FOREST RIGHTS ACT
1. Context
In a first since the Forest Rights Act (FRA) came into being in 2006, the Union government has started funding structural mechanisms to “facilitate” the implementation of the law meant to give forest rights to Scheduled Tribes and forest-dwelling communities. Implementation of the FRA, for the last 19 years, has been the domain of State and Union Territory governments.
2. Background
- The ST Commission is caught in a row with the Union Environment Ministry over the latest Forest Conservation Rules (FCR), 2022.
- The row is over the potential violation of provisions enshrined in the Scheduled Tribes and Other Forest Dwellers (Recognition of Forest Rights) Act, 2006 was dubbed the Forest Rights Act (FRA).
3. The involvement of NCST in the Act
- The Ministry of Environment, Forests and Climate Change in June 2022 notified the forest (Conservation Rules, 2022, which prescribed the mechanism for the diversion of Forest land for non-forest purposes.
- These amended rules have omitted a clause (Present in 2014 and 2017 Rules) that explicitly required any proposal to mandatorily have the consent of local tribespeople and Other Traditional Forest Dwellers (OTFDs) of the area, before proceeding for Stage 1 clearance.
- The FCR, 2022 has allowed applying entities to go for the consent of locals, represented by the Gram Sabha after Stage 1 or even after Stage 2 clearance.
- According to the FRA, 2006, in case of a dispute over forest land, precedence has to be given to the rights of STs and OTFDs, who live in and off the forest and its resources, over any other party.
4. NCST demands
- In September 2022, NCST Chairperson Harsh Chouhan shot off a letter to Environment Minister Bhupendra Yadav, highlighting the potential consequences of FCR, 2022, recommending that they be put on hold and the previous Rules, which provided for the consent clause, be strengthened.
- The ST panel argued that the previous versions of the Rules provided a legal space for ensuring the completion of the processes for recognition and vesting of rights under the FRA in areas where forests are being diverted.
- The ST Commission noted that it made little sense to take the consent of tribals and forest dwellers after an applicant had got Stage 1 clearance.
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By then, the applicant would be invested in the project and would then have the incentive to "pursue the State It said governments or Union Territories" to divert the land at the earliest.
The NCST added that the FCR, 2022 provided for compensatory Afforestation, but nowhere did it prescribe safeguards or a mechanism for compliance with FRA.
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- Further, the NCST's Working Group found that FRA compliance was in trouble even under the old rules.
It said currently, nearly 25, 000-30, 000 hectares of forest land were being diverted every year. - It cited a study by the Centre for Environment and Development, ATREE to note: " Out of 128 applications for forest diversion for mining, over 100 had been processed between 2009 and 2018".
- It added that 74 proposals had Stage 2 approval, 46 had Stage 1 approval (in principle), with just five rejected and four closed for other reasons.
- None of the rejections was for non-compliance with FRA.
- The study also found that 14 of these cases (all post-2014) had been cleared with an FRA compliance report, despite, this being far from the "ground reality".
5. About NCST
- The National Commission for Scheduled Tribes is a constitutional body that was established by the Constitution (89th Amendment) Act, 2003.
- The Commission is an authority working for the economic development of Scheduled Tribes in India.
This amendment replaced the National Commission for Scheduled Castes and Scheduled Tribes with two distinct commissions which are:
- National Commission for Scheduled Castes (NCSC)
- National Commission for scheduled Tribes (NCST)
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Article 366 (25) of the Constitution, Scheduled Tribes are those communities that are scheduled in by article 342 of the Constitution.
Also, Article 342 of the Constitution says that: The Scheduled Tribes are the tribes or tribal communities or part of or groups within these tribes and tribal communities which have been declared as such by the President through a public notification.
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5.1. Composition of NCST
- The NCST consists of one chairperson, one vice-chairperson and three full-time members.
- Out of the three members, there should compulsorily be one lady member.
- Tenure of the members is 3 years.
5.2. Functions of NCST
- It investigates and monitors issues related to safeguarding the provisions for Scheduled Tribes under the Constitution and evaluating the working of those safeguards.
- NCST will inquire into specific complaints concerned with the deprivation of rights and safeguards of the STs.
- The commission participates and advises on the planning process for the socio-economic development of the STs and also evaluates the progress of the various developmental activities.
- The President will be presented with an annual report on the working of those safeguards.
- Apart from annual reports, other reports also will be submitted to the President as and when necessary.
- The Commission will also give reports on what measures are to be taken by both the central and various state governments for the effective execution of the measures and safeguards for the protection, development and welfare of the STs.
- Other functions of NCST are related to the welfare, protection, development and advancement of the STs.
6. Forest Rights Act
- The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, commonly known as the Forest Rights Act of India, is often referred to as the Tribal Rights Act or the Tribal Land Act.
- It was enacted in 2006 and recognises the rights of tribal communities that live in the forest as well as other traditional forest dwellers to the forest resources that were essential to their ability to provide for a variety of needs, including subsistence, habitation and other sociocultural requirements.
- The forest management policies, including the Acts, Rules and Forest Policies of Participatory Forest Management policies in both colonial and post-colonial India, did not, till the enactment of this Act., recognize the symbiotic relationship of the STs with the forests, reflected in their dependence on the forests as well as in their traditional wisdom regarding conservation of the forests.
| The Act encompasses Rights of Self-cultivation and Habitation which are usually regarded as Individual rights; and Community Rights such as Grazing, Fishing and access to Water bodies in the forest, Habitat Rights for PVTGs, Traditional Seasonal Resources access to Nomadic and Pastoral Communities, access to biodiversity, community right to intellectual property and traditional knowledge, recognition of traditional customary rights and right to protect, regenerate or conserve or manage any community forest resource for sustainable use. |
- It also provides rights to the allocation of forest land for developmental purposes to fulfil the basic infrastructural needs of the community.
- In conjunction with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Settlement Act, 2013 FRA protects the tribal population from eviction without rehabilitation and settlement.
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The Act further enjoins upon the Gram Sabha and rights holders the responsibility of conservation and protection of bio-diversity, wildlife, forests, adjoining catchment areas, water sources and other ecologically sensitive areas as well as to stop any destructive practices affecting these resources or cultural and natural heritage of the tribals.The Gram Sabha is also a highly empowered body under the Act, enabling the tribal population to have a decisive say in the determination of local policies and schemes to impact them.
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Thus the Act empowers the forest dwellers to access and use the forest resources in the manner that they were traditionally accustomed, to protect, conserve and manage forests, protect forest dwellers from unlawful evictions and also provides for basic development facilities for the community of forest dwellers to access facilities of education, health, nutrition, infrastructure etc.
6.1. Objective
- To undo the historical injustice that occurred to the forest-dwelling communities
- To ensure land tenure, livelihood and food security of the forest-dwelling Scheduled Tribes and other traditional forest dwellers
- To Strengthen the conservation regime of the forests by including the responsibilities and authority of Forest Rights holders for sustainable use, conservation of biodiversity and maintenance of ecological balance.
For Prelims & Mains
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For Prelims: Forest Rights Act, NCST, NCSC, Forest Conservation Rules 2022, Traditional Forest Dwellers,
For Mains:
1.Discuss the powers and functions of the National Commission for Scheduled Tribes in protecting the rights of the Forest-dwellers in India. (250 Words)
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Source: The Hindu and Ministry of Tribal Affairs
INTERNATIONAL ATOMIC ENERGY AGENCY (IAEA)
1. Context
The UN nuclear watchdog’s board of governors on Thursday formally found that Iran isn’t complying with its nuclear obligations for the first time in 20 years, a move that could lead to further tensions and set in motion an effort to restore United Nations sanctions on Tehran later this year
2. International Atomic Energy Agency (IAEA)
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The International Atomic Energy Agency (IAEA) was founded in 1957 in response to growing global concerns and hopes regarding the expansion of nuclear technology. Its establishment was inspired by U.S. President Dwight D. Eisenhower’s landmark “Atoms for Peace” speech delivered to the United Nations General Assembly on December 8, 1953.
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In recognition of its significant contributions to global peace and safety, the IAEA and its Director General at the time, Mohamed ElBaradei, were awarded the Nobel Peace Prize in 2005. The award acknowledged their efforts to prevent the military use of nuclear energy while promoting its safe application for peaceful purposes.
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IAEA safeguards are rooted in binding international agreements, which countries voluntarily accept upon entering into treaties with the agency. These safeguards are crucial in ensuring states adhere to nuclear non-proliferation commitments through independent monitoring and verification.
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The IAEA categorizes its safeguards into three primary types, all of which can be supplemented by an Additional Protocol (AP):
(a) Comprehensive Safeguards Agreements, applicable to non-nuclear-weapon states under the Nuclear Non-Proliferation Treaty (NPT);
(b) Voluntary Offer Agreements, involving nuclear-weapon states that are parties to the NPT;
(c) Item-Specific Safeguards Agreements, which are applied to countries outside the NPT framework. -
In 2014, India officially ratified the Additional Protocol, enhancing the IAEA’s ability to monitor its civilian nuclear facilities. India, along with Pakistan and Israel, has signed item-specific safeguard agreements with the IAEA. These nations, although nuclear-capable, are not part of the Nuclear Suppliers Group (NSG).
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The IAEA created the Incident and Emergency Centre in 2009 to manage international cooperation and provide assistance in the event of nuclear or radiological emergencies, irrespective of their origin or magnitude
3. Nuclear Suppliers Group (NSG)
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After India conducted its nuclear tests in 1974, the United States advocated for the creation of the Nuclear Suppliers Group (NSG), a coalition of 48 countries that establishes and enforces common guidelines for the export of nuclear technology and materials. The primary objective of this group is to prevent nuclear proliferation, and decisions on membership require unanimous agreement.
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Since 2008, India has actively sought membership in the NSG. Gaining entry would allow India to participate in shaping the rules of global nuclear trade and eventually enable it to engage in the sale of nuclear equipment.
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The NSG operates in alignment with the broader global nuclear non-proliferation framework, which is centered around the 1968 Nuclear Non-Proliferation Treaty (NPT). The NPT only recognizes countries that tested nuclear weapons before January 1, 1967, as nuclear-weapon states. As India conducted its tests later, it does not qualify under this definition and, like Pakistan and Israel, has not signed the treaty.
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Although nuclear energy was seen as a potential area for international collaboration, India's non-membership in the NPT meant it was excluded from access to nuclear technology. The signing of the US-India Civil Nuclear Agreement helped break this deadlock.
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Under this agreement, India committed to separating its military and civilian nuclear facilities, placing the latter under the oversight of the International Atomic Energy Agency (IAEA). India also aligned its export control policies with those of the NSG and three other major non-proliferation regimes — the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement, and the Australia Group.
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In February 2025, both India and the United States reaffirmed their commitment to fully implement the US-India 123 Civil Nuclear Agreement. They also agreed to advance cooperation on the development of American-designed nuclear reactors in India, emphasizing large-scale domestic manufacturing and potential transfer of technology
4. Nuclear Export Control Regime
- Missile Technology Control Regime (MTCR): Formed in 1987, the MTCR is a voluntary association of countries committed to preventing the spread of missiles and related technologies capable of delivering weapons of mass destruction. It currently includes 35 member nations. India became a member in June 2016, while China remains outside the group.
- Australia Group: This is an informal coalition of countries working together to ensure that exports of chemical and biological materials do not aid in the development of weapons. By coordinating export control policies, the group seeks to prevent the misuse of these materials. India officially joined as the 43rd member on January 19, 2018.
- Wassenaar Arrangement (WA): Established in 1996, the Wassenaar Arrangement promotes openness and responsible behavior in the trade of conventional weapons and dual-use technologies to prevent excessive stockpiling and to keep such items out of the hands of terrorists. India became the 42nd member state of the WA in 2017
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For Prelims: Non-Proliferation Treaty (NPT), Nuclear Suppliers Group (NSG), Wassenaar Arrangement (WA)
For Mains: GS III -International Atomic Energy Agency (IAEA)
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Previous Year Questions
1.In India, why are some nuclear reactors kept under “IAEA safeguards” while others are not? (2020) (a) Some use uranium and others use thorium (b) Some use imported uranium and others use domestic supplies (c) Some are operated by foreign enterprises and others are operated by domestic enterprises (d) Some are State-owned and others are privately owned Answer (b) 2.In the Indian context, what is the implication of ratifying the ‘Additional Protocol’ with the ‘International Atomic Energy Agency (IAEA)’? (UPSC CSE 2018) (a) The civilian nuclear reactors come under IAEA safeguards. (b) The military nuclear installations come under the inspection of IAEA. (c) The country will have the privilege to buy uranium from the Nuclear Suppliers Group (NSG). (d) The country automatically becomes a member of the NSG. Answer (a) |
Source: Indianexpress
INFLATION
1. Context
A fall in prices of fruits, pulses, and cereals helped lower India’s headline retail inflation rate to a 75-month low of 2.82 per cent in May 2025, acording to data released on Thursday by the Ministry of Statistics and Programme Implementation (MoSPI), possibly providing some more easing room to the Reserve Bank of India (RBI).
2. What is Inflation?
- It is the rise in prices of goods and services within a particular economy wherein consumers' purchasing power decreases, and the value of the cash holdings erodes.
- In India, the Ministry of Statistics and Programme Implementation (MoSPI) measures inflation.
- Some causes that lead to inflation are demand increases, reduction in supply, demand-supply gap, excess circulation of money, increase in input costs, devaluation of the currency, and rise in wages, among others.
3. How is Food Inflation measured in India?
Food inflation in India is measured using various indices and indicators. The primary indices used to measure food inflation in India include the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Both indices provide insights into the overall price movements of goods and services, including food items, but they differ in terms of their coverage and methodology.
Consumer Price Index (CPI)
- The CPI is a key indicator used by the Government of India and the Reserve Bank of India (RBI) to monitor inflation, including food inflation.
- The CPI measures the average change over time in the prices paid by urban and rural consumers for a basket of goods and services, including food items, housing, clothing, transportation, and more.
- Within the CPI, food and beverages form a significant component, and food inflation is specifically derived from the changes in food prices within the CPI basket.
- The CPI is released monthly by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation.
Wholesale Price Index (WPI)
- The WPI is another important index that tracks price changes at the wholesale level for a selected group of commodities, including food products, manufactured goods, fuel, and more.
- The WPI measures price changes from the perspective of producers and wholesalers, providing insights into inflationary pressures in the production and distribution stages.
- Food articles, such as cereals, pulses, vegetables, fruits, and edible oils, are included in the WPI basket for monitoring food inflation.
- The WPI is released weekly by the Office of Economic Adviser under the Ministry of Commerce and Industry.
In addition to these indices, other indicators such as the Food Sub-Index within the CPI and specific price indices for essential food items (like vegetables, pulses, and cereals) are also used to gauge food inflation more accurately. The RBI closely monitors food inflation trends as part of its monetary policy framework to make informed decisions regarding interest rates and economic stability. Overall, the combination of CPI, WPI, and specific food-related indices provides a comprehensive assessment of food inflation in India.
4. Headline and Core Inflation
Inflation is a key economic indicator that measures the rate at which prices of goods and services rise over time. In India, two important measures of inflation are headline inflation and core inflation.
- Headline Inflation: Headline inflation refers to the overall rate of inflation in an economy, taking into account the price changes across all goods and services included in the consumer basket. It reflects the broad-based movement in prices, including food, fuel, housing, transportation, and other essential and non-essential items. Headline inflation is typically measured using indices such as the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Fluctuations in headline inflation can be influenced by various factors, including changes in global commodity prices, government policies, supply chain disruptions, and demand-side pressures.
- Core Inflation: Core inflation, on the other hand, excludes volatile items such as food and energy from the basket of goods used to calculate inflation. By excluding these volatile components, core inflation provides a more stable measure of underlying inflationary trends in the economy. Core inflation is often considered a better gauge of long-term inflationary pressures and helps policymakers in making informed decisions regarding monetary policy. The Reserve Bank of India (RBI), for example, closely monitors core inflation to assess the underlying inflationary trends and formulate appropriate monetary policy responses.
Understanding the distinction between headline and core inflation is essential for policymakers, businesses, and consumers alike. While headline inflation provides a comprehensive view of overall price movements, core inflation offers insights into the underlying inflationary pressures, helping to distinguish between temporary fluctuations and sustained inflation trends. By closely monitoring both measures of inflation, policymakers can effectively manage inflationary risks and maintain price stability, contributing to sustainable economic growth and stability.
5. Monetary Policy Committee (MPC)
The Monetary Policy Committee (MPC) is a crucial institutional framework established by the Reserve Bank of India (RBI) to formulate and implement monetary policy decisions in India.
Role
- Formulating Monetary Policy: The primary role of the MPC is to formulate and implement monetary policy in India. This includes setting the key policy interest rates, such as the repo rate, reverse repo rate, and marginal standing facility (MSF) rate, to achieve the objectives of price stability and economic growth.
- Targeting Inflation: The MPC's main objective is to maintain price stability, which is primarily achieved by targeting a specific inflation rate. In India, the RBI has adopted a flexible inflation targeting framework, where the MPC aims to keep the Consumer Price Index (CPI) inflation within a specified target range over the medium term. Currently, the inflation target is set at 4% with a tolerance band of +/- 2%.
- Evaluating Economic Conditions: The MPC assesses various economic indicators, such as GDP growth, inflation expectations, fiscal policy measures, global economic developments, and financial market conditions, to make informed decisions about monetary policy.
- Communication: The MPC communicates its monetary policy decisions, rationale, and outlook for the economy through periodic press releases, statements, and the publication of meeting minutes. This transparency enhances predictability and credibility in monetary policy.
Composition
- Members: The MPC consists of six members, including three members nominated by the Government of India and three members from the Reserve Bank of India. The Governor of the RBI serves as the ex-officio Chairperson of the MPC.
- Appointment: The members of the MPC are appointed by the Central Government based on their expertise and experience in economics, banking, finance, or related fields. The RBI Governor and Deputy Governor (in charge of monetary policy) are automatic members of the MPC.
- Voting Rights: Each member of the MPC, including the RBI Governor, has one vote in the decision-making process. Decisions are made by a majority vote, with the Governor having the casting vote in case of a tie.
- Terms: Members of the MPC serve fixed terms, typically for four years, with eligibility for reappointment. This ensures continuity and stability in monetary policy formulation.
6. The Way Forward
By implementing the measures and fostering collaborative efforts among policymakers, regulators, and stakeholders, India can effectively manage inflationary pressures, maintain price stability, and promote sustainable economic growth and development.
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For Prelims: Inflation, MPC, CPI, WPI, food Inflation, RBI, Headline inflation, Core inflation For Mains:
1. Explain the concept of inflation and its impact on an economy. Discuss the various causes of inflation and the measures that can be taken to control it, with specific reference to India. (250 Words)
2. What are the challenges and opportunities associated with managing inflation in India? Evaluate the effectiveness of recent policy measures in addressing inflationary pressures and maintaining price stability. Suggest strategies for sustainable economic growth while managing inflation risks. (250 Words)
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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
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
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.
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 5. Read the following passage and answer the question that follows. Your answers to these items should be based on the passage only.
Policymakers and media have placed the blame for skyrocketing food prices on a variety of factors, including high fuel prices, bad weather in key food producing countries, and the diversion of land to non-food production. Increased emphasis, however, has been placed on a surge in demand for food from the most populous emerging economics. It seems highly probable that mass consumption in these countries could be well poised to create a food crisis.
With reference to the above passage, the following assumptions have been made: (UPSC 2021)
1. Oil producing countries are one of the reasons for high food prices.
2. If there is a food crisis in the world in the near future, it will be in the emerging economies. Which of the above assumptions is/are valid?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
6. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
7. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
8. With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (UPSC 2016)
1. The Agreement was signed by all the member countries of the UN and it will go into effect in 2017
2. The Agreement aims to limit greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2°C or even 1.5°C above pre-industrial levels.
3. Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.
Select the correct answer using the code given below:
A. 1 and 3 only B. 2 only C. 2 and 3 only D. 1, 2 and 3
Answers: 1-C, 2-C, 3-D, 4-A, 5-D, 6-B, 6-C, 7-B
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Source: The Indian Express
EUROPEAN FREE TRADE ASSOCIATION (EFTA)
1. Context
Union Minister engages with Industry Leaders at India–Sweden Trade and Investment Policy Forum; Explores India–EU FTA Opportunities
2. About European Free Trade Association
The European Free Trade Association (EFTA) is an intergovernmental organization that aims to facilitate free trade and economic cooperation among its member states. EFTA was established on May 3, 1960, as an alternative trade bloc to the European Economic Community (EEC), which later evolved into the European Union (EU). The founding members of EFTA were Austria, Denmark, Norway, Portugal, Sweden, Switzerland, and the United Kingdom.
The key aspects of EFTA
EFTA comprises four member countries: Iceland, Liechtenstein, Norway, and Switzerland. The organization has experienced changes in membership over the years, with some countries joining or leaving.
- EFTA's primary objectives include promoting free trade and economic cooperation among its member states. It aims to facilitate the reduction or elimination of barriers to trade in goods and services, enhance economic relations, and foster mutual understanding and collaboration in various economic sectors.
- While EFTA is a distinct organization, its member states often have close economic ties with the European Union. EFTA countries have developed various agreements and arrangements with the EU to facilitate trade and economic cooperation. However, EFTA member states are not part of the EU Customs Union or the EU Single Market.
- EFTA has engaged in numerous free trade agreements (FTAs) with countries and regions around the world. These agreements aim to reduce or eliminate tariffs and other trade barriers, promoting the flow of goods and services. EFTA countries have FTAs with countries in Europe, Asia, Africa, and South America.
- The EFTA Surveillance Authority oversees the application of EFTA's rules in its member states. It monitors compliance with agreements, including ensuring that competition rules and other regulations are adhered to by member countries.
- The EFTA Court serves as the judicial body for the EFTA states. It handles disputes related to the interpretation and application of EFTA law. The court's decisions contribute to the legal framework of EFTA's trade and economic agreements.
- Over the years, EFTA has seen changes in its membership. Some countries have joined, while others have left. Accession to EFTA involves negotiations and the fulfillment of certain criteria, reflecting the organization's commitment to free trade and economic cooperation.
- EFTA member countries have diverse and developed economies. They are known for their high living standards, economic stability, and competitiveness. The organization provides a platform for these countries to collaborate and engage in trade with partners around the world.
- While trade is a central focus, EFTA member states also collaborate in other areas, including research and development, innovation, and cultural exchanges. The organization serves as a forum for discussing and addressing various economic and policy issues.
Main Goals of EFTA
- To promote free trade and economic integration among its member states.
- To strengthen member states' economies and improve their competitiveness on the global market.
- To cooperate with other countries and international organizations to further liberalize trade and promote economic development.
Institutional Structure
- The EFTA Council is the organization's highest governing body, consisting of representatives from each member state. It meets regularly to discuss and decide on important matters related to EFTA's objectives and activities.
- The EFTA Secretariat, based in Geneva, Switzerland, provides administrative support and facilitates communication among member states.
- EFTA actively engages in negotiations and establishes free trade agreements (FTAs) with various countries and regions outside the organization, contributing to the expansion of economic cooperation.
Current Status of EFTA
- Despite not being part of the EU, EFTA members maintain close economic ties with the EU through a series of bilateral agreements.
- They participate in the European Single Market and are part of the Schengen Area, allowing for the free movement of goods, services, capital, and people.
- EFTA remains an important economic player in Europe, with a combined GDP of over €1 trillion and a population of over 13 million.
Benefits of EFTA Membership
- EFTA's free trade agreements and common market have led to a significant increase in trade and investment between member states and their trading partners.
- EFTA's focus on free trade and economic cooperation has helped to stimulate economic growth in member states.
- By cooperating on research and development, innovation, and education, EFTA member states have become more competitive in the global market.
- EFTA membership has contributed to a higher standard of living and greater prosperity for the citizens of member states.
Challenges for EFTA
- The EU remains EFTA's largest trading partner, but it also poses a significant challenge. The EU's larger size and economic power give it an advantage in negotiations, and some EFTA businesses have expressed concerns about being at a disadvantage compared to their EU counterparts.
- With the ongoing integration of the EU, EFTA needs to ensure that it remains relevant and attractive to potential members and trading partners. The association needs to continue to find ways to differentiate itself from the EU and to offer unique benefits to its members.
- The global economy is constantly evolving, and EFTA needs to be able to adapt to these changes. The association needs to focus on emerging markets and new technologies to ensure that its members remain competitive in the long term.
3. The Way Forward
EFTA remains a vital economic force in Europe. The association is well-positioned to continue to prosper in the coming years, thanks to its strong member states, its focus on free trade and economic cooperation, and its adaptability. By continuing to adapt to the changing global economy and by finding ways to differentiate itself from the EU, EFTA can ensure that it remains a relevant and successful organization for its members in the years to come.
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For Prelims: European Union, free trade, European Free Trade Association, European Economic Community
For Mains:
1. Examine the impact of Switzerland's policy on tariff-free entry for all industrial goods on India's potential gains from the ongoing India-EFTA Free Trade Agreement negotiations. (250 Words)
2. Discuss the strategies and opportunities for EFTA to remain relevant, differentiate itself, and adapt to the evolving global economy. (250 Words)
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Previous Year Questions
1.‘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 Answer (a) 2. Consider the following countries: (2018)
Which of the above are among the ‘free-trade partners’ of ASEAN? (a) 1, 2, 4 and 5 Answer (c) 3. The term ‘Regional Comprehensive Economic Partnership’ often appears in the news in the context of the affairs of a group of countries known as (2016) (a) G20 Answer (b) |
Source: The Indian Express
CONSUMER PRICE INDEX (CPI)
1. Context
Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month of May, 2025 over May, 2024 is 2.82% (Provisional)
2. Consumer Price Index
- The Consumer Price Index (CPI) is a measure of the change in prices of a basket of goods and services that are commonly purchased by consumers. It is the most commonly used measure of inflation.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
3. Wholesale Price Index
- The Wholesale Price Index (WPI) is a measure of the change in prices of goods and services at the wholesale level.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the WPI inflation rate.
- The WPI is calculated for 67 groups of commodities, which are further divided into 225 subgroups.
- The weights of each group and subgroup in the WPI are determined by the value of the goods and services produced in each group and subgroup.
- The WPI inflation rate is an important indicator of inflation at the wholesale level.
- It is used by businesses to make pricing decisions and by the government to set monetary policy.
4. Findings of the Report
4.1. Food inflation
- Food inflation in India remained high in August, at 9.94%. This was driven by rising prices of essential food items, such as cereals, pulses, vegetables, and oils.
- Eleven of the 12 items on the heavyweight food and beverages group of the CPI logged price increases, with oils and fats, the sole item logging a year-on-year decline in prices, posting its first sequential increase in nine months.
- Vegetables provided some relief, with tomatoes leading an appreciable month-on-month deflation of 5.88% in the 19-member basket.
- However, the cooking staples of potatoes and onions were among the seven items that continued to log sequential inflation (2.3% and 12.3%, respectively).
4.2. Monsoon deficit and rising crude oil prices
- The near-term inflation outlook is also made more uncertain by other factors, including a distinct deficit in monsoon rainfall.
- Besides the overall 10% shortfall, sharp regional and temporal anomalies in rain distribution have impacted either the sowing or the quality of produce of several farm items.
- Kharif's sowing of pulses had, as of September 8, recorded an 8.6% shortfall compared with the year-earlier period.
- Another inflation driver, crude oil, has also seen a steady rise in prices as the output cuts by major oil producers of the OPEC+ grouping start to bite.
- The price of India's crude basket had, as of September 12, climbed 7.2% from the average in August to $92.65/barrel, according to official data.
4.3. RBI measures to control inflation
- For the RBI, the latest inflation data further roils its interest rate calculus.
- Unless CPI inflation decelerates by an incredible 250 basis points in September to a 4.33% pace, price gains are certain to substantially overshoot the monetary authority's 6.2% forecast for the July-September quarter, leaving it with few real options to achieve its medium-term price stability goal of 4% inflation.
- As the RBI has been at pains to stress, failure to anchor inflation expectations risks hurting growth.
5. About the sticky Consumer Price Index (CPI)
- The sticky Consumer Price Index (CPI) is a subset of the CPI that includes goods and services that change prices relatively infrequently.
- These goods and services are thought to incorporate expectations about future inflation to a greater degree than prices that change more frequently.
- Some of the items included in the sticky CPI are Rent, Housing costs, Utilities, Education, Healthcare, Transportation, Household furnishings and appliances, Personal insurance, Recreation, and Miscellaneous goods and services.
- The sticky CPI is often used by economists to measure inflation expectations.
- This is because prices of sticky goods and services are less likely to be affected by short-term changes in supply and demand, and are therefore more likely to reflect changes in inflation expectations.
- The sticky CPI is also used by central banks to set monetary policy.
- This is because the central bank wants to make sure that inflation expectations are anchored at a low level.
- If inflation expectations start to rise, the central bank may raise interest rates to bring them back down.
6. How India’s retail inflation is measured?
- India's retail inflation is measured by the Consumer Price Index (CPI), a basket of goods and services commonly purchased by urban households.
- The CPI is calculated by the National Statistical Office (NSO) every month.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular month to those of the same in a base month.
- The base month is usually the previous year's corresponding month. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services, Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living in India.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
7. Calculation of Inflation
- Inflation is the rate at which the prices of goods and services increase over time.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to the prices of the same basket of goods and services in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the inflation rate.
There are two main ways to calculate inflation
1. Consumer Price Index (CPI): The CPI is a measure of the change in prices of a basket of goods and services that are commonly purchased by consumers. It is the most commonly used measure of inflation.
The CPI is calculated by the following formula:
CPI = (Cost of a basket of goods and services in current period / Cost of a basket of goods and services in base period) * 100
2. Producer Price Index (PPI): The PPI is a measure of the change in prices of goods and services that are produced by businesses. It is used to track inflation at the wholesale level.
The PPI is calculated by the following formula:
PPI = (Cost of a basket of goods and services at the wholesale level in the current period / Cost of a basket of goods and services at the wholesale level in the base period) * 100
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For Prelims: Consumer Price Index, Wholesale Price Index, Inflation, retail inflation, Producer Pirce Index, National Statistical Office, OPEC+, Crude oil, Kharif season, Monsoon,
For Mains:
1. Analyse the factors contributing to high food inflation in India in recent months. Discuss the impact of high food inflation on the Indian economy and suggest measures to mitigate it. (250 words)
2. Explain the concept of sticky inflation. What are the various factors that contribute to sticky inflation? Discuss the implications of sticky inflation for the Indian economy. (250 words)
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Previous Year Questions
1. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
Answer: C
2. With reference to India, consider the following statements: (UPSC 2010)
1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.
2. As compared to Consumer Price Index for Industrial Workers (CPI(IW)), the WPI gives less weight to food articles.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: C
3. Consider the following statements: (UPSC 2020)
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. 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
4. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
5. The Public Distribution System, which evolved as a system of management of food and distribution of food grains, was relaunched as _______ Public Distribution System in 1997. (SSC JE EE 2021)
A. Evolved B. Transformed C. Tested D. Targeted
Answer: D
6. Under the Antyodaya Anna Yojana, up to what quantity of rice and wheat can be purchased at a subsidised cost? (FCI AG III 2023)
A. 35 kg B. 40 kg C. 30 kg D. 25 kg E. 50 kg
Answer: A
7. As per the the National Statistical Office (NSO) report released on 7 January 2022, India's Gross domestic product (GDP) is expected to grow at ___________ per cent (in first advance estimates) in the fiscal year 2021-22? (ESIC UDC 2022)
A. 17.6 per cent B. 9.5 per cent C. 11 per cent D. 9.2 per cent E. None of the above
Answer: D
8. The main emphasis of OPEC (Organisation of the Petroleum Exporting Countries) is on which of the following? (UKPSC 2016)
A. The production of petroleum
B. Control over prices of petroleum
C. Both (a) and (b)
D. None of the above
Answer: C
9. In the context of global oil prices, "Brent crude oil" is frequently referred to in the news. What does this term imply? (UPSC 2011)
1. It is a major classification of crude oil.
2. It is sourced from the North Sea.
3. It does not contain sulfur.
Which of the statements given above is/are correct?
A. 2 only B. 1 and 2 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
10. The term 'West Texas Intermediate', sometimes found in news, refers to a grade of (UPSC 2020)
A. Crude oil B. Bullion C. Rare earth elements D. Uranium
Answer: C
11. With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements: (UPSC 2019)
1. Area under rice cultivation is the highest.
2. Area under the cultivation of jowar is more than that of oilseeds.
3. Area of cotton cultivation is more than that of sugarcane.
4. Area under sugarcane cultivation has steadily decreased.
Which of the statements given above are correct?
A. 1 and 3 only B. 2, 3 and 4 only C. 2 and 4 only D. 1, 2, 3 and 4
Answer: A
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Source: The Hindu
