Daily Current Affairs (DCA) 1 April, 2025

Daily Current Affairs Quiz
1 April, 2025

International Affairs

1. Trump’s Announcement on Reciprocal Tariffs

Context:

US President Donald Trump declared that the reciprocal tariffs, scheduled to be announced on April 2, would apply to all countries without exception. This came as a significant blow to expectations for tariff relief for India and other nations.

• Trump emphasized that the tariffs would apply to every country the US is negotiating with, clarifying that there would be no special exemptions.
• The tariffs would be “generous”, and Trump stated that the US would be much “nicer” in its approach compared to how other nations treated the US in trade negotiations.

Context of the Announcement

• Ongoing Negotiations: The announcement comes during ongoing talks between the US and various nations, including India, regarding tariff concessions under a potential Bilateral Trade Agreement (BTA).
• Global Economic Impact:
  • Stock Market Declines: Following the announcement, global stock indices experienced a decline, with Nasdaq Composite down by 1.9%, S&P 500 down by 0.8%, and Dow Jones remaining unchanged.
  • In Europe, major indices like CAC 40, Euro Stoxx 50, and DAX all saw declines of 1.5-1.7%. Similarly, Asian markets including Taiwan’s TAIEX, Nikkei 225, and Kospi dropped between 3-4%.
  • Gold Prices: As a result of the uncertainty and market reaction, gold prices surged to new highs, signaling an increased demand for safe-haven assets.

Trump’s Perspective on Trade

• Asia’s Trade Practices: Although not naming any countries specifically, Trump pointed to Asian trade practices, stating that no country has treated the US fairly or nicely in trade.
  • He implied that the US would be “much more generous” in its approach towards these nations, suggesting an aggressive stance in upcoming trade negotiations.

Impact on India

• The announcement casts a shadow over India’s trade relations with the US, especially as both nations were negotiating a Bilateral Trade Agreement (BTA). The potential for new tariffs could affect India’s exports and further complicate the trade dynamics between the two countries.

The US’s broad application of reciprocal tariffs is causing significant global uncertainty, with major markets reacting negatively, while the full impact on India’s trade will unfold in the coming months.

BS

2. NATO’s Baltic Sentry

Context:

The recent mission of the HNLMS Luymes, under Belgian Navy Commander Erik Kockx, in the Baltic Sea marks a significant milestone in NATO‘s Baltic Sentry operation. This mission aims to secure critical undersea infrastructure such as pipelines and cables, ensuring protection against sabotage and damage, a task made more urgent by increased tensions in the region.

Operation Baltic Sentry

• Mission Overview
  • Baltic Sentry was launched by NATO in January 2025 to enhance the security of the Baltic Sea, particularly focusing on subsea infrastructure such as undersea cables and pipelines. This mission comes after several incidents where ships, suspected to have links to Russia, damaged critical infrastructure by dragging anchors.
• NATO’s Surveillance Strategy
  • The mission utilizes a combination of naval ships, drones, surveillance planes, and advanced technologies to monitor and secure the Baltic Sea. Currently, at least 10 NATO ships are actively engaged in the operation, working alongside forces from member countries bordering the Baltic. Additionally, undersea drones and surveillance planes from various NATO nations further strengthen monitoring efforts.

Technology and Innovation in Surveillance

• AI and Data Integration
  • NATO’s new undersea infrastructure center has created a unified map of the Baltic Sea floor, incorporating artificial intelligence (AI) to track shipping patterns and detect unusual behavior. The AI-powered application, Mainsail, analyzes traffic patterns and helps spot anomalies that might indicate sabotage or suspicious activity.
• NATO’s Advanced Equipment
  • Ships like the HNoMS Hinnoy and HNLMS Luymes are equipped with cutting-edge sonar, submersible probes, and maritime drones, all crucial for monitoring the seabed and inspecting pipelines and cables. The Luymes, for example, is a Royal Dutch Navy hydrographic survey ship that is usually used for sea-bottom inspections but also doubles as a surveillance vessel in this operation.

NATO’s Approach to Deterrence and Prevention

• Preventing Damage
  • The Baltic Sentry operation is designed to deter sabotage and prevent damage rather than respond to it after it occurs. This shift in focus is modeled on the philosophy of police forces, where the mere presence of surveillance can encourage better behavior. As observed by Commander Kockx, ships alter their behavior upon noticing the surveillance, indicating that the operation is already having a preventative impact.
• The Role of Human and AI Vigilance
  • While AI assists in analyzing data and detecting suspicious patterns, human vigilance remains crucial. Officers on NATO ships continue to conduct regular drills and maintain operational readiness, ensuring swift responses to any identified threats. The mission’s ability to reduce response time from 17 hours to just one hour highlights the success of this coordinated effort.

International Collaboration and Challenges

• Multinational Coordination
  • Baltic Sentry relies on collaboration among NATO members and non-NATO countries, which introduces a complex array of authorities and responsibilities. However, this international cooperation allows for a comprehensive approach to maritime security, ensuring that all relevant organizations ranging from coast guards to commercial entities work together seamlessly.
• Deterrence Over Policing
  • The goal of the operation is not to monitor every inch of the sea but to create a deterrent effect. The mere knowledge that NATO is actively surveilling the region is expected to dissuade potential perpetrators from attempting sabotage or illegal activity on subsea infrastructure.

Future Outlook

• Continued Vigilance
  • While Baltic Sentry has made significant strides in ensuring the security of the Baltic Sea, ongoing surveillance, technological innovation, and international cooperation will be essential for its continued success. The presence of NATO forces, combined with advanced AI and surveillance capabilities, will continue to act as a significant deterrent to potential threats.
• Wider Implications
  • NATO’s efforts in the Baltic could serve as a model for securing other vital maritime regions. The integration of AI and real-time surveillance systems could be replicated in other areas with strategic infrastructure, contributing to broader global security.

NATO’s Baltic Sentry operation, through its combination of human expertise, technological innovation, and international cooperation, is proving to be an effective initiative in securing critical infrastructure in the Baltic Sea. By focusing on deterrence and prevention, the operation seeks to ensure the safety and integrity of subsea infrastructure, contributing to the broader stability and security of the region.

Mint

3. The Arctic Region

Geographic Location:

• The Arctic is a polar region located at the northernmost part of Earth.
• It spans parts of several countries, including northern Norway, Sweden, Finland, Russia, the United States (Alaska), Canada, Denmark (Greenland), and Iceland.
• It includes areas like:
  • Norway: Nordland, Troms, Finnmark, Svalbard, Jan Mayen
  • Sweden: Västerbotten, Norrbotten, Lappland
  • Finland: North Ostrobothnia, Kainuu, Lappi
  • Russia: Murmansk, Siberia, Nenets Okrug, Novaya Zemlya
  • United States: Alaska
  • Canada: Yukon, Northwest Territories, Nunavut
  • Denmark (Greenland): Part of the Danish Realm
  • Iceland: Grímsey and Kolbeinsey
• The Arctic Ocean and adjacent seas are integral to the region’s geography.

Characteristics of the Arctic Region

Climate and Terrain:

• The Arctic experiences seasonally varying snow and ice cover, with predominantly treeless permafrost under the tundra.
• Land is often characterized by vast stretches of ice and snow with extreme cold temperatures, particularly in the winter months.
• The terrain is largely tundra, a cold, treeless region, with some ice-covered seas that freeze seasonally.

Flora and Fauna:

• Marine Life: The Arctic Ocean is home to zooplankton, phytoplankton, fish, and marine mammals such as whales, seals, and walruses.
• Land Animals: The region supports animals adapted to the cold, such as polar bears, Arctic foxes, and reindeer.
• Birds: Many bird species, including migratory birds, thrive in the Arctic.
• Plant Life: Arctic plants are hardy and adapted to the cold, such as mosses, lichens, and low-growing shrubs.

Cultural and Societal Aspects

• The Arctic indigenous peoples have developed unique ways of life suited to the harsh conditions. These include the Sámi people in Scandinavia, the Inuit in Canada and Greenland, and the Chukchi, Nenets, and other groups in Russia.
• These communities rely on traditional practices such as hunting, fishing, and herding for subsistence, along with modern adaptations to the challenging environment.

Geopolitical Importance:

• The Arctic region is of growing geopolitical importance due to its strategic location, potential natural resources (such as oil and gas), and changing climate conditions, which are making the region more accessible.
• Climate change is leading to the melting of Arctic ice, opening new shipping routes and increasing the potential for resource extraction.

Why is the Arctic Gaining Attention?

• Climate Change Impact: Ice caps are melting rapidly, exposing new shipping routes and untapped natural resources.
• Resource Reserves: Estimated 13% of the world’s undiscovered oil and 30% of untapped natural gas are in the Arctic.
• Strategic Trade Routes: The Northeast Passage along Russia’s Arctic coast could shorten trade routes between East Asia and Europe by 8,000 km.

Who Controls the Arctic?

• Eight Arctic Nations:
  • Canada, Denmark (via Greenland), Finland, Iceland, Norway, Russia, Sweden, and the U.S.
  • These nations form the Arctic Council, responsible for scientific research, environmental protection, and indigenous rights.
• Territorial Claims:
  • UNCLOS allows nations to extend seabed claims beyond 200 nautical miles if they prove it’s a natural extension of their continental shelf.
  • Canada, Denmark, and Russia have overlapping claims.
  • Russia has the largest Arctic fleet, including nuclear-powered icebreakers.

What are the Main Sources of Tension?

• Northwest Passage Dispute:
  • Canada: Considers it part of its internal waters and wants control.
  • U.S.: Claims it’s an international waterway with free navigation rights.
• U.S.-Denmark-Greenland Dispute:
  • The U.S. tried to buy Greenland, citing national security concerns.
  • Denmark reinforced Greenland’s security in response.
• Russia vs. NATO Tensions:
  • Russia has military bases in the Arctic and conducted joint naval drills with China in 2022.
  • Russia’s claim over Svalbard (Norwegian island) raised security concerns.
  • Finland and Sweden joined NATO, increasing Western military presence.
• China’s Arctic Ambitions:
  • Declared itself a “Near-Arctic State” in 2018.
  • Plans to build nuclear icebreakers and access Arctic trade routes with Russia.

What Lies Ahead?

• Increasing Military Presence: NATO and Russia are ramping up Arctic operations.
• Strategic Resource Control: Countries are racing to secure Arctic oil, gas, and rare earth elements.
• Geopolitical Realignment: The Arctic’s future will depend on evolving alliances and regional claims.

The Arctic, once a remote and peaceful region, is now at the heart of global power struggles, with military, economic, and environmental stakes higher than ever.

TH

National Affairs

1. Dhruva Space and Infostellar Collaborate

Context:

Hyderabad-based Dhruva Space and Japan-based Infostellar have announced a collaboration to explore integration of the Dhruva Space’s 3.8m S&X-band ground station antenna in Hyderabad into Infostellar’s StellarStation, expanding its global ground station network and enhancing satellite communications interoperability.

Key Highlights

• Partnership Announcement
  • Hyderabad-based Dhruva Space and Japan-based Infostellar have partnered to integrate Dhruva Space’s 3.8m S&X-band ground station antenna in Hyderabad with Infostellar’s StellarStation platform.
  • This collaboration aims to expand the global ground station network and enhance satellite communications interoperability.
• Integration with StellarStation
  • Infostellar will onboard Dhruva Space’s antenna onto its cloud-based StellarStation platform.
  • The move will enable global accessibility for enhanced satellite ground segment services.
  • The integration is subject to necessary licensing approvals from the Indian government.
• Significance of Dhruva Space
  • Dhruva Space is India’s only commercial ground station solutions provider.
  • This partnership strengthens India’s role in the global satellite communication ecosystem.

This collaboration marks a significant step in advancing satellite communication infrastructure and boosting international cooperation in the space sector.

TH

2. 800-Year Increase in Monsoon Rainfall in Western Ghats

Context:

A recent study by researchers at the Central University of Kerala (CUK) has revealed a significant increase in monsoon rainfall in the Western Ghats over the past 800 years. By reconstructing Indian monsoon patterns over the last 1,600 years, the study provides key insights into long-term climate variations in the region.

Key Findings

Research Insights

• A study conducted by researchers at the Central University of Kerala has revealed a steady increase in monsoon rainfall in the Western Ghats over the past 800 years.
• The research reconstructed Indian monsoon patterns over the last 1,600 years, offering valuable insights into long-term climate variations.

Impact of Intensifying Monsoon

• The increasing monsoon intensity is linked to more frequent and extreme rainfall events in recent years.
• The study highlights how disasters such as the 2018 and 2019 landslides and floods in Wayanad (Kerala) and Kodagu (Karnataka) may be part of this broader climatic trend.

Urgent Need for Climate Resilience

• The research emphasizes the need for better disaster preparedness, particularly in vulnerable regions of the Western Ghats.
• Sustainable land-use planning is essential to prevent ecological degradation and reduce the risk of landslides and floods.
• Long-term environmental policies must focus on mitigating the risks posed by intensifying monsoon patterns.

Research Methodology

• The study used a multidisciplinary approach, incorporating geological and climate analysis.
• Researchers analyzed lake sediments from Cheppandikere Lake near Madikeri, Karnataka, to trace monsoon intensity trends over several centuries.

Why This Study Matters?

This research provides critical historical evidence of increasing monsoon intensity in the Western Ghats, reinforcing the urgency of climate adaptation measures. With extreme weather events becoming more frequent, proactive conservation strategies, scientific planning, and sustainable development are essential to minimize environmental and human risks.

TH

3. Delimitation and Financial Devolution

Overview

• The ongoing discourse on delimitation and financial devolution has led to intense political debate in Parliament and State Assemblies.
• Concerns are rising over its impact on India’s federal structure, particularly in terms of political representation and resource allocation.

Historical Context of Delimitation in India

• From 1951 to 1971, Lok Sabha seats increased in proportion to population growth.
• Population representation per seat rose from 7.3 lakh in 1951 to 10.1 lakh in 1971, when the seat count was fixed at 543.
• This freeze on seat allocation, in place since 1971, is set to expire in 2026.

Projected Changes in 2026

• If trends continue, the number of seats may rise to 753, with an average of 20 lakh people per seat.
• This could reduce the political representation of peninsular States, as their population growth rates have been lower than those of northern States like Madhya Pradesh, Uttar Pradesh, and Bihar.

Concerns Over Political Representation

• The 15th Finance Commission revised population-based financial devolution using 2011 Census data instead of 1971 data.
• A weightage for demographic performance was introduced to balance States with lower population growth but better development metrics.
• The core question remains: Should population alone determine representation?

Rethinking the Approach to Delimitation

• Instead of absolute population numbers, alternatives such as population density should be considered.
• The North-East already follows this principle, with smaller population sizes but greater seat representation.
• Even if the status quo is maintained, the overall number of seats should increase to reflect India’s growing population.

Limitations of a Purely Population-Based Approach

• The per capita approach to resource allocation and representation is misleading as it does not account for regional disparities.
• Factors such as gender and caste-based reservations further complicate the delimitation process.
• The demographic composition of a population is just as important as its size when determining entitlements, rights, and representation.

The Need for a Demographic Outlook

• A scientific, demographic-based approach should replace a simple headcount method.
• Consideration must be given to regional characteristics, historical trends, and socio-economic factors in political representation and financial devolution.
• Without such a nuanced approach, the federal balance of India could be severely disrupted.

The upcoming delimitation exercise must go beyond raw population figures and incorporate demographic, economic, and regional factors. A balanced approach is needed to prevent political marginalization and ensure equitable representation for all States while maintaining India’s federal integrity.

4. Assurances in Parliament

Context:

Since 2014, the Ministry of Home Affairs (MHA) made 421 assurances in the Lok Sabha and 338 in the Rajya Sabha. However, the MHA dropped nearly 15% and 12% of these assurances, the highest percentage among all Ministries.

Understanding Parliamentary Assurances

• An assurance is a commitment made by a Ministry during a parliamentary discussion that requires further action and reporting back to the House.
• If an assurance is not fulfilled within three months, the Ministry must apply for an extension or request for it to be dropped.
• The Committee of Government Assurances, formed in 1953, monitors the implementation of these commitments.

Status of Assurances in Lok Sabha

• As of March 24, 2024, nearly 65% of assurances made in 2024 are still pending.
• Pending assurances from previous years:
  • 2023: 44% still pending
  • 2022: 18% still pending
• Example: A March 2023 question by Congress MP B. Manickam Tagore about Adani-owned ports remains unresolved.

Status of Assurances in Rajya Sabha

• As of March 24, 2024, nearly 66% of assurances made in 2024 are still pending.
• Pending assurances from previous years:
  • 2023: 36% still pending
  • 2022: 24% still pending
• Between 2014 and 2022, the share of dropped assurances ranged between 2% and 15% in Rajya Sabha.

Ministries with the Highest Dropped Assurances

• Home Affairs Ministry (Highest)
  • Examples of dropped assurances:
    • 2014: Question on terrorist attacks and arrests (Sirajuddin Ajmal).
    • 2014: Inquiry into out-of-turn promotions and gallantry awards for policemen involved in fake encounters (Asaduddin Owaisi).
    • 2019 & 2020: Questions on the Pulwama terror attack (Manish Tiwari).
• Other Ministries among the Top Five:
  1. Finance
  2. Law and Justice
  3. Road Transport and Highways
  4. Railways

The high rate of dropped assurances, especially by the Home Affairs Ministry, raises concerns about government accountability. Pending and dropped assurances highlight the gap between commitments and execution, impacting public trust and policy transparency. The Committee of Government Assurances needs to enforce stricter oversight to ensure that promises made in Parliament translate into real action.

TH

5. Bipolar Disorder

What are Mood Disorders?

• Mood disorders are characterized by pathological alterations in one’s mood, energy, and activity levels, significantly affecting daily functioning.
  • Major Depressive Disorder (MDD): Persistent sadness, loss of interest in activities, fatigue, cognitive difficulties, feelings of hopelessness, and suicidal thoughts.
  • Bipolar Disorder: Involves extreme mood fluctuations between depression and mania, the latter being characterized by elevated mood, increased energy, decreased need for sleep, and impulsivity.

Causes of Mood Disorders

• The genesis of mood disorders is multifactorial and influenced by a combination of genetics and environmental factors.
  • Genetic vulnerability: Mood disorders, particularly bipolar disorder, tend to run in families. The genetic contribution to bipolar disorder is significant, with heritability ranging between 60-85%.
  • Gene-environment interactions: Environmental stressors, such as childhood abuse, trauma, financial difficulties, and significant life events, interact with genetic predispositions, influencing the onset of mood disorders.
    • Proximal stressors: Include adverse childhood experiences like abuse, neglect, or domestic violence.
    • Distal stressors: Include adulthood challenges such as financial difficulties, bereavement, and trauma.

The Role of Chronic Stress

• Chronic stress leads to HPA axis dysregulation, where the body’s response to stress (via cortisol release) remains active even after the stressor ends, leading to a chronic low-grade inflammatory state.
• Bipolar disorder is particularly sensitive to stress, with depressive relapses linked to negative life events and manic relapses associated with goal-attainment events.

Circadian Functioning in Bipolar Disorder

• Bipolar disorder is closely linked to disruptions in the circadian system, which regulates the body’s internal clock. Circadian rhythms such as body temperature and melatonin secretion often become disrupted during mood episodes.
  • The relationship between these disturbances and mood dysfunction is still under study, as researchers are unsure whether these circadian disruptions cause or result from mood disorders.

Diagnostic Challenges

• Bipolar disorder often begins with depressive episodes, and it can take 6 to 10 years from the first symptoms to an accurate diagnosis.
• Hypomanic episodes may go unnoticed because individuals may not seek help during these phases, sometimes enjoying the elevated mood.
• Clinicians look for:
  • Early-onset depression.
  • Family history of bipolar disorder.
  • Unusual responses to antidepressants.
  • Substance misuse or attention deficit disorder.

Bipolar disorder and other mood disorders are complex and multifactorial. While genetic factors play a significant role, environmental stressors and disruptions in circadian rhythms also contribute to the onset and progression of these disorders. Early recognition and intervention are critical, and with appropriate treatment, individuals with mood disorders can lead fulfilling, productive lives.

TH

Banking/Finance

1. The Impact of Excessive Regulatory Involvement

Context:

The forex liability accounting fiasco at IndusInd Bank has attracted widespread media attention, particularly concerning the reappointment of its managing director (MD) for a one-year term, rather than the requested three years. This decision mirrors a similar situation from the previous year, raising questions about the rationale behind such truncated approvals.

Recent Issues with MD Appointments

• The reappointment of the MD at IndusInd Bank follows a trend of curtailed tenure approvals. The rationale behind approving an individual for a shortened term, despite previous concerns, remains unclear.
• A similar incident occurred in 2023 at Kotak Mahindra Bank, where an interim MD appointment was approved for just two months, despite the initial request for a four-month term.
• Financial regulators, such as Sebi and Irdai, also follow practices of approving MD appointments in piecemeal terms, often resulting in entities operating without an MD for extended periods, sometimes up to six months.

Regulatory Involvement in Appointments

• Financial regulators have increasingly asserted their control over MD appointments and reappointments, rejecting candidate panels and altering remuneration structures.
• Private sector entities are governed by their boards but face significant regulatory oversight in key appointments, including the CEO, executive directors, and independent directors.
• Regulators also participate in selecting CMDs and whole-time directors for public sector banks and insurance companies, sometimes appointing their nominees to boards.

The Issue of Regulatory Overreach

• Excessive regulatory involvement in the appointment process has led to unintended consequences:
  • Uncertainty over leadership impacts business plans.
  • The regulatory approval process delays appointments and undermines accountability for governance lapses.
  • This involvement risks creating moral hazards, where entities rely too heavily on regulators to manage their governance processes.

Public vs Private Sector Dynamics

• Public sector entities face an additional challenge in leadership appointments, as 42% of director positions on public sector bank boards are vacant, primarily due to delays in the Appointments Committee of the Cabinet, headed by the Prime Minister.
• In contrast, private sector boards can act independently, but their appointments are subject to scrutiny by regulatory bodies, creating a perception of non-neutrality based on ownership type.

Consequences of Expanded Oversight

• Uncertainty in leadership can disrupt the operations of regulated entities, impacting business plans and shareholder confidence.
• A talent drain is emerging, with skilled professionals increasingly unwilling to join boards or leadership positions in heavily regulated entities.
• Listed entities are particularly sensitive to leadership uncertainties, which can adversely affect their market performance.

The Need for a Balanced Approach

• Regulatory oversight should act as a safeguard, not a substitute for internal governance.
• Accountability should rest with the boards and management of these entities, with strict penalties for governance failures.
• Deregulation in the financial sector should empower entities to act as responsible adults, allowing them to make decisions without excessive regulatory interference.

The current approach to regulatory involvement in executive appointments in the financial sector creates instability and undermines the autonomy of regulated entities. By focusing on internal governance and holding boards accountable, regulators can help create a more resilient financial sector that operates efficiently and with long-term stability.

2. IndusInd Bank’s Aggressive Fundraising

Context:

IndusInd Bank raised a substantial ₹16,550 crore through the Certificate of Deposit (CD) market in March after disclosing discrepancies in its derivatives portfolio. The move was a response to a flight of deposits, signaling a significant shift in its fundraising strategy.

Details of Fundraising

• IndusInd Bank’s CD Issuances:
  • March 10: Raised ₹1,890 crore by issuing 12-month CDs at a coupon rate of 7.75%.
  • On the same day, the bank revealed discrepancies in its derivatives portfolio, which would reduce its net worth by 2.35%.
  • To address these issues, the bank appointed an external agency for a review of the loss estimate and later decided to hire an independent firm to conduct a comprehensive investigation.
  • Subsequent Week: The bank raised an additional ₹11,000 crore through CDs with coupon rates ranging from 7.8% to 7.9%, marking a 15 basis point increase compared to the previous week’s rates.

Reason for Increased Subscription

• Attractive Yields: The higher yields offered by IndusInd Bank (7.75% to 7.9%) compared to those of public-sector banks (which were in the range of 7.5% to 7.6%) created an opportunity for these banks to secure a favorable spread over their borrowing costs.
  • A treasury official from a large public-sector bank noted that the higher rates made IndusInd Bank’s CDs particularly attractive.

Implications

• Investor Confidence: Despite the bank’s internal findings revealing discrepancies in its derivatives portfolio, the aggressive fundraising and high demand for its CDs suggest that investors, particularly public-sector banks, were not overly deterred due to the higher returns.
• Long-Term Impact: The ongoing investigation into the discrepancies will be critical in determining the long-term impact on IndusInd Bank’s reputation and financial stability.

BS

3. Sebi Considers Direct Access for Foreign Investors in Indian Stock Market

Background and Proposal:

• The Securities and Exchange Board of India (Sebi) is exploring options to expand the ownership base for local risk assets by allowing overseas individuals to invest directly in India’s primary and secondary stock markets.
• Currently, foreign individuals can only invest in Indian markets through the Foreign Portfolio Investor (FPI) route.
• The proposal, discussed in a meeting with Sebi management and market participants, is still in the preliminary stages and would require approval from both the Finance Ministry and the Reserve Bank of India (RBI).

Current Investment Framework

• FPI Route: Foreign investors currently access Indian markets through the FPI framework, particularly Category II FPIs, which can invest after registering with Sebi and using a local sub-custodian.
• Direct Investment Proposal: Sebi is considering allowing foreign individuals to directly open brokerage accounts and invest in listed Indian stocks, bypassing the FPI intermediary route. This could potentially ease compliance requirements for such investors.

Potential Benefits

• Broaden Investor Base: Allowing direct access could attract ultra-high-net-worth individuals (UHNWIs) from global financial hubs like London, New York, and Singapore, increasing foreign participation in Indian equities.
• Simplified Access: Direct market access could simplify the process, reducing reliance on institutional investors and promoting greater liquidity in Indian markets.
• Compliance Efficiencies: With direct access, investors may avoid the complex structures and costs associated with the current FPI route.

Challenges and Safeguards

• Regulatory Concerns: India has traditionally been cautious about allowing foreign individuals to invest directly due to the need for strict Know Your Customer (KYC) checks and anti-money laundering (AML) regulations.
• Potential Risks: Direct foreign investments might circumvent current checks, raising concerns about transparency and regulatory control. Additionally, overseas investors could potentially use Participatory Notes (P-notes), which have been criticized for lack of transparency.
• Foreign Direct Investment (FDI) Regulations: If an individual investor’s stake in a listed company crosses 10% through the FPI route, it is considered FDI, which is subject to sectoral restrictions.
• Compliance Framework: Experts emphasize the need for a robust regulatory framework to mitigate risks. Key measures would include ensuring proper tax payments, monitoring ownership limits, and addressing sector-specific restrictions under FDI regulations.

While Sebi’s proposal could potentially broaden foreign participation in Indian markets, any change in regulations will need to address key concerns related to compliance, tax, and transparency. The necessary safeguards and regulatory frameworks will be critical in ensuring the success of this initiative.

The Economic Times

4. Sebi Urged to Reconsider IPO Quota Rules

Context:

Investment banks handling Initial Public Offerings (IPOs) have recently called on the Securities and Exchange Board of India (Sebi) to reduce the quota of shares reserved for retail investors in large IPOs. The argument is that the 35% retail quota may be impacting the price discovery mechanism.

Key Arguments Against Current Quota System

• Under-Subscription Issues: The retail investor portion of some IPOs has not been fully subscribed, leading to inefficiencies in the listing process.
• Mutual Fund (MF) Activity: Mutual funds also participate in the portion reserved for institutional investors, further distorting the demand from the institutional segment.
• Imbalance in Quotas:
  • Retail investors, including High Net-Worth Individuals (HNIs), have a 50% allocation in IPOs. Additionally, MFs also participate, effectively increasing retail exposure.
  • Institutional investors, despite their 50% quota, have less influence on pricing due to the significant retail participation.

Counterarguments and Defenses

• Market Conditions Influence Retail Participation: Retail demand in IPOs is not only influenced by the allocation rules but also by broader market conditions. The under- or over-subscription of retail portions cannot solely determine the quota limits.
• Sebi’s Intervention Against Speculation: Sebi has previously stepped in to curb speculative activities in the IPO market, ensuring a more stable pricing mechanism.
• Improved Price Discovery: The recent period of retail investor disinterest can be linked to greater scrutiny and alignment between primary and secondary market pricing. This has led to a refined price discovery process.
• Institutional Demand Ensures IPO Success: Even when retail participation is weak, strong institutional interest has ensured that IPOs still get subscribed, demonstrating that price discovery is not hindered.

Potential Impact of Shrinking Retail Quota

• Who Benefits from Freed-Up Quota? If the retail quota is reduced, the question arises of who will benefit from the freed-up shares. Institutional investors already have adequate representation in IPOs.
• Concerns Over HNI Segment: The HNI segment has been seen as “frothy” and requires additional controls to prevent market distortions.
• Mutual Fund (MF) Participation: MFs engage in IPOs with an institutional approach. Treating this as disguised retail participation would be misleading, as MFs typically adopt a more strategic, professional investment approach.

The arguments for reducing the retail investor quota are weak, and it is not necessary to adjust the allotment rules. The current system, which ensures a significant retail allocation, sends a strong signal of regulatory intent and encourages broader retail participation in IPOs. Sebi should continue fostering a balanced market environment that safeguards investor interests and ensures the integrity of the price discovery process.

The Economic Times

5. Key Changes in Regulatory Guidelines Effective April 1, 2025

1. Priority Sector Lending (PSL) Guidelines by RBI

• Objective: To enhance credit flow to priority sectors and foster inclusive growth.
• Changes:
  • Increased Limits:
    • Education Loans: Raised limits to encourage access to education financing.
    • Renewable Energy Loans: Expanded support for financing renewable energy projects.
    • Affordable Housing Loans: Increased limits for loans under affordable housing schemes.
• Impact: These changes are expected to boost lending to key sectors that contribute to economic growth and social welfare.

Risk Weights on Bank Loans to Non-Banking Financial Companies (NBFCs)

• Change: The RBI has restored the risk weight on bank loans to NBFCs from 125% to 100%.
• Effective Date: April 1, 2025.
• Impact: This adjustment reduces the capital burden on banks lending to NBFCs, helping the sector deal with higher borrowing costs.

New Guidelines for UPI Transactions

• Implemented by: National Payments Corporation of India (NPCI).
• Changes:
  • Mobile Number Record Updates: Banks and Payment Service Providers (PSPs) must update mobile number records weekly to reduce transaction errors.
  • Opt-In Requirement: UPI users must explicitly opt-in for seeding their UPI numbers.
• Purpose: These guidelines are aimed at enhancing security and reducing fraudulent transactions in the UPI ecosystem.

ATM Charges Increased

• Change: The maximum fee that banks can charge for ATM cash withdrawals has been increased to ₹23.
• Effective Date: May 1, 2025.
• Previous Limit: ₹21.
• Impact: The fee hike may lead to increased costs for customers withdrawing cash from ATMs.

Revised SRO Guidelines for Micro Finance Institutions (MFIs)

• Implemented by: RBI-recognized Self-Regulatory Organization (SRO) for MFIs, MFIN.
• New Guidelines:
  • Borrower Limit: A borrower will not be able to obtain loans from more than four lenders simultaneously.
• Objective: This rule aims to reduce over-borrowing and mitigate the risk of excessive debt burdens on borrowers.

Prompt Corrective Action (PCA) Framework for Urban Cooperative Banks

• Change: The existing Supervisory Action Framework (SAF) for weak Urban Cooperative Banks (UCBs) will be replaced by the PCA framework.
• Effective Date: April 1, 2025.
• Key Criteria for PCA:
  • Consecutive Losses: Banks incurring losses for two consecutive years.
  • Net NPAs: Net Non-Performing Assets (NPAs) above 6% but below 9%.
  • Capital Adequacy Ratio (CAR): CAR up to 250 basis points below the required level.
• Impact: The PCA framework is designed to be principle-based, with fewer parameters, providing RBI with more flexibility to address financial stress in UCBs.

BL

6. RBI’s 90th Anniversary

Context:

On completing 90 years of its journey, the Reserve Bank of India (RBI) reaffirmed its commitment to ensuring monetary stability, trust in the financial system, and support for economic growth. The theme for this significant milestone, ‘Stability, Trust, and Growth’, encapsulates RBI’s core values, focusing on its role in maintaining a resilient financial ecosystem, enhancing public trust, and contributing to India’s economic prosperity.

Key Pillars of RBI’s Mandate

Price Stability

• Objective: To maintain stable prices and control inflation, which can erode the value of money, particularly affecting the poor.
• Target: Aiming for 4% CPI inflation with a 2% band.
• Approach: Ensuring moderate inflation to foster economic growth, avoiding the risks of both stagnation and excessive price volatility.
• Future Focus: A review of the flexible inflation targeting framework in collaboration with the government to create favorable conditions for both inflation control and economic growth.

Financial Stability

• Objective: Ensuring the health of financial institutions, which directly supports economic activities.
• Achievements: India has maintained a stable financial system with well-capitalized banks and Non-Banking Financial Companies (NBFCs).
• Focus: Ensuring financial institutions are resilient, managing risks effectively, and continuing to support real sector activities.

External Stability

• Objective: To maintain stable foreign exchange rates, crucial for importers, exporters, and investors.
• Strategy: Ensuring sufficient foreign exchange reserves and a manageable current account balance to weather external shocks.
• Outlook: RBI’s focus will be on managing excessive forex volatility, maintaining stability without targeting specific exchange rate levels.

The Importance of Trust

• Currency Integrity: Trust in currency is fundamental for its acceptance and use in daily transactions.
• Public Confidence: Trust ensures that individuals feel secure when depositing their money in banks and when relying on monetary policy to control inflation expectations.
• Financial Stability: Trust in financial institutions, payment systems, and settlement processes is integral to a stable financial system.
• Transparency and Independence: RBI strives for transparency in its operations and accountability while maintaining independence, which further strengthens public trust.

Growth and Development

• Vision: Aligning with the government’s goal of a Viksit Bharat (Developed India) by 2047, RBI aims to support inclusive and accelerated economic growth.
• Proactive Measures: RBI’s approach has been both pragmatic and visionary, including a strong response to the COVID-19 pandemic to stabilize the economy.
• Financial Inclusion: Expanding access to financial services, particularly for the underserved, is central to fostering equitable growth. RBI will continue to promote the use of technology to enhance lending capabilities and support sustainable growth.

Technological Advancements

• Key Innovations:
  • Unified Payments Interface (UPI)
  • Account Aggregator
  • Central Bank Digital Currency (CBDC)
• Focus: Leveraging technology to deepen financial inclusion, improve financial management, expand credit, and enhance customer service experience.
• Global Integration: Efforts to internationalize the rupee and globalize India’s payment systems are ongoing, aiming to make India’s financial infrastructure globally recognized.

RBI’s Future Commitment

• Values: RBI remains committed to upholding the values of integrity, transparency, accountability, and professionalism.
• Goals: The central bank continues to foster a safe, secure, and stable financial system that aligns with the aspirations of the nation.
• Rededication: As Mahatma Gandhi once said, “The future depends on what we do in the present.” RBI reaffirms its rededication to serving the nation, ensuring a robust financial system that supports the country’s growth and well-being.

In essence, as RBI celebrates its 90th anniversary, its focus on stability, trust, and growth continues to guide its path forward, ensuring a resilient financial system that contributes to the prosperity of India and its citizens.

TOI

Economy

1. Growth Outlook for Indian Economy

Economic Context and Challenges

• The Indian economy is entering the financial year 2024-25 with a cautious growth outlook due to reciprocal tariffs, trade uncertainties, and geopolitical tensions.
• US President Donald Trump has promised to impose reciprocal tariffs on trading partners starting April 2, following tariffs on steel, aluminium, and automobiles, which may affect global trade dynamics.
• Vivek Kumar, economist at QuantEco Research, noted that these risks could potentially slow global growth, which may indirectly impact India by 5-10 basis points (bps), with direct effects possibly being greater.

Growth Projections

• The Economic Survey projects India’s growth between 6.3% to 6.8% for FY26, while the Reserve Bank of India (RBI) estimates 6.7% growth.
• Some economists believe that the trade uncertainty will eventually subside, leading to greater clarity for investors, coupled with lower inflation and strengthening domestic consumption.

Positive Economic Indicators

• Rumki Majumdar, economist at Deloitte India, highlights factors such as:
  • Lower inflation
  • Stable global oil prices
  • Government tax stimulus
  • Lower borrowing rates
  • More liquidity
  • These factors, along with a more certain global environment, are expected to boost market sentiment in FY26.
• The service sector has shown positive performance and is expected to continue its growth. The manufacturing sector is also showing signs of improvement, which will likely contribute significantly to GDP growth.

Trade and Export Concerns

• Trade experts have raised concerns about the evolving geopolitical dynamics and escalating tariff wars, which could impact India’s exports.
  • According to Nomura, if India’s tariffs on US imports are 9.5% and the US tariffs on India are 3%, the reciprocal tariff could be around 6.5%. However, experts expect the US tariffs to be more broad-based and difficult to quantify.
• Biswajit Dhar, professor at Council for Social Development, warned that India’s exports could face pressure due to uncertainties in key markets like the US and the EU, two of India’s largest export destinations.
  • India’s exports to the US account for 17.7% of total outbound shipments, while the EU accounts for 17.4%. The escalating tariff war and geopolitical tensions could hinder trade in both these regions.

Export Data and Outlook

• In February, India’s exports contracted sharply by 10.9% year-on-year, totaling $36.91 billion, impacted by global petroleum price fluctuations and growing economic uncertainty.
• Cumulative exports for the first 11 months of FY25 remained flat at $395 billion.

Optimistic Outlook Amidst Challenges

• Despite the challenges, economists remain hopeful due to India’s strong economic fundamentals, lower inflation, and positive growth drivers.
• A softening inflationary pressure could contribute to a pick-up in overall growth in FY26. However, economists also urge caution due to the uncertain global economic landscape and the ongoing tariff issues.

BS

Agriculture

1. Central Government’s Move to Revise Base Year for CPIAL/RL

Context:

After nearly 40 years, the Central Government is planning to revise the base year of the Consumer Price Index for Agricultural Labourers (CPIAL) and Rural Labourers (CPIRL) to better reflect the current inflation faced by these workers. The Labour Bureau has formed an expert committee, chaired by Asit Kumar Sadhu (National Statistical Commission member), to revise the base year from 1986-87 to 2024-25.

Purpose of CPIAL/RL

• The Consumer Price Index for Agricultural Labourers (CPIAL) and Rural Labourers (CPIRL) are essential tools used by both the Central and State Governments to determine minimum wages for agricultural and rural labourers, engaged in either agricultural or non-agricultural work.
  • CPIAL is also crucial in setting wages for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the government’s flagship rural jobs program.

Current Situation

• The Union Government is revising the base year of CPIAL and CPIRL, as they are currently based on the outdated 1986-87 year.
  • The new base year will reflect the 2024-25 agricultural year, incorporating the latest economic and consumption data.
  • This revision aims to ensure that the indices are more aligned with current consumption patterns and inflationary pressures experienced by rural workers.

Key Updates on the Revision Process

• An expert committee, consisting of representatives from the consumer affairs and statistics ministries, alongside independent experts, has been formed for this task.
• The recently released Household Consumption Expenditure Survey is being utilized for updating the indices.
• The revision also aims to extend the coverage of the indices to all states and Union Territories (UTs), as they are currently available for only 20 states/UTs. States without a dedicated index typically use neighbouring states’ indices for determining minimum wages.

Impact on MGNREGA Wages

• The updated CPIAL will be used for wage calculations under MGNREGA, which are adjusted annually based on changes in CPIAL, typically applied from April 1.
• The wage rate for MGNREGA workers will be more accurately aligned with real inflation data, particularly the inflation faced by low-income rural populations.

Consumption Patterns and Weightings

• Rural workers, especially those involved in agriculture, spend a significant portion of their earnings on food, which is why food-related items have a disproportionate weight in these indices.
  • CPIAL currently assigns 72.9% weight to food, and CPIRL assigns 70.4% weight to food.
  • Other consumption categories, such as medical care and education, have much lower weightings (around 4.38% for CPIAL in medical care, and 0.94% for education).

Key Considerations

• The base year revision will ensure that these indices more accurately track the inflation faced by low-income rural workers, particularly in relation to food prices.
• This update is also crucial for ensuring that MGNREGA wages and minimum wages are based on relevant and timely data, helping to support the economic stability of rural workers.

The revision of CPIAL and CPIRL indices is a crucial step to align wage determinations with the real cost of living faced by rural and agricultural workers. The update will help ensure that these workers receive fair compensation in line with current inflation trends, particularly in food prices.

BS

Facts To Remember

1. 2014-batch IFS officer Nidhi Tewari named private secy to PM

Nidhi Tewari, a 2014-batch Indian Foreign Service officer, has been appointed as private secretary to PM Narendra Modi, becoming the first woman to get such a posting in recent history. Incidentally, she is from Mehmurganj in UP’s Varanasi, the parliamentary constituency Modi has been representing in Lok Sabha since 2014.

2. Moody’s projects India’s 6.5% growth, leading G-20 Nations

Moody’s Ratings said India’s growth at 6.5 per cent will remain the highest amongst the advanced and emerging G-20 countries, supported by tax measures and continued monetary easing. 

3. India celebrates 52 years of Project Tiger: A global conservation success story

India proudly commemorates 52 years of Project Tiger, a pioneering initiative that transformed the landscape of wildlife conservation. On this day in 1973, the Government of India launched Project Tiger to protect the country’s dwindling tiger population. 

4. India-US begin 4th edition of Exercise Tiger Triumph in Visakhapatnam

The Fourth edition of Exercise Tiger Triumph, a bilateral Tri-Service India-US Humanitarian Assistance and Disaster Relief (HADR) Exercise, is scheduled to begin at Visakhapatnam today. 

5. Rajgir to host Hero Asia Cup Hockey 2025 in August

Rajgir in Bihar will host the Hero Asia Cup Hockey 2025 in August of this year. Hockey India and the Bihar State Sports Authority signed a Memorandum of Understanding (MoU) in this regard at the Patliputra Sports Complex in Patna.