Daily Mains Practice Questions 05-04-2023

KEY POINTS

·        The production cuts by OPEC countries, which account for one-third of the global oil production, will begin in May 2023 and last for the entire calendar year.

·        OPEC has said the cuts are a precautionary measure aimed at supporting the stability of oil markets.

·        Global crude oil production averaged at 100 million bpd in 2022 and is expected to hit 101.5-102 million bpd in 2023.

·        On Monday, after the crude oil exporting cartel announced production cuts, the global benchmark Brent rose by more than 5 per cent to hit $84.13 per barrel, one of the sharpest price rises in the past 10-11 months.

·        For India, this would mean higher oil import bills and this could stoke inflation if the government resumes the daily retail auto fuel price revision mechanism.

·        If the government continues to freeze retail prices, then the oil marketing companies will again witness huge under recoveries.

·        Cut in production has started impacting crude oil prices within a day of the announcement  Brent prices went up by $5 a barrel.

·        Now, the apprehension is that if crude prices continue going northward, then prices of petrol and diesel could go up as governments (Central and States) have limited room available for duty cut.

KEY POINTS

·        The backdrop for the forthcoming monetary policy committee meeting to be held this week has sharply altered since the February meeting owing to financial stability risks emanating from the US banking sector.

·        Given this backdrop, it is prudent for the Reserve Bank to decouple from the global tightening cycle and pause its rate tightening spree.

·        Private sector investments are slowly but steadily recovering and would require support from lower borrowing costs in the economy.

·        Domestically, the transmission of the RBI’s rate hikes has picked up since December, and key rates have either surpassed or reached close to the pre-pandemic five-year average.

·        Moreover, there are also limits to how much interest rates can rise before they begin to suppress growth.

·        The pricing power of firms is also getting constricted as firms may hesitate to raise prices, given its negative impact on demand.

·        On the inflation front, CPI print has continued to remain outside the RBI’s target band owing to sticky core and food inflation. With oil and other commodity prices moderating, inflation is likely to remain contained.

·        To conclude, as food inflation has played a key role in driving CPI inflation, monetary tightening alone will not be enough to tame the inflation menace.

KEY POINTS

·        Environmental destruction has been part of every country’s recipe for boosting GDP growth. But the consequence of this approach has been the relentless emission of carbon, causing runaway climate change.

·        It might also make sense to allow companies to use high-quality international carbon credits to offset up to a certain percentage of their taxable emissions.

·        Recent months have revealed the political pressures on decarbonisation: soaring energy prices led the EU to sell millions of emission permits, causing a 10% drop in carbon prices.

·        Sweden may have handled some of these political constraints as well as any by presenting the carbon tax as part of a bigger fiscal package that lowers other taxes and includes new social safety nets.

·        Communicating the idea of wins at the societal level, even in the presence of some individual producers’ losses, is vital.

·        A high enough carbon tax across China, the U.S., India, Russia, and Japan alone (more than 60% of global effluents), with complementary actions, could have a notable effect on global effluents and warming

·        India, as president at the G-20 summit this September, can play a lead role by tabling global carbon pricing in the existential fight against climate change.