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DAILY CURRENT AFFAIRS, 12 FEBRUARY 2026

KEN-BETWA RIVER LINKING PROJECT

 

1. Context

Three cases have been filed in Madhya Pradesh’s Chhatarpur against a group of people after a protest they were carrying out against the Ken-Betwa river-linking project and the arrest of a local activist turned violent

2. About Ken-Betwa Link Project

  • It is the first project under the National Perspective Plan for the interlinking of rivers.
  • It envisages transferring water from the Ken river to the Betwa river, both tributaries of the Yamuna.
  • The Ken-Betwa Link Canal will be 221 km long, including a 2 km long tunnel.
  • The project has two phases with mainly four components.
  • Phase-I will involve one of the components Daudhan Dam complex and is subsidiary units such as Low-Level Tunnel, High-Level Tunnel, Ken-Betwa Link Canal, and powerhouses.
  • Phase II will involve three components Lower Orr Dam, Bina Complex Project, and Kotha Barrage.
According to the Jal Shakti Ministry, the project is expected to provide annual irrigation of 10.62 lakh hectares, supply drinking water to about 62 lakh people, and generate 103 MW of hydropower and 27 MW of solar power.
 
  • As per an official statement issued after the Cabinet approval on Wednesday, the total cost of the Ken-Betwa link project has been assessed at Rs.44,605 crores at 2020-21 price levels.
  • The Union Cabinet has approved central support of Rs.39,317 crores for the project, covering a grant of Rs.36,290 crores and a loan of Rs.3,027 crores.
  • The statement further said that the project is proposed to be implemented in 8 years with “state-of-the-art technology.

3. Special Purpose Vehicle (SPV)

  • A Special Purpose Vehicle (SPV) for the project is called Ken-Betwa Link Project Authority (KBLPA) will be set up to implement the project.
  • The Centre has set in motion the process of creating the National Interlinking of Rivers Authority (NIRA) is an independent autonomous body for planning, investigation, financing, and implementation of the interlinking of river (ILR) projects in the country.
  • The NIRA will have the power to set up SPV for individual link projects.
 

Ken-Betwa project agreement 

On March 22, 2021, a memorandum of agreement was signed between the Ministry of Jal Shakti and the governments of Madhya Pradesh and Uttar Pradesh to implement the Ken-Betwa Link Project (KBLP).

4. Conceptualiztion of the project

  • The idea of linking Ken with Betwa got a major push in August 2005, when a tripartite memorandum of understanding for the preparation of a detailed project report (DPR) was signed between the Centre and the two states.
  • In 2008, the Centre declared KBLP a National Project. Later, it was included as part of the Prime Minister’s package for the development of the drought-prone Bundelkhand region.
  • In April 2009, it was decided that the DPR will be prepared in two phases.
  • In 2018, a comprehensive DPR including phase-I, II, and additional areas proposed by Madhya Pradesh was also prepared.
  • It was sent to Uttar Pradesh, Madhya Pradesh, and the Central Water Commission in October 2018.
  • The memorandum of agreement was signed to implement the project.

5. Benefits from Project

  • The project lies in Bundelkhand, a drought-prone region, which spreads across 13 districts of Uttar Pradesh and Madhya Pradesh.
According to the Jal Shakti Ministry, the project will be of immense benefit to the water-starved region, especially the districts of Panna, Tikamgarh, Chhatarpur, Sagar, Damoh, Datia, Vidisha, Shivpuri and Raisen of Madhya Pradesh, and Banda, Mahoba, Jhansi and Lalitpur of Uttar Pradesh.
  • It will pave the way for more interlinking of river projects to ensure that scarcity of water does not become an inhibitor for development in the country.
 
Image source: The Indian Express
 
6. The Panna Tiger Reserve
  • According to the National Water Development Agency under the Jal Shakti Ministry, the Daudhan dam, to be built on the Ken river, will be 77 meters high and its gross capacity will be 2,853 million cubic meters.
  • According to the NWDA, the reservoir of Daudhan dam will involve “a submergence of 9000 ha area, out of which 5803 ha comes under Panna Tiger Reserve.
  • The latter includes 4141 ha of forest area which is about 7.6% of the total Panna Tiger Reserve area”.
  • To mitigate adverse impacts on Panna Tiger Reserve, as decided by NTCA,
  • Landscape Management Plan to decide mitigation strategy concerning KenBetwa Link entrusted to Wildlife Institute of India, Dehradun, and is in its final stage.
  • In addition to above three wildlife sanctuaries, viz Nauradehi, Rani Durgawati of MP and Ranipur WLF of UP are planned to be integrated with PTR for the proper conservation of Wild Life under Tiger Reserve.

7. The concept of river linking in India

  • In the past, several river-linking projects have been taken up.
  • For instance, the Periyar Project, under which the transfer of water from the Periyar basin to the Vaigai basin was envisaged, was commissioned in 1895.
  • Other projects such as Parambikulam Aliyar, Kurnool Cudappah Canal, Telugu Ganga Project, and Ravi-Beas-Sutlej too were undertaken.
  • In the 1970s, the idea of transferring surplus water from a river to a water-deficit area was mooted by the then Union Irrigation Minister Dr. K L Rao.
  • Himself an engineer, he suggested the construction of a National Water Grid for transferring water from water-rich areas to water-deficit areas.
  • Later, Captain Dinshaw J Dastoor proposed a Garland Canal to redistribute the water from one area to another.
  • However, the government did not pursue these two ideas further.
  • It was not until August 1980 that the Ministry of Irrigation prepared a National Perspective Plan for water resources development envisaging interbasin water transfer.
  • The NPP comprised two components: Himalayan Rivers Development; and Peninsular Rivers Development. Based on the NPP, the National Water Development Agency (NWDA) identified 30 river links 16 under the Peninsular component and 14 under the Himalayan Component.
  • Later, the river-linking idea was revived during the Atal Bihari Vajpayee regime.
  • The Ken-Betwa Link Project is one of the 16 projects under the peninsular component.

8. Clearances for a river-linking project

Various types of clearances are required, such as techno-economic clearance (given by the Central Water Commission);
  1. Forest clearance, and environmental clearance (Ministry of Environment & Forests);
  2. Resettlement and rehabilitation plan of tribal population (Ministry of Tribal Affairs) and
  3. Wildlife clearance (Central Empowered Committee).

For Prelims & Mains

For Prelims: river-linking projects, Ken-Betwa Link Project, Himalayan Rivers Development; and Peninsular Rivers Development, National Water Development Agency, Jal Shakti Ministry, The Panna Tiger Reserve, NitiAayog. Yamuna river, Ken-Betwa Link Project Authority (KBLPA), 
For Mains: 
1. Discuss the significance and hurdles of the Ken-Betwa River Link Project (250 Words)
2. What is River linking and discuss the significance of the River linking system in India (250 Words)
 
Source: PIB and The Indian Express 
 
 

UNLAWFUL ACTIVITIES (PREVENTION) ACT (UAPA)

 
 
 
1. Context
 
 
The Supreme Court on Wednesday questioned the National Investigation Agency (NIA) as to whether it was “fair and just” to invoke the draconian Unlawful Activities (Prevention) (UAPA) Act in the Beldanga violence case in West Bengal without even looking at any material or evidence, and term it a “terrorist act” affecting the economic security of the nation.
 
 
2. About Unlawful Activities (Prevention) Act (UAPA)
 

The Unlawful Activities (Prevention) Act (UAPA) is an Indian law that was enacted in 1967 to effectively prevent unlawful activities that pose a threat to the sovereignty and integrity of India.

Key highlights of the UAPA

  • Objective: The primary objective of the UAPA is to provide law enforcement agencies with effective tools to combat terrorism and other activities that threaten the security of the nation.
  • Definition of Unlawful Activities: The act defines unlawful activities to include actions that intend to or support the cession of a part of the territory of India or disrupt the sovereignty and integrity of the country.
  • Powers of Designation: The government has the authority to designate an organization as a terrorist organization if it believes that such an organization is involved in terrorism. This designation has significant legal consequences, including the freezing of assets.
  • Powers of Arrest and Detention: The UAPA provides law enforcement agencies with powers of arrest and detention to prevent individuals from engaging in unlawful activities. The act allows for preventive detention to curb potential threats before they materialise.
  • Banning of Terrorist Organizations: The government can proscribe organizations as terrorist organizations, making their activities illegal. This includes banning these organisations, freezing their assets, and taking other measures to curb their operations.
  • Admissibility of Confessions: The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. This provision has been a point of contention, with concerns about potential misuse and coercion.
  • Designation of Individuals as Terrorists: In addition to organizations, the UAPA allows the government to designate individuals as terrorists. This designation carries legal consequences, including restrictions on travel and freezing of assets.
  • Amendments and Stringency: Over the years, the UAPA has undergone several amendments to strengthen its provisions and make it more effective in dealing with emerging threats. However, these amendments have also been criticized for potential violations of civil liberties.
  • International Cooperation: The UAPA allows for cooperation with foreign countries in matters related to the prevention of unlawful activities. This includes extradition of individuals involved in such activities.
 

3. Unlawful Activities (Prevention) Act (UAPA) and Human Rights

 

The Unlawful Activities (Prevention) Act (UAPA) and human rights lie in the impact the act can have on various fundamental rights guaranteed by the Constitution of India and international human rights standards.

The key points connecting the UAPA and human rights:

  • The UAPA allows for preventive detention, which means individuals can be detained without formal charges based on suspicions of involvement in unlawful activities. This raises concerns about the right to liberty, as individuals may be deprived of their freedom without the presumption of innocence until proven guilty.
  • The admissibility of confessions made to police officers under the UAPA raises issues related to the right against self-incrimination. There is a risk that such confessions might be obtained under duress or coercion, compromising the fairness of legal proceedings.
  • Designating individuals as terrorists and proscribing organizations without due process may impinge on the right to a fair trial. This includes the right to be informed of charges, the right to legal representation, and the right to present a defense.
  • The UAPA provides authorities with the power to proscribe organizations as terrorist organizations, limiting their activities. Critics argue that this may infringe upon the right to freedom of association, particularly when such designations are made without sufficient evidence or proper legal procedures.
  • The potential for misuse of the UAPA to target individuals or organizations critical of the government raises concerns about freedom of expression. If the act is used to suppress dissent or stifle legitimate political or social activities, it can undermine this fundamental right.
  • The UAPA grants authorities the power to intercept communications and conduct surveillance on individuals suspected of engaging in unlawful activities. This raises concerns about the right to privacy, as individuals may be subjected to intrusive surveillance without adequate safeguards.
  • Human rights standards require that any restrictions on rights, such as those imposed by the UAPA, must be proportionate and necessary for achieving a legitimate aim. Critics argue that the broad scope of the UAPA may lead to disproportionate measures that unduly restrict individual rights.
  • The UAPA's compatibility with international human rights standards, including the International Covenant on Civil and Political Rights (ICCPR), is a critical point of consideration. Ensuring that the act aligns with these standards is essential to upholding human rights principles.
 

4. Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Constitution

 

The Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Indian Constitution lie in how the UAPA's provisions for arrest and detention intersect with the constitutional safeguards provided under Article 22. 

  • Article 22 provides certain protections to individuals who are arrested or detained. It outlines the rights of arrested individuals, emphasizing safeguards to prevent arbitrary or unlawful detention.
  • Article 22(1) states that every person who is arrested and detained shall be informed, as soon as may be, of the grounds for such arrest. This provision ensures that individuals are aware of the reasons behind their arrest, preventing arbitrary or secret detentions.
  • Article 22(1) also guarantees the right of an arrested person to consult and be defended by a legal practitioner of their choice. This ensures that individuals have access to legal assistance during the legal process, contributing to a fair and just legal system.
  • The UAPA includes provisions for preventive detention, allowing authorities to detain individuals to prevent them from committing certain offences. However, Article 22(4) allows preventive detention only under specific circumstances, and certain safeguards must be followed, such as providing the detenu with the grounds for detention and an opportunity to make a representation against the detention.
  • Article 22(4) further mandates that a person detained under a law providing for preventive detention must be afforded the earliest opportunity to make a representation against the detention. Additionally, the case of every person detained is required to be placed before an advisory board within three months.
  • The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. However, this provision has been a point of concern concerning Article 22, as confessions obtained under duress or coercion may violate the right against self-incrimination.
  • Article 22(2) ensures the right to be brought before the nearest magistrate within 24 hours of arrest, excluding the time necessary for the journey. This provision aims to prevent prolonged detention without judicial oversight and contributes to the right to a speedy trial.
 
 
For Prelims: Unlawful Activities (Prevention) Act, Article 22, Terrorism
For Mains: 
1. Discuss the key provisions of the Unlawful Activities (Prevention) Act (UAPA) and analyze how they may impact fundamental human rights. Elaborate on the balance between national security concerns and the protection of individual rights. (250 Words)

 

Previous Year Questions

1. Under Article 22 of the Constitution of India, with the exception of certain provisions stated there in, what is the maximum period for detention of a person under preventive detention? (MPSC 2014)

A. 2 months       B. 3 months         C. 4 months           D. 6 months

 

2. Article 22 of the Constitution ensures (CTET 2016)

A. Right not to be ill-treated during arrest or while in custody

B. Right to Constitutional Remedies

C. Right against Exploitation

D. Right to Education

Answers: 1-B, 2-A

Mains

1. Indian government has recently strengthed the anti-terrorism laws by amending the Unlawful Activities(Prevention) Act, (UAPA), 1967 and the NIA Act. Analyze the changes in the context of prevailing security environment while discussing scope and reasons for opposing the UAPA by human rights organizations. (UPSC 2019)

Source: The Indian Express

 

 

SPECIAL INTENSIVE REVISION (SIR)

 
 
1. Context
 
In the first week of February 2026, in an unprecedented event, the Chief Minister of West Bengal, Mamata Banerjee, appeared before the Supreme Court of India in the ongoing hearings around the conduct of the Special Intensive Revision (SIR) of the electoral rolls, which has been taking place in multiple States across India
 
2. What is the Special Intensive Revision?
 
 
  • The Special Intensive Revision (SIR) of the Electoral Rolls is an important exercise undertaken by the Election Commission of India (ECI) to ensure that the voter lists (electoral rolls) are accurate, updated, and inclusive before any major election or as part of the annual revision cycle.
  • In simpler terms, the SIR is a comprehensive verification and correction process of the electoral rolls — aimed at including eligible voters, removing ineligible ones, and rectifying errors in the existing list.
  • It is called “special” because it involves an intensified, house-to-house verification and greater public participation compared to the routine annual summary revision
  • The purpose of the Special Intensive Revision is to maintain the purity, accuracy, and inclusiveness of India’s democratic process. Clean and updated voter rolls are essential for free, fair, and credible elections, as they prevent issues like bogus voting, disenfranchisement, and duplication.
  • In summary, the Special Intensive Revision (SIR) is a focused, large-scale voter verification campaign conducted by the Election Commission to ensure that the electoral rolls are error-free, inclusive, and reflective of the current eligible voting population. It plays a crucial role in strengthening the integrity and transparency of India’s electoral system

During the Special Intensive Revision, Booth Level Officers (BLOs) visit households to verify voter details such as name, address, age, and photo identity. This exercise helps identify:

  • Citizens who have turned 18 years or older and are eligible to vote,

  • Entries that need to be corrected or deleted due to death, migration, or duplication, and

  • Any discrepancies in the voter’s details such as gender, address, or photo mismatch
 
 
3. Election Commission of India, its powers and functions
 
  • Article 324(1) of the Indian Constitution empowers the Election Commission of India (ECI) with the authority to oversee, guide, and manage the preparation of electoral rolls as well as the conduct of elections for both Parliament and the State Legislatures.
  • As per Section 21(3) of the Representation of the People Act, 1950, the ECI holds the right to order a special revision of the electoral roll for any constituency, or part of it, at any time and in a manner it considers appropriate.
  • According to the Registration of Electors’ Rules, 1960, the revision of electoral rolls may be carried out intensively, summarily, or through a combination of both methods, as directed by the ECI.
  • An intensive revision involves preparing an entirely new roll, while a summary revision deals with updating or modifying the existing one
 
4. How is SIR different from the National Register of Citizens (NRC)?
 
 
 
 
Aspect  Special Intensive Revision (SIR) National Register of Citizens (NRC)
Purpose To verify, update, and correct the electoral rolls so that all eligible voters are included and ineligible names are removed To identify legal citizens of India and detect illegal immigrants
Authority / Governing Body Conducted by the Election Commission of India (ECI) Conducted under the Ministry of Home Affairs (MHA)
Legal Basis Based on Article 324(1) of the Constitution, Section 21(3) of the Representation of the People Act, 1950, and the Registration of Electors' Rules, 1960. Governed by the Citizenship Act, 1955 and the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003
Scope Focuses only on Indian citizens aged 18 years and above who are eligible to vote Covers all residents of India (or a particular state) to determine their citizenship status
Nature of the Exercise A regular, recurring administrative exercise carried out to maintain accurate voter lists A special, large-scale verification exercise conducted under specific legal or political mandates.
Relation to Citizenship Does not determine citizenship — only eligibility to vote Directly determines citizenship status
 
 
5. What are the concerns related to SIR?
 

One of the major concerns is the erroneous deletion of eligible voters from the rolls.

  • Mistakes during house-to-house verification or data entry may lead to legitimate voters—especially migrants, daily-wage workers, and marginalized communities—being left out.

  • Such exclusions can directly affect voter participation and undermine the democratic process.

Despite the intensive verification, fake or duplicate names often remain due to poor coordination or outdated records.

  • Deaths, migrations, or multiple registrations in different constituencies are not always updated accurately.

  • This raises questions about the accuracy and credibility of the electoral rolls.

The SIR is a large-scale field operation requiring trained personnel, coordination among departments, and robust data systems.

  • Booth Level Officers (BLOs) are often overburdened with multiple duties and may not have sufficient time or training for thorough verification.

  • Limited digital infrastructure in rural areas can also hamper real-time data updates.

Electoral roll revisions, especially when conducted close to elections, can spark political allegations of bias or manipulation.

  • Parties may accuse each other or the Election Commission of targeting specific communities or constituencies.

  • Even unintentional errors can lead to trust deficits in the electoral process.

 
6. Way Forward
 
 
While the Special Intensive Revision is essential for ensuring clean and updated electoral rolls, its effectiveness depends on transparent procedures, proper training, digital accuracy, and public awareness.
Addressing these concerns is vital to maintain trust in the Election Commission and uphold the credibility of India’s democratic system
 
 
For Prelims: Special Intensive Revision (SIR), National Register of Citizens (NRC), Election Commission of India (ECI)
For Mains: GS II - Indian Polity
 
 

Previous year Question

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 recognized political parties.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 only
C. 2 and 3 only
D. 3 only
Answer: D
 
2. Consider the following statements : (UPSC 2021)
1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.
2. In the 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies.
3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. 1 and 3
D. 2 and 3
Answer: B
 
Mains
 
1.To enhance the quality of democracy in India the Election Commission of India has proposed electoral reforms in 2016. What are the suggested reforms and how far are they significant to make democracy successful? (UPSC CSE 2017)
Source: Indianexpress
 
 

CONSUMER PRICE INDEX (CPI)

1. Context

Inflation, one of the most closely watched macroeconomic indicators, is something that most people feel in daily life in their routine household expenses. The Consumer Price Index (CPI) captures this reality by tracking the prices of goods and services that households regularly consume, turning everyday experiences into an official measure of inflation. For the common man, the CPI is like a quiet mirror of daily life capturing, inter alia, the changing cost of basic needs such as food on the plate, rent for the roof over the head, and fuel for the journey to work.

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

 

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)
 
 
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
 
Source: The Hindu
 
 

16TH FINANCE COMMISSION

1. Context

The 16th Finance Commission under the chairmanship of Dr. Arvind Panagariya has submitted its report for the period of 2026-31. The Central government has accepted its recommendations with respect to devolution of funds from Centre to States.

2. Finance Commission

  • The Finance Commission is a crucial constitutional body in India responsible for the distribution of financial resources between the central government and the state governments.
  • It plays a vital role in maintaining fiscal federalism by ensuring a fair and equitable distribution of financial revenues and grants-in-aid among the various tiers of government.
  • The Finance Commission is set up every five years, or at such earlier intervals as the President of India may decide, as per Article 280 of the Indian Constitution.
  • It consists of a Chairman and four other members, each appointed by the President. These members are experts in the fields of economics, finance, and public administration.

3. Mandate and Functions

  • The primary objective of the Finance Commission is to make recommendations to the President regarding the distribution of the net proceeds of taxes between the Union (central government) and the states, and the allocation of resources among the states.
  • It also suggests measures to improve the financial position of the states, if necessary. The Commission's recommendations are aimed at addressing regional imbalances and ensuring the overall economic development of the country.

4. The specific functions of the Finance Commission include

  • Tax Revenue Sharing: The Commission reviews the trends in revenue collections and recommends the percentage of the divisible pool of taxes that should be shared with the states. The divisible pool includes taxes like income tax, corporate tax, and excise duty.
  • Grants-in-Aid: Besides the devolution of taxes, the Finance Commission also suggests grants-in-aid to states to support their financial requirements for various developmental projects and schemes.
  • Debt Relief: The Commission may recommend measures to provide relief to states facing a high burden of debt, thereby promoting fiscal discipline.
  • Macro-Fiscal Management: It examines the overall financial situation of the country and suggests measures to maintain macroeconomic stability.
  • Any Other Matter: The President may also refer specific matters to the Commission for examination and recommendations.

5. Process of Working

  • The Finance Commission follows a consultative process while formulating its recommendations.
  • It seeks input from various stakeholders, including the central and state governments, local bodies, financial experts, and economists.
  • The Commission examines historical data, financial indicators, and the needs of states to arrive at a comprehensive and objective assessment.
  • After conducting detailed studies and consultations, the Commission submits its report to the President.
  • The recommendations of the Finance Commission are ordinarily binding in nature, and both the central and state governments are expected to implement them. However, their acceptance depends on the discretion of the central government.

6. Importance

  • The Finance Commission is crucial in maintaining the federal structure of India and ensuring that all states receive adequate financial support for their development.
  • By promoting equitable distribution of resources, helps in reducing regional disparities and fostering balanced economic growth across the country.
  • The Commission's recommendations also play a vital role in shaping the fiscal policies of both the central and state governments.

7. Recommendations of the Previous Finance Commission

13th Finance Commission Recommendations:

  • Increase the number of court working hours using existing infrastructure.
  • Enhance support to Lok Adalats.
  • Provide additional funding to State Legal Services Authorities to enhance legal aid for the marginalized.
  • Promote the use of Alternative Dispute Resolution (ADR) mechanisms.
  • Enhance the capacity of judicial officers and public prosecutors through training programs.
  • Support the creation of a judicial academy in every state for training purposes.
  • Allocate funds for the setting up of specialized courts.
14th Finance Commission's Recommendations:
  • Raised states' share in the divisible pool of central taxes to 42%
  • Revised to 41% after the number of states reduced to 28
  • The withdrawal of Planning Commission grants helped manage the situation

15th Finance Commission Recommendations:

  • Gather quantifiable data on the level of various services available in different states.
  • Collect corresponding unit cost data to estimate cost disabilities among states.
  • Fill gaps in statistical data through the efforts of the Ministry of Statistics.

8. Need for realistic expectations regarding  the following 16th Finance Commission

  • Acknowledging Implementation Challenges: Recognize the challenges and complexities involved in implementing Finance Commission recommendations, such as coordination issues, administrative capacity, and resistance to change. This understanding will help shape realistic expectations and strategies for addressing these challenges.
  • Strengthening Implementation Mechanisms: Focus on improving the implementation mechanisms and processes. This includes enhancing coordination and cooperation between the Union and state governments, strengthening administrative capacity at all levels, and streamlining the implementation of conditionalities to facilitate smoother execution.
  • Robust Monitoring and Evaluation: Establish effective monitoring and evaluation mechanisms to track the progress and outcomes of implemented reforms. Regular assessment will help identify implementation gaps and provide opportunities for course correction and improvement.
For Prelims: Finance Commission, Article 280, Fiscal Consolidation, Fiscal Federalism, and Alternative Dispute Resolution (ADR) mechanism.
For Mains: 1. Discuss the Role and Challenges of the Finance Commission in Promoting Fiscal Federalism and Ensuring Equitable Resource Distribution in India. (250 words).
 

Previous year Question

1. With reference to the Finance Commission of India, which of the following statements is correct? (UPSC 2011)
A. It encourages the inflow of foreign capital for infrastructure development.
B. It facilitates the proper distribution of finances among the Public Sector Undertaking.
C. It ensures transparency in financial administration.
D. None of the statements (a), (b), and (c) given above is correct in this context.
Answer: D
 
2. With reference to the Fourteenth Finance Commission, which of the following statements is/are correct? (UPSC 2015)
1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent.
2. It has made recommendations concerning sector-specific grants.
Select the correct answer using the code given below.
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: A
 
3. Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission? (UPSC 2012)
1. A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design.
2. A design for the creation of lakhs of jobs in the next ten years in consonance with India's demographic dividend.
3. Devolution of a specified share of central taxes to local bodies as grants
Select the correct answer using the codes given below: 
A. 1 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: C
 
 Source: The Hindu
 
 

SMALL INDUSTRIES

 
 
1. Context
 
Small and Medium Enterprises (SME) face limited access to intermediary facilities such as merchant bankers and are unfamiliar with capital markets, which make it challenging for them to go public
 
2. Micro Small Medium Enterprises (MSME)
 
Small-scale industries account for nearly 95% of all industrial units and are a crucial component of the nation's economic framework. Mahatma Gandhi emphasized the importance of cottage and small-scale industries for India's progress. As reported by the Ministry of Statistics and Programme Implementation (MoSPI), this sector provides employment to approximately 17.5 million people. Consequently, it plays a vital role in job creation. The sector encompasses a wide array of industries, including modern small-scale enterprises, unorganized traditional industries, and organized large and medium-sized businesses
 
Classification of Industries
Classification/ Industry type Micro Small Medium
Investment Not more than Rs.1 crore Not more than Rs.10 crore Not more than Rs.50 crore
Annual Turnover Not more than Rs. 5 crore Not more than Rs. 50 crore Not more than Rs. 250 crore
 
 
3. Role of Small Industries in Indian Economy
 
  • Expansion of Entrepreneurial Activities: The innovative approaches adopted by small industries have contributed to the growth of entrepreneurial ventures. This expansion has brought more economic sectors into the fold, offering a broader range of goods and services that cater to both domestic and international markets.
  • Industrialization of Rural and Underdeveloped Areas: Small industries have helped reduce regional disparities, promoting a more equitable distribution of wealth and income throughout the nation.
  • Employment Creation: Small industries are crucial to India's economic development, as they generate significant employment opportunities at a much lower capital investment compared to large-scale industries

 

Village Small Industries (VSI)
 
The term "Village and Small Industry (VSI)" is commonly used to refer to unorganized traditional sectors and small-scale industries. The VSI sector is composed of seven sub-sectors: handicrafts, handlooms, Khadi and Village Industries, coir, sericulture, power looms, and small-scale industries
 
 
 
4. Government Initiatives
 
  • Prime Minister’s Employment Generation Programme (PMEGP): The aim of this program is to create employment opportunities by establishing new micro-enterprises, projects, and self-employment initiatives across rural and urban areas of the country. The Khadi and Village Industries Commission (KVIC) serves as the national nodal agency responsible for implementing the scheme, while its execution at the state level is managed by State KVIC offices, State Khadi and Village Industries Boards (KVIB), District Industries Centres (DIC), Coir Board (for coir-related activities), and Banks.
  • Collateral-Free Credit Provision for MSMEs: Banks and other financial institutions, including NBFCs, are mandated to provide collateral-free credit to Micro and Small Enterprises. The scheme ensures that up to ₹5 crore (effective from April 1, 2023) per borrowing unit is covered for collateral-free credit facilities (term loans and/or working capital) extended to micro and small enterprises by eligible lending institutions.
  • A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship (ASPIRE): The ASPIRE program has been approved for continuation from 2021-2022 to 2025-2026 with a budget allocation of ₹194.87 crore. Updated guidelines issued on January 28, 2022, focus on the following objectives:
  1. Reducing unemployment and generating jobs,
  2. Promoting an entrepreneurial culture in India,
  3. Encouraging innovation to enhance the competitiveness of the MSME sector.
  • Entrepreneurship and Skill Development Programmes (ESDP): This program is designed to inspire youth from diverse social backgrounds, including women, SC/ST communities, disabled individuals, ex-servicemen, and those below the poverty line, to consider careers in self-employment or entrepreneurship.
  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The scheme aims to create competitive, sustainable employment opportunities for traditional industries and artisans by organizing them into clusters. It also seeks to enhance the marketability of products produced by these clusters, upgrade the skills of traditional artisans, provide better tools and equipment, strengthen cluster governance with active stakeholder participation, and foster innovative products, advanced technologies, processes, market intelligence, and new models of public-private partnerships.
  • MSME Champions Scheme: This program, set to run from 2021-2022 to 2025-2026, is divided into three components:
  1. MSME-Sustainable (ZED) Certification Scheme
  2. MSME-Competitive (Lean) Scheme
  3. MSME-Innovative (for Incubation, IPR, and Design) Scheme
  • Greening MSME: SIDBI has introduced the "Greening MSME" initiative, which offers financial assistance up to a maximum of ₹20 crore to MSMEs for adopting energy-efficient and environmentally sustainable technologies
 
5. Challenges
 
  • Access to Finance: Access to funding is a major challenge for Indian MSMEs, with the total financing gap expected to reach $400 billion. While closing this gap will take time, targeted green finance initiatives in areas like waste management, electric vehicles, energy efficiency, and renewables can support MSME growth in these sectors.
  • Interest Rates: The Central Government should lower interest rates and make consumer finance, housing loans, and vehicle loans more accessible to stimulate market demand.
  • Climate Commitments and Transitioning to Low-Carbon: Small enterprises are limited to adhering to environmental regulations, while global supply chains increasingly shift to greener processes and products. There is currently no strategic plan to help MSMEs manage the risks associated with this transition.
  • Unorganized Nature: Due to its fragmented structure and the predominance of micro-sized businesses, the MSME sector is one of the most vulnerable in the Indian economy. The COVID-19 pandemic has highlighted this vulnerability, with millions of MSMEs facing closure due to decreased demand caused by lockdowns.
  • Green Transition of MSMEs: MSMEs are more exposed to policy and demand uncertainties, often with greater downside risks. Even if they recognize the benefits of going green, most lack the financial and technical capacity to invest in new initiatives. However, certain government programs can help address these barriers.
  • Incentives and Penalties: Encouraging Small and Medium Enterprises (SMEs) to exceed mere compliance can be achieved by taxing negative externalities and offering subsidies or tax breaks for green investments. Updating environmental legislation should also consider the risks posed by different industries, and these policies should be assessed for their impact on MSMEs before widespread implementation
 
6. Way forward
 

MSMEs should embrace best practices like implementing low-energy strategies, adopting renewable energy sources, improving waste management, ensuring women's safety, and making timely wage payments.

Governments, business associations, civil society organizations, and other stakeholders can play a proactive role in promoting awareness, sharing best practices, and providing training and resources. Financial incentives, such as tax breaks, subsidies, grants, and low-interest loans, can be offered by governments and investors to encourage MSMEs to adopt sustainable practices or invest in sustainable technologies.

Larger companies can support MSMEs in adopting sustainable practices by offering training, technical support, and financial assistance

 

 

For Prelims: Current events of national and international importance

For Mains: GS III - Indian Economy
 

Previous year Questions

1. Consider the following statements with reference to India: (UPSC 2023)
1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.
2. All bank loans to the Micro, Small, and Medium Enterprises qualify under the priority sector.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: B
 
2. Which of the following can aid in furthering the Government's objective of inclusive growth? (UPSC 2011)
1. Promoting Self-Help Groups
2. Promoting Micro, Small and Medium Enterprises
3. Implementing the Right to Education Act
Select the correct answer using the codes given below:
A. 1 only
B. 1 and 2 only
C. 2 and 3 only
D. 1, 2 and 3
Answer: D
 
Source: Indianexpress
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