What’s in today’s article?

• Why in News?
• What the Report Says on Nestlé?
• What are Added Sugars?
• Why are Added Sugars Harmful?

Why in News?

• According to a recent report, leading food and beverage brand Nestlé’s products for babies in Asia, Africa and Latin America were found to contain added sugars, while the same products sold in Europe did not have it.
• Currently, Nestlé controls 20% of the baby-food market, valued at nearly $70 billion.

What the Report Says on Nestlé?

• The product included the world’s biggest baby cereal brand Cerelac, which is meant for six-month-old babies.
  • Cerelac has no added sugars in Germany and the United Kingdom but contains nearly 3 grams per serving when sold in Indian markets and over 5 grams per serving in Ethiopia and 6 grams in Thailand.
• Nestlé also did not make the quantity of sugar content clear on the products’ packaging.
• The report (‘How Nestlé gets children hooked on sugar in lower-income countries’ by a Swiss organisation Public Eye) faulted Nestlé for employing different nutritional standards in its products, depending on the country it served.
• Sugar is generally not recommended for infants, although guidelines in several developing countries do not explicitly prohibit it, posing health risks for children.
• Nestlé's baby food products with added sugars are permitted under national legislation (of some countries) despite the fact that they go against World Health Organisation’s (WHO) guidelines.
  • In 2015, the WHO’s guideline recommended that adults and children reduce their daily intake of free sugars to less than 10% of their total energy intake.
  • It would be even healthier to consume less than 5% (roughly 25 grams per person a day) of free sugars.
• According to a Nestlé India spokesperson, the company has reduced added sugars by up to 30% (in the last five years), depending on the variant, in their infant cereals portfolio (milk cereal based complementary food).

What are Added Sugars?

• Sugar is a simple carbohydrate. Some food items have sugar that is naturally occurring.
  • For example, it is found in milk (lactose) and fruit (fructose) and any product that contains milk (such as yogurt, milk or cream) or fruit (fresh, dried) contains some natural sugars.
• Free sugar or added sugar is added separately to a food item during preparation or processing.
• It can include natural sugars such as white sugar, brown sugar and honey, as well as other caloric sweeteners that are chemically manufactured (such as high fructose corn syrup).
• Low- and middle-income countries are increasingly being exposed to free sugars with growing incomes and the proliferation of giant global food brands that mass produce their products.
• According to a UNICEF-supported study, of the 1,600 infant cereals, snacks and ready-to-eat meals marketed at young children in Southeast Asia, nearly half included added sugars and sweeteners.

Why are Added Sugars Harmful?

• Sugar consumption is supposed to be kept limited for health reasons. Excessive consumption can lead to increased overall energy intake in a person’s overall diet.
• It may be at the cost of food items having nutritionally adequate calories, eventually leading to an unhealthy diet.
• The risks of contracting non-communicable diseases, such as diabetes, obesity and heart-related ailments, are then increased.
• Sugar should not be added to foods offered to babies and young children because it is unnecessary and highly addictive, starting a negative cycle that increases the risk of nutrition-based disorders in adult life.

Tooth decay is also associated with early exposure to sugar.

Q.1. What are the non-communicable diseases (NCDs)?

Non Communicable Diseases are a diverse group of chronic diseases that are not communicable. They are defined as diseases of long duration; generally slow progression and they are the major cause of adult mortality and morbidity worldwide. Examples: diabetes, cancer, etc.

Q.2. How are standards for various food products decided in India?

The FSSAI approves a food product before they are introduced in the market. The FSSAI has set standards for various food products through the Food Safety and Standards (FSS) Act 2006; the FSS (Approval of non-specified food and food ingredients) Regulations 2017, etc.

What’s in today’s article?

• Background
• What is GFCF and Why Does It Matter?
• Current Trend in Private Investment in India
• Reasons for Fall in Private Investments
• Conclusion

Background

• Private investment in India, shown by how much businesses are spending on things like buildings and equipment compared to the total value of the economy, has been slow to grow.
• Since 2011-12, this kind of investment has been going down.
• The government expected big Indian companies to increase their spending, hoping this would boost the economy.
• To encourage this, in 2019, the government reduced corporate taxes from 30% to 22%, hoping that it would prompt companies to invest more.

What is GFCF and Why Does It Matter?

• GFCF stands for Gross Fixed Capital Formation.
• It refers to the growth in the size of fixed capital in an economy.
  • Fixed capital refers to things such as buildings and machinery, for instance, which require investment to be created.
• So private GFCF can serve as a rough indicator of how much the private sector in an economy is willing to invest.
• Overall GFCF also includes capital formation as a result of investment by the government.
• Importance of GFCF:
  • GFCF matters because fixed capital, by helping workers produce a greater amount of goods and services each year, helps to boost economic growth and improve living standards.
  • In other words, fixed capital is what largely determines the overall output of an economy and hence what consumers can actually purchase in the market.
  • Developed economies such as the U.S. possess more fixed capital per capita than developing economies such as India.

Current Trend in Private Investment in India

• In India, private investment started to grow more after economic changes in the late 1980s and early 1990s made businesses more confident.
• Before these changes, private investment stayed around 10% of the total economy.
• On the other hand, government spending on projects (public investment) went up steadily from less than 3% in 1950-51 to more than private investment by the early 1980s.
• But after the economic changes, private investment became more important for building things like factories and infrastructure.
• Private investment kept growing until the global financial crisis in 2007-08.
  • It went from about 10% of the economy in the 1980s to 27% in 2007-08.
  • However, after 2011-12, private investment started to decrease, reaching a low of 19.6% of the economy in 2020-21.

Reasons for Fall in Private Investments

• Some Indian economists believe that low consumer spending is the main reason private businesses aren't investing much lately, especially since the pandemic started.
• They think that when people spend more, businesses feel confident about future sales and invest more in things like factories and equipment.
  • So, they suggest that the government should give people more money to spend, which could boost business investments.
• However, looking back at India's history, more consumer spending hasn't always led to more business investments.
• In fact, when consumer spending dropped from 90% of the economy in 1950-51 to 54.7% in 2010-11, it was followed by a peak in business investments.
• Since 2011-12, consumer spending has gone up while business investments have gone down.
• This might be because money saved and invested by the government or businesses is money not spent by consumers.
• On the other hand, some economists think that deeper issues, like government policies and uncertainty, might be the real reasons behind the drop in business investments.
• They point out that when economic reforms began in 1991, business investments went up.
• But in the last two decades, when reforms slowed down, investments dropped.
• Uncertainty about government policies can also make businesses hesitant to invest in long-term projects.

Conclusion

• Low private investment can slow down economic growth because businesses aren't spending enough on things like factories and machinery, which are important for increasing production.
• Some people worry that when the government spends more, it can discourage private businesses from investing because there's less room for them to grow.
• On the other hand, some believe that when private businesses aren't investing enough, government spending can help make up for it.
• However, it's generally thought that private businesses are better at deciding where to invest money than the government.

Also, taxes used to fund government spending can slow down the economy by taking money away from businesses and consumers.

Q1. What is the difference between Debt and Equity?

"Debt" involves borrowing money to be repaid, plus interest, while "equity" involves raising money by selling interests in the company.

Q2. What is the RERA Act?

RERA stands for Real Estate Regulatory Authority that came into existence as per the Real Estate (Regulation and Development) Act, 2016, with the purpose of protecting the home purchasers and also boosting the real estate investments.

Source: Why have private investments dropped? | Explained 

What’s in today’s article?

• Background
• How is Gold Price Determined Globally?
• How is Gold Price Determined in India?

Background

• Global price of gold (24 carat) on April 10 was $2,349.88 per ounce. In India it was ₹7,174 per gram.
• In recent weeks gold has witnessed phenomenal price increase, with expectations to rise further.
• There is a direct relationship between global price of crude oil and the international price of gold (positive correlation).
• On the other hand, there is an inverse relationship between the external value of the U.S. dollar and the international price of gold (negative correlation).
• Simply put, whenever global oil prices shot up, the price of gold also rose.
• Similarly, whenever the U.S. dollar declined in value against the currencies of its major trading partners, gold appreciated in price.
• Reason Behind these Positive & Negative Correlations:
  • Rise in international crude oil prices signaled the specter of global inflation.
  • This leads to an increase in the demand for gold as a hedge against inflation.
  • Gold being a real asset unlike financial assets and hence not subject to loss of value.
  • Similarly, since the global price of gold is expressed in U.S. dollars, its depreciation meant global price of gold had to rise.

How is Gold Price Determined Globally?

Gold’s price is determined by supply and demand factors.

• Supply Side:
  • The production of gold by producing countries and the cost of mining gold are factors to be considered on the supply side.
  • Since most of the available gold in the world has already been mined, new production will involve digging deeper into the bowels of the earth, which is expensive, as goldmining is both an energy and labour intensive.
  • So when the prices of crude oil and natural gas rise, it contributes to the rise in the price of gold.
• Demand Side:
  • However more than gold’s supply, its demand contributes to periodic spikes in its price.
  • The demand for gold can be broken up into institutional, investor, consumer and industrial demand.
  • It is institutional demand in the form of central banks’ demand for gold that drives its price up to record levels each day.
  • Central banks buy gold to boost their reserve assets, as it is a store of value and forms the basis for the issue of new currency.
  • Faced with the threat of inflation against the backdrop of the current increase in crude oil prices (Brent crude touching $90 a barrel) and geopolitical uncertainty in the wake of the wars in West Asia and Eastern Europe, central banks worldwide, especially the Central Bank of China, are stocking up on gold.
  • Foreign currency reserves in central banks under the current situation are subject to risk and loss of value.
  • Investor demand comes from individuals as well as institutional investors, who would like to invest in physical gold or their financial derivatives and Exchange Traded Funds (ETFs) as a component of their investment portfolio.
  • Return on investment is an investor’s primary concern, but diversification of risk and safety of investment, under uncertain geopolitical and economic conditions is driving demand from this group.
  • Consumer demand arises from individuals as well as jewelers.
  • In both China and India, the largest consumers and importers of gold, it is bought as a traditional store of wealth and as ornaments for special occasions. So, consumer demand is mostly seasonal.
  • Industrial demand is influenced by technology. Gold as a metal is preferred by industry for its intrinsic properties like malleability and conductivity.

How is Gold Price Determined in India?

• Demand and Supply:
  • The demand and supply largely influence the gold rate in the domestic market.
  • The price will be higher when the demand for gold exceeds supply.
  • But the price will fall if the demand in the market is lower than the supply of gold.
• Interest Rate:
  • The gold loan interest rate in India are monitored and changed by the RBI.
  • It is done to manage the capital flow in the Indian market.
  • In case of higher interest rates, gold sell-off will be heavy.
  • It leads to increased supply which means higher gold rates. But the low-interest rates increase demand and lower gold prices.
• Economic Situation:
  • People often invest in gold to hedge against inflation and recession.
  • Any adverse economic factors lead to a fall in the financial market.
  • In such a situation, investors have limited liquidity and more losses.
  • That's why they invest in gold because its demand increases in the domestic market.
• Rupee-Dollar Conversion Rate:
  • If the value of the dollar increases against the rupee, it becomes expensive for India to import gold from international markets.
  • Therefore, the price of gold also rises considerably in the Indian market.
• Mathematical Formula to Calculate Gold Prices:
  • The gold rate in India can be calculated using two mathematical formulas depending on the purity of gold.
  • The two formulas to calculate gold prices are as follows:
• Purity Method (Percentage)
• Gold value = (Gold rate x purity x weight) / 24
• Karats Method

Gold value = (Gold rate x purity x weight) / 100

Q1. What is the difference between 24 carat and 18 carat of gold?

24 carat is pure gold with no other metals. Lower caratages contain less gold; 18 carat gold contains 75 per cent gold and 25 per cent other metals, often copper or silver. The minimum caratage for an item to be called gold varies by country.

Q2. What is PetroDollar?

Petrodollars are U.S. dollars paid to an oil-exporting country. Petrodollars are the primary source of revenue for many OPEC members and other oil exporters. Oil exporters settle sales in U.S. dollars because the dollar is the most widely used currency, making it easier for them to invest export proceeds.

Source: What’s the positive correlation between prices of gold and the U.S. dollar?

What’s in today’s article?

• Why in News?
• How India-US Settled WTO Disputes?
• Impact of Settling WTO Disputes on Indian and US Economy
• Case of India’s Wheat Subsidies and India’s Take on This

Why in News?

• US Trade Representative highlighted that sorting out World Trade Organisation (WTO) disputes with India is a win for the agriculture and rural communities in the US.
• However, she raised some concerns on India’s wheat subsidies allegedly hurting American farmers.

How India-US Settled WTO Disputes?

• The discussions on bilateral settlement of pending WTO disputes between both sides began during the annual Trade Policy Forum (TPF) meeting between both countries in January 2023.
  • The TPF aims to resolve trade and investment issues between both nations.
• Since these outstanding disputes were areas where both countries have had some wins and some losses, both countries have directed their officials to engage ‘aggressively’ on the matter.
• Thereafter (in June 2023), both sides decided to close half-a-dozen outstanding disputes at the WTO including the retaliatory tariffs India imposed on imports of some farm products from the US.
• The six disputes included -
  • India’s appeal against the US's imposition of tariffs on imports of steel and aluminium products from India;
  • The US appeal against India’s retaliatory tariffs;
  • India’s renewable energy subsidies for solar cells and modules under Jawaharlal Nehru National Solar Mission;
  • India’s appeal over similar subsidies for solar cells and solar modules by eight US state governments;
  • The US appeal against India’s export subsidy programmes;
  • India's imposition of countervailing duties on imports of certain hot-rolled carbon steel flat products from the US.
• The last dispute between the two, which was settled in September 2023, was on poultry import from Washington as part of which India agreed to cut import duties on some farm items.

Impact of Settling WTO Disputes on Indian and US Economy

• The US was India’s largest trading partner in 2022-23 with bilateral trade rising 7.65% to $128.55 billion.
• Settling of disputes means improved access for chickpeas, lentils, almonds, walnuts, and apples benefiting farmers across the country.
• India agreeing to reduce tariffs on several US products means more market access for turkey, duck, blueberries, and cranberries benefiting farmers in the US.

Case of India’s Wheat Subsidies and India’s Take on This

• According to the USTR, India’s wheat subsidies are distorting prices and making it harder for the USA’s farmers to compete in the Asian market.
• In discussions around its wheat subsidies under the MSP programme at the WTO, India has been maintaining that -
  • Its subsidies were well within the range prescribed by the WTO, and
  • Its food security programmes were necessary to support vulnerable farmers and feed the poor.

Q.1. What is the Trade Policy Forum (TPF) between India-US?

TPF is a platform to resolve trade and investment issues between the two countries. It has five focus groups - Agriculture, Investment, Innovation and Creativity (IPR), Services and Tariff and Non-Tariff Barriers.

Q.2. What is the bilateral trade between India and the US?

During 2022-23, the USA was the top destination of Indian exports to the world and third source of India's imports from the world. Further, India's exports to the USA stood at $ 78.5 billion in 2022-23 and its imports from the USA were $ 50.2 billion.