UPSC Key | Balance of Payments, Agniveers, East Coast Rail Link and more

Explained

Balance of Payments

UPSC Syllabus:

Preliminary Examination: Economy

Mains Examination: GS-III: Economy

What’s the ongoing story- Last week, data from the Reserve Bank of India (RBI) showed that India’s current account registered a surplus during the fourth quarter (Jan-Mar) of the 2023-24 financial year. This was the first time in 11 quarters that India had witnessed a surplus.

Prerequisites:

— What is the Balance of Payment (BoP)?

— What are the constituents of BoP?

— What is a Current Account?

Key takeaways: 

— The Balance of Payments (BoP) is essentially a ledger of a country’s transactions with the rest of the world. As Indians trade and transact with the rest of the world, money flows in and out of the country. The BoP shows how much money (shown here in billions of US dollars) went out of the country and how much money came in. All the money coming into the country is marked positive and all the money going out is marked negative. As such, in the BoP table, a minus sign points to a deficit.

— The BoP matters because it captures the relative demand of the rupee vis-à-vis the demand for foreign currencies (represented in dollar terms). Hypothetically, if there were only two countries in the world, India and the US, every time an Indian wanted to buy an American good or service, or to invest in the US, they would have to hand over a certain number of rupees to first buy the dollars needed to complete that transaction.

— In the end, the exchange rate would be determined by the relative demand of the two currencies — if Indians demanded more dollars than Americans demanded rupees, the ‘price’ (or the exchange rate) of the dollar relative to the rupee would go up.

— There are two subdivisions of the current account: the trade of goods, and the trade of services…

— The capital account captures transactions that are less about current consumption and more about investments, such as Foreign Direct Investment (FDI) and Foreign Institutional Investments (FII).

— When there is a BoP surplus — net of current and capital account — implying billions of dollars coming into the country, the RBI sucks up these dollars and adds to its foreign exchange reserves.

— If the RBI did not do this, the rupee’s exchange rate would appreciate — and undermine the competitiveness of India’s exports.

— Contrary to the images they evoke in the lay person’s mind, the words ‘deficit’ and ‘surplus’ do not always correlate to ‘bad’ and ‘good’ respectively. So, a current account deficit may not always be bad for an economy, nor is a current account surplus necessarily a good development.

For Your Information:

— The country’s current account balance recorded a surplus of $5.7 billion, or 0.6 per cent of gross domestic product (GDP) in the January-March 2024 quarter, driven by a lower merchandise trade deficit.

— The current account deficit is the difference between exports and imports of goods and services. It is a key indicator of the country’s external sector.

Points to Ponder: 

— What is trade balance?

— What does a deficit in the Balance of Trade indicate?

— What is the difference between the Balance of Trade and the balance on the current account of BoP?

— What is the role of the RBI in managing rupee’s exchange rate?

Post Read Question:

With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? (UPSC CSE 2014)

1. Balance of trade

2. Foreign assets

3. Balance of invisibles

4. Special Drawing Rights

Select the correct answer using the code given below.

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 4 only

Other Important Articles Covering the same topic:

Current account balance records surplus of 0.6% of GDP in Q4FY24: RBI

How Agniveers compensation differs from a regular soldier’s

UPSC Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: GS-II: Government Policies & Interventions

What’s the ongoing story- Earlier this week, Leader of Opposition in Lok Sabha Rahul Gandhi alleged that the family of Agniveer Ajay Kumar, who was killed in a landmine blast in January, did not receive financial assistance from the government.

Prerequisites:

— What is the Agnipath Scheme?

— What is One Rank One Pay (OROP)?

— What is the Seva nidhi?

Key takeaways: 

— Deaths of regular soldiers are classified into five categories — A to E — while those of Agniveers are put in three categories — X, Y, and Z.

— Category A (for regular soldiers) and category X (for Agniveers) deaths are neither attributable to, nor aggravated by military service.

— Deaths placed in categories B and C are attributable to and aggravated by military service, and include accidents on duty. For Agniveers, these deaths are placed in category Y.

— Category Z — D and E for regular soldiers — includes deaths in acts of violence, natural calamities, enemy action, border skirmishes, and war-like situations.

— Seva Nidhi is a contributory scheme applicable only to Agniveers. For those whose deaths are neither attributable to nor aggravated by military service, get the amount accumulated till the date of death, along with the government’s contribution and interest.

— Agniveers who die while on duty or in operations get the full pay for the unserved period up to four years, including the Seva Nidhi component.

— Some benefits are exclusive to regular soldiers. Gratuity and monthly family pension, which is a substantial amount, are available only to regular soldiers.

— Children of soldiers who die due to operational reasons are eligible for a children’s education allowance which is equal to the cost of school/ college fees and books till graduation. Transportation, hostel charges, and uniform costs are also included.

— The families of regular soldiers are entitled to benefits of the Ex-Servicemen Contributory Health Scheme (ECHS), a centrally-funded scheme along the lines of CGHS to provide medical care to armed forces pensioners and their families.

For Your Information:

— Agnipath was aimed at recruiting personnel below officer ranks — soldiers, airmen, and sailors who are not commissioned officers — to the Indian Armed Forces for a period of four years. At the end of this tenure, upto 25% of these recruits, the so called ‘Agniveers’, can join the services on a permanent commission (another 15 years), subject to merit and organisational requirements.

— Aspirants between the ages of 17.5 years and 23 years are eligible to apply (the upper age limit was increased from 21), and the recruitment standards remain the same as with regular service, prior to Agnipath.

Points to Ponder: 

— What is the significance of the Agnipath Scheme?

— What are the concerns associated with the Agnipath Scheme?

— What steps need to be taken by the government to address those concerns?

Post Read Question:

Consider the following statements regarding Agnipath Scheme?

1. Agnipath scheme is a recruitment scheme for youth to serve in all three defense services.

2. On completion of the engagement period of five years, Agniveers will be paid one time non contributory Seva Nidhi Package.

3. Agniveers will be provided non contributory Life Insurance Cover of Rs. 24 lakh for their duration of their engagement period in the Indian Armed Forces.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Other Important Articles Covering the same topic:

Explained: What is the Agnipath scheme and the opposition to it?

Why China wants to build a rail network to Singapore, via Southeast Asia 

UPSC Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: GS-I, II: Geography,  International Relations

What’s the ongoing story- During his visit to Malaysia last week, Chinese Premier Li Qiang said China was willing to study a plan to connect its railway projects in the Southeast Asian countries of Malaysia, Laos, and Thailand for “enhancing regional connectivity”. Li attended the groundbreaking ceremony for Malaysia’s East Coast Rail Link (ECRL) Gombak Integrated Terminal Station with Malaysian Prime Minister Anwar Ibrahim.

Prerequisites:

— What is the East Coast Rail Link (ECRL)?

— What is the Belt and Road Initiatives (BRI)?

Key takeaways: 

— The nearly $10 billion ECRL project is sometimes linked to a China-led “pan-Asian” railway network that would connect the southern Chinese city and transportation hub of Kunming with Singapore at the tip of the Malaysian peninsula by lines running across multiple Southeast Asian countries.

— China has made significant investments in the region as part of its Belt and Road Initiative (BRI) to enhance infrastructure development in Asia, Africa and South America.

— The 665-km-long ECRL will connect Kota Bharu on the Kelantan river, close to Malaysia’s northeastern coast with Port Klang on the strategically important Strait of Malacca on the country’s west coast.

— Work on the ECRL began in 2017, but suffered due to funding constraints, and remained stalled for several years. It is now expected to be completed by 2027.

— Like Malaysia, Thailand has also faced problems of high costs and the government’s wariness about taking assistance from China. Doubts have been expressed over the projections of the economic gains from the project.

— According to the Chinese government, “In 2023, the trade volume between China and ASEAN reached USD 911.7 billion, making China and ASEAN (Association of Southeast Asian Nations) each other’s largest trading partners for four consecutive years.”

— With the BRI, these ties can be further strengthened. China has emerged as a provider of loans for infrastructure projects in countries that have historically lacked them, the apprehensions in many countries about the terms of the financing notwithstanding.

For Your Information:

— India’s position on the BRI has remained relatively consistent since 2013. From the beginning, India had reservations about the BRI – mainly due to sovereignty-related issues, as the CPEC goes through the Pakistan-occupied Kashmir (PoK), and geopolitical implications of projects in the Indian Ocean.

— While India has refrained from endorsing the BRI and has not taken part in any BRI Forums, it has been an active participant in the China-headquartered Asian Infrastructure Investment Bank (AIIB) since its inception. The Silk Road Fund (SRF) and the AIIB are the two main channels for BRI investment and financing.

Points to Ponder: 

— Why is China often accused of “debt trap diplomacy”?

— What are India’s concerns with BRI and ECRL?

— What is the significance of ASEAN for India?

Post Read Question:

Prelims

Kota Bharu which was recently in the news for East Coast Rail Link (ECRL) is located in which country?

(a) Malaysia

(b) Vietnam

(c) Thailand

(d) Myanmar

Mains

‘China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbor. (UPSC CSE 2017)

Other Important Articles Covering the same topic:

An Expert Explains | 10 years of China’s Belt and Road Initiative: The project, its aims and where it stands now

 

The Ideas Page

Not an open and shut case

UPSC Syllabus:

Preliminary Examination: Polity and Governance

Mains Examination: GS-II: Government policies and intervention

What’s the ongoing story- Menaka Guruswamy writes: There has been a seismic shift in criminal law in India. The Bharatiya Nyaya Sanhita, 2023 (BNS) has replaced the Indian Penal Code (IPC), 1860, the Bharatiya Sakshya Adhiniyam, 2023, has come in the stead of the Indian Evidence Act, 1872 and the Bharatiya Nagarik Suraksha Sanhita, 2023 replaces the Code of Criminal Procedure, 1973.

Prerequisites:

— What was the need for the new criminal laws?

— What are the significant changes brought in the New criminal law of India?

Key takeaways: 

— Experts suggest that 80 to 90 per cent of the IPC is retained in the BNS, 2023. What has been revised are the provision numbers, but the essence of the provisions have been maintained. This includes provisions pertaining to culpable homicide, murder, assault, forgery, criminal intimidation, defamation and rape. For instance, murder, which was represented by the classic sections 300 and 302 in IPC, is now in sections 101 and 103 of the BNS.

— However, there have been some major changes — Sedition as an offence has been retained (section 152 BNS), but the definition has been expanded, the nomenclature changed and the punishment for the offence made more severe… Under the BNS, the punishment is now seven years to life imprisonment, an increase from three years to life.

— The BNS also specifically punishes death caused by negligence of a “registered medical practitioner” while performing a medical procedure. The erstwhile section 304A that could be used against doctors, did not specifically mention this.

— Section 303 of the BNS provides for community service for offenders who have been convicted for the first time and where the value of the stolen property is under Rs 5,000. Given that most theft is petty theft, this is a welcome provision.

— The definitional provisions of the UAPA and BNS are similar with the difference that the former special statute has comparatively greater procedural safeguards. Now, the BNS provides that an officer, not below the rank of Superintendent of Police, shall decide whether to register the case under BNS or UAPA. The need for law reform in postcolonial nations is undeniable.

— However, the contours of that postcolonial law reform must be in consonance with the Constitution’s values. In the context of criminal law, this includes fair trial, a presumption of innocence and procedural justice.

For Your Information:

— Among the key changes will be the introduction of new offences in the Bharatiya Nyaya Sanhita (BNS) — from making a deceitful promise to marry (up to 10 years in jail); ‘mob lynching’ on the ground of race, caste or community, sex… (life sentence or death penalty); snatching (up to 3 years in jail) to bringing in stringent anti-terror, organised crimes under its ambit.

— The rearrangement of provisions in the BNS signals legislative intent. Like the IPC, it starts with chapters dealing with general exceptions, punishments, abetment, and the Right of Private Defense. Offences against the state comes before offences against women and offences against body. But in the BNS crimes against women, comes before in Chapter V before offences against the state (like sedition).

Points to Ponder: 

— What are the issues and challenges with the implementation of new criminal laws?

— What are the concerns with the BNS?

— What are the recommendations of the various committees on the criminal justice system of India?

Post Read Question:

We are witnessing increasing instances of sexual violence against women in the country. Despite existing legal provisions against it, the number of such incidences is on the rise. Suggest some innovative measures to tackle this menace. (UPSC CSE 2014)

Other Important Articles Covering the same topic:

Explained: New crimes under the Bharatiya Nyay Sanhita, and some grey areas

The Editorial Page

Taking back control

UPSC Syllabus:

Preliminary Examination: Current events of national and international events

Mains Examination: GS-II: International Relations

What’s the ongoing story- Power is poised to change hands in Westminster with a landslide win for the Labour party in the general elections. In a year where several elections globally have delivered surprising verdicts, the British public have stuck firmly with the consistent trends flagged by opinion polls.

Prerequisites:

— Which are the major political parties in Britain?

— Know about the history of Toris and Labour Party

Key takeaways: 

— After 14 years in government, the public turned on the Tory party in no uncertain fashion. Labour returns to office with its first general election win in 19 years. Keir Starmer deserves plaudits for turning around the fortunes of a party that seemed in doldrums not so long ago.

— As an exhausted Tory party cedes office, the result also speaks to the voter desire for renewal that has found expression through the democratic process. The public has signalled that it needs a hopeful vision for the future. In this narrative, a focus on stability and a push for growth are not mutually exclusive. If Keir Starmer is to make the most of his majority, he should push on when goodwill is intact. That would truly signify “taking back control”.

For Your Information:

— With the new Labour’s stated intention of continuing to pursue a productive relationship with India, that developed under the Tories, Delhi has reason to be optimistic. This is a sharp departure from the party’s narrow view of India through the prism of Kashmir and Pakistan alone.

— In recent years, the India-UK relationship has emerged as a key one for both sides and David Lammy, who is likely to be the new Foreign Secretary, has already spoken of closing the FTA deal with India and moving ahead on the technological and defence fronts. For India, a Labour-led UK that speaks of “progressive realism” as a guide for foreign policy, opens the window of opportunity wider.

Points to Ponder: 

— India and UK trade relations

— Draw a comparison between the Indian Parliamentary system and UK parliamentary system

— What are the issues with the India-UK Free Trade Agreement?

— What was the role of the Labour Party in India’s Independence struggle?

Post Read Question:

We adopted parliamentary democracy based on the British model, but how does our model differ from that model? (UPSC CSE 2021)

1. As regards legislation, the British Parliament is supreme or sovereign but in India, the power of the Parliament to legislate is limited.

2. In India, matters related to the constitutionality of Amendment of an Act of the Parliament are referred to the Constitution Bench by the Supreme Court.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Other Important Articles Covering the same topic:

Starmer’s Labour Party wins UK poll: A landslide foretold

Express Network

Centre looks to resume rice sales to states

UPSC Syllabus:

Preliminary Examination: Governance and Economy

Mains Examination: GS-II, III: Government Initiatives and Economy

What’s the ongoing story- With its granaries full, the Centre is contemplating options to offload “excess” rice, including allowing states to buy rice from Food Corporation of India (FCI) under the Open Market Sale Scheme-Domestic (OMSS-D), The Indian Express has learnt.

Prerequisites:

— What is the Open Market Sale Scheme?

— What are buffer stocks?

— What are Empowered Group of Ministers?

Key takeaways: 

— Sources said the Centre had to incur a carrying cost of Rs 6,000 crore to maintain the “excess” stock of rice during financial year 2023-24 and it is expected to rise by another Rs 1,600 crore in the current financial year.

—  Despite the Centre offering rice at Rs 29 per kg — much below the economic cost of Rs 39.31 per kg — only 1.72 lakh tonnes of rice was sold through e-auctioning under the OMSS-D during financial year 2023-24.

For Your Information:

— Boosted by “good, timely monsoon rains”, the Kharif sowing area of onions is set to be 27% higher than last year, the Union Consumer Affairs, Food and Public Distribution Ministry said Friday. “Target area under Kharif onion is 3.61 lakh hectare… 27% higher than last year.

Points to Ponder: 

— What are Rabi and Kharif crops?

— What are the challenges of food storage in India?

— What is Mega food storage plan?

— What is the role of FCI?

Post Read Question:

What is the significance of Buffer stock for ensuring food security in India? Analyse the key challenges and issues associated with the storage of buffer stock.

Other Important Articles Covering the same topic:

Why govt must create a buffer stock of all main food items

Govt & Politics

Manufacturing in Defence hits record high at Rs 1.27 lakh crore

UPSC Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: GS-III: Security

What’s the ongoing story- India’s indigenous defence production rose to a record high value of Rs 1.27 lakh crore in 2023-24, the Defence Ministry said Friday, attributing the 16.7% growth against the previous fiscal to government policies and self-reliance initiatives.

Prerequisites:

— What is Indigenisation of Defence?

— What’s the status of defense export and import?

Key takeaways: 

— As per the data received from all DPSUs (Defence Public Sector Undertakings), other PSUs manufacturing defence items and private firms, the value of defence production in the country has gone up to a record-high figure, i.e., Rs 1,26,887 crore, reflecting a growth of 16.7% over the defence production of the previous financial year”.

— Of the total value of production (VoP) in 2023-24, about 79.2% came from DPSUs and other PSUs, and 20.8% percent by the private sector, the Ministry said.

— What contributed to the overall growth in the indigenous production, according to the Ministry, was the increasing defence exports. In FY 2023-24, defence exports worth Rs 21,083 crore were registered, up 32.5% over Rs 15,920 crore in the previous fiscal.

For Your Information:

— The Defence Acquisition Procedure (DAP) 2020 prescribed 50 per cent indigenous content (IC) in procurement contracts. To encourage foreign original equipment manufacturers (OEMs) to set up maintenance and manufacturing facilities in India, a new procurement category — Buy (Global-Manufacture in India) — has been introduced.

— This will enable ab initio indigenisation of spare parts. The Union Ministry of Defence (MoD) has released several “Positive Indigenisation Lists” that mention items that must be procured only from domestic sources. Nearly 5,000 items currently imported by the Defence Public Sector Units (DPSUs) and the three Services figure in this list.

Points to Ponder: 

— Why is the government focusing on defense indigenisation?

— What are the challenges in indigenisation of the defense sector?

— What are the initiatives of the government in this regard?

— Read about India’s expenditure in defense from Stockholm International Peace Research Institute (SIPRI) Report

Post Read Question:

Prelims

Which of the following is/are correctly matched in terms of equivalent rank in the three services of Indian Defence forces? (UPSC CSE 2024)

	Army	Air Force	Navy
1.	Brigadier	Air Commodore	Commander
2.	Major General	Air Vice Marshal	Vice Admiral
3.	Major	Squadron Leader	Lieutenant commander
4.	Lieutenant Colonel	Group Captain	Captain

Select the correct answer using the code given below:

(a) 1 and 4

(b) 1 and 3

(c) 2, 3 and 4

(d) 3 only

Mains

Foreign Direct Investment (FDI) in the defence sector is now set to be liberalized: What influence this is expected to have on Indian defence and economy in the short and long run? (UPSC CSE 2014)

Other Important Articles Covering the same topic:

India’s atmanirbhar defence sector

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