Daily Current Affairs (DCA) 11 March, 2025

Daily Current Affairs Quiz
11 March, 2025

International Affairs

1. India U.S. Bilateral Trade Agreement (BTA)

Context:

On February 13, 2025, during Indian Prime Minister Narendra Modi’s visit to the United States, the two nations agreed to start negotiations for a Bilateral Trade Agreement (BTA) by fall of 2025.
While the details regarding the scope and provisions of the BTA remain vague, it contemplates the BTA to have a multisector perspective rather than to be one primarily oriented toward the liberalization of trade, a feature of the FTA.
The agreement would be bilaterally permissible under WTO trade laws, and with respect to India and the U.S., both being members of WTO, especially the General Agreement on Tariffs and Trade (GATT), whatever concerns compliance with WTO trade laws.

Key Legal Considerations Under WTO Law

Most Favoured Nation (MFN) Principle & Free Trade Agreements (FTAs)

• In other words, preferential trade agreements are banned unless they have been legalized under the WTO.
• Under Article 24.8(b) of GATT, agreements such as these have to eliminate tariffs and barriers on substantially all the trade among them.
• The proposed India U.S.-BTA will break the WTO law if it reduces tariffs to selected products unless it can somehow qualify as a Free Trade Agreement.

Interim Agreements Under GATT

• Article 24.5 would permit interim agreements leading to FTAs to be concluded within a reasonable time frame (which would be 10 years at most).
• If India and the U.S. wish to refer to the BTA as an interim agreement, then there must be a strong timetable for moving to real FTA status.
• An agreement relying on this provision that is incompatible with MFN could undoubtedly be testable in court.

The Enabling Clause: Preferential treatment for developing countries

• This clause allows developed countries to provide preferential treatment to developing countries, but it does not say the contrary.
• Since the BTA requires India to cut tariffs on imports from the United States, it could fall under this exception.

Challenges & Compliance with WTO Law

• It is necessary for India to make sure that under the BTA only selective tariff reductions are made with the understanding that Indo US tariff structures are transitioning to an FTA.
• Policies of the U.S. under previous administrations such as Trump’s idea of “reciprocal tariffs” were counter to the principles of MFN and Special & Differential Treatment (S&DT) of WTO.
• As a proponent of a rules based trading system, India must resist any pressures to deviate from the principles for the sake of concluding the BTA.

The India U.S. BTA will have to be drawn up strictly with a view to WTO conformity as an FTA or at least as a genuine interim agreement. Any selective reductions involved without adherence to the standards set out by the WTO may trigger the legal challenges raised against these reductions.

2. India on Tariff Reduction Claims by the US

Context:

The Indian government denied making any commitment on a tariff reduction in the face of US President Donald Trump’s assertion. Discussions continue since India wants an extended time frame until September 2025 to negotiate the Bilateral Trade Agreement (BTA).

Selective Tariff Reductions Possible

• India may lower tariffs on select items, for example, nuts, but it will protect its dairy industry.
• Tariff concessions, where applicable, are restricted to the bilateral format, and in no way constitute an MFN concession.

India’s Trade with the US is Different Than With Canada and Mexico

• Commerce Secretary Sunil Barthwal distinguishes that India’s trade and security ties with the US are distinct from those in the case of Canada and Mexico.
• Trade issues for India will, however, not concern immigration and national security effects as with its border sharing neighbors.

Challenges Against US Claims

• Trump’s Remarks (March 8, 2025)
  • Trump said that India agreed to bring down tariffs while diplomatic talks were held.
  • Trump claimed huge tariffs imposed by India restricted exports to that nation.
  • Trump further stated that foreign goods tariff would be reciprocally applied by the US from April 2, 2025.
• Counter by the Indian Government
  • India had received no official deadline from the US about any tariff reductions.
  • Trade discussions have been held with focus on mutually beneficial ends immediate tariff cuts are not part of this.

Inputs Made to the Parliamentary Panel

• Commerce Secretary Sunil Barthwal and Foreign Secretary Vikram Misri briefed the 30 member panel, headed by Congress MP Shashi Tharoor.
• The subjects discussed included:
  • India-US trade negotiations and tariff issues.
  • Reports of China’s plans regarding a mega hydropower dam on the Brahmaputra River.

In its negotiations, India stands steadfast to pursue its terms, keeping in mind the protection of strategic sectors like dairy. Despite the pressure from the US, India would insist that tariff reductions would be bilaterally negotiated, and there is no confirmed deadline of April 2.

3. US Economic Outlook & Trump’s Trade Policies (2025)

Policy Indecision & Market Confusion

• Since Donald Trump was re elected in January 2025, his policy decisions have swayed and now create uncertainty.
• Tariffs imposed, withdrawn, or put on hold created confusion in markets.
• It becomes increasingly difficult to predict economic impact with uncertainty regarding breadth, applicability, and time of tariffs.

Rising Tension Surrounding the Imminent Recession

• The August 2025 reading of the New York Federal Reserve’s Recession Probability Gauge is the third highest in decades, rivaling the downturns of the 1970s and 1980s.
• Bond yields signal worry
  • Two year US Treasury yields declining: Expectation of economic deceleration, which could lead to Federal Reserve rate cuts.
  • Contrast with 2024: In the previous year, the opposite was true increasing yields reflected optimism toward the business policies.

Market Sentiment Transition

• So, were the initial assumptions
  • Optimism in light of the 2024 election: Tax cuts first, tariffs later leading to growth and inflation.
  • Current events in reality
    • No longer confident in Trump’s economic strategy.
    • Their sentiments are moving negative mostly based on poor communication from the administration.

Response of Trump to Recession Risks

• Trump, uninterested in what happens in the future downturn, calls it a “period of transition” in economic restructuring.
• Commerce Secretary’s statement
  • Must be “detoxing” from over reliance on government expenditure by the US economy.
• Effects of tariffs on the longer term
  • More often than not, bad for growth and inflation.
  • Benefits potentially short term uncertain.

Global & Industry Effects

• The recession threat of the US affects global economies, including
  • The IT sector of India, heavily dependent on the US markets, would have to take the possible slowdown into consideration.
• Second term of Trump
  • More aggressive trade policies than in first term.
  • Prepared, willing to risk the economy going downhill if it means he gets to put his tariff driven policy into effect.

The rising potential for recession in the US economy increases as Trump’s trade policies continue to usher uncertainty. Markets are adjusting completely to new economic expectations, and businesses must prepare themselves for effects that may take place as far as a downturn goes.

4. China’s Deflation Crisis

Why in News?

Even though policymakers in Beijing may be putting up a sanguine show, not all is well with China’s economy. Its latest official data reveals that prices in China fell 0.7% from a year earlier in February, marking the first time in more than a year that the economy is in the grip of deflation.

Economic Indicators Signaling Deflation

• Consumer Prices Declined:
  • Prices in China fell 0.7% YoY in February, marking the first deflationary period in over a year.
• Producer Prices Also Dropped:
  • 2.2% decline in producer prices indicates weakening industrial demand.

What is Deflation?

• Definition
  • Deflation is the opposite of inflation—a sustained and general decrease in overall price levels of goods and services.
• How it Works
  • In a deflationary environment, the purchasing power of money increases over time, allowing consumers to buy more for the same amount.
• Causes of Deflation
  • Reduced Consumer Demand: Low consumer spending leads to falling prices.
  • Oversupply of Goods: Excess production without sufficient demand.
  • Technological Advancements: Lower production costs reduce prices.
  • Tight Monetary Policy: Central banks restricting money supply.
  • China’s Case: Mainly driven by economic slowdown and weak consumer demand.

Impact of Deflation

Positive Effects

• Lower Interest Rates
  • Central banks may cut interest rates to encourage borrowing and investment.
  • Can stimulate economic activity and boost spending.
• Improved Savings Incentives
  • Since money gains value over time, savers benefit from higher purchasing power.
  • Encourages long-term financial stability.
• Economic Efficiency
  • Companies innovate and reduce costs to stay profitable.
  • Leads to higher productivity and competitiveness.
• Favorable for Fixed-Income Beneficiaries
  • Retirees and those with fixed incomes gain purchasing power.
  • Their savings and pensions become more valuable.

Negative Effects

• Downward Economic Spiral
  • Consumers delay purchases, expecting further price drops.
  • Leads to decreased demand, lower production, job losses, and economic slowdown.
• Lower Business Revenue & Investment
  • Falling prices reduce business profits, discouraging expansion and hiring.
  • Can lead to higher unemployment and financial instability.
• Increased Debt Burden
  • Debt remains constant in nominal terms, but as incomes decline, repayment becomes more expensive in real terms.
  • Harder for individuals, businesses, and governments to manage loans and financial obligations.

Why Deflation is a Concern

• Consumer Spending Declines:
  • Consumers delay purchases expecting further price drops, weakening overall demand.
• Credit Becomes Riskier:
  • Loans become costlier in real terms, discouraging borrowing and investment.
• Economic Growth Slows:
  • Weak demand and cautious lending hamper overall economic expansion.

China’s Policy Response

• Fiscal Stimulus:
  • Government plans to raise the fiscal deficit to 4% of GDP (up by 1 percentage point).
  • Intended to boost consumption and economic activity.
• Challenges to Stimulus Effectiveness:
  • US Tariff Barriers: May shrink Chinese exports, reducing trade-driven growth.
  • Risk of Overproduction: Factories may continue producing excess goods, exacerbating global concerns about Chinese dumping.
  • Potential Supply Cutbacks: Could help stabilize markets and alleviate fears of oversupply globally.

China’s Delicate Balancing Act

• Policymakers face a tough challenge: stimulating domestic demand while managing external trade pressures.
• The effectiveness of fiscal measures remains uncertain amid trade restrictions and global economic slowdown.
• Careful supply-side adjustments may be necessary to prevent worsening deflationary trends.

Source: Mint

National Affairs

1. Obesity in India

Context:

An analysis of the earnings data for salaried workers, casual labourers, and self-employed persons from Periodic Labour Force Survey (PLFS) reports shows that when adjusted for inflation, wages for salaried workers in India have stagnated since 2019.

Tackling Obesity in India

Background

• Dramatic obesity and diabetes crisis, wherein
  • 1 in 4 adults are obese.
  • 1 in 4 adults are diabetic or pre diabetic (National Family Health Survey 5).
• The Economic Survey 2025 put forth a suggestion for levying a health tax on ultra processed foods (UPFs) in opposition to their high consumption.
• However, weak food marketing regulations counter any credible action taken in this regard.

Food Labelling and Advertisement Dilemmas

Flawed Labelling System

• FSSAI’s Indian Nutrition Rating (INR) (2022)
  • Modeled loosely on Australia’s ineffective health star system.
• Deceptive star ratings
  • Making UPF look good.
• Conflict of interest
  • Policymaking was heavily influenced by the food industry.
  • Traffic light warning labels (2021 draft regulations) were scrapped due to pressures from the industry.

Problems of INR System

• These UPFs continue to be rated ‘healthy’
  • 2 Stars for Biscuits (high fat, sugar, salt).
  • 2 Stars for Soft Drinks (high sugar).
  • 3 Stars for Cornflakes (high sugar, sodium).
• International Best Practice
  • Warning labels (Chilean way ‘high in’ black labels), have reduced consumption by UPFs by 24%.
• The Way Ahead: Shift INR into mandatory ‘high in’ warning label implementation according to WHO or Indian Council of Medical Research (ICMR) guidelines.

Weak Advertising Regulations

• Four existing laws try to halt the misleading advertising HFSS/UPF, but none are effective.
• 2017 National Multisectoral Action Plan called for restricting HFSS food ads, however, no action has been taken.
• Consumer Protection Act, 2019
  • Defines ‘misleading ads’ but does not compel nutritional information to be declared in food ads.
• For instance: A cola drink is free to advertise sugar per bottle, which is 9 10 teaspoons.
• Gaps in FSSAI Regulations
  • No clear definition of HFSS/UPFs.
  • There are no nutritional disclosure requirements in ads.
• Impact
  • Marketing for unhealthy foods is directed at children & youth that aggravate the rates of obesity & diabetes.
• Global evidence: Banning junk food ads is shown to effectively reduce childhood obesity rates.

Recommendations: The Way Forward

• Inevitably disband Indian Nutrition Rating systems, compulsorily introduce mandatory ‘high in’ warning labels under WHO and ICMR guidelines.
• Specify threshold limits for sugar/salt/fat applicable to HFSS food products in conformity with the WHO SEARO and ICMR NIN guidelines.
• Close advertising loopholes by
  • Either amending the existing laws or making a new consolidated HFSS/UPF ad ban.
  • Restrict junk food ads, especially targeting children.
  • Launch a national campaign against UPFs and their risks through multiple languages.

Source: The Hindu

2. Global Arms Trade Trends (2020-2024): SIPRI Report

Context:

Ukraine, involved in a war with Russia for the past four years, was the largest importer of major arms in the world in the 2020-24 period, clocking a nearly hundredfold rise in imports compared with the figures for 2015-19.

Key Highlights

• Ukraine became the largest importer of major arms, with a 100-fold increase compared to 2015-19, due to its ongoing war with Russia.
• India ranked as the second-largest arms importer, despite a 9.3% decline in imports.
• China dropped out of the top 10 arms importers for the first time since 1990-94, reflecting its growing domestic defense industry.
• Russia’s arms exports fell by 64%, dropping to third place behind the U.S. and France.
• France’s arms exports surged, making India its largest customer (28% of exports), followed by Qatar (9.7%).
• Pakistan’s arms imports increased by 61%, with China providing 81% of its weapons.

India’s Arms Imports: Changing Trends

Global Arms Export & Import Trends

• Top 3 Arms Exporters (2020-24):
  1. United States (43% of global exports) – Maintained dominance.
  2. France (9.6%) – Overtook Russia as the second-largest exporter.
  3. Russia (7.8%) – Significant decline in global share.
• Key Regional Trends:
  • Europe’s arms imports increased by 155%, largely due to rearmament in response to Russia.
  • Italy rose to sixth place among arms exporters, securing a 4.8% share.
  • Saudi Arabia, India, and China saw declining import volumes for varied reasons.

Ukraine’s Arms Imports

• Received 8.8% of global arms imports in 2020-24.
• At least 35 countries supplied weapons to Ukraine since 2022.
• Major supplies came from France, U.S., and European allies.

Conclusion

• The Russia-Ukraine war has reshaped global arms trade, with Europe increasing imports and Russia losing market dominance.
• India is diversifying its suppliers, relying more on France and reducing dependence on Russia.
• China is self-sufficient, reducing its arms imports significantly.
• Pakistan remains heavily reliant on China, while Ukraine has rapidly become the world’s top arms importer.

Source: The Hindu

3. Ultra-High Energy Particles in Space

Key Discovery

• Researchers from Johns Hopkins University (U.S.) and Northumbria University (U.K.) found that collisionless shock waves act as powerful cosmic particle accelerators.
• Their study, published in Nature Communications, helps solve the long-standing electron injection problem—how electrons initially reach high speeds before being further accelerated.

Understanding Shock Waves in Space

• What are Collisionless Shock Waves?
  • Unlike regular shock waves (which transfer energy through particle collisions), collisionless shock waves transmit energy via electromagnetic interactions in plasma.
  • Found near pulsars, black holes, and supernova remnants.
• Plasma Role:
  • Plasma is a charged gas where particles rarely collide but interact through electric and magnetic fields.
  • Shock waves in plasma can energize electrons without direct particle collisions.

Key Findings from Space Missions

• Data was collected from NASA‘s MMS, THEMIS, and ARTEMIS missions, observing interactions between the solar wind and Earth’s magnetosphere.
• Bow Shock Region:
  • Where solar wind slows and transfers energy to Earth’s magnetic field.
  • This is where researchers identified the electron acceleration mechanism.
• December 17, 2017 Event:
  • Scientists detected electrons in the foreshock region reaching 500 keV of energy (~86% the speed of light).
  • A huge leap from the typical 1 keV energy levels in that region.

The Electron Injection Problem Solved?

• Previously, scientists struggled to explain how electrons initially accelerate to 50% of the speed of light, a necessary condition for further acceleration by diffusive shock acceleration.
• New data suggests:
  • Multiple plasma interactions in Earth’s foreshock region enabled electrons to reach ultra-high speeds.
  • This could apply universally, explaining high-energy cosmic rays seen in distant astrophysical environments.

Implications for Cosmic Ray Research

• Potential Source of Cosmic Rays
  • Previously attributed mainly to supernova explosions.
  • New findings suggest planetary bow shocks (e.g., from gas giants orbiting close to stars) might also contribute to cosmic rays.
• Broader Astrophysical Impact
  • The study highlights that planetary systems, not just extreme cosmic events, might play a role in accelerating high-energy particles.
  • Calls for further research into stellar astrophysics and particle acceleration.

Next Steps

• The study provides a major breakthrough in understanding high-energy cosmic particles.
• Researchers call for further studies to confirm the role of planetary systems in cosmic ray generation.
• Findings enhance our understanding of plasma physics in both our solar system and deep space.

Source: TH

4. The Challenges of Tribunalization in India

What is a Tribunal?

A tribunal is a person or institution that has the authority to settle disputes or claims. Tribunals can be used to resolve administrative or tax-related disputes. In India, tribunals are quasi-judicial bodies that are an alternative to the traditional court system. 

Tribunals: A Solution That Hasn’t Delivered

• Purpose: Tribunals were set up to ease the burden on courts, offering faster, specialized adjudication.
• Reality: Many have become inefficient and slow, mirroring the very problems they aimed to resolve.

Key Challenges Across Tribunals

A. Overburdened & Inefficient Tribunals

• National Company Law Appellate Tribunal (NCLAT)
  • Overloaded after merging with the Competition Appellate Tribunal (COMPAT) in 2017.
  • Handles Companies Act, Insolvency & Bankruptcy Code, and Competition Law cases—leading to delays.
  • Result: Slower case resolution, loss of competition law specialization.
• Debt Recovery Tribunal (DRT)
  • Created to expedite loan recoveries but now has 215,431 pending cases.
  • Recovery rates fell to just 9.2% (2022-23), undermining its purpose.
• Appellate Tribunal for Electricity (APTEL)
  • Struggles with vacancies, delaying key regulatory reforms in the power sector.

B. Judicial Intervention: Undermining Tribunal Authority

• Supreme Court Overruling Tribunals
  • Example: The AGR case (TDSAT ruling overturned by SC), affecting the telecom industry.
  • Impact: Tribunals lose credibility if major rulings are routinely challenged and overturned.

C. Economic & Legal Ramifications

• Delays create regulatory uncertainty, discouraging investment and affecting industries like finance, energy, and telecom.
• Merging tribunals with courts hasn’t improved efficiency—it adds more cases to an already burdened judiciary.

Core Issues Behind Tribunal Inefficiency

A. Poor Selection & Lack of Infrastructure

• Retired judges and bureaucrats dominate tribunals, raising concerns about:
  • Lack of technical expertise in specialized areas.
  • Post-retirement placements that may lack accountability.

B. Lack of Structural Oversight

• No central regulatory authority to streamline tribunal functioning.
• Law Commission (272nd Report, 2017) suggested a central nodal agency, but it hasn’t been implemented.

C. Appeal System Undermines Finality

• High Courts & Supreme Court frequently override tribunal decisions, leading to:
  • Increased judicial workload (e.g., CAT cases appealed under Articles 226/227).
  • Reduced tribunal effectiveness and longer case timelines.

Potential Reforms & Solutions

A. Strengthening Tribunal Autonomy

• Implement SC recommendations from L. Chandra Kumar (1997) for an independent oversight authority.
• Set up a National Administrative Appellate Tribunal to handle CAT & SAT appeals, reducing HC workload.

B. Improving Efficiency & Reducing Backlogs

• Double-shift working hours (discussed in 2011 but never implemented).
• Better case management systems & digitalization to streamline dispute resolution.

C. Overhauling Appointment Process

• Inclusion of domain experts, not just retired judges and bureaucrats.
• Merit-based selection to ensure technical expertise.

D. Addressing Government Apathy

• The government must prioritize tribunal reforms to ensure they serve their intended purpose rather than becoming a burden.

Tribunals were meant to fast-track justice, but inefficiency, poor oversight, and excessive judicial intervention have made them part of the problem. Without structural reforms, better appointments, and stronger independence, tribunalization will remain an incomplete solution rather than a true alternative to courts.

Banking/Finance

1. SEBI’s Proposed Short selling Reforms

What is Short Selling?

Short selling is a trading strategy in which a trader aims to profit from a decline in a security’s price by borrowing shares and selling them, hoping the stock price will then fall, enabling them to purchase the shares back for less money.

• At Present
  • Short selling is conducted under F&O(Future & Options) stocks).
• Proposed
  • Broaden short selling to cover all stocks except for the ones in the Trade to Trade(T2T) segment.

Abrogation of Short Sale Reports

• At Present
  • The institutional trader must disclose upfront any transaction qualifying as a short sale.
  • The retail trader must report by the end of the day.
  • Weekly short sale position reporting is done by brokers and exchanges.
• Proposed
  • Scrap any disclosure rules since these are already redundant under developments in clearing and settlement progress.

Alteration to the Delivery and Settlement Regime

• Direct payout of securities will
  • Short Term Strategies like Buy Today Sell Tomorrow (BTST) will go for a toss.
  • Shares pending delivery shall traditionally not be treated as short sales to protect against disturbances.

Modifications to Penalties and Enforcement

• Current Provision
  • Penalty leviable 0.05% on the value of shortages for failed deliveries.
  • The exchange must initiate action against brokers for the failures related to settlements.
• Proposal
  • Once direct payout kicks in, the enforcement role should be removed from the exchange.
  • Double penalties should be avoided by letting clearing corporations deal with short deliveries.

Reasons for the Changes

• Short sales of nonfuture option stocks would happen through intraday squaring.
• The present state of affairs regarding Securities Lending and Borrowing (SLB) mechanism kill any reason to keep the disclosure requirement.
• Securities Lending and Borrowing (SLB) is a process that allows investors to lend or borrow securities for a set period of time. It’s also known as stock lending and borrowing. 
• Thus, fetches walking for exchange enforcement eliminating inefficiencies from operations.

What Comes Next?

• A consultation paper will be given by SEBI, latest by next week.
• The regulatory authority has not officially responded to the proposal yet.

If adopted, SEBI’s proposed amendments will enhance liquidity and efficiency in the market due to an expansion in the options available for short selling and a reduction in regulatory hurdles. But projecting the risks of market volatility and settlement failures will require attention.

Source: BL

2. SEBI Tightens Rules on SME IPOs

Context:

These regulations have been mauled by a stricter Securities and Exchange Board of India (SEBI) for small and medium enterprise initial public offer (SME IPOs) transparency as well as better investor protection.

Introducing the Regulation Changes

• Profitability Requirement
  • Previous SMIEs were required to demonstrate profitability for public funds.
• Capping Offer for Sale (OFS) to 20%
  • Existing shareholders are prevented from offloading greater than 20 percent of shares within the context of an SME-IPO limitation.
  • Ensure the company will raise fresh capital rather than just allowing early investors to exit.

Intentions of Such New Measures

• Encouragement for Quality Listings
  • With a good financial history, the SMEs can now seek going public in the public market.
• Creating Better Investor Protection
  • Reduced chances for speculative influxes into IPOs triggered by huge promoter exits.
• Addressing Surge in SME-IPOs
  • In response to the increased investor interest and participation in SME issues, the new framework will respond.

Impacts Expected

• Enhanced Credibility Towards SME-IPOs
• Increased scrutiny could heighten investor confidence over SME listings.
• Reduced Speculation & Volatility
• Large promoter exits should help stabilize SME stocks post listing.
• More Sustainable Fundraising for SMEs
• IPO proceeds are used for business growth rather than exit of existing shareholders.

The new SEBI regulations will balance both the interests of SME growth and those of the investor by ensuring that only financially strong will be able to access public funds. This is expected to enhance the long term sustainability of SME IPOs while curbing excessive speculation.

Source: TOI

3. SME-IPO Boom Amid Mainboard Slowdown

Context:

While the mainboard IPO market has slowed down significantly due to market volatility and cautious investor sentiment, SME-IPOs continue to thrive. The resilience of the SME segment reflects a shift in investor preference towards smaller, high-growth companies that offer promising returns despite broader market challenges.

SME vs. Mainboard IPOs: 2024 Trends

Month	SME IPOs	Funds Raised (₹ Cr)	Mainboard IPOs	Funds Raised (₹ Cr)
January	20	880	6	4,845
February	20	930	3	10,878
March (as of March 11)	6	170	0	0

SME IPO Market: Yearly Growth

Year	No. of Issues	Funds Raised (₹ Cr)
2018	141	2,287
2019	51	624
2020	27	159
2021	59	746
2022	109	1,875
2023	182	4,686
2024 (YTD)	240	8,761

Why Are SME IPOs Gaining Momentum?

• Investor Appetite for High-Growth Companies
  • SMEs, often in emerging sectors, present high-growth opportunities that attract investors willing to take calculated risks.
  • The retail investor base, particularly in Tier 2 and Tier 3 cities, is increasingly participating in SME IPOs, fueling demand.
• Easier Market Entry & Regulatory Support
  • SME listing requirements are less stringent compared to mainboard IPOs, making it easier for companies to raise funds.
  • Recent regulatory reforms by SEBI, including restrictions on Offer-for-Sale (OFS) and profitability requirements, aim to enhance transparency while supporting strong SME listings.
• Liquidity & Strong Listing Gains
  • Many SME IPOs have delivered impressive post-listing returns, encouraging more retail and institutional participation.
  • Despite lower liquidity compared to mainboard stocks, SME IPOs are seen as lucrative investment avenues in the current market.
• Cautious Approach by Mainboard Companies
  • Larger companies are delaying IPO plans due to market volatility, higher interest rates, and valuation concerns.
  • Investors remain selective about mainboard IPOs, focusing on profitability and sustainability rather than mere growth prospects.

What This Means for the Broader Market

• The continued success of SME IPOs suggests that investor confidence remains intact, albeit directed towards smaller, more agile businesses.
• If market conditions stabilize, mainboard IPOs could see a revival, but for now, SMEs remain the dominant players in the primary market.
• The growing participation of retail investors in SME IPOs could lead to deeper market penetration and a more diverse investor base.

Outlook

The current SME IPO boom is driven by a combination of regulatory ease, strong investor interest, and market adaptability. However, whether this trend sustains depends on broader economic conditions and how mainboard companies respond to evolving investor expectations.

Source: BS

4. Regulatory Concerns in the SME IPO Segment

Context:

Retail investor enthusiasm has been the primary factor behind the robust fundraising in the SME (Small and Medium Enterprise) IPO segment. Strong post-listing performances of SME stocks have encouraged continued investor participation.

• Exponential Growth in Retail Participation
  • The average number of retail applications per SME IPO surged from 297 in 2020 to 188,000 in 2024.
  • This increase is largely driven by listing gains that have jumped from 1% to 60% in the same period.
• BSE SME IPO Index Growth
• The BSE SME IPO index (tracking prices of SME-listed stocks) rose 2.5 times in 2024, compared to a 32% increase in the BSE IPO index for mainboard companies.
• Recent Performance
• However, despite past success, SME IPOs have recently experienced a sharp correction. On a year-to-date basis, the BSE SME IPO index is down by 26%, while the mainboard index has declined by 19%.

Concerns About SME IPO Risks

• High Risk and Illiquidity
  • SMEs tend to be riskier and illiquid investments, which could be problematic for small retail investors.
  • Some experts argue that investors may not fully understand the inherent risks of investing in the SME segment.
• Regulatory Warning
  • Pranav Haldea from Prime Database emphasized that although SME IPOs have attracted attention due to high returns, these stocks are extremely volatile.
  • He expects a potential drop in issuances unless overall market sentiment revives.

Sebi’s New Regulatory Measures

The Securities and Exchange Board of India (Sebi) tightened the regulatory framework for SME IPOs in response to investor exuberance, introducing measures to ensure only companies with strong track records can list:

• Profitability Requirement
  • Companies must show an operating profit of at least ₹1 crore over the last two to three financial years before launching an IPO.
• Offer-for-Sale (OFS) Cap
  • The OFS size by selling shareholders is now capped at 20% of the total issue size, and individual selling shareholders can’t sell more than 50% of their holdings.

Ticket Size and Retail Accessibility

• Minimum Application Size
  • The minimum application size for SME IPOs is ₹1 lakh, which was initially intended to deter retail participation.
  • However, as investor incomes have increased over the years, many are now comfortable investing in SME IPOs without full understanding of the associated risks.
• Call for Stricter Controls
  • Some experts, including Ambareesh Baliga, suggest raising the minimum lot size for SME IPO applications to ₹2 lakh to limit uninformed retail participation.

Future Outlook and Challenges

While SME IPOs have been a significant fundraising avenue, regulatory tightening and increased market volatility may temper future enthusiasm. Experts predict a potential slowdown in the number of issuances unless market sentiment improves and investor awareness grows about the risks associated with these high-risk stocks.

5. Indian Banks Struggle to Boost Deposit Growth Amid Rising Loan Demand

Loan Growth Outpacing Deposit Growth

• Banks are lending more than they are accumulating in deposits, leading to a rising Loan-to-Deposit Ratio (LDR).
• As of February 7, 2025, the incremental LDR (rolling 3-month basis) hit 126%, meaning banks are loaning out ₹126 for every ₹100 in fresh deposits.
• Overall, fiscal year LDR stands at 103%, signaling a persistent weakness in deposit mobilization.

Trends & Statistics

Loan & Deposit Growth

• Credit growth (YoY): 11.3%
• Deposit growth (YoY): 10.6%
• Since FY22, deposit growth has consistently lagged behind loan growth by an average gap of 416 basis points (bps).

System-wide LDR

• Reached 80.4% in the first half of FY25, the highest in the past five years.
• This has led to increased reliance on alternative funding sources, such as infrastructure bonds and bulk deposits.

Challenges Facing Banks

CASA (Current Account Savings Account) Struggles

• Customers prefer locking funds in high-interest term deposits, reducing CASA growth.
• Banks need to attract more CASA deposits, which provide a cheaper source of funds than fixed deposits (FDs).

Competition for Deposits

• Public Sector Banks (PSBs) are becoming more aggressive in deposit mobilization, intensifying competition.
• A high deposit growth rate (12-13%) is expected in FY26, but at the cost of increased competition and higher interest payouts.

Alternative Funding Pressure

• Banks rely more on bonds and market borrowings as deposit growth remains sluggish.
• Higher borrowing costs could reduce banks’ profit margins in the long run.

Implications for the Banking Sector

Risk of Funding Shortfalls:

• If deposit growth remains weak, banks may face constraints in future lending.
• Higher reliance on non-deposit funding sources could lead to liquidity mismatches.

Higher Borrowing Costs:

• Banks may increase deposit rates to attract funds, affecting net interest margins (NIMs).
• More funds locked in term deposits could make the banking system less flexible.

Regulatory & Policy Considerations:

• The Reserve Bank of India (RBI) may intervene if LDR continues to rise unchecked.
• More incentives for CASA growth could be introduced to encourage stable deposit flows.

Future Outlook & Possible Solutions

Deposit Growth Expected at 12-13% in FY26:

• Similar to FY25, but will require intensive efforts from banks.

Strategies for Banks:

• Enhance CASA Ratios through innovative savings and current account products.
• Offer attractive term deposit rates while balancing interest costs.
• Explore alternative deposit structures (e.g., sweep-in accounts, retail bonds).

Regulatory Measures Could Be Introduced:

• RBI may consider policy actions to ensure liquidity stability.
• A balance between credit expansion and sustainable deposit growth will be crucial.

Source: The Economic Times

6. MDR on UPI & RuPay Debit Card Transactions

Context:

The government is evaluating a proposal to bring back merchant charges on transactions conducted through Unified Payments Interface (UPI) and RuPay debit cards.

What is MDR (Merchant Discount Rate)?

• MDR is a fee paid by merchants to banks for processing digital transactions in real time.
• Currently, UPI and RuPay debit card transactions have zero MDR, meaning merchants do not pay any charges.
• The cost of maintaining the UPI infrastructure is currently borne by banks and the government.

Key Proposal Details

• MDR to be reintroduced for “large merchants”.
• Threshold for applicability: Merchants with GST-based annual turnover of more than ₹40 lakh.
• Current Status: The proposal has been sent to the Union government and is under consideration.
• Proposed by: The banking industry, which has been lobbying for MDR to improve revenue and cover operational costs.

Rationale Behind Bringing Back MDR

• Sustainability of the UPI Payment Ecosystem
  • Banks bear the cost of real-time transaction processing without any revenue.
  • MDR can help cover infrastructure costs and encourage further innovation in digital payments.
• Alignment with Global Payment Models
  • Other card-based payment systems (Visa, Mastercard) charge MDR.
  • Bringing MDR back could help banks invest in improving the digital payment network.
• Targeting Only Large Merchants
  • Ensures that small businesses and MSMEs remain unaffected, preventing disruption in digital payment adoption.
  • Focuses on businesses that already have high transaction volumes.

Potential Implications

• Impact on Merchants:
  • Large businesses may pass the MDR cost onto consumers via higher prices.
  • Some merchants may discourage UPI transactions in favor of cash or other low-cost alternatives.
• Possible Resistance from Merchants & Consumer Groups:
  • UPI adoption has been high due to zero-cost digital payments for merchants.
  • MDR introduction may face pushback from businesses that have already integrated UPI widely.
• Revenue Boost for Banks & Payment Service Providers:
  • Encourages sustainable growth of the digital payments ecosystem.
  • Provides an incentive for banks to enhance UPI services and security measures.

Open Questions & Future Considerations

• What MDR percentage will be charged?
  • Industry speculation suggests 0.3% to 1%, but no official figure has been proposed yet.
• Will there be sector-specific exemptions?
  • Certain industries (e.g., government services, essential goods) may be exempted.
• How will the government balance merchant interests with banking sector needs?
  • A phased introduction or government incentives could soften the impact.

Source: The Economic Times

7. Software as a Service (SaaS)

Context:

B2B SaaS company Perfios, a provider of software services to banks and other financial services companies, has acquired CreditNirvana, a debt management and collections platform.

B2B

B2B stands for business-to-business, which refers to the exchange of products, services, or information between businesses. It’s different from business-to-consumer (B2C), which is when a business sells to an individual. 

How does B2B work?

• B2B transactions can involve the purchase of raw materials, outsourcing tasks, or enhancing products. 
• B2B transactions are part of the supply chain, which moves goods and services from supplier to customer. 
• B2B transactions are often driven by cost-effectiveness, quality, reliability, and long-term business relationships. 

Overview of the Acquisition

• Acquirer: Perfios (a B2B SaaS provider for financial services)
• Target: CreditNirvana (AI-powered debt management platform)
• Financial Terms: Not disclosed
• Strategic Focus: Strengthening Perfios’ end-to-end financial lifecycle solutions

Software as a Service (SaaS)

Software as a Service (SaaS) is one of the cloud computing models, allowing users to access applications over the internet with a subscription or pay-as-you-go model. Under a SaaS model, the service provider maintains the software, infrastructure, and data, and the user needs to access the application.

Earlier, companies used to install software in the clients’ localised hardware so that they could use the application. So, this meant customers have to pay for the usage of the software beforehand, and also for the hardware on which the software would run.

• The key features of SaaS are
  • Subscription-based pricing:
    • Users pay a set monthly or yearly fee for access to the software.
  • Pay-per-use:
    • Costs depend on the consumption of software usage. It is like paying per number of transactions or data.
  • Scalability:
    • The dynamic provision of more resources will tackle more workload with SaaS applications.
  • Multi-tenancy:
    • This means one version of the application will be run by all the subscribers from host servers.
  • Automated update:
    • All the patches and updates for the software will automatically be updated by the service provider.
• Some examples include email, Calendaring, Office tools, customer relationship management (CRM), and project management software.
• SaaS offers a more cost-effective as well as more flexible way by which organizations will access software products without having to manage the infrastructure or software maintenance.

Credit: The Economic Times

Economy

1. Rupee Down again

Context:

The rupee plummeted to a two-week low upon closing at 87.34 to the US dollar, down 0.52% from the previous close of 86.88.

Reasons Behind Rupee Depreciation

On-Going Strong Demand for Dollars in the NDF Market

• In the NDF market, there was strong demand for the dollars without deliverability due to maturities of $34 billion against the rupee.
• This was downward historical rupee pressure in weakness, as it became the worst-performing currency in Asia.

Limited Effect from RBI Intervention

• The aforementioned RBI intervention was carried out in the morning between 87.30 Rs. and 87.35 Rs. in order to manage the rupee volatility and to gainfully exit the market for the time being on this subject.
• However, the further weakening of the rupee was sustained as no intervention was visible during the day.

General Broader Market Trends and Other Global Factors

• The dollar index, meanwhile, declined near a 4-month low (103.7) in response to soft US employment data and uncertainties arising from geopolitical vulnerabilities to the global markets.
• The offshore Chinese yuan was down 0.2% on the back of deflationary worries emanating from China, thus pouring further negative weight on the Asian currencies.
• Added to this was the concern over any retaliatory tariffs that the U. S. may impose on the imports from India, further compounding the downside risks.

Consequences for the Indian Markets and Economy

• Increased Import Costs
  • While the expense of import items such as crude oil is nearly doubled by depreciation of the rupee, inflationary considerations come into play.
• Action on the Part of the RBI
  • The interventions of the RBI would be more pronounced in the presence of hovering volatility.
• FII Outflows
  • Continuous FII sales are limiting rupee appreciation in the near term.

Outlook

In contrast, any intervention on the part of the RBI will stabilize the rupee if global risk sentiment improves. Debt holders will closely monitor U.S. trade policy and FII trends, since they will play a critical role in determining the movement of the rupee in the coming weeks.

2. Government Seeks ₹6.79 Trillion in Additional Expenditure

Context:

The Government requested Parliamentary approval for gross additional expenditures of ₹6.79 trillion and a total net cash outgo of ₹51,463 crore. Most of this expenditure will be completely offset by savings not exceeding ₹6.27 trillion from other ministries, and the resultant enhanced receipts and recoveries will ensure that there is no impact on the fiscal deficit.
So as to provide the possibility of absorbing such savings where a new service or instrument is involved, a token provision of ₹6,700,000 has also been incorporated.

Expenditure?

Expenditure is the act of spending money on goods, services, or activities. It can also refer to the total amount of money spent. 

How is expenditure recorded?

• Expenditure is recorded at the time of purchase. 
• An accountant or bookkeeper records an expenditure by showing proof of the sale, such as a sales receipt or invoice. 

Allocations Behind Any Additional Spending

Over and above 85% of the total net cash outgo, other spending allocations include:

• Fertiliser Subsidy: ₹12,000 crore for the Department of Fertilisers.
• Unified Pension Scheme (UPS): ₹7,000 crore under the overall limit of ₹13,449 crore allocated for pensions.
• Telecom and Defence: Noteworthy allocations for telecom and defence related pensions.

The first supplementary grant already provided for a net cash outgo of ₹44,123 crore earlier in FY25.

Fiscal Impact and Government Strategy

• The nominal GDP estimate has been revised upwards by 2.1% and has created some fiscal room for the economy, which has helped in restraining the fiscal deficit to GDP ratio currently at 4.8% for FY25.
• Such additional spending, though, will push up the fiscal deficit number beyond the revised estimate of ₹15.7 trillion, although analysts expect the deficit to remain at around 4.7% of GDP.

Fiscal Outlook

• Aditi Nayar (ICRA) opines that savings in expenditure from other ministries will provide a cushion to contain the total government spending from going out of control in FY25.
• The revised target for fiscal deficit is still well placed due to higher revenue collection and controlled expenditure in other areas, despite the fresh outgo.

The second supplementary demand for grants signifies the Government’s strategic approach toward managing fiscal preferences, maintaining allocations of utmost priority while keeping a perspective of general fiscal discipline.

3. AI in Inflation Forecasting

The Evolution of Inflation Challenges

• Historical Shift in Central Bank Policy
  • Pre-Global Financial Crisis: Struggled to control inflation (fear of wage hikes, fiscal expansion).
  • Post-Pandemic (2022-2025): Struggling to push inflation down amid volatile global trends.
• Factors Influencing Inflation Forecasting:
  • Globalization & Labor Markets: Entry of low-wage workers complicates wage-inflation dynamics.
  • Macroeconomic Uncertainty: Geopolitical issues (e.g., trade wars, oil price fluctuations) impact inflation.

RBI’s Approach to Inflation Forecasting

• India’s Inflation Landscape:
  • CPI inflation highly impacted by food prices, global commodity trends, and gold purchases by central banks.
  • Emerging monetary policy challenges require advanced forecasting techniques.
• AI’s Role in Enhancing Economic Research:
  • RBI Governor has emphasized the need for advanced tools in forecasting inflation trajectories.

How Large Language Model (LLM) Can Revolutionize Inflation Forecasting

A. Nowcasting & Real-Time Data Analysis

• Traditional forecasting relies on numerical data, whereas AI-driven LLMs analyze:
  • News articles, reports, social media trends to identify inflationary trends.
  • “Nowcasting” short-term inflation predictions more accurately.

B. AI-Driven Forecasting Accuracy

• Studies like Faria-e-Castro & Leibovici (2024) at the Fed show that LLMs:
  • Provide lower mean-squared errors in inflation forecasts.
  • Outperform traditional Survey of Professional Forecasters methods.
• Bybee (2023) used GPT-3.5 to simulate economic expectations successfully.

C. AI Agents in Inflation Expectation Surveys

• AI-driven survey simulations can provide insights into household inflation expectations:
  • Households’ expectations are crucial for monetary policy but are costly to survey.
  • AI agents can simulate consumer responses, providing cost-effective alternatives.

AI’s Expanding Role in Economic Decision-Making

• Rise of Generative AI (GAI):
  • 40% of US adults (by Aug 2024) use AI, with 28% using it at work (Bick et al., 2024).
  • Half of US households now use AI tools (Aldasoro et al., 2024).
• AI’s Influence on Policy:
  • As AI-assisted decision-making increases, central banks must adapt AI-driven forecasting models.

Challenges & Limitations of LLMs in Forecasting

• Data Control Issues:
  • LLMs are trained on external datasets; central banks lack control over training data.
  • Training data is not timestamped, making real-time retraining difficult.
• Model Replicability Issues:
  • Publicly available LLMs are retrained periodically, posing challenges in maintaining consistent results.
• Despite these caveats, LLMs offer a new frontier in economic forecasting.

AI Success Story: Predicting Indian Elections (2024)

• AI-based election forecasting outperformed traditional exit polls:
  • Kcore Analytics used AI-driven analysis of social media trends to predict results.
  • Incorporated economic sentiment, including inflation, into its predictive model.
• Lesson: AI can enhance economic and political forecasting, influencing decision-making.

The Future of AI in Inflation Forecasting

• AI-driven inflation forecasting is a game-changer, offering:
  • Faster, more accurate predictions using real-time data.
  • Cost-effective alternatives to traditional surveys.
  • Enhanced economic policymaking tools for central banks.
• Despite limitations, integrating LLMs into monetary policy is a logical next step.

Source: BS

Agriculture

1. AAHAR 2025

Context:

The Agricultural and Processed Food Products Export Development Authority (APEDA) took center stage at the 39th edition of AAHAR 2025, held from March 4–8, 2025, at Bharat Mandapam, New Delhi. The event, organized by the India Trade Promotion Organization (ITPO), underscored India’s growing influence in the global agriculture and food processing industry.

Diverse Participation Reflecting India’s Agri-Food Strength

APEDA facilitated the participation of 95 exhibitors, including:

• Farmer Producer Organizations (FPOs) and Farmer Producer Companies (FPCs)
• Entrepreneurs and manufacturing firms from 17 states and multiple Union Territories

This broad representation highlighted India’s regional agricultural diversity and its evolving food processing sector, emphasizing innovation, sustainability, and quality standards.

Focus on Sustainable and Plant-Based Food Innovations

During the ‘India Plant-Based Foods Show’, APEDA Chairman Shri Abhishek Dev emphasized:

• India’s expanding agricultural and processed food exports
• The rising global demand for plant-based food as a sustainable alternative
• The potential of millets and organic products to meet international sustainability goals

Showcasing India’s Processed Food Diversity

The APEDA Pavilion featured a wide array of organic and processed food categories, including:

• Millets & value-added products
• Frozen & canned foods (vegetarian & non-vegetarian)
• Dehydrated onions & garlic
• Flavored cashews, confectionery & chocolates
• Edible oils, cereals, spices & health-centric beverages

The Pavilion served as a hub for industry professionals, fostering networking and trade collaborations.

Culinary Showcase & Live Demonstrations

A wet sampling area, led by an Indian chef, provided live demonstrations of healthy millet-based cuisines such as:

• Millet mathri pie, foxtail corn risotto, ragi & mango smoothie
• Aromatic biryani, brown rice porridge, and other nutritious dishes

This interactive segment attracted strong footfall, offering attendees a first-hand experience of India’s evolving culinary innovations.

Key Inaugurations & Industry Engagement

• The event was inaugurated by Hon’ble Union Minister of Food Processing Industries, Shri Chirag Paswan.
• The APEDA Pavilion was launched by APEDA Chairman, Shri Abhishek Dev, alongside officials from FSSAI and other regulatory bodies.

Their participation reinforced India’s commitment to exporting high-quality, sustainable food products, positioning the country as a key player in global food markets.

Strategic Takeaways & Future Outlook

• Enhanced international trade collaborations through APEDA’s export-ready product showcase.
• Strong investor and buyer interest in plant-based, organic, and processed foods.
• Emphasis on sustainability, with a growing focus on millets and plant-based food innovation.
• Potential regulatory refinements to further facilitate the export of Indian agricultural products.

APEDA’s participation at AAHAR 2025 marked a significant milestone in India’s food export strategy, demonstrating its agricultural prowess and commitment to sustainable food production. The event further cemented India’s role as a global leader in processed and organic food exports, opening doors for enhanced trade partnerships and investment opportunities.

Source: PIB

Facts To Remember

1. Following review, U.S. to scrap 83% of USAID programmes, says Rubio

Secretary of State Marco Rubio said on Monday that after a six-week review, the U.S. was cancelling 83% of programsmes at USAID. “The 5,200 contracts that are now cancelled spent tens of billions of dollars in ways that did not serve, (and in some cases even harmed), the core national interests of the U.S”.

2. Former banker Carney to be Canada PM

Former central banker Mark Carney claimed a landslide victory to be elected chief of Canada’s Liberal Party and the country’s next PM.

3. President appoints Justice Bagchi to SC

The President on Monday appointed Calcutta high court’s Justice Joymalya Bagchi to Supreme Court. Justice Bagchi is scheduled to become the Chief Justice of India on May 26, 2031, the second from Calcutta HC to rise to the top post in 40 years.

4. Govt advertises for Irdai chief post

Finance ministry has invited applications for the post of chairman of the Insurance Regulatory and Development Authority of India (Irdai), with the position set to fall vacant on March 13, 2025, after Debasish Panda’s tenure ends. 

5. RBI to conduct $10 billion forex swap on March 24

The Reserve Bank of India on Monday said it would conducta forex swap of $10 billion later this month to inject liquidity into the banking system. The USD/INR BuySell swap auction of $10 billion fora tenor of thirty six months would be conducted on March 24, the RBI said ina statement.

6. Sun Pharma to buy US oncology firm for $355 million

Sun Pharmaceutical Industries Ltd has agreed to buy US-based immunotherapy and oncology firm Checkpoint Therapeutics Inc. for an upfront payment of $355 million, as India’s largest drugmaker bolsters its specialty therapy portfolio.

7. ICICI Securities Delisting Upheld by NCLAT

Delhi Bench of NCLAT: Rejected all appeals challenging ICICI Securities’ delisting.

Reason for Appeal: Concerns over minority shareholder interests and share-swap ratio fairness.

8. PM Modi praises Indian diaspora for performing Geet-Gawai during his welcome in Mauritius

Prime Minister Narendra Modi today expressed his profound gratitude for the warm welcome from the Indian community in Mauritius. 

9. Govt to open daycare cancer centres in every district within 3 years: Health Minister

The Union Government will open daycare cancer centres in every district of the country within the next three years. Replying to a supplementary in Rajya Sabha.

10. Indian Wells Open: Yuki Bhambri & André Göransson advance to pre-quarterfinals in Men’s Doubles 

In Tennis, India’s Yuki Bhambri and his companion André Göransson of Sweden have advanced to the Men’s Doubles pre-quarterfinals of the Indian Wells Open in California, United States. 

11. Saudi Crown Prince meets Ukrainian President Zelensky, US Secretary of State Rubio

Saudi Crown Prince Mohammed bin Salman met with Ukrainian President Volodymyr Zelenskyy and US Secretary of State Marco Rubio in Jeddah last evening. Both Zelenskyy and Rubio arrived in Saudi Arabia ahead of the US-Ukraine talks, reportedly scheduled.