GS Paper 3

Rupee Depreciation can be Slowed

Context: The exchange rate has changed from less than ₹4 a dollar in 1947 to more than ₹85/dollar in 2025. Given the higher inflation target in India than in the US, we need to accept depreciation of the rupee. However, we can, going forward, slow down the rate of depreciation. 

Relevance of the Topic: Prelims: Relationship b/w exchange rate, inflation and exports, Rupee Depreciation- Causes. 

What is Currency Depreciation?

  • Currency depreciation is a fall in the value of a currency in a floating exchange rate system.
    • It means that the rupee is now weaker than what it used to be earlier.
  • Rupee depreciation means that the rupee has become less valuable with respect to the dollar.
    • For instance, $1 used to equal Rs. 4 in 1947, now $1 is equal to Rs. 85.
    • This implies that the rupee has depreciated relative to the dollar i.e., it takes more rupees to purchase a dollar.
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Causes of Rupee Depreciation:

  • High Inflation Target: Currently, RBI has an inflation target of 4 per cent.
    • Persistent inflation weakens the value of rupee, causing its depreciation and decreasing its purchasing power.
  • Food Price Inflation: RBI has found it difficult to meet the accepted inflation target rate, mostly due to a big rise in food prices.
  • Competitiveness in Exports: A decline in India's competitiveness in production and exports weakens the rupee.
    • Factors such as high production costs, regulatory hurdles, and inadequate infrastructure contribute to reduced export performance.

How to control Rupee Depreciation?

  • Reducing inflation target: Shift from 4 per cent inflation target to 3 per cent target next year when inflation targeting will be up for a review.
    • A reduced inflation target is also desirable for the less well-off. So, there is a need to amend the mandate under inflation targeting.
    • This shift requires coordinated efforts by the Reserve Bank of India (RBI), the Ministry of Finance (MoF), and Parliament.
  • Controlling Money Supply: RBI must regulate the issuance of money to control inflation in the long term.
    • While this may reduce the RBI's dividend to the Ministry of Finance, alternative revenue sources or expenditure cuts can compensate for the shortfall.
  • Reducing Food Price Inflation:
    • Framing a policy of more free trade in food.
    • A calibrated policy of procurement, reserves, timely distribution, and a countercyclical tax-subsidy scheme can also help.
    • This necessitates collaboration among the Ministry of Agriculture, Ministry of Commerce and Industry, and MoF.
  • Enhancing Export Competitiveness:
    • Improving the competitiveness of Indian goods in foreign markets through steps like simplifying regulatory frameworks, removing entry barriers, etc.
    • Facilitating Ease of Doing Business.
  • Role of RBI:
    • RBI should intervene in the currency market, but do so only when it is absolutely necessary. 
    • It is also consistent with flexible inflation targeting.

In conclusion, at least for now it is advisable to accept the long-term fall in the value of the rupee vis-a-vis the dollar but we can move to a slower rate of depreciation. This requires some serious work by the central bank and other public authorities but it is doable.

India’s GDP growth projected to fall to a 4-year low: NSO

Context: The First Advance Estimates of the National Statistics Office (NSO) for FY 2024-25 show a fall in projected GDP growth to a 4-year low pace of 6.4%. This calls for a reality check for India’s economic growth trajectory. 

Relevance of the Topic: Prelims: GDP Growth- Trends, Components, Factors affecting GDP Growth rate. 

What is an Advance Estimate?

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  • Advance Estimates are essentially a forecast of what the government expects India’s economic output to be at the end of the financial year in March.
  • These estimates are made by extrapolating available data and past trends.

Data from NSO’s First Advance Estimates of GDP 2024-25:

  • Real GDP: expected to reach Rs. 184.88 lakh crores in FY 2024-25.
    • Provisional estimate of GDP for FY 2023-24 was Rs. 173.82 lakh crore.
  • Real GDP growth: expected to rise at a 4-year low pace of 6.4%.
    • For 2023-24, it was at 8.2%.
  • Real Gross Value Added (GVA): expected to rise by 6.4%.
    • For 2023-24, it increased by 7.2%.
  • Among 8 economic sectors, only 2 registered higher growth than last year:
    • Agriculture: expected to rise 3.8% from 1.4% last year.
    • Public Administration, Defence and Other Services: increased 9.1% from 7.8% in 2023-24.
  • Construction GCA Growth: pegged at 8.6% from 9.9% last year.
  • Manufacturing GVA Growth: expected to nearly halve from 9.9% in 2023-24 to 5.3% this year. 
  • GVA in Mining & Quarrying: expected to rise just 2.9% from 7.1% last year.
  • Gross Fixed Capital Formation (GFCF): expected to grow at a pace of just 6.4% compared to 9% rise in 2023-24. 
  • Private Final Consumption Expenditure: expected to expand 7.3% from 4% in 2023-24.
  • Government Final Consumption Expenditure: seen rising 4.1% from 2.5% last year. 
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How is GDP Calculated in India?

  • GDP is calculated by adding up all the money spent in the economy. 
  • There are 4 engines of GDP Growth:
    • Private Final Consumption Expenditure
    • Government Final Consumption Expenditure
    • Gross Fixed Capital Formation
    • Net Exports. 
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  • Private Final Consumption Expenditure (PFCE):
    • It is calculated as the total spending by individuals.
    • It accounts for almost 60% of India’s GDP. 
  • Government Final Consumption Expenditure (GFCE):
    • Spending by governments to meet daily expenditures such as salaries, etc.
    • Accounts for 10% of GDP.
  • Gross Fixed Capital Formation (GFCF):
    • Spending towards boosting the productive capacity of the economy.
    • Includes investments by the government to build roads, companies building factories or buying office equipment, etc.
    • Accounts for around 30% of GDP.
  • Net Exports:
    • Resultant of Indians spending on imports and foreigners spending on Indian exports.
    • Since Indian exports < Indian imports, net exports for India are negative. 
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Factors holding back GDP Growth in India

  • Low growth rate of Private Spending:
    • What Indians spend in their personal capacity is the most vital determinant of GDP growth.
    • If this growth rate is low, it drags down the overall GDP. Further, it discourages investments in the economy.
  • Sluggish growth in Government spending:
    • Unlike other players in the economy, governments can potentially spend in excess of their incomes.
    • When the rest of the economy is struggling, governments are expected to borrow money and spend it in a manner to re-energize the economy.
    • However, Government’s own spending has grown just 4.2% in the current year, and an average of 3.1% since 2019.
  • Petering out of Investments growth:
    • Spending towards productive capacity increases if:
      • Private businesses find it profitable to expand capacity (in the hope of selling it to the public)
      • Governments boost capital expenditure (spending towards physical infrastructure).
    • In FY 2024-25, this spending has gone up by just 5.3% annually.
    • Investment growth in the economy has been fading away since 2014.
    • Unless private consumption rebounds, businesses will not invest in fresh capacity, regardless of tax incentives.

Thus, over a longer period, India’s real economy has grown at less than 5% per annum- almost half the rate at which it would need to if it is to become Viksit Bharat by 2047

Microsoft to invest $3 billion on AI, cloud infrastructure in India

Context: Microsoft CEO has announced plans to invest $3 billion in India in AI and cloud infrastructure, including setting up new data centres over the next two years. The company is also aiming to train 10 million Indian people with AI skills by 2030.

Relevance of the Topic: Mains: Key facts about AI, Cloud infrastructure in India, Government Initiatives.  

Major Highlights:

  • Efficiency metrics for AI applications: The formula to measure the efficiency of AI applications is stipulated to be: Tokens per dollar per watt.
    • Tokens per dollar per watt signify how many tokens (units of information) can be generated per dollar spent on computing power, per unit (watt) consumption of energy, required to produce those tokens. 
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Key Terms:

What is Artificial Intelligence?

  • Artificial intelligence (AI) is broadly defined as the capability of a machine (computer systems) to imitate intelligent human behaviour. E.g., Machines can perform cognitive tasks like thinking, perceiving, learning, problem-solving and decision-making. 

What is Cloud Computing?

  • Cloud computing involves the rental of computing resources—such as servers, storage, applications, and databases— over the internet, as opposed to owning physical infrastructure. At its core, cloud computing relies on the infrastructure provided by data centers. 
  • E.g., Software as a Service (SaaS): SaaS grants users access to software applications hosted by the cloud service provider.

What are Data Centres?

  • Data centers are highly specialised facilities designed to house computing systems and their related components, such as, physical hardware, servers, networking equipment and storage systems. 
  • The primary purpose of data centers is to process, store, and distribute data for various applications and services, such as websites, cloud computing, and enterprise operations.
  • Data centers empower organisations to handle large volumes of data securely and efficiently and enable cloud computing to function seamlessly.
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Potential of Data Centres in India

  • India aims to become a global hub for AI innovation and data centre development. 
  • Current capacity: 
    • As of 2024, India's data centre capacity is at approximately 1,255 MW, which is expected to surge to 17 GW by 2030
    • India holds 20% of global data but only 3% of data centre capacity.
  • Expansion potential of data centres in future, due to:
    • Increasing digitalisation & data consumption 
    • Rise in demand for AI and generative AI projects
    • Nationwide roll-out of 5G
    • Need for edge computing to allow data processing on devices
    • Need to store data locally (within National borders).  
  • Concentration of data centres in India: About 95% of the existing data centre capacity is in metros and big cities. Mumbai has >50% of current capacity due to its central location, reliable power and cable landing stations. 

Government Initiatives in this Regard

1. Data Localisation Rules: India’s laws mandate that certain data be stored locally, such as:

  • Reserve Bank of India's Directive (2018) mandates payment system providers to store entire payment data (transaction details, customer information and related data) within India. 
  • IRDAI (Maintenance of Insurance Records) Regulation, 2015 requires covered organisations to store insurance data within India.
  • The draft Digital Personal Data Protection Rules focus on targeted data localisation, addressing children's online age verification challenges, and data protection.
    • Digital Personal Data Protection Act permits cross-border data transfers to all countries, unless restricted by the Central Government by notification.

2. Digital India Mission:

  • Digital India campaign launched in 2015, aims at the development of secure and stable digital infrastructure (including data centres), delivering government services digitally, and universal digital literacy.

3. IndiaAI Mission:

  • The Rs 10,370 croreIndiaAI Mission aims to:
    • establish a computing capacity of more than 10,000 GPUs.
    • help develop foundational models with a capacity of more than 100 billion parameters trained on datasets covering major Indian languages for priority sectors like healthcare, agriculture, and governance. 
  • The idea is that if such an infrastructure exists in the country, start-ups could plug into it for developing AI systems.
  • Of the total outlay, Rs 4,564 crore has been earmarked for building computing infrastructure. 

Read More: IndiaAI Mission 

Global Water Monitor Report 2024

Context: According to the Global Water Monitor Report 2024, climate change has been wreaking havoc on Earth’s water cycle by disrupting how water circulates between the ground, oceans and atmosphere.

Relevance of the Topic: Prelims: Water Cycle; Global Water Monitor Report 2024. 

Water Cycle

  • It involves the continuous circulation of water in the Earth-atmosphere system. 
  • There are many processes involved in the water cycle, the most important are evaporation, transpiration, condensation, precipitation, and runoff. 
Water Cycle
  • Although the total amount of water within the cycle remains essentially constant, its distribution among the various processes is continually changing.
  • Most water cycles through the planet because of the energy from the Sun and changes in temperatures.
  • The water cycle is crucial as it not only enables the availability of water for all living organisms but also regulates weather patterns on the Earth. 

Components and Processes of the Water Cycle

ComponentsProcesses
Water storage in oceansEvaporation, Evapotranspiration, Sublimation
Water in the atmosphereCondensation, Precipitation
Water storage in ice and snowSnowmelt runoff to streams
Surface runoffStream flow, freshwater storage, infiltration
Groundwater storageGroundwater discharge springs

What is Climate Change?

  • Climate change refers to long-term shifts in weather patterns and average temperatures on Earth, primarily caused by human activities, such as the burning of fossil fuels, deforestation, and industrial processes.
  • Characterised by: Increase in greenhouse gas emissions, particularly carbon dioxide, which traps heat in the Earth's atmosphere and leads to global warming.
  • Impacts: Rising temperatures, changing precipitation patterns, melting glaciers and polar ice caps, sea-level rise, and altered ecosystems.
  • Consequences: Far-reaching consequences for human societies, ecosystems, agriculture, water resources, and natural disasters, posing significant challenges to global sustainability and the well-being of future generations.

Global Water Monitor Report 2024

  • Report: Global Water Monitor Report – 2024
  • Published by: Consortium of researchers from universities and organisations in countries like Australia, Saudi Arabia, China, Germany, Austria, USA, Netherlands and Denmark etc.

Key Global Findings

  • Climate change has intensified the water cycle by increasing the rate of evaporation, driven by rising air temperatures. This has resulted in increasing the strength, duration and rainfall intensity of monsoons, cyclones and other storm systems, causing severe flooding across the world.
  • Water-related disasters caused major damage in 2024. They caused over 8,700 deaths, displaced 40 million people, and inflicted more than US$550 billion in damages. Flash floods, landslides, and tropical cyclones were the worst types of disasters in terms of casualties and economic damage.
  • Both High rainfall and Drought are becoming more extreme. In 2024, months with record-low precipitation were 38% more common than during the baseline period of 1995-2005, while record-high 24h rainfall extremes were 52% more frequent.
  • Rainfall records are being broken with increasing regularity. For instance, record highs for monthly rainfall were set 27% more often in 2024 than in the year 2000, and daily rainfall records were set 52% more frequently.
  • Global temperatures continue to increase rapidly. Average air temperature over land area hit an all-time high, reaching 1.2°C above the 1995-2005 average. Over 111 countries experienced their warmest year yet, while 34 countries set new maximum temperature records.
  • Last year, most of the world’s dry regions experienced ongoing low values of the terrestrial water storage (TWS). However, the values increased in western, Central and Eastern Africa.
  • The outlook for 2025 shows increased risks. Seasonal climate forecasts and current catchment conditions signal potential worsening of droughts in northern South America, southern Africa, and parts of Asia. Wetter regions like the Sahel and Europe may face elevated flood risk. 

Other Reports Cited

  • Nature journal – Study titled ‘Observed poleward freshwater transport since 1970’ (published in 2022) found that climate change had intensified the global water cycle by up to 7.4%.
  • The Intergovernmental Panel on Climate Change (IPCC) - In its sixth assessment report in 2021 said climate change will cause long-term changes to the water cycle. This would lead to more frequent and intense droughts and extreme rainfall events, the report added.

Read More:  Impacts of Climate Change 

India & U.S. to jointly manufacture Sonobuoys for Indian Navy

Context: In a significant development, India and the U.S. announced cooperation on co-production of U.S. Sonobuoys for the Indian Navy, a high-end technology that allows tracking submarines in the deep seas and oceans, to enhance undersea domain awareness (UDA). 

Relevance of the Topic: Prelims: Sonobuoys, P-8I Maritime Aircraft.

Recent Development

  • India and the U.S. will manufacture sonobuoys for the Indian Navy to US Navy standards in accordance with ‘Make in India’ principles. 
  • Co-production of sonobuoys:
    • US-based Ultra Maritime and Indian defence PSU Bharat Dynamics Ltd (BDL) will co-produce sonobuoys.
    • Co-production will happen through transfer of technology from Ultra Maritime to BDL.
    • These will be produced at a facility in Visakhapatnam, which will go operational by 2027.
  • The Indian Navy operates 12 P-8I maritime patrol aircraft. These sonobuoys are dropped from the aircraft into the sea for anti-submarine warfare.
  • Significance: Help augment the Indian Navy’s capability to detect and track underwater objects, particularly the submarines and enhance undersea domain awareness.  

What are Sonobuoys?

  • Sonobuoys are expendable, electro-mechanical acoustic sensors that relay underwater sounds emitted from ships and submarines.
  • They remain active for about 24 hours and help in detection, classification and prosecution of adversarial ships and submarines
  • Working Mechanism: 
    • A naval helicopter or fixed-wing aircraft generally drops sonobuoys in a pattern. They are dropped in canisters and are deployed automatically upon impact with water.
    • An inflatable system with a radio transmitter remains on the surface for communication with the ship or aircraft tracking it, while sensors descend below the surface to a pre-determined depth. It then relays acoustic information back to those monitoring them. 
    • A group of sonobuoys deployed in a pattern can find out the exact location of the submarine which then can be tracked by other systems.
  • Types of Sonobuoys:
    • Active sonobuoys emit sound energy and receive the echo, based on which it transmits information back to the aircraft.
    • Passive sonobuoys only listen for sounds coming from ships or submarines. They then transmit the sound back to the aircraft.
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About P-8I Maritime Aircraft

  • P-8 Poseidon is a maritime patrol and reconnaissance aircraft developed and produced by United States' Boeing Defense.
  • The P-8I is a variant of the P-8 Poseidon specially designed for the Indian Navy.
  • Utility: P-8I is responsible for coastal patrolling, maritime surveillance, anti-submarine and anti-surface warfare, search-and-rescue, anti-piracy, and supporting operations of other arms of the military.

Trends of Women’s Workforce Participation in India

Context: The National Sample Survey Office’s (NSSO) most recent annual report of Periodic Labour Force Survey indicates an increase in aggregate employment rates, after a prolonged period of decline since 2011-12. 

This is dominantly due to a significant rise in women’s work force participation. However, this spurt in women’s workforce participation must be interpreted with great caution.

Relevance of the Topic: Mains: Women’s workforce participation- Trends, Concerns, etc.

Analysis of Women’s Workforce Participation

  • Dramatic rise in women’s workforce participation:
    • Men’s work participation rates have risen slightly from 71.2% in 2017-18 to 76.1% in 2023-24. 
    • However, for women, it rose from 22% in 2017-18, to reach 40.3% in 2023-24. 
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  • Rural females vs. Urban females:
    • Women’s workforce participation increased in both rural and urban areas
    • The increase was particularly sharp in rural India. 
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  • Persistence of Jobless Growth:
    • NSSO includes ‘unpaid helpers in family enterprises’ in its classification of workers.
    • It is in this category where most of the increase in women’s “employment” occurs.
    • This indicates that the benefits of GDP growth have not translated into higher employment, hence persisting jobless growth.

Concerns with Data Classification

  • ILO’s definitions of work and employment make it clear that employment is ONLY that subset of work for which remuneration is received. 
  • Since “unpaid helpers” are clearly not the primary workers who would receive remuneration, they should not really be classified as “employed” at all.
  • Further, NSSO classifies those engaged in Codes 92 and 93 as “not in the labour force”, so they are excluded from the employment data.
    • Codes 92 and 93 include the activity classifications that cover unpaid work done within households.
    • Code 92: engaged in domestic duties — essentially care work within the household.
    • Code 93: domestic duties plus extended SNA activities like fetching fuelwood, fetching water, engaging in kitchen gardening and livestock and poultry rearing, etc.

Work Profile of Rural Women

  • By 2023-24, there was a dramatic decline in unpaid workers (Codes 92 and 93) to half of the 2017-18 level.
  • Significant increase in self-employment, which amounted to 95% of the increase in recorded “employment”.
    • So, the decline in the proportion of unpaid women workers is almost completely explained by the increase in self-employment.
  • The share of both regular and casual workers barely increased at all (together they account for less than 1/10th of rural women).
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Work Profile of Urban Women

  • 8 percentage point increase in women’s recorded work participation and a 6 percentage point decrease in unpaid workers
  • The increase in women’s recorded employment was split equally between regular workers and self-employed women. 
  • There was a decline in the proportion of both casual workers and unpaid helpers in family enterprises.
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Changes in Real Wages

  • Real wages for women regular workers fell in both rural and urban areas
    • This suggests that much of this was distress employment
    • This could well have been in domestic work and similar occupations (significant sources of employment in urban India for poor women). 
  • However, the decline in real incomes from self-employment for women was even greater.
    • This indicates a crowding of more women workers into relatively limited types of activities.
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Gender Gap in Earnings

  • The gender gap in earnings grew significantly over this period, particularly in rural areas.
  • The gap is shockingly high for self-employed workers.
    • Women receive only around 1/3rd of the incomes from self-employment that their male counterparts earn.
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Overall, this is hardly a picture of dynamism in labour markets that is leading to more employment of women.  It is necessary to move beyond that fairy tale to address the reality of women’s work in India.

RBI’s Gold Reserves

Context: According to the World Gold Council, the Reserve Bank of India (RBI) added 8 tonnes of gold to its reserves in November, 2024. In 2024 Central banks, mostly from the emerging markets, were keen gold buyers, driven by the need for a stable and secure asset amid global economic uncertainties.

Relevance of the Topic: Prelims: Key facts about RBI’s Foreign Exchange Reserves, World Gold Council

Details about Forex Reserves

RBI’s Gold Reserves
  • Meaning: Assets which are readily available to the RBI for:
    • financing Balance of Payments (Meeting shortfall in BoP).
    • Intervention in the forex market to check exchange rate volatility (i.e., to sell Dollars to check Rupee Depreciation).
  • How does RBI Build Forex Reserves?
    • In the event of surplus in the BoP, the RBI purchases the surplus dollars from the market (Authorised Dealers) and builds Forex reserves.
    • Forex reserves accrete when there is positive BoP, while negative BoP may deplete the forex reserves. 
  • Legal Framework: In India, the Reserve Bank of India Act 1934 enables the RBI to act as the Custodian of Forex Reserves.

What are the components of Forex Reserves?

  • Foreign Exchange Assets: Foreign Currency, Foreign G-Secs, Deposits with other Central Banks, Deposits with Overseas Branches of Commercial Banks.
  • Monetary Gold: Gold with the RBI as part of Forex Reserves.
  • Special Drawing Rights (SDRs): International Reserve Asset of the International Monetary Fund (IMF). 
  • Reserve Position in the International Monetary Fund (IMF). 

Adequacy of Forex Reserves:

  • Import Cover: Number of months of imports that could be paid for by Forex reserves. In India, it is presently around 9-10 months.
  • Greenspan-Guidotti rule: Forex Reserves should be sufficient to pay the short-term External Debt.

About World Gold Council (WGC):

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  • WGC is a membership organisation that champions the role gold plays as a strategic asset, shaping the future of a responsible and accessible gold supply chain. 
  • It is a non-profit association of the world's leading gold producers. 
  • Formation: WGC was formed in 1987 by some of the world’s most forward-thinking mining companies.
  • Headquarters: London, United Kingdom. 
  • Governance:
    • WGC is governed by Board of Directors, comprised of:
      • member company representatives (Chairperson or Chief Executive Officer) and 
      • World Gold Council’s Chief Executive Officer. 
    • The Board has a fiduciary responsibility to all Members in ensuring that the World Gold Council fulfills its mission and objectives.
  • It aims to maximise the industry's potential growth by monitoring and defending existing gold consumption.
  • The WGC is also the global authority on gold, and they offer comprehensive analyses of the industry.
  • The WGC was the creator of the first gold exchange-traded fund. 

US-India Civil Nuclear Cooperation

Context: The US National Security Advisor has announced that the United States is finalising steps to remove long-standing regulatory barriers that have hindered collaboration between American Nuclear companies and India’s leading energy institutions. Beyond the nuclear deal, the iCET initiative holds immense promise for the future of US-India ties

Background- The Road to Civil Nuclear Cooperation:

1. India’s Nuclear Isolation:

  • India’s Peaceful Nuclear Explosion (PNE) in 1974 and its voluntary exclusion from the Non-Proliferation Treaty (NPT) led to India’s isolation from trade in nuclear power plant materials. 

2. US-India Nuclear Deal: 

  • The US-India Nuclear Deal or the US-India Civil Nuclear Agreement is a bilateral agreement signed between the US & India in 2008. 
  • It is popularly known as the 123 Agreement.
  • Benefits:
    • Ends India’s nuclear isolation and technology denial regimes against India. 
    • Enables India to have civil nuclear cooperation as an equal partner with the US and the rest of the world. 
    • Allows US companies to supply nuclear fuel and dual-use nuclear technology (including materials and equipment that could be used to enrich uranium or reprocess plutonium) for India’s civilian nuclear energy program.
    • Enables India to meet the twin challenges of energy security and environmental sustainability
  • India agrees to allow inspectors from the International Atomic Energy Association (IAEA), the United Nations’ nuclear watchdog group, access to its civilian nuclear program. 

3. NSG India-specific Agreement

  • In 2008, the Nuclear Suppliers Group (NSG) agreed on an India-specific exemption to its nuclear export guidelines after complex negotiations.
  • Following the NSG India-specific agreement, civil nuclear cooperation agreements have since been signed with the US, Russia, France, Australia and Kazakhstan, among other countries.
  • Note: India is not a member of the NSG, the main reason being its refusal to sign the Nuclear Non Proliferation Treaty (NPT).

Associated Challenges:  

 The Civil Nuclear Cooperation between India and US has faced numerous challenges over the years: 

1. Nuclear Liability law of India: 

  • India’s Nuclear Liability law (Civil Liability for Nuclear Damage Act, 2010) has been a barrier to the growth of the nuclear energy industry.
    • India’s strict liability law places the burden of compensation for nuclear accidents on the plant operator, which can deter private companies from investing in nuclear power. 
    • Also, according to the Act, the liability can be shifted from the operator to the vendor or supplier in case the accident is due to equipment or material. 
  • This has created apprehension among potential foreign suppliers, delaying India’s ambitious nuclear energy plans. E.g., Nuclear liability is the major issue why the deal to install French European Pressurised Reactors at Jaitapur, Maharashtra, has not made progress.

2. Limitations of the US Atomic Energy Act of 1954:

  • On the American side, a significant impediment is the ‘10CFR810’ authorisation (Part 810 of the US Atomic Energy Act of 1954), which gives US nuclear vendors the ability to export equipment to countries such as India under some strict safeguards. 
  • However, it does not permit them to manufacture any nuclear equipment or perform any nuclear design work in India.

Civil Liability for Nuclear Damage Act (CLNDA), 2010: 

  • India enacted CLNDA in 2010 to provide a quick compensation mechanism for victims of a nuclear accident.
  • The Act establishes a strict and no-fault liability for nuclear plant operators, meaning they are liable for damage regardless of fault. 
  • However, the operator of the nuclear installation, after paying the compensation for nuclear damage shall have the right to recourse where-
    • The nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services.
    • The nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.
  • The operator will have to maintain a financial security to cover its maximum liability of ₹1,500 crore for civil nuclear damage and requires the operator to cover liability through insurance or other financial security.
  • In case the damage claims exceed ₹1,500 crore, the gap will be bridged by the Central Government. The government liability amounts to the rupee equivalent of 300 million Special Drawing Rights (SDRs) or about ₹2,100 to ₹2,300 crore.

Recent Developments: 

  • However, the National Security Advisor of the US has confirmed that the US is moving closer to formalising agreements that will facilitate the transfer of US nuclear technology to India, needed for India to expand its clean energy capacity.
    • This includes removing Indian government entities from the US entity list, these could include: Bhabha Atomic Research Centre (BARC); Indira Gandhi Atomic Research Centre (IGCAR) and Indian Rare Earths Limited (IREL).
    • The US Entity List is a list of foreign individuals, businesses, and organisations that are subject to export restrictions and licensing requirements for certain goods and technologies.
  • Additionally, the US-India collaboration in critical technologies is growing. The US-India Initiative on Critical and Emerging Technologies (iCET) has focused on cutting-edge fields like artificial intelligence, quantum computing, space, and defence.

Initiative on Critical and Emerging Technologies (iCET): 

  • US-India iCET is a framework agreed upon by India and the U.S. to strengthen their strategic partnership and drive technology and defence industrial cooperation. 
  • Launch: 2023 
  • Objective: Fosters cooperation on critical and emerging technologies in areas including artificial intelligence, quantum computing, semiconductors, space and wireless telecommunication. 
  • Significance:
    • Facilitates dual-use technology transfer.
    • Streamline defense and tech cooperation via frameworks like INDUS-X.

Significance of advancement of Nuclear Cooperation & iCET for India:

  • On the Nuclear front, iCET could pave the way for plans to jointly manufacture nuclear components for any new project in India by deploying American Atomic reactors. 
  • Presently, India is over-reliant on Pressurised Heavy Water Reactors (PHWRs) for nuclear energy production, however, the Light Water Reactors (LWR) that are now the most dominant reactor type across the world.
  • Furthering Civil Nuclear Cooperation between India and US will allow India to deploy American Light Water Atomic Reactors. 

Issue of Cross-Border Insolvency and Need for Legal Reforms

Context: The growth of India’s external trade necessitates an effective cross-border insolvency framework. India's current framework being inadequate, experts recommend adopting the UNCITRAL Model Law and enhancing National Company Law Tribunal’s (NCLT) powers for efficient insolvency management.

What is Cross-Border Insolvency?

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  • Cross-border insolvency is a complicated phenomenon that occurs when a business that has assets and liabilities dispersed across several jurisdictions goes bankrupt
  • Such cases present special issues since they require coordinated action between courts and insolvency professionals in many nations.

Evolution of Insolvency Framework in India

  • Under British Raj:
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  • Post-Independence:
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Cross-Border Insolvency Challenges in India:

  • Absence of Reciprocal Arrangements: E.g., In the case of State Bank of India vs Jet Airways (India) Limited 2019, the absence of reciprocal arrangement b/w India and Netherlands for cross-border insolvency resolution, delayed the resolution. 
  • Unenforceable Legal Provisions: Sections 234 and 235 of the Insolvency and Bankruptcy Code (IBC) are not notified, rendering them as ‘dead-letters’ or legally unenforceable. 
  • Limitations of NCLT: National Company Law Tribunal lacks the power to enforce foreign judgments, limiting its effectiveness in managing cross-border insolvency matters.

Regulatory Interventions to address Cross-border Insolvency:

  • Expert Committees: 
    • The Ministry of Corporate Affairs constituted two expert committees: Insolvency Law Committee (2018) and Cross-Border Insolvency Rules/Regulation Committee (2020). 
    • Both committees recommended adopting UNCITRAL Model Law on Cross-Border Insolvency. 
  • Parliamentary Recommendations: 
    • These recommendations were later endorsed by the Parliamentary Standing Committee on Finance in its Thirty-Second Report, “Implementation of IBC – Pitfalls and Solutions” (2021), and reiterated in its Sixty-Seventh Report (2024).
  • Ad-hoc Solutions: 
    • In State Bank of India vs Jet Airways (India) Limited 2019, National Company Law Appellate Tribunal (NCLAT) adopted a “cross-border insolvency protocol”.
    • Cross-border insolvency protocol is an internationally recognised approach used as an ad hoc solution (temporary solution) for regulating cross-border insolvencies.

UNCITRAL Model Law:

  • UNCITRAL Model Law provides a structural approach to cross-border insolvency. The model law deals with four major principles of cross-border insolvency:
    • Direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor.
    • Recognition of foreign proceedings & provision of remedies.
    • Cooperation between domestic and foreign courts & domestic and foreign insolvency practitioners.
    • Coordination between two or more concurrent insolvency proceedings in different countries, by identifying the centre of main interest (COMI).

About UN Commission on International Trade Law (UNCITRAL)

  • It is a subsidiary body of the UN General Assembly established in 1966.
  • Mandate: To further the progressive harmonization and unification of the law of international trade. 
  • Membership:
    • The Commission is composed of 60 member States elected by the General Assembly.
    • The 60 member States include:
      • 14 African States
      • 14 Asian States
      • 8 Eastern European States
      • 10  Latin  American and Caribbean States 
      • 14 Western European and other States. 
  • The General Assembly elects members for terms of six years; every three years the terms of half of the members expire
  • India is a founding member of this organisation.

Reforms needed in Cross-border Insolvency:

  • Adopting a Structured Framework:
    • Protocols are only an ad hoc/temporary solution. 
    • Need for court approvals increases judicial burden, transaction costs, and delays resolutions, reducing the debtor’s asset value.
    • A structured framework modelled on lines of UNCITRAL Model Law is the need of the hour.
  • Modernise Judicial Coordination:
    • Reforming the outdated communication methods between Indian and foreign courts is crucial, especially for cross-border insolvency cases. 
    • Adoption of Judicial Insolvency Network (JIN) Guidelines (2016) and its Modalities of Court-to-Court Communication (2018) is recommended to:
      • modernise judicial coordination
      • enhance transparency
      • improve efficiency in handling cross-border insolvency matters.
  • Empowering NCLT:
    • Section 60(5) of the IBC restricts Civil Courts from exercising jurisdiction over insolvency matters, including cross-border cases. This leaves NCLT as the sole adjudicating authority
    • However, NCLT lacks the power to enforce foreign judgments, limiting its effectiveness in managing cross-border insolvency matters. Thus, it is imperative to expand the powers of the NCLT to recognise and enforce foreign judgments. 

Conclusion: Adopting the UNCITRAL Model Law on Cross-Border Insolvency is in line with international standards and provides a structured framework for recognition, cooperation and coordination in cross-border insolvency cases. Along with it, empowering NCLT will strengthen the insolvency framework in India. 

Pallas’s Cat

Context: A snow leopard population census in Himachal Pradesh, has led to an unexpected find: the presence of the Pallas’s cat in the state. Researchers were going over data from a camera-trap survey conducted, when it produced the first-ever photographic evidence of the cat in the state.

Relevance of the Topic: Prelims: Key facts about Pallas’s Cat. 

About Pallas’s Cat:

Pallas’s Cat
  • The Pallas’ cat is one of the smallest wildcats in the world. It is dubbed the world’s grumpiest cat and is an elusive creature. 
  • Physiological characteristics:
    • The Pallas’s cat has a distinct appearance. Its face is flatter compared with other wildcats, big and small. 
    • Its eyes are green with a black rim around them and its cheeks have black stripes. 
    • It has long, dense and white fur, which changes to a light brown in summer.
  • Distribution: It is distributed in the grasslands and montane steppe of Central Asia, in Kazakhstan, Kyrgyzstan, Tajikistan, Russia (Siberia), Iran, Afghanistan, Pakistan, Nepal, India (Sikkim and Ladakh), Mongolia and China (including Tibet). Its territory overlaps that of the equally elusive snow leopard.
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  • Habitat & Ecology:
    • It is distributed in landscapes with extreme continental climates - little rainfall, low humidity, and a wide range of temperatures. 
    • Prey: Their prey are birds, reptiles, pikas (a small rodent-like mammal) and rodents.
    • Predators: Large raptors, wolves and red foxes are their predators. Due to predation pressure Pallas’s Cat strongly selects habitats providing hiding cover and avoids open habitats.
  • IUCN Status: Least Concern. 

Dr. Rajagopala Chidambaram

Context: Eminent Indian physicist and nuclear scientist Dr. Rajagopala Chidambaram passed away on January 4, 2025. 

Relevance of the Topic: Mains: Contributions of Dr. Rajagopala Chidambaram.

About Dr. Rajagopala Chidambaram (1936-2025):

Dr. Rajagopala Chidambaram
  • Born in 1936, Chidambaram was an alumnus of Presidency College, Chennai, Tamil Nadu and Indian Institute of Science Bengaluru, Karnataka.
  • His career comprises numerous prestigious positions he held, including:
    • Principal Scientific Adviser to the government of India (2001–2018)
    • Director of Bhabha Atomic Research Centre (1990-1993)
    • Chairman of Atomic Energy Commission
    • Secretary to the government of India, DAE (1993-2000).
  • He also served as chairman of the Board of Governors of the International Atomic Energy Agency (IAEA) (1994–1995).
  • He was honoured with Padma Shri in 1975 and the Padma Vibhushan in 1999 (for his stellar contributions to making India a nuclear weapons state).
  • His autobiography: India Rising (highlights his leadership in designing and executing the peaceful nuclear explosion experiment at Pokhran in 1974)

Contributions of Dr. R Chidambaram: 

  • Development of India’s Nuclear Programme:
    • He was integral to the Nation's first Nuclear Test in 1974.
    • He led the Department of Atomic Energy team during the Pokhran-II nuclear tests in 1998.
    • This makes him one of the rare atomic scientists who contributed to India’s both Nuclear tests:
      • Smiling Buddha (Pokhran) in 1974
      • Operation Shakti (Pokhran) in 1998.
  • Foundation for Modern Materials Science Research: 
    • His research in high-pressure physics, crystallography, and materials science significantly advanced the scientific community's understanding of these fields.
    • His pioneering work laid the foundation for modern materials science research in India.
  • As Principal Scientific Advisor (2001-2018), he:
    • set up the National Knowledge Network for high-speed connectivity to educational and research institutions. 
    • backed National Supercomputing Mission, Mission on Quantum Technologies, Laser Interferometer Gravitational Wave Observatory (LIGO) India (Indian node of LIGO to probe the universe) etc. 
    • established programmes such as the Rural Technology Action Groups and the Society for Electronic Transactions and Security
    • established rural technology laboratories at several engineering colleges.
    • pushed for the development of cleaner and more efficient thermal power plants, backed research in Ayurveda.
    • funded a number of projects that looked at integrating Ayurveda with modern medicine. 

Dr. Chidambaram was a firm believer in self-reliance and strongly opposed reliance on imported technology. His unparalleled contributions furthered India's nuclear prowess and strategic self-reliance and his legacy will continue to inspire generations.

Logistics Ease Across Different States (LEADS) Report, 2024

Context: The Ministry of Commerce and Industry has released the 6th edition of the ‘Logistics Ease Across Different States (LEADS) 2024’ Report, ranking various states on the parameter of logistics performance.

Relevance of the Topic: Prelims: Index and report based questions.

About LEADS

  • The index is an indicator of the efficiency of logistical services necessary for promoting exports and economic growth. 
  • The report divides states into:
    • Three broad criteria i.e., Achievers, Front movers and Aspirers, based on their performance. 
    • Groups: Coastal, Landlocked, North-Eastern, and Union Territories. 
  • The report ranks states on the basis of four key pillars -- Logistics Infrastructure, Logistics Services, Operating and Regulatory Environment, and the newly introduced Sustainable Logistics. 
Logistics Ease Across Different States

Performance of States (2024)

  • Achievers:
    • 13 States and Union Territories bagged the top rank of ‘achievers’, topped by Gujarat. 
    • Gujarat, Karnataka, Maharashtra, Odisha, Tamil Nadu, Delhi, Chandigarh, Haryana, Telangana, Uttar Pradesh, Uttarakhand, Assam and Arunachal Pradesh. 
  • Front Movers: Andhra Pradesh, Goa, Bihar, Himachal Pradesh, Madhya Pradesh, Punjab, Rajasthan, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Dadar and Nagar Haveli, Jammu and Kashmir, Lakshadweep and Puducherry.
  • Aspirers: Kerala, West Bengal, Chhattisgarh, Jharkhand, Andaman and Nicobar and Ladakh.

Key Recommendations

Presently, India's logistics cost is 13-14 per cent of GDP which is extremely high.

  • LEAD Framework: Report suggests logistics sector to adopt LEAD framework – Longevity, Efficiency and Effectiveness, Accessibility and Accountability and Digitalisation of processes to transform the logistics sector.
  • Public Private Partnership: The report suggests public private partnership as the key tool to enhance logistic performance of India.
  • Technological support: The report claims AI, Big Data and satellite communication as vital tools to boost logistic performance.
  • Green Logistics initiatives: There is an advocacy to support green initiatives like hybrid fuel and electric vehicles for logistics to make a smooth transition in the logistic sector.