UPSC Essentials | Mains answer practice — GS 3 : Questions on repo rate adjustments and principle of fast breeder reactors (Week 149)

QUESTION 2

Discuss the concept of ‘criticality’ and the working principle of fast breeder reactors. How this development strengthens India’s three-stage nuclear power programme?

QUESTION 1: In the context of the RBI Monetary Policy, discuss the effectiveness and limitations of repo rate adjustments as a tool to manage such supply-side inflation in India.

Relevance: The question links core macroeconomic concepts with current RBI policy actions. It is important for understanding policy trade-offs between growth and price stability, which can be asked in GS-3. Aspirants must also focus on ongoing challenges of managing inflation driven by external shocks like crude prices and geopolitics.

Note: This is not a model UPSC answer. It only provides you with a thought process which you may incorporate into the answers.

Introduction:

— As Reserve Bank of India Governor Sanjay Malhotra prepares to announce monetary policy, the economic landscape has evolved substantially since the February 2026 review: the West Asia conflict has obscured the economic vista. Rising crude oil prices and a raging conflict now offer new concerns, with the potential to drive up inflation and put corporate earnings and economic growth at risk due to rising input costs, supply disruption, and raw material shortages in numerous sectors.

— A policy rate that remains unchanged would bring significant relief to borrowers, as their equivalent monthly instalments (EMIs) on home, vehicle, personal corporate, and small business loans are unlikely to alter.

Body:

You may incorporate some of the following points in your answer:

What is the repo rate?

— People go to commercial banks either to deposit their savings or to get a loan. On savings/deposits, the bank pays interest to the depositor while on loans, it charges interest to the borrower. Typically, the interest rate banks charge on loans is higher than the interest they pay on deposits. This is how they make money.

— The interest rate that the RBI charges when commercial banks borrow money from it is called the repo rate. The interest rate the central bank pays commercial banks when they park their excess cash is called the reverse repo rate.

How repo rate adjustments as a tool manages inflation in India?

— The RBI uses these two rates to set the tone for all other interest rates in the banking sector and, by extension, the broader economy.

— For instance, when the RBI wants to encourage economic activity in the economy, it reduces the repo rates. Doing this enables commercial banks to bring down the interest rates they charge (on their loans) as well as the interest rate they pay on deposits. This, in turn, incentivises people to spend money, because keeping their savings in the bank now pays back a little less, and businesses are incentivised to take new loans for new investments because new loans now cost a little less as well.

— On the other hand, when the RBI wants to control inflation, it increases the repo rate. Banks thus have to pay more interest to borrow from the RBI, which means they will charge more interest to their borrowers. At a macro level, this inhibits people from borrowing money as well as from spending, which in turn reduces the amount of money in the market, and thus negates inflation.

Conclusion:

— As the ongoing conflict in West Asia continues to disrupt global supply chains, shortages of critical inputs and rising uncertainty in international markets have heightened concerns among policymakers and industry stakeholders alike. In this context, the guidance and policy stance of the Governor and the MPC are set to be closely scrutinised, particularly with regard to their assessment of the inflation trajectory.

— Against this backdrop, the central bank’s communication and policy measures will play a critical role in anchoring market expectations and ensuring financial stability amid an increasingly uncertain global environment.

(Source: Monetary Policy: Why RBI will keep rates steady & revise inflation and growth forecasts, This Word Means: Repo Rate)

Points to Ponder

How do external factors such as crude oil prices and geopolitical tensions constrain RBI’s policy choices?

Can monetary policy alone ensure price stability?

Related Previous Year Question

What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation. (2024)

QUESTION 2: Discuss the concept of ‘criticality’ and the working principle of fast breeder reactors. How this development strengthens India’s three-stage nuclear power programme?

Relevance: The topic integrates core nuclear physics concepts with India’s strategic energy policy. It is also linked to recent developments in India’s nuclear programme. Students should explore the dimensions of technological advancement, sustainability, and strategic autonomy.

Prime Minister Narendra Modi witnesses initiation of core loading of India’s indigenous Prototype Fast Breeder Reactor, at Kalpakkam in Tamil Nadu, Monday, March 4, 2024. (PTI Photo)

Note: This is not a model UPSC answer. It only provides you with a thought process which you may incorporate into the answers.

Introduction:

— India is one of the few countries in the world with a long experience of developing nuclear technologies, including the generation of nuclear power. This includes a mastery over the pressurised heavy water reactor (PHWR) technology, or reactors that use natural uranium as fuel and heavy water (deuterium oxide) as coolant and moderator.

— Two other technologies are a work-in-progress: atomic reactors called fast breeders and a longstanding project that aims at eventually fabricating thorium-based nuclear reactors. These three technologies (PHWRs-FBRs-Thorium reactors), progressing in series, make up India’s ambitious three-stage nuclear power programme.

Body:

You may incorporate some of the following points in your answer:

— The vital second stage of India’s three-stage nuclear programme got a boost with the country’s first indigenous Fast Breeder Reactor (FBR) at Kalpakkam in Tamil Nadu attaining criticality. Attaining criticality, or going critical, means the initiation of a self-sustaining nuclear fission reaction that will eventually lead to the generation of power by the 500-megawatt electric (MWe) FBR.

What is the concept of ‘criticality’?

— It is a “defining step” in advancing the country’s civil nuclear programme and said the indigenously designed and built reactor reflects “the depth of our scientific capability and the strength of our engineering enterprise”. Attaining criticality is a key milestone before full power generation, indicating that the reactor core is functioning as designed and that each fission event in the core now releases a sufficient number of neutrons to sustain an ongoing series of reactions.

Working principle of fast breeder reactors (FBRs)

— In the second stage of India’s nuclear power programme, the FBRs would be deployed at scale. Fast reactors are essentially designed to produce more fuel than they consume and in the Indian context, ‘higher breeding’ is desired so that the rate at which the power capacity can grow would be higher.

— FBRs enable the potential to harness the energy of natural uranium by over 60 times through multiple recycles.

— These breeder reactors are also crucial for enlarging the inventory of plutonium — produced after the first stage PHWRs — so that a much larger irradiation capacity to produce an isotope of Uranium (U-233) at scale for use in the third stage programme can be built up. For this, at an appropriate stage, the FBRs would need to be loaded with thorium (Th232) as the blanket material which would be converted to U-233. With sufficient inventory and production capacity for U-233 having built up,the move onto the third stage can then happen. Thus, FBRs provide the essential link between the first and third stages of the power programme based on the indigenous nuclear material resources.

Conclusion:

— Once commissioned, India will be the second country after Russia to have a commercial operating FBR. China has a small programme on fast breeders; programmes in countries such as Japan, France, and the United States were shut down amid safety concerns.

— The FBR is clearly being seen as an important milestone for getting to the third stage, clearing the way for the eventual full utilisation of the country’s thorium. Transitioning to thorium-based nuclear power generation in India is vital for securing our energy independence, which requires building sufficient inventory of fissile uranium233 through irradiation of thorium in thermal or fast nuclear reactors of relevant capacity.

(Source: Kalpakkam fast breeder reactor attains criticality: why this is a ‘defining step’ in India’s 3-stage n-programme)

Points to Ponder

What are the technological, economic, and safety challenges associated with fast breeder reactors?

Related Previous Year Questions

The fusion energy programme in India has steadily evolved over the past few decades. Mention India’s contributions to the international fusion energy project International Thermonuclear Experimental Reactor (ITER). What will be the implications of the success of this project for the future of global energy? (2025)

With growing energy needs should India keep on expanding its nuclear energy programme? Discuss the facts and fears associated with nuclear energy? (2018)

Previous Mains Answer Practice

UPSC Essentials: Mains answer practice — GS 3 (Week 148)

UPSC Essentials: Mains answer practice — GS 3 (Week 147)

UPSC Essentials: Mains answer practice — GS 2 (Week 148)

UPSC Essentials: Mains answer practice — GS 2 (Week 147)

UPSC Essentials: Mains answer practice — GS 1 (Week 148)

UPSC Essentials: Mains answer practice — GS 1 (Week 147)

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