skill set of the workers may not be sufficient enough to fulfill their job requirements. Such form of unemployment is caused to rapid technological advances. Frictional Unemployment refers to temporary unemployment which is caused when people switch from one job to another).

Hence, the increase in the rate of inflation would not have impact on reducing natural rate of unemployment with an economy.

Secondly, a very high rate of inflation would lead to decrease in the GDP growth rates in the long run and hence would lead to increase in unemployment. This was seen in the US economy during 1970s wherein higher rate of inflation in the long run had in turn led to economic stagnation and higher unemployment rates (Stagnation).

Hence, in order to promote economic growth and employment within an economy, the rate of Inflation has to be at moderate levels. Both zero rate of inflation and higher rates of inflation are considered to be equally bad for an economy. That is why, the Central banks across the world target to maintain a moderate of Inflation in order to promote economic growth and employment opportunities. In case of India, the RBI has been mandated to

maintain rate of Inflation at 4% which could either increase or decrease by 2%.

 

Current Affairs: Here’s how lightning strikes, and why it kills | July Explained

UPSC Syllabus: Prelims: Geography, Mains: GS Paper 1: Geography and Environment  

Sub Theme: Lightening  | UPSC

 Context: As a whole, India sees 2,000-2,500 lightning deaths every year on average. Lightning is the biggest contributor to accidental deaths due to natural causes. A few years ago, over 300 people were reported killed by lightning in just three days.

Lightning Mechanism -

Due to temperature of sun light water in the earth surface gets vaporized, the light, warm, moist air particles start moving upwards. It goes at a height of 2-7 km in the atmosphere and get cooled and condensed there and forms clouds.

As the temperature start decreasing with increasing height from earth surface the rising air reaches its dew point temperature, water vapor condenses into water droplets or ice.

The upper part of cloud becomes more condensed and ice pellets form there called graupel (soft hail) and as it’s big in size with some countable weight it starts falling downwards.

So in the same time two different movements in a cloud takes place, i.e the small ice droplets moves upwards and the graupel of cloud moves downwards. At the middle part of the cloud the rising ice crystals collide with the downward falling graupel and as a result of collision and friction the ice crystals lose electrons from it and become positively charged and the graupels acquire some extra electrons from the crystals and become negatively charged.

And then so many positively charged crystals get stored at the upper part of the cloud and the negatively charged graupels come to the lower part of the cloud. It makes the cloud bipolar, i.e a part of the cloud becomes positively charged and another part become negatively charged.

A very high potential difference get created between the earth surface and the lower part of the cloud which is highly charged. Charge has a tendency to flow towards lower potential region when any two points of different potential regions get connected by a conductor.  Here due to the extremely high electric potential difference, the air between the lower part of the cloud and the earth ground get ionized and start conducting the charges. And this is when heavy amount of charges flow from the cloud to the ground through a narrow channel and we can see the path illuminating as a Lightning bolt. The charge of the cloud flows to the ground and the cloud gets neutralized. This type of Lightning is cloud to ground.

 Thunder

Thunder sound is created by the lightning bolt when it propagate through the air of the atmosphere. As the temperature generated by lightning bolt is so high (Five times more than the temperature of sun surface) the pressure in the air around the hot lightning channel suddenly increases. It causes expansion and vibration in the air around the channel. This expansion in the air creates sonic shock wave very similar to a sonic bomb that produces loud pealing thunder sound.

 

Current Affairs: Explained: How Europe’s ambitious new climate agenda will affect businesses | July Explained

UPSC Syllabus: Prelims: International relations

Sub Theme:  Fit for 55 plan | UPSC

 Fit for 55 plan - European Union

  • The European Commission’s plan, “Fit for 55,”calls for its 27 member states to cut their output of greenhouse gases by 55% by 2030, compared with 1990 levels.
  • The US had committed to reduce emissions by 40% to 43% over the same period, 
  • Britain pledged a 68% reduction.
  • China, the world’s largest emitter, has only said it aims for emissions to peak by 2030.

 

Current Affairs: Explained: Could balloons power uncensored Internet in Cuba | July Explained

UPSC Syllabus: Prelims: Science and Technology

Sub Theme:  Project loon | UPSC

Project loon - Google

Instead of trying to extend the Internet from the ground, Loon takes to the sky via a network of balloons, traveling along the edge of space, to expand internet connectivity to rural areas, fill coverage gaps, and improve network resilience in the event of a disaster.

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