GOVERNOR'S POWER
1. Context
2. About Governor
- Part VI of the Constitution deals with the states and lists out the role and responsibility of the Governor of states.
- Article 153 provides for a Governor of every state and is the constitutional head of the state.
- The executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution (Article 154).
- Governor performs the same duties as of President, but as the executive head of a State; the work remains the same as of the office of the President of India.
- A Governor is a nominated head and not an elected representative.
- Dual Role of the Governor as head and representative
- Constitutional head of state; and
- Link between Union and State governments. - His dual role makes him a key functionary in the Indian Constitutional system.
3. Powers of Governor
- Under Article 161 the Governor has the following powers –the power to grant pardons, reprieves, respites, or remissions of punishment; the power to suspend, remit or commute the sentence of any person convicted of any offence against any law relating to a matter to which the executive power of the State extends.
- The Governor makes all executive decisions on behalf of the state government (Article 166(1)).
- The Governor appoints the Chief Minister and other cabinet members. They serve at the pleasure of the Governor (Article 164).
- He may create rules for the efficient execution of a state government's work and its distribution among the ministers. (Article 166(3))
- He appoints the state's advocate general and determines his tenure and conditions of service.
- He has the authority to recommend to the President the declaration of a state of constitutional emergency.
- He may request from the Chief Minister any information about the administration of the state's affairs, as well as legislative suggestions (Article 167).
- The governor appoints the state election commissioner and establishes his term of office and working conditions (Article 243K).
4. Friction points between the States and Governor
- In recent years. these have been largely about the selection of the party to form a government, the deadline for proving the majority, sitting on Bills, and passing negative remarks on the state administration.
- Kerala’s government was dismissed based on a report by the Governor. Several state governments have been dismissed since then, including 63 through President’s Rule orders issued by Governors between 1971 and 1990.
- Kerala Governor in 2020 turned down a request to summon a special sitting of the Assembly to debate the three central farm laws.
- In 2018 J&K Governor dissolved the Assembly amid indications that various parties were coming together to form the government. This paved the way for the Centre to later bifurcate the state into two Union territories, by considering the Governor as the government.
- In 2019 Maharashtra Governor quietly invited the BJP leader and administered his oath as CM. This government lasted just 80 hours. Six months later, the governor refused to nominate CM to the Legislative Council.
- Following the Karnataka polls in 2018, Governor Vajubhai Vala invited the BJP to form the government and gave B S Yeddyurappa 15 days to prove the majority. Challenged by Congress and JDS in the Supreme Court, it was reduced to three days.
5. Reasons for the friction between the Governor and the state governments
- There is no provision for impeaching the Governor, who is appointed by the President on the Centre's advice. While the Governor has a 5-year tenure, he can remain in office only until the pleasure of the President.
- There are no guidelines for the exercise of the Governor's powers, including for appointing a CM or dissolving the Assembly. There is no limit set for how long a Governor can withhold assent to a Bill.
- According to the Constitutional expert, although the Constituent Assembly envisaged the governor to be apolitical. But the truth is, politicians, become Governors and then resign to fight elections.
- The CM is answerable to the people. But the Governor is answerable to no one except the Centre. This is the fundamental defect in the Constitution.
6. Reforms Suggested
Several Panels, the Administrative Reforms Commission of 1968 and the Sarkaria Commission of 1988 have recommended reforms such as
- selection of the Governor through a panel comprising the PM, the Home Minister, the Lok Sabha Speaker, and the CM.
- Apart from fixing his tenure for five years
- Recommendations have also been made for a provision to impeach the Governor by the Assembly.
For Prelims & Mains
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For Prelims: Governor, Chief Minister, Article 153, Article 154, Article 164, and Article 243K.
For Mains: 1. In the context of friction between the state governments and the Governor explain the role and powers of the Governor and what reforms have been suggested so far to end the tussle between the state governments and the Governor.
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Previous Year Questions
Which of the following are the discretionary powers given to the Governor of a State? (UPSC CSE 2014)
1. Sending a report to the President of India for imposing the President’s rule 2. Appointing the Ministers 3. Reserving certain bills passed by the State Legislature for consideration of the President of India 4. Making the rules to conduct the business of the State Government Select the correct answer using the code given below
A. 1 and 2 Only
B. 1 and 3 Only
C. 2, 3 and 4
D. 1, 2, 3, 4
Answer (B)
2.Which one of the following suggested that the Governor should be an eminent person from outside the State and should be a detached figure without intense political links or should not have taken part in politics in the recent past? (UPSC CSE 2019)
A.First Administrative Reforms Commission (1966)
B.Rajamannar Committee (1969)
C.Sarkaria Commission (1983)
D.National Commission to Review the Working of the Constitution (2000)
Answer (C)
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PRESIDENT RULE
- President’s Rule, as outlined in Article 356, is invoked when a state’s constitutional machinery fails. In such cases, based on a Governor’s report or other relevant inputs, the President can issue a Proclamation to take over the state government’s functions, effectively placing them under the Union government’s control.
- Additionally, the State Assembly’s powers are transferred to Parliament. However, the President does not have the authority to assume the powers of a High Court.
- This proclamation must be presented before Parliament and will lapse in two months unless both Houses approve it.
- It can be extended every six months, up to a maximum of three years, but after the first year, further extensions require either the declaration of an Emergency at the national or state level or a determination by the Election Commission that elections cannot be conducted in the state.
- Article 356 does not specify the exact conditions for imposing President’s Rule, leaving it to the President’s discretion, based on the advice of the Union Council of Ministers, to determine whether governance in the state can continue as per constitutional provisions.
- A 2016 Lok Sabha Secretariat report identified various instances of its imposition beyond issues like militancy and law and order, including defections by legislators, collapse of coalitions, no-confidence motions, resignations of Chief Ministers, absence of legislatures in newly formed states, and public unrest causing instability.
- In the 1994 S.R. Bommai vs Union of India case, the Supreme Court outlined instances where the President’s Rule could or could not be applied, though it clarified that this list was not exhaustive
- President’s Rule has been enforced 135 times across 35 States and Union Territories, including some that no longer exist. The first instance occurred in June 1951 in Punjab when Chief Minister Gopi Chand Bhargava resigned due to internal conflicts within the Congress party.
- Punjab has remained under Central administration for over a decade in total. The only region to have experienced President’s Rule for a longer duration is Jammu and Kashmir, where it has been in place for nearly 15 years, including its time as a Union Territory.
- The longest uninterrupted periods were from 1990 to 1996 and from 2019 to 2024. Uttar Pradesh has seen President’s Rule imposed 10 times, making it one of the most frequently affected states after Manipur.
- There have also been instances where Article 356 was applied even when the ruling party at the Centre and the State were the same, such as in Andhra Pradesh (1973), Assam (1981), Gujarat (1974), Karnataka (1990), and most recently in Manipur (2025).
- A notable political use of President’s Rule occurred in 1977 when the newly elected Morarji Desai government dismissed nine Congress-ruled States, arguing that they had lost the electorate’s confidence after the Congress was defeated at the national level.
- In response, when Indira Gandhi regained power in 1980, she similarly dismissed governments in nine States for the same reason. The Supreme Court at the time declined to intervene in these decisions
- A few decades later, the S.R. Bommai verdict marked a turning point in judicial oversight of President’s Rule. The nine-judge Bench ruled that the President’s proclamation could be reviewed by the courts to determine whether it was issued based on any material, whether that material was relevant, or whether the decision was made in bad faith.
- Former Attorney-General Soli Sorabjee had noted in his analysis of the 1994 judgment that this meant proclamations could be invalidated if found unconstitutional. Former Lok Sabha Secretary General P.D.T. Acharya highlighted that this served as a strong deterrent against arbitrary use of the provision.
- From 1950 to 1994, President’s Rule was enforced 100 times, averaging 2.5 instances per year. In the three decades since, it has been applied 30 times, roughly once per year.
- The most recent imposition, in Manipur, is the first since Puducherry in February 2021, marking almost four years without its use.
- Since the Narendra Modi-led NDA government assumed office in 2014, President’s Rule has been imposed 11 times, including four instances in Jammu and Kashmir.
- Courts have overturned the proclamation on two occasions— in Arunachal Pradesh and Uttarakhand
Article 355 and Article 356 of the Indian Constitution are closely related, as the former lays the foundation for the latter.
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Article 355 – Duty of the Union to Protect States
- It places an obligation on the Union government to protect every state against external aggression and internal disturbances.
- It also ensures that the state government functions in accordance with constitutional provisions.
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Article 356 – President’s Rule
- If a state fails to function as per the Constitution, the President can invoke Article 356 based on the Governor’s report or other relevant inputs.
- This provision allows the Union to assume control of the state’s administration temporarily.
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For Prelims: Article 356, Article 352, Article 360
For Mains: General Studies II - Polity & Governance
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Previous Year Questions
1.During which Five Year Plan was the Emergency clamped, new elections took place and the Janata Party was elected? (2009) (a) Third Answer (c) 2. Which of the following are not necessarily the consequences of the proclamation of the President’s rule in a State? (2017)
Select the correct answer using the code given below: (a) 1 and 2 only Answer (b) |
RIGHT TO PRIVACY
The right to privacy is a fundamental human right and legal concept that protects individuals from unwarranted intrusion into their personal lives, affairs, or information. It encompasses several key aspects:
- Personal information: Protection of an individual's personal data and control over how it's collected, used, and shared.
- Physical privacy: The right to have personal space free from intrusion, such as in one's home or private property.
- Communication privacy: Protection of personal communications, including phone calls, emails, and other forms of correspondence.
- Bodily privacy: The right to make decisions about one's own body and medical treatments without interference.
- Territorial privacy: Freedom from surveillance in public and private spaces.
- Information privacy: Control over the collection, use, and dissemination of personal information.
The right to privacy is recognized in various international human rights documents, such as the Universal Declaration of Human Rights, and is enshrined in many national constitutions and laws. However, the extent and interpretation of privacy rights can vary between jurisdictions
3. What are the constitutional provisions related to the Right to Privacy?
The Right to Privacy, while not explicitly mentioned in many constitutions, is often derived from broader fundamental rights and principles. In India, the Right to Privacy has been recognized through judicial interpretation and is now considered a fundamental right.
| Article | Provision | Explanation |
| Article 21 | Right to Life and Personal Liberty | States that "No person shall be deprived of his life or personal liberty except according to the procedure established by law." The Supreme Court in Justice K.S. Puttaswamy (Retd.) vs. Union of India (2017) held that the Right to Privacy is an intrinsic part of the Right to Life and Personal Liberty under Article 21 |
| Article 19(1)(a) | Freedom of Speech and Expression | Guarantees the freedom of speech and expression. Privacy is linked to this right as it is essential for the effective exercise of this freedom. |
| Article 19(1)(d) | Freedom of Movement | Guarantees the right to move freely throughout the territory of India. Privacy is essential for the exercise of this right, ensuring individuals can move without unwarranted intrusion. |
| Article 14 | Right to Equality | Guarantees equality before the law and equal protection of the laws. The Right to Privacy is seen as necessary to protect the dignity and autonomy of individuals, which are essential aspects of equality. |
| Case | Year | Contribution |
| Kharak Singh vs. State of Uttar Pradesh | 1963 | The Supreme Court first recognized the concept of privacy, though it did not explicitly declare it a fundamental right |
| Gobind vs. State of Madhya Pradesh | 1975 | The Court acknowledged that the right to privacy is a part of personal liberty under Article 21, though it was not given definitive recognition |
| Justice K.S. Puttaswamy (Retd.) vs. Union of India | 2017 | The Supreme Court unanimously declared that the Right to Privacy is a fundamental right, protected under Articles 14, 19, and 21 of the Constitution. This judgment overruled previous contradictory rulings and firmly established privacy as a fundamental right |
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For Prelims: Indian Polity and Governance
For Mains: GS-II: Polity, Constitution
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Previous Year Questions
1.‘Right to Privacy’ is protected under which Article of the Constitution of India? (UPSC CSE 2021) (a) Article 15 (b) Article 19 (c) Article 21 (d) Article 29 Answer (c) The Right to Privacy in India is protected under Article 21 of the Constitution of India. This was explicitly established by the landmark judgment of the Supreme Court of India in the case of Justice K.S. Puttaswamy (Retd.) v. Union of India in 2017 Mains 1.Examine the scope of Fundamental Rights in the light of the latest judgement of the Supreme Court on the Right to Privacy. (UPSC CSE 2017) |
SOLID WASTE MANAGEMENT
- As of now, Delhi's solid waste management (SWM) system faces significant challenges. According to the 2011 Census, the population of New Delhi was approximately 1.7 crore, expected to reach around 2.32 crore in 2024.
- With an average per capita waste generation of 0.6 kg/day, the city generates roughly 13,000 tonnes per day (TPD) of waste, equivalent to about 1,400 truckloads, totalling approximately 42 lakh tonnes annually.
- With the projected population increase to 2.85 crore by 2031, waste generation could surge to 17,000 TPD.
- About 90% of the waste generated in Delhi is collected by the three municipal corporations: the Municipal Corporation of Delhi (MCD), Delhi Cantonment Board, and the New Delhi Municipal Corporation.
- Typically, 50-55% of the waste in Indian cities is biodegradable wet waste, 35% is non-biodegradable wet waste, and 10% is inert.
- Consequently, Delhi generates around 7,000 TPD of wet waste, 4,800 TPD of dry waste, and 2,000 TPD of inert waste.
6. Decentralization of Waste Processing
- Given the challenges associated with identifying large land parcels in Delhi, collaboration with neighbouring states becomes essential for setting up composting plants. Moreover, there exists a market for organic compost produced from wet waste in states like Haryana and Uttar Pradesh, highlighting the potential for cross-border partnerships.
- Delhi, with its 272 wards, can draw inspiration from states like Tamil Nadu and Kerala, which have established decentralised Micro-Composting Centres (MCCs) at the ward level, each with a capacity of five TPD. These MCCs have the potential to manage approximately 20% of the city's wet waste. Similarly, Bengaluru has implemented ward-level Dry Waste Collection Centres (DWCCs) with a capacity of 2 TPD each, capable of handling about 10% of the dry waste.
- To effectively manage waste, Delhi's SWM system should integrate decentralized options for both wet and dry waste. These initiatives should be complemented by larger processing facilities to ensure all generated waste undergoes scientific processing. The city must maximize the utilization of existing processing facilities while simultaneously constructing new ones to prevent any waste from remaining untreated.
- Furthermore, urban local bodies should actively seek to learn from best practices implemented in other Indian cities and abroad regarding efficient SWM processing. By adopting such approaches, Delhi can enhance its waste management infrastructure and address its waste challenges more effectively.
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For Prelims: Solid Waste Management, Environment Pollution
For Mains:
1. How can waste-to-energy plants contribute to sustainable waste management in India? Evaluate the potential benefits and drawbacks of this approach. (250 Words)
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Previous Year Questions
1. In India, ‘extend producer responsibility’ was introduced as an important feature in which of the following? (UPSC CSE 2019) (a) The Bio-medical Waste (Management and Handling) Rules, 1998
(b) The Recycled Plastic (Manufacturing and Usage) Rules, 1999
(c) The e-Waste (Management and Handling) Rules, 2011
(d) The Food Safety and Standard Regulations, 2011
Answer: C
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Source: The Hindu
NATIONAL POPULATION REGISTER (NPR)
1. Context
2. What is the National Population Register (NPR)?
- The NPR is a register of the usual residents of the country. It is mandatory for every usual resident of India to register in the NPR. It includes both Indian citizens as well as foreign citizens.
- The objective of the NPR is to create a comprehensive identity database of every usual resident in the country.
- The first National Population Register was prepared in 2010 and updating this data was done in 2015 by conducting door-to-door surveys.
- The next update of the NPR will take place next year from April to September with the House listing phase of the Census 2021.
- It is being prepared at the local (Village/sub-Town), sub-District, State, and National level under provisions of the Citizenship Act 1955 and the Citizenship (Registration of Citizens and issue of National Identity cards) Rules, 2003.
3. What is the meaning of usual Resident?
4. What is Census?
- The Census is the enumeration of the population of the country. It is being conducted at an interval of 10 years.
- The Census 2021 will be the 16th census in the country since the first census happened in 1872.
- However, it will be the 8th census after the Independence. For the first time, the Census 2021 will use the Mobile App for data collection.
- It will also provide a facility to the public for self-enumeration.
5. What is the difference between NPR and NRC?
- The NPR is different from the National Register of Citizens which excludes foreign citizens.
- According to the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, notified on December 10, 2003, a Population Register is ‘the register containing details of persons usually residing in a village or rural area or town or ward or demarcated area (demarcated by the Registrar General of Citizen Registration) within a ward in a town or urban area.
- Whereas, the ‘National Register of Indian Citizens’ is a register containing details of Indian Citizens living in India and outside India.
- The rules further say that ‘The National Register of Indian Citizens shall contain the particulars of every citizen i.e. Name; Father’s name; Mother’s name; Sex; Date of birth; Place of birth; Residential address (present and permanent); Marital status if ever married, name of the spouse; Visible identification mark; Date of registration of Citizen; Serial number of registration; and National Identity Number.
6. What is the link between NPR and NRC?
- According to the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, notified on December 10, 2003, The Central Government may, by an order issued in this regard, decide a date by which the Population Register shall be prepared by collecting information relating to all persons who are usually residing within the jurisdiction of Local Registrar.
- The Local Register of Indian Citizens shall contain details of persons after due verification made from the Population Register.
7. What makes NPR Controversial?
- Another debate has been about privacy. The NPR intends to collect many details of personal data on residents.
- The NPR is among a host of identity databases such as Aadhaar, voter cards, passports, and more than Home Minister Shah said he would like to see combined into one card. “We will have to end all these separate exercises,” Shah said at the foundation stone laying ceremony for the new Office of Registrar General of India and Census Commissioner on September 24.
8. If there was a previous NPR, how and when did the idea originate?
- At that time, it had clashed with Aadhaar (UIDAI) over which project would be best suited for transferring government benefits to citizens.
- The Home Ministry then pushed NPR as a better vehicle because it connected every NPR-recorded resident to a household through the Census.
- The ministry pushed even put the UIDAI project on the back burner. The data for NPR was first collected in 2010 along with the house-listing phase of Census 2011. In 2015, this data was updated by conducting door-to-door surveys.
- However, with the NDA government picking out Aadhaar as the key vehicle for the transfer of government benefits in 2016 and putting its weight behind it, NPR took a backseat.
- It was through a notification on August 3 by the RGI that the idea has been revived. The exercise to update the 2015 NPR with additional data has begun.
- The digitization of updated information has been completed.
9. What kind of data will be collected?
- Aadhaar Number (voluntary)
- Mobile Number
- Date & Place of Birth of Parents
- Place of Last Residence
- Passport Number (if Indian passport holder)
- Voter ID Card Number
- Permanent Account Number
- Driving Licence Number
10. Why does the government want so much data?
- While there are concerns about privacy, the government's position is based on two grounds. One is that every country must have a comprehensive identity database of its residents with demographic details.
- In its statement issued after Cabinet approval to NPR, the Home Ministry said the objective of conducting NPR is to “prepare a credible register of every family and individual” living in the country apart from “strengthening security” and “improvement in the targeting of beneficiaries under various Central government schemes”.
- The second ground, largely to justify the collection of data such as driving license, voter ID, and PAN, is that it will ease the life of those residing in India by cutting red tape.
- It is common to find different dates of birth of a person on different government documents. NPR will help eliminate that. With NPR data, residents will not have to furnish various proofs of age, address, and other details in official work. It would also eliminate duplication in voter lists.
- However, insist that NPR information is confidential, meaning it will not be shared with third parties.
- There is as yet no clarity on the mechanism for the protection of this vast amount of data that the government plans to collect.
11. What does one make of the defiance of West Bengal and Kerala?
- These Opposition-ruled states are making a political point. Citizenship, aliens, and naturalization are subject matters listed in List 1 of the Seventh Schedule that fall exclusively under the domain of Parliament.
- Legally, the states have no say in implementing or ruling out NPR. However, given that the manpower is drawn from the states, the defiance could potentially result in a showdown.
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For Prelims: National Population Register (NPR), National Register of Indian Citizens (NRC),
Citizenship (Registration of Citizens and issue of National Identity cards) Rules, 2003, Office of Registrar General of India, Aadhaar (UIDAI).
For Mains: 1. What is National Population Register (NPR)? Discuss its Objectives and how it is different from the National Register of Indian Citizens (NRC). (250 Words)
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1. With reference to India, consider the following statements: (UPSC 2021)
1. There is only one citizenship and one domicile.
2. A citizen by birth only can become the Head of State.
3. A foreigner once granted citizenship cannot be deprived of it under any circumstances. Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. 1 and 3
D. 2 and 3
Answer: A
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EL NINO AND LA NINA
- El Niño and La Niña, translating to “little boy” and “little girl” in Spanish, are climatic events arising from interactions between the ocean and atmosphere. They influence water temperatures in the central and eastern tropical Pacific Ocean, thereby affecting global weather patterns.
- The Earth's rotation from east to west causes winds between 30 degrees north and south of the equator to tilt in their paths. This results in winds flowing southwest in the northern hemisphere and northwest in the southern hemisphere, a phenomenon known as the Coriolis Effect.
- Consequently, trade winds blow westward on either side of the equator. Typically, these winds move west from South America towards Asia, leading to upwelling, where cold water from beneath the ocean surface rises, replacing warmer surface waters.
- Occasionally, weakened trade winds shift back towards South America, preventing upwelling. This leads to warmer-than-normal sea surface temperatures along the equatorial Pacific Ocean, marking the onset of El Niño conditions.
- In contrast, during La Niña, stronger trade winds push warm water towards Asia, enhancing upwelling and bringing cold, nutrient-rich water to South America.
- Thus, El Niño and La Niña represent opposite phases of the El Niño Southern Oscillation (ENSO) cycle, which also includes a neutral phase.
- El Niño events are more common than La Niña ones, occurring every two to seven years when neutral ENSO conditions are disrupted by either phase. Recently, La Niña conditions were observed from 2020 to 2023
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- Due to ENSO and the associated changes in ocean temperatures, air circulation in the region is also influenced. This, in turn, affects precipitation levels in nearby areas and has an impact on the Indian monsoon.
- The current El Niño event, which started last June, has weakened considerably. It is anticipated that by June, neutral ENSO conditions will be in place. Following this, La Niña conditions are expected to develop, potentially starting to have an impact by August
- Like India, countries such as Indonesia, the Philippines, Malaysia, and their neighbors experience abundant rainfall during a La Niña year. This year, Indonesia has already experienced flooding.
- Conversely, droughts are common in the southern parts of North America, where winters tend to be warmer than usual.
- Canada and the northwestern coast of the United States face heavy rainfall and flooding. Southern Africa experiences above-average rainfall, while the eastern regions of the continent receive below-average rainfall.
- ENSO significantly influences hurricane activity over the Atlantic Ocean, with La Niña years typically seeing an increase in hurricanes. For example, in the La Niña year of 2021, the Atlantic Ocean saw a record 30 hurricanes
- In India, El Niño is known to reduce southwest monsoon rainfall, leading to higher temperatures and more intense heatwaves, as seen this summer.
- Historically, monsoon seasons following an El Niño, such as in 1982-1983 and 1987-1988, saw abundant rainfall in 1983 and 1988. A similar pattern may occur this year.
- From 2020 to 2023, the longest La Niña event of the century took place. This was followed by ENSO neutral conditions, which transitioned to El Niño by June 2023.
- However, El Niño has been weakening since last December. According to Rajeevan, this rapid shift to La Niña is a natural occurrence and has happened many times in the past.
- Scientists suggest that climate change will impact the ENSO cycle. Various studies indicate that global warming may alter the average oceanic conditions in the Pacific Ocean, leading to more frequent El Niño events.
- The World Meteorological Organization (WMO) also predicts that climate change will likely affect the intensity and frequency of extreme weather and climate events associated with El Niño and La Niña
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For Prelims: Indian and World Geography
For Mains: GS-I, GS-III: Important Geophysical phenomena and environment
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PURCHASING MANAGERS INDEX (PMI)
- PMI is typically calculated through surveys of purchasing managers in various industries. These managers are asked about their perception of different aspects of business activity, including new orders, production levels, employment, supplier deliveries, and inventories.
- PMI is usually reported as a number between 0 and 100.
- A PMI value above 50 generally indicates expansion in the sector, while a value below 50 suggests contraction. The farther the PMI is from 50, the stronger the perceived expansion or contraction.
- PMI is considered a leading indicator because it provides insights into economic conditions before official economic data, such as GDP growth or employment figures, are released. It can be used to anticipate changes in economic activity.
- PMIs are calculated separately for manufacturing and services sectors. A Manufacturing PMI focuses on the manufacturing sector, while a Services PMI provides insights into the services sector. These sector-specific PMIs can give a more detailed view of the economy.
Components: PMI is composed of several components, including:
- New Orders: This component measures the number of new orders received by businesses. An increase in new orders often signals growing demand and economic expansion.
- Production: This component reflects changes in production levels. An increase suggests increased economic activity.
- Employment: The employment component indicates changes in the level of employment within the sector. An increase typically means job growth.
- Supplier Deliveries: This measures the speed at which suppliers can deliver materials. Slower deliveries may indicate supply chain issues or increased demand.
- Inventories: Inventory levels can be an indicator of expected demand. A decrease in inventories might suggest an expectation of rising demand.
- The Purchasing Managers' Index (PMI) is a significant economic indicator with several important implications and uses
- PMI serves as a barometer of the economic health of a country or region. A PMI above 50 generally indicates economic expansion, while a PMI below 50 suggests contraction.
- This provides a quick and easily understandable snapshot of the direction of economic activity, making it a valuable tool for assessing the overall economic climate.
- PMI is a leading indicator, meaning it often provides insights into economic conditions ahead of other official economic data, such as GDP growth or employment figures. As such, it is used by businesses, investors, and policymakers to anticipate changes in economic activity and make informed decisions
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Previous Year Questions
1.What does S & P 500 relate to? (UPSC CSE 2008) (a) Supercomputer Answer: (d) |
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT (FRBM) ACT
Kerala faces significant fiscal stress, meaning its government struggles to meet its expenditure with its revenue.
- High fiscal deficit: Kerala has a high fiscal deficit, which is the difference between its revenue and expenditure. This indicates the government spends more than it earns, requiring borrowing to bridge the gap.
- Debt burden: The state has a high debt-to-GDP ratio, which is the total debt compared to the size of its economy. This increasing debt burden raises concerns about future repayment ability and limits spending on essential services.
- Limited revenue generation: While Kerala's tax effort (ratio of tax collected to GDP) is considered above average, it still struggles to generate enough revenue to meet its needs.
- Causes: Several factors contribute to Kerala's fiscal stress, including:
- High social welfare spending: The state prioritises social programs, leading to high expenditure on healthcare, education, and pensions.
- Stagnant economic growth: Limited economic diversification and a slowdown in some sectors restrict revenue growth.
- Dependence on central government transfers: Kerala relies heavily on financial assistance from the central government, making it vulnerable to fluctuations in central transfers.
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Impacts: Fiscal stress can have negative consequences for Kerala's development:
- Limited investment in infrastructure: Reduced funds for infrastructure projects like roads, bridges, and power plants can hinder economic growth.
- Crowding out private investment: High government borrowing might compete with private sector borrowing, limiting investment opportunities.
- Reduced service delivery: Fiscal stress can impact the quality and accessibility of public services like healthcare and education.
Current Situation
- Kerala is categorised as one of the five most indebted states in India by the Reserve Bank of India (RBI).
- The debate continues how to address the issue. Some advocate for stricter fiscal discipline and exploring new revenue sources. Others emphasise the need for increased central government support and economic reforms to boost revenue generation.
- Article 293 (1) empowers states to borrow money for their functioning, but with limitations set by their respective legislatures. This ensures responsible borrowing and prevents excessive debt accumulation by state governments.
- Article 293 (2) allows the Central Government to provide loans to state governments.
- Article 293 (3) restricts states from raising loans without the Central Government's consent if they already have outstanding loans or guarantees from the Central Government. This provision aims to ensure states manage their finances responsibly and avoid excessive debt.
- Article 293 (4) A consent under clause (3) may be granted subject to such conditions, if any, as the Government of India may think fit to impose.
The Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) is a crucial piece of legislation in India that aims to achieve fiscal discipline by the government.
Objectives
- Reduce India's fiscal deficit: The act sets targets for the government to gradually bring down the fiscal deficit, which is the gap between its revenue and expenditure.
- Improve macroeconomic management: By ensuring responsible borrowing and spending, the FRBM Act aims to promote economic stability and growth.
- Enhance transparency in fiscal operations: The act mandates the government to present medium-term fiscal policy statements, promoting greater transparency in budgeting and debt management.
Key Provisions
- Fiscal deficit targets: The act originally laid out a roadmap for reducing the fiscal deficit to 3% of GDP (Gross Domestic Product) by March 2008. This target has been revised over time.
- Fiscal policy statements: The government is required to present three statements to the Parliament along with the annual budget
- Medium-Term Fiscal Policy Statement (MTFPS) outlines the fiscal roadmap for the next three years, including revenue and expenditure projections.
- The Fiscal Policy Strategy Statement (FPSS) document focuses on the medium-term fiscal strategy for achieving the deficit targets.
- Macroeconomic Framework Statement (MFS) statement presents the government's assessment of the overall economic situation and its implications for fiscal policy.
- Fiscal responsibility rules: The act empowers the government to frame rules for achieving the fiscal deficit targets. These rules may specify measures for curtailing expenditure, improving revenue collection, and managing public debt.
Criticisms and Challenges
- Balancing fiscal discipline with growth: Critics argue that a rigid focus on deficit reduction might hinder government spending on essential sectors, impacting economic growth.
- Achieving targets: The government has not always been able to meet the stipulated deficit targets due to various factors like economic slowdowns or unforeseen circumstances.
- Flexibility: Debates exist regarding the need for flexibility in the act to accommodate economic emergencies or unforeseen circumstances.
Significance
Despite the challenges, the FRBM Act has played a significant role in promoting fiscal discipline and transparency in India's public finances. It has helped to:
- Reduce the fiscal deficit over time, leading to greater macroeconomic stability.
- Increase awareness of fiscal issues and promote public debate on budgetary matters.
- Provide a framework for medium-term fiscal planning and debt management.
States in India can sometimes borrow beyond the FRBM (Fiscal Responsibility and Budget Management) Act limits but with some restrictions.
FRBM Act and Borrowing Limits: The FRBM Act sets targets for the government to gradually reduce the fiscal deficit (the gap between revenue and expenditure). These targets apply to both the central government and state governments.
Exceptions for States
- Legislative Flexibility: State legislatures can set their own borrowing limits within the FRBM framework. This allows some flexibility for states based on their specific circumstances.
- Central Government Loans: Article 293 (2) of the Indian Constitution allows the Central Government to provide loans to state governments. In critical situations, the central government might offer loans exceeding the FRBM limits to support states.
- Natural Disasters and Emergencies: In unforeseen circumstances like natural disasters or national emergencies, states may be allowed to borrow beyond the FRBM limits to meet immediate needs. However, this usually requires approval from the central government.
Restrictions on Borrowing Beyond Limits
- Article 293 (3) of the Constitution: This provision restricts states from raising loans without the central government's consent if they already have outstanding loans or guarantees from the central government. This discourages excessive borrowing and ensures some level of control.
- Loan Conditions: The central government may impose conditions on loans exceeding FRBM limits. These conditions could involve stricter fiscal discipline measures or reforms from the state government.
These recommendations are typically part of fiscal discipline measures to ensure responsible borrowing and debt management by state governments.
- 2021-22: 4% of GSDP: This recommendation implies that for the fiscal year 2021-22, state governments are advised to keep their net borrowing within 4% of their respective Gross State Domestic Product. This limit serves as a guideline to prevent excessive borrowing that could strain state finances.
- 2022-23: 3.5% of GSDP: For the following fiscal year 2022-23, the recommended net borrowing limit is lowered to 3.5% of GSDP. This reduction indicates a gradual tightening of fiscal discipline, aiming to curb borrowing and promote fiscal sustainability.
- 2023-24 to 2025-26: 3% of GSDP: The subsequent years from 2023-24 to 2025-26 see a further reduction in the recommended net borrowing limit to 3% of GSDP. This signifies a sustained effort to limit state borrowing and manage public debt within manageable levels relative to the state's economic output.
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For Prelims: Kerala, Fiscal Responsibility and Budget Management Act, Article 293, GSDP, Reserve Bank of India
For Mains:
1. Explain the constitutional provisions related to states' borrowing powers as outlined in Article 293 of the Indian Constitution. How do these provisions ensure responsible borrowing and prevent excessive debt accumulation by state governments? (250 Words)
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Previous Year Questions
1. 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
2. With reference to Indian economy, consider the following statements: (UPSC 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
3. Consider the following statements: (UPSC 2018)
1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt to GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of 49% of GDP of the State Governments.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government's consent for raising any loan if the former owes any outstanding liabilities to the latter.
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
4. Recently, which one of the following currencies has been proposed to be added to the basket of IMF’s SDR? (UPSC 2016)
A. Rouble
B. Rand
C. Indian Rupee
D. Renminbi
5. Rapid Financing Instruments" and "Rapid Credit Facility" are related to the provisions of lending by which one of the following? (UPSC 2022)
A. Asian Development Bank
B. International Monetary Fund
C. United Nations Environment Programme
D. Finance Initiative World Bank
6. 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 7. 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 Answers: 1-C, 2-B, 3-C, 4-D, 5-B, 6-B, 7-A
Mains
1. Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC 2020) 2. Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC 2021) |

