MONETARY POLICY COMMITTEE (MPC)
1. Context
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday voted unanimously to reduce the policy repo rate by 25 basis points (bps) to 5.25% with immediate effect.
2. What is Monetary policy?
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)
5.Monetary Policy Committe and Inflation
- 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
6. Way forward
With more than half of the current financial year witnessing positive developments in the economy, the full financial year should conclude as projected with a strong growth performance and macroeconomic stability. Yet risks on the downside persist. Inflation is one of them that has kept both the government and the RBI on high alert. Financial flows in the external sector also need constant monitoring as they impact the value of rupee and the balance of payments. A fuller transmission of the monetary policy may also temper domestic demand
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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 |
Source: Indianexpress
SPECIAL INTENSIVE REVISION (SIR)
1. Context
The Election Commission (EC) on Friday further extended by a week the schedule of the special intensive revision (SIR) of electoral rolls in Kerala as the local body elections are being held in the State.
2. What is the Special Intensive Revision?
- The Special Intensive Revision (SIR) of the Electoral Rolls is an important exercise undertaken by the Election Commission of India (ECI) to ensure that the voter lists (electoral rolls) are accurate, updated, and inclusive before any major election or as part of the annual revision cycle.
- In simpler terms, the SIR is a comprehensive verification and correction process of the electoral rolls — aimed at including eligible voters, removing ineligible ones, and rectifying errors in the existing list.
- It is called “special” because it involves an intensified, house-to-house verification and greater public participation compared to the routine annual summary revision
- The purpose of the Special Intensive Revision is to maintain the purity, accuracy, and inclusiveness of India’s democratic process. Clean and updated voter rolls are essential for free, fair, and credible elections, as they prevent issues like bogus voting, disenfranchisement, and duplication.
- In summary, the Special Intensive Revision (SIR) is a focused, large-scale voter verification campaign conducted by the Election Commission to ensure that the electoral rolls are error-free, inclusive, and reflective of the current eligible voting population. It plays a crucial role in strengthening the integrity and transparency of India’s electoral system
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During the Special Intensive Revision, Booth Level Officers (BLOs) visit households to verify voter details such as name, address, age, and photo identity. This exercise helps identify:
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3. Election Commission of India, its powers and functions
- Article 324(1) of the Indian Constitution empowers the Election Commission of India (ECI) with the authority to oversee, guide, and manage the preparation of electoral rolls as well as the conduct of elections for both Parliament and the State Legislatures.
- As per Section 21(3) of the Representation of the People Act, 1950, the ECI holds the right to order a special revision of the electoral roll for any constituency, or part of it, at any time and in a manner it considers appropriate.
- According to the Registration of Electors’ Rules, 1960, the revision of electoral rolls may be carried out intensively, summarily, or through a combination of both methods, as directed by the ECI.
- An intensive revision involves preparing an entirely new roll, while a summary revision deals with updating or modifying the existing one
4. How is SIR different from the National Register of Citizens (NRC)?
| Aspect | Special Intensive Revision (SIR) | National Register of Citizens (NRC) |
| Purpose | To verify, update, and correct the electoral rolls so that all eligible voters are included and ineligible names are removed | To identify legal citizens of India and detect illegal immigrants |
| Authority / Governing Body | Conducted by the Election Commission of India (ECI) | Conducted under the Ministry of Home Affairs (MHA) |
| Legal Basis | Based on Article 324(1) of the Constitution, Section 21(3) of the Representation of the People Act, 1950, and the Registration of Electors' Rules, 1960. | Governed by the Citizenship Act, 1955 and the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003 |
| Scope | Focuses only on Indian citizens aged 18 years and above who are eligible to vote | Covers all residents of India (or a particular state) to determine their citizenship status |
| Nature of the Exercise | A regular, recurring administrative exercise carried out to maintain accurate voter lists | A special, large-scale verification exercise conducted under specific legal or political mandates. |
| Relation to Citizenship | Does not determine citizenship — only eligibility to vote | Directly determines citizenship status |
5. What are the concerns related to SIR?
One of the major concerns is the erroneous deletion of eligible voters from the rolls.
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Mistakes during house-to-house verification or data entry may lead to legitimate voters—especially migrants, daily-wage workers, and marginalized communities—being left out.
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Such exclusions can directly affect voter participation and undermine the democratic process.
Despite the intensive verification, fake or duplicate names often remain due to poor coordination or outdated records.
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Deaths, migrations, or multiple registrations in different constituencies are not always updated accurately.
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This raises questions about the accuracy and credibility of the electoral rolls.
The SIR is a large-scale field operation requiring trained personnel, coordination among departments, and robust data systems.
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Booth Level Officers (BLOs) are often overburdened with multiple duties and may not have sufficient time or training for thorough verification.
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Limited digital infrastructure in rural areas can also hamper real-time data updates.
Electoral roll revisions, especially when conducted close to elections, can spark political allegations of bias or manipulation.
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Parties may accuse each other or the Election Commission of targeting specific communities or constituencies.
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Even unintentional errors can lead to trust deficits in the electoral process.
6. Way Forward
While the Special Intensive Revision is essential for ensuring clean and updated electoral rolls, its effectiveness depends on transparent procedures, proper training, digital accuracy, and public awareness.
Addressing these concerns is vital to maintain trust in the Election Commission and uphold the credibility of India’s democratic system
Addressing these concerns is vital to maintain trust in the Election Commission and uphold the credibility of India’s democratic system
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For Prelims: Special Intensive Revision (SIR), National Register of Citizens (NRC), Election Commission of India (ECI)
For Mains: GS II - Indian Polity
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Previous year Question1. Consider the following statements: (UPSC 2017)
1. The Election Commission of India is a five-member body.
2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
3. Election Commission resolves the disputes relating to splits/mergers of recognized political parties.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 only
C. 2 and 3 only
D. 3 only
Answer: D
2. Consider the following statements : (UPSC 2021)
1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.
2. In the 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies.
3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. 1 and 3
D. 2 and 3
Answer: B
Mains
1.To enhance the quality of democracy in India the Election Commission of India has proposed electoral reforms in 2016. What are the suggested reforms and how far are they significant to make democracy successful? (UPSC CSE 2017)
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Source: Indianexpress
OPEN MARKET OPERATIONS (OMO)
1. Context
In view of the evolving liquidity conditions and the outlook, the Reserve Bank of India (RBI) on Friday announced to conduct Open Market Operation (OMO) purchases of government securities of ₹1,00,000 crore and a three-year USD/INR Buy Sell swap of $5 billion this month to inject durable liquidity into the system.
2. Open market operations by RBI
- Open market operations (OMOs) are a monetary policy tool used by central banks to influence the money supply and interest rates.
- It involves buying and selling government securities in the open market. When the central bank buys government securities, it injects money into the economy. When it sells government securities, it withdraws money from the economy.
- Open market operations (OMOs) are the buying and selling of government securities in the open market by the Reserve Bank of India (RBI) to influence the money supply and interest rates.
- When the RBI buys government securities, it injects money into the economy. This is because the RBI pays for the securities using cash.
- This increase in the money supply can lead to lower interest rates and higher economic growth.
- When the RBI sells government securities, it withdraws money from the economy. This is because the RBI receives cash in exchange for the securities.
- This decrease in the money supply can lead to higher interest rates and lower economic growth.
2.1. Examples of OMOs by RBI
The RBI uses OMOs to achieve its monetary policy objectives, which are to maintain price stability and promote sustainable economic growth. For example, the RBI may conduct OMOs to:
- inject liquidity into the economy to support economic growth during a recession.
- Withdraw liquidity from the economy to control inflation.
- Manage the exchange rate of the rupee.
The RBI has used OMOs to inject liquidity into the economy to support economic growth. For example, in March 2020, the RBI conducted a series of OMOs to inject ₹30,000 crores into the economy in response to the COVID-19 pandemic.
The RBI has also used OMOs to withdraw liquidity from the economy to control inflation. For example, in October 2022, the RBI announced that it would conduct OMO sales of government bonds to withdraw ₹50,000 crores from the economy.
2.2. Advantages and Disadvantages of OMOs by RBI
- OMOs are a flexible tool that the RBI can use to quickly and precisely adjust the money supply and interest rates.
- They are also a relatively transparent tool, as the RBI typically announces its OMO plans in advance.
- OMOs can be complex and difficult to understand. They can also be less effective in influencing the economy during times of financial market stress.
- OMOs are a powerful tool that the RBI can use to manage the money supply and interest rates. They are an important part of the RBI's monetary policy toolkit.
3. Monetary Policy Committee
The Monetary Policy Committee (MPC) is a committee or group responsible for setting the monetary policy of a country, including key interest rates. It is an important institution in many central banks worldwide, including the Reserve Bank of India (RBI).
Key features and functions of a Monetary Policy Committee:
- The MPC typically consists of a group of experts, including both members from the central bank and external members. In the case of the RBI, the MPC is composed of six members: three from the RBI, including the RBI Governor, and three external members appointed by the Government of India.
- The primary function of the MPC is to make decisions regarding the central bank's monetary policy, including setting key policy interest rates. This group assesses various economic indicators, financial market conditions, and other factors to make informed decisions.
- Many MPCs, including the RBI's MPC, operate under a framework of inflation targeting. This means that their primary objective is to achieve and maintain a specific inflation rate within a target range. The committee uses interest rate adjustments to control inflation.
- MPCs aim to operate transparently and communicate their decisions to the public. They often release statements explaining the rationale behind their decisions and their economic outlook.
- The independence of the MPC from political interference is crucial. It allows the committee to make decisions solely based on economic and financial considerations, free from political pressures.
- MPCs typically meet at regular intervals, such as every quarter or month, to review the economy, assess the impact of previous policy decisions, and make adjustments if necessary.
- MPCs engage in economic forecasting to anticipate future economic conditions, including inflation trends. These forecasts guide their monetary policy decisions.
- One of the primary tools at the disposal of an MPC is setting key policy interest rates. For example, the RBI's MPC sets the repo rate (the rate at which banks can borrow money from the central bank) and the reverse repo rate (the rate at which banks can lend money to the central bank).
- Decisions made by the MPC can have a significant impact on financial markets. Changes in policy rates can affect interest rates, exchange rates, and asset prices.
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For Prelims: RBI, Monetary Policy Committee, COVID-19 pandemic, Open market operations, interest rates, inflation,
For Mains:
1. Explain the concept of Open Market Operations (OMO) as a monetary policy tool. How do OMOs impact the money supply and interest rates in an economy? Provide examples of OMOs conducted by the Reserve Bank of India (RBI) to achieve its monetary policy objectives. (250 Words)
2. Explore the concept of inflation targeting and how it influences the primary objective of the Monetary Policy Committee. Discuss the significance of interest rate adjustments in controlling inflation. (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
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 5. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: C
6. In the context of vaccines manufactured to prevent COVID-19 pandemic, consider the following statements: (UPSC 2022)
1. The Serum Institute of India produced COVID-19 vaccine named Covishield using mRNA platform.
2. Sputnik V vaccine is manufactured using vector based platform.
3. COVAXIN is an inactivated pathogen based vaccine.
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
7. In the context of Indian economy, 'Open Market Operations' refers to (UPSC 2013)
A. borrowing by scheduled banks from the RBI
B. lending by commercial banks to industry and trade
C. purchase and sale of government securities by the RBI
D. None of the above
Answer: C
8. If the interest rate is decreased in an economy, it will (UPSC 2014)
A. decrease the consumption expenditure in the economy
B. increase the tax collection of the Government
C. increase the investment expenditure in the economy
D. increase the total savings in the economy
Answer: C
9. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
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
10. 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
Answer: D
11. 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
12. 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
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Source: Indianexpress
QUAD
1. Context
At a time when ties between India and the US are strained over punitive tariffs, New Delhi and Washington have come together to cooperate on counter-terrorism. And, the Quad members also joined in Delhi to work on ways to expand cooperation to combat terrorism under the framework of the grouping.
2. Quadrilateral Security Dialogue (QUAD)
- The Quad, short for the Quadrilateral Security Dialogue, is a strategic forum comprising four major Indo-Pacific countries: the United States, Japan, India, and Australia.
- The Quad was initiated in 2007 but was relatively dormant for several years before experiencing a revival and increased prominence in recent times.
3. Objectives
- The Quad aims to promote a free, open, and inclusive Indo-Pacific region. Its core objectives include ensuring regional security, stability, and economic prosperity.
- It seeks to uphold the rules-based international order and address common challenges such as maritime security, infrastructure development, economic connectivity, and disaster response.
4. Member Countries
- United States: As a major Pacific power, the U.S. plays a central role in the Quad, emphasizing its commitment to the Indo-Pacific region's security and stability.
- Japan: Japan is a key member, contributing its economic and technological prowess, and advocating for a rules-based international order.
- India: India brings its strategic location and growing influence in the Indo-Pacific to the Quad, strengthening regional security cooperation.
- Australia: Australia is a significant player, contributing to maritime security efforts and championing economic development in the Indo-Pacific.
5. Meetings and Engagement
- The Quad holds regular meetings at various levels, including ministerial meetings and consultations among senior officials.
- It engages in dialogues on a wide range of regional and global issues, from security and defense to infrastructure development and technology cooperation.
Regional Implications:
- The Quad has been viewed as a response to China's rising influence in the Indo-Pacific. However, member countries emphasize that it is not an alliance against any specific country but rather a platform for cooperation on shared interests.
- Some view the Quad as a potential counterbalance to China's assertive behavior in the South China Sea and its Belt and Road Initiative (BRI) infrastructure projects.
Expanding Partnerships:
- The Quad has sought to expand its partnerships with other countries in the Indo-Pacific, including Southeast Asian nations. This approach reflects its commitment to inclusivity and regional engagement.
6. Significance of QUAD for India
The Quad holds significant importance for India due to several strategic, economic, and geopolitical reasons:
Countering Regional Challenges:
- The Quad provides India with a platform to collaborate with like-minded countries, such as the United States, Japan, and Australia, to address common regional challenges. These challenges include maritime security, territorial disputes, and economic concerns in the Indo-Pacific.
Strengthening Regional Security:
- As a member of the Quad, India gains access to enhanced security cooperation, intelligence sharing, and joint exercises. This bolsters its ability to protect its interests and contribute to regional stability in the face of security threats.
Balancing China's Influence:
- India views the Quad as a mechanism to balance China's growing influence in the Indo-Pacific. It helps deter aggressive actions and assertive behavior by China, particularly in areas like the South China Sea and the Indian Ocean region.
Economic Opportunities:
- The Quad promotes economic connectivity and infrastructure development in the Indo-Pacific. India can leverage these initiatives to enhance its trade, investment, and connectivity in the region, which is vital for its economic growth.
Strengthening Ties with Key Allies:
- The Quad allows India to deepen its strategic partnerships with key allies, such as the United States and Japan. These relationships have resulted in increased defense cooperation, technology sharing, and economic collaboration.
Regional Leadership Role:
- Participation in the Quad elevates India's status as a regional leader in the Indo-Pacific. It aligns with India's "Act East" policy, reinforcing its commitment to the stability and prosperity of the broader region.
7. Challenges
- China's Territorial Claims: China claims that it has historical ownership over nearly the entire region of the South China Sea, which gives it the right to manufacture islands. However, the International Court of Arbitration rejected the claim in 2016.
- China's Closeness to ASEAN: The ASEAN countries also have a well-knit relationship with China. The Regional Cooperation Economic Partnership (RCEP) is a recent example of China's increasing influence over ASEAN nations.
- Economic Power of China: Considering the economic might of China and the dependence of QUAD nations like Japan and Australia on China, the QUAD nations can not afford to have strained relations with it.
- Convergence among Quad Nations: The nations in the Quad grouping have different aspirations, and aims at balancing their own interest. Therefore, coherence in the vision of the Quad nation as a grouping is absent.
8. Way forward
The Quad represents a forum for strategic cooperation among four major Indo-Pacific nations, with a focus on regional security, economic development, and upholding the rules-based international order. Its evolving role in the region will likely be a subject of ongoing geopolitical interest and debate.
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For Prelims: Quadrilateral Security Dialogue (QUAD), South China Sea, Belt and Road Initiative (BRI), Indo-Pacific region, ASEAN, and Regional Cooperation Economic Partnership (RCEP).
For Mains: 1. Discuss the evolution, objectives, and geopolitical significance of the Quad (Quadrilateral Security Dialogue) in the context of the Indo-Pacific region. Analyze the challenges and opportunities it presents for the member countries, particularly India. (250 words).
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Source: The Indian Express
DIRECTORATE OF ENFORCEMENT (ED)
1. Context
In March 2005, the Jharkhand police stormed an aeroplane about to take off from Ranchi’s Birsa Munda Airport. They were looking for two newly elected MLAs, Hari Narayan Rai, 42, and Enos Ekka, 35. Finding the MLAs was critical, as they were the missing pieces in deciding the new Chief Minister of Jharkhand
2. About the Directorate of Enforcement
The Directorate of Enforcement (ED) is a law enforcement agency in India that operates under the Department of Revenue, Ministry of Finance. It is responsible for enforcing economic laws and fighting financial crimes in the country. The primary objective of the Directorate of Enforcement is to enforce the provisions of two major laws:
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Foreign Exchange Management Act (FEMA): This law deals with foreign exchange and foreign trade in India. The ED ensures compliance with FEMA regulations and investigates violations related to foreign exchange transactions.
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Prevention of Money Laundering Act (PMLA): The ED is also responsible for implementing the provisions of the PMLA, which focuses on preventing money laundering and combating the financing of terrorism. It investigates cases related to money laundering and takes appropriate action against those involved.
The Directorate of Enforcement plays a crucial role in maintaining the economic stability of the country by addressing financial offenses and ensuring compliance with relevant laws. It conducts investigations, searches, and seizures, and has the authority to attach and confiscate properties acquired through illegal means
3. Establishment and History
- The Directorate of Enforcement was established on 1st May 1956, as the "Enforcement Unit" within the Department of Economic Affairs.
- Its primary focus was on preventing and detecting violations of the Foreign Exchange Regulation Act (FERA) of 1947.
- Over the years, the agency's role expanded, and in 1999, the Enforcement Directorate was established as a separate entity under the Ministry of Finance.
- The enactment of the Prevention of Money Laundering Act (PMLA) in 2002 further broadened its jurisdiction, giving it the power to investigate cases related to money laundering.
- Since its establishment, the ED has played a crucial role in combating economic offences and ensuring compliance with economic laws in India.
- It has been involved in several high-profile cases, including those related to financial scams, money laundering by influential individuals, and cross-border financial crimes.
- The ED collaborates with various domestic and international agencies, including financial intelligence units, law enforcement agencies, and Interpol, to gather information, share intelligence, and effectively coordinate efforts to combat economic offences.
4. Functions and Roles of ED
4.1. Enforcing Economic Laws
- The primary function of the ED is to enforce two key economic laws in India: the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).
- It ensures compliance with these laws and investigates money laundering, foreign exchange violations, and economic fraud cases.
4.2. Money Laundering Investigations
- The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate.
- It identifies and seizes properties and assets derived from illicit activities and prevents their further use.
4.3. Foreign Exchange Violations
- The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations.
- It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.
4.4 Financial Frauds
- The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system.
- It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.
5. Challenges
5.1. The complexity of economic crimes.
- Economic crimes are often complex and involve a variety of financial transactions.
- This can make it difficult for the ED to trace the proceeds of crime and to build a case against the perpetrators.
5.2. The difficulty of tracing the proceeds of crime
- The proceeds of crime are often hidden in complex financial structures, making it difficult for the ED to track them down.
- The ED also faces challenges in obtaining information from foreign jurisdictions, where the proceeds of crime may have been transferred.
5.3. The lack of international cooperation
- Economic crime is often transnational, making it difficult for the ED to cooperate with foreign law enforcement agencies.
- This is due to differences in legal systems, as well as political and economic considerations.
5.4. Political interference
- The ED has been accused of being used as a political tool by the ruling party to target its opponents and critics.
- This has raised questions about the independence and impartiality of the ED.
5.5. Lack of transparency
- The ED has been criticized for its lack of transparency.
- The agency does not publish its annual reports, and it is difficult to obtain information about its investigations.
- This has made it difficult for the public to hold the ED accountable.
5.6. Human rights violations
- The ED has been accused of violating the human rights of those it investigates.
- The agency has been accused of using coercive tactics, such as prolonged detention and interrogation, to extract confessions from suspects.
5.7. The limited resources
- The ED is a relatively small agency with limited resources.
- This can make it difficult for the ED to investigate complex economic crimes and prosecute the perpetrators.
6. Conclusion
- The Directorate of Enforcement in India plays a crucial role in enforcing economic laws, preventing money laundering, and combating financial crimes.
- With its specialized expertise, investigative capabilities, and coordination with domestic and international partners, the ED contributes to the integrity of the financial system, national security, and the country's overall socio-economic development.
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For Prelims: Directorate of Enforcement, Financial Action Task Force, Prevention of Money Laundering Act (PMLA), the Foreign Exchange Management Act (FEMA), Supreme Court, Foreign Exchange Regulation Act (FERA) of 1947, Central Bureau of Investigation,
For Mains:
1. Discuss the establishment and evolution of the Directorate of Enforcement in India. Explain its key functions and roles in combating economic offences. (250 Words)
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Previous Year Questions 1. Which one of the following is not correct in respect of Directorate of Enforcement ? (CDS 2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
Answer: D
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
A. July 2002 B. August 2003 C. July 2004 D. July 2005
Answer: D
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC 2013)
A. 1991 B. 1997 C. 2000 D. 2007
Answer: C
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020)
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
Answer: D
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017)
A. Union B. State C. Global D. Concurrent
Answer: A
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Source: The Indian Express
AIR POLLUTION
1. Context
As the government looks to tackle the stubborn smog choking the national capital region (NCR), flagging vehicular pollution and calling for a shift to electric vehicles (EVs), China’s action plan for curbing air pollution in its capital city offers some actionable cues.
2. Air Pollution and its severity
According to the International Energy Associates, road transport accounts for 12% of India’s CO2 emissions, with heavy vehicles being the primary source of Particulate Matter (PM) 2.5 emissions. PM2.5 consists of tiny particles that can penetrate deeply into the lungs and enter the bloodstream, leading to various respiratory and cardiovascular issues. Heavy vehicles also play a major role in emitting Nitrogen Oxide (NOx), which has similar health effects. NOx contributes to the formation of ground-level ozone, which degrades air quality and increases heat, exacerbating air pollution in urban areas. Research shows that heavy vehicles are responsible for approximately 60-70% of vehicular PM emissions and about 40-50% of NOx emissions in cities
3. Measures to Control Air Pollution
- With the transport sector expanding at a rate of 9.1% annually, the Bureau of Energy Efficiency’s (BEE) effort to develop draft Corporate Average Fuel Economy (CAFE) standards for cars in India is both timely and commendable.
- The planned implementation timelines for CAFE III (2027-2032) and CAFE IV (2032-2037) are practical. Transitioning from the Modified India Driving Cycle (MIDC) to the World Light Duty Vehicle Testing Procedure (WLTP) starting March 31, 2027, is a positive move, as the WLTP provides a more accurate and globally standardized assessment of a vehicle's fuel consumption and CO2 emissions.
- The proposed emissions targets under CAFE III at 91.7g CO2/km and CAFE IV at 70g CO2/km are achievable. These stringent CO2 targets are crucial for fostering innovation and promoting the adoption of cleaner technologies.
- For the benefit of both the environment and public health, these targets should remain firm.
- However, it is important to note that the CAFE norms do not cover emissions from heavy vehicles such as trucks and lorries
4. Government Initiatives to Control air pollution
- In 2022, the government launched a vehicle scrappage policy aimed at retiring old and polluting vehicles, including heavy-duty ones. The policy requires passenger vehicles older than 20 years and commercial vehicles older than 15 years to pass a “fitness and emissions test.”
- Vehicles that fail these tests are deemed end-of-life, lose their registration certificates, and are recommended for scrapping.
- However, the policy has not yet been effectively implemented in Karnataka due to the limited number of scrapyards (only two in the entire state) and its voluntary nature.
- In Bangalore, many older vehicles are not four-wheelers but include older BMTC buses, private vans, and heavy vehicles.
- Maharashtra, among 21 states, has introduced incentives like road tax discounts or new vehicle purchase reductions to promote scrapping, but these measures have yet to significantly impact air pollution. It is crucial for policymakers to ensure that these guidelines are not just theoretically sound but practically enforced.
- Current government measures to address air pollution—such as regular vehicle emissions testing, banning open garbage burning, and monitoring industrial emissions—must be strictly enforced.
- While the government's efforts to reduce air pollution are commendable, it is important to emphasize that expanding mass transit is essential for a sustainable approach to tackling air pollution in India
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For Prelims: National Clean Air Programme, Air Pollution, Particulate Matter, Clean Air Action Plans For Mains:
1. What are the challenges and opportunities presented by the National Clean Air Programme (NCAP) for improving air quality in Indian cities? Discuss the measures required to overcome implementation hurdles and ensure the effective management of air pollution. (250 Words)
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Previous Year Questions
1. In the cities of our country, which among the following atmospheric gases are normally considered in calculating the value of Air Quality Index? (UPSC 2016)
Select the correct answer using the code given below: A. 1, 2 and 3 only B. 2, 3 and 4 only C. 1, 4 and 5 only D. 1, 2, 3, 4 and 5 2. Which of the following are the reasons/factors for exposure to benzene pollution? (UPSC 2020)
Select the correct answer using the code given below: A. 1, 2 and 3 only B. 2 and 4 only C. 1, 3 and 4 only D. 1, 2, 3, 4 and 5
3. What is the ‘Greenhouse Gas Protocol’? (UPSC 2016) (a) It is an international accounting tool for government and business leaders to understand, quantify and manage greenhouse gas emissions
(b) It is an initiative of the United Nations to offer financial incentives to developing countries to reduce greenhouse gas emissions and to adopt eco-friendly technologies.
(c) It is an inter-governmental agreement ratified by all the member countries of the United Nations to reduce greenhouse gas emissions to specified levels by the year 2022
(d) It is one of the multilateral REDD+ initiatives hosted by the World Bank
4. Photochemical smog is a resultant of the reaction among (UPSC 2013) (a) NO2, O3 and peroxyacetyl nitrate in the presence of sunlight
(b) CO, O2 and peroxyacetyl nitrate in the presence of sunlight
(c) CO, CO2 and NO2 at low temperature
(d) high concentration of NO2 O3 and CO in the evening
5. Acid rain is caused by the pollution of the environment (UPSC 2013, 2022) (a) Carbon Dioxide and Nitrogen
(b) Carbon Monoxide and Carbon Dioxide
(c) Ozone and Carbon Dioxide
(d) Nitrous Oxide and Sulphur Dioxide
6. Biological Oxygen Demand (BOD) is a standard criterion for (UPSC 2017) (a) Measuring oxygen level in blood
(b) Computing oxygen levels in forest ecosystems
(c) Pollution assay in aquatic ecosystem
(d) Assessing oxygen levels in high-altitude regions
7. The Ministry of Environment, Forest and Climate Change recently published the draft Environment Impact Assessment (EIA) Notification, in 2020. Which of the following statements is correct about EIA? (Punjab Civil Service 2020)
1. It predicts the effect of a proposed industrial/infrastructural project on the environment.
2. It prevents the proposed activity/project from being approved without proper oversight or taking adverse consequences into account.
3. It compares various alternatives for a project and seeks to identify the one which represents the best combination of economic and environmental costs and benefits.
4. As per the new notification, Coal and non-Coal mineral prospecting and solar photovoltaic projects do not need prior environmental clearance.
Select the correct answer using the code given below:
A. Only 1 and 2
B. Only 2, 3 and 4
C. Only 1, 2 and 3
D. Only 1, 2 and 4
8. Headquarters of the World Meteorological Organization is located in (NDA 2017)
A. Washington B. Geneva C. Moscow D. London
9. With reference to the 'Global Climate Change Alliance', which of the following statements is/are correct? (UPSC 2017)
1. It is an initiative of the European Union.
2. It provides technical and financial support to targeted developing countries to integrate climate change into their development policies and budgets.
3. It is coordinated by World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD)
Select the correct answer using the code given below:
A. 1 and 2 only B. 3 only C. 2 and 3 only D. 1, 2 and 3
10. The IPCC is the United Nations body for assessing the science related to climate change. IPCC stands for: (RRB NTPC CBT 2 2022)
A. Intergovernmental Provision on Climate Change
B. International Panel on Climate Change
C. International Provision on Climate Change
D. Intergovernmental Panel on Climate Change
11. Comprehension (SSC CHSL 2020)
Direction: In the following passage some words have been deleted. Fill in the blanks with the help of the alternatives given. Select the most appropriate option for each blank.
Forest fire always (1) ______ by one of two reasons-naturally caused or human-caused. Natural fire is generally (2) ______ by lightning, with a very small percentage (3) ______ by spontaneous combustion of dry fuel such as sawdust and leaves. (4) ______, human-caused fire can happen (5) ______ any number of reasons.
Select the most appropriate option for blank No. 1.
A. takes up B. happens C. causes D. creates
12. Which of the following statements best describes the term 'Social Cost of Carbon'? It is a measure, in monetary value, of the (UPSC 2020)
A. long-term damage done by a tonne of CO2 emission in a given year.
B. requirement of fossil fuels for a country to provide goods and services to its citizens, based on the burning of those fuels.
C. efforts put in by a climate refugee to adapt to live in a new place.
D. contribution of an individual person to the carbon footprint on the planet Earth.
13. The increasing amount of carbon dioxide in the air is slowly raising the temperature of the atmosphere, because it absorbs (UPSC 2012)
A. the water vapour of the air and retains its heat
B. the ultraviolet part of the solar radiation
C. all the solar radiations
D. the infrared part of the solar radiation
14. As per the World Health Organisation (WHO) recommendation of a balanced diet, to avoid unhealthy weight gain, total fat should NOT exceed _______ of total energy intake. (UPSSSC Mandi Inspector 2019)
A. 20% B. 30% C. 10% D. 40%
15. What is the role of ultraviolet (UV) radiation in the water purification systems? (UPSC 2012)
1. It inactivates/kills the harmful microorganisms in water.
2. It removes all the undesirable odours from the water.
3. It quickens the sedimentation of solid particles, removes turbidity and improves the clarity of water.
Which of the statements given above is/are correct?
A. 1 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
16. Which of the following ultraviolet rays is more dangerous? (UPTET 2017)
A. UV-A B. UV-B C. UV-C D. None of the above
17. Consider the following statements: (UPSC 2019)
1. Agricultural soils release nitrogen oxides into environment.
2. Cattle release ammonia into environment.
3. Poultry industry releases reactive nitrogen compounds into environment.
Which of the statements given above is/are correct?
A. 1 and 3 only B. 2 and 3 only C. 2 only D. 1, 2 and 3
18. Which of the following is a VOC? (MP Vyapam 2022)
A. Toulene B. Water C. Carbon dioxide D. Carbon monoxide
19. Volatile Organic Compounds (VOCs) are of great concern because (UGC NET Environmental Science 2020)
A. Once such compounds are in the vapour state, they are difficult to control in the environment.
B. Most of them are ozone-depleting substances
C. They contribute to a general increase in reactive hydrocarbons in the atmosphere.
D. They are less soluble in water.
Answers: 1-B, 2-A, 3-A, 4-A, 5-D, 6-C, 7-D, 8-B, 9-A, 10-D, 11-B, 12-A, 13-D, 14-B, 15-A, 16-C, 17-D, 18-A, 19-C
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Source: The Hindu
