INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY
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European Free Trade Association (EFTA) and Sixth Schedule of the Indian Constitution its significance for the UPSC Exam? Why are topics like Capital Expenditure , Consumer Price Index (CPI), Mahatma Gandhi Natural Rural Employment Act (MGNREGA) important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for October 13, 2025 |
- The European Free Trade Association (EFTA) is an intergovernmental organization established in 1960 as an alternative to the European Economic Community (EEC), which later became the European Union (EU). Its main purpose is to promote free trade and economic integration among its member countries without requiring them to join the EU.
- The founding idea behind EFTA was to provide a platform for countries that wanted to enjoy the benefits of trade liberalization in Europe but did not wish to participate in the deeper political and economic union envisioned by the EEC.
- While many of its original members later joined the EU, the current EFTA membership includes Iceland, Liechtenstein, Norway, and Switzerland.
- EFTA works to remove tariffs and trade barriers among its members and to negotiate free trade agreements (FTAs) with other countries and regional blocs around the world. This allows its members to access global markets on favorable terms while maintaining their own national trade policies.
- Notably, three of the four EFTA members — Iceland, Liechtenstein, and Norway — are also part of the European Economic Area (EEA), which gives them access to the EU’s single market while remaining outside the EU’s customs union and political institutions. Switzerland, on the other hand, has chosen to maintain a separate set of bilateral agreements with the EU to regulate its trade and cooperation.
- In essence, EFTA represents a model of economic cooperation based on sovereignty and flexibility, enabling small but advanced economies to participate in global trade networks without full EU membership. It plays a significant role in promoting open markets, economic stability, and cooperation among European and global trading partners
- India achieved independence during the turbulent period of the Cold War, when two competing economic systems — capitalism and socialism — were shaping global politics. Emerging from years of colonial exploitation, India deliberately chose to remain non-aligned, avoiding formal association with either bloc.
- Instead, the country pursued a balanced and pragmatic economic approach, blending features of both capitalist and socialist models to suit its distinctive developmental needs.
- After years of limited engagement, India has renewed its focus on Europe, at a time when the continent itself is beginning to redefine its global role — moving away from being merely an extension of the United States within the broader “collective West.”
- Since the Second World War, the notion of “the West” has implied a political and strategic unity dominated by American power, with Europe and Japan largely deferring to Washington.
- The collapse of the Soviet Union further reinforced this unity, briefly bringing Russia into Western institutions such as the G7 and giving rise to the 1990s belief in the “end of history” and the triumph of liberal democracy.
- However, this unipolar moment did not last. A resentful Russia began seeking greater respect in international affairs, while a rising China set out to challenge Western dominance by constructing an alternative global order.
- In recent years, internal rifts within the Western bloc have become more visible, giving rise to what can be described as a “multipolar West.” India’s foreign policy increasingly reflects an understanding of this evolving dynamic.
- The “America First” approach under former U.S. President Donald Trump deepened these divisions by questioning alliances, revising security commitments, and altering global norms.
- This period compelled both Europe and Asia to reconsider their dependence on U.S. leadership and to pursue strategic autonomy in anticipation of a more unpredictable American role.
- Today, differences among Western allies — on issues like Russia, China, trade, and technology — are substantial. Europe also views with unease the political polarization in the U.S., where internal cultural and ideological conflicts are spilling over into transatlantic relations.
- Despite persisting internal divisions — between eastern and western threat perceptions and northern and southern economic priorities — Europe is unmistakably moving toward greater strategic coherence and a more independent geopolitical identity. This evolution is not a sign of decline but a reconfiguration of power within the West.
- Europe is actively strengthening its defence capabilities, expanding cooperation both within the EU and with partners such as the UK, Canada, Japan, and South Korea. On the economic front, it is seeking to diversify trade by building deeper ties with the Indo-Pacific and Latin America.
- Similarly, America’s key allies in Asia — including Australia, Japan, South Korea, and ASEAN — are adapting to a world where U.S. commitments are less predictable, balancing the need to manage risks with opportunities emerging from a more pluralistic Western order.
- Within this changing landscape, India has become a central partner in Europe’s strategic diversification. The EU’s Joint Communication on relations with India (September 2025) emphasizes that India and Europe share a mutually reinforcing relationship — “India’s success benefits the EU, just as the EU’s success benefits India.”
- For India, however, a multipolar West presents both opportunities and challenges. On one hand, it creates greater flexibility and space for forming varied partnerships within the Western bloc. On the other, the fragmentation of Western unity could dilute global responses to authoritarian assertiveness and introduce new forms of instability in the international order
Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and (2017)
(a) European Union
(b) Gulf Cooperation Council
(c) Organization for Economic Cooperation and Development
(d) Shanghai Cooperation Organization
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Answer (a)
The Broad-based Trade and Investment Agreement (BTIA) refers to the proposed Free Trade Agreement (FTA) between India and the European Union (EU). Negotiations for this agreement began in 2007, aiming to enhance trade in goods and services, promote investments, and strengthen economic cooperation between India and the EU. However, talks have faced multiple challenges over issues such as market access, intellectual property rights, data protection, and tariff reductions. Efforts to revive negotiations have continued in recent years to deepen the India–EU economic partnership |
- The Sixth Schedule of the Indian Constitution provides a framework for the governance of tribal areas in the northeastern states of Assam, Meghalaya, Tripura, and Mizoram. Inclusion of Ladakh under this Schedule would enable the creation of Autonomous District Councils (ADCs) and Autonomous Regional Councils (ARCs), which are elected bodies with authority over tribal areas.
- These councils would have legislative powers over various subjects such as forestry, agriculture, village and town administration, inheritance, marriage, divorce, and social customs.
- The Schedule also empowers ADCs and ARCs to collect land revenue, impose taxes, regulate money lending and trade, levy royalties from mineral leases or licenses, and develop public infrastructure like schools, markets, and roads.
- In 2019, the National Commission for Scheduled Tribes recommended that Ladakh be brought under the Sixth Schedule, citing several reasons: the region has a tribal population exceeding 97%, there are restrictions on land acquisition by outsiders, and Ladakh possesses a distinct cultural heritage that needs protection.
- Following violent incidents linked to these demands, climate activist Sonam Wangchuk, who had been on a 35-day hunger strike, ended his fast. The Leh administration imposed restrictions on gatherings of four or more people as a precaution.
- The unrest occurred ahead of scheduled talks between the Centre and the Leh Apex Body on October 6, after a four-month hiatus. Government sources indicated that Wangchuk was seen as a potential obstacle to the negotiations.
- The roots of the issue go back to 2019, when the repeal of Article 370 and the Jammu and Kashmir Reorganisation Act led to the bifurcation of the state into two Union Territories: Jammu and Kashmir with a legislature, and Ladakh without one.
- The political and legal status of Ladakh has remained a matter of debate, with the people advocating for Sixth Schedule inclusion due to the high proportion of Scheduled Tribes (over 90%).
- Under Article 244, the Sixth Schedule allows the establishment of ADCs, which govern tribal-majority areas. These councils, each having up to 30 members serving five-year terms, can legislate on issues related to land, forests, water, agriculture, village councils, health, sanitation, and policing at village and town levels.
- Currently, there are 10 ADCs in the Northeast, distributed as three each in Assam, Meghalaya, and Mizoram, and one in Tripura.
- Sonam Wangchuk, an engineer and innovator of sustainable technologies, is widely recognized for inspiring the character portrayed by Aamir Khan in the 2009 film 3 Idiots.
- In 2018, he was awarded the Ramon Magsaysay Award for his systematic, community-driven reforms in education and his efforts to improve opportunities for Ladakhi youth, serving as a model for minority communities worldwide
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Answer (C)
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Why Indian capital needs to invest domestically?
For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS III - Economy
Context:
A central challenge for policy makers in India, at the present juncture, is to work out a balance between the long-term benefits of global trade and the short-term harms that current uncertainties pose to large sections of the population who are at risk of low wages and unemployment. Tackling this requires a change of the existing system to account for the needs of the larger masses rather than only enriching private capital’s interests.
Read about:
What is Capital Expenditure?
What is Capital gain tax?
Key takeaways:
- Indian capital has a pivotal role in shaping economic change by broadening its vision beyond short-term profits and aggressive accumulation. The history of capitalism demonstrates that it is not a rigid system; it has adapted in the past and can do so again to remain relevant.
- With the economy exposed to risks such as weakening global demand, rising tariffs, and trade disruptions, Indian capital must reinvent itself and collaborate with the government to cushion these shocks.
- Traditionally, private businesses in India have demanded greater involvement in the economy along with incentives, subsidies, and a liberal business climate. For decades before liberalisation, many enterprises thrived in a protected domestic market, benefiting from import restrictions and policies that shielded them from global competition.
- This allowed them to earn supernormal profits and build reserves, which later enabled expansion into global markets in the 1990s. Although not all Indian firms ventured abroad, this trend produced strong industrial players who continue to dominate key sectors today.
- Now, as the global economy enters a prolonged period of instability, Indian business houses must realign with public interest and work hand in hand with the state to sustain growth momentum.
- The emergence of modern mass markets globally has historically been driven by three factors: the rise of wage labour, the productivity gains of industrial-scale manufacturing, and shifts in consumer demand as incomes increased.
- Demand growth, though often overlooked, is a vital component of this process. Without rising demand, firms cannot fully capitalise on expanded supply. Yet many macroeconomic models still assume demand automatically adjusts to supply, undervaluing its central role.
- In today’s interconnected world, demand stems from both domestic and external markets. While earlier strategies of industrialisation focused on internal demand and later turned outward, current global turbulence has weakened external demand, disrupting exports and creating vulnerabilities.
- This situation underscores the need to stimulate domestic demand and build resilience by strengthening internal markets.
The Importance of Domestic Capital
For India, domestic capital is crucial to revitalising demand and can act through three key channels:
1. Boosting private investment
Despite record profits, Indian companies have been reluctant to expand investments. Public investment has been driving growth, with fiscal and monetary policies providing support through incentives, credit, tax reforms, and infrastructure spending. Capital expenditure by the government has jumped significantly—from ₹3.4 lakh crore in FY20 to ₹10.2 lakh crore in FY25. However, private investment remains stagnant. Interestingly, while domestic investment lags, Indian outward FDI has risen sharply, suggesting a preference for foreign opportunities over the domestic economy. A reversal of this trend is needed to accelerate domestic growth.
2. Supporting wage growth
The Economic Survey 2024–25 highlighted rising corporate profits but stagnant wages, with 2023–24 marking a 15-year high in profits while wage growth faltered. Projections suggest further slowdown in real wage growth, undermining income distribution and weakening domestic demand. The increasing shift toward contractual employment within formal sectors has eroded workers’ bargaining power, especially in manufacturing, worsening the problem. Sustained and equitable wage growth is essential to balance profitability with inclusive demand.
3. Increasing investment in Research and Development (R&D)
India’s expenditure on R&D remains insufficient at 0.64% of GDP, heavily reliant on government funding. In advanced economies such as the U.S., Japan, and South Korea, private enterprises account for over 70% of national R&D expenditure, while in India the figure is only around 36%. Moreover, private investment in innovation is concentrated in a few sectors like pharmaceuticals, IT, defence, and biotechnology, neglecting broader scientific and industrial research. To secure long-term productivity gains, Indian capital must step up investment in fundamental research and innovation, shifting focus from short-term returns to sustained growth
Follow Up Question
Mains
1."Capital expenditure is often highlighted as a key driver for long-term economic growth, yet India faces challenges in mobilising private sector investment despite record corporate profits" Discuss
Prelims
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Answer (A)
Statement 1: Acquiring new technology is capital expenditure. ✅
Statement 2: Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure. âŒ
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On declining inflation, improving consumer confidence
For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS III - Economy
Context:
Since August 2023, retail inflation in India has witnessed a sharp deceleration from being close to 7% to being around or below 2% in August this year. That means the rate at which the general price level was rising has come down.
Read about:
Consumer Price Index (CPI)
Wholesale Price Index (WPI)
Key takeaways:
Inflation is the sustained rise in the general price level of goods and services in an economy over a period of time. In simple terms, when the purchasing power of money falls — meaning you can buy fewer things with the same amount of money than before — that is inflation.
It does not mean that the price of one or two items has gone up, but that the overall average price level in the economy is increasing.
For example, if last year ₹100 could buy you a basket of rice, vegetables, and milk, but this year the same basket costs ₹110, then the economy is experiencing 10% inflation.
Economists usually measure inflation using indices like:
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Consumer Price Index (CPI): Reflects changes in the retail prices of goods and services consumed by households.
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Wholesale Price Index (WPI): Tracks changes in the price of goods at the wholesale level.
A moderate level of inflation is considered normal and even necessary for economic growth, as it encourages spending and investment. But high inflation erodes purchasing power and destabilises the economy, while deflation (falling prices) can discourage production and investment.
Consumer Price Index (CPI)
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Meaning: It measures the average change over time in the prices of goods and services that households consume.
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Focus: Retail inflation (prices faced by consumers).
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Base basket: Food, clothing, housing, fuel, education, healthcare, etc.
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Prepared by: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
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Types of CPI in India:
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CPI (Rural)
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CPI (Urban)
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CPI (Combined) – Official measure of retail inflation (used by RBI for monetary policy)
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Wholesale Price Index (WPI)
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Meaning: It measures the average change in the prices of goods at the wholesale level, i.e., before retail.
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Focus: Wholesale inflation (prices at the producer/supplier level).
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Base basket: Manufactured goods, fuel & power, primary articles (like food grains, minerals).
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Prepared by: Office of Economic Adviser (OEA), Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry.
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Importance: Reflects supply-side inflation, often used by businesses and government for macroeconomic analysis
Consider the following statements: (UPSC CSE 2020)
- The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
- The WPI does not capture changes in the prices of services, which CPI does.
- Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
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Answer (a)
1. The weightage of food in CPI is higher than that in WPI.
2. The WPI does not capture changes in the prices of services, which CPI does.
3. RBI has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
âœ”ï¸ Correct Answer: (a) 1 and 2 only ✅ |
For Preliminary Examination: Current events of national and international Significance like Naxals and Left wing extremism
For Mains Examination: GS III - Various Security Forces & Agencies & their Mandate Security Challenges & their Management in Border Areas.
Context:
Almost six decades after the Naxalbari uprising, an armed peasant revolt led by a breakaway faction of the Communist Party of India (Marxist) which spurred a lengthy left-wing insurgency in India, the Maoist movement is at a crossroads.
Read about:
Who are Maoists?
What is Naxalism?
Key takeaways:
- The origins of the Maoist-Naxal movement trace back to May 18, 1967, in Naxalbari, a village in northern West Bengal. On that day, about 150 peasants armed with basic weapons like sickles, spears, and daggers, rose against landlords, capturing stocks of paddy and seizing land.
- The ideological inspiration behind this revolt was Charu Mazumdar, a CPI(M) leader who had, between 1965 and 1967, authored a set of writings later known as the Historic Eight Documents.
- In them, he denounced the Indian state as a bourgeois institution, accused mainstream communist parties of diluting revolutionary principles by working within the parliamentary framework, and argued instead for a long, armed struggle modeled after Mao Zedong’s revolution in China and the guerrilla warfare led by Fidel Castro and Che Guevara in Cuba.
- The uprising created a rift within the CPI(M), which opposed violence as a political strategy. Mazumdar, along with Kanu Sanyal and other radicals, was expelled, eventually forming the CPI (Marxist-Leninist) in 1969.
- The government responded with an intense crackdown, arresting or eliminating several leaders. Mazumdar himself was arrested and died in police custody in 1972. Though the initial movement weakened in Bengal, it spread to other regions—most prominently Andhra Pradesh, where deep-rooted conflicts between landlords and tribal cultivators in Srikakulam erupted in 1969, fueling a fresh wave of armed peasant uprisings under splinter CPI(ML) groups.
- By the late 2000s, what the government officially termed Left-Wing Extremism (LWE) had spread to nearly 180 districts, spanning around 92,000 sq km. But a combined approach of security operations, development programs, and local community engagement significantly reduced its reach.
- By April 2024, the number of affected districts had dropped to just 38, with six marked as “districts of concern” requiring additional resources. Union Home Minister Amit Shah even declared that the movement would be “ended” by the following March.
- These pressures have left Maoist leadership fractured. Recently, Mallojula Venugopal Rao, the CPI (Maoist)’s chief ideologue and spokesperson, wrote that the time had come to halt the armed struggle in order to preserve the party.
- The movement is faltering under relentless government action by central armed forces and elite state police units, leaving its guerrilla base weakened.
- Recruitment has also dried up. Non-tribal populations stopped joining years ago, and now even tribal youth—once the backbone of the movement—are reluctant. Many attribute this to the changing social and economic landscape: government welfare programs and access to education have uplifted rural communities, while exposure to mobile phones and the internet has shifted aspirations away from the hardships of jungle-based guerrilla life.
- As a result, the Maoist ranks are aging, with much of the senior leadership suffering from ill health. Once seen as a formidable revolutionary force, the movement today is struggling to remain relevant in a society that has undergone rapid transformation
Follow Up Question
Mains
1.What are the determinants of left-wing extremism in the Eastern part of India? What strategy should the Government of India, civil administration and security forces adopt to counter the threat in the affected areas? (2020)
Prelims
1.With reference to the Maoist-Naxal movement in India, consider the following statements:
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The Naxalbari uprising of 1967 was led by peasants who attacked landlords using basic agricultural tools as weapons.
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Charu Mazumdar’s Historic Eight Documents formed the ideological foundation of the movement, advocating for a protracted revolutionary war.
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The Indian Constitution contains provisions that empower the government to deal with Left-Wing Extremism (LWE).
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In recent years, recruitment into Maoist ranks has declined due to the expansion of government welfare schemes and social changes in tribal areas.
Which of the statements given above is/are correct?
(a) 1, 2 and 3 only
(b) 1, 2 and 4 only
(c) 2 and 3 only
(d) 1, 3 and 4 only
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Answer (b)
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Why are the new rules for Panchayats getting flak?
For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS II - Indian Polity
Context:
The Mohan Majhi-led Bharatiya Janata Party (BJP) government in Odisha announced the new Odisha Panchayat Samiti Accounting Procedure (Amendment) Rules, 2025, after state cabinet approval last month. However, the Biju Janata Dal (BJD) and the Congress have strongly criticised the amended rules, stating that it undermines people’s representatives of the Panchayati Raj Institutions (PRIs).
Read about
Panchayati Raj Institutions (PRIs)
Mahatma Gandhi Natural Rural Employment Act (MGNREGA)
Key takeaways:
Panchayati Raj Institutions (PRIs)
- Panchayati Raj Institutions (PRIs) in India represent a system of rural local self-government that aims to ensure people’s participation in the decision-making process at the grassroots level.
- The idea is rooted in the Gandhian vision of Gram Swaraj (village self-rule), where villages function as self-reliant units of democracy. The institutional framework for PRIs was given constitutional status through the 73rd Constitutional Amendment Act of 1992, which came into effect in April 1993.
- This amendment added Part IX to the Constitution, making local self-governance a mandatory feature in rural areas. It provided a three-tier structure consisting of the Gram Panchayat at the village level, the Panchayat Samiti at the block or intermediate level, and the Zila Parishad at the district level.
- Every state is required to establish these bodies, except those with populations below 20 lakhs where a two-tier system may exist. The members of these institutions are directly elected by the people, ensuring representation from all sections of society, including women and Scheduled Castes and Scheduled Tribes through the system of reservation.
- The Gram Sabha, comprising all the registered voters of a village, is the foundation of this system. It is entrusted with functions such as approving plans, budgets, and reviewing the functioning of the Panchayat.
- The elected Panchayats, on the other hand, have been assigned responsibilities related to economic development and social justice in their jurisdictions, covering areas like agriculture, rural housing, water management, health, sanitation, and poverty alleviation.
- Financially, Panchayats draw their resources from three channels: funds allocated by the state government, grants from the central government (such as those recommended by the Finance Commission), and their own revenue sources like taxes, duties, and fees. The State Finance Commissions, constituted every five years, recommend measures to strengthen their financial base.
- Thus, Panchayati Raj Institutions embody the principle of democratic decentralization. They not only bring governance closer to the people but also empower marginalized groups by giving them a voice in decision-making.
- Despite challenges such as inadequate financial resources, bureaucratic control, and varying degrees of effectiveness across states, PRIs remain a crucial mechanism for participatory development and inclusive governance in rural India
- The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), enacted in 2005, is one of India’s most significant social welfare legislations aimed at enhancing livelihood security in rural areas.
- It provides a legal guarantee of at least 100 days of wage employment in a financial year to every rural household whose adult members are willing to do unskilled manual work.
- The Act not only assures employment but also emphasizes the creation of durable assets that improve rural infrastructure, such as water conservation, land development, afforestation, and rural connectivity.
- The core objective of MGNREGA is to reduce rural poverty and unemployment by providing an alternative source of income, particularly during the lean agricultural season.
- It is a rights-based programme, meaning that employment is a legal entitlement and workers are entitled to an unemployment allowance if work is not provided within 15 days of application.
- Wages are to be paid according to notified minimum wages, and payment must be made within 15 days to ensure timely income support.
- A unique feature of MGNREGA is its emphasis on transparency and accountability through social audits, regular monitoring, and the use of Information and Communication Technology (ICT) tools for wage payments.
- It also mandates the participation of women, ensuring that at least one-third of the beneficiaries are women workers.
- Over the years, MGNREGA has become a lifeline for millions of rural households by not only providing income security but also empowering marginalized groups and promoting rural development
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Answer (B)
Statement 1: The minimum age prescribed for any person to be a member of Panchayat is 25 years. ⌠Incorrect. Statement 2: A Panchayat reconstituted after premature dissolution continues only for the remainder period. ✅ Correct. |