21 August 2023

• Economy: An RBI State of the Economy report projected 8 per cent GDP growth for the April-June 2023 quarter. July retail inflation surged to a 15-month high of 7.44 per cent.
• BRICS: The 15th BRICS Summit was underway in Johannesburg (22-24 August). India's position was one of cautious support for consensus-based expansion.
• Clean Energy: Geopolitical factors were identified as a major risk to the clean energy transition, particularly for critical mineral supply chains.
• Infrastructure: 982 projects worth 3 lakh crore rupees were in the pipeline, with 60 per cent in infrastructure sectors.

GS area: Economy (macroeconomics)

The Reserve Bank of India's monthly State of the Economy report for July 2023 provided an update on growth and inflation.

• GDP projection: RBI projected approximately 8 per cent growth for the April-June 2023 quarter.
• Inflation alert: Retail inflation (CPI) surged to 7.44 per cent in July 2023, a 15-month high. The spike was driven by vegetable prices, particularly tomatoes.
• Tomato price crisis: Tomato prices hit record highs in July-August 2023 across India due to a combination of unseasonal rains, pest attacks, and supply chain disruptions.
• Export decline: Merchandise exports fell approximately 16 per cent in July, touching a nine-month low of 32.25 billion dollars.
• Positive signals: E-way bill volumes were robust, FMCG sales increased, and cargo at major ports rose. These indicators suggested continued economic momentum outside the export sector.
• MPC mandate: The Monetary Policy Committee is mandated to keep CPI inflation at 4 per cent with a tolerance band of plus or minus 2 percentage points. The July print of 7.44 exceeded the upper bound of 6 per cent.

Static linkage: Monetary policy, CPI, RBI functions (GS Paper 3).

GS area: International Relations

The 15th BRICS Summit was scheduled for 22-24 August 2023 in Johannesburg, South Africa. India's position on expansion was one of cautious support.

• India's view: India supported BRICS expansion in principle but was not enthusiastic about rapid or China-driven expansion. India preferred consensus-based criteria for new members.
• Expansion interest: Over 20 countries had applied or expressed interest in BRICS membership before the summit.
• China's interest: China had been the strongest advocate for expansion, seeing BRICS enlargement as a vehicle for reducing Western dominance in global institutions.
• India's concern: A larger, China-aligned BRICS could dilute India's relative weight and voice within the grouping.
• South Africa's role: As the host and current chair, South Africa prepared the modalities for expansion, including criteria for new members.

Static linkage: BRICS, multilateral organisations, India's foreign policy (GS Paper 2).

GS area: Environment (energy), International Relations

Analysts identified geopolitical fragmentation as a major risk to the global clean energy transition, particularly through its impact on critical mineral supply chains.

• Critical minerals: The clean energy transition requires large quantities of lithium, cobalt, nickel, manganese, and rare earth elements.
• Concentration risk: Mining is concentrated in a few countries (Congo for cobalt, Chile and Argentina for lithium). Processing is dominated by China.
• Trade disputes: Rising US-China trade tensions led to export controls on gallium and germanium by China (announced August 2023), both critical for electronics and defence.
• India's strategy: The Critical Minerals Mission and membership of mineral supply chain partnerships (Minerals Security Partnership with the US and partners) are India's responses.
• Investment needed: The International Energy Agency estimated trillions of dollars of investment in critical mineral supply chains are needed by 2030 to meet climate targets.

Static linkage: Critical minerals, clean energy, international trade (GS Paper 3).

GS area: Environment, International Finance

Two important conservation finance developments came together in this period.

• Gabon debt-for-nature swap: Gabon completed the largest debt-for-nature swap in Africa and the second-largest globally, at 500 million dollars. Gabon received concessional refinancing in exchange for a commitment to conserve 30 per cent of its land and ocean territory.
• Blue Bond: The swap was structured as a "Blue Bond" targeting marine conservation. Partners included Bank of America, USDFC, and The Nature Conservancy.
• Debt-for-nature swaps: A mechanism where a creditor reduces a developing country's debt in exchange for the debtor country committing to conservation spending or protected area expansion.
• India relevance: India is exploring similar mechanisms for financing its biodiversity commitments under the Kunming-Montreal Global Biodiversity Framework (target: protect 30 per cent of land and ocean by 2030).

Static linkage: Conservation finance, international environment law, biodiversity (GS Paper 3).

GS area: Economy (investment, infrastructure)

Government data on infrastructure investment showed 982 projects worth approximately 3 lakh crore rupees in the pipeline for 2022-23.

• Sector distribution: About 60 per cent of bank-funded projects were in infrastructure sectors including roads, railways, and ports.
• States leading investment: Uttar Pradesh, Gujarat, Odisha, Maharashtra, and Karnataka were the leading states for infrastructure project announcements.
• PM Gati Shakti: The National Master Plan for Multi-Modal Connectivity, launched in 2021, is the central platform for coordinating infrastructure projects across 16 ministries.
• Gross Fixed Capital Formation (GFCF): A measure of investment in fixed assets. GFCF increased from 32 lakh crore rupees in 2014-15 to 54 lakh crore rupees in 2022-23.

Static linkage: Infrastructure, investment, economic growth (GS Paper 3).

• Jal Sansads: Student-led water parliaments in over 150 schools in Jodhpur, Rajasthan. Students conduct water audits, implement rainwater harvesting, and run awareness campaigns. Teacher Sheela Asopa received the National Water Award in June 2023 for this initiative.
• Offshore wind in India: The government planned auctions for 4 GW of offshore wind capacity in 2023-24, with an additional 3 GW in the following year. Two models are being used: government-backed Viability Gap Funding and competitive bidding.
• Infrastructure Debt Fund-NBFCs: RBI updated guidelines for IDF-NBFCs including minimum net owned funds of 300 crore rupees and a Capital-to-Risk Weighted Assets Ratio of at least 15 per cent.