QUESTION : Write a brief note on “SPACE TOURISM AND COMMERCIALIZATION OF SPACE”
The Hindu Editorial Topic : THE DRAW OF SPACE AND NUCLEAR TECHNOLOGIES :
Space Venture and Nuclear Venture
WHY IN NEWS ?
Critical analysis of the new ventures of Jeff Bezos and Bill Gates which is promised to strike a chord and benefit mankind.
KNOW ABOUT SPACE TOURISM :
Space tourism is human space travel for recreational purposes. There are several different types of space tourism, including orbital, suborbital and lunar space tourism. Work also continues towards developing suborbital space tourism vehicles. This is being done by aerospace companies like Blue Origin and Virgin Galactic. In addition, SpaceX (an aerospace manufacturer) announced in 2018 that they are planning on sending space tourists, including Yusaku Maezawa, on a free-return trajectory around the Moon on the Starship.
MORE ABOUT TO KNOW :
- These days billionaires are preparing to blast off into space and to launch their own nuclear reactor with an eye on the possibility of exporting fast breeder reactors to power hungry nations.
- These billionaires cites their visions:
o Of taking all heavy industry, all polluting industry and moving it into space, and keep Earth as this beautiful gem of a planet that it is.
o The importance of nuclear power as the clean energy required to meet the requirements of the world;
Even though the safety of nuclear reactors and the risk of proliferation of nuclear weapons are a growing concern.
FUTURE OF ATOMIC ENERGY :
- Back in 2007-08, the International Atomic Energy Agency (IAEA) had established a Committee of Eminent Persons to look at the future of nuclear power in 2020 and beyond.
- Expanded use of nuclear technologies offered immense potential to meet important development needs.
- To satisfy energy demands and to mitigate the threat of climate change (two of the 21st century’s greatest challenges) there are major opportunities for expansion of nuclear energy.
o Nuclear renaissance will solve not only the world’s energy problems, but also alleviate climate change.
SITUATION AFTER FUKUSHIMA ACCIDENT :
- The Fukushima Daiichi accident in Japan on March 11, 2011 completely transformed the nuclear power situation beyond recognition.
o It dealt a blow to plans for swiftly scaling up nuclear power to address not only climate change but also energy poverty and economic development.
- The global community turned its attention to strengthening nuclear safety, and several countries opted to phase out nuclear power.
- The nuclear industry was at a standstill except in Russia, China and India.
- Even in India, the expected installation of imported reactors did not materialise because of our liability law and the anti-nuclear protests in proposed locations.
- India had to go in for more indigenous reactors to increase the nuclear component of its energy mix.
- More than 50 nations, which were knocking at the door of the IAEA for nuclear energy for peaceful purposes, quietly withdrew their requests.
- After intensive efforts to strengthen nuclear safety, and with global warming becoming ever more apparent, nuclear power is regaining a place in global debates as a climate-friendly energy option once again.
o Countries such as Japan and Germany reopened their reactors to produce energy.
o But even organisations such as the Intergovernmental Panel on Climate Change and the International Energy Agency (IEA) recognise the ability of nuclear power to address major global challenges.
o It remains uncertain whether the value of this clean, reliable and sustainable source of energy will achieve its full potential any time soon.
- In some major markets, nuclear power lacks a favourable policy and financing framework that recognise its contributions to climate change mitigation and sustainable development.
o Without such a framework, nuclear power will struggle to deliver on its full potential, even as the world remains as dependent on fossil fuels as it was three decades ago.
THE BILL GATES PLAN :
- Even when the uncertainty continues and the anti-nuclear lobby is gaining momentum.
- TerraPower, the nuclear company founded by Mr. Gates, has just announced an agreement with private funders, and the State of Wyoming, U.S.;
o To site its Natrium fast reactor demonstration project there.
o The U.S. Department of Energy (DOE), will subsidise the project to the extent of $80 million in 2021.
- Experts state that the fast breeder reactors will replace the current reactors.
o The DOE and other nuclear enthusiasts also believe that small, factory-built, modular reactors will be cheaper and safer.
o It will be so attractive to foreign buyers that they will revive America’s nuclear industry and enable the United States to compete in an international market now dominated by China and Russia.
o Another benefit envisaged is that fast breeder reactors will provide a solid nuclear industrial base for meeting U.S. military nuclear requirements.
o The failure of earlier efforts to develop such reactors, and
o The risk of the turning of inert uranium to plutonium, and then using the plutonium as fuel.
o Experts argued that it can even “breed” excess plutonium to fuel new fast reactors.
Plutonium is a nuclear explosive which can be used for developing a bomb.
The availability of plutonium through commercial channels would be fraught with dangers.
o TerraPower announced in March 2021 that Natrium would be fuelled with uranium enriched to 20% U-235 rather than explosive plutonium.
But the question being asked is if the Natrium reactor takes off and is offered for export, will the same restraint apply.
Currently, only a handful of nations can make 20% enriched uranium.
The critics believe that there will be a rush to make 20% enriched uranium world wide.
The main objection to nuclear enrichment beyond a point in Iran arises from the fact that it would lead to weapon grade uranium being available for them.
The way it is configured, the reactor would make and reuse massive quantities of material that could also be used as nuclear explosives in warheads.
o The claim that fast reactors are safer than light water reactors has also been called into question.
FOCUS ON INDIA AND CHINA :
- India’s fast breeder reactor, which is not subject to international inspections, is seen as capable of feeding the nuclear weapons capability of India.
- And the recent reports that China is building two more fast reactors have immediately provoked international concerns about China’s possible weapons plutonium production.
- It has been pointed out that U.S. Presidents Gerald Ford and Jimmy Carter made it U.S. policy to discourage the commercialising of plutonium-fuelled reactors.
o President Ford had announced that the U.S. would not support reliance on plutonium fuel and associated reprocessing of spent fuel until “the world community can effectively overcome the associated risks of proliferation.
PLANNED SPACE PROJECTS OF ISRO :
After the mission to Moon (Chandrayaan 1 and 2) and Mars (Mangalyaan), the government has proposed a manned space flight (Gaganyaan) before 2022.
ISRO would be undertaking many prolonged space exploration projects and sending many astronauts into space. In this pursuit, ISRO has declared its intention to build a permanent space station for itself, possibly in the next five to seven years.
Aditya-L1 will be India’s first solar mission is under process
NEED TO DEVELOP PRIVATE CAPACITY IN SPACE :
Space tourism is one among several opportunities that Indian businesses may be keen to explore.
o A policy framework to enable private participation in this sector, of course, would have to be formulated by the government.
Small satellite revolution is underway, globally, 17,000 small satellites are expected to be launched between 2020 and 2030.
o A strong private sector in space will help India to tap into this lucrative commercial space launch market.
Increasing space competitiveness
o Singapore is offering itself as a hub for space entrepreneurship based on its legal environment, availability of skilled manpower and equatorial location.
o New Zealand is positioning itself as a location for private rocket launches.
o China, too, has changed its rules to allow private commercial space activity.
ISRO has been a genuine global pioneer of aerospatial cost compression on several fronts. Cost-effectiveness has given the agency a distinct edge in the commercial arena of satellite launch services.
o With such a valuable base of expertise within the country, it is only natural to expect the emergence of a private space industry that could prove globally competitive.
No one can predict whether the space adventure or the nuclear venture will benefit the U.S. and the wider world. But billionaires have the sixth sense to know how to multiply their own billions.
QUESTION : Define the relationship between economic growth and the inflation and what measures to be taken to curb the high inflation in an economy ?
The Hindu Editorial Topic : A CYCLE OF LOW GROWTH, HIGHER INFLATION
Growth and Inflation
WHY IN NEWS ?
In recent times, several economists have been arguing that the Government does not need to do anything with the economy. They argue that like after the Great Depression, the economy rebounded worldwide, and so will it with us. The argument is fallacious on four accounts:
4 FACTORS THAT MAKE RECOVERY DIFFERENT FROM THE RECOVERY AFTER GREAT DEPRESSION :
1) Demand destruction
- In the case of the Great Depression, demand was created by the Second World War effort, especially in the United States.
- Demand destruction: In the current scenario, the COVID-19 pandemic has resulted in demand destruction.
- This is because many jobs have been lost, and even where jobs were retained, there have been pay cuts.
- Both of these trends were confirmed in the Centre for Monitoring Indian Economy and other surveys.
Bright spot on export front
- The only bright spot in this dismal scenario is that the western world has spent a lot of money stimulating the economy.
- However, the Indian exporter face the challenge of rising freight costs and structural issues such as a strong rupee relative to major competitors.
- Only the Indian IT sector is placed well to capitalise on rising demand in the world markets.
2) Inflation and factors driving it
- India is suffering from stagnant growth to low growth in the last two quarters.
- As in the low initial base set by last year, almost any growth this year is seen as a significant growth percentage.
- Commodity prices and monetary policy: Inflation in India is being imported through a combination of high commodity prices and high asset price inflation caused by ultra-loose monetary policy followed across the globe.
- Liquidity infusion: RBI is infusing massive liquidity into the system by following an expansionary monetary policy through the G-SAP, or Government Securities Acquisition Programme.
- Foreign portfolio investors have directed a portion of the liquidity towards our markets.
- India has a relatively low market capitalisation, therefore, India cannot absorb the enormous capital inflow without asset prices inflating.
- Supply chain issues: Additionally, supply chain bottlenecks have contributed to the inflation we see in India today.
- Rising fuel prices: India’s usurious taxation policy on fuel has made things worse.
- Rising fuel prices percolate into the economy by increasing costs for transport.
IMPACT OF INFLATION :
- The middle and lower-middle-class get destitute due to regressive indirect taxes and high inflation, with their wealth eroding due to said inflation.
- Especially in the case of the lower middle class, inflation is lethal as they do not have access to any hard assets, including the most fundamental hard asset, gold.
- The increase in fuel prices will also lead to a rise in wages demanded as the monthly expense of the general public increases.
- This leads to the dangerous cycle of inflation and depleting growth.
3) Interest Rate
- The only solution for any central banker once he realises that inflation is entrenched is tightening liquidity and further pushing the cost of money.
- If this does not dampen inflation, repo rates will need to go up later this year or early next year.
- Tightening the money supply is a painful act that will threaten to decimate what is left of our economy.
- Rising interest rates lead to a decrease in aggregate demand in a country, which affects the GDP.
- There is less spending by consumers and investments by corporates.
4) Rising NPA and its impact on credit growth
- Rising interest rates, lack of liquidity, and offering credit to leveraged companies instead of direct subsidies to support small and medium-sized enterprises (SMEs) and micro, small and medium enterprises (MSMEs) to counter the COVID-19 pandemic and its effects will result in NPAs of public sector banks climbing faster.
- Our small and medium scale sector is facing a Minsky moment.
- The Minsky moment marks the decline of asset prices, causing mass panic and the inability of debtors to pay their interest and principal.
- India has reached its Minsky moment.
- This means that the public sector unit and several other banks will need capital in copious amounts to make up for bad debt.
- The Union government’s Budget is in no position to infuse large amounts of capital.
- As a result of the above causes, credit growth is at a multi-year low of 5.6%.
MAIN CAUSES OF INFLATION :
High demand and low production or supply of multiple commodities create a demand-supply gap, which leads to a hike in prices.
Excess circulation of money leads to inflation as money loses its purchasing power.
With people having more money, they also tend to spend more, which causes increased demand.
Spurt in production prices of certain commodities also causes inflation as the price of the final product increases. This is called cost-push inflation.
Increase in the prices of goods and services is also a factor to consider as the involved labour also expects and demands more costs/wages to maintain their cost of living. This spirals to further increase in the prices of goods.
The term was coined by Iain Macleod, a Conservative Party MP in the United Kingdom, in November 1965.
Stagflation is said to happen when an economy faces stagnant growth as well as persistently high inflation.
With stalled economic growth, unemployment tends to rise and existing incomes do not rise fast enough and yet, people have to contend with rising inflation.
So people find themselves pressurised from both sides as their purchasing power is reduced.
Case of Stagflation :
In the early and mid-1970s when OPEC (The Organisation of Petroleum Exporting Countries), which works like a cartel, decided to cut supply and sent oil prices soaring across the world.
On the one hand, the rise in oil prices constrained the productive capacity of most western economies that heavily depended on oil, thus hampering economic growth. On the other hand, the oil price spike also led to inflation and commodities became more costly.
For instance, in 1974, the oil prices went up by almost 70% and it leads to a consequent rise in inflation.
INDICES WHICH MEASURE INFLATION IN AN ECONOMY :
Wholesale Price Index (WPI) :
- WPI measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. In other words, WPI tracks prices at the factory gate before the retail level.
- The numbers are released by the Ministry of Commerce and Industry.
- Even as the WPI is used as a key measure of inflation in some economies, the RBI no longer uses it for policy purposes, including setting repo rates.
Consumer Price Index (CPI) – Retail Inflation :
- It is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services used by consumers.
- It is released by Central Statistics Office (CSO) under Ministry of Statistics and Programme implementation
- In April 2014, the RBI had adopted the CPI as its key measure of inflation.
What is the difference between WPI & CPI?
- WPI, tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.
- Both baskets measure inflationary trends (the movement of price signals) within the broader economy, the two indices differ in which weightages are assigned to food, fuel and manufactured items.
- WPI does not capture changes in the prices of services, which CPI does.
Headline Retail Inflation vs Core :
- Headline inflation is the raw inflation figure reported through the Consumer Price Index (CPI) that is released by CSO. The headline figure is not adjusted for seasonality or for the often-volatile elements.
- Core inflation removes the CPI components that can exhibit large amounts of volatility from month to month, which can cause unwanted distortion to the headline figure. The most commonly removed factors are those relating to the cost of food and energy
WHAT CAN WE DO FOR CURBING THE INFLATION ?
MONETARY MEASURES :
- The governments may take recourse to tighter monetary policy to cool down either the demand-pull or the cost-push inflation. For example, the RBI may increase the bank rates/repo rates. etc to curb the supply of money in the market.
- Because of such a step, the public may want to invest more in the banks and lead to a drop in the consumption, thereby driving down the inflation in the economy.
- It may also use qualitative control methods such as raise margins on loans for commodities for which traders have a tendency to speculate and hoard.
- Reserve Bank may also resort to other operations such as the Open Market Operations to mop out the liquidity from the market by selling government securities and bonds.
- But monetary steps can only be successful if inflation is due to demand pull factors and not structural in nature.
- Some of the limitations of raising interest rates to curb inflation have been discussed below:
- It has been observed several times in the past that the increase in bank rate by the RBI may not translate into a commensurate increase in interest rates by the banks.
- Banks necessarily do not raise their own interest rates at times even if the correct signals have been given by the RBI thereby defeating the entire purpose of the move.
- Another issue, which is important in a country like India, is the large presence of unorganized banking.Because of this RBI is not able to control a large part of the banking sector in the economy.
FISCAL MEASURES :
- As far as fiscal measures are concerned the government can take two routes to bring down the prices.
- Firstly, it can cut down its own spending on various schemes, projects, etc and secondly it can increase the taxes (either direct or indirect).
- As far as the first option is concerned most of the governments across the world do not employ this method for two simple reasons, first they cannot suddenly reduce the money, which is being spent on several critical projects pertaining to infrastructure, etc as it would not only bring down the image of the country but also create a negative market sentiment.
- Secondly, if they cut down spending on several important welfare schemes, etc then it may politically harm them in the next elections. So cutting down government expenditure is not considered feasible because of a mix of reasons. The second method is raising the taxes to discourage spending.
- The government may increase the private direct taxes to reduce the incomes and thereby decreasing the consumption tendencies among the public.
- It may also increase the indirect taxes on commodities raising their prices and thereby discouraging spending on them by the public.
- Indian economy is in a vicious cycle of low growth and higher inflation unless policy action ensures higher demand and growth.
- In the absence of policy interventions, India will continue on the path of a K-shaped recovery where large corporates with low debt will prosper at the cost of small and medium sectors. This means lower employment as most of the jobs are created by the latter.