Back to Basics-Day-01

Core inflation

  • Also known as underlying inflation
  • A measure of inflation which excludes items that face volatile price movement, notably food and energy. 
  • It is nothing but Headline Inflation minus inflation that is contributed by food and energy commodities. 

To understand the concept in a better way we can say that food and fuel prices may go up in the short run due to some disturbance in the agriculture sector or oil economy. However, over the long term they tend to revert back to their normal trend growth. On the other hand, prices of other commodities do not fluctuate as regularly as food and fuel – as such increase in their prices could be taken relatively to be much more of a permanent nature. If this is so, then it follows logically for Central Banks to target only core inflation, as it reflects the demand side pressure in the economy. In practice too, the Reserve Bank of India (RBI) and Central Banks around the World always keep an eye on the core inflation. Whenever core inflation rises, Central Banks increase their key policy rates to suck excess liquidity from the market and vice versa. 
  • It is, therefore, a preferred tool for framing long-term policy.

Here it needs to be mentioned that, unlike core inflation, headline inflation also takes into account changes in the price of food and energy. Since food and energy prices are highly volatile, headline inflation may not give an accurate picture of how an economy is behaving. 
  • Responding to headline inflation might therefore sometimes be inappropriate as it generates excessive variability in the unemployment rate – variability that would be much more subdued when policy responds to core inflation.
  • Research has shown that headline inflation tends to revert strongly towards core inflation once the temporary fluctuation in food and energy sector stabilizes.

National Mission for a Green India (GIM)

  • The National Mission for Green India (GIM) is one of the eight Missions outlined under the National Action Plan on Climate Change (NAPCC). 
  • It aims at protecting; restoring and enhancing India’s diminishing forest cover and responding to climate change by a combination of adaptation and mitigation measures. 
  • It envisages a holistic view of greening and focuses on multiple ecosystem services, especially, biodiversity, water, biomass, preserving mangroves, wetlands, critical habitats etc. along with carbon sequestration as a co-benefit. 
  • This mission has adopted an integrated cross-sectoral approach as it will be implemented on both public as well as private lands with a key role of the local communities in planning, decision making, implementation and monitoring.

Mission Goals

  • To increase forest/tree cover to the extent of 5 million hectares (mha) and improve quality of forest/tree cover on another 5 mha of forest/non-forest lands;
  • To improve/enhance eco-system services like carbon sequestration and storage (in forests and other ecosystems), hydrological services and biodiversity; along with provisioning services like fuel, fodder, and timber and non-timber forest produces (NTFPs); and
  • To increase forest based livelihood income of about 3 million households.

Hydrocarbon Exploration and Licensing Policy (HELP)

  • A policy adopted by Government of India on 10.03.2016 indicating the new contractual and fiscal model for award of hydrocarbon acreages towards exploration and production (E&P). 
  • HELP is applicable for all future contracts to be awarded.
  • HELP replaces the present policy regime for exploration and production of oil and gas, known as New Exploration Licensing Policy , which has been in existence for 18 years.

    Objectives of HELP
    The major Guiding Principles behind HELP are to:
    • enhance domestic oil and gas production
    • bring substantial investment
    • generate sizable employment
    • enhance transparency and
    • reduce administrative discretion

Commodities Transaction Tax (CTT)

  • Commodities transaction tax (CTT) is a tax similar to Securities Transaction Tax (STT), levied in India, on transactions done on the domestic commodity derivatives exchanges. 
  • Vide Finance Act, 2016, it was stipulated that transactions carried out in a recognized commodity exchange located in an International Financial Center, where the payments are carried out in terms of foreign currency, would be exempt from the payment of CTT.
  • Like all financial transaction taxes, CTT aims at discouraging excessive speculation, which is detrimental to the market and to bring parity between securities market and commodities market such that there is no tax / regulatory arbitrage. (Futures contracts are financial instruments and provide for price risk management and price discovery of the underlying asset (commodity / currency/ stocks / interest).
  • It is therefore essential that the policy framework governing is uniform across all the contracts irrespective of the underlying to minimize the chances of regulatory arbitrage.) The proposal of CTT also appears to have stemmed from the general policy of the Government to widen the tax base.

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