RBI Notifications

How the RBI unconventionally innovated policy to fight the pandemic


From UPSC perspective, the following things are important :

Prelims level : Liquidity corrridor

Mains level : Paper 3- RBI innovative approach during pandemic


Recently, the RBI has been at the receiving end for mission the inflation target.

Understanding the RBI’s rationale

  • Supply side shock: Inflation has been largely the result of supply side shocks from vegetable prices, caused by crop damages due to unseasonal rains (tomato, onion and potato) in late 2019 and widespread supply-side disruptions after the outbreak of the pandemic.
  • A narrow-minded focus on inflation caused by supply shocks would have constrained the MPC from supporting growth amidst the unprecedented loss of life and livelihood.
  • Focusing on recovery: Therefore, it was necessary to provide a lifeline to the economy at that juncture by focusing on the recovery.
  • Moreover, the wide tolerance band of 200bps +/- in the inflation targeting framework was specifically designed to accommodate such supply shocks, which provided the flexibility in the flexible targeting (FIT) framework.
  • Taking into account objective of growth: In contrast to a pure inflation targeting framework (inflation nutters), the amended mandate of the RBI under FIT reads as “price stability, taking into account the objective of growth”.
  • Therefore, the MPC was justified in looking through the higher inflation print during the pandemic while trying to resurrect growth.

No contradiction between Governor’s statement and MPC resolution

  • Recently, the MPC highlighted inflation concerns and voted to raise the policy repo rate.
  • The governor’s statement of the same day noted that the RBI will ensure an orderly completion of the government’s borrowing programme.
  • Contradictory objectives: It is said that the above two actions created confusion as lowering inflation and lowering government bond yields are contradictory objectives.
  • This justification is redundant as an orderly completion of the borrowing programme does not imply lowering yields.
  • It basically ensures that the borrowing programme is completed seamlessly at low costs (ensured through auctions).
  • Moreover, from a theoretical perspective, this is not inconsistent because controlling inflation and lowering inflation expectations bodes well for the term premia of bond yields — which moderate once expectations are anchored.
  • Therefore, if inflation is reined in, the government stands to gain in terms of lower interest costs.
  • Was width of corridor lost during pandemic? It is argued that  the MPC kept repo rates unchanged while the RBI changed the reverse repo rate during the pandemic, meaning that the fixed width of the corridor was lost and the MPC lost its role in setting interest rates and so, its credibility.
  • This argument does not stand scrutiny.
  • During the pandemic, the policy repo rate was cumulatively reduced by an unprecedented 115 bps and the interest rate on the overnight fixed-rate reverse repo was reduced cumulatively by 155 bps.
  • Assymetric corridor justified in crises: This measure was not incongruous with contemporary wisdom as an asymmetric corridor has been justified, particularly during crisis times (Goodhart, 2010).
  • Given that elevated inflation concerns precluded the possibility of any further repo rate cuts (cumulatively reduced by 250 basis points since February 2019), financial conditions were eased substantially by reducing the reverse repo rate, which lowered the floor rate of interest in the economy.
  • Since the mandate of the MPC is to control inflation for which the policy instrument is the repo rate, the RBI had used the LAF through changes in the reverse repo rate to alter liquidity conditions.

Trade offs involved in inflation targeting for emerging economies

  • Inflation-targeting countries, because of their sole focus on inflation, experience lower inflation volatility but higher output volatility.
  • Higher output volatility entails a higher sacrifice ratio — the proportion of output foregone for lowering inflation.
  • For an emerging economy, the costs of higher output foregone against the benefits of lower inflation must always be balanced as potential output keeps on changing given the shift of the production function.
  • Developed countries, on the other hand, operate near full employment — therefore, sacrifice ratios are lower.
  • As a result, smoothening inflation volatility is relatively costless for them.


The RBI has innovated admirably under its current stewards during the pandemic, keeping in mind the task of reinvigorating the economy. Despite the existing targeting framework, it did not get fixated on a one-point agenda, daring to look beyond the inflation print.

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Back2Basics: Liquidity corridor

  • The Corridor in monetary policy of the RBI refers to the area between the reverse repo rate and the MSF rate.
  • Reverse repo rate will be the lowest of the policy rates whereas Marginal Standing Facility is something like an upper ceiling with a higher rate than the repo rate.
  • The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.

Anti Defection Law

Do not weaken the anti-defection law


From UPSC perspective, the following things are important :

Prelims level : Schedules of the Constitution

Mains level : Paper 2- Strengthening anti-defection law


The political developments in Maharashtra throw up troubling questions about how the political class is weakening the anti-defection law.

Background of the anti-defection law

  •  It was enacted as the Tenth Schedule of the Constitution of India, in 1985, under Rajiv Gandhi’s premiership.
  • The law as it was enacted provided for the disqualification of a legislator belonging to a political party if he voluntarily gave up his membership of his party or if he defied the whip of his party by voting contrary to its directions in the legislative house.
  • Two exceptions: Initially, there were two exceptions provided in the schedule which would exempt a legislator from disqualification.
  • 1] Split: The first exception was a split in their original political party resulting in the formation of a group of legislators.
  • If the group consisted of one third of such legislators of that party, they were exempted from disqualification.
  • This exception was deleted from the schedule through a Constitution Amendment Act of 2003 because of frequent misuse.
  • 2] Merger: The second exception was ‘merger’ which can be invoked when the original political party of a legislator merges with another party and not less than two thirds of its legislators agree to such a merger.

Interpretation of term ‘merger’ and issues with it

  • It is this second exception contained in paragraph four of the schedule which has been taken recourse to by a large number of legislators across States and even in Parliament to defect to the ruling party.
  • These legislators interpreted for themselves the term ‘merger’ to mean the merger of two thirds of legislators.
  • Now, the same is being repeated in Maharashtra.
  • But there is a little difference here.
  • It appears that the dissidents of Shiv Sena believed that if they get the two third number they can form a separate group and topple the government and then form a government with the help of the Bharatiya Janata Party.
  • The law imposes the condition of merger of the original political party.
  • However, a recent judgment of the Goa Bench of the Bombay High Court ( Girish Chodankar vs The Speaker, Goa State Legislative) that held that the merger of two thirds of Members of the Legislative Assembly is deemed to be the merger of the original party seems to have given them a ray of hope.
  • So, the legal position is if the dissidents do not merge with another party they will be disqualified now or later.

Question of disqualification

  • Disqualification petitions have been filed by the Shiv Sena against 16 of the dissidents under paragraph 2(1)(a) on the ground that they have voluntarily given up the membership of the party.
  • The question of whether they have voluntarily given up the membership of the party is decided on the basis of the conduct of a member.
  • In Ravi S. Naik vs Union of India (1994), the Supreme Court had said “an inference can be drawn from the conduct of a member that he has voluntarily given up the membership of the party.

Weakening the anti-defection law

  • Unprincipled defection: The ongoing developments in Maharashtra have once again brought before the country the reality of what the Supreme Court also described as the political evil of unprincipled defection.
  • But the order of the Supreme Court, on June 27, on petitions from the dissidents in the Shiv Sena, gives undue advantage to the dissident legislators.
  • The Court has granted them a longer time to submit replies than the rules mandate.
  • This order is going to set in motion certain political developments which will resurrect in a big way what the Supreme Court characterised as political evil.
  • The intervention by the Supreme Court too has thrown up some crucial question.
  • Kihoto Hollohan case: The first question is whether the Court can intervene at a stage prior to the decision by the Deputy Speaker.
  • A Constitution Bench of the Supreme Court had held in Kihoto Hollohan (1993) that judicial review cannot be available prior to the making of a decision by the Speaker nor at an interlocutory stage of the proceeding.
  •  The notice of no-confidence against the Deputy Speaker has added another piece to the jigsaw puzzle.
  • Nabam Rebia case: The Supreme Court had held in Nabam Rebia (2016) that the Speaker shall not decide the disqualification cases till the no-confidence motion against him is disposed of.
  • The House rules clearly say that the notice of no-confidence against the Speaker/Deputy Speaker needs to be admitted in the first place which is done only by the Speaker.
  • But it is the House which takes the final decision on the motion. If the notice of no-confidence does not contain specific charges, it can be disallowed by the Speaker. 
  • Further, the notice can be given only if the House is summoned.
  • When the notice was given, the Assembly was not convened. So, the notice against the Deputy Speaker can have no validity under the rules.


The law, though not perfect, is a serious attempt to strengthen the moral content of democracy. There will be shortcomings in this Bill but as we see and identify those shortcomings we should try to overcome them.

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Mother and Child Health – Immunization Program, BPBB, PMJSY, PMMSY, etc.

Is India really ahead of the West in terms of reproductive rights?


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Reproductive rights in India


Contrary to the grandstanding since the overturning of the landmark Roe V. Wade judgment, the truth is that India is not ahead of the West in terms of reproductive rights.

Medical Termination of Pregnancy (MTP) Act

  • Abortion in India has been a legal right under various circumstances for the last 50 years with the introduction of Medical Termination of Pregnancy (MTP) Act in 1971.
  • The Act was amended in 2003 to enable women’s accessibility to safe and legal abortion services.
  • Abortion is covered 100% by the government’s public national health insurance funds, Ayushman Bharat and Employees’ State Insurance with the package rate for surgical abortion.

The idea of terminating your pregnancy cannot originate by choice and is purely circumstantial. There are four situations under which a legal abortion is performed:

  1. If continuation of the pregnancy poses any risks to the life of the mother or mental health
  2. If the foetus has any severe abnormalities
  3. If pregnancy occurred as a result of failure of contraception (but this is only applicable to married women)
  4. If pregnancy is a result of sexual assault or rape

These are the key changes that the Medical Termination of Pregnancy (Amendment) Act, 2021, has brought in:

  • The gestation limit for abortions has been raised from the earlier ceiling of 20 weeks to 24 weeks, but only for special categories of pregnant women such as rape or incest survivors. But this termination would need the approval of two registered doctors.
  • All pregnancies up to 20 weeks require one doctor’s approval. The earlier law, the MTP Act 1971, required one doctor’s approval for pregnancies upto 12 weeks and two doctors’ for pregnancies between 12 and 20 weeks.
  • Women can now terminate unwanted pregnancies caused by contraceptive failure, regardless of their marital status. Earlier the law specified that only a “married woman and her husband” could do this.
  • There is also no upper gestation limit for abortion in case of foetal disability if so decided by a medical board of specialist doctors, which state governments and union territories’ administrations would set up.

Issues with legal provisions related to reproductive rights in India

  • Lack of rights based approach: The Medical Termination of Pregnancy (Amendment) Act 2021 is far from ideal and has been criticised for not taking a rights-based approach.
  • According to the Act, a pregnancy can be terminated on the following conditions: Grave danger to the physical/mental health of the pregnant woman; foetal abnormalities; rape/coercion; and contraceptive failure.
  • A woman’s right to choose to end the pregnancy even in the first few weeks is still not recognised in India.
  • Systemic barriers: It doesn’t give the pregnant person complete autonomy in ending the pregnancy, instead making them go through various systemic barriers.
  • The final decision falls not on the pregnant person, but on registered medical practitioners (RMP).
  • The constitution of a medical board, a requirement by the Act, is considered a barrier by the World Health Organisation.
  • Excludes transgenders and non-binary persons: Additionally, it uses the word “woman”, thereby leaving out pregnant transgender and non-binary persons who are biologically capable of bearing children.
  • It forces them to identify themselves in the gender-binary ignoring their gender identity.

Social factors and lack of medical facilities

  • It is important to look through an intersectional lens, and factor in class and caste privilege.
  • Abortion facilities in private medical centres are expensive, available only for those who have the resources.
  • Lack of access: Not all public health centres, especially in rural India, provide abortion facilities.
  • Most unmarried women end up resorting to unsafe abortions in illegal clinics or at home.
  • According to the latest National Family Health Survey 2019-2021, 27 percent of the abortions were carried out by the woman herself at home.
  • According to United Nations’ Population Fund’s (UNFPA) State of the World Population Report 2022, around 8 women die each day in India due to unsafe abortions.
  • It also found that between 2007-2011, 67 percent of the abortions were classified as unsafe.
  • Unsafe abortion was one of the top three causes of maternal deaths.

Discussion on reproductive rights in India are incomplete without mentioning surrogacy.

Issues in the Surrogacy (Regulation) Act 2021

  • While well-intentioned, leaves much to be desired.
  • The plethora of regulations one must undergo is antithetical to a dignified standard of living.
  • Exclusionary in nature: Experts have pointed out that the Act is exclusionary in nature, disregards privacy, and also exploits women’s reproductive labour.
  • Only a heterosexual married couple (with certain preconditions) can be the intending parents.
  • It strips the reproductive autonomy of LGBTQ+ persons and single, divorced, and widowed intending parents. It can be seen as a violation to the fundamental right to equality.
  • Experts also believe that regulations, rather than a complete ban on commercial surrogacy, should have been the way forward.
  • Violates right to privacy: The Act requires the intending couple to declare their infertility and reveals the identity of the surrogate, both of which violate the right to privacy.
  • The landmark Puttaswamy judgment discusses bodily privacy – the right over one’s body and “the freedom of being able to prevent others from violating one’s body.”
  • The current reproductive rights regulatory framework falls short in guaranteeing bodily privacy.


The situation in India is far from perfect and we should take this moment to reflect and learn from progressive practices around the world. We should strive for inclusivity, complete bodily autonomy, and reproductive equity.

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Anti Defection Law

The anti-defection law — political facts, legal fiction


From UPSC perspective, the following things are important :

Prelims level : Anti-defection law

Mains level : Paper 2- Paragraph 4 of Tenth Schedule


The ongoing political crisis in Maharashtra, and many others before it, are grim reminders of what the Tenth Schedule can and cannot do.

About 10th Schedule

  • In 1985 the Tenth Schedule, popularly known as the anti-defection law, was added to the Constitution.
  • But its enactment was catalyzed by the political instability after the general elections of 1967.
  • This was the time when multiple state governments were toppled after MLAs changed their political loyalties.
  • The purpose of the 1985 Constitution Amendment was to bring stability to governments by deterring MPs and MLAs from changing their political parties on whose ticket they were elected.
  • The penalty for shifting political loyalties is the loss of parliamentary membership and a bar on becoming a minister.

Provisions of the 10th Schedule

  • Instances of floor crossing have long gone unchecked and unpunished.
  • In part, this can be attributed to the exemption given to mergers between political parties which facilitate bulk defections.
  • Disqualification provision: The second paragraph of the Tenth Schedule allows for disqualification of an elected member of a House if such member belonging to any political party has voluntarily given up membership of their party, or if they vote in the House against such party’s whip.
  • Exceptions: Paragraph 4 creates an exception for mergers between political parties by introducing three crucial concepts — that of the “original political party”, the “legislature party”, and “deemed merger”.
  • What is the legislature party?  It means the group consisting of all elected members of a House for the time being belonging to one political party.
  • Original political party: An “original political party” means the political party to which a member belongs (this can refer to the party generally, outside of the House).
  • Paragraph 4 does not clarify whether the original political party refers to the party at the national level or the regional level.

How Paragraph 4 of the 10th Schedule deals with mergers?

  • Paragraph 4 is spread across two sub-paragraphs, a conjoint reading of which suggests that a merger can take place only when an original party merges with another political party, and at least two-thirds of the members of the legislature party have agreed to this merger.
  • It is only when these two conditions are satisfied that a group of elected members can claim exemption from disqualification on grounds of merger.
  • The second sub-paragraph (of Paragraph 4) says that a party shall be “deemed” to have merged with another party if, and only if, not less than two-thirds of the members of the legislature party concerned have agreed to such merger.
  • However, in most cases there is no factual merger of original political parties at the national (or even regional) level.
  • Creation of legal fiction: Paragraph 4 seems to be creating a “legal fiction” so as to indicate that a merger of two-third members of a legislature party can be deemed to be a merger of political parties, even if there is no actual merger of the original political party with another party.
  • In statutory interpretation, “deemed” has an established understanding.
  • The word “deemed” may be used in a law to create a legal fiction, and give an artificial construction to a word or a phrase used in a statute.
  • In other cases, it may be used to include what is obvious or what is uncertain.
  • In either of these cases, the intention of the legislature in creating a deeming provision is paramount.

Merger exception and issues with it

  • The merger exception was created to save instances of the principled coming together of political groups from disqualification under the anti-defection law, and to strike a compromise between the right of dissent and party discipline. 
  • In the absence of mergers of original political parties, the deeming fiction could, presumably, be used as a means to allow mergers of legislature parties.
  • Encouraging defection: Reading Paragraph 4 in this manner would empower legislature parties to solely merge with another party, and thus, practically ease defection.

What if sub-paragraphs are read conjunctively?

  • For a valid merger then, an original political party has to first merge with another political party, and then two-thirds of the legislature party must support that merger.
  • Given the politics of current times, stark differences in parties’ respective ideologies, and deep-seated historical rivalries, it is unimaginable how a merger between major national or regional parties would materialise.

Way forward

  • Remove Paragraph 4: In a situation where either reading of Paragraph 4 in its current form yields undesirable results, its deletion from the Tenth Schedule is a possible way forward.
  • The Law Commission in 1999 and the National Commission to Review the Working of the Constitution (NCRWC) in 2002 made similar recommendations.
  • Revisiting by Supreme Court: Till that happens, an academic revisiting of the Tenth Schedule by the Supreme Court, so as to guide future use of the anti-defection law, is timely and should happen soon.


Neither of these two interpretations of Paragraph 4complements the ‘mischief’ that the Tenth Schedule was expected to remedy — that of curbing unprincipled defections. Amending it is the need of the hour.

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Foreign Policy Watch: India-Middle East

The significance of PM’s visit to the UAE


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- India-UAE relations


Prime Minister Narendra Modi’s visit to the UAE on June 28 was his fourth, having visited the country earlier in August 2015, in February 2018 and again in August 2019.

Why do the Gulf and UAE matters to India?

  • The UAE has given crucial support to India in the Islamic world, first by inviting our late External Affairs Minister Sushma Swaraj as a guest of honour at an OIC foreign ministers meeting in Abu Dhabi.
  • The UAE stood with us on Jammu and Kashmir following the abrogation of Article 370.
  • The Gulf is our third-largest trading partner.
  • The Gulf region is our principal source of hydrocarbons.
  • It is also a major source of foreign investment.
  • The region is home to some 8 million Indians who send in over $50 billion annually in remittances.

Deepening bilateral ties

  • CEPA: In a virtual summit with Sheikh Mohamed in February 2022, both sides signed a Comprehensive Economic Partnership Agreement (CEPA).
  • CEPA is a significant milestone that was negotiated and finalised in just 88 days and promises to increase bilateral trade from $60 billion to $ 100 billion in five years.
  •  It is expected to help Indian exports in areas ranging from gems and jewellery and textiles to footwear and pharmaceuticals, apart from enhanced access for Indian service providers to 11 specific sectors.
  • Vision statement: An ambitious, forward-looking Joint Vision Statement titled, “Advancing the India and UAE Comprehensive Strategic Partnership: New Frontiers, New Milestones” was also issued.
  • The Dubai-based DP World and India’s National Skills Development Council signed an agreement to set up a Skill India Centre in Varanasi to train local youth in logistics, port operations and allied areas so that they can pursue overseas employment.

New avenues for multilateral cooperation

  • The rapid normalisation of ties between the UAE and Israel following the Abraham Accords of August 2020 has also opened new avenues of trilateral and multilateral cooperation.
  • Technology, capital and scale: Some Israeli tech companies are already establishing a base in Dubai and seeking to marry niche technologies with Emirati capital and Indian scale. 
  • 2I2U: The US has announced that President Joe Biden’s forthcoming visit to West Asia will see a virtual summit of what it calls the 2I2U, a new grouping that brings together India, Israel, the US and UAE.


The UAE today is India’s closest partner in the Arab world. Both countries need to expand the areas of cooperation and deepen their engagement.

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Back2Basics: Abraham Accords

  • The Israel–UAE normalization agreement is officially called the Abraham Accords Peace Agreement.
  • It was initially agreed to in a joint statement by the United States, Israel and the United Arab Emirates (UAE) on August 13, 2020.
  • The UAE thus became the third Arab country, after Egypt in 1979 and Jordan in 1994, to agree to formally normalize its relationship with Israel as well as the first Persian Gulf country to do so.
  • Concurrently, Israel agreed to suspend plans for annexing parts of the West Bank.
  • The agreement normalized what had long been informal but robust foreign relations between the two countries.

Poverty Eradication – Definition, Debates, etc.

The extent of poverty


From UPSC perspective, the following things are important :

Prelims level : Poverty line

Mains level : Paper 3- Estimating poverty in India


There has been an uproar about the working papers of the IMF and World Bank, reporting no or low poverty for India in the pandemic year or just before that.

About the IMF paper

  • The paper by Roy and Weide (2022) for the World Bank explores the possibility of using CMIE (unemployment data) in poverty calculations after correcting for the unrepresentative character of its panel data by modifying the weightages of households for aggregation.
  • These adjustments carried out to remove the non-convergence of the CMIE data with other macro statistics have resulted in a poverty figure of 12 per cent.

What does the poverty index measure or attempt to capture?

  • Its construction involves complex calculations — to identify a poverty basket of consumption, working out price indices for updation of the poverty line and then applying it to the income or consumption of households for determining their poverty status.
  • Absence of consumption expenditure: The computation becomes far more challenging in the absence of data on consumption expenditure as is the case in India and several developing countries.
  • Intending to provide inputs for policy making, researchers have evolved ingenious methods of estimating the data, using past datasets and those that have not been designed to get robust expenditure estimates.

Background of poverty line in India

  • A nine-member working group set up by the Planning Commission proposed the poverty line at Rs 20 per capita per month in the early Sixties, loosely ensuring the adequacy of minimum requirements.
  • Poverty line based on calorie needs: Dandekar and Rath (1970) went into detail about minimum calorie needs, based on the average consumption pattern.
  • Issues with calorie based poverty line: During the Eighties and Nineties, it was realised that this linkage is getting blurred due to changes in the consumption pattern, microenvironment for living, etc.
  • Sukhatme argued that the emphasis on calories and nutrition is misplaced as the absorption of nutrients depends on physical health, particularly the presence or absence of gastrointestinal diseases.
  • Water and sanitation facilities were noted as important in determining the poverty line.
  •  It was accepted that the state, through poverty interventions, cannot and should not try to guarantee adequate nutrition to people.
  • Delinking the nutritional norms: The Tendulkar Committee formally announced delinking of nutritional norms from poverty in 2010.

Extrapolating the consumption expenditure on NSS 2011-12

  • Bhalla, Virmani and Bhasin (2022) in their IMF Working Paper have developed a method of interpolation and extrapolation of the consumption expenditure of the NSS 2011-12 and building a series up to 2019-20.
  • They use the growth rate of private final consumption expenditure (PFCE) but bring in the distributional changes by allowing household consumption to grow as per the nominal per capita income in each state.
  • Takes into account rural-urban price difference: Rural-urban price differences are also introduced through separate poverty lines.
  • The method is reasonable except that it assumes the distributions to remain unchanged both within the rural and urban segments in each state over 2014-20.
  • Also, the growth rates of different commodities in the PFCE are significantly different and hence commodity-wise adjustments can be done to give higher weights to the items of consumption by the poor.
  • Taking into account the role of state: The most significant contribution of the study is its bringing in the differential engagement of the state in the provisioning of the essentials to the poor into poverty calculations.
  • This opens up the possibility of changes in the level of state engagement in poverty estimation, including free gas cylinders, etc.


People find the World Bank paper figures pegged at 12% more acceptable not because of the methodology but the magnitude. One does not know whether the poverty estimate would be a bit higher had the adjustments been carried out for a few other parameters and also at the state level.

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Digital India Initiatives

India must prepare for 5G technology


From UPSC perspective, the following things are important :

Prelims level : Working principle of optical fibre

Mains level : Paper 3- Creating digital infrastructure for 5G


5G technology is going to make inroads into the country very soon.

Making Digital India project successful

  • With over 117 crore telecom users and more than 82 crore internet subscribers, India is one of the fastest-growing markets for digital consumers.
  • A 2019 Mckinsey study rated India as the second-fastest digitising economy. 
  • Internet connectivity is critical for making the Digital India project inclusive, and widespread use of optical fibre in the remotest corners of the country is vital to ensure that no one is left behind in this endeavour.

Digital infrastructure for 5G

  • Digital infrastructure, which seamlessly integrates with physical and traditional infrastructure, is critical to India’s growth story and the country’s thrust towards self-reliance.
  • Networking equipment that relies on optical fibre and other semiconductor-based device ecosystems are at the heart of building the infrastructure that will be needed when the country takes the next step in its digital journey.
  • The government has taken several measures to build the next generation of digital infrastructure.
  • A basic requirement of 5G will be data transmission networks.
  • Optical fibre is the backbone of the digital infrastructure required for this purpose — the data is transmitted by light pulses travelling through long strands of thin fibre.

Optical fibre industry in India

  • In the last 10 years, domestic manufacturers invested more than Rs 5,000 crore in optical fibre industry, which has generated direct and indirect employment for around 4 lakh individuals.
  • Exports from India: India exported optical fibre worth $138 million to over 132 countries between April 2020 and November 2021.
  • India’s annual optic fibre manufacturing capacity is around 100 million fibre km (fkm) and the domestic consumption is around 46 million fkm. Indian optical fibre cable consumption is predicted to increase to 33 million fkm by 2026 from 17 million fkm in 2021.
  • A little more than 30 per cent of mobile towers have fibre connectivity; this needs to be scaled up to at least 80 per cent.

Unfair competition from cheap imports

  • India’s optical fibre industry has also seen unfair competition from cheap imports from China, Indonesia and South Korea.
  • These countries have been dumping their products in India at rates lower than the market price.
  • What is dumping? The World Trade Organisation defines dumping as “an international price discrimination situation in which the price of a product offered in the importing country is less than the price of that product in the exporting country’s market”.
  • Way ahead: Imposing anti-dumping duties is one way of protecting the domestic industry.
  • The Directorate General of Trade Remedies has recently begun investigations against optical fibre imports.


  • India needs to invest in R&D, offer production-linked incentive (PLI) schemes to support indigenous high-tech manufacturing and develop intellectual property in critical aspects of digital connectivity.


The need of the hour is to unlock the full potential of India’s optical fibre industry and enable India to emerge as a major manufacturing and technology hub while achieving atmanirbharta in its 5G journey.

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Back2Basics: About optical fibre

  • Fiber optics, also spelled fibre optics, the science of transmitting data, voice, and images by the passage of light through thin, transparent fibers.
  • In telecommunications, fiber optic technology has virtually replaced copper wire in long-distance telephone lines, and it is used to link computers within local area networks.
  • Fibre optics is also the basis of the fiberscopes used in examining internal parts of the body (endoscopy) or inspecting the interiors of manufactured structural products.
  •  Through a process known as total internal reflection, light rays beamed into the fibre can propagate within the core for great distances with remarkably little attenuation or reduction in intensity.

G20 : Economic Cooperation ahead

G7 observer status serves to advance India’s foreign and security policy objectives


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- G-7 and India


The meeting of G7 leaders that concluded in Bavaria was attended by India as an observer.

About G7

  • The G-7 or ‘Group of Seven’ includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
  • It is an intergovernmental organisation that was formed in 1975 by the top economies of the time as an informal forum to discuss pressing world issues.
  • Initially, it was formed as an effort by the US and its allies to discuss economic issues.
  • The G-7 forum now discusses several challenges such as oil prices and many pressing issues such as financial crises, terrorism, arms control, and drug trafficking.
  • It does not have a formal constitution or a fixed headquarters. The decisions taken by leaders during annual summits are non-binding.
  • Canada joined the group in 1976, and the European Union began attending in 1977.
  • The G7 is trying hard not to be yesterday’s club.
  • It is still a powerful grouping, with seven of its members in the top 10 economies of the world, three of them permanent members of the UNSC.

Important outcomes of the G7 meeting

  • Statement on support for Ukraine: A standalone G7 Statement on Support for Ukraine was issued.
  • There was an unconditional commitment that the grouping will provide financial, humanitarian, military and diplomatic support and stand with Ukraine for as long as it takes.
  • Russia was also warned that any use of chemical, biological and nuclear weapons would be met with severe consequences.
  • Further intensification of sanctions against Russia was contemplated.
  • Tough language on China: Significantly, the G7 final communique has tough language on China as well.
  • It says there is no legal basis for China’s expansive maritime claims in the South China Sea, it calls on China to press Russia to withdraw troops from Ukraine and expresses grave concern about the country’s human rights situation.
  • It calls on China to respect universal human rights and fundamental freedoms in both Tibet and Xinjiang, highlighting the issue of forced labour in the latter.

Significance of India’s observer status

  • The fact is that even the G7 knows its clout has declined compared to, say, 20 years ago.
  • That explains the move to invite key G20 countries as observers to its summits.
  • As for India, its importance lies in the undeniable truth that no global problem can be seriously tackled without New Delhi’s involvement.
  • For India, G7 summits have always been an invaluable opportunity to exchange views not just in a plurilateral format but also in the bilateral meetings on the margins of the main meetings.
  • 2 statements: India has lent its name to two statements issued by the G7. One is titled “Resilient Democracies Statement” and the other is “Joining Forces to Accelerate Clean and Just Transition towards Climate Neutrality”.
  • The first statement talks of democracies as reliable partners seeking to promote a rules-based international order and supporting democracy worldwide including through electoral assistance.
  • The other statement to which India is a signatory is the one on clean and just transition towards carbon neutrality.


India’s participation in this meeting as an observer serves to advance its foreign and security policy objectives and will keep it in good stead when it assumes the G20 presidency in December.

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Government Budgets

States, freebies and the costs of fiscal profligacy


From UPSC perspective, the following things are important :

Prelims level : FRBM Act provisions

Mains level : Paper 3- Freebies and finances of the States


Many states are pursuing the freebie culture, which raises several questions.

About freebies

  • Why do governments give freebies? The obvious motivation for States in expanding freebies is to use the exchequer to build vote banks.
  • Electoral calculations tempt them to place short-term gains ahead of long-term sustainability.
  • Case in which it is necessary? A certain amount of spending on transfer payments to provide safety nets to the most vulnerable segments of the population is not only desirable but even necessary.
  • What is the problem? The problem arises when such transfer payments become the main plank of discretionary expenditure, the spending is financed by debt, and the debt is concealed to circumvent the FRBM targets.
  • Opportunity cost: The more States spend on transfer payments, the less they have for spending on physical infrastructure such as, for example, power and roads, and on social infrastructure such as education and health, which can potentially improve growth and generate jobs.

Questioning the logic of freebie culture

  • Sustainability: Is borrowing and spending on freebies sustainable?
  • Best use: Is this the best possible use of public money?
  • Opportunity cost: What is their opportunity cost — what is it that the public are collectively giving up so that the government can fund these payments?
  • Checks and balances: Should not there be some checks on how much can be spent on them?

Where should government spend the borrowed money?

  • Ideally, governments should use borrowed money to invest in physical and social infrastructure that will generate higher growth, and thereby higher revenues in the future so that the debt pays for itself.
  • On the other hand, if governments spend the loan money on populist giveaways that generate no additional revenue, the growing debt burden will eventually implode.

But what is the problem with freebies if states are confirming to the FRBM targets?

  • Any analysis of State Budgets by the Reserve Bank of India shows that State finances are in good health and that all of them are conforming to the Fiscal Responsibility and Budget Management (FRBM) targets.
  • This is a misleading picture.
  • Off budget borrowing: Much of the borrowing that funds these freebies happens off budget, beyond the pale of FRBM tracking.
  • The typical modus operandi for States has been to borrow on the books of their public enterprises, in some cases by pledging future revenues of the State as guarantee.
  • Effectively, the burden of debt is on the State exchequer, albeit well concealed.
  • The Comptroller and Auditor General of India (CAG) had in fact pointed out that in respect of some States.
  • Huget cost: The costs of fiscal profligacy at the State level can be huge.
  • The amount States borrow collectively every year is comparable in size to the Centre’s borrowing which implies that their fiscal stance has as much impact on our macroeconomic stability as does that of the Centre.
  • The need, therefore, for instituting more effective checks that can make wayward States fall in line is compelling.

What are the institutional checks and balances? What are the reasons of their failure?

  • 1] Legislature and opposition: In theory, the first line of defence has to be the legislature, in particular the Opposition, whose responsibility it is to keep the Government in line.
  • But the Opposition does not dare speak up for fear of forfeiting vote banks that are at the end of these freebies.
  • 2] Lag in CAG reports: Another constitutional check is the CAG audit which should enforce transparency and accountability.
  • In practice, it has lost its teeth since audit reports necessarily come with a lag, by when political interest has typically shifted to other hot button issues.
  • 3] The market: The market is another potential check.
  • It can signal the health or otherwise of State finances by pricing the loans floated by different State governments differently, reflecting their debt sustainability.
  • But in practice this too fails since the market perceives all State borrowing as implicitly guaranteed by the Centre, never mind that there is no such guarantee in reality.


  • 1] Amend FRBM Act for complete disclosure: First, the FRBM Acts of the Centre as well as States need to be amended to enforce a more complete disclosure of the liabilities on their exchequers.
  • Even under the current FRBM provisions, governments are mandated to disclose their contingent liabilities, but that disclosure is restricted to liabilities for which they have extended an explicit guarantee.
  • The provision should be expanded to cover all liabilities whose servicing obligation falls on the Budget, or could potentially fall on the Budget, regardless of any guarantee.
  • 2] Centre should impose conditionalities: Under the Constitution, States are required to take the Centre’s permission when they borrow.
  • The Centre should not hesitate to impose conditionalities on wayward States when it accords such permission.
  • 3] Use of financial emergency provision: There is a provision in the Constitution of India which allows the President to declare a financial emergency in any State if s/he is satisfied that financial stability is threatened.
  • This provision has never been invoked so far for fear that this will turn into a political weapon.
  • But the provision is there in the Constitution for a reason.
  • After all, the root cause of fiscal irresponsibility is the lure of electoral nirvana. It will stop only if the political leadership fears punishment.
  • 4] Course correction by the Centre: The Centre itself has not been a beacon of virtue when it comes to fiscal responsibility and transparency.
  • To its credit, it has embarked on course correction over the last few years.
  • It should complete that task in order to command the moral authority to enforce good fiscal behaviour on the part of States.


The state governments, as well as the Central government, need to avoid the freebies that harm financial health and cause long-term harm. For that, there is a need to implement the suggestions mentioned above.

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Back2Basics: FRBM Act

  • The FRBM is an act of the parliament that set targets for the Government of India to establish financial discipline, improve the management of public funds, strengthen fiscal prudence and reduce its fiscal deficits.
  • It was first introduced in the parliament of India in the year 2000 by Vajpayee Government for providing legal backing to the fiscal discipline to be institutionalized in the country.
  • Subsequently, the FRBM Act was passed in the year 2003.

Start-up Ecosystem In India

Downturn in tech startup ecosystem


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Challenges ahead for tech startups


The startup ecosystem which has been in overdrive for the past few years — propelled by a combination of factors, but largely, by the era of cheap money — is now showing signs of weakness.

Factors that helped fuel the tech startups

  • With the combination of accelerated financial inclusion (bank accounts), ease of identification (Aadhaar) and connectivity (mobile phones) it was said that it is ultimately a bet on the Indian consumer, and the economy, not on government regulations/policies.
  • Low-interest rates: In the era of cheap money and negative real interest rates, uncomfortable questions over the true market size and profitability were swept under the rug.
  • Growth fuelled by cash burn: High cash burn rates were the norm as both startups and investors sought growth by subsidising the customer.

What is going wrong?

  • Lack of profitability: Among the startups that have gone public in recent times, Paytm’s losses stood at Rs 2,396 crore in 2021-22, while for Zomato and PB Fintech (PolicyBazaar) losses were Rs 1,222 crore and Rs 832 crore respectively.
  • Drying-up of investment: Sure, investors will continue to pour money.
  • Some early age start-ups will continue to be funded, as will some of the more mature ones.
  • But investors are likely to be more circumspect in their dealings.
  • Impact on valuation: There are also reports of startups in diverse markets, ranging from Ola to OYO, planning to raise funds at lower valuations.
  • Among those who have gone public in recent times, most are trading much below their listing price.
  • Tighter financial conditions, a re-rating of the market, will impact both fundraising efforts and valuations.

Lack of discretionary spending capacity

  • Many numbers were given as indicators of the size of the market or TAM (the total addressable market).
  • Smartphone users: One such number thrown around is the smartphone users in the country — some have pegged this at 500 million.
  • UPI transactions: The transactions routed through the UPI platform — in May there were almost six billion transactions worth Rs 10 trillion.
  • Bank account holders: We have the near universality of bank accounts.
  • But in reality, for most of these startups, the market or even the potential market is just a fraction of this.
  • There aren’t that many consumers with significant discretionary spending capacity, and those with the capacity aren’t increasing their spending as these companies would hope.
  • No increase in spending: What is equally worrying is the complete absence of any increase in spending by even these consumers who would have the capacity to spend more.
  • While more consumers are on-board digital payment platforms — Paytm has about 70 million monthly transacting users — these numbers suggest that when it comes to consumers with considerable discretionary spending, the size of the market shrivels considerably.


Tech startups are about to witness a tough time ahead. Some startups will survive this period. Many may not. And changes in the dynamics of private markets will also have a bearing on public markets.

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e-Commerce: The New Boom

The online marketplace is skewed in favour of big players


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- E-commerce regulation issue


The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. However, these platforms also have given rise to several concerns as well.

Issues created by the e-commerce sites

  • Predatory pricing: These companies resort to predatory pricing to acquire customers even as they suffer persistent financial losses.
  • SEBI is rightly revisiting the valuation norms of such companies looking to list on the stock exchange.
  • Exclusionary practice: They take away choice from suppliers and consumers.
  • This, in the long run, can be viewed as an exclusionary practice that eliminates other players from the market. 
  • Lack of level playing field: While neutrality is the fundamental basis of a marketplace and a level playing field is in the fitness of things, claims of outfits such as Flipkart or Amazon to be a marketplace for a wide variety of sellers can be questioned.
  • A few select sellers, who are generally affiliated with the platform, reap the benefits of greater visibility and better terms of trade — reduced commissions and platform-funded discounts.
  • Undue advantage to associated companies: The associate companies are prominent sellers on their platform.
  • It is alleged that undue advantage is given while recommending or listing these products.
  • Cartelisation: Online travel aggregators are often accused of cartelisation.
  • Information asymmetry: The aggregators gather shopping habits, consumer preferences, and other personal data.
  • The platforms are accused of using this data to create and improve their own products and services, taking away business from other sellers on their platform.
  • They capitalise on this data and information about other brands to launch competing products on their marketplace.
  • This information asymmetry is exploited by the aggregators to devour organisations they promise to support.
  • Problems in dispute resolution mechanism: Another issue often noticed is the lack of a fair and transparent dispute resolution mechanism for sellers on these platforms.
  • Delayed payments, unreasonable charges, and hidden fees are common occurrences.
  • Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates) which allows them to offer rooms at a much cheaper rate but bars the hotels from doing so.

Impact of the e-commerce

  • The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in.
  • The ultimate loss bearer is the consumer who will have a reduced bargaining position.

Way forward

  • Comprehensive rules: It is time that a set of comprehensive rules and regulations is put together.
  • These regulations need to be inclusive, should eliminate the conflicts of interest inherent in current market practices, and prevent any anti-competitive practices.
  • Model agreement: A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented.
  • Learning from EU act: There is a lot to learn from the Digital Markets Act of the EU that seeks to address unfair practices by these gatekeepers.
  • Need for dispute resolution mechanism: Strong and quick grievance redressal and dispute resolution mechanisms should be established.
  • Punitive penalties: The rules should allow for punitive penalties for unfair practices.
  • Fair competition rules: Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.


The nature of our success in dealing with this change will lie in the ways in which we deal with the concerns of all players.

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Fertilizer Sector reforms – NBS, bio-fertilizers, Neem coating, etc.

What India needs to do to reduce its fertiliser bill


From UPSC perspective, the following things are important :

Prelims level : Di-ammonium fertilisers

Mains level : Paper 3- Reducing the cost of fertiliser imports


The global prices of urea, DAP, MOP, phosphoric acid, ammonia and LNG have soared by two to two-and-a-half times in the last year

Resource richness of Indian agriculture

  • No country has as much area under farming as India.
  • Land under cultivation: At 169.3 million hectares (mh) in 2019, its land used for crop cultivation was higher than that of the US (160.4 mh), China (135.7 mh), Russia (123.4 mh) or Brazil (63.5 mh).
  • Ample water: With its perennial Himalayan rivers and average annual rainfall of nearly 1,200 mm – against Russia’s 475 mm, China’s 650 mm and the US’s 750 mm – India has no dearth of land, water and sunshine to sustain vibrant agriculture.
  • But there’s one resource in which the country is short and heavily import-dependent — mineral fertilisers.

India’s important dependence

  • In 2021-22, India imported 10.16 million tonnes (mt) of urea, 5.86 mt of di-ammonium phosphate (DAP) and 2.91 mt of muriate of potash (MOP).
  • Import value: In value terms, imports of all fertilisers touched an all-time high of $12.77 billion last fiscal.
  • In 2021-22, India also produced 25.07 mt of urea, 4.22 mt of DAP, 8.33 mt of complex fertilisers (containing nitrogen-N, phosphorus-P, potassium-K and sulphur-S in different ratios) and 5.33 mt of single super phosphate (SSP).
  • Import of raw material: The intermediates or raw materials for the manufacture of these fertilisers were substantially imported.
  • Total value of fertiliser imports: The total value of fertiliser imports by India, inclusive of inputs used in domestic production, was a whopping $24.3 billion in 2021-22.

Two costs involved in import

  • 1] Foreign exchange outgo for import: The first is foreign exchange outgo:
  • Imports are mostly from the following countries:
  • Urea: Imported from China, Oman, UAE and Egypt
  • DAP: Imported from China, Saudi Arabia and Morocco.
  • MOP: Imported from Belarus, Canada, Russia, Israel and Jordan.
  • LNG: Imported from Qatar, US, UAE and Nigeria.
  • Ammonia: Morocco, Jordan, Senegal and Tunisia (phosphoric acid); Saudi Arabia and Qatar.
  • Rock phosphate: Jordan, Morocco, Egypt and Togo.
  • 2] Fiscal cost: The second cost is fiscal.
  • Fertilisers are not only imported but also sold at subsidised prices.
  • The difference is paid as a subsidy by the government.
  • That bill was Rs 1,53,658.11 crore or $20.6 billion in 2021-22 and projected at Rs 2,50,000 crore ($32 billion) this fiscal.
  • Unsustainably high costs: Both costs are unsustainably high to bear for a mineral resource-poor country.


1] Reduce consumption of high-analysis fertilisers

  • There is a need to cap or even reduce consumption of high-analysis fertilisers – particularly urea (46 per cent N content), DAP (18 per cent N and 46 per cent P) and MOP (60 per cent).
  • Incorporate urease and inhibition compounds in urea: This can be done by incorporating urease and nitrification inhibition compounds in urea.
  • These are basically chemicals that slow down the rate at which urea is hydrolysed and nitrified (which increases leaching).
  •  By reducing ammonia volatilisation and nitrate leaching, more nitrogen is made available to the crop, enabling farmers to harvest the same yields with a lesser number of urea bags.
  • Liquid nano-urea: Together with products such as liquid “nano urea” –it is possible to achieve a 20 per cent or more drop in urea consumption from the present 34-35 mt levels.
  • Liquid nano-urea with their ultra-small particle size is conducive to easier absorption by the plants than with bulk fertilisers, translating into higher nitrogen use efficiency.

2] Promote the sale of SSP and complex fertilisers

  • A second route is by promoting sales of SSP (containing 16 per cent P and 11 per cent S) and complex fertilisers such as “20:20:0:13” and “10:26:26”.
  • Restrict DAP use: DAP use should be restricted mainly to paddy and wheat; other crops don’t require fertilisers with 46 per cent P content. 
  • India can also import more rock phosphate to make SSP directly or it can be converted into “weak” phosphoric acid
  • The latter, having only about 29 per cent P (compared to 52-54 per cent in normal “strong” merchant-grade phosphoric acid), is good enough for manufacturing “20:20:0:13”, “10:26:26” and other low-analysis complex fertilisers.

3] Incorporate MOP into complexes

  • As regards MOP, roughly three-fourths of the imported material is now applied directly and only the balance is sold after incorporating into complexes.
  • It should be the other way around.
  • India, to re-emphasise, needs to wean its farmers away from all high-analysis fertilisers. 

4] Use of NPKS complexes and indigenous sources

  • The moment to use more NPKS complexes and SSP, is already happening.
  • It requires a concerted push, alongside popularising high nutrient use-efficient water-soluble fertilisers (potassium nitrate, potassium sulphate, calcium nitrate, etc).
  • Exploiting alternative indigenous sources needs to be considered (for example, potash derived from molasses-based distillery spent-wash and from seaweed extract).

5] Revise nutrient application recommendations

  • Farmers need to know what is a suitable substitute for DAP and which NPK complex or organic manure can bring down their urea application from 2.5 to 1.5 bags per acre.
  • It calls for agriculture departments and universities not just to revisit their existing crop-wise nutrient application recommendations, but disseminating this information to farmers on a campaign mode.


The costs associated with the use of fertilisers are unsustainably high to bear for a mineral resource-poor country such as India. We need to act on the measures to reduce our import dependence.

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Back2Basics: High-analysis fertilisers

  • Fertilizers that have more than 30% total available nutrients are called high analysis fertilizers, whereas those with less than 30% total available nutrients are called low analysis fertilizers.
  • A 15-15-15 is a high analysis fertilizer; a 5-10-10 is a low analysis fertilizer, and a 10-10-10 is right on the borderline.

Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

The inflation tightrope


From UPSC perspective, the following things are important :

Prelims level : Dutch disease

Mains level : Paper 3- Inflation challenge


The Indian economy has been hit by inflationary shocks of late.

Inflation story so far

  • RBI mandate: The inflation target of the Reserve Bank of India is 4 per cent, with a band of 2 per cent on either side.
  • Inflation was at or above the upper threshold of 6 per cent since the beginning of this year.
  • Only after inflation hit 7 per cent did the RBI raise the repo rate.
  • Increase in interest rate: The RBI has raised the cost of borrowing (by 90 basis points so far), with a promise of more to come.
  • Fuel taxes reduced: The central government has cut fuel taxes with alacrity, and has banned the export of certain items.

Role of monetary authorities

  • Monetary authorities raise interest rates if inflation is above the preferred target, and vice versa.
  • What should be the interest rate? Interest rates should rise more than inflation so the “real” interest rates rise, causing a compression in demand (and a fall in economic activity), which in turn will reduce inflation.
  • The RBI embraced this idea. In 2016, an independent monetary policy committee was constituted.

Effects of global inflation

  • Some part of inflation is coming from abroad is an added complication.
  • Outflow of fund: There has also been a steady outflow of foreign funds from the stock market.
  • Depreciation of rupee: This could cause the rupee to depreciate, in turn, raising the prices of imported goods thereby adding to the inflationary woes.

Two ways in which the Indian economy is different

1] Role of agriculture in Indian economy

  • India’s non-food and non-oil components of the consumer price index CPI are about 47 per cent.
  •  In comparison, for the ECB, it is less than one-third of the CPI.
  • Of course, the RBI has no control over international prices of food and oil, so it must squeeze less than 50 per cent of the domestic economy to lower inflation.
  • The real interest rise works through demand compression.
  • But the problem is on the supply side.
  • Also, as compared to the RBI, the ECB would suffer a lower rise in inflation, and has a larger menu on which to apply demand compression.

2] Exchange rate and its effect on output

  • Until the 1970s, the accepted wisdom was that an economy had to achieve both internal balance and external balance.
  • Internal balance consisted of full employment and low inflation using monetary and fiscal policies.
  • Over time, the internal balance has come to mean, from a policy perspective, low inflation, since “the market” will ensure full employment.
  • External balance required a balanced current account over some horizon (“don’t get too much into foreign debt”), by using, for example, the exchange rate.
  • For the OECD countries, the external balance was not a constraint any longer, since they had made their currencies fully convertible, and international capital flows were unrestricted.
  • But this is not the case with India.
  • If it were so, no one would be interested in discussing the country’s foreign exchange reserves, because these could be generated instantaneously by exchanging the domestic currency for foreign exchange.

India’s foreign reserves and its impact on competitiveness of Indian products

  • Until 2020, India had seen massive portfolio capital inflows when OECD interest rates were low, and its current account deficits were financed by foreign reserves.
  • But portfolio inflows can, and do, reverse themselves.
  • FII inflows also contribute to India’s lack of competitiveness.
  • The RBI bought foreign exchange (with rupees).
  • But fearing this would stoke inflation, it sold government bonds, and removed the excess liquidity.
  • This “sterilised intervention” saw the RBI’s foreign exchange assets going up, matched by a reduced holding of government bonds.
  • Thus, India’s foreign exchange reserves were not its “own”— there were liabilities against it.
  • India’s Dutch Disease: The RBI could have let the rupee appreciate or have accumulated foreign reserves.
  • It chose an intermediate solution — a mix of an appreciation and accumulation of reserves.
  • The appreciation caused by inflows reduced international competitiveness for Indian products.
  • In effect, we had our own episode of the “Dutch Disease”.

Way forward

  • As the RBI raises interest rates, outflows will possibly slow down with the rupee appreciating.
  • That is not good for external balance.
  •  It is easy to see that inflation targeting could be at odds with external balance.


If inflation does prove stubborn, and fighting inflation is all that the authorities in India worry about, we could see an external crisis.

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Back2Basics: What is Dutch Disease?

  • Dutch disease is an economic term for the negative consequences that can arise from a spike in the value of a nation’s currency.
  • It is primarily associated with the new discovery or exploitation of a valuable natural resource and the unexpected repercussions that such a discovery can have on the overall economy of a nation.
  • Symptoms include a rising currency value leading to a drop in exports and a loss of jobs to other countries.

How Hanoi and New Delhi are fortifying defence ties


From UPSC perspective, the following things are important :

Prelims level : UNCLOS

Mains level : Paper 2- India-Vietnam defence ties


The two countries recently deepened bilateral cooperation with the signing of the Joint Vision Statement on India-Vietnam Defence Partnership towards 2030 during the recent visit of Defence Minister Rajnath Singh to Vietnam.

About the Joint Vision Statement

  • India and Vietnam Wednesday signed a Joint Vision Statement on India-Vietnam Defence Partnership towards 2030, “which will significantly enhance the scope and scale of existing defence cooperation”.
  • Boosting the scale and scope of defence cooperation: The Joint Vision Statement is aimed at boosting the scope and scale of the existing defence cooperation between the two nations.
  • Mutual logistic support: The two sides also signed a Memorandum of Understanding (MoU) on mutual logistics support.
  • Elevating CSP: This is the first agreement of its kind that Hanoi has entered into with any other country and elevates the standing of Comprehensive Strategic Partnership (CSP) which Hanoi shares with New Delhi since 2016 (along with only Russia and China).

Enhanced maritime cooperation

  • Both countries find convergence in their approaches towards the maintenance of stability and security of the Indo-Pacific.
  • This approach has translated into diplomatic and political support in the context of developments within the region and manifested in the form of tangible and functional cooperation instruments — the most vital being bilateral defence partnership.
  • Because of the volume of maritime trade that passes through sea lanes of communication in the Indo-Pacific and potential as well as estimated energy reserves in these waters, maritime cooperation between countries in the region have expanded exponentially.

Emphasis on the cooperative mechanism

  • The enhanced geostrategic prominence and attendant uncertainties vis-à-vis China’s expanding and often abrasive footprints in the Indo-Pacific have resulted in an overall increase in emphasis on cooperative mechanisms and frameworks across the region.
  • Defence partnership between the two countries has been growing steadily following the signing of the Defence Protocol in 2000 and today covers extensive navy-to-navy cooperation.

Dealing with Chinese transgression

  • Vietnam has and continues to be one of the most vocal countries with respect to China’s periodic transgressions in the South China Sea.
  • Freedom of navigation: In India, Vietnam has found an equally uncompromising partner when it comes to the question of violations of freedom of navigation and threats to sovereign maritime territorial rights as enshrined under international maritime law.
  • New Delhi has supported Vietnam’s position in the South China Sea with respect to Beijing’s destabilising actions and coercive tactics backing by reiterating the irrefutability of the UNCLOS.
  • India has also not backed down from continuing ONGC Videsh Ltd (OVL)’s oil exploration project in Block 128 (which is within Hanoi’s EEZ) despite China’s protests.
  • Emphasis on naval diplomacy: It is also in the last few years that Vietnam has augmented its emphasis on naval diplomacy and strengthened its ties with the US alongside the extension of its engagement with India and other ASEAN members.
  • Despite the fact that the China factor has provided impetus to the solidification of ties, it is also important to consider that mutual cooperation is not driven solely by it.
  • Support in the rubric of Indo-Pacific: Both countries have expanded areas of collaboration and are supportive of each other’s individual and multilateral involvements within the rubric of the Indo-Pacific.


Convergences between New Delhi and Hanoi has naturally found expression in bilateral relations and the two countries are poised to develop their partnership further in the coming years.

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Back2Basics: About UNCLOS

  • UNCLOS is sometimes referred to as the Law of the Sea Convention or the Law of the Sea treaty.
  • It came into operation and became effective from 16th November 1982.
  • It defines the rights and responsibilities of nations with respect to their use of the world’s oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources.
  • It has created three new institutions on the international scene :
    1. International Tribunal for the Law of the Sea,
    2. International Seabed Authority
    3. Commission on the Limits of the Continental Shelf

Democratic Backsliding in America


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Abortion rights in the US


With the US Supreme Court’s overturning of abortion as a constitutionally guaranteed right, America has taken another step towards democratic backsliding.

Background of the Roe v Wade case

  • Bodily autonomy: Roe, the 1973 outcome of an unmarried woman’s crusade for bodily autonomy, had declared overbroad, and consequently unconstitutional, a provision of the Texas Penal Code which permitted only those abortions that were “procured or attempted by medical advice to save the life of the mother”.
  • Right to abortion: While locating the right of privacy within the guarantee of personal liberty enshrined in the fourteenth amendment of the American constitution, Roe embodies a supervening constitutional right to abortion emanating from this right of privacy.
  • The right to abort was held to be a constitutionally protected right within the right of privacy.
  • Recognition of states’ rights: The decision simultaneously recognised the state’s interest in protecting the life of the foetus as also the life of the mother. 
  • Roe is not only relevant as a progressive trailblazer for reproductive rights in the United States but is also fundamental to constitutional jurisprudence globally for the interpretative tools it employed.

Overturning of Roe Vs Wade case

  • The US Supreme Court on June 24 overturned a half-century-old right to abortion, granted by a 1973 Supreme Court decision in the Roe vs Wade case.
  • No nationwide right to abortion: With a 5-4 majority, the court has said that American women have no nationwide right to abortion.
  • Rather, state legislatures should decide whether women can have that right in their respective states.
  • Concerns about the life of the unbors: In the court’s opinion, the right to privacy stemming from the 14th Amendment is not relevant, for abortion concerns not only the pregnant woman but also the life of the unborn.
  • Not mentioned in the 1787 constitution: Moreover, the court said, abortion is neither “enumerated” as a right in the original 1787 constitution nor is it consistent with American history and tradition.
  • Taking away the right once granted: In a democracy, can a right once granted be taken away?
  • As the world’s oldest surviving democracy, the United States has figured prominently in this debate.
  • With the overturning of Roe vs Wade, this debate has now become wider.

Was the right to abortion constitutionally justified?

  • Protection of liberty and privacy: The 1973 court decision allowing the right to abortion was based on the 14th Constitutional Amendment (1868).
  • Even though abortion was not mentioned in the 1787 US Constitution, abortion’s defence was derived from the 1868 Amendment
  • This Amendment, the court said, allowed protection of liberty and privacy, something the state could not impinge upon.
  • Not absolute right: The 1973 court also argued that this right was not absolute, limited as it would be by considerations of “protecting potential life”.

Issues with the overturning of Roe Vs. Wade case

  • 1] No constitution can anticipate the evolution of rights:  Abortion was not mentioned in the 1787 constitution, nor explicitly in the 1868 amendment.
  • That is because women were not autonomous political agents at that time.
  • Until they were given the right to vote in 1920, they were not a constitutional category in the US, as was true virtually everywhere in the world.
  • Women are autonomous agents today. Norms change; rights evolve.
  • 2] Ignores rape and incest:  As the court’s dissent note puts it, this majority decision ignore rape and incest.
  • If abortion as a right is dissolved, women can be forced to give such unwanted births.
  • The majority decision of the court is silent on this important matter.
  • 3] Against the right to participate equally in economic and social life: Having a child is not simply a deeply moral obligation to the unborn.
  • It is also a decision that affects “the ability of women to participate equally in (the nation’s) economic and social life”.
  • These words are from a later decision, known as Casey (1992), when the US Supreme Court added the concept of “undue burdens” to support the idea of abortion.
  • 4] Right over body ignored: Men don’t have to deal physically with pregnancy, whereas the foetus grows inside a woman’s body for nine months.
  •  If men have the right over their bodies, which can’t be taken away by the government,then women should also have autonomy over their bodies as well.
  •  Maternity must be a voluntary choice.
  • There is no going back to the notion of rights as they were viewed in the 18th century — unequal, unneutral, unbalanced.


Typically, as they evolve and deepen, democracies allow the arc of rights to broaden further, not retreat. After this judgment in the US, the stakes have become much higher and the democratic challenges bigger.

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Parliament – Sessions, Procedures, Motions, Committees etc

Upper House, a question


From UPSC perspective, the following things are important :

Prelims level : Article 89

Mains level : Paper 2- Role of Rajya Sabha


This article seeks to re-articulate a question pertaining to the composition of the Council of States.

Historical background and CAD over the issue of second chamber

  • Lokanath Misra led the charge against a federal second chamber in the Constituent Assembly stating that there was not need for the second chamber and also that it will not serve any useful purpose.
  • Shibban Lal Saksena, was equally emphatic: He said that as per their experience, the Upper House acts as a clog in the wheel of progress.
  • They were not the only ones who had concerns. Other members expressed them too in different contexts during the Constituent Assembly debate on draft Article 67.

Issues with the role of Rajya Sabha

  • Unable to protect the interest of the States: Article 1(1) of the Indian Constitution states “India, that is Bharat, shall be a Union of States.”
  • Therefore, the primary responsibility of a Council of States would be to protect the interests of the states vis a vis the Union.
  • There is hardly any empirical evidence that substantiates that the Rajya Sabha has measured upto the task ever since it came into existence on April 3r 1952.
  • No focus on states: From 1952 to 2003, at least there was a veneer of a state focus when it was mandatory that any citizen desirous of contesting a Rajya Sabha election had to be an elector from that particular state.
  • By amending Section 3(1) of the Representation of People’s Act 1952 and doing away with the domicile requirement, the Government removed this fig leaf also in 2003.
  •  A five-judge bench did not uphold tha challenge to this judgement.
  •  This amendment and the subsequent judgment buried the earlier practice of individuals entering the Rajya Sabha from anywhere based upon rather dodgy but still some form of domicile credentials.
  • All states do not have bicameral legislature: Twenty-four states have unicameral legislatures, that is, only one legislative body, and only six states are bicameral.
  • If the bulk of the states can make do with one House why not the Centre?
  • Rajya Sabha as continuous house argument: It is also argued that the Rajya Sabha is a continuous House as opposed to the Lok Sabha that gets mandatorily dissolved every five years if not sooner.
  • That can be fixed with a simple amendment to Article 83 (2) that should state that “Lok Sabha would remain in existence till the time its successor body/house is not constituted.
  • Article 83 (1) would stand deleted and consequential amendments can be carried out to other parts of the Constitution.


It would be instructive to keep in mind that the Basic Structure doctrine enunciated by the Supreme Court in Re: Kesvananda Bharti holds parliamentary democracy to be basic structure, not bicameralism.

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Russian Invasion of Ukraine: Global Implications

Caution in buying Russian cruide


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Purchasing Russian oil


This week the Wall Street Journal and the New York Times both reported on India emerging as a major buyer of Russian oil.

Background of rising fuel prices due to Ukraine crisis

  • A significant fallout of Russia’s invasion of Ukraine has been the rising cost of petroleum.
  • In response to the invasion, Western countries, including the United States and Europe, have imposed an array of sanctions against Russia.
  • Reduced purchases from Russia: Europe and the United States have seen the price of oil steadily rise after they reduced their purchases from Russia.
  • For now, Russia has been able to mitigate the impact of sanctions by selling crude, oil and coal at reasonable prices in greater volumes to newer bulk buyers like India, to combat Europe trying to wean itself off Russian crude.

Why India increased purchase of Russian oil

  • India has chosen a different route.
  • Cope with rising fuel prices: We are the third-largest importer and consumer of oil in the world and have increased our purchase of Russian oil to cope with rising oil prices elsewhere.
  • We are also refining crude oil or turning it into products like jet fuel and diesel and selling it to Europe and other nations.
  • Curb inflation: Importing Russian crude also helps us curb inflation that has been made worse by rising fuel prices.
  • Halting the fall of the rupee: Procuring discounted Russian oil is an effort by the government to bring down prices and halt the decline in the value of the Indian rupee.
  • India’s behaviour is governed by our best interest, which is the most important element of any astute foreign and economic policy.

Issues with purchasing oil from Russia

  • The European Union has announced a ban against insuring ships carrying Russian oil, to commence this December.
  • Insurance ban: Countries like India, China and Turkey that are increasing their oil purchases from Russia have six months to find a work-around to the insurance ban by using non-European insurance companies.
  • European companies own most of the ships carrying Russian oil to India.
  • These insurance sanctions will impact the companies that own these ships as well.
  • Dependence for batteries: Apart from geopolitical changes in the world indicating the rise of China, there is a major change: Electric vehicles and electric batteries substituting for non-renewable resources like petroleum and diesel.
  • India cannot afford to be dependent on an unhindered supply of electric batteries from China, given geopolitical considerations and border disputes between the two nations.

Way forward

  • To weather the new electric era that will no doubt be dotted with territorial wars and national security concerns, India would do well to preempt shortages in the arena – by putting in place factories which will build the electric batteries that will power our futures.
  • What the invasion of Ukraine has taught us is that we need to be more self-reliant and have in-house energy sources.


India needs to factor in the implications of comprehensive western sanctions as it increases its purchase of discounted Russian oil.

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Issues with use of NMMS app in NREGA


From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Use of NMMS app and issues


The National Mobile Monitoring Software (NMMS) app seeks to improve citizen oversight and increase transparency in NREGA works. This causes significant difficulty for NREGA workers.

About NMMS app

  • National Mobile Monitoring Software (NMMS) App  was launched by the Minister of Rural Development on May, 21 2021.
  • The National Mobile Monitoring App is applicable for the Mahatma Gandhi NREGA workers for all the States/ Union Territories.
  • This app is aimed at bringing more transparency and ensure proper monitoring of the schemes.
  •  The main feature of the app is the real-time, photographed, geo-tagged attendance of every worker to be taken once in each half of the day. 
  • The app helps in increasing citizen oversight of the programme.

Issues with the use of the app

  • While such an app may be useful in monitoring the attendance of workers who have fixed work timings, in most States, NREGA wages are calculated based on the amount of work done each day, and workers do not need to commit to fixed hours.
  • Disproportionately affects women: NREGA has historically had a higher proportion of women workers (54.7% in FY 2021-22) and has been pivotal in changing working conditions for women in rural areas.
  • Due to the traditional burden of household chores and care work on women, the app is likely to disproportionately affect women workers.
  • Lack of stable network: There are challenges of implementation with the NMMS as well.
  • A stable network is a must for real-time monitoring; unfortunately, it remains patchy in much of rural India.
  • NREGA Mates impacted: The app has adversely impacted NREGA Mates as well.
  • The role of a Mate was conceptualised as an opportunity to empower local women to manage attendance and work measurement in their panchayat.
  • To be a Mate, one needs to have a smartphone.
  • This new condition disqualifies thousands of women who do not own smartphones from becoming Mates.
  • Erosion of transparency:  The app claims to “increase citizen oversight” by “bringing more transparency and ensuring proper monitoring of the schemes, besides potentially enabling processing payments faster”.
  • With no physical attendance records signed by workers anymore, workers have no proof of their attendance and work done.
  • No clarity provided on corruption: While ostensibly the NMMS’s focus on real-time, geo-tagged attendance could be one way of addressing this corruption, the MoRD has not provided much clarity on either the magnitude of this corruption or the manner in which the NMMS addresses it.
  • No parameters: There are no parameters established to assess the app’s performance, either on transparency, or on quicker processed payments.

Way forward

  • Social audits: Social audits are citizen-centric institutions, where the citizens of the panchayat have a direct role and say in how NREGA functions in their panchayat.
  • Audits have worked well in the past, allowing the local rights holders to be invested in decisions, and hold the administration accountable themselves.


The NMMS has very clear problems that will make it increasingly difficult for workers to continue working under NREGA, eroding the right to work that underwrites the NREGA Act.

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RBI Notifications

Need for transparency in RBI’s policy making


From UPSC perspective, the following things are important :

Mains level : Paper 3- Transparency in RBI's policy making


Modern inflation targeting central banks are often bound by explicit statutory mandates. Critics have argued that the RBI ignored its statutory inflation targeting duty.

Why transparency and predictability of the central bank is important?

  • Prior to the 1990s, central banks preferred secrecy.
  • Surprising market: The common wisdom was that the efficacy of monetary policy depended on taking markets by surprise.
  • This belief started changing gradually with the adoption of inflation targeting.
  • Influencing the inflation expectations: Targeting inflation required central banks to influence households’ and firms’ decisions.
  • Thus emerged the need for central banks to be transparent and predictable.

Independence with accountability of the Central bank

  • There was growing international recognition that central banks as monetary authorities should enjoy a relatively higher degree of independence from governments.
  •  In a democratic polity, this could only be expected in exchange for increased accountability.
  • As a result, regulatory governance gradually emerged as a relevant consideration for independent central banks over the last three decades.

Regulatory governance at the RBI

  • The regulatory governance discourse in India came into the focus with the report of the Financial Sector Legislative Reforms Commission in 2013.
  •  Like a state, regulators usually enjoy significant legislative, executive and judicial powers and should be subject to appropriate accountability mechanisms.
  • These should include internal separation of powers; a well-structured regulation making process overseen by the board, through public consultation and cost-benefit analysis; duty to explain its actions to regulated entities and public at large; regular reporting requirements; and judicial review.
  • Based on these recommendations, the Ministry of Finance released a handbook in 2013 for voluntary adoption of these enhanced governance standards by all financial sector regulators.
  • These developments turned the spotlight on the RBI’s regulatory governance.

Reasons for the criticism of the RBI

  • Targeting exchange rate: The central bank appears to have ventured into uncharted legal territory by possibly targeting the exchange rate instead of inflation.
  • Regulatory governance issues: Separately, critics have also highlighted broader regulatory governance challenges at the RBI.
  • For instance, its alleged use of informal nudges to restrict a foreign player’s access to the Indian payment ecosystem goes against an adverse Supreme Court ruling.
  • Such criticisms underline an urgent need to improve the credibility of the central bank’s rule of law quotient.
  • Least responsive in legislative function:  A 2019 research paper found the central bank’s legislative functions to be the least responsive in comparison to three other regulators – SEBI, TRAI and AERA.
  • RBI’ss consultation papers usually presented only one solution and did not offer merits and demerits of multiple possible solutions.

Implications of weak regulatory governance: Judicial scrutiny

  • Weak regulatory governance resulted in weak regulations, inviting judicial scrutiny.
  • Changes in master circular: In 2019, the Supreme Court effectively rewrote RBI’s master circular on wilful defaulters to provide additional procedural safeguards to borrowers.
  •  Striking down of crypto ban: In 2020, the court struck down an RBI circular that sought to ban its regulated entities from dealing or settling in virtual currencies.
  • The court found that the RBI had neither adduced any cogent evidence of the likely harm, nor had it considered any less intrusive alternative before issuing the circular.

RRA 2.0 suggestions for the RBI

  • The recent report of the Regulations Review Authority 2.0 (RRA) offers useful suggestions to improve the central bank’s regulation-making process.
  • The RBI had set up the Review Authority 2.0 (RRA) in April 2021 to streamline its regulations.
  • Skill improvement in regulatory drafting: RRA has advocated for skill development in regulatory drafting inside the RBI.
  • Public consultation: To improve regulatory governance at the RBI, RRA suggested that its regulatory instructions should be issued only after public consultation, except if they are urgent or time sensitive.
  • They must contain a brief statement of objects and reasons clearly explaining the rationale behind their issuance.
  •  Although much softer than the FSRLC standards, RRA nevertheless signal a progressive step forward.


The RBI should heed these recommendations. It should ideally hardcode the suggested principles into a secondary legislation that is binding on itself. That would be the best way to signal that the central bank takes regulatory governance and rule of law seriously.

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Soil Health Management – NMSA, Soil Health Card, etc.

Land Degradation


From UPSC perspective, the following things are important :

Prelims level : Soil Health Card

Mains level : Paper 3- Soil degradation


A key element of sustainable food production is healthy soil because nearly 95 per cent of global food production depends on soil. The current status of soil health is worrisome.

The threat posed by soil degradation

  • The challenge to food security: Soil degradation on an unprecedented scale is a significant challenge to sustainable food production.
  • About one-third of the earth’s soils is already degraded and alarmingly, about 90 per cent could be degraded by 2050 if no corrective action is taken.
  • Soil degradation in India: While soil degradation is believed to be occurring in 145 million hectares in India, it is estimated that 96.40 million hectares — about 30 per cent of the total geographical area — is affected by land degradation.
  • The FAO’s latest ‘State of the World’s Land and Water Resources for Food and Agriculture’ says: “…soil pollution is also an issue. It knows no borders and compromises the food we eat, the water we drink and the air we breathe.
  • Globally, the biophysical status of 5,670 million hectares of land is declining, of which 1,660 million hectares (29 per cent) is attributed to human-induced land degradation, according to the Food and Agriculture Organisation’s ‘State of Land, Soil and Water’ report.

Cause of the problem

  • Use of agrochemicals: The excessive or inappropriate use of agrochemicals is one cause of the problem.
  • The global annual production of industrial chemicals has doubled since the beginning of the 21st century, to approximately 2.3 billion tonnes.
  • Extensive use of fertilisers and pesticides led to the deterioration of soil health and contamination of water bodies and the food chain, which pose serious health risks to people and livestock.
  • Salination: Another challenge comes from salinisation, which affects 160 million hectares of cropland worldwide.”

About Soil Health Card Scheme

  • Soil Health Card (SHC) scheme is promoted by the Department of Agriculture & Co-operation under the Ministry of Agriculture and Farmers’ Welfare.
  • An SHC is meant to give each farmer soil nutrient status of his/her holding and advice him/her on the dosage of fertilizers and also the needed soil amendments, that s/he should apply to maintain soil health in the long run.
  • SHC is a printed report that a farmer will be handed over for each of his holdings.
  • It will be made available once in a cycle of 2 years, which will indicate the status of soil health of a farmer’s holding for that particular period.
  • The SHC given in the next cycle of 2 years will be able to record the changes in the soil health for that subsequent period.
  • Under the programme as of date, soil health cards have been distributed to about 23 crore farmers.
  • The scheme has not only helped in improving the health of the soil, but has also benefited innumerable farmers by increasing crop production and their incomes.

Progress made so far on soil restoration

  • India is well on course to achieving the restoration of 26 million hectares of degraded land by 2030.
  • A study conducted by the National Productivity Council in 2017 on this programme revealed that there has been a decrease in the use of chemical fertilisers in the range of 8-10 per cent as a result of the application of fertilisers and micro-nutrients as per the recommendations on the soil health cards.
  • Overall, an increase in crop yields to the tune of 5-6 per cent was reported as a result.
  • First organic state in the world: “A Healthy Planet for Healthy Children’’ published by the United Nations Institute for Training and Research and the World Future Council highlighted success stories from various countries — including Sikkim in India, which became the first organic state in the world.

Way forward

  • Natural farming: Several studies have established that natural farming and organic farming are not only cost-effective but also lead to improvement in soil health and the farmland ecosystem.
  • Agro-ecological practices: With the threat to food security looming large globally, the need of the hour is to adopt innovative policies and agro-ecological practices that create healthy and sustainable food production systems.


The time has come for collective global action involving governments and civil society to reverse the alarming trend of soil degradation.

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