What to Read in Indian Express Editorial( Topic and Syllabus wise)

Editorial 1: A bridge called SCO

Context:

Recent SCO summit provided a stage where terrorism was criticized, focus was on enhancing trade connectivity and increasing the opportunities in the globalised world. Also, it was highlighted that SCO has relevance beyond Eurasian region as it can acts as the voice of global south.

About SCO

• The Shanghai Cooperation Organization (SCO) is a permanent intergovernmental international organization founded in 2001 in Shanghai by China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.
• Later, India and Pakistan joined in 2017, making it the world’s largest regional organization in terms of geographical coverage and population.
• In 2023, Iran became the 9th full member.
• Observers: Afghanistan, Belarus, Mongolia.
• Dialogue partners include Turkey, Azerbaijan, Armenia, Nepal, Sri Lanka, Cambodia, etc.
• Headquarters: Beijing, China.
• Regional Anti-Terrorist Structure (RATS) HQ:Tashkent, Uzbekistan.

Its main objectives are:

• Strengthening mutual trust and good-neighborliness among member states.
• Promoting effective cooperation in politics, trade, economy, research, technology, culture, education, energy, transport, tourism, and environment.
• Maintaining and ensuring peace, security, and stability in the region.
• Establishing a democratic, fair, and rational new international political and economic order.

Criticizing Terrorism and Radicalism:

• In 25^thSCO summit India has highlighted that its policy towards SCO is built on three pillars, namely S for security, C for connectivity and O for opportunities.
• PM Modi has highlighted that recent Pahalgam attacks were a threat to the humanity.
• Security and stability form the basis of growth and prosperity for India and World. It for the basis of nation’s economic development.
• However, terrorism, radicalism and separatism are considered to be challenges in modern times. They are global challenges moving beyond domestic boundaries.
• India has always voiced the importance of fighting this menace together.
• SCO-RATS has been significant in fight against terrorism at global stage. When India was part of its Joint Information Operation, it has taken measures against terror group Al-Qaeda and its affiliated terror organization. It has also proposed the joint measures between its members.
• India has criticized that some countries follow double standards by supporting terrorism. Terrorism anywhere is threat to humanity everywhere.

Increasing Connectivity:

• Connectivity increases the trade across borders. It also enhances the trust and development.
• India has taken many initiatives such as Chabhar Port, International North South Transport Corridor (INSTC). This will enhance connectivity with Afghanistan and Central Asia.
• India has also highlighted that any initiative to boost connectivity that violates sovereignty of any country is against the core principles of SCO charter. If it violates sovereignty, it loses the trust.

Opportunity-Third pillar:

• In 2023, during its presidency, India has added many new areas of cooperation such as start-ups, transitional medicine, youth development, and digital inclusion and shared Buddhist culture.
• India tried to provide opportunities for youth, scientists, and scholars of SCO countries.
• India has proposed the creation of Civilization Dialogue Forum under the SCO. It will increase people-to-people ties by allowing us to share the richness of ancient civilization art, literature, tradition at global level.
• India with its motto of “reform, perform, transform” is endeavoring to convert every challenge to opportunities for its people.
• It proposed that wide ranging reforms will create new opportunities for its people.

Relevance of SCO in present times:

• Four new centers are to be established to address the modern challenges of organized crime, drug trafficking, and cybersecurity.
• SCO members must increase their cooperation in global institution such as UNSC, World Bank, IMF.
• It must play an important role in promoting multilateralism and inclusive global order.

Way Forward:

Next year, Kyrgyzstan will host the SCO summit. India is facing threats such as arbitrary unilateral tariffs, border disputes, terrorism. In multilateral scenario, India must follow the policy the Non-Alignment with any major global powers. At the same time it must increase its engagement with Central Asian region. It must work with Central Asian countries to increase the relevance of SCO in today’s world. This will also increase its global position as rising responsible Global power.

 

Editorial 2: Understanding the high April-June GDP growth numbers

Context:

Ministry of Statistics and Program Implementation (MoSPI) has released GDP estimates for April-June quarter.  GDP has grown at the rate of 7.8% in the given quarter, higher than 7.4% in January-March period. These statistics call for close investigation as the GDP deflator used by it are not well defined. It uses faulty single deflation technique for all sectors except agriculture.

The GDP deflation:

• GDP growth is driven by two factors- Inflation and the volume of the production of goods and services.
• The GDP at nominal rate is calculated first. It captures the value of final goods and services produced by the economic factors within the domestic territory of any country in a given financial year at the current prices.
• This GDP is adjusted for inflation by using GDP deflatorto give the GDP at real prices. These real prices are based on the base year adopted by the country for calculating its GDP. This real GDP is useful for comparison across the year and with the countries.
• Real GDP growth rate for April-June quarter is 7.8%, while the nominal GDP growth rate is 8.8%.
• The nominal GDP is Rs.86.05 lakh crore for April-June quarter. This GDP is deflated by using a combination of wholesale and retail inflation. Wholesale inflation has a significantly greater role in deflation.
• In April-June quarter, Wholesale Price Index (WPI) averaged less than 0.3%, while CPI inflation averaged 2.7% which is lowest in six years. This resulted in lower “GDP deflator” at 0.9%.
• The smaller the GDP Deflator, the lower the difference between nominal and real GDP.

Problems with GDP deflator:

• There are shortcomings in the method used by MoSPIfor deflating the GDP. Most of the expected jump in real GDP id due to the sectors where very soft deflator leads to significant buoyancy in real growth numbers.
• In fact, nominal growth rates capture the growth trajectory more realistically.
• Services sector recorded the real growth at 9.3% in this period. The nominal growth is 11.3%, which is near to the growth of 11.2% recorded in October-December, 2024. The deflator is roughly 1.9%.  Economists suggest that this real growth for services is overestimated.
• The deflator used for services aligns more with Goods oriented WPI inflation, than with CPI services inflation. As the WPI inflation for goods was low due to low commodity prices. This resulted in inadequately deflating services and exaggerating real growth.

Single and Double method of deflation:

• In ‘agriculture’ and ‘mining and quarrying sector’, different deflators are used for input and output. This is called double-deflation method.
• For other sectors, same deflator is used for input and output. This is called single deflation method.
• Double-deflation method is more useful in GDP calculation. If it would have been applied appropriately to manufacturing sector, then growth rate would have been much lower than 7.7% recorded in April-June.

Way Forward:

With WPI and CPI inflation expected to be low in July, this distortion in real GDP rates is expected to continue. The GDP deflator will remain low resulting in disconnect between real GDP and high frequency data such as IIP index, CPI index, PMI index. GDP is used as metric for FDI, and well-being at the global levels. These distortions lower the GDP data credibility and may impact ease of doing business in India.