The issue of honour killing grabbed headlines with the death of Nirupama Pathak, a Delhi-based journalist, who was alleged to have been killed by her family because she was pregnant and was planning to marry a person outside her caste. This was followed by two more cases of suspected honour killing (see here and here) in the capital. While incidences of honour killing are a rarity in the capital, such incidences are common in the northern states of India such as Punjab, Haryana and Uttar Pradesh. The basic reason behind honour killings is the idea that a family’s honour is tied to a woman’s chastity. Thus, a wide range of causes can trigger honour killing such as marital infidelity, pre-marital sex, having unapproved relationships, refusing an arranged marriage or even rape. In India, honour killings take place if a couple marries outside their caste or religion. Khap panchayats also oppose and mete out punishments to couples who marry within the same gotra (lineage) or transgress other societal norms. A recent judgement by a sessions court in Karnal for the first time awarded the death penalty to five men for murdering a young couple who had married against the diktats of a khap panchayat. It gave life sentence to a member of the khap panchayat who declared the marriage invalid and was present when the killing took place. On June 22, the Supreme Court issued a notice to the centre and eight states to explain the steps taken to prevent honour killing. Taking a cautious approach the government rejected Law Minister, M. Veerappa Moily’s proposal to amend the Indian Penal Code and rein in the khap panchayats (caste based extra constitutional bodies). It however decided to constitute a Group of Ministers to consult the states and look into the scope for enacting a special law that would treat honour killing as a social evil. Experts are divided over the proposed honour killing law. Some experts argue that the existing laws are sufficient to deter honour killing, if implemented properly while others feel that more stringent and specific provisions are required to tackle the menace of honour killings.
Existing Penalties under Indian Penal Code:
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| Arguments favouring new law | Arguments against new law |
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| Sources: “Define honour killing as ‘heinous crime’: Experts”, Hindustan Times, May 12, 2010; “Legal experts divided over proposed honour killing law,” Indian Express, Feb 16, 2010; “Legal Tangle,” Indian Express, July 10, 2010; and “Honour Killing: Govt defers decision on Khap Bill,” Indian Express, July 8, 2010; “Honour Killing: Govt considers special law,” Indian Express, July 9, 2010. | |
Meanwhile, khap panchayats are up in arms defending their stance against same gotra marriage. They have demanded an amendment to the Hindu Marriage Act, 1955 disallowing same gotra marriage. While condemning honour killings, some politicians such as Naveen Jindal and Bhupinder Singh Hooda have extended support to the demands of the khap panchayats. It remains to be seen if India is effectively able to address this tug of war between tradition and modernity.
The Monetary Policy Committee (MPC) has decided to conduct an off-cycle meeting today to discuss the failure to meet the inflation target under Section 45ZN of the Reserve Bank of India Act, 1934. As per the Reserve Bank of India Act (RBI), 1934, MPC is required to meet at least four times each year, to discuss the macroeconomic issues in the country, and take policy decisions to address those. This is the second time MPC has conducted an off-cycle meeting in 2022-23. The meeting is scheduled in light of inflation being consistently high for nine consecutive months.
In this blog, we discuss what the inflation targeting framework is, examine retail and wholesale prices, and the divergence between them.
What is the inflation targeting framework, and what happens if inflation is persistently high?
In 2016, Parliament amended the RBI Act, 1934 to change the monetary policy, and introduce an inflation targeting framework. This framework prioritises price stability to achieve sustainable GDP growth. Price stability allows investors to confidently invest their money for productive activities, without worrying about it losing value. Price stability also maintains the purchasing power of consumers, i.e., the ability to purchase a good (or service) with a given amount of money.
As per the new framework, the central government, in consultation with RBI sets: (i) an inflation target, and (ii) an upper and lower tolerance level for retail inflation. The target has been set at 4%, with an upper tolerance limit of 6% and a lower tolerance limit of 2%. The upper and lower limits indicate that although it is desirable for inflation to be close to 4%, deviation between these limits is acceptable. The target and bands are revised every five years. In March 2021, the existing targets were carried forward.
Retail inflation has been above 6% for the past nine months, and it has been above 4% from October 2019 onwards (See Figure 1).
Figure 1: Consumer price index (year-on-year; in percentage)
Sources: Database on Indian Economy, Reserve Bank of India; PRS.
If inflation is above or below the prescribed limits for three quarters, RBI must submit a report to the central government explaining why prices have been rising (or falling) persistently, what will be done to correct that, and an estimate as to when the target will be achieved.
The MPC uses tools such as interest rates to control the level of inflation in the economy. One such rate is the policy repo rate, which is the rate at which RBI lends money to banks. An increase in the policy repo rate makes borrowing money more costly, and hence is expected to control inflation by reducing the money supply. MPC increased this rate from 4% in April 2022 to 4.4% in May 2022, to 4.9% in June 2022, to 5.4% in August 2022, and to 5.9% in September 2022.
Breaking down the Consumer Price Index and the Wholesale Price Index
Consumer Price Index (CPI) measures the general prices of goods and services such as food, clothing, and fuel over time. Retail inflation is calculated as the change in the CPI over a period of time. Goods and services such as petrol, food products, health, and education are considered for its calculation, which are assigned different weights (See Table 1). Between February 2022 and August 2022, the average annual inflation was 6.9%. The rise in prices of subcomponents of the CPI during this period is indicated in Table 2.
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Table 1: Assigned weights for the calculation of CPI
Sources: MOSPI; PRS. |
Table 2: Average inflation of some CPI components
Sources: Database on Indian Economy, RBI; PRS. |
CPI is not the only index that measures inflation in an economy. The Wholesale Price Index (WPI) measures the wholesale prices of goods. A change in wholesale prices reflects wholesale inflation. Table 3 indicates the weights assigned to goods for calculating the WPI. Manufactured goods include metals, chemicals, food products, and textiles.
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Primary articles (23%) include food articles, and crude petroleum and natural gas. Fuel and power (12%) include mineral oils, electricity, and coal. WPI has remained above 10% from April 2021 onwards. It reached an all-time high of 17% in May 2022. This was driven by the inflation in metals, kerosene and petroleum coke, fruits and vegetables, and palm oil. |
Table 3:Assigned weights for the
Sources: Ministry of Commerce and Industry; PRS. |
Why has WPI inflation been consistently above CPI inflation?
Movements in the WPI have an impact on the CPI. For almost a year and half, CPI inflation has remained below WPI inflation. However, as per the design of the indices, it is expected that CPI would remain above WPI, and that any increase in WPI would reflect in the CPI after a time lag. This is because retail prices include taxes (as a percentage of price), while wholesale prices do not. Additionally, some of the goods in WPI act as inputs in the goods considered in CPI. An increase in input prices would lead to higher retail prices after a time lag.
We discuss possible reasons for why CPI has remained below WPI for a year and a half.
Figure 2: Consumer Price Index and Wholesale Price Index
Sources: Database on Indian Economy, Reserve Bank of India; PRS.
Composition of indices
As indicated in Table 2 and 3, the composition of the two indices varies. For instance, prices of manufacture of basic metals, chemicals, and machinery grew at an average rate of 13% between February 2021 and September 2022. They contribute 7% to the WPI. These are input goods for producing final goods and services such as automobiles, which are included in the CPI. The rise in prices of transport vehicles, communication devices, fuel for transport, and housing (CPI components) rose by 6% during this period.
The Ministry of Finance has observed that wholesale prices did not feed into retail prices (from March 2021 onwards) as wholesalers absorbed the rising input costs and did not pass them on to retailers. In August 2022, it noted that as retail prices are rising now, the pass-through may occur.
