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Subject: International Relations

  • Bulgaria joins the eurozone

    Why in the news?

    Bulgaria officially adopted the euro as its national currency on January 1, 2026, replacing the Bulgarian lev and becoming the 21st member of the eurozone.

    About Bulgaria

    What it is

    Bulgaria is a Balkan country in southeastern Europe. It has been a member of the European Union since 2007 and NATO since 2004. The adoption of the euro followed the fulfilment of European Union convergence criteria.

    Location

    • Eastern Balkan Peninsula
    • Strategic link between Europe, the Black Sea region, and West Asia

    Borders

    • Romania in the north
    • Serbia and North Macedonia in the west
    • Greece and Turkey in the south
    • Black Sea in the east

    Geographical features

    • Danubian Plain in the north, an important agricultural belt
    • Balkan Mountains extending east west
    • Rila Rhodope Massif in the south with Mount Musala, the highest peak in the Balkans
    • Black Sea coastline supporting ports, tourism, and trade

    About the eurozone

    What it is

    The eurozone is the group of European Union countries that use the euro as their official legal tender and follow a common monetary policy.

    Evolution

    • 1992 Maastricht Treaty established the Economic and Monetary Union
    • 1999 Euro introduced for electronic transactions
    • 2002 Euro notes and coins entered circulation

    Members

    • 21 European Union countries as of 2026, including Bulgaria

    Key features

    • Single currency system
    • Unified monetary policy by the European Central Bank
    • No internal currency exchange costs
    • Free movement of goods, services, capital, and labour

    Prelims pointers

    • Bulgaria joined the eurozone in 2026
    • Eurozone membership is different from EU membership
    • ECB governs monetary policy of eurozone states
    [2025] Consider the following countries: 

    I. Austria 

    II. Bulgaria

    III. Croatia

    IV. Serbia

    V. Sweden

    VI. North Macedonia

    How many of the above are members of the North Atlantic Treaty Organization? 

    (a) Only three (b) Only four (c) Only five (d) All the six

  • As EU carbon tax kicks in, India’s metal exports face price threat

    Introduction

    The European Union has begun implementing the Carbon Border Adjustment Mechanism (CBAM), imposing a carbon-linked levy on imports from carbon-intensive sectors. India, a major exporter of steel and aluminium to the EU, now faces higher compliance costs and potential loss of competitiveness. The mechanism represents a departure from tariff-based trade barriers towards climate-conditioned trade regulation, with significant implications for developing economies.

    Why in the News?

    CBAM has entered its implementation phase for the first time globally, covering carbon-intensive imports such as steel, aluminium, cement, fertilisers, electricity, and hydrogen. Indian metal exports to the EU now face an estimated price increase of 15-22%, creating a direct cost shock for exporters. The mechanism shifts climate action costs to exporting countries, raising concerns over equity, WTO compliance, and the future of South–North trade relations.

    What Is the EU’s Carbon Border Adjustment Mechanism (CBAM)?

    1. Carbon Pricing Mechanism: Imposes a levy on imported goods equivalent to the EU’s internal carbon price.
    2. Sectoral Coverage: Applies to steel, aluminium, cement, fertilisers, power, energy-intensive inputs.
    3. Objective Framing: Prevents carbon leakage by aligning import prices with EU climate standards.
    4. Operational Shift: Replaces implicit trade barriers with explicit climate-linked taxation.

    Why Are India’s Metal Exports Particularly Vulnerable?

    1. Export Concentration: India largely exports steel and aluminium to the EU, both CBAM-covered sectors.
    2. Production Technology: Indian steel manufacturing relies heavily on blast furnaces, which are more carbon-intensive.
    3. Scrap Constraint: Limited availability of steel scrap restricts transition to electric arc furnaces (EAFs).
    4. Cost Pass-through Limits: MSME exporters lack pricing power to absorb compliance costs.

    How Will CBAM Increase Export Costs for India?

    1. Price Impact: Estimates suggest a 15-22% increase in landed cost of Indian metal exports.
    2. Compliance Burden: Requires detailed plant-level emissions data, often unavailable with MSMEs.
    3. Default Emissions Risk: Absence of verified data may lead to higher default emission values.
    4. Competitiveness Erosion: Raises risk of market substitution by lower-carbon producers.

    What Are the Key Concerns Raised by Indian Exporters and Experts?

    1. Equity Concerns: Undermines the principle of Common but Differentiated Responsibilities (CBDR).
    2. Developmental Impact: Disproportionately affects developing economies with legacy infrastructure.
    3. WTO Compatibility: Raises questions on non-discrimination and disguised protectionism.
    4. Technology Lock-in: Penalises countries still transitioning to greener industrial processes.

    Why Is Scrap Availability Central to the Debate?

    1. Technology Divide: EAFs use scrap and emit less carbon than blast furnaces.
    2. Global Scrap Control: US, EU, and UK dominate scrap reserves and exports.
    3. Cost Advantage: Scrap-based producers face lower CBAM exposure.
    4. Structural Disadvantage: Indian producers lack access to adequate scrap volumes.

    What Is India’s Position on CBAM?

    1. Policy Opposition: India views CBAM as a trade barrier rather than a climate solution.
    2. Legal Standpoint: Challenges unilateral climate measures under multilateral trade norms.
    3. Negotiation Strategy: Seeks carve-outs for MSMEs and developing countries.
    4. Global Forums: Raises concerns at WTO and UNCTAD platforms.

    Does CBAM Meaningfully Address Climate Change?

    1. Limited Impact: Expected to mitigate only 0.1% of global CO₂ emissions.
    2. Exported Emissions: Risks shifting emissions geographically rather than reducing them.
    3. Technology Gap: Fails to support transition financing for developing countries.
    4. Policy Mismatch: Emphasises taxation over technology diffusion.

    What Are the Implications for Global Trade Governance?

    1. Precedent Setting: Encourages climate-linked trade barriers by developed economies.
    2. Fragmentation Risk: Weakens multilateral trade consensus.
    3. South-North Divide: Reinforces asymmetry in climate responsibility.
    4. Regulatory Spillover: UK and US considering similar mechanisms.

    Conclusion

    The EU’s Carbon Border Adjustment Mechanism marks a decisive shift in global climate governance by embedding carbon costs into international trade. While framed as a tool to prevent carbon leakage, its unilateral design risks undermining the principles of equity and common but differentiated responsibilities that anchor the global climate regime. For India, the immediate challenge lies in protecting export competitiveness without diluting climate commitments, while the larger task is to push for multilateral, finance- and technology-supported pathways to industrial decarbonisation. The future credibility of global climate action will depend on whether climate ambition is advanced through cooperative transition mechanisms or enforced through trade barriers that deepen developmental asymmetries.

    PYQ Relevance

    [UPSC 2022] Discuss global warming and mention its effects on global climate. Explain the control measures to bring down the level of greenhouse gasses which cause global warming in the light of the Kyoto Protocol 1997. 

    Linkage: CBAM represents a post-Kyoto unilateral climate control measure linked with trade.

  • AI Impact Summit 2026 

    Why in the News?

    Narendra Modi will inaugurate the AI Impact Summit to be held from 15 to 20 February 2026 at Bharat Mandapam, with participation from over 100 countries, according to the Ministry of Electronics and Information Technology.

    About AI Impact Summit

    The AI Impact Summit is a global high level platform focused on shaping responsible, inclusive and outcome driven Artificial Intelligence solutions for productive sectors of the economy.

    Host Country: India

    Key Highlights

    • Participation from over 100 countries
       • 15 to 20 Heads of Government expected, including France
       • 15,500 plus registrations from 136 countries
       • 76 countries from the Global South
       • Over 100 global AI leaders, including CXOs, CSOs, academics, and policy thinkers

    Notable Global Leaders Confirmed

    • Bill Gates, Demis Hassabis, Dario Amodei, Shantanu Narayen, Marc Benioff, Cristiano Amon and Raj Subramaniam

    Core Objective

    • Develop AI solutions for productive sectors
       • Focus areas include: Healthcare, Agriculture, Governance, Education and Manufacturing
    [2025] Consider the following statements regarding AI Action Summit held in Grand Palais, Paris in February 2025: 

    1. Co-chaired with India, the event builds on the advances made at the Bletchley Park Summit held in 2023 and the Seoul Summit held in 2024. 

    2. Along with other countries, the US and UK also signed the declaration on inclusive and sustainable AI. 

    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

  • Myanmar’s military regime seeks legitimacy through a sham election

    Introduction

    Myanmar’s military regime is conducting elections not as a democratic transition but as an instrument to entrench control under the 2008 Constitution. The polls exclude most opposition forces, occur only in junta-controlled areas, and coincide with intensified violence against civilians. The election mirrors the military’s 2010 strategy but unfolds under far more adverse domestic and international conditions, raising serious questions about legitimacy, sovereignty, and governance.

    Why in the News

    Nearly five years after overthrowing the elected government of Aung San Suu Kyi in February 2021, Myanmar’s military (Tatmadaw) has initiated a tightly controlled, multi-phase election process. The first phase, held on December 28, recorded sparse turnout amid heavy security and active conflict, with subsequent phases scheduled in January. The exercise is significant because it marks the junta’s attempt to manufacture political legitimacy during an ongoing civil war that has killed thousands, displaced millions, and fragmented territorial control.

    How has the military structured the election process?

    1. Phased Elections: Conducted in three phases to manage security risks, with the first phase on December 28 and later phases in January.
    2. Restricted Geography: Held only in areas under junta control, excluding conflict-affected rural regions.
    3. Low Participation: Sparse turnout recorded, indicating limited public acceptance and fear-driven abstention.
    4. Security Enforcement: Conducted under heavy militarisation, including troop deployment and surveillance.

    Why is the election widely considered a sham?

    1. Exclusion of Opposition: National League for Democracy (NLD), which won 90% of seats in 2020, barred from contesting.
    2. Token Political Competition: Military-backed Union Solidarity and Development Party (USDP) dominates candidate lists.
    3. Criminalisation of Resistance: National Unity Government (NUG) and People’s Defence Forces (PDFs) designated as illegal.
    4. Absence of Electoral Integrity: No independent monitoring, free campaigning, or fair media access.

    What constitutional framework enables military dominance?

    1. Structural Power: 2008 Constitution reserves 25% of parliamentary seats for the military.
    2. Legislative Control: Ensures veto power over constitutional amendments.
    3. Emergency Provisions: Enables prolonged emergency rule since the 2021 coup.
    4. Electoral Engineering: Proportional representation favours military-aligned parties.

    How has the civil war altered electoral legitimacy?

    1. Territorial Fragmentation: Junta controls barely half of Myanmar’s townships.
    2. Active Conflict Zones: Elections absent in at least 65 townships where fighting persists.
    3. Civilian Casualties: Bombing of residential areas during polling, including Budalin and Khin-U townships.
    4. Humanitarian Crisis: Over 20 million people require assistance, undermining basic state capacity.

    What role do ethnic armed organisations (EAOs) play?

    1. Military Setbacks: Three Brotherhood Alliance (TBA) forced junta withdrawal from northern Shan and parts of Rakhine.
    2. Expanded Resistance: Kachin, Karen, and Karenni groups intensified operations alongside PDFs.
    3. Urban-Rural Divide: Junta retains urban centres like Sittwe while losing peripheral regions.
    4. Operational Adaptation: Use of Chinese-made drones and paragliders by the military.

    How do external actors influence the conflict and elections?

    1. Strategic Backing: Russia, China, and Belarus provide diplomatic and military support.
    2. China’s Calculus: Tacit approval of rebel advances near border scam centres, followed by ceasefire pressure.
    3. Western Ambivalence: US signals moderation, including sanction relief for some junta-linked firms.
    4. Geoeconomic Interests: Rare-earth minerals and border trade routes shape external engagement.

    Why does the junta persist despite unpopularity?

    1. Fragmented Resistance: Lack of unified command between PDFs and EAOs.
    2. International Paralysis: Absence of coordinated global pressure.
    3. Resource Control: Retention of key economic assets and trade corridors.
    4. Institutional Entrenchment: Constitutional safeguards ensure military primacy regardless of electoral outcomes.

    Conclusion

    Myanmar’s elections represent an exercise in controlled political symbolism rather than democratic renewal. Conducted amid widespread violence, exclusion, and constitutional manipulation, the polls fail to address the fundamental crisis of legitimacy confronting the military regime. The result is strategic stalemate, prolonged instability, and deepening civilian suffering with no political resolution in sight.

    PYQ Relevance

    [UPSC 2022]  ‘India is an age -old friend of Sri Lanka.’ Discuss India’s role in the recent crisis in Sri Lanka in the light of the preceding statement.

    Linkage: This PYQ is relevant to GS-II (International Relations-Neighbourhood) as it examines India’s response to political-economic crises in its immediate neighbourhood. The Myanmar case similarly highlights India’s calibrated engagement amid instability, balancing humanitarian concerns, regional security, and strategic competition, reflecting the same neighbourhood-first and strategic autonomy dilemmas.

  • [31st December 2025] The Hindu OpED: A multipolar world with bipolar characteristics

    PYQ Relevance

    [UPSC 2019] “The long-sustained image of India as a leader of the oppressed and marginalised nations has disappeared on account of its new-found role in the emerging global order.” Elaborate.

    Linkage:  The question directly aligns with GS Paper II (International Relations) by examining how the shift from a unipolar to a multipolar-bipolar global order has altered India’s external posture. It links to India’s transition from normative leadership of the Global South to pragmatic strategic hedging amid U.S.-China rivalry and great-power competition.

    Mentor’s Comment

    The article examines the structural transformation of the international system from post-Cold War unipolarity to an emerging multipolar order with distinctly bipolar characteristics. It situates recent U.S. strategic decisions, China’s economic-military rise, and Russia’s revisionist behaviour within a larger reordering of global power, making it directly relevant for GS Paper II (International Relations) and GS Paper III (Security).

    Introduction

    The contemporary global order is undergoing a structural transition. While the United States remains the world’s most powerful military and economic actor, it no longer enjoys uncontested dominance. China’s rapid rise and Russia’s revisionist assertiveness have ended unipolarity, giving rise to a multipolar world that increasingly exhibits bipolar dynamics centred on U.S.-China rivalry, with Russia acting as a swing power.

    Why in the News

    The issue has gained renewed salience following the United States’ largest troop mobilisation in the Caribbean in decades and the release of its 2025 National Security Strategy, which reasserts hemispheric primacy while signalling retrenchment from European security. This marks a sharp departure from the post-Second World War U.S. role as Europe’s primary security guarantor and highlights the limits of the U.S.-led rules-based order amid rising Chinese power and Russia’s continued defiance despite sanctions.

    Is the unipolar moment definitively over?

    1. End of Unipolarity: Confirms the erosion of post-1991 U.S. dominance as China and Russia acquire the capacity to shape geopolitical outcomes independently.
    2. Structural Shift: Demonstrates transition from a single-centre system to dispersed authority across multiple power centres.
    3. Empirical Trigger: Russia’s annexation of Crimea (2014) and sustained resistance to Western sanctions expose limits of the rules-based order.

    Does American dominance still persist despite decline?

    1. Military Primacy: Retains unmatched global force projection and alliance networks.
    2. Economic Weight: Continues as the world’s most powerful economy despite relative decline.
    3. Strategic Constraint: Loses ability to unilaterally determine geopolitical outcomes, particularly in Eurasia.

    Why is China the principal systemic challenger?

    1. Economic Scale: Accounts for ~66% of U.S. GDP, up from 57% Soviet GDP at the Cold War peak.
    2. Growth Trajectory: Continues faster economic expansion, steadily narrowing the power gap.
    3. Military Conversion: Translates economic power into naval dominance, operating the world’s largest navy by ship count.
    4. Regional Ambition: Seeks hegemony in East and Southeast Asia as a pathway to long-term superpower status.

    What role does Russia play in the emerging order?

    1. Relative Weakness: Possesses smaller economy and shrinking sphere of influence.
    2. Strategic Assets: Retains nuclear arsenal, geographic depth, and energy resources.
    3. Revisionist Behaviour: Uses force to reassert primacy in its near abroad, including Georgia (2008) and Ukraine.
    4. Swing Power Role: Operates between the U.S. and China, giving the multipolar system a bipolar character.

    Why is multipolarity still incomplete?

    1. Absence of Blocs: Lacks Cold War-style ideological and economic blocs.
    2. Alliance Uncertainty: Shows strain within U.S. alliances and distrust within Russia-China partnership.
    3. Hedging by Middle Powers: Japan, Germany, India, and Brazil avoid firm alignment amid uncertainty.

    How does U.S. strategy reflect this transition?

    1. Regional Retrenchment: Reduces commitment to European security burden-sharing.
    2. Sphere Reassertion: Reinvokes Monroe Doctrine logic in Latin America and the Caribbean.
    3. China Focus: Prepares for prolonged strategic competition in the Indo-Pacific.

    Does the emerging order resemble the Cold War?

    1. Partial Bipolarity: Displays U.S.-China central rivalry rather than rigid blocs.
    2. Multipolar Complexity: Allows autonomous manoeuvring by middle and regional powers.
    3. Systemic Instability: Remains fluid, unsettled, and structurally incomplete.

    Conclusion

    The contemporary international system no longer reflects a stable unipolar or fully formed multipolar order. It is shaped by enduring U.S. primacy, China’s rapid economic-military rise, and Russia’s disruptive revisionism, producing a multipolar structure with bipolar characteristics. In this fluid and unsettled environment, power politics, spheres of influence, and strategic hedging dominate state behaviour, while the absence of clear blocs or settled norms makes the emerging global order inherently unstable and transitional.

  • What is the India-New Zealand Free Trade Agreement?

    Introduction

    The India-New Zealand Free Trade Agreement (FTA) represents a strategic pivot in India’s trade policy, prioritising bilateral, region-specific agreements over multilateral trade negotiations. Beyond tariff liberalisation, the agreement integrates investment, labour mobility, MSME participation, and services trade, positioning India within the Indo-Pacific economic architecture while safeguarding sensitive domestic sectors.

    Why in the News?

    India and New Zealand concluded a FTA in December, under which New Zealand will grant zero-duty access to 100% of India’s exports, while India will eliminate tariffs on 95% of imports from New Zealand, with 57% becoming duty-free from day one. New Zealand has also committed $20 billion in FDI by 2030, making this one of India’s most comprehensive trade agreements in recent years. The agreement is significant as it is India’s third FTA in one year, following deals with the UK and Oman. This contrasts sharply with stalled negotiations with the US and slow progress with the EU.

    What are the key trade provisions of the FTA?

    1. Zero-duty access: Grants New Zealand zero-duty access to 100% of India’s exports, enhancing competitiveness across merchandise sectors.
    2. Tariff liberalisation: Eliminates tariffs on 95% of Indian imports from New Zealand, with 57% of products duty-free from the first day.
    3. Merchandise trade scale: Covers bilateral trade currently valued at $1.3 billion, with scope for expansion through lower trade barriers.

    What investment commitments has New Zealand made?

    1. Foreign Direct Investment: Commits $20 billion in FDI by 2030, spread over 15 years.
    2. Clawback safeguards: Introduces firm clawback mechanisms if investment milestones are not met.
    3. Sectoral focus: Targets skill mobility, services, and employment generation across 18 sectors.

    How does the FTA benefit India’s services and labour mobility?

    1. Professional mobility: Enables India to supply skilled professionals in IT, engineering, yoga instruction, music education, healthcare, education, and construction.
    2. Youth opportunities: Facilitates work permits up to 20 hours per week during study and extended post-study work visas.
    3. Diaspora leverage: Builds on the 5% Indian-origin population in New Zealand, strengthening migration and professional linkages.

    Which sectors has India deliberately kept outside the agreement?

    1. Sensitive agriculture: Excludes dairy and agricultural products such as milk, cheese, cream, butter, yoghurt, onions, sugar, edible oils, spices, and nuts.
    2. Domestic protection: Shields Indian farmers, pastoral livelihoods, and edible oil producers from import competition.
    3. Political economy rationale: Addresses concerns related to farmer incomes and food security.

    How does the agreement support MSMEs and labour-intensive sectors?

    1. MSME integration: Expands opportunities for MSMEs in textiles, apparel, leather footwear, gems and jewellery, engineering goods, and processed foods.
    2. Supply chain access: Facilitates entry into higher-income Oceanian markets such as Australia and the Pacific.
    3. Employment impact: Strengthens labour-intensive manufacturing through assured market access.

    Why is India accelerating FTAs with select partners?

    1. Trade diversification: Reduces dependence on the US, EU, and China amid tariff volatility.
    2. Geopolitical alignment: Reinforces Indo-Pacific partnerships through economic engagement.
    3. Negotiation flexibility: Enables region-specific commitments beyond WTO constraints.
    4. Policy coherence: Aligns with Make in India, export competitiveness, and MSME growth objectives.

    What criticisms have emerged against the FTA?

    1. Agriculture exclusion: Faces criticism in New Zealand for excluding dairy and agriculture, a key export sector.
    2. Political opposition: Opposition parties in New Zealand argue the deal lacks fairness.
    3. Indian concerns: Indian FTAs have been criticised for widening trade deficits, though such risks are moderated here through sectoral exclusions.

    What is the way forward identified in the article?

    1. Domestic competitiveness: Emphasises the need to improve quality standards, productivity, and cost efficiency.
    2. Rules of origin: Calls for strong safeguards to prevent trade diversion.
    3. MSME support: Requires targeted capacity building to ensure MSMEs benefit.
    4. Implementation focus: Success hinges on effective execution rather than treaty signing.

    Conclusion

    The India-New Zealand Free Trade Agreement marks a calibrated shift in India’s trade and foreign policy, where economic openness is balanced with strategic caution. By securing near-total market access, long-term FDI commitments, and mobility for skilled services, while insulating sensitive agricultural sectors, India has signalled a move towards outcome-oriented, interest-based bilateralism. The agreement’s true significance lies not merely in tariff reductions, but in its role as a template for India’s future trade engagements in a fragmented global order, where trade agreements increasingly serve as instruments of economic resilience, geopolitical alignment, and domestic capacity-building.

    PYQ Relevance

    [UPSC 2024] Critically analyse India’s evolving diplomatic, economic and strategic relations with the Central Asian Republics (CARs) highlighting their increasing significance in regional and global geopolitics.

    Linkage: The India-New Zealand FTA reflects India’s broader strategy of strengthening bilateral economic partnerships to secure strategic space in the Indo-Pacific. Similar to India’s engagement with CARs, the agreement integrates trade, investment, and geopolitical alignment.

  • Linked civilizations, a modern strategic partnership

    Introduction

    India and Iran represent two ancient civilisations whose interaction predates modern statecraft. Their relationship, rooted in linguistic, cultural, and philosophical exchanges, has endured political upheavals and geographic separation. In the contemporary era, shared economic needs, energy complementarities, and regional security concerns are transforming this civilisational bond into a strategic partnership. This has implications for Eurasian connectivity, West Asian stability, and Asia’s emerging multipolar order.

    Why in the News

    India-Iran relations have acquired renewed strategic salience as global geopolitics shift towards multipolarity and regional connectivity becomes central to economic and security architectures. The strategic importance of the Chabahar Port and the International North-South Transport Corridor (INSTC), offering a 40% shorter and 30% more cost-efficient route than the Suez Canal, marks a significant departure from earlier episodic engagement.

    How do civilisational links shape modern India-Iran relations?

    1. Shared cultural heritage: Reflects deep historical ties through linguistic, religious, and philosophical exchanges between the Indo-Gangetic plains and the Iranian plateau.
    2. Literary synthesis: Enabled the development of Indo-Persian literary traditions, including the Sabk-e-Hindi style in Persian poetry.
    3. Intellectual legacy: Produced enduring figures such as Mirza Abdul-Qadir Bedil Dehlavi, shaping Persian literary and philosophical thought.
    4. Cultural continuity: Sustained trust and mutual recognition despite political disruptions and geopolitical distance.

    Why is economic pragmatism driving a renewed partnership?

    1. Geopolitical transition: Aligns bilateral engagement with a multipolar global order and Asia’s rising economic weight.
    2. Trade diversification: Reduces overdependence on conventional trade routes vulnerable to geopolitical shocks.
    3. Financial innovation: Strengthens local-currency trade mechanisms to mitigate exposure to external financial constraints.
    4. Long-term stability: Anchors economic cooperation in structural complementarities rather than short-term transactions.

    How does energy security form a central pillar of cooperation?

    1. Energy demand: Supports India’s growing energy needs amid rising industrial and economic expansion.
    2. Hydrocarbon reserves: Positions Iran as a natural long-term supplier of oil and gas.
    3. Supply diversification: Reduces India’s vulnerability to regional disruptions and market volatility.
    4. Strategic alignment: Integrates energy cooperation with broader economic and connectivity frameworks.

    Why is connectivity central to India-Iran strategic convergence?

    1. Chabahar Port: Enhances India’s access to Afghanistan, Central Asia, and Eurasia while bypassing geopolitical chokepoints.
    2. INSTC integration: Connects India to Russia and Northern Europe through a multimodal corridor.
    3. Efficiency gains: Provides a route 40% shorter and 30% more cost-effective than the Suez Canal.
    4. Eurasian competitiveness: Strengthens both countries’ positions in transcontinental trade networks.

    What role does security cooperation play in bilateral ties?

    1. Shared threats: Addresses extremism and terrorism affecting West and South Asia.
    2. Intelligence coordination: Facilitates discreet but essential cooperation to counter non-state threats.
    3. Strategic autonomy: Enables both states to manage third-party pressures without compromising core interests.
    4. Regional stability: Anchors cooperation in mutual interest rather than alliance politics.

    How can technology and knowledge sectors deepen engagement?

    1. IT cooperation: Leverages India’s comparative advantage in information technology.
    2. Advanced sciences: Expands collaboration in nanotechnology and medical sciences, where Iran has demonstrated progress.
    3. Economic diversification: Moves partnership beyond hydrocarbons and traditional trade.
    4. Innovation-driven growth: Positions bilateral ties within future-oriented economic sectors.

    Conclusion

    India-Iran relations are transitioning from historical affinity to strategic necessity. Civilisational depth provides legitimacy, while energy security, connectivity corridors, and regional stability concerns provide contemporary relevance. A revitalised partnership anchored in mutual respect, strategic autonomy, and innovation-driven cooperation can contribute to stability in West Asia and reinforce Asia’s multipolar economic architecture.

    PYQ Relevance

    [UPSC 2017] The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyze India’s energy policy cooperation with West Asian Countries.

    Linkage: This question directly links to India-Iran energy cooperation highlighted in the article, especially Iran’s hydrocarbon reserves and India’s long-term energy security needs. Alongside connectivity projects like Chabahar, these integrate energy, trade, and regional stability.

  • Somaliland  

    Why in the News?

    Recently, Israel formally recognised the self declared Republic of Somaliland as an independent and sovereign state.

    About Somaliland

    • Located in the Horn of Africa
       • Borders Djibouti, Ethiopia, Somalia, and the Puntland region
       • Has a strategic coastline along the Gulf of Aden
       • Capital city Hargeisa

    Economy and Infrastructure

    • Economy primarily livestock based
       • Major exports of livestock to Gulf countries
       • Berbera Port is being developed as a regional trade and logistics hub
       • Port plays a key role in providing access to sea trade for landlocked Ethiopia

    Prelims Pointers

    • Somaliland is not a UN recognised state despite functioning independently
       • Located along a strategic maritime route near the Bab el Mandeb region
       • Unique political system combining customary institutions and democracy
       • Berbera Port enhances regional connectivity in the Horn of Africa
    Which of the following countries has been suffering from decades of civil strife and food shortages and was in news in the recent past for its very severe famine? [2023]

    (a) Angola 

    (b) Costa Rica 

    (c) Ecuador 

    (d) Somalia

  • India weathers tariff storm for now

    Introduction

    India ends 2025 with relatively strong macroeconomic fundamentals despite a turbulent global environment marked by tariff wars, slowing global growth, and technological disruptions. While fears of a tariff-led slowdown, especially following renewed US trade protectionism, have not fully materialised, structural weaknesses in domestic consumption pose a critical challenge. The central policy question is whether India can transition from public-investment-led growth to a consumption- and private-investment-driven growth cycle.

    Why in the News?

    India’s economy has defied early pessimism around global tariff escalation, particularly fears arising from renewed US trade protectionism. Despite facing one of the highest effective tariff exposures among major economies, India closed 2025 with stable growth, low inflation, and manageable external balances. 

    Has India Successfully Weathered the Global Tariff Shock?

    1. Tariff absorption capacity: Maintained growth despite heightened US tariff actions, including punitive duties linked to Russian crude purchases.
    2. Export resilience: Benefited from tariff-exempt segments such as pharmaceuticals, electronics, and selected manufacturing exports.
    3. Macroeconomic stability: Achieved low inflation, narrowing fiscal deficit, and controlled interest rates by end-2025.
    4. Relative performance: Emerged less impacted than China and several emerging markets facing sharper trade slowdowns.

    Why Do Global Tariff Shocks Continue to Matter for 2026?

    1. Policy uncertainty: Lack of clarity on future US trade actions sustains volatility in investment decisions.
    2. Capital flow risks: Heightened risk of portfolio outflows amid global risk aversion.
    3. Export vulnerability: Slowing global demand and rising protectionism constrain export-led growth.
    4. Cost pressures: Higher global capital costs and supply chain reconfigurations affect manufacturing competitiveness.

    Is Domestic Demand Showing Signs of Weakness?

    1. Consumption slowdown: GST and festive-season data indicate uneven household demand recovery.
    2. Income stress: Middle and lower income households face stagnating real wage growth.
    3. Capacity utilisation ceiling: Manufacturing utilisation at ~75-77% limits fresh private investment.
    4. K-shaped recovery: Aggregate growth masks divergent sectoral and income-group outcomes.

    Why Is Private Investment Not Responding Adequately?

    1. Demand visibility gap: Firms delay expansion due to uncertain consumption outlook.
    2. Credit transmission limits: While balance sheets have improved, risk appetite remains cautious.
    3. Public investment dominance: Growth remains heavily reliant on government capital expenditure.
    4. Structural rigidities: Labour market frictions and regulatory uncertainty persist.

    What External Headwinds Could Intensify in 2026?

    1. Global growth slowdown: Weak recovery in major economies constrains export demand.
    2. AI-driven disruption: Automation threatens employment-intensive sectors, affecting income-led demand.
    3. Trade diversion risks: Chinese exports diverted from the US could flood emerging markets.
    4. Geopolitical instability: Ongoing conflicts heighten energy and financial market volatility.

    Can Policy Levers Offset Consumption Headwinds?

    1. Monetary space: Stable inflation allows accommodative monetary stance if growth slows.
    2. Fiscal recalibration: Shift from capital-heavy spending to targeted consumption support.
    3. Structural reforms: Labour codes, logistics efficiency, and regulatory predictability improve confidence.
    4. External engagement: Trade negotiations with the EU and diversification of export markets reduce exposure.

    Conclusion

    India enters 2026 with macroeconomic stability and demonstrated resilience to global tariff shocks, but the durability of growth remains uncertain. Public investment has sustained momentum, yet weak household consumption and sub-optimal capacity utilisation constrain private investment revival. External headwinds, protectionism, capital flow volatility, and technology-led disruptions, continue to pose risks. Sustaining high growth will therefore depend on rebalancing the growth model toward demand revival, improving income and employment outcomes, and ensuring that public expenditure effectively crowds in private investment while preserving macro-stability.

    PYQ Relevance

    [UPSC 2018] How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India?
    Linkage: The article analyses India’s exposure to renewed US tariff protectionism and its impact on growth, exports, capital flows, and macro stability in 2026.

  • [26th December 2025] Thze Hindu OpED: A year of dissipating promises for Indian foreign policy

    PYQ Relevance

    [UPSC 2019] ‘‘The long-sustained image of India as a leader of the oppressed and marginalised Nations has disappeared on account of its new found role in the emerging global order”. Elaborate.

    Linkage: This PYQ examines the transformation of India’s normative foreign policy identity amid power politics and global realignments. The article highlights India’s selective silence on democracy and human rights in its neighbourhood and alignment dilemmas, weakening its moral leadership image in 2025.

    Introduction

    India entered 2025 with expectations of active diplomacy backed by political continuity and economic scale. Planned bilateral visits, trade negotiations, and regional outreach were intended to reposition India amid global flux. However, the year unfolded with mounting challenges across economic security, energy security, global strategic stability, and regional security, forcing India into reactive diplomacy rather than agenda-setting leadership.

    Did India’s Economic and Energy Security Strategy Falter in 2025?

    1. Tariff escalation by the U.S.: Imposition of a 25% reciprocal tariff on Indian goods affected labour-intensive sectors such as apparel, gems and jewellery, and seafood.
    2. Trade vulnerability exposure: Actions reversed expectations of a smooth India-U.S. reset under Trump’s second term.
    3. Generalized System of Preferences (GSP) withdrawal legacy: Continued absence of preferential market access compounded export stress.
    4. Energy sanctions pressure: U.S. surcharge on Russian oil imports raised costs, making India the most heavily tariffed Russian oil buyer.
    5. Investment uncertainty: Factory-level job losses and delayed contracts reflected tangible economic impact.
    6. FTA stagnation: Despite negotiations with the U.K., Oman, and New Zealand, major agreements with the U.S. and EU remained unsigned.

    Did China Engagement Deliver Strategic Stability?

    1. Symbolic diplomatic engagement: High-profile Modi-Xi interactions restored optics but not substance.
    2. Unresolved security guarantees: No rollback of Chinese military deployments or confidence-building mechanisms at the LAC.
    3. Economic barriers intact: Restrictions on Chinese investment and trade regulations remained unchanged.
    4. Consular incident escalation: Prolonged detention of an Indian airline passenger in Shanghai raised diplomatic credibility concerns.
    5. Strategic ambiguity persistence: Engagement failed to translate into operational de-escalation.

    Has India’s Russia Policy Reached Strategic Limits?

    1. Energy dependence peak: Russian oil imports rose to $52 billion after sanctions eased.
    2. Renewed sanctions pressure: New U.S. actions revived uncertainty over import sustainability.
    3. Summit outcome gap: India-Russia summit ended without major agreements in defence, nuclear energy, or space cooperation.
    4. Reputational costs: Alignment dilemmas increased amid geopolitical polarisation.
    5. Strategic autonomy strain: Balancing Western pressure and Eurasian partnerships became costlier.

    Is Global Strategic Space Shrinking for India?

    1. Shift in U.S. strategic framing: 2025 U.S. National Security Strategy adopted a softer but ambiguous stance on China and Russia.
    2. Reduced India emphasis: India’s role articulated mainly within Indo-Pacific security, not as a global strategic partner.
    3. G-2 speculation: Trump’s references to Xi Jinping heightened concerns over marginalisation.
    4. Rules-based order erosion: Gaza and Ukraine ceasefire proposals weakened accountability norms.
    5. China’s governance push: Beijing’s Global Governance framework challenged existing international architectures.

    Did Regional Security Challenges Expose Diplomatic Gaps?

    1. Pahalgam terror attack: April attack demonstrated continued cross-border terrorist capability.
    2. Operation Sindoor limitations: Militarily effective retaliation lacked sustained diplomatic backing.
    3. Limited international support: Few countries openly endorsed India’s response.
    4. Neighbourhood volatility: Political instability in Bangladesh and Nepal reduced predictability.
    5. Pakistan dynamics: Rise of ultra-hardline leadership constrained crisis management options.

    Has India’s Neighbourhood Policy Lost Momentum?

    1. Bangladesh reversal: Post-protest regime change reversed engagement gains.
    2. Nepal instability: Fragile transitional government limited cooperation.
    3. Myanmar elections: India engaged with junta while also reaching out to deposed leadership without results.
    4. Human rights dilemma: Calls for democratic values conflicted with strategic silence.
    5. Reduced influence: India appeared reactive rather than agenda-shaping in South Asia.

    What Lessons Does 2025 Offer for India’s Foreign Policy?

    1. Limits of performative diplomacy: Summits and symbolism failed to deliver strategic gains.
    2. Credibility deficit risk: Silence on sensitive issues weakened diplomatic trust.
    3. Normative inconsistency: External democracy advocacy clashed with internal minority concerns.
    4. Narrative recalibration: Shift from Vishwaguru to Vishwamitra lacked operational clarity.
    5. Strategic self-reflection: Acknowledging double standards emerged as a policy necessity.

    Conclusion

    India’s foreign policy experience in 2025 underscores a widening gap between diplomatic ambition and strategic delivery. Economic coercion, unresolved security challenges, neighbourhood volatility, and shrinking multilateral space revealed the limits of symbolism-driven diplomacy. The year demonstrates that strategic autonomy cannot be sustained through optics alone and requires consistency, credibility, and outcome-oriented engagement. Recalibrating foreign policy around economic resilience, principled regional leadership, and realistic power alignment will be essential for restoring India’s influence in an increasingly transactional global order.

    Value Addition: India’s Foreign Policy Trajectory under the Modi Government (2014-2025)

    1. Strategic Reorientation: Transitioned India’s foreign policy from issue-based reactivity to agenda-setting and assertive diplomacy aligned with national interest.
    2. Guiding Doctrine: Anchored diplomacy in the principles of Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas, reinforcing inclusivity, trust-building, and collective effort.

    Regional and Neighbourhood Outreach

    1. Neighbourhood First Policy: Prioritised political stability, connectivity, development assistance, and crisis support in South Asia.
    2. Extended Neighbourhood Strategies:
      1. Act East strengthened ASEAN and Indo-Pacific engagement.
      2. Think West deepened ties with West Asia and the Gulf.
      3. Connect Central Asia expanded India’s Eurasian footprint.
    3. SAGAR Doctrine: Reinforced maritime security, regional cooperation, and inclusive growth in the Indian Ocean Region.

    Defence Self-Reliance and Strategic Partnerships

    1. Atmanirbhar Defence: Expanded indigenous manufacturing and reduced import dependence.
    2. INS Vikrant Commissioning: Demonstrated India’s capability in complex defence platforms and blue-water navy ambitions.
    3. iDEX Framework: Institutionalised innovation by integrating startups, MSMEs, and academia into defence R&D ecosystems.

    Humanitarian Diplomacy and Crisis Response

    1. First Responder Role: Institutionalised rapid humanitarian assistance through the MEA’s Rapid Response Cell.
    2. Evacuation and Relief Operations:
      1. Operation Dost (Turkey-Syria earthquake, 2023)
      2. Operation Ganga (Ukraine, 2022)
      3. Operation Devi Shakti (Afghanistan, 2021)
      4. Mission Sagar (IOR outreach, 2020)
    3. Outcome: Enhanced India’s credibility as a reliable humanitarian partner.

    Global Initiatives and Multilateral Leadership

    1. Climate and Sustainability Leadership:
      1. International Solar Alliance (ISA)
      2. Coalition for Disaster Resilient Infrastructure (CDRI)
      3. Lifestyle for Environment (LiFE) Movement
    2. Multilateral Impact: Positioned India as a norm-shaper on climate action, resilience, and sustainable development.

    G20 Presidency and Global South Leadership

    1. G20 2023 Presidency: Advanced consensus-driven diplomacy under the theme “Vasudhaiva Kutumbakam”.
    2. African Union Inclusion: Secured AU’s permanent G20 membership, strengthening Global South representation.
    3. Development-Centric Agenda: Emphasised debt relief, digital public infrastructure, and inclusive growth.

    Overall Significance for UPSC Mains

    1. Demonstrates India’s evolution from a rule-taker to a rule-shaper in global governance.
    2. Provides counterbalance to critiques of 2025 by highlighting structural strengths, institutional capacity, and long-term strategic vision.
    3. Useful for GS II answers on India’s foreign policy evolution, Global South leadership, strategic autonomy, and multilateralism.