💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • [pib] WAVES Anime & Manga Contest

    Why in the News?

    In an effort to promote anime and manga culture in India, the Ministry of Information & Broadcasting has launched the WAVES Anime & Manga Contest (WAM!).

    About the WAVES Anime & Manga Contest

    • The WAM! is an innovative initiative launched by the Ministry of Information & Broadcasting in collaboration with the Media & Entertainment Association of India (MEAI).
    • The contest is part of Create in India Challenge and is aimed at nurturing local creative talent in anime and manga production.
    • It provides a unique platform for Indian creators to produce localized versions of Japanese art styles, targeting both domestic and global audiences.
    • The contest offers marketing support and opportunities for global recognition, helping creators showcase their talent in manga, webtoon, and anime.

    WAM! features 3 key categories:

    1. Manga (Japanese style comics): Individual participation for both students and professionals.
    2. Webtoon (Vertical comics for digital mediums): Individual participation for students and professionals.
    3. Anime (Japanese style animation): Team participation (up to 4 members) for students and professionals.

     

    About the Create in India Challenge

    • The Create in India Challenge aligns with Prime Ministers vision of “Design in India, Design for the World”, emphasizing the development of creative industries in India.
    • It is part of the broader effort to make India a global hub for design, innovation, and creative production.
    • It is a precursor to the WAVES Summit, a large-scale event aimed at promoting creativity and technology in media and entertainment.

    PYQ:

    [2014] Though 100 percent FDI is already allowed in non-news media like a trade publication and general entertainment channel, the government is mulling over the proposal for increased FDI in news media for quite some time. What difference would an increase in FDI make? Critically evaluate the pros and cons.

  • [pib] 10 Years of Make in India

    Why in the News?

    It has been 10 years since the announcement of “Make in India” Programme on September 25 in the year 2014.

    About the Make in India Programme:

    Details
    Led by Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry
    Objective To transform India into a global manufacturing and investment hub
    Key Focus Areas Attract foreign investment, promote industrialization, export-led growth
    Make in India 2.0 Sectors Covers 27 sectors, including strategic manufacturing and services
    GDP Target (Manufacturing) Increase manufacturing share in GDP from 16% to 25% by 2022
    Job Creation Target 10 crore additional jobs by 2022
    Manufacturing Growth Target 12-14% annual growth in the manufacturing sector
    Four Pillars
    • Focus on Ease of Doing Business, de-licensing, and de-regulation of industries
    • Develop industrial corridors, strengthen existing infrastructure, fast-track registration
    • 27 sectors including manufacturing, infrastructure, and services
    • Government as a facilitator, partnering with industries for economic development

    Success of the Project

    • India is now the second-largest mobile phone producer globally.
    • The PLI Schemes have attracted ₹1.97 lakh crore in investment across 14 key sectors, generating 8 lakh jobs.
    • The PM GatiShakti initiative has improved logistics and transport connectivity, while India received $667.41 billion in FDI from 2014-2024.
    • Indigenous projects like INS Vikrant and Vande Bharat Trains have showcased India’s growth in manufacturing.
    • India improved its Ease of Doing Business ranking, moving from 142nd to 63rd.
    • Limitations:
      • The share of manufacturing in GDP has remained flat at 17.3% in 2023-24, the same level as in 2013-14, despite rising briefly to 18.5% in 2021-22.
      • Employment has declined, with manufacturing’s share in total employment falling from 11.6% in 2013-14 to 10.6% in 2022-23.
      • India’s share in global exports grew from 1% in 2005-06 to 1.6% by 2015-16, but only increased marginally to 1.8% by 2022-23.
      • Additionally, imports as a share of GDP have risen back to 25% in 2023-24, similar to 27% in 2013-14, after a dip to 21.2% in 2020-21 during the pandemic.

    PYQ:

    [2017] “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product (GDP) in the post-reform period.” Give reasons. How far are the recent changes in Industrial-Policy capable of increasing the industrial growth rate?

  • Navigating cross-border insolvency

    Why in the News?

    It is essential to incorporate the significance of insolvency laws into global trade discussions through both multilateral and bilateral channels.

    What are the key challenges in managing cross-border insolvency cases?

    • Jurisdictional Conflicts: Difficulty in determining which country’s courts have jurisdiction over insolvency proceedings, especially when a company has assets and creditors in multiple countries.
    • Recognition of Foreign Proceedings: Some countries may not recognize foreign insolvency proceedings, leading to inconsistent outcomes.
    • Coordination Issues: Lack of cooperation between courts and administrators in different countries can complicate the resolution of cross-border insolvency cases.
    • Legal and Cultural Differences: Variations in legal systems, insolvency laws, and business practices across countries make harmonization challenging.
    • Enforcement of Judgments: Difficulty in enforcing insolvency-related judgments or agreements across different jurisdictions.

    How does the Insolvency and Bankruptcy Code (IBC) address cross-border insolvency in India?

    • Limited Provisions: The IBC, 2016, has provisions for handling cross-border insolvency on a case-by-case basis through bilateral agreements, but it lacks a comprehensive framework.
    • Bilateral Arrangements: India’s approach currently relies on ad hoc bilateral agreements to manage cross-border insolvency cases, making the process fragmented and less efficient.
    • No Adoption of the UNCITRAL Model Law: Despite several recommendations by committees, India has yet to adopt the UNCITRAL Model Law on Cross-Border Insolvency, which would provide a more standardized and efficient resolution mechanism.

    What international frameworks exist to facilitate cross-border insolvency resolutions?

    • UNCITRAL Model Law on Cross-Border Insolvency (1997): A widely recognized framework designed to facilitate cooperation between courts and administrators in different countries.
      • It operates on four pillars: access, recognition, cooperation, and coordination. It has been adopted by over 60 countries.
    • EU Insolvency Regulation: Provides a framework for handling insolvency within EU member states, facilitating the recognition of insolvency proceedings across borders within the EU.
    • NAFTA/US-Mexico-Canada Agreement (USMCA): Includes provisions for resolving insolvencies with cross-border implications between member countries.
    • Bilateral and Multilateral Trade Agreements: Some international agreements include limited provisions on cross-border insolvency, though most focus on general trade and dispute resolution, leaving a gap in addressing insolvency directly.

    Way forward: 

    • Adopt the UNCITRAL Model Law: India should expedite the adoption of the UNCITRAL Model Law on Cross-Border Insolvency to establish a standardized framework, improving cooperation, recognition, and legal certainty in international insolvency cases.
    • Integrate Cross-Border Insolvency in Trade Agreements: India should incorporate cross-border insolvency provisions in Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs) to ensure seamless insolvency resolution in international trade.

  • Spices Board targets exports of $25 billion by 2047

    Why in the News?

    • The Spices Board of India aims to achieve $25 billion in annual exports of spices and spice-based products by 2047, a significant increase from the current $4.4 billion.
      • Current consumption is 10 million tonnes, with 1.42 million tonnes exported annually. By 2047, the export target is 2.7 million tonnes.

    About Spices Board of India

    • The merger of the erstwhile Cardamom Board and Spices Export Promotion Council on 26th February 1987, under the Spices Board Act 1986 led to the formation of the Spice Board of India.
    • The Board functions as an International link between the Indian exporters and the importers abroad with a nodal Ministry of Commerce & Industry.
    • It is headed by a Chairman, a rank equivalent to Joint Secretary to the GoI.
    • Headquartered in Kochi, it has regional laboratories in Mumbai, Chennai, Delhi, Tuticorin, Kandla and Guntur.
    • Main Functions:
      • It promotes organic production, processing, and certification of spices.
      • Responsible for the overall development of Cardamom.
      • It focuses on post-harvest improvement programs to improve the quality of the 52 scheduled spices for export.
      • These programs are included under the head ‘Export Oriented Production’.

    Present Scenario of Spices  

    • Production:
      • Major producing states: Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Assam, Orissa, Uttar Pradesh, West Bengal, Tamil Nadu, and Kerala.
      • During 2022-23, the export of spices from India stood at US$ 3.73 billion, up from US$ 3.46 billion in 2021-22.
      • India produces about 75 of the 109 varieties listed by the International Organization for Standardization (ISO).
    • Major Produced and Exported Spices by India:
      • Pepper, cardamom, chili, ginger, turmeric, coriander, cumin, celery, fennel, fenugreek, garlic, nutmeg & mace, curry powder, spice oils, and oleoresins.
      • Out of these spices, chili, cumin, turmeric, ginger, and coriander make up about 76% of the total production.
      • Chilli is the leading export earner, generating $1.1 billion annually.
      • Ginger exports have a compound annual growth rate (CAGR) of 27%.
    • Export:
      • In 2023-24, India’s spice exports totalled $4.25 billion, accounting for a 12% share of the global spice exports (till February 2024 data).
      • India exported spices and spice products to 159 destinations worldwide as of 2023-24. The top destinations were China, the USA, Bangladesh, the UAE, Thailand, Malaysia, Indonesia, the UK, and Sri Lanka. These countries accounted for more than 70% of total exports.

     

    PYQ:

    [2019] Among the agricultural commodities imported by India, which one of the following accounts for the highest imports in terms of value in the last five years?

    (a) Spices

    (b) Fresh fruits

    (c) Pulses

    (d) Vegetable oils

  • NBFC sector resilient under scale-based regulations framework: RBI bulletin

    Why in the News?

    During the transition to the Scale-Based Regulation (SBR) framework, the NBFC sector experienced double-digit credit growth, maintained adequate capital levels, and saw a reduction in delinquency ratios.

    What is Scale-Based Regulation (SBR)?

    • The SBR framework was first outlined in October 2021 and became effective on October 1, 2022.
    • It aims to categorize NBFCs based on their size, activities, and perceived riskiness rather than merely distinguishing between systemically important and non-systemically important entities.

    What are the key points presented by RBI on the resilience of the NBFC sector?

    • Improvement in Asset Quality: Since the introduction of the Scale-Based Regulation (SBR) framework in October 2022, the asset quality of NBFCs has improved, with lower gross non-performing asset (GNPA) ratios.
      • By December 2023, GNPA ratios had decreased to 2.4% for government-owned NBFCs and 6.3% for non-government NBFCs, reflecting enhanced risk management.
    • Double-Digit Credit Growth: The NBFC sector maintained strong credit growth throughout 2023, driven by a diversified funding base, including retail credit (gold loans, vehicle loans, and housing loans) and expanding into industrial and service sectors.
    • Improved Profitability: The sector witnessed a rise in profitability, as evidenced by better returns on assets (RoA) and equity (RoE).
    • Net NPA (NNPA) Performance: Upper layer NBFCs had lower GNPA ratios than middle layer NBFCs, but the latter maintained sufficient provisions for riskier portfolios, ensuring that their NNPA ratios were also controlled.
    • Compliance with SBR: Major NBFCs in the “Upper Layer” identified by the RBI under the SBR framework, such as LIC Housing Finance, Bajaj Finance, and L&T Finance, have complied or initiated steps to comply with listing requirements.

    Regulatory measures  taken up by the NBFC sector 

    • Scale-Based Regulation (SBR) Framework: Introduced in October 2022, the SBR framework categorizes NBFCs into different layers based on their size, systemic importance, and risk profile. For instance, strengthen asset quality, capital requirements, and risk management.
    • Prompt Corrective Action (PCA) Norms: Effective from October 2024, PCA norms will apply to government-owned NBFCs. These measures aim to enhance financial discipline, focusing on capital adequacy and asset quality.
    • Diversification of Funding Sources: Due to rising risk weights on bank lending, NBFCs have diversified their funding base by reducing dependence on bank borrowings and expanding into secured retail credit.
    • Listing Compliance: Many NBFCs in the upper layer have complied or are in the process of complying with listing requirements as part of regulatory mandates.

    What are the emerging risks that NBFCs need to cater? (Way forward) 

    • Cybersecurity Risks: With the increasing use of digital platforms, NBFCs need to enhance cybersecurity measures to safeguard against evolving cyber threats.
    • Climate Risk: The financial impact of climate change poses a new risk. NBFCs must integrate climate-related risks into their risk management frameworks to mitigate potential disruptions.
    • Financial Assurance Functions: The RBI emphasizes that assurance functions like risk management, compliance, and internal audit are critical in maintaining resilience in the face of rapid changes in the financial landscape.
    • Evolving Regulatory Environment: As the financial sector continues to evolve, NBFCs must stay ahead of regulatory changes and ensure that their risk management practices are aligned with emerging threats and new regulations.

  • Wide-ranging reforms undertaken in food-processing sector in last 10 years

    Why in the News?

    Prime Minister Narendra Modi stated on Thursday that over the past decade, India has implemented “comprehensive” reforms to revolutionize the food-processing sector.

    What are the steps taken by Govt in food processing industry in India?

    • Priority Sector Lending: In April 2015, food and agro-based processing units were included as agricultural activities under the Priority Sector Lending norms, facilitating easier access to credit for these businesses.
    • FDI Policies: The government allows 100% Foreign Direct Investment (FDI) under the automatic route for the food processing sector, encouraging foreign investment and technological transfer.
    • Special Food Processing Fund: A fund of ₹2,000 crore was established with NABARD to support food processing projects and infrastructure development.
    • Regulatory Reforms: The Food Safety and Standards Authority of India (FSSAI) shifted from product-by-product approvals to an ingredient-based approval process in 2016, simplifying compliance for businesses.
    • Infrastructure Development: Initiatives such as the Pradhan Mantri Kisan Sampada Yojana (PMKSY) aim to create a robust infrastructure for food processing through cold storage facilities, processing units, and logistics support.

    Status of food processing industries in India

    • Economic Contribution: The sector accounts for approximately 13% of India’s total exports and 6% of industrial investment. It is expected to generate around 9 million jobs by 2024.
    • Growth Rate: The industry has been growing at an average annual rate of about 11.18% over recent years, indicating significant potential for expansion.
    • Market Share: Despite being one of the largest producers of agricultural commodities, India’s food processing sector represents only about 10% of total food production.

    What are the still challenges present in food processing industry in India? 

    • Inadequate Infrastructure: A lack of cold storage and transportation facilities leads to over 30% post-harvest losses.
    • Fragmented Supply Chains: The supply chain is highly fragmented, causing inefficiencies and increased costs due to poor connectivity and coordination among stakeholders.
    • Regulatory Complexities: The industry is burdened by a complex web of regulations that can hinder business operations and compliance efforts.
    • Lack of Skilled Labor: There is a significant shortage of skilled professionals in areas such as food technology and quality control, which hampers innovation and adherence to safety standards.
    • Limited Technology Adoption: Many processors still rely on outdated technologies, which affects productivity and product quality. High costs and lack of technical expertise further inhibit technological advancements.

    What should be done by Govt to resolve these challenges? (Way forward)

    • Infrastructure Investment: Increase investments in cold chain logistics and transportation infrastructure to minimize post-harvest losses and improve supply chain efficiency.
    • Financial Support Mechanisms: Facilitate easier access to finance through specialized loans for small and medium enterprises (SMEs) in the food processing sector.
    • Skill Development Programs: Enhance vocational training initiatives focused on food technology and safety management.
    • Regulatory Simplification: Streamline existing regulations to reduce bureaucratic hurdles. A unified regulatory framework could help clarify compliance requirements and foster a more conducive environment for business operations.
    • Promote R&D Investment: Encourage investment in research and development to foster innovation within the sector.

    Mains PYQ:

    Q Elaborate the policy taken by the Government of India to meet the challenges of the food processing sector. (UPSC IAS/2019)

  • Cabinet approves continuation of PM-AASHA to provide better prices to farmers

    Why in the News?

    The government has approved the extension of the PM-AASHA scheme, allocating ₹35,000 crore, to ensure farmers receive better prices for their produce and to regulate price fluctuations of essential commodities for consumers.

    What is PM-AASHA?

    Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) is an umbrella scheme launched by the Government of India in September 2018, aimed at ensuring remunerative prices for farmers’ produce. It integrates various existing schemes to provide a comprehensive approach to price support, including:

    • Price Support Scheme (PSS): Physical procurement of specific crops by central agencies.
    • Price Deficiency Payment Scheme (PDPS): Direct payments to farmers for the difference between the Minimum Support Price (MSP) and market prices.
    • Pilot of Private Procurement & Stockist Scheme (PPPS): Involvement of private players in crop procurement.

    The scheme has been extended until 2025-26 with a financial outlay of ₹35,000 crore to enhance its effectiveness and reach.

    What are the implications of PM-AASHA?

    • Income Security: By ensuring MSP, PM-AASHA aims to stabilize farmers’ incomes and protect them from price fluctuations in the market.
    • Increased Production: The assurance of remunerative prices is expected to encourage farmers to increase production, particularly in pulses and oilseeds, which have historically been underproduced.
    • Market Stability: The scheme helps regulate prices of essential commodities, making them affordable for consumers while ensuring fair compensation for producers.
    • Strengthened Procurement Mechanism: The integration of various schemes under PM-AASHA enhances the overall procurement process, making it more efficient and transparent.

    What are the issues related to MSP?

    • Limited Coverage: MSP is primarily applicable to a few crops like wheat and rice, leaving many farmers without guaranteed prices for their produce.
    • Inefficient Procurement Infrastructure: The existing infrastructure for procurement is inadequate, leading to delays and inefficiencies that affect farmers’ ability to sell their produce at MSP.
    • Lack of Awareness: Many farmers are unaware of their rights regarding MSP or how to access these benefits effectively.
    • Regional Disparities: There are significant regional disparities in the implementation of MSP. States like Punjab and Haryana benefit more from MSP due to better procurement systems, while farmers in other states may struggle to access these benefits.
    • Market Distortions: The MSP system leads to market distortions, encouraging overproduction of certain crops while neglecting others.

    What should be done to resolve the issues related to MSP?

    • Expand MSP Coverage: The government should consider extending MSP to a wider range of crops, particularly those that are crucial for food security and farmer livelihoods.
    • Enhance Procurement Infrastructure: Investments should be made in developing better procurement facilities, including storage and transportation systems, especially in rural areas.
    • Increase Awareness Campaigns: Implementing educational programs for farmers about their rights regarding MSP and how they can benefit from it would empower them significantly.

    Mains PYQ:

    Q What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low income trap?  (UPSC IAS/2016)

  • Adjusted Gross Revenue (AGR)

    Why in the News?

    The Supreme Court has dismissed the curative petitions filed by major telecom service providers, seeking relief from the 2019 judgment regarding Adjusted Gross Revenue (AGR) dues.

    What is Adjusted Gross Revenue (AGR)?

    • AGR is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
    • It forms the basis for calculating telecom companies’ dues to the government, including the license fee and spectrum usage charges (SUC).
    • The AGR is divided into:
    1. Spectrum Usage Charges (SUC): These are pegged at 3-5% of AGR, depending on the telecom company’s spectrum holdings.
    2. License Fees: Telecom operators are required to pay 8% of their AGR as a license fee to the government.

    Contention over AGR Calculation

    • The DoT maintains that AGR should include all revenues earned by telecom companies, including non-telecom sources such as deposit interest, asset sales, and dividends.
    • Telecom operators, on the other hand, insist that AGR should only include revenues generated from core telecom services, excluding income from non-telecom sources like interest and capital gains.

    Legal Disputes on AGR

    1. Beginning of the Dispute (2005): The AGR saga began in 2005 when the Cellular Operators Association of India (COAI) challenged the government’s definition of AGR in court. The dispute centered on whether non-telecom revenue should be included in the AGR calculation.
    2. TDSAT Ruling (2015): In 2015, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) ruled in favor of telecom companies. TDSAT held that AGR should include only revenue from core telecom activities and exclude non-core sources such as rent, profit from the sale of assets, dividends, and interest income.
    3. Supreme Court Ruling (2019): Setting aside the TDSAT decision, the SC upheld the DoT’s definition of AGR on October 24, 2019, declaring that AGR must include all revenue sources, including non-telecom activities like interest and capital gains. This ruling significantly increased the financial liabilities of telecom companies, as they had to pay outstanding dues.

    Financial Impact of the AGR Ruling

    The Supreme Court ruling had serious financial implications for telecom companies:

    • Massive Liabilities: Telecom companies, especially Vodafone Idea and Bharti Airtel, faced huge financial liabilities. The ruling resulted in unpaid dues amounting to over ₹1.4 lakh crore, which included penalties and interest.
    • Vodafone Idea’s Crisis: Vodafone Idea, in particular, was hit hard by these liabilities and faced potential insolvency, with its future in the Indian telecom sector hanging in the balance.
    • Sector Consolidation: The financial pressure from the AGR liabilities led to the consolidation of the telecom sector, with smaller players exiting the market.

    PYQ:

    [2019] In India, which of the following review the Independent regulators in sectors like telecommunications, insurance, electricity, etc.?

    1. Ad Hoc Committees set up by the Parliament
    2. Parliamentary Department Related Standing Committees
    3. Finance Commission
    4. Financial Sector Legislative Reforms Commission
    5. NITI Aayog

    Select the correct answer using the code given below:

    (a) 1 and 2

    (b) 1, 3 and 4

    (c) 3, 4 and 5

    (d) 2 and 5

  • Nagaland’s King Chilli Festival

    Why in the News?

    The village of Seiyhama in Nagaland hosted the 3rd edition of the Naga King Chilli Festival, celebrating the importance of the Naga king chilli, one of the world’s hottest chillies.

    About Naga King Chilli

    • The Naga King Chilli, also known as Raja Mircha or Bhut Jolokia, is one of the world’s hottest chillies, with heat levels exceeding 1 million Scoville Heat Units (SHU).
    • It is primarily grown in the Northeast Indian states of Nagaland, Assam, Manipur, and Arunachal Pradesh.
    • In 2006, it was certified by the Guinness World Records as the hottest chilli in the world, a title it held for several years.
    • In 2008, it received a GI tag, recognizing its unique origin and significance in the global spice market.
    • The chilli has a heat range of 800,000 to 1,041,427 SHU, making it significantly hotter than common chillies like the jalapeño, which has a SHU of 2,500 to 8,000.
    • Benefits offered:
      • Rich in capsaicin, it is known for its pain-relieving properties and potential health benefits, such as boosting metabolism, promoting heart health, and relieving pain and inflammation.
      • Traditionally, the chilli has been used to preserve food in Nagaland’s hot, humid climate, helping to extend the shelf life of food and reduce waste.
    • Cultivation:
      • The chilli is grown in bamboo groves using ancient cultivation methods.
      • Farming begins in December or January, with peak harvests in August and September.
      • Approximately 150 households in Seiyhama village, Nagaland, cultivate the Naga King Chilli, with the annual harvest reaching 14,000 kg, valued at ₹70 lakh.

    PYQ:

    [2015] Which of the following has/have been accorded ‘Geographical Indication’ status?

    1. Banaras Brocades and Sarees

    2. Rajasthani Daal-Bati-Churma

    3. Tirupathi Laddu

    Select the correct answer using the codes given below:

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 only 3 only

    (d) 1, 2 and 3

  • Why US Fed cut interest rates, how India could be impacted? 

    Why in the News?

    The United States Federal Reserve, responsible for the country’s monetary policy, announced on Wednesday that it will lower its key interest rate, called the Federal Funds Rate, by 0.5%, or 50 basis points.

    Why did the Fed cut interest rates?

    • The Federal Reserve cut the benchmark interest rate by 50 basis points to address rising unemployment concerns while inflation was stabilizing.
    • After a series of aggressive rate hikes to counter inflation that surged due to post-COVID recovery and the Russia-Ukraine war, inflation began to moderate, nearing the Fed’s target of 2%.
    • Rising unemployment data signaled that the restrictive monetary policy might harm the labor market, prompting the Fed to act.

    Will the US economy achieve a soft landing?

    • Optimistic Projections: Despite earlier predictions that high inflation would lead to a recession, the Fed’s strategy may succeed in achieving a soft landing, reducing inflation without crashing the economy.
    • GDP Growth: The Summary of Economic Projections (SEP) estimates GDP growth to remain around 2% for the next few years, indicating a stable economy.
    • Unemployment: While the unemployment rate has risen slightly to 4.4%, it remains manageable, with expectations of improvement.
    • Risks: Potential policy shifts, especially related to the upcoming presidential election, could disrupt the economic outlook, particularly if trade tariffs are imposed.

    How will India be affected?

    • Increased Foreign Investments: Lower US interest rates could encourage foreign investors to borrow in the US and invest in India through stocks, bonds, or foreign direct investment (FDI), benefiting capital inflow.
    • Rupee Strengthening: With falling US interest rates, the US dollar may weaken against the Indian rupee, potentially strengthening the rupee. This would negatively affect Indian exporters but benefit importers.
    • RBI’s Interest Rate Decisions: While the Fed’s rate cuts influence global markets, India’s central bank, the RBI, may not directly follow suit due to differing inflation targets and mandates. The RBI prioritizes inflation control and GDP growth over unemployment figures.

    Way forward: 

    • Encourage Capital Inflows: India should take advantage of lower US interest rates by attracting foreign investments through improved ease of doing business, fostering growth in key sectors like infrastructure, technology, and manufacturing.
    • Maintain Monetary Stability: The RBI should carefully assess global trends but prioritize domestic conditions when adjusting interest rates, focusing on inflation control, financial stability, and sustained GDP growth.

    Mains PYQ:

    Q Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (UPSC IAS/2016)