GS Analyst: Daily Current Affairs

Context:

The Policy of tourism is governed by the perception that the tourism industry is the key to prosperity in a region. An important element of this perception is the underestimation of the cost of unbridled tourism for the fragile Himalayan ecology.

The Background: A Himalayan Case Study

• Violent engineering: The roads in the Himalayan regions of Uttarakhand and Himachal Pradesh were widened to provide the luxury of four-lane driving.
• Distress: Laborers and their contractors return to clear the debris on highways as all major tourist destinations in Himachal Pradesh and Uttarakhand are facing intermittent distress and closure.
• Steps for cutting down the number of tourists are hardly defined in any policy measure. Many among them are facing extraordinary circumstances — forest fires, unprecedentedly high temperatures, floods, landslides, and so on.

The current situation of Himachal and Uttarakhand Himalayas

• Tussle is between discourses: Landslides seem to have made little impact on economic planning in Himachal Pradesh and Uttarakhand. On one side is the discourse of development, tourism being central to it in the hills. On the other side is the wail of nature conservationists.
• Who cares? Across the Himalayan region, the hospitality industry does not care for the disappearance of forests or the disposal of waste, which is emptied out on the back slope, to eventually get immersed in a river.
• Rivers are the ultimate drainage: Recently, a 4 lane highway near Manali was washed out by the mighty Beas River during cloud burst event.

The Tourists personality and stereotypes

• Luxury above nature: Providing tourists luxurious access is regarded as part of hospitality, even in pilgrimage sites where difficult access was a prized value until recently.
• Irresponsible behavior: Tourists don’t seem to notice that their travel style injures the hills, if a disaster unfolds while they are on the move, they don’t associate it with their holiday plan.
• Nothing but entertainment: The stereotype can be seen with a recent event of forest fire near a hotel in Uttarakhand, when some foreign tourists started taking pictures, assuming that a fire dance was being staged to entertain them.

Context:

As per the data released by NITI Aayog for Multidimensional poverty index (MPI), shows that the poverty has declined to 15% in the year 2019-20. However, it is argued that relevance of National Sample Survey (NSS) consumption-based poverty estimates are still very important to consider than the Multi-dimensional poverty.

Facts supporting Consumption based Poverty estimation:

• Based on Tendulkar estimates: The estimates of poverty based on consumer expenditure, using the Tendulkar committee methodology show (over a seven-year period between 2004-05 and 2011-12) that the number of poor came down, but less than the MPI estimates.
• Different mechanism of interpretation: Poverty based on income or consumption is different from deprivations based on education or health.
• Deaton and Drèze (2014): It also indicates that “it is important to supplement expenditure-based poverty estimates with other indicators of living standards, relating for instance to nutrition, health, education and the quality of the environment”.

Changes in surveys for consumption estimates:

• For aggregation of correct data: Independent indicators and analytically appropriate rules of aggregation require that all of them relate to the same household. More generally, this requirement poses several data constraints.
• Lack of survey data: The survey data on consumption expenditures done in 2017-18 have not been released officially. In the absence of such data, indirect methods like Centre for Monitoring Indian Economy (CMIE) and Periodic Labour Force Survey (PLFS) data sources can be used for differing conclusions.
• Mismatches in aggregate consumption estimates: The differences in aggregate consumption estimates between National Accounts Statistics (NAS) and NSS data. These two estimates of consumption (NSS and NAS) do not match in any country;

Suggestive Measures:

• MPI data evaluation must be changed: Data collection and interpretation is different. For e.g. there is a problem with the child mortality indicator as it is for population groups and not for households.
• To supplement the results of consumption surveys: The data obtained from consumption survey must be supplemented to study the impact of public expenditure on health and education of different expenditure classes.
• Role of NSO: The National Statistical Office must study the problem and come out with possible suggestions to improve the collection of data through both routes.

Context:

NSO data, showed retail inflation accelerating to a 15-month high, comes less than a week after the Reserve Bank of India (RBI) left interest rates unchanged even as it warned of “a substantial increase in headline inflation” in the near term. 

Inflation dynamics-things to know

• Retail inflation: Also called as Consumer Price Index (CPI) inflation, it is the increase in the prices of goods and services that consumers buy for personal use. Any increase may hamper consumption.
• CPI as economic tool: CPI is used as a macroeconomic indicator of inflation, as a tool by the central bank and government for inflation targeting and for inspecting price stability, and as deflator in the national accounts.
• Headline inflation and core inflation: Change in the prices of all goods in the basket is headline and when we exclude food and fuels items from this basket (as they are volatile) we get core inflation.

What does recent Data reflects?

• Recent surge: Driven by food price component, accelerating by 11.51%, from June’s 4.55%. Besides oils and fats, the 12 basket CPI index showed year on year increase.
• Surge in staples: Cereals, with almost 10% weight in the CPI representing rice and wheat, saw prices surge 13% from July 2022 levels. Data compiled by CMIE show the sequential surge in vegetable prices was the highest in at least five years.
• Effect on common man: Prices of 18 of the 19 items in the vegetables sub-group registered appreciable sequential price gains making it for family to manage its monthly food budget. Inflation in non-food items too were a palpable (easy felt) concern. 

Concerns and Way forward:

• Spread of inflation: The 5 other broad groups on the CPI, all recorded price increases, signalling inflation is now more widely spread across the goods and services consumed in the economy. Lifting the food bill by over 12.3% for urban, while rural consumers encountered 11% food inflation.
• Impacts: Undermines broader consumption and economic growth. Optimism that current price shock is temporary, policymakers are cautious about disregarding the impact of a couple of high headline inflation readings. Concern lies in risk of inflation expectations becoming unanchored due to rapid & sustained price increases.
• Way forward: looming El Niño and uneven monsoon adds uncertainty over the supply the RBI may find an uphill task in aligning inflation to its avowed target of 4% unless all authorities act in concert. Changes in interest rates can signal the central bank's stance on controlling inflation. If the central bank raises rates to curb inflation, it sends a message that it is committed to controlling rising prices.