Daily Answer Writing for UPSC 12th August 2023

Daily Answer Writing for UPSC 12th of August 2023, as aspirants engage in their daily answer writing routine for the UPSC examination, the journey towards civil services takes a step closer to fruition. The date marks another opportunity to sharpen analytical skills, articulate thoughts concisely, and synthesize knowledge gained through rigorous preparation.

As candidates delve into diverse topics encompassing governance, economy, polity, and more, each written response serves as a testament to their dedication and determination. The daily practice not only hones writing proficiency but also nurtures the ability to provide well-structured, informed insights—a crucial attribute in the realm of civil services that demand astute problem-solving and strategic thinking.

Question: Define deflation and assess its potential risk in China and its possible repercussions on the worldwide economy.

Answer:

Daily Answer Writing for UPSC 12th August 2023 – Deflation refers to a continuous decrease in overall prices, resulting in reduced consumer spending and demand due to falling prices of goods and services. It can be caused by increased productivity, decreased overall demand, or a decrease in credit volume in the economy. While deflation is generally considered positive for the economy, it can also occur alongside an economic contraction under certain conditions.

China is currently facing the risk of deflation, as evidenced by the decline in the consumer price index and producer prices. This is primarily attributed to the turmoil in the property sector, which has potential repercussions for various industries and overall economic performance.

Repercussions on the Worldwide Economy

China’s significance in global trade and consumption means that its deflationary situation has a worldwide impact. The reduced demand for imports from China affects countries that are dependent on Chinese consumption. It also triggers disruptions in commodity markets and has an impact on global supply chains due to China’s integration.

Mitigation Strategies

To counter deflation, countries can implement monetary and fiscal tools. It is also crucial for nations to engage in international cooperation in order to address systemic deflation challenges.

Way Forward

The risk of deflation in China stems from diminished demand and concerns in specific sectors. This risk has broader implications for international trade, commodities, and industries. Effective policies, both at the national and global levels, are necessary to manage these implications and maintain economic stability.