INDEX OF INDUSTRIAL PRODUCTION (IIP)
1. Context
The Index of Industrial Production (IIP) growth reached a 25-month high of 6.7% in November, driven by broad-based gains led by manufacturing and capital goods sectors, data released by the Union Statistics and Programme Implementation Ministry on Monday showed.
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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Source: indianexpress
DEFENCE ACQUISITION COUNCIL
1. Context
The Defence Acquisition Council (DAC), chaired by Defence Minister Rajnath Singh, on Monday accorded Acceptance of Necessity (AoN) for capital acquisition proposals amounting to about ₹79,000 crore from the Army, Navy, and Air Force.
2. About the Defence Acquisition Council
The Defence Acquisition Council (DAC) is the apex body for all defence acquisitions in India. It was formed after recommendations made by the Group of Ministers on 'Reforming the National Security System' in 2001, post-Kargil war. The DAC is headed by the Defence Minister and comprises the following members:
- Chief of the Defence Staff (CDS)
- Secretary, Department of Defence Production
- Secretary, Finance
- Secretary, Defence Research and Development
- Controller General of Defence Accounts
- Other senior officers from the Ministry of Defence and the Services
The Role of the Defence Acquisition Council
The DAC's primary role is to:
- Accord approval for AoN (Acceptance of Necessity) for Capital Acquisition Proposals.
- Categorise the acquisition proposals into 'Buy, Buy & Make, & Make'.
- In-principle approval of 15-Year Long-Term Integrated Perspective Plan (LTPP) for Defence Forces.
- Delegate powers to Services/C&AS for the acquisition of items up to a certain value.
- Consider and approve other issues as may be referred to it by the Defence Minister.
Functions of the Defence Acquisition Council
The DAC's primary functions are to:
- Approve capital acquisitions for the Indian Armed Forces.
- Formulate and implement policies and procedures for defence acquisitions.
- Monitor the progress of defence acquisitions.
- Oversee the implementation of the Defence Procurement Procedure (DPP).
Reasons for the creation of the Defence Acquisitions Council
The DAC was created to address the following shortcomings of the previous defence acquisition system:
- Lack of a clear and transparent decision-making process.
- Delays in the procurement of defence equipment.
- Escalation of costs.
- Lack of coordination between different agencies involved in the procurement process.
3. About Defence acquisition
Defence acquisition is the process of acquiring goods and services for the Indian Armed Forces. It is a complex and time-consuming process that involves the identification of requirements, the preparation of specifications, the selection of vendors, the negotiation of contracts, and the delivery of equipment. The Indian defence acquisition process is governed by the Defence Procurement Procedure (DPP), which is a set of guidelines that outlines the process for acquiring defence equipment.
The key stages of the defence acquisition process:
- The first step is to identify the requirements of the Armed Forces. This is done through a detailed assessment of the operational needs of the Armed Forces and the availability of resources.
- Once the requirements have been identified, the next step is to prepare the specifications for the equipment to be acquired. The specifications must be clear, detailed, and unambiguous so that the vendors can understand what is required.
- The next step is to select the vendors who will be invited to participate in the bidding process. The vendors are selected based on their technical ability, financial strength, and experience.
- Once the vendors have been selected, the next step is to negotiate the contracts. The contracts must be fair and reasonable, and they must protect the interests of the government.
- The final step is to deliver the equipment to the Armed Forces. Once the equipment has been delivered, it must be tested and accepted by the Armed Forces.
4. The Defence Procurement Procedure (DPP)
The Defence Procurement Procedure (DPP) is the guideline for defence acquisitions in India. The DPP was first introduced in 2006 and has been revised several times since then. The DPP outlines the process for defence acquisitions, from the identification of a requirement to the final acceptance of a product.
The DPP is designed to ensure that defence acquisitions are conducted in a transparent, efficient, and cost-effective manner. The DPP also seeks to promote indigenous defence production and to maximize the involvement of Indian companies in the defence sector.
Key features of the DPP
- The DPP emphasizes the need for transparency in all stages of the defence acquisition process. This includes publishing all relevant documents online and making them available to the public.
- The DPP aims to streamline the defence acquisition process and reduce delays. This includes simplifying the tendering process and reducing the number of approvals required.
- The DPP seeks to ensure that defence acquisitions are conducted cost-effectively. This includes negotiating the best possible price for goods and services and promoting indigenous defence production.
- The DPP promotes indigenous defence production by giving preference to Indian companies in the tendering process. The DPP also provides incentives for Indian companies to invest in research and development.
- The DPP seeks to maximize the involvement of Indian companies in the defence sector. This includes encouraging Indian companies to form joint ventures with foreign companies.
5. The Way Forward
The DAC and the DPP play a vital role in ensuring that the Indian Armed Forces are equipped with the latest and best possible weapons and equipment. The DAC and the DPP are also important for promoting indigenous defence production and for maximizing the involvement of Indian companies in the defence sector.
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For Prelims: Defence Acquisition Council, Defence Procurement Procedure, Light Combat Aircraft, Tejas Mk 1 A and 156, Light Combat Helicopters, Hindustan Aeronautics Limited, Kargil war
For Mains:
1. Critically analyze the role of the Defence Acquisition Council (DAC) in streamlining and expediting defence acquisitions in India. (250 Words)
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Previous Year Questions
1. The Light Combat Aircraft (LCA) designed and developed by HAL is also known as (MP Police Constable 2017)
A. Suryakiran B. Aryabhatta C. Tejas D. Prakash
2. Which of the following statements is true about the recent procurement of Tejas fighter’s aircraft by IAF? (IB ACIO Grade II 2021)
(1) The IAF has recently purchased 83 Tejas fighters aircraft from HAL
(2) The total deal is Rs. 78,000-crore
A. 1 only B. Neither 1 nor 2 C. Both 1 and 2 D. 2 only
3. What is the name of India's indigenously built Light Combat Helicopter? (OSSC BSSO 2022)
A. Nag B. Trishul C. Prachand D. Agni
4. The headquarters of the Hindustan Aeronautics Limited is located at _______________. (MP Police Constable 2017)
A. Chennai B. Bengaluru C. Dewas D. Koraput
5. What was Kargil war otherwise known as? (MP Patwari 2017)
A. Operation Vijay B. Operation Vishwas C. Operation Shaurya D. Operation Paramveer
Answers:1-C, 2-A, 3-C, 4-B 5-A
Mains
1. Analyze the circumstances that led to the Tashkent Agreement in 1966. Discuss the highlights of the Agreement. (UPSC 2013)
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Source: The Indian Express
FREE TRADE AGREEMENT
1. Context
The recent India-New Zealand Free Trade Agreement (FTA) was concluded in December, under which New Zealand will levy zero duty on 100% of India’s exports and bring in $20 billion in Foreign Direct Investment (FDI) by 2030
2. About the Free Trade Agreement
- A Free Trade Agreement (FTA) is an agreement between two or more countries to reduce or eliminate barriers to trade, such as tariffs, quotas, and subsidies.
- FTAs can also include provisions on other issues, such as investment, intellectual property, and labour standards.
- The goal of an FTA is to promote trade and economic growth between the signatory countries.
- By reducing or eliminating trade barriers, FTAs can make it easier for businesses to export their goods and services to other countries, which can lead to increased production, employment, and innovation.
3. Types of Free Trade Agreement
- Bilateral Free Trade Agreement (BFTA) involves two countries, aiming to promote trade and eliminate tariffs on goods and services between them. It establishes a direct trade relationship, allowing for a more focused and tailored agreement between the two nations.
- Multilateral Free Trade Agreement (MFTA) Involving three or more countries, an MFTA seeks to create a comprehensive trade bloc, promoting economic integration on a larger scale. It requires coordination among multiple parties, addressing diverse economic interests and fostering a broader regional economic landscape.
- Regional Free Trade Agreement (RFTA) involves countries within a specific geographic region, aiming to enhance economic cooperation and integration within that particular area. It focuses on addressing regional economic challenges and fostering collaboration among neighbouring nations.
- Preferential Trade Agreement (PTA) involves a reciprocal reduction of tariffs and trade barriers between participating countries, granting preferential treatment to each other's goods and services. It allows countries to enjoy trading advantages with specific partners while maintaining autonomy in their trade policies with non-participating nations.
- Comprehensive Economic Partnership Agreement (CEPA) is a broad and advanced form of FTA that goes beyond traditional trade barriers, encompassing various economic aspects such as investment, intellectual property, and services. It aims for a more comprehensive economic partnership, encouraging deeper integration and collaboration between participating countries.
- Customs Union While not strictly an FTA, a Customs Union involves the elimination of tariffs among member countries and the establishment of a common external tariff against non-member nations. It goes beyond standard FTAs by harmonizing external trade policies, creating a unified approach to trade with the rest of the world.
- Free Trade Area (FTA) with Trade in Goods (TIG) and Trade in Services (TIS): Some FTAs specifically emphasize either trade in goods or trade in services, tailoring the agreement to the specific economic strengths and priorities of the participating countries. This approach allows nations to focus on areas where they have a comparative advantage, fostering specialization and efficiency.
4. India's Free Trade Agreements
India is a member of several free trade agreements (FTAs) and is currently negotiating others. India's FTAs have helped to reduce trade barriers and promote trade and economic growth. They have also helped to attract foreign investment and create jobs.
- The South Asian Free Trade Agreement (SAFTA) was signed in 1995 by the seven countries of the South Asian Association for Regional Cooperation (SAARC). SAFTA aims to reduce or eliminate tariffs on trade between the member countries.
- The India-Bangladesh FTA was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Sri Lanka FTA was signed in 1999 and came into force in 2000. It is a comprehensive FTA that covers goods, services, and investments.
- The India-ASEAN Free Trade Agreement was signed in 2002 and came into force in 2010. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Korea Comprehensive Economic Partnership Agreement (CEPA) was signed in 2010 and came into force in 2011. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Japan Comprehensive Economic Partnership Agreement(CEPA) was signed in 2022 and came into effect in 2023. It is a comprehensive FTA that covers goods, services, and investments.
- The India-UAE Comprehensive Partnership Agreement (CEPA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Australia Economic Cooperation and Trade Agreement (ECTA) was signed in 2022 and came into effect in 2022. It is a comprehensive FTA that covers goods, services, and investments.
- The India-Malaysia Comprehensive Economic Cooperation Agreement (CECA) was signed in 2010 and aims to enhance economic ties by addressing trade in goods and services, as well as investment and other areas of economic cooperation.
- The India-Thailand Free Trade Agreement was signed in 2003 and focuses on reducing tariffs and promoting trade in goods and services between India and Thailand.
- The India-Singapore Comprehensive Economic Cooperation Agreement (CECA) has been operational since 2005, this agreement covers trade in goods and services, as well as investment and intellectual property.
- The India-Nepal Trade Treaty While not a comprehensive FTA, India and Nepal have a trade treaty that facilitates the exchange of goods between the two countries.
- The India-Chile Preferential Trade Agreement was signed in 2006 and aims to enhance economic cooperation and reduce tariffs on certain products traded between India and Chile.
5. India - UK Free Trade Agreement
5.1. Background
- Both countries have agreed to avoid sensitive issues in the negotiations.
- The interim (early harvest agreement) aims to achieve up to 65 per cent coverage for goods and up to 40 per cent coverage for services.
- By the time the final agreement is inked, the coverage for goods is expected to go up to "90 plus a percentage" of goods.
- India is also negotiating a similar early harvest agreement with Australia, which is supposed to set the stage for a long-pending Comprehensive Economic Cooperation Agreement that both countries have been pursuing for nearly a decade.
- While the commencement of negotiations does mark a step forward in the otherwise rigid stance adopted and when it comes to trade liberalisation, experts point to impediments and the potential for legal challenges going ahead.
5.2. GATT (General Agreement on Trade and Tariffs)
- The exception to the rule is full-scale FTAs, subject to some conditions.
- One rider, incorporated in Article XXIV.8 (b) of GATT, stipulates that a deal should aim to eliminate customs duties and other trade barriers on "Substantially all the trade" between the WTO member countries that are signatories to an FTA.
- For this Agreement, a free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the constituent territories in products originating in such territories.
- It is often beneficial to negotiate the entire deal together, as an early harvest deal may reduce the incentive for one side to work towards a full FTA.
- These agreements are not just about goods and services but also issues like investment.
- If you are trying to weigh the costs and benefits, it is always better to have the larger picture in front of you.
- In the case of the early harvest agreement inked with Thailand, automobile industry associations had complained that relaxations extended to Bangkok in the early harvest had reduced the incentive for Thailand to work towards a full FTA.
- Early harvest agreements may serve the function of keeping trading partners interested as they promise some benefits without long delays, as India becomes known for long-drawn negotiations for FTAs.
- Government emphasis on interim agreements may be tactical so that a deal may be achieved with minimum commitments and would allow for contentious issues to be resolved later.
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For Prelims: Free Trade Agreement, India-U.K, Bilateral Free Trade Agreement, G-20 Summit, Agenda 2030, Covid-19 Pandemic, SAARC, General Agreement on Trade and Tariffs, Comprehensive Economic Partnership Agreement, Multilateral Free Trade Agreement, Regional Free Trade Agreement, Preferential Trade Agreement, Customs Union,
For Mains:
1. Evaluate the potential impact of the India-UK FTA on the Indian economy, considering both positive and negative aspects (250 Words)
2. Critically evaluate the significance of Free Trade Agreements (FTAs) in promoting trade and economic growth, considering their potential benefits and drawbacks. (250 Words)
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Previous Year Questions
1. Consider the following countries:
1. Australia
2. Canada
3. China
4. India
5. Japan
6. USA
Which of the above are among the free-trade partners' of ASEAN? (UPSC 2018)
A. 1, 2, 4 and 5 B. 3, 4, 5 and 6 C. 1, 3, 4 and 5 D. 2, 3, 4 and 6
Answer: C
2. Increase in absolute and per capita real GNP do not connote a higher level of economic development, if (UPSC 2018) (a) Industrial output fails to keep pace with agricultural output. Answer: C 3. The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: (2010)
Which of the above are the objectives of this Act? (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3 Answer: A 4. A “closed economy” is an economy in which (UPSC 2011) (a) the money supply is fully controlled Answer: D 5. With reference to the “G20 Common Framework”, consider the following statements: (UPSC 2022)
1. It is an initiative endorsed by the G20 together with the Paris Club. 2. It is an initiative to support Low Income Countries with unsustainable debt. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: C
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Source: The Hindu
ARAVALLI RANGE
1. Context
Amid the row over the threat to the Aravallis following the Supreme Court-approved definition that limits legal recognition of the hills to landforms rising 100 metres or more above local relief, the top court Saturday initiated suo motu proceedings on the definition question and fixed it for hearing on December 29.
2. Significance of the Aravalli range
- Beyond being almost two billion years old and the oldest mountain system in India, these hills function as a vital ecological shield against the advance of desert conditions into the Indo-Gangetic plains.
- They act as a natural barrier slowing the eastward expansion of the Thar Desert into Haryana, Rajasthan, and western Uttar Pradesh. The range plays a crucial role in climate regulation, biodiversity conservation, and groundwater replenishment.
- Extending roughly 650 km from Delhi to Gujarat, it supports key water-recharge networks and gives rise to major rivers such as the Chambal, Sabarmati, and Luni.
- The region is abundant in building stones like sandstone, limestone, marble, and granite, as well as minerals including lead, zinc, copper, gold, and tungsten.
- Although these resources have been extracted for centuries, the last forty years have seen rampant stone and sand quarrying, leading to declining air quality and a sharp reduction in groundwater recharge.
- Part of this mining activity has occurred unlawfully. The Court also observed that India has international obligations under the United Nations Convention to Combat Desertification to safeguard fragile ecosystems like the Aravalli range
3. Geological & Physical Features of Aravalli
- The Aravalli Range is one of the oldest fold mountain systems in the world, with its geological origins dating back nearly two billion years to the Precambrian era.
- Unlike young fold mountains such as the Himalayas, the Aravallis have undergone extensive weathering and erosion over millions of years, which has reduced them to a series of low-lying hills, ridges, and rocky outcrops rather than sharp peaks.
- This long geological history makes the range a valuable record of early crustal evolution and ancient tectonic processes on the Indian subcontinent.
- Geologically, the Aravallis are composed primarily of metamorphic and igneous rocks, including quartzite, schist, gneiss, marble, and granite. These rock formations are part of the Aravalli–Delhi orogenic belt, which was formed due to ancient tectonic collisions and crustal movements.
- The presence of economically significant minerals such as copper, lead, zinc, gold, and tungsten reflects the complex geological processes that shaped the region. Over time, repeated uplift and denudation exposed these mineral-rich formations at the surface, making the range an important mining zone historically.
- Physically, the Aravalli Range stretches for about 650 kilometres in a south-west to north-east direction, beginning near Palanpur in Gujarat and extending through Rajasthan to Haryana and Delhi.
- The range is discontinuous in nature, with broken hill chains and isolated ridges rather than a continuous mountain wall. Its highest peak is Guru Shikhar in the Mount Abu region of Rajasthan, rising to about 1,722 metres above sea level.
- Moving northwards, the height of the range gradually declines, merging into low hills and rocky terrain around Delhi.
- The Aravallis play a significant role in shaping the physical geography of north-western India. Acting as a natural climatic divide, they influence rainfall patterns by intercepting south-west monsoon winds to a limited extent and preventing the unchecked eastward expansion of the Thar Desert.
- The range also forms an important watershed, giving rise to several seasonal and perennial rivers such as the Chambal, Sabarmati, Luni, and Banas.
- The fractured and porous nature of its rock formations allows rainwater to percolate underground, contributing substantially to groundwater recharge in an otherwise semi-arid region
4. What is the “100-metre definition” of Aravalli Hills?
- The “100-metre definition” of the Aravalli Hills refers to an administrative and legal criterion used—especially in environmental regulation and court proceedings—to identify and protect the Aravalli region.
- Under this definition, any area that rises more than 100 metres above the surrounding plain is treated as part of the Aravalli hill system, irrespective of whether it is a prominent mountain, ridge, or a low, eroded hill. In other words, even subtle elevations and fragmented hillocks that meet this height threshold are classified as Aravalli features.
- This definition became important because the Aravallis are very old and heavily eroded, meaning many sections no longer appear as classic mountains. If protection were limited only to visibly high or continuous hills, large portions of the range—especially in Haryana, Rajasthan, and the Delhi-NCR region—would fall outside legal safeguards.
- The Supreme Court and various environmental authorities have relied on the 100-metre criterion to prevent mining, construction, and land-use change in ecologically sensitive areas of the Aravalli range.
- By using a measurable elevation benchmark rather than appearance alone, the definition helps expand environmental protection to degraded and fragmented parts of the hills
5. Supreme Court Intervention and Uniform Definition
- The Supreme Court’s intervention in the Aravalli region arose from growing concerns over rampant mining, construction, and land-use changes that were degrading this fragile and ancient mountain system.
- One of the core problems identified by the Court was the absence of a uniform and scientifically grounded definition of the Aravalli Hills.
- Different States and authorities were using varying criteria—based on revenue records, forest classification, or visual identification—allowing large tracts of the Aravallis to be excluded from protection and opened up for exploitation.
- To address this ambiguity, the Supreme Court emphasised the need for a uniform definition applicable across States, particularly Rajasthan, Haryana, and Delhi, where the Aravallis are most fragmented and vulnerable.
- The Court endorsed an objective, elevation-based approach, popularly referred to as the “100-metre definition”, under which land rising more than 100 metres above the surrounding plains would be treated as part of the Aravalli hill system.
- This was intended to ensure that even low, eroded, or discontinuous hill formations, which are characteristic of the Aravallis due to their great geological age, are brought within the protective framework.
- Through its interventions, the Supreme Court also linked the protection of the Aravallis to India’s international environmental obligations, particularly under the UN Convention to Combat Desertification (UNCCD).
- The Court observed that the degradation of the Aravalli range could accelerate desertification in north-western India and undermine groundwater recharge, air quality, and regional climate stability.
- Consequently, it directed governments to adopt a consistent and precautionary approach in identifying, mapping, and regulating activities in the Aravalli region
6. Action against mining
- Since the early 1990s, the Union Environment Ministry has framed regulations permitting mining only in projects that receive official approval, but these safeguards have been widely disregarded.
- In response to persistent violations, the Supreme Court intervened in 2009 and enforced a complete ban on mining activities in Haryana’s Faridabad, Gurugram, and Mewat districts.
- More recently, in May 2024, the Court halted the issuance and renewal of mining leases across the Aravalli range and instructed its Central Empowered Committee (CEC) to carry out an in-depth review. This exercise culminated in a set of recommendations submitted in March 2024.
- The CEC advocated a holistic strategy that called for scientifically mapping the entire Aravalli system across States, conducting a broad-scale environmental impact assessment of mining operations, and enforcing an absolute ban on mining in ecologically fragile zones.
- These included wildlife-protected areas, water bodies, tiger corridors, critical groundwater recharge regions, and locations within the National Capital Region.
- The Committee also stressed the need for tighter controls over stone-crushing units and advised that no fresh mining permissions or lease extensions be granted until comprehensive mapping and impact studies were completed.
- The Supreme Court incorporated these recommendations in its order issued in November 2025.
- In addition, in June 2025, the Union government launched the Aravalli ‘Green Wall’ initiative, aimed at increasing vegetation cover in a five-kilometre buffer zone around the range across 29 districts in Gujarat, Rajasthan, Haryana, and Delhi.
- According to the government, this programme is expected to make a significant contribution towards the restoration of 26 million hectares of degraded land by the year 2030.
7. Way Forward
The Court observed that earlier instances demonstrate how absolute prohibitions frequently give rise to illegal mining networks, aggressive sand mafias, and uncontrolled resource extraction. Consequently, instead of enforcing a complete shutdown, the Court adopted a balanced strategy—allowing lawful mining operations to proceed under strict oversight, placing a temporary halt on new mining activities until a science-based framework is developed, and keeping ecologically critical zones permanently closed to mining
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For Prelims: Aravalli ranges, UN Convention to Combat Desertification (UNCCD)
For Mains: GS I - Indian Geography
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Source: The Hindu
CONSUMER PRICE INDEX (CPI)
1. Context
The Statistics Ministry will make public the weights of each item that will be part of the new Consumer Price Index (CPI) basket before the first retail inflation data is released on February 12.
2. Consumer Price Index
- The Consumer Price Index (CPI) is a measure of the change in prices of a basket of goods and services that are commonly purchased by consumers. It is the most commonly used measure of inflation.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
3. Wholesale Price Index
- The Wholesale Price Index (WPI) is a measure of the change in prices of goods and services at the wholesale level.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to those of the same in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the WPI inflation rate.
- The WPI is calculated for 67 groups of commodities, which are further divided into 225 subgroups.
- The weights of each group and subgroup in the WPI are determined by the value of the goods and services produced in each group and subgroup.
- The WPI inflation rate is an important indicator of inflation at the wholesale level.
- It is used by businesses to make pricing decisions and by the government to set monetary policy.
4. Findings of the Report
4.1. Food inflation
- Food inflation in India remained high in August, at 9.94%. This was driven by rising prices of essential food items, such as cereals, pulses, vegetables, and oils.
- Eleven of the 12 items on the heavyweight food and beverages group of the CPI logged price increases, with oils and fats, the sole item logging a year-on-year decline in prices, posting its first sequential increase in nine months.
- Vegetables provided some relief, with tomatoes leading an appreciable month-on-month deflation of 5.88% in the 19-member basket.
- However, the cooking staples of potatoes and onions were among the seven items that continued to log sequential inflation (2.3% and 12.3%, respectively).
4.2. Monsoon deficit and rising crude oil prices
- The near-term inflation outlook is also made more uncertain by other factors, including a distinct deficit in monsoon rainfall.
- Besides the overall 10% shortfall, sharp regional and temporal anomalies in rain distribution have impacted either the sowing or the quality of produce of several farm items.
- Kharif's sowing of pulses had, as of September 8, recorded an 8.6% shortfall compared with the year-earlier period.
- Another inflation driver, crude oil, has also seen a steady rise in prices as the output cuts by major oil producers of the OPEC+ grouping start to bite.
- The price of India's crude basket had, as of September 12, climbed 7.2% from the average in August to $92.65/barrel, according to official data.
4.3. RBI measures to control inflation
- For the RBI, the latest inflation data further roils its interest rate calculus.
- Unless CPI inflation decelerates by an incredible 250 basis points in September to a 4.33% pace, price gains are certain to substantially overshoot the monetary authority's 6.2% forecast for the July-September quarter, leaving it with few real options to achieve its medium-term price stability goal of 4% inflation.
- As the RBI has been at pains to stress, failure to anchor inflation expectations risks hurting growth.
5. About the sticky Consumer Price Index (CPI)
- The sticky Consumer Price Index (CPI) is a subset of the CPI that includes goods and services that change prices relatively infrequently.
- These goods and services are thought to incorporate expectations about future inflation to a greater degree than prices that change more frequently.
- Some of the items included in the sticky CPI are Rent, Housing costs, Utilities, Education, Healthcare, Transportation, Household furnishings and appliances, Personal insurance, Recreation, and Miscellaneous goods and services.
- The sticky CPI is often used by economists to measure inflation expectations.
- This is because prices of sticky goods and services are less likely to be affected by short-term changes in supply and demand, and are therefore more likely to reflect changes in inflation expectations.
- The sticky CPI is also used by central banks to set monetary policy.
- This is because the central bank wants to make sure that inflation expectations are anchored at a low level.
- If inflation expectations start to rise, the central bank may raise interest rates to bring them back down.
6. How India’s retail inflation is measured?
- India's retail inflation is measured by the Consumer Price Index (CPI), a basket of goods and services commonly purchased by urban households.
- The CPI is calculated by the National Statistical Office (NSO) every month.
- The CPI is calculated by comparing the prices of the goods and services in the basket in a particular month to those of the same in a base month.
- The base month is usually the previous year's corresponding month. The difference in prices is expressed as a percentage, and this is the CPI inflation rate.
- The CPI is calculated for eight different categories of goods and services, Food and beverages, Housing, Clothing and footwear, Transport, Health, Education, Communication, Recreation and Miscellaneous goods and services.
- The weights of each category in the CPI are determined by the expenditure patterns of urban households. For example, food and beverages have the highest weight in the CPI, followed by housing and transport.
- The CPI inflation rate is an important indicator of the cost of living in India.
- It is used by the government to set monetary policy and by businesses to make pricing decisions.
7. Calculation of Inflation
- Inflation is the rate at which the prices of goods and services increase over time.
- It is calculated by comparing the prices of a basket of goods and services in a particular period to the prices of the same basket of goods and services in a base period.
- The base period is usually the previous year's corresponding period. The difference in prices is expressed as a percentage, and this is the inflation rate.
There are two main ways to calculate inflation
1. Consumer Price Index (CPI): The CPI is a measure of the change in prices of a basket of goods and services that are commonly purchased by consumers. It is the most commonly used measure of inflation.
The CPI is calculated by the following formula:
CPI = (Cost of a basket of goods and services in current period / Cost of a basket of goods and services in base period) * 100
2. Producer Price Index (PPI): The PPI is a measure of the change in prices of goods and services that are produced by businesses. It is used to track inflation at the wholesale level.
The PPI is calculated by the following formula:
PPI = (Cost of a basket of goods and services at the wholesale level in the current period / Cost of a basket of goods and services at the wholesale level in the base period) * 100
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For Prelims: Consumer Price Index, Wholesale Price Index, Inflation, retail inflation, Producer Pirce Index, National Statistical Office, OPEC+, Crude oil, Kharif season, Monsoon,
For Mains:
1. Analyse the factors contributing to high food inflation in India in recent months. Discuss the impact of high food inflation on the Indian economy and suggest measures to mitigate it. (250 words)
2. Explain the concept of sticky inflation. What are the various factors that contribute to sticky inflation? Discuss the implications of sticky inflation for the Indian economy. (250 words)
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Previous Year Questions
1. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
Answer: C
2. With reference to India, consider the following statements: (UPSC 2010)
1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.
2. As compared to Consumer Price Index for Industrial Workers (CPI(IW)), the WPI gives less weight to food articles.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: C
3. Consider the following statements: (UPSC 2020)
1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
A. 1 and 2 only B. 2 only C. 3 only D. 1, 2 and 3
4. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
5. The Public Distribution System, which evolved as a system of management of food and distribution of food grains, was relaunched as _______ Public Distribution System in 1997. (SSC JE EE 2021)
A. Evolved B. Transformed C. Tested D. Targeted
Answer: D
6. Under the Antyodaya Anna Yojana, up to what quantity of rice and wheat can be purchased at a subsidised cost? (FCI AG III 2023)
A. 35 kg B. 40 kg C. 30 kg D. 25 kg E. 50 kg
Answer: A
7. As per the the National Statistical Office (NSO) report released on 7 January 2022, India's Gross domestic product (GDP) is expected to grow at ___________ per cent (in first advance estimates) in the fiscal year 2021-22? (ESIC UDC 2022)
A. 17.6 per cent B. 9.5 per cent C. 11 per cent D. 9.2 per cent E. None of the above
Answer: D
8. The main emphasis of OPEC (Organisation of the Petroleum Exporting Countries) is on which of the following? (UKPSC 2016)
A. The production of petroleum
B. Control over prices of petroleum
C. Both (a) and (b)
D. None of the above
Answer: C
9. In the context of global oil prices, "Brent crude oil" is frequently referred to in the news. What does this term imply? (UPSC 2011)
1. It is a major classification of crude oil.
2. It is sourced from the North Sea.
3. It does not contain sulfur.
Which of the statements given above is/are correct?
A. 2 only B. 1 and 2 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
10. The term 'West Texas Intermediate', sometimes found in news, refers to a grade of (UPSC 2020)
A. Crude oil B. Bullion C. Rare earth elements D. Uranium
Answer: C
11. With reference to the cultivation of Kharif crops in India in the last five years, consider the following statements: (UPSC 2019)
1. Area under rice cultivation is the highest.
2. Area under the cultivation of jowar is more than that of oilseeds.
3. Area of cotton cultivation is more than that of sugarcane.
4. Area under sugarcane cultivation has steadily decreased.
Which of the statements given above are correct?
A. 1 and 3 only B. 2, 3 and 4 only C. 2 and 4 only D. 1, 2, 3 and 4
Answer: A
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Source: The Hindu
ELECTORAL BONDS
1. Context
The unequal access to and the distribution of private donations directly impact the equality of political participation and electoral competition. The electoral level-playing field can be seriously undermined as a result of financial disparities between political forces, giving the better-resourced parties an edge over their competitors. This is also true for political funding in India. Despite decades of reform proposals, the nexus between money and politics persists due to weak legal enforcement, inadequate regulation, and a lack of political will
2. What was the Electoral Bond Scheme?
An electoral bond is in the nature of a promissory note which shall be a bearer banking instrument that does not carry the name of the buyer or payee. Any citizen or company could buy these bonds in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore and donate it to a political party. It can be encashed only through a bank account with an authorised bank. The State Bank of India was the bank authorised to issue and encash these bonds
3. What changes were made to the scheme?
Contemporary society relies significantly on satellites, presenting them as both valuable assets and potential weaknesses. However, the effectiveness of a nuclear weapon in space is constrained by the inability to selectively target specific satellites, limiting its practical utility. Consequently, certain security experts propose that if Russia possesses nuclear capabilities in space, such weaponry would likely be reserved for use as a last resort. Alternatively, some suggest that the 'nuclear' aspect might be confined to the power source itself. The prevailing view is that Russia is more likely developing a system fueled by a nuclear source with electronic warfare capabilities upon reaching orbit, rather than a weapon equipped with a nuclear explosive warhead
4. Government's Version
- The government justified the scheme by emphasizing its ability to facilitate the transfer of funds to political parties through lawful banking channels, allowing individuals to support their chosen parties while discouraging unregulated cash contributions.
- The confidentiality granted to donors was presented as advantageous, fostering contributions of clean money to political parties.
- The utilization of established banking channels was asserted to diminish the influence of black money in election funding, and donor anonymity was highlighted to alleviate concerns about potential retaliation or pressure from parties to which donors had not contributed.
- In a notable argument, the government contended that citizens did not possess a general right to be informed about the financial backing of political parties.
- It asserted that the right to information was not of a broad nature but rather an evolution by courts specifically aimed at enabling voters to make informed choices in favor of the ethically sound candidate
5.Supreme Court Ruling
- In prior rulings, the highest court has affirmed that voters possess the right to information crucial for the effective exercise of their voting freedom.
- Consequently, the court maintained that details regarding funding to a political party are vital for a voter to express their right to vote effectively.
- The Electoral Bond Scheme, insofar as it compromises this right by anonymizing contributions through bonds, infringes upon Article 19(1)(a), which safeguards the freedom of expression.
- Regarding the objective of curbing black money, the court applied a proportionality test to assess whether the limitation on voters' right to information through donor anonymity was achieved through the least restrictive means.
- It suggested that alternatives, such as electronic transfer for small contributions and donations to an Electoral Trust for larger amounts, were available.
- Since the government failed to demonstrate that the scheme represents the least restrictive means to balance contributors' "informational privacy" and the right to information on political contributions, the amendments to the IT Act and RPA were deemed unconstitutional.
- Concerning changes to the Companies Act, the court determined that the removal of the disclosure requirement on contribution details violated the voter's right to information. Additionally, the scheme permitted both profit-making and loss-making companies to make political contributions, whereas previously, companies could only donate a percentage of their net profit.
- Given the higher risk of quid pro quo in the case of loss-making companies, the amendment was deemed arbitrarily manifest
6.Way forward
The electoral bonds scheme was introduced to enhance transparency, it has generated significant debates and concerns. A comprehensive way forward should focus on striking a balance between anonymity for donors and the citizens' right to know the financial sources of political parties. Transparent and accountable political funding is crucial for upholding the democratic values and integrity of the political process in India.
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For Prelims: Electoral Bonds, SBI, Election Commission of India, Right to Know, Finance Act 2017, Prime Minister's Relief Fund
For Mains:
1. Examine the challenges and controversies surrounding the Electoral Bonds Scheme, particularly regarding donor anonymity and transparency in political funding. How have these issues raised concerns about the integrity of the political process in India? (250 Words)
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Previous Year Questions
Prelims
1. 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 recognised 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. With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following? (UPSC CSE 2019) Answer: B 3. 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
4. Consider the following statements about Electoral Bond Scheme 2018: (RPSC RAS Prelims 2018)
(A) The aim of this scheme is to bring about transparency in the funding process of political parties.
(B) Only the political parties recognized by the Election Commission which secured not less than one per cent of the votes polled in the last general election to the House of People or the Legislative Assembly of the State shall be eligible to receive the Electoral Bonds.
(C) Electoral Bonds shall be valid for fifteen calendar days from the date of issue.
(D) The Electoral Bond deposited by an eligible political party in its account shall be credited on the same day.
Which of the above statements are correct?
1. Only (A) and (B)
2. (A), (B), (C) and (D)
3. Only (B), (C) and (D)
4. Only (A), (C) and (D)
Answer: 2
5. With reference to the PM CARES Fund, consider the following statements: (AFCAT 27 2022)
I. The amount collected by it directly goes to the Consolidated Fund of India.
II. It can avail donations from the foreign contribution and donations to fund can also avail 100% tax exemption.
Which of the above statements is/are correct?
A. I only B. II only C. Both I and II D. Neither I nor II
Answer: B
6. The Prime Minister's National Relief Fund is operated by which one of the following bodies? (CDS 2019)
A. The Prime Minister's Office (PMO)
B. The National Disaster Management Authority
C. The Ministry of Finance
D. The National Development Council (NDC)
Answer: A
Mains 1. In the light of recent controversy regarding the use of Electronic Voting Machines (EVM), what are the challenges before the Election Commission of India to ensure the trustworthiness of elections in India? (UPSC 2018) 2. Discuss the role of the Election Commission of India in the light of the evolution of the Model Code of Conduct. ( UPSC 2022) |
Source: The Hindu
RUPEE EXCHANGE RATE
1. Context
“Having crossed some psychological “90” barrier, the rupee is once again in the news and once again giving rise to angst and confusion
2. What is the rupee exchange rate?
The rupee's exchange rate with the dollar signifies the quantity of rupees needed to purchase one US dollar. This metric is crucial not only for acquiring American goods but also for engaging in trade involving other commodities and services, like crude oil, which is conducted in US dollars. When the rupee depreciates, the cost of importing goods and services increases. However, for those exporting products and services, particularly to the United States, the depreciation enhances the competitiveness of India's offerings by making them more affordable for foreign buyers
Exchange rate for 1 Indian Rupee (INR) is as follows:
- United States Dollar (USD): 0.012011 INR
- Euro (EUR): 0.011223 INR
- British Pound (GBP): 0.009784 INR
- Australian Dollar (AUD): 0.018827 INR
- Singapore Dollar (SGD): 0.016343 INR
- Swiss Franc (CHF): 0.010845 INR
- Malaysian Ringgit (MYR): 0.056619 INR
- Japanese Yen (JPY): 1.824210 INR
3. Effects on rupee
- If the rupee experiences a faster depreciation rate than its long-term average, it surpasses the dotted line, and vice versa.
- Over the past couple of years, the rupee has demonstrated greater resilience than the long-term trend, but the current decline indicates a correction.
- When considering a diverse range of currencies, data indicates that the rupee has strengthened or appreciated against this basket.
- To clarify, while the US dollar has strengthened against various major currencies, including the rupee, the rupee, in contrast, has strengthened compared to many other currencies like the euro. For example, forex reserves have decreased by over $50 billion between September 2021 and now. Over these 10 months, the rupee's exchange rate with the dollar has declined by 8.7%, from 73.6 to 80.
- To provide context, historically, the rupee typically depreciates by around 3% to 3.5% in a year. Moreover, many experts anticipate further weakening of the rupee in the next 3-4 months, potentially falling to as low as 82 to a dollar.
4. What is rupee depreciation?
Rupee depreciation refers to a decrease in the value of a country's currency, specifically the Indian rupee in this context, in comparison to other currencies. It means that more units of the domestic currency are required to purchase a fixed amount of foreign currency, usually the US dollar. Depreciation can occur due to various factors, including changes in supply and demand for the currency in the foreign exchange market, economic conditions, inflation rates, and geopolitical events
When the rupee depreciates, it has several implications:
Import Costs: Imported goods and services become more expensive, as it takes more rupees to buy the same amount of foreign currency needed for these transactions. This can contribute to inflationary pressures in the economy.
Export Competitiveness: On the positive side, a depreciated rupee can make the country's exports more competitive in the global market. Foreign buyers find the country's products and services relatively cheaper, potentially boosting export volumes.
External Debt: Countries with significant external debt denominated in foreign currencies may face increased repayment burdens when their domestic currency depreciates. Servicing debt in stronger foreign currencies becomes more expensive.
Inflation: Depreciation can contribute to inflationary pressures by increasing the cost of imported goods and raw materials.
5. Effects on the Indian economy
- Due to a substantial portion of India's imports being priced in dollars, these imports will become more expensive.
- An illustrative example is the higher cost associated with the crude oil import bill. The increased expense of imports, in turn, will contribute to the expansion of the trade deficit and the current account deficit.
- This, in consequence, will exert pressure on the exchange rate. On the export side, the situation is more complex, as noted by Sen.
- In bilateral trade, the rupee has strengthened against many currencies. In exports conducted in dollars, the impact is contingent on factors such as how much other currencies have depreciated against the dollar.
- If the depreciation of other currencies against the dollar is greater than that of the rupee, the overall effect could be negative.
6. Way forward
Defending the rupee will simply result in India exhausting its forex reserves over time because global investors have much bigger financial clout. Most analysts believe that the better strategy is to let the rupee depreciate and act as a natural shock absorber to the adverse terms of trade
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For Prelims: Inflation, Deflation, Depreciation, Appreciation
For Mains: General Studies III: How does Depreciation of rupee affect Indian economy
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Previous Year Questions
1. Which one of the following groups of items is included in India's foreign exchange reserves? (UPSC CSE 2013)
A.Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries B.Foreign-currency assets, gold holdings of the RBI and SDRs
C.Foreign-currency assets, loans from the World Bank and SDRs
D.Foreign-currency assets, gold holdings of the RBI and loans from the World Bank
Answer (B)
2.Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? (UPSC CSE 2019)
A.Curbing imports of non-essential goods and promoting exports
B.Encouraging Indian borrowers to issue rupee-denominated Masala Bonds
C.Easing conditions relating to external commercial borrowing
D.Following an expansionary monetary policy
Answer (D)
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Source:indianexpress
