MONETARY POLICY COMMITTEE (MPC)
Monetary policy refers to the actions and strategies undertaken by a country's central bank to control and regulate the supply of money, credit availability, and interest rates in an economy. Its primary goal is to achieve specific economic objectives, such as price stability, full employment, and sustainable economic growth.
Central banks use various tools to implement monetary policy, including:
Interest Rates: Adjusting the interest rates at which banks lend to each other (known as the federal funds rate in the United States) influences borrowing and spending in the economy.
Open Market Operations: Buying or selling government securities in the open market to regulate the money supply. When a central bank buys securities, it injects money into the system, and when it sells them, it reduces the money supply.
Reserve Requirements: Mandating the amount of reserves banks must hold, affecting their ability to lend money.
By influencing the availability and cost of money, central banks aim to stabilize prices, control inflation, encourage or discourage borrowing and spending, and promote economic growth. However, the effectiveness of monetary policy can be influenced by various factors such as global economic conditions, fiscal policies, and market expectations.
3.What is the primary objective of the monetary policy?
The primary objective of monetary policy typically revolves around maintaining price stability or controlling inflation within an economy. Central banks often set an inflation target, aiming to keep it at a moderate and steady level. Stable prices help in fostering confidence in the economy, encouraging investment, and ensuring that the value of money remains relatively constant over time.
However, while controlling inflation is often the primary goal, central banks might also consider other objectives, such as:
Full Employment: Some central banks have a secondary objective of supporting maximum employment or reducing unemployment rates.
Economic Growth: Encouraging sustainable economic growth by managing interest rates and credit availability to stimulate or cool down economic activity.
Exchange Rate Stability: In some cases, maintaining stable exchange rates might be an important consideration, especially for countries with open economies heavily reliant on international trade.
These additional objectives can vary depending on the economic conditions, priorities of the government, and the central bank's mandate. Nonetheless, ensuring price stability is typically the fundamental goal of most monetary policies, as it forms the basis for a healthy and growing economy.
4. Monetary Policy Committee (MPC)
- In line with the amended RBI Act, 1934, Section 45ZB grants authority to the central government to establish a six-member Monetary Policy Committee (MPC) responsible for determining the policy interest rate aimed at achieving the inflation target.
- The inaugural MPC was formed on September 29, 2016. Section 45ZB stipulates that "the Monetary Policy Committee will ascertain the Policy Rate necessary to meet the inflation target" and that "the decisions made by the Monetary Policy Committee will be obligatory for the Bank."
- According to Section 45ZB, the MPC comprises the RBI Governor as the ex officio chairperson, the Deputy Governor overseeing monetary policy, a Bank official nominated by the Central Board, and three individuals appointed by the central government.
- The individuals chosen by the central government must possess "capabilities, ethical standing, expertise, and experience in economics, banking, finance, or monetary policy" (Section 45ZC)
- The Monetary Policy Committee (MPC) plays a crucial role in managing inflation through its decisions on the policy interest rate.
- When inflation is too high, the MPC might decide to increase the policy interest rate. This action aims to make borrowing more expensive, which can reduce spending and investment in the economy.
- As a result, it could help decrease demand for goods and services, potentially curbing inflation.
- Conversely, when inflation is too low or the economy needs a boost, the MPC might decrease the policy interest rate.
- This move makes borrowing cheaper, encouraging businesses and individuals to spend and invest more, thus stimulating economic activity and potentially raising inflation closer to the target level.
- The MPC's goal is to use the policy interest rate as a tool to steer inflation toward a target set by the government or central bank.
- By monitoring economic indicators and assessing the current and expected inflation levels, the MPC makes informed decisions to maintain price stability within the economy
For Prelims: Economic and Social Development
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
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Previous Year Questions
1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4 Answer: C 3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall. (b) Central bank is no longer making loans to commercial banks. (c) Central bank is following an easy money policy. (d) Central bank is following a tight money policy. Answer: (d) 4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only Answer: A |
NATIONAL INVESTIGATION AGENCY (NIA)
1. Context
2. About National Investigation Agency (NIA)
- The National Investigation Agency (NIA) is a federal counter-terrorism law enforcement agency in India.
- It was established in 2008 after the Mumbai terror attack the same year.
- The NIA is empowered to deal with the investigation of terror-related crimes across states without special permission from the states under written proclamation from the Ministry of Home Affairs.
- The primary mandate of the National Investigation Agency is to investigate and prosecute offences that have national and cross-border implications, specifically focusing on terrorism, insurgency, and other related matters.
- The NIA is headquartered in New Delhi and has 12 regional offices across the country.
- It is headed by a Director General of Police (DGP) rank officer.
- The NIA has a team of highly trained and experienced officers who are experts in counter-terrorism investigations.
- The NIA has been successful in investigating and prosecuting several high-profile terrorism cases, including the 26/11 Mumbai attacks, the 2012 Pune bombing, the 2013 Hyderabad blasts, and the 2014 Pathankot attack.
- The NIA has also played a key role in disrupting terrorist networks and preventing terrorist attacks.
- It has arrested several senior terrorist operatives and seized a large quantity of arms and ammunition.
3. The Changes Made under the NIA (Amendment) Act 2019
The National Investigation Agency (Amendment) Act, 2019, brought significant changes and enhancements to the powers and jurisdiction of the National Investigation Agency (NIA) in India. The amendments aimed to strengthen the agency's ability to combat terrorism and other transnational crimes effectively.
The key changes made under the NIA (Amendment) Act, 2019
- The amendment expanded the jurisdiction of the NIA. Previously, the agency could investigate cases related to terrorism and certain other offences listed in the NIA Act.
- The Act adds new offences to the list of scheduled offences that can be investigated by the NIA. These include
- Cyber terrorism under Section 66-F of the Information Technology Act, 2000
- Human trafficking under Section 370 of the Indian Penal Code, 1860
- Counterfeiting of currency or bank notes under Sections 489C and 489E of the Indian Penal Code, 1860
- Manufacture or sale of prohibited arms or ammunition under Sections 25 and 26 of the Arms Act, 1959
- Offenses under the Explosive Substances Act, 1908
- This extension of jurisdiction gives the NIA greater reach and authority in handling cases with international ramifications.
- The amendment allowed for the establishment of special courts for the trial of NIA cases.
- These courts are designated to expedite the trial process and ensure that cases are heard and disposed of more quickly, particularly in terrorism-related cases.
- The NIA (Amendment) Act introduced provisions for the protection of witnesses.
- It empowers the NIA to request the central government to issue orders for the protection of witnesses.
- Ensuring the safety of witnesses is crucial for the successful prosecution of cases, especially in terrorism-related trials.
- The amended law allows the NIA to seize and attach properties that are believed to be the proceeds of terrorism or used for terrorism-related activities.
- This provision is essential in disrupting the financial networks of terrorist organizations.
- The NIA can now request the central government to seek extradition of individuals involved in terrorism and other offences under the NIA Act.
- This provision facilitates the extradition of accused persons from foreign countries to face trial in India.
- The central government has the authority to designate session courts as NIA Special Courts.
- These courts are responsible for the trial of NIA cases and follow the procedures outlined in the NIA Act.
- The NIA Act includes a schedule listing offences that fall under its jurisdiction.
- The amendment allows for offences in this schedule to be amended by the central government through notification.
- This flexibility allows for the inclusion of new offences based on emerging threats and challenges.
- The NIA (Amendment) Act includes provisions to enhance transparency and accountability in the agency's functioning.
- It mandates the submission of an annual report on its activities to the central government, which is then laid before both houses of Parliament.
4. The Way Forward
For Prelims: National Investigation Agency, Terrorism, NIA Act,2008, NIA (Amendment) Act, 2019, the Ministry of Home Affairs, Information Technology Act, 2000, Indian Penal Code, Arms Act 1959, Explosive Substances Act, 1908,
For Mains:
1. "The NIA (Amendment) Act, 2019, introduced provisions for the confiscation of property believed to be connected to terrorism." Analyze the significance of this provision in curbing the financial networks of terrorist organizations and its alignment with international counter-terrorism efforts. (250 Words)
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Previous Year Questions
1. The Stiglitz Commission established by the President of the United Nations General Assembly was in the international news. The commission was supposed to deal with: (UPSC CSE 2010) (a) The challenges posed by the impending global climate change and prepare a road map Answer: B 2. Match List - I with List-II and select the correct answer using the codes given below the lists: (UPPSC 2020) List – I List – II A. Indian Arm Act 1. 1876 B. Royal Title Act 2. 1878 C. Indian High Court Act 3. 1869 D. Indian Divorce Act 4. 1861 A. (A) 2, (B) 3, (C) 1, (D) 4 B. (A) 3, (B) 1, (C) 2, (D) 4 C. (A) 1, (B) 2, (C) 3, (D) 4 D. (A) 2, (B) 1, (C) 4, (D) 3 Answer: D 3. Which one of the following is NOT correctly matched? (UPPSC RO/ARO 2020) A. Prevention of Sedition Meetings Act - 1908
B. Explosive Substances Act - 1908
C. Indian Criminal Law Amendment Act - 1908
D. Newspaper (Incentive to Offence) Act - 1908
Answer: A |
THE PLACES OF WORSHIP ACT
1. Context
2. The Places of Worship Act and its Provisions
The long title describes it as “An Act to prohibit conversion of any place of worship and to provide for the maintenance of the religious character of any place of worship as it existed on the 15th day of August, 1947, and for matters connected therewith or incidental thereto.” |
religious denomination into a place of worship of a different religious denomination or even a different segment of the same religious denomination.
Section 4(1) declares that the religious character of a place of worship “shall continue to be the same as it existed” on August 15, 1947.
Section 5 stipulates that the Act shall not apply to the Ramjanmabhoomi-Babri Masjid case, and to any suit, appeal or proceeding relating to it.
At least two petitions challenging the Act are pending before the Supreme Court.
The law has been challenged on the ground that it bars judicial review, which is a basic feature of the Constitution, imposes an “arbitrary irrational retrospective cutoff date”, and abridges the right to religion of Hindus, Jains, Buddhists and Sikhs. |
3. Reasons for bringing of the act
- The Act was brought by the Prime Minister P V Narasimha Rao at a time when the Ram temple movement was at its peak.
- The Babri Masjid was still standing, but L K Advani’s rath yatra, his arrest in Bihar and the firing on kar sevaks in Uttar Pradesh had raised communal tensions.
Moving the Bill in Parliament, then Home Minister S B Chavan said: “It is considered necessary to adopt these measures in view of the controversies arising from time to time with regard to conversion of places of worship which tend to vitiate the communal atmosphere Adoption of this Bill will effectively prevent any new controversies from arising in respect of conversion of any place of worship…” |
4. Supreme Court verdict
- The constitutional validity of the 1991 Act was not under challenge, nor had it been examined before the Supreme Court Bench that heard the Ramjanmaboomi-Babri Masjid title suit.
- Even so, the court, while disagreeing with certain conclusions drawn by the Allahabad High Court about the Act, made specific observations in its support.
- “In providing a guarantee for the preservation of the religious character of places of public worship as they existed on 15 August 1947 and against the conversion of places of public worship, Parliament determined that independence from colonial rule furnishes a constitutional basis for healing the injustices of the past by providing the confidence to every religious community that their places of worship will be preserved and that their character will not be altered,” the court said.
5. Constitutional obligations
- The law addresses itself to the State as much as to every citizen of the nation.
- The State, has by enacting the law, enforced a constitutional commitment and operationalised its constitutional obligations to uphold the equality of all religions and secularism which is a part of the basic features of the Constitution.
- The Places of Worship Act imposes a non-derogable obligation towards enforcing our commitment to secularism under the Indian Constitution.
- The law is hence a legislative instrument designed to protect the secular features of the Indian polity, which is one of the basic features of the Constitution.
- The Places of Worship Act is a legislative intervention which preserves non-retrogression as an essential feature of our secular values.
For Prelims: The Places of Worship Act, secularism, Indian Constitution, Ramjanmaboomi-Babri Masjid title suit,
For Mains:
1. What is the Places of Worship Act and discuss its constitutional obligations (250 words)
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WINDFALL TAX
1. Context
The government on (December 2) withdrew the windfall gains tax on domestic production of crude oil and export of diesel, petrol, and aviation turbine fuel (ATF), scrapping the levy that was introduced 30 months ago amid a surge in the prices of crude oil and key fuels in the international market in the wake of Russia’s invasion of Ukraine.
2.Windfall tax
- It is designed to tax the profits a company derives from an external, sometimes unprecedented event-for instance, the energy price rise as a result of the Russia –Ukraine conflict.
- These are profits that cannot be attributed to something the firm actively did, like an investment strategy or an expansion of business.
- The U.S Congressional Research Services (CRS)defines a windfall as an unearned, unanticipated gain in income through no additional effort or expense.
- Government typically levies this as a one-off tax retrospectively over and above the normal rates of tax.
- Finance Minister explained the introduction of the windfall tax as a way to rein in the “phenomenal profits" made by some oil refineries who chose to export fuel to reap the benefits of skyrocketing global prices which affected domestic supplies.
3.Rationale behind tax
- Pandemic recovery and supply issues resulting from the Russia –Ukraine conflict shored up energy demands, which in turn have driven up global prices.
- The rising prices meant huge and record profits for energy companies while resulting in hefty gas and electricity bills for households in major and smaller economies.
- The UN chief urged all governments to tax these excessive profits and use the funds to support the most vulnerable people through these difficult times.
4.Windfall tax in India
- In July, India announced a windfall tax on domestic crude oil producers who it believed were reaping the benefits of the high oil prices.
- It also imposed an additional excise levy on diesel, petrol, and air turbine fuel (ATF) exports.
- India's case was different from other countries, as it was still importing discounted Russian oil.
Windfall tax was targeted mainly at Reliance Industries ltd and Russian Oil major Rosneft –backed Nayara Energy, who the government believed were making a killing on exporting large volumes of fuel made from discounted Russian oil at the cost of the domestic market. |
5.Purpose tax
6.Issues in imposing tax
- Since windfall taxes are imposed retrospectively and are often influenced by unexpected events, they can brew uncertainties in the market about future taxes.
- German economist Andreas Peichl said that such taxes are populist and politically opportune in the short term.
- IMF said that taxes in response to price surges may suffer from design problems given their expedient and political nature.
- It will reduce future investment because prospective investors will internalize the likelihood of potential taxes when making investment decisions.
- There is another argument about what exactly constitutes true windfall profits, how it can be determined, and what level of profit is normal or excessive.
Another issue is who should be taxed only the big companies responsible for the bulk of high-priced sales or smaller companies as well as raising the question of whether producers with revenues or profits below a certain threshold should be exempt. |
For Prelims & Mains
For Prelims: Windfall tax, crude oil
For Mains: what is windfall tax and why reasons for imposing it in India. (250 words).
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AJMER DARGAH
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- Over the centuries, the Ajmer Dargah has become one of the most significant Sufi shrines in the subcontinent, symbolizing historical importance, spiritual unity, and cultural heritage.
- Dargahs are shrines built over the graves of respected religious figures, typically Sufi saints. The Ajmer Dargah is the tomb of Khwaja Moinuddin Chishti (also spelled Muinuddin or Mu’in al-din), affectionately known as Gharib Nawaz, who played a crucial role in spreading Sufism across the region. The shrine was constructed by the Mughal emperor Humayun to honor Khwaja Moinuddin Chishti.
- Historical records from the Siyar-ul-Auliya, a detailed biography of Sufi saints, suggest that Khwaja Moinuddin Chishti arrived in Ajmer from Persia around 1192 CE, laying the foundation of the Chishti Sufi order in India. His teachings centered on universal love, peace, and spiritual equality.
- The Ajmer Dargah complex exemplifies Indo-Islamic architecture. The white marble shrine, richly embellished with silver and gold accents, showcases the architectural brilliance of the medieval era.
- The main entrance, known as the Nizam Gate, was a donation from the Nizam of Hyderabad in the 19th century, reflecting the broad reverence for the saint. According to Explore Rajasthan, the Ajmer Dargah is a “true representation of the Mughal architectural style,” blending influences from Humayun to Shah Jahan.
- The saint's tomb is enclosed by a silver railing and surrounded by a marble screen. Nearby, a prayer room built by Chimni Begum, the daughter of Shah Jahan, serves as a peaceful space exclusively for women.
- The Ajmer Dargah has also played a role in India’s cultural diplomacy, especially with its neighboring countries. Notable figures, including former US President Barack Obama, who offered a chadar, and leaders from neighboring nations like Pervez Musharraf, General Zia-ul-Haq, Benazir Bhutto, and Sheikh Hasina, have visited the shrine personally
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Ajmer, formerly known as Ajaymeru, was once the capital of the Chauhans, a Rajput clan that governed areas of present-day Rajasthan, Haryana, Delhi, and Uttar Pradesh from the 7th to the 12th centuries CE. Ajaydeva is credited with founding the city in the mid-12th century.
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The town was looted and destroyed by the Afghan invader Muhammad of Ghor after he defeated Prithviraj III (commonly known as Prithviraj Chauhan) in the Second Battle of Tarain in 1192 CE. The Ghurid forces killed, plundered, and "ruined the pillars and foundations of the idol temples" in Ajaymeru, as noted by Har Bilas Sarda, an Ajmer-based jurist, in his book Ajmer: Historical and Descriptive (1911). Sarda’s account serves as a key historical reference in the petition filed before the court.
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The city remained in ruins for nearly 400 years before experiencing a revival during the reign of Mughal Emperor Akbar (1556–1605). The construction of the mausoleum occurred sometime in the second half of the 15th century
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Sufism, the mystical dimension of Islam, developed between the 7th and 10th centuries as a response to the growing orthodoxy of the clergy and the increasing materialism of the ummah. In Islamic texts, Sufism is referred to as tasawwuf.
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Sufis adopted a more ascetic and devotional approach to Islam, often engaging in various mystical practices. Over time, Sufi practitioners formed different orders, each centered around the teachings of a particular teacher or wali.
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The Sufi traditions, particularly those of the Chishti order, to which figures like Moinuddin, and later Sufi masters such as Qutbuddin Bakhtiyar Kaki, Hazrat Nizamuddin Auliya, and Nasiruddin Mahmud Chiragh Dehlavi of Delhi belonged, incorporated many local practices that were often considered heretical by orthodox Islam. The Chishti saints in India emphasized messages of tolerance and inclusivity
Significance of Sufism in history
Sufism has played a profound role in the history of Islam, particularly in terms of its cultural, spiritual, and social impact.
The significance of Sufism can be understood from various perspectives:
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For Prelims: Indian architecture, Sufism
For Mains: GS I - Indian History & Culture
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CASH RESERVE RATIO (CRR)
The Cash Reserve Ratio (CRR) represents the portion of a bank’s total deposits that must be held as liquid cash with the Reserve Bank of India (RBI). The RBI periodically determines the CRR rate, which is currently set at 4.5%. Banks do not earn interest on this reserve amount.
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While the Monetary Policy Committee (MPC) is responsible for decisions related to the repo rate and policy stance, the RBI independently manages liquidity measures.
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Analysts suggest that the RBI might lower the CRR by either 25 basis points (bps) or 50 bps. (Note: One basis point equals 0.01%). If implemented, this would mark the first reduction in over 4.5 years.
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To curb rupee volatility resulting from sustained Foreign Portfolio Investor (FPI) outflows and the strengthening of the US dollar, the RBI has been actively selling dollars in the foreign exchange market
If the RBI reduces the Cash Reserve Ratio (CRR) by 50 basis points (bps), it would release approximately ₹1.10 lakh crore to ₹1.2 lakh crore in bank liquidity currently held with the central bank. A smaller cut of 25 bps would make around ₹55 crore to ₹60 crore available to banks.
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This additional liquidity could be utilized by banks to enhance lending, which in turn would support economic growth.
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The RBI last reduced the CRR during the COVID-19 pandemic in March 2020, lowering it from 4% to 3% on March 28, 2020, after maintaining it unchanged for seven years. Since then, the CRR has been increased three times, with the most recent revision to 4.5% on May 21, 2022
Composition of Liquid Assets:
- The assets that banks can use to maintain the SLR include:
- Cash
- Gold
- Government bonds and securities (mainly government-approved bonds).
Feature | SLR (Statutory Liquidity Ratio) | CRR (Cash Reserve Ratio) |
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What is maintained | Liquid assets (cash, gold, government securities) | Cash reserves with RBI |
Earnings | Earns interest on government securities | No interest earned |
Regulation | Regulated by the RBI for liquidity control | Regulated by the RBI for inflation control |
Impact on Lending | Higher SLR means less funds available for lending | Higher CRR means less funds available for lending |
- Since a portion of a bank's deposits is held with the Reserve Bank of India (RBI), it ensures the safety of the funds in case of emergencies, making the cash available when customers withdraw their deposits.
- During periods of high inflation, the government aims to prevent excess money from circulating in the economy. The Cash Reserve Ratio (CRR) plays a role in controlling inflation.
- When there is a risk of high inflation, the RBI raises the CRR, requiring banks to hold more money in reserves, which reduces the amount available for lending and slows down the flow of money in the economy.
- On the other hand, when the need arises to inject funds into the economy, the RBI may reduce the CRR.
- This allows banks to lend more to businesses and industries, fostering investment and boosting economic growth. Lower CRR also contributes to accelerating the growth rate of the economy
For Prelims: Economic and Social Development
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
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Previous Year Questions
1.Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC CSE 2017)
1. It decides the RBI’s benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: (a) 1 only (b) 1 and 2 only (c) 3 only (d) 2 and 3 only Answer (a)
Thus, the correct answer is (a) 1 only |
INDIA - CHINA BORDER DISPUTE
Border Dispute:
- The India-China border is divided into three sectors:
- Western Sector: Aksai Chin, claimed by India but controlled by China.
- Middle Sector: Less contentious, but areas like Barahoti in Uttarakhand witness minor disputes.
- Eastern Sector: Arunachal Pradesh, claimed by China as part of South Tibet.
- The Sino-Indian War of 1962 remains a significant point of contention, with unresolved border claims.
Recent Standoffs
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Doklam (2017):
- A 73-day standoff occurred at the tri-junction of India, China, and Bhutan.
- Triggered by Chinese road construction near Bhutanese territory, viewed as a threat to India's strategic Siliguri Corridor (Chicken’s Neck).
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Galwan Valley (2020):
- Marked by the first casualties in 45 years; 20 Indian soldiers and an unknown number of Chinese troops died.
- Followed by a series of disengagement talks.
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Eastern Ladakh (2020-present):
- Ongoing disputes in areas like Pangong Tso Lake, Depsang Plains, and Hot Springs.
- Despite disengagement in some areas, tensions persist.
The Line of Actual Control is a 4,057-kilometer-long (2,520 mile) disputed border line that separates Indian-controlled territory from Chinese-controlled territory in the Himalayan region. It runs through the disputed border regions of Ladakh, Aksai Chin, and other areas along the India-China border.
Key characteristics of the LAC include:
- Undefined Demarcation: Unlike most international borders, the LAC is not precisely demarcated or delineated. It is essentially a loose line of perception where both Indian and Chinese troops are positioned.
- Historical Context: The LAC emerged after the Sino-Indian War of 1962, which resulted in a ceasefire but did not resolve the underlying territorial disputes.
- Disputed Sections: There are multiple areas along the LAC where both countries have different perceptions of where the actual line should be, leading to occasional tensions and military standoffs.
- Strategic Importance: The region is geographically challenging, with high-altitude terrain including mountain passes, glaciers, and rugged landscapes.
- Periodic Tensions: In recent years, particularly in 2020, there have been significant military confrontations between Indian and Chinese troops, most notably in the Galwan Valley region of Ladakh.
The LAC is divided into three sectors:
- Western Sector (Ladakh)
- Middle Sector (Uttarakhand, Himachal Pradesh)
- Eastern Sector (Arunachal Pradesh)
Early Friendship (1947–1954)
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Common Goals and Anti-Colonial Sentiments:
- India and China, as newly independent nations, sought to rebuild their societies and oppose colonialism and imperialism.
- Prime Minister Jawaharlal Nehru admired China’s cultural legacy and revolutionary transformation under the Communist regime led by Mao Zedong.
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Support for China on the Global Stage:
- India was one of the first non-communist nations to recognize the People’s Republic of China (PRC) in 1949.
- Nehru supported China's entry into the United Nations, arguing that the PRC represented the Chinese people rather than Taiwan (Republic of China).
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Signing of the Panchsheel Agreement (1954):
- India and China signed the Panchsheel Agreement, based on five principles of peaceful coexistence:
- Mutual respect for sovereignty and territorial integrity.
- Non-aggression.
- Non-interference in each other's internal affairs.
- Equality and mutual benefit.
- Peaceful coexistence.
- The slogan "Hindi-Chini Bhai-Bhai" symbolized the optimism in bilateral ties
- India and China signed the Panchsheel Agreement, based on five principles of peaceful coexistence:
Emerging Tensions (1954–1959)
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The Tibetan Question:
- China's annexation of Tibet (1950–51) and its suppression of Tibetan uprisings created friction.
- India’s grant of asylum to the 14th Dalai Lama in 1959 after the failed Tibetan rebellion was viewed as interference by China.
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Border Disputes:
- Despite the Panchsheel Agreement, India and China had unresolved territorial disputes:
- Aksai Chin (Western Sector): Controlled by China, claimed by India.
- Arunachal Pradesh (Eastern Sector): Claimed by China as South Tibet.
- Discovery of China's construction of a road in Aksai Chin (1957–58) intensified tensions
- Despite the Panchsheel Agreement, India and China had unresolved territorial disputes:
Deterioration and War (1959–1962)
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Border Incursions and Skirmishes:
- China’s aggressive patrols and incursions along the Line of Actual Control (LAC) exacerbated hostilities.
- Nehru’s "Forward Policy" (establishing advanced Indian outposts along the disputed border) was seen as provocative by China.
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Sino-Indian War (October–November 1962):
- China's invasion of Aksai Chin and parts of Arunachal Pradesh marked a turning point.
- The war exposed India's military vulnerabilities, resulting in territorial losses in Aksai Chin.
- China declared a unilateral ceasefire and withdrew from Arunachal Pradesh but retained control over Aksai Chin.
Differences Between the Terms
Term | Scope | Focus | Finality |
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De-induction | Broader withdrawal | Long-term stability | Final withdrawal of troops |
Disengagement | Specific sites/areas | Preventing skirmishes | Temporary or site-specific |
De-escalation | Entire conflict zone | Reducing overall tensions | Long-term trust-building |
For Prelims: Current events of national and international importance.
For Mains: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
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Previous Year Questions
1.“Belt and Road Initiative” is sometimes mentioned in the news in the context of the affairs of : (UPSC CSE 2016)
(a) African Union (b) Brazil (c) European Union (d) China Answer (d)
The Belt and Road Initiative (BRI) is a global development strategy launched by China in 2013 under President Xi Jinping. It aims to enhance connectivity and cooperation among countries primarily in Asia, Africa, and Europe through infrastructure projects, investments, and trade networks. The BRI includes two main components:
BRI is often in the news due to its economic, geopolitical, and strategic implications for participating countries and its criticism for creating debt traps Mains 1.‘China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbour. (UPSC CSE GS2, 2017) 2.With respect to the South China sea, maritime territorial disputes and rising tension affirm the need for safeguarding maritime security to ensure freedom of navigation and over flight throughout the region. In this context, discuss the bilateral issues between India and China. (UPSC CSE GS2, 2014) |