CRITICAL MINERALS
Prime Minister Narendra Modi on Sunday met South African President Cyril Ramaphosa on the sidelines of the G-20 Summit here.
The two leaders discussed cooperation in various areas, including trade, investment, mining, critical minerals, AI, and food security.
- Rare Earth Elements (REEs): neodymium, dysprosium, terbium
- Lithium
- Cobalt
- Graphite
- Gallium
- Indium
- Tungsten
- Platinum Group Metals (PGMs)
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- Minerals such as copper, lithium, nickel, and cobalt, along with certain rare earth elements, are considered critical due to their essential role in the global transition to greener and cleaner energy sources.
- According to the International Energy Agency (IEA), the demand for lithium surged by 30% in 2023, with nickel, cobalt, graphite, and rare earth elements experiencing growth between 8% and 15%, collectively valued at $325 billion.
- The IEA's Global Critical Minerals Outlook 2024 report indicates that achieving the world's goal of limiting global warming to 1.5 degrees Celsius within a net-zero emissions framework will necessitate a significant increase in demand for these minerals.
- By 2040, copper demand is projected to rise by 50%, nickel, cobalt, and rare earth elements by 100%, graphite by 300%, and lithium by 800%, which is vital for battery production.
- Developing sustainable supply chains for these minerals is therefore crucial. In India, the absence of readily available reserves has led to complete import dependence for minerals such as lithium, cobalt, and nickel.
- Although India possesses natural reserves of several critical minerals, they remain largely unexplored and untapped. For example, despite holding 11% of the world's ilmenite deposits, which is the primary source of titanium dioxide used in numerous applications, India still imports a billion dollars' worth of titanium dioxide annually, as noted by former Mines Secretary Vivek Bharadwaj.
- Additionally, the "lucky" discovery of lithium reserves in the Union Territory of Jammu and Kashmir (J&K) by the Geological Survey of India (GSI) while exploring for limestone has raised hopes for achieving some level of self-sufficiency in lithium. Announced in February as India's first lithium find, these reserves are estimated at 5.9 million tonnes, prompting the government to expedite their extraction.
- Recognizing the risks of relying on a limited number of countries for these minerals and their processing, the central government amended the Mines and Minerals (Development and Regulation) Act, 1957 in August 2023 to allow mining concessions for 24 critical and strategic minerals.
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For Prelims: Critical minerals, Ministry of Mines, carbon emissions, cleaner energy, lithium, cobalt, nickel, graphite, tin, copper, Selenium, Cadmium, Centre of Excellence on critical minerals, Australia's CSIRO, Geological Survey of India,
For Mains:
1. What are critical minerals? Discuss their significance for a country's economic development and national security. Explain how the identification of critical minerals helps in reducing import dependency and ensuring resource security. (250 Words)
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Previous Year Questions
1. With reference to the mineral resources of India, consider the following pairs: (UPSC 2010)
Mineral 90%Natural sources in
1. Copper Jharkhand
2. Nickel Orissa
3. Tungsten Kerala
Which of the pairs given above is/are correctly matched?
A. 1 and 2 only B. 2 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
2. Recently, there has been a concern over the short supply of a group of elements called 'rare earth metals.' Why? (UPSC 2012)
1. China, which is the largest producer of these elements, has imposed some restrictions on their export.
2. Other than China, Australia, Canada and Chile, these elements are not found in any country. 3. Rare earth metals are essential for the manufacture of various kinds of electronic items and there is a growing demand for these elements.
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
Answer: C
3. In India, what is the role of the Coal Controller's Organization (CCO)? (UPSC 2022)
1. CCO is the major source of Coal Statistics in Government of India.
2. It monitors progress of development of Captive Coal/Lignite blocks.
3. It hears any objection to the Government's notification relating to acquisition of coal-bearing areas.
4. It ensures that coal mining companies deliver the coal to end users in the prescribed time. Select the correct answer using the code given below:
A. 1, 2 and 3 B. 3 and 4 only C. 1 and 2 only D. 1, 2 and 4
Answer: A
4. 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.
Answer: A
5. Direction: It consists of two statements, one labelled as ‘Statement (I)’ and the others as ‘Statement (II)’. You are to examine these two statements carefully and select the answer using the codes given below: (UPSC ESE 2018)
Statement (I): Green energy refers to one which does not harm the ecosystem of planet earth. Statement (II): All renewable energy is green energy.
A. Both Statement (I) and Statement (II) individually true and Statement (II) is the correct explanation of Statement (I)
B. Both statement (I) and Statement (II) are individually true, but Statement (II) is not the correct explanation of Statement (I)
C. Statement (I) is true, but Statement (II) is false
D. Statement (I) is false, but Statement (II) is true
Answer: C
6. Which type of battery is used in the recently launched world's first fully electric cargo ship by change? (Delhi Police Constable 2017)
A. Lead Acid B. Manganese C. Lithium ion D. Nickel metal hydride
Answer: C
7. White gold is an alloy of (UPSC CAPF 2022)
A. gold, nickel and palladium
B. gold, cobalt and palladium
C. gold, titanium and platinum
D. gold, magnesium and palladium
Answer: A
8. Graphene is frequently in news recently. What is its importance? (UPSC 2012)
1. It is a two-dimensional material and has good electrical conductivity.
2. It is one of the thinnest but strongest materials tested so far.
3. It is entirely made of silicon and has high optical transparency.
4. It can be used as 'conducting electrodes' required for touch screens, LCDs and organic LEDs. Which of the statements given above are correct?
A. 1 and 2 only B. 3 and 4 only C. 1, 2 and 4 only D. 1, 2, 3 and 4
Answer: C
9. Graphite and diamonds are__________. (WBCS Prelims 2020)
A. isotopes B. isomers C. isotones D. allotropes
Answer: D
10. Consider the following statements: (UPSC 2020)
1. Coal ash contains arsenic, lead and mercury.
2. Coal-fired power plants release sulphur dioxide and oxides of nitrogen into the environment. 3. High ash content is observed in Indian coal.
Which of the statements given above is/are correct?
A. 1 only B. 2 and 3 only C. 3 only D. 1, 2 and 3
Answer: D
11. Which of the following can be found as pollutants in the drinking water in some parts of India? (UPSC 2013)
1. Arsenic
2. Sorbitol
3. Fluoride
4. Formaldehyde
5. Uranium
Select the correct answer using the codes given below.
A. 1 and 3 only B. 2, 4 and 5 only C. 1, 3 and 5 only D. 1, 2, 3, 4 and 5
Answer: C
12. In the context of solving pollution problems, what is/are the advantage/advantages of the bioremediation technique? (UPSC 2017)
1. It is a technique for cleaning up pollution by enhancing the same biodegradation process that occurs in nature.
2. Any contaminant with heavy metals such as cadmium and lead can be readily and completely treated by bioremediation using microorganisms.
3. Genetic engineering can be used to create microorganisms specifically designed for bioremediation.
Select the correct answer using the code given below:
A. 1 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
13. Due to improper/indiscriminate disposal of old and used computers or their parts, which of the following are released into the environment as e-waste? (UPSC 2013)
1. Beryllium
2. Cadmium
3. Chromium
4. Heptachlor
5. Mercury
6. Lead
7. Plutonium
Select the correct answer using the codes given below.
A. 1, 3, 4, 6 and 7 only B. 1, 2, 3, 5 and 6 only
C. 2, 4, 5 and 7 only D. 1, 2, 3, 4, 5, 6 and 7
Answer: B
14. When was the Geological Survey of India (GSI) of India founded? (UPRVUNL Staff Nurse 2021)
A. 1851 B. 1951 C. 1871 D. 1931
Answer: A
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OPEN MARKET OPERATIONS (OMO)
1. Context
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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RARE DISEASES
1. Context
2. What are Rare Diseases?
- Rare diseases as the name suggests are conditions that affect very few people.
- The World Health Organisation defines it as any debilitating lifelong disease or disorder with a prevalence of ten or fewer per 10,000 population.
- other countries follow standards ranging between 1 and 10 cases per 10,000 to define a condition as a rare disease.
- There are about 7,000 to 8,000 conditions globally that have been defined as rare diseases.
- The landscape of rare diseases keeps changing, with newer conditions being identified and reported constantly.
- With limited experience with these diseases, they are extremely difficult to diagnose and more difficult to test for.
- A report quoted by the country’s National Rare Disease Policy 2021 says that in the United States, a person with rare disease gets diagnosed on average after 7.6 years and in the United Kingdom after 5.6 years.
- The patients have to visit as many as eight physicians, including four specialists, to get a diagnosis.
- Two to three misdiagnoses are also typical before getting the final diagnosis, as per the study.
- Even after one gets a diagnosis, most rare diseases do not have a specific treatment and, the ones that do can be prohibitively expensive.
3. What are the drugs that have been exempted from customs duty?
The specified conditions include
- Lysosomal storage disorder (a group of metabolic disorders that lead to a buildup of toxic materials in the cells).
- Maple syrup urine disease (a hereditary condition where the body cannot process the building blocks of proteins resulting in the buildup of harmful substances in blood and urine).
- Severe food protein allergy, Wilson’s disease (a disorder that results in the body accumulating copper) among others.
- These medicines usually attract a basic customs duty of 10 percent, with some vaccines or medicines attracting a lower 5 percent or nil as previously notified.
- Medicines for the treatment of spinal muscular athrophy and duchenne muscular dystrophy were already exempt from customs.
- This will be a huge relief for people living with rare diseases because many of the medicines and food products are not available in India and have to be imported.
- The cost of medicines is also usually very high, going up with the increasing age and weight of the person. And, the medicines for many of the conditions have to be taken for life.
4. How can one avail of the exemption?
- To avail of the benefits, people importing it have to get a certificate from the central director general, deputy director general, or assistant director general of health services, director general of state health services, or district medical officer or civil surgeon.
- The certificate has to be provided to the deputy commissioner of customs or assistant commissioner of customs at the time of clearance. (or)
- The person will have to give the undertaking to furnish the certificate in a specified period, failing which the customs duty will have to be paid.
5. Why are drugs for rare diseases so expensive?
- Even though there have been developments in the treatment of rare diseases in recent years, almost 95 percent of the conditions do not have specific treatment.
- With a very small number of people suffering from each of the 7,000- 8,000 rare conditions, they do not make a good market for drugs.
- This is the reason most pharmaceutical companies are reluctant to spend on research for treatments of the disease.
- This is the reason the medicine for rare conditions that do exist are known as “orphan drugs” and are prohibitively priced to recoup the cost of research and development.
- As per the National Rare Disease Policy, treatment for some rare diseases can vary from Rs 10 lakh to 1 crore per year for a child weighing 10 kg.
- The treatment has to be continued lifelong, with the costs going up along with the age and weight of the person.
- At present, very few pharmaceutical companies are manufacturing drugs for rare diseases globally and there are no domestic manufacturers in India.
6. Situation in India
- Data on how many people suffer from conditions that are considered to be rare diseases globally is not available in India.
- There is no epidemiological data on the incidence, but cases reported from tertiary care hospitals do get recorded in the national portal that was set up by the Indian Council of Medical Research after the rare disease policy came out.
- As per data submitted to the parliament in December 2021, at least 4,001 rare disease cases were recorded on the portal.
- Primary immunodeficiency disorder (a genetic condition that impairs the immune system)
- Lysosomal storage disorders (a group of metabolic disorders that lead to a buildup of toxic materials in the cells)
- Small molecule inborn errors of metabolism (a large group of genetic conditions, where the genetic code for metabolic enzymes are defective)
- Cystic fibrosis (a condition that severely damages the lung leading to the need for a transplant)
- Osteogenesis imperfect (a condition where bones fracture easily) and
- Certain forms of muscular dystrophies and spinal muscular atrophy.
7. Government Provision for financial support
- Other than relief from customs duty, the government also has provision for providing financial support up to R50 lakh for the treatment of any kind of rare disease at the Centres of Excellence.
- Earlier, financial aid of up to R20 lakh was provided to those with Group 1 rare diseases where one-time curative treatments exist.
For Prelims & Mains
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For Prelims: Rare Diseases, National Rare Disease Policy 2021, Customs Duty, Indian Council of Medical Research (ICMR).
For Mains: 1. What are Rare Diseases? Discuss the India scenario of Rare Diseases as per the National Disease policy 2021.
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GROSS DOMESTIC PRODUCT (GDP)
There are three primary ways to calculate GDP:
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Production Approach (GDP by Production): This approach calculates GDP by adding up the value-added at each stage of production. It involves summing up the value of all final goods and services produced in an economy.
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Income Approach (GDP by Income): This approach calculates GDP by summing up all the incomes earned in an economy, including wages, rents, interests, and profits. The idea is that all the income generated in an economy must ultimately be spent on purchasing goods and services.
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Expenditure Approach (GDP by Expenditure): This approach calculates GDP by summing up all the expenditures made on final goods and services. It includes consumption by households, investments by businesses, government spending, and net exports (exports minus imports).
3. Measuring GDP
GDP can be measured in three different ways:
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Nominal GDP: This is the raw GDP figure without adjusting for inflation. It reflects the total value of goods and services produced at current prices.
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Real GDP: Real GDP adjusts the nominal GDP for inflation, allowing for a more accurate comparison of economic performance over time. It represents the value of goods and services produced using constant prices from a specific base year.
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GDP per capita: This is the GDP divided by the population of a country. It provides a per-person measure of economic output and can be useful for comparing the relative economic well-being of different countries.
The GDP is a useful measure of economic health, but it has some limitations. For example, it does not take into account the distribution of income in an economy. It also does not take into account the quality of goods and services produced.
Despite its limitations, the GDP is a widely used measure of economic health. It is used by economists, policymakers, and businesses to track the performance of an economy and to make decisions about economic policy
4. Gross Value Added (GVA)
Gross Value Added (GVA) is a closely related concept to Gross Domestic Product (GDP) and is used to measure the economic value generated by various economic activities within a country. GVA represents the value of goods and services produced in an economy minus the value of inputs (such as raw materials and intermediate goods) used in production. It's a way to measure the contribution of each individual sector or industry to the overall economy.
GVA can be calculated using the production approach, similar to one of the methods used to calculate GDP. The formula for calculating GVA is as follows:
GVA = Output Value - Intermediate Consumption
Where:
- Output Value: The total value of goods and services produced by an industry or sector.
- Intermediate Consumption: The value of inputs used in the production process, including raw materials, energy, and other intermediate goods.
Gross Domestic Product (GDP) and Gross National Product (GNP) are both important economic indicators used to measure the size and health of an economy, but they focus on slightly different aspects of economic activity and include different factors. Here are the key differences between GDP and GNP:
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Definition and Scope:
- GDP: GDP measures the total value of all goods and services produced within a country's borders, regardless of whether the production is done by domestic or foreign entities. It only considers economic activities that take place within the country.
- GNP: GNP measures the total value of all goods and services produced by a country's residents, whether they are located within the country's borders or abroad. It takes into account the production of residents, both domestically and internationally.
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Foreign Income and Payments:
- GDP: GDP does not consider the income earned by residents of a country from their economic activities abroad, nor does it account for payments made to foreigners working within the country.
- GNP: GNP includes the income earned by a country's residents from their investments and activities abroad, minus the income earned by foreign residents from their investments within the country.
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Net Factor Income from Abroad:
- GDP: GDP does not account for net factor income from abroad, which is the difference between income earned by domestic residents abroad and income earned by foreign residents domestically.
- GNP: GNP includes net factor income from abroad as part of its calculation.
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Foreign Direct Investment:
- GDP: GDP does not directly consider foreign direct investment (FDI) flowing into or out of a country.
- GNP: GNP considers the impact of FDI on the income of a country's residents, both from investments made within the country and from investments made by residents abroad.
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Measurement Approach:
- GDP: GDP can be calculated using three different approaches: production, income, and expenditure approaches.
- GNP: GNP is primarily calculated using the income approach, as it focuses on the income earned by residents from their economic activities.
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For Prelims: GDP, GVA, FDI, GNP
For Mains: 1.Discuss the recent trends and challenges in India's GDP growth
2.Examine the role of the service sector in India's GDP growth
3.Compare and contrast the growth trajectories of India's GDP and GNP
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Previous Year Questions
1.With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. 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 (b)
2.A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (a)
Previous year UPSC Mains Question Covering similar theme: Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC CSE GS3, 2020) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE GS3, 2021) |
INDEX OF INDUSTRIAL PRODUCTION (IIP)
1. Context
2. About the Index of Industrial Production (IIP)
- The Index of Industrial Production (IIP) is a macroeconomic indicator that measures the changes in the volume of production of a basket of industrial goods over some time.
- It is a composite index that reflects the performance of the industrial sector of an economy.
- The IIP is compiled and released by the Central Statistical Organisation (CSO) in India.
- The IIP is calculated using a Laspeyres index formula, which means that the weights assigned to different industries are based on their relative importance in a base year. The current base year for the IIP is 2011-12.
- The eight core sector industries represent about 40% of the weight of items that are included in the IIP.
- The eight core industries are Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement and Fertilizers.
- It covers 407 item groups included into 3 categories viz. Manufacturing, Mining and Electricity.
- The IIP is a useful tool for assessing the health of the industrial sector and the overall economy.
- It is used by policymakers, businesses, and investors to track trends in industrial production and make informed decisions.
3. Significance of IIP
The IIP is a significant economic indicator that provides insights into the following aspects
- The IIP reflects the growth or decline of the industrial sector, which is a major contributor to overall economic growth.
- The IIP measures the level of industrial activity, indicating the production volume of various industries.
- The IIP serves as a guide for policymakers to assess the effectiveness of economic policies and make informed decisions.
- Businesses use the IIP to assess market conditions, make production plans, and evaluate investment opportunities.
- The IIP influences investor sentiment as it reflects the overall health of the industrial sector.
4. Service Sector and IIP
- The IIP does not include the service sector. It focuses on the production of goods in the industrial sector, such as manufacturing, mining, and electricity.
- The service sector is measured by a separate index, the Index of Services Production (ISP).
- The IIP data is released monthly by the Central Statistical Organisation (CSO) in India.
- The data is released with a lag of six weeks, allowing for the collection and compilation of information from various industries.
5. Users of IIP Data
The IIP data is used by a wide range of stakeholders, including:
- Government agencies and central banks use the IIP to assess economic conditions and formulate policies.
- Companies use the IIP to evaluate market trends, make production decisions, and assess investment opportunities.
- Investors use the IIP to gauge the health of the industrial sector and make investment decisions.
- Economic analysts and researchers use the IIP to study economic trends and develop forecasts.
- The IIP is widely reported in the media and is of interest to the general public as an indicator of economic performance.
6. Manufacturing Drives Industrial Production Growth
- Factory output gained on the back of a 9.3 per cent increase in manufacturing, which accounts for 77.6 per cent of the weight of the IIP (Index of Industrial Production).
- Manufacturing output had grown by 5 per cent in July and had contracted by 0.5 per cent in August 2022.
- In absolute terms, it improved to 143.5 in August from 141.8 in July and 131.3 in the year-ago period.
- As per the IIP data, seven of the 23 sectors in manufacturing registered a contraction in August, with furniture, apparel, and computer and electronics among the significant non-performers.
- Among the performing sectors, fabricated metal products, electrical equipment and basic metals fared better.
- Garments and chemicals witnessed negative growth. This can be attributed to lower growth in exports as these two are export-dependent.
- The electronics industry also witnessed negative growth, which again can be linked to existing high stocks and lower export demand.
- In terms of the use-based industries, consumer durables output returned to positive territory for the second time this fiscal with 5.7 per cent growth in August, reflecting a pickup in consumption demand.
- However, it came on the back of a 4.4 per cent contraction in consumer durables output in the year-ago period.
- Primary, infrastructure/ construction, and capital goods recorded double-digit growth rates in August at 12.4 per cent, 14.9 per cent and 12.6 per cent, respectively.
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For Prelims: The Index of Industrial Production (IIP), Central Statistical Organisation,
For Mains:
1. Discuss the significance of the Index of Industrial Production (IIP) as an economic indicator and its role in assessing the health of the industrial sector and the overall economy. (250 Words)
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| Previous Year Questions
1. In India, in the overall Index of Industrial Production, the Indices of Eight Core Industries have a combined weight of 37.90%. Which of the following are among those Eight Core Industries? (UPSC CSE 2012)
1. Cement
2. Fertilizers
3. Natural gas
4. Refinery products
5. Textiles
Select the correct answer using the codes given below:
A. 1 and 5 only B. 2, 3 and 4 only C. 1, 2, 3 and 4 only D. 1, 2, 3, 4 and 5
Answer: C
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THREE LANGUAGE POLICY
- The NEP 2020 continues with the three-language formula, originally introduced in the 1968 NEP. However, a key distinction is that while the earlier policy mandated Hindi as a compulsory language nationwide, NEP 2020 adopts a more flexible approach.
- Under the 1968 policy, Hindi-speaking states were required to teach Hindi, English, and a modern Indian language—preferably one from southern India—whereas non-Hindi-speaking states had to include their regional language, Hindi, and English in their curriculum.
- In contrast, the NEP 2020 does not impose any particular language on states. Instead, it allows states, regions, and students to choose their three languages, provided that at least two of them are Indian languages.
- This implies that while students must learn their state’s language, the additional Indian language does not have to be Hindi. The policy also highlights the importance of bilingual education, particularly in the home language or mother tongue alongside English.
- Additionally, Sanskrit is given notable emphasis as an optional choice within the three-language framework
The Three-Language Formula is an educational policy in India designed to promote multilingualism and linguistic harmony in a country with immense linguistic diversity. It was first proposed by the Kothari Commission in 1968 and has since been adopted by many states, with variations based on regional needs. The formula aims to balance the learning of regional, national, and international languages to foster unity, cultural preservation, and global competitiveness.
Key Objectives of the Three-Language Formula:
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Promote National Integration:
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By encouraging the study of Hindi (the official language of the Union) and English (an associate official language), the formula seeks to bridge communication gaps between states and promote national unity.
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It also respects regional languages, ensuring that local cultures and identities are preserved.
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Preserve Linguistic Diversity:
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India is home to hundreds of languages and dialects. The formula ensures that students learn their mother tongue or regional language, helping to sustain linguistic heritage.
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Enhance Global Competence:
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The inclusion of English, a global lingua franca, prepares students for higher education and professional opportunities in an increasingly interconnected world.
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Facilitate Communication:
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The formula aims to equip students with proficiency in multiple languages, enabling them to communicate effectively across different regions and cultures within India.
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Structure of the Three-Language Formula:
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First Language: The mother tongue or regional language of the state.
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Second Language: Hindi (in non-Hindi-speaking states) or another Indian language (in Hindi-speaking states).
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Third Language: English or a modern Indian language (depending on the state's policy)
- Tamil Nadu has historically opposed the imposition of Hindi. In 1937, when the C. Rajagopalachari-led government in Madras sought to make Hindi a compulsory subject in secondary schools, the Justice Party strongly resisted the move.
- During the protests, two young activists, Thalamuthu and Natarajan, lost their lives and became symbols of the anti-Hindi movement. Following widespread opposition, Rajaji resigned, and the British administration repealed the order.
- In 1965, as the deadline for making Hindi the sole official language of India approached, large-scale protests erupted in Tamil Nadu, resulting in the deaths of at least 70 people due to police action or self-immolation.
- The issue resurfaced when Parliament passed the Official Languages (Amendment) Act, 1967, and the Official Language Resolution, 1968, which mandated Hindi instruction under the three-language formula.
- In response, the C.N. Annadurai-led DMK government passed a resolution in January 1968, advocating for the abolition of the three-language policy and the removal of Hindi from Tamil Nadu's school curriculum.
- Since then, the state has consistently adhered to a two-language system, offering instruction only in Tamil and English. Both the ruling DMK and the opposition AIADMK have steadfastly resisted any attempts to modify this approach. In 2019, widespread opposition led the Kasturirangan Committee to drop the mandatory Hindi clause from the draft National Education Policy (NEP
- Political parties and activists in Tamil Nadu perceive the three-language policy as a covert attempt to introduce Hindi under the guise of linguistic diversity. They argue that, in reality, implementing this policy would inevitably result in Hindi being taught, as there are limited resources available for recruiting teachers and developing learning materials for other languages.
- Additionally, the Union Government and key BJP leaders have consistently advocated for the expansion of Hindi. In 2019, the Union Budget allocated ₹50 crore for hiring Hindi teachers in non-Hindi-speaking states.
- Critics argue that the Centre’s actions contradict its stated commitment to promoting regional languages, pointing to the insufficient recruitment of regional language teachers in Kendriya Vidyalayas and the lack of efforts to introduce South Indian languages in schools north of the Vindhyas
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For Prelims: NEP 2020, National Curriculum Framework, Sustainable Development Goals, University Grants Commission, Kothari Commission, Sarva Shiksha Abhiyan, Rashtriya Madhyamik Shiksha Abhiyan,
For Mains:
1. Discuss the key provisions and objectives of the National Education Policy (NEP) 2020. How does it aim to transform the Indian education system, and what are its implications for inclusive development? (250 Words)
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Previous Year Questions
1. Consider the following statements: (UPSC CSE 2018)
1. As per the Right to Education (RTE) Act, to be eligible for appointment as a teacher in a State, a person would be required to possess the minimum qualification laid down by the State Council of Teacher Education concerned.
2. As per the RTE Act, for teaching primary classes, a candidate is required to pass a Teacher Eligibility Test conducted in accordance with the National Council of Teacher Education guidelines.
3. In India, more than 90% of teacher education institutions are directly under the State Governments.
Which of the statements given above is/are correct?
(a) 1 and 2 (b) 2 only (c) 1 and 3 (d) 3 only
Answer: B
2. Consider the following statements: (UPSC CSE 2016)
1. The Sustainable Development Goals were first proposed in 1972 by a global think tank called the 'Club of Rome'.
2. The Sustainable Development Goals have to be achieved by 2030.
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: B
3. The objective(s) of Rashtriya Madhyamik Shiksha Abhiyaan is/are: (UKSSSC Forest Guard 2021)
A. To provide quality based education to all children from 14 to 18 years
B. Universal standstill till the year 2020
C. To provide residential school for the students of remote areas
D. All of the above
Answer: D
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PARIS AGREEMENT
1. Context
2. What is Paris Agreement?
- Paris Agreement is a multinational agreement that was signed as part of the UNFCCC with the intention of reducing and mitigating greenhouse gas emissions.
- 196 nations ratified the climate change agreement at the Conference of the Parties (COP 21) in Paris in December 2015. It is an international agreement that is binding on all parties involved.
- Achieving the long-term temperature goal was the purpose of the Paris Climate Accord. To attain a world without greenhouse gas emissions by the middle of the century, nations strive to peak global greenhouse gas emissions as soon as possible.
- The Paris Climate Accord's major objective is to keep global warming well below 2° Celsius and ideally below 1.5° Celsius in comparison to pre-industrial levels.
- The Paris Agreement is a watershed moment in the multilateral climate change process because it brings all nations together for the first time in a binding agreement to undertake ambitious efforts to combat climate change and adapt to its effects.
3. COP21
- To keep the rise in the average world temperature to well under 2°C above pre-industrial levels. To continue making efforts to keep global warming to 1.5°C over pre-industrial levels, knowing that doing so would greatly lessen the dangers and effects of climate change.
- The Agreement also mentions achieving the global peaking of emissions by the middle of the century while taking into account the fact that developing nation Parties will have a longer peaking period.
4. What are NDCs
- At the Conference of the Parties (COP21) of the U.N. Framework Convention on Climate Change (UNFCCC), which took place in Paris in December 2015, nations from all over the world pledged to establish a new global climate agreement by that time.
- In advance of a new international agreement, nations have committed to publicly state their Intended Nationally Determined Contributions or the climate activities they plan to take after 2020.
- The 2015 agreement's ambitious goals and whether the world is put on a course toward a low-carbon, climate-resilient future will be largely determined by the INDCs.
- The Intended Nationally Determined Contribution (INDC) of India has also been submitted to the United Nations Framework Convention on Climate Change.
- Countries communicate actions they will take to reduce greenhouse gas emissions to meet the Paris Agreement's goals in their NDCs.
- Countries also communicate actions they will take to build resilience to adapt to the effects of rising temperatures in their NDCs.
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5. Highlights of the report on the performance of the Paris Agreement
- After the signing of the Agreement, the last eight years (2015-2022) have consecutively been the warmest years on record globally.
- The situation could have been far worse if the La Nina weather event had not occurred in the past three years, which has a cooling effect on the weather system.
- Globally updated Nationally Determined Contributions (NDCs) to limit global warming to 1.5 degrees Celsius have failed even to achieve a 2-degree Celsius target.
- The Paris Agreement has not been able to equitably phase out fossil fuels predominantly responsible for the climate crisis.
- Neither the NDCs nor the disaster risk reduction and climate risk management plans are in place to combat climate-induced extreme weather phenomena.
6. A series of climate records fell over in 2022, the report showed.
- Global mean temperature rising: The global mean temperature in 2022 was 1.15°C, ranging from 1.02°C to 1.28°C above the 1850–1900 average. This was the highest on record for the past eight years. The value is about 0.2°C higher than the statistic before 2015. The pre-industrialisation era is considered a benchmark as there was no significant anthropogenic emission at the time.
- Record melting of Antarctica ice: Sea ice in Antarctica dropped to an all-time low, 1.92 million square kilometres, on February 25, 2022. This was almost a million sq km below the mean of the last three decades till 2020.
- Greenhouse gases surged: The levels of three major greenhouse gases — carbon dioxide, methane, and nitrous oxide — continued to increase in 2022. The data shows that growth rates of all three gases have increased around 20 per cent compared to 2011-15 levels.
- Sea level rise doubled: Global mean sea level continued to rise in 2022. It has doubled to 4.62 millimetres per year during 2013–2022 from 2.27 mm recorded in the first decade of the satellite record (1993–2002). The rate of increase quickened after 2015. Ocean heat content, which measures this gain in energy, reached a new observed record.
- Record thinning of glaciers: Long-term observational data is available for glaciers, which were found to have thinned over 1.3 metres between October 2021 and October 2022. The loss is much larger than before. The cumulative thickness loss since 1970 amounts to almost 30 metres.
- More than half of the oceans saw marine heatwaves in 2022: Despite continuing La Nina conditions, 58 per cent of the ocean surface experienced at least one marine heatwave during 2022.
- Heatwaves killed 15,000 in Europe: Record-breaking heatwaves affected China and Europe during the summer, with excess deaths associated with the heat in Europe exceeding 15000. Casualties were reported across Spain, Germany, the United Kingdom, France and Portugal.
- 1,600 suffered deaths from weather extremes in India: India suffered from significant flooding at various stages during monsoon, particularly in the northeast in June, with over 700 deaths reported from flooding and landslides and a further 900 from lightning.
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For Prelims: Paris Agreement, Conference of the Parties (COP 21), World Meteorological Organization (WMO), UNFCCC, Nationally Determined Contributions (NDCs).
For Mains: 1. Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference? (UPSC 2021)
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Previous year Question1. 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 for global warming and committed to donate $1000 billion a year from 2020 to help developing countries 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 Answer: B
2. The term ‘Intended Nationally Determined Contributions’ is sometimes seen in the news in the context of ( UPSC 2016)
A. pledges made by the European countries to rehabilitate refugees from the war-affected Middle East B. plan of action outlined by the countries of the world to combat climate change C. capital contributed by the member countries in the establishment of the Asian Infrastructure Investment Bank D. plan of action outlined by the countries of the world regarding Sustainable Development Goals Answer: B |
Source: Down to Earth

