UPSC Key—27th December, 2023: Veer Bal Diwas, Kudankulam Nuclear Power Project and Make in-India Programme

Russian oil import at 8-month low in Oct as discount falls, OPEC share up

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key Points to Ponder:

• What’s the ongoing story- With discounts on Russian crude oil shrinking, Moscow’s share in India’s oil imports declined to an eight-month low in October, while New Delhi’s traditional West Asian suppliers — Iraq, Saudi Arabia and the United Arab Emirates (UAE) — managed to claw back part of the market share they had ceded to Russia.

• What India’s official trade data says?

• Where does India import oil from?

• Which country is the top oil supplier to India?

• How much worth oil does India import?

• For Your Information-According to an analysis of India’s official trade data by The Indian Express, Russia’s share in India’s oil imports (by volume) in October was 31.9 per cent, down from 34.8 per cent in September. It declined for four consecutive months from the peak of 44.7 per cent registered in June.
On the other hand, the combined share of Iraq, Saudi Arabia and the UAE touched a seven-month high of 44.1 per cent in October, having risen consistently month-over-month since June. Higher supply of crude from these three countries over the past few months has been leading the recovery in the share of the Organization of the Petroleum Exporting Countries (OPEC) in India’s oil imports.
In October, OPEC’s share in India’s oil import volumes was 50.2 per cent, up from 49.1 per cent in September. In April 2022, when Russian oil deliveries to India were starting to rise notably, the international oil suppliers’ cartel accounted for a 71.3 per cent share, led by Iraq, Saudi Arabia and the UAE, which together had a share of nearly 61 per cent in New Delhi’s oil imports. Apart from these three countries, OPEC has 10 other member nations.
The government releases country-wise and commodity-wise trade data with a lag; the data till October is available so far.
While the price of crude oil depends on grades and can vary substantially, the average landed price of crude and import volumes from the supplying countries were used for computations as the government does not release grade-wise oil import data.
Prior to the war in Ukraine, Iraq was India’s top source of crude, followed by Saudi Arabia and the UAE, while Russia was a marginal player. However, as the West began shunning Russian oil following Moscow’s February 2022 invasion of Ukraine, Russia started offering deep discounts to willing buyers. Indian refiners started lapping up the discounted barrels, catapulting Russia to the top spot on the list of India’s oil suppliers. Iraq, Saudi Arabia and the UAE have each slipped a rank on the list.
According to The Indian Express’s analysis of trade data, the discount on the delivered price – including freight and insurance – of Russian crude with respect to the average delivered price of oil from Iraq, Saudi Arabia and the UAE was just 5.7 per cent in October, after falling for four consecutive months from June’s peak level of 22.7 per cent. Similarly, the discount on Russian oil with respect to the average price of oil received from all OPEC suppliers fell for four consecutive months to 6.9 per cent in October from 23.1 per cent in June.
Even as the discounts on Russian oil vis-à-vis other major suppliers have visibly shrunk, for India, which depends on imports to meet over 85 per cent of its oil requirement, even lower concessions matter as they help the country save billions of dollars in foreign exchange.

• What percentage of India’s oil is imported from Russia?

• How India’s oil trade with Russia transformed over the years?

• What are the factors which led to the dip in Indian Import of Russian Oil?

• What are the issues and challenge for India in Russian Oil Import?

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📍The dramatic transformation of India’s oil trade with Russia, in seven charts

GOVT & POLITICS

PM: India coming out of slavery mindset, world is respecting it

Syllabus:

Preliminary Examination: History of India

Main Examination:

• General Studies I: Indian culture will cover the salient aspects of Art Forms, literature and Architecture from ancient to modern times and Modern Indian history

• General Studies IV: Contributions of moral thinkers and philosophers from India and world

Key Points to Ponder:

• What’s the ongoing story-Prime Minister Narendra Modi on Tuesday said the Sikh gurus have taught Indians to live for the glory of their land and served as an inspiration to make the country better and developed. Speaking at a “Veer Bal Diwas” event to commemorate the martyrdom of two sons of Guru Gobind Singh, Modi said India is now coming out of the “mindset of slavery” and has full faith in its people, their abilities and heritage.

• ‘Veer Baal Diwas’ on December 26-why?

• Do You Know-Every December, Sikhs mark the supreme sacrifice made by the four sons and the mother of their 10th religious leader, Guru Gobind Singh. Shaheedi Jor Mela or Shaheedi Sabha are observed in Punjab’s Chamkaur Sahib and Fatehgarh Sahib, attended by lakhs of people.
The historic battle of Chamkaur in December 1704 was fought here when a small number of Sikhs took on the huge army of the Mughals and the hill kings. Guru Gobind Singh’s younger sons, Sahibzada Zorawar Singh (9) and Sahibzada Fateh Singh (7), were killed following an attack on Anandpur Sahib. The Guru’s mother Mata Gujari and his two elder sons, Sahibzaada Ajit Singh (18) and Sahibzaada Jujhar Singh (14), were also killed within a week.
In January 2022, the Centre announced that December 26 would be observed as ‘Veer Bal Diwas’ to mark the martyrdom of Guru Gobind Singh’s younger sons.

• What led to the attack on Anandpur Sahib?

• Guru Gobind Singh-About him, Philosophy, and Contributions

• Sahibzaade (Prince) Zorawar Singh and Sahibzaade (Prince) Fateh Singh

• What happened to the Chhote Sahibzade?

• For Your Information-Sahibzada Zorwar Singh and Sahibzada Fateh Singh, along with their grandmother, were staying in village Kheri at the house of one Gangu, who had served as a cook for the family.
Gangu, tempted by the gold ornaments and coins Mata Gujari was carrying and the reward announced by the Mughal governor, handed over the children and their grandmother to Sarhind’s Nawab Wazir Khan.
The three – the 81-year-old Mata Gujari ji, and the two Sahibzade aged 7 and 9 – were imprisoned in the Thanda Burj (cold tower), which had a river flowing next to it and was bitterly cold.
When the children were presented in court, they were offered riches and gifts and told to convert to Islam. They were told their father and elder brothers had been killed in the war. The Sahibzade refused to convert or to bow to Wazir Khan.
After efforts to make them give up their religion failed, Wazir Khan decided that the boys would be bricked alive. There was resistance to this from some Muslim courtiers, like Nawab Sher Khan, who said it was against Islam to sentence two children to death.
However, Wazir Khan prevailed. It is said that even as a wall was being erected around them, the Sahibzada stood unflinching. Two executioners then slit their throats, killing the younger, Sahibzada Fateh Singh, first. On the same day, Mata Gujari died of shock.
A few years later, Baba Banda Singh Bahadur avenged the execution of the Sahibzade, by attacking, capturing Sarhand and executing Wazir Khan.

• Shiromani Gurdwara Parbandhak Committee and Gurdwaras Act of 1925

• Sikhism and History of Sikhs

• Bhakti Movement and Sikhism

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📍Veer Bal Diwas: For the nation, a story from Punjab

India, Russia sign pacts on future units of Kudankulam plant

Syllabus:

Preliminary Examination: Current events of national and international importance and General Science

Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

Key Points to Ponder:

• What’s the ongoing story- India and Russia Tuesday signed some “very important” agreements related to the construction of the future power-generating units of the Kudankulam nuclear power plant.

• Kudankulam nuclear Power Project-Know in detail

• Do You Know-The Kudankulam nuclear power plant is being built in Tamil Nadu with the technical assistance of Russia. The construction began in March 2002. Since February 2016, the first power unit of the Kudankulam NPP has been steadily operating at its design capacity of 1,000 MW. The plant is expected to start operating at full capacity in 2027, according to Russian state media.

• What is Nuclear Energy?

• Why do we need nuclear energy?

• Pressurized Heavy Water Reactor, Light Water Reactor and Prototype Fast Breeder Reactor-Compare and contrast

• What is Pressurized Heavy Water Reactor?

• A nuclear reactor is a device used to initiate and control a fission nuclear chain reaction or nuclear fusion reactions-True or False?

• How does a nuclear reactor work?

• What are the Components of a nuclear reactor?

• What are the types of nuclear reactor?

• What is the current Status of Nuclear Energy and Nuclear power plants in India?

• Map Work-Mark Nuclear power plants

• Issues and Challenges with Kudankulam nuclear Power Project-Brainstorm

• The Department of Atomic Energy (DAE) is under the direct charge of the Prime Minister through a Presidential Order-True or False?

• What are the milestones in the evolution of India’s PHWR technology?

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📍Scaling down in nuclear power and space: Why small is now the new big as India opens up two strategic sectors to private participation

THE EDITORIAL PAGE

A missing industrial policy

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: 

• General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

• General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Points to Ponder:

• What’s the ongoing story-Rajat Kathuria , Aakash Dev Writes: The Make in India campaign launched in 2014 is a very different policy package from the dogma of self-sufficiency that India embraced in the 1970s. If the latter was chalk, this is cheese. Make in India (MII) does not, by any stretch, bring back dirigiste recollections of the license raj, self-sufficiency, import-substituting industrialisation, and the like. It is vastly dissimilar, although fears have been raised about the manner in which MII is being implemented in some sectors, particularly by raising tariff duties to provide protection to encourage the setting up of domestic industry.

• Make in India campaign and India’s Industrial policy-connect the dots

• “Make in India (MII) does not, by any stretch, bring back dirigiste recollections of the license raj, self-
sufficiency, import-substituting industrialisation, and the like”-Comment

• What is Make in-India Programme?

• Can you name some prominent schemes by the Government of India in Make in India programme category?

• What are the issues and challenges with Make in India Programme?

• Do You Know-India launched MII in September 2014 as a sequel to earlier initiatives designed to create a robust and competitive manufacturing sector. Thus, the National Manufacturing Policy (NMP, 2011) stated that inadequate physical infrastructure, a complex and (corrupt) regulatory environment, and inadequate availability of skilled manpower had constrained its growth. It sought to raise the contribution of manufacturing in GDP from the stagnant 15 per cent since the beginning of the 1980s to at least 25 per cent and to create 100 million additional jobs. That it did not succeed is to state the obvious. MII of 2014, has, in addition to the dynamic objectives of NMP 2011, aimed “to transform India into a global design and manufacturing export hub”. In other words, MII for the world.
A few weeks ago, the government put the new industrial policy (NIP ’23), which has been in the making for over two years, on hold. A draft had been circulated for consultation a year ago. With the prized production-linked incentive (PLI) scheme already in operation, what more can industrial policy achieve at this stage of India’s economic advance?
According to a press release, “the purpose of the PLI schemes is to attract investments in key sectors and cutting-edge technology; ensure efficiency and bring economies of size and scale in the manufacturing sector and make Indian companies and manufacturers globally competitive”. Industrial policy over and above PLI for sectors such as toys, readymade garments and footwear, to name a few, needs articulation as well. To our mind, industrial policy in a labour abundant country with mediocre educational attainments and skills is necessary to shape productive job creation for the abundant factor. The other objectives are icing on the cake, but job creation for our abundant factor, especially women, is key, and that is only possible with labour-intensive manufacturing. After all, empirical trade literature has established the vital significance of the abundant factor in generating competitiveness and scale. The narrative of jobless growth has stuck because reasonable quality jobs with some social protection have been a conspicuous absence. Arguably devising an industrial policy for just exports is easier than creating one for mass job creation in India, and according to us, the latter is the touchstone against which success ought to be gauged.
India’s labour market research points towards the presence of low-paying, subdued productivity, and mostly informal jobs in the unorganised sector. Over 99 per cent of India’s 63 million micro, small and medium enterprises (MSMEs) are in the unorganised sector with very little flexibility for productive job creation. Their hand-to-mouth existence is not a recipe for jobs or scale. China’s example suggests the influence of scale in manufacturing for more and more jobs. So how has MII, that embraces several other complementary policies, along the way fared in this respect? This is a weighty and important question for India and one that does not lend itself to easy scrutiny primarily because of a paucity of official data at frequent and short intervals.
In the absence of such data, policy making is like shooting darts blindfolded. The former Chief Economic Advisor, Kaushik Basu once perceptibly remarked that economic policymaking should contain both an intellect (to interpret data) and a moral compass to shape a better world. In the absence of high frequency data on PLI, either on value added or jobs generated, the latter ought to be employed in abundant measure. Hence, whenever NIP is next released, it will be well advised, to continue India’s drive to excel in labour-intensive sectors. PLI as conceived is good for high-end manufacturing, but for the masses, the good old manufacturing sector is still the best bet. And with industrial policies gaining currency even among erstwhile “freethinking” institutions and individuals, it is an opportunity for us.

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📍For Make in India, Invent in India

THE IDEAS PAGE

Seeing the new South Asia

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: India and its neighbourhood- relations.

Key Points to Ponder:

• What’s the ongoing story-C. Raja Mohan Writes: Has India lost the Subcontinent? The lament on “losing” South Asia becomes louder when “negative” (from Delhi’s perspective) developments — for example, the Maldives’ recent demand that India withdraw its military presence — occur in the region. India’s South Asia debate, unfortunately, is sentimental, self-referential and disconnected from the changing regional reality.

• “The hawks are upset that our neighbours dare to challenge India’s presumed primacy in the region”-Discuss

• “That world is long gone, along with the British departure from the Subcontinent”-Comment

• “China is not the only external power gaining ground in South Asia”-Examine the role of China and western countries in South Asia.

• ‘The real question, then, is not about India “losing South Asia” but finding ways to gain ground in a changing region’-Elaborate

• What is the relationship between India and South Asia?

• What is India’s Neighbourhood First Policy?

• Map Work-South Asia

• India’s bilateral relations with her neighbouring countries-Know in detail

• What are the Challenges regarding Regional Cooperation in South Asia?

• What is the role of India in South Asia?

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📍C Raja Mohan writes: South Asia, now open to business

EXPRESS NETWORK

Ram Temple: Makrana marble, pink sandstone from Rajasthan, granite from TN & Telangana

Syllabus:

Preliminary Examination: History of India

Mains Examination: 

• General Studies I: Indian culture will cover the salient aspects of Art Forms, literature and Architecture from ancient to modern times

• General Studies II: Structure, organization and functioning of the Executive and the Judiciary

Key Points to Ponder:

• What’s the ongoing story- Makrana marble and pink sandstone from Rajasthan, granite stone from Tamil Nadu and Telangana, and coloured marble from Mandla in Madhya Pradesh have been used in the under-construction Ram Temple in Ayodhya that will be inaugurated in a grand ceremony on January 22, officials of the Shri Ram Janmabhoomi Teerth Kshetra Trust entrusted with building the structure said.

• Who are the architects for the temple?

• Who is in charge of the Ayodhya Ram temple construction?

• For Your Information-The Supreme Court, in its November 2019 verdict in the demolished Babri mosque case, had ruled that the 2.77 acres of disputed land in Ayodhya be handed over to a trust for the construction of a Ram temple. This trust was to be set up within three months. Accordingly, the Shri Ram Janmbhoomi Teerth Kshetra Trust (SRJBTKshetra) was set up by the central government.
Prime Minister Narendra Modi announced the formation of the trust in Lok Sabha on February 5, 2020. The trust has 15 members, of which 12 were nominated by the Government of India and three were selected in its first meeting, held on February 19, 2020.

• Ram Mandir is one of the important Hindu temple-why?

• Know more about Architectural features of Ram Mandir

• What is the Nagara style of architecture?

• What are the features of Nagara style of temple architecture?

• What is the Dravidian architecture style?

• Nagara style of architecture and Dravidian architecture style-Compare and Contrast

• Nagara style of architecture is further divided into different schools of architecture based on region and geography-what are those different schools of architecture?

• Makrana marble-What you know about the same?

• Why Makrana marble is unique?

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📍Explained: Milestones in the Ayodhya Ram temple journey

83 JN.1 cases in India so far, most in Gujarat, says INSACOG

Syllabus:

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies II: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

Key Points to Ponder:

• What’s the ongoing story-At least 83 cases of the new JN.1 variant have been detected in India so far, with the highest 34 sequences from Gujarat, according to India’s genome sequencing consortium INSACOG. This was followed by 18 from Goa, 8 from Karnataka, 7 from Maharashtra, 5 each from Kerala and Rajasthan, 4 from Tamil Nadu, and 2 from Telangana.
At least 409 new Covid-19 cases were reported in the last 24 hours, with the highest cases in Kerala. Of the 4,170 active cases, 3,096 are in Kerala. Karnataka also reported 122 cases and 3 deaths, according to the Health Ministry data.

• What is JN.1?

• What do we know about JN.1?

• Do You Know-The sub-variant JN.1 is a descendant of the BA.2.86 variant, commonly referred to as Pirola, and is not exactly new. The first cases of this variant were detected in the United States in September and the first case globally was detected as early as January this year.
While JN.1 contains only one additional mutation on the spike protein as compared with Pirola, it has been on the watch-list of researchers because Pirola contains more than 30 mutations on the spike protein. Mutations on the spike protein of Sars-CoV-2 matter because they are the ones that attach to receptors on a human cell and allow the virus to enter it.

• Can it lead to a surge, or more severe symptoms?

• What has led to the current concerns?

• What is INSACOG?

• For Your Information-INSACOG was established in December 2020 as a joint initiative of the Union Health Ministry of Health and Department of Biotechnology (DBT) (under the Ministry of Science and Technology) with the Council for Scientific & Industrial Research (CSIR) and Indian Council of Medical Research (ICMR) to expand the whole-genome sequencing of SARS-CoV-2, the coronavirus that causes the Covid-19 disease, across India with the aim of understanding how the virus spreads and evolves.
INSACOG started out with the participation of 10 national research laboratories of the central government, and gradually expanded to a network of 38 labs, including private labs, operating on a hub-and-spoke model.
The 10 INSACOG Genome Sequencing Laboratories handhold the new laboratories, and the pan-India consortium works to monitor genomic variations in SARS-CoV-2 by a sentinel sequencing effort which is facilitated by the National Centre for Disease Control (NCDC), involving the Central Surveillance Unit (CSU) under the central government’s Integrated Disease Surveillance Programme (IDSP).
INSACOG is also working to establish a systematic correlation between genome sequencing and clinical outcomes. The consortium is working towards establishing a hospital network across the country with the aim to study clinical correlations in mild vs severe cases of Covid-19, and to carry out a longitudinal study to understand long-term post-Covid complications and change in immunity. INSACOG is also looking to expand to sewage surveillance as an early detection tool, and to assess the spread of variants in hotspot localities.

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📍Covid cases up, states told to ramp up testing

EXPLAINED

Sunny forecast, some clouds of concern

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Points to Ponder:

• What’s the ongoing story-As 2023 draws to a close, it rounds up an unusually turbulent three years that saw multiple black-swan events: a once-in-a-century pandemic, two bloody wars, sticky global inflation, and growing protectionism that threatens to upend both the post-pandemic recovery and the long-held consensus on globalisation.

• What major multiple black-swan events happened in 2023?

• Why economists are of opinion of slowdown in the momentum of government capex?

• For Your Information-According to Axis Bank research, India’s output gap vs the pre-pandemic trend has narrowed to 7% until December 2023, and in terms of the number of years of growth lost, it has caught up to the global average. But there is still a gap — and from a statistical perspective, a normalising base for the GDP data could be a potential bugbear for policymakers.
The FY24 second quarter GDP print did offer some clear positives: the growth in the construction sector that surprised on the upside; the mining and electricity segments, and utility services witnessing double-digit expansion; declining commodity prices; and the investment rate (measured as the nominal investment to output — Gross Fixed Capital Formation-to-Gross Domestic Product — ratio) surging to 30%, which was the highest in any second quarter period since the second quarter of FY15.
The growth momentum in the markets, both primary and secondary, are a signal that investors, especially domestic investors, are willing to bet on listed companies and the ones getting listed. The mutual fund sector and insurance companies have become sizable investors, even absorbing selloffs by Foreign Portfolio Investors (FPIs) in the capital markets. But this advantage is limited to a small sliver of India’s enterprise base — formal sector firms and companies that have the wherewithal to tap the capital markets.
But a more fundamental problem that is now being talked about in policy circles is this: the Indian economy suffers from a very narrow base to support high growth rates that is, especially after 2016, clearly reflected in the small share of the consuming class with significant discretionary incomes, low bank credit as a share of GDP, a relatively low level of investible financial savings, a missing middle of productive small and medium-sized enterprises that create the majority of jobs, and an acute scarcity of good-quality skilled workers.
In the absence of these growth factors, India is becoming an economy with a small group of highly productive firms and employees, and high consumption in this specific category. The vast majority remains stuck in poor productivity and subsistence consumption, and this trend has intensified after 2017-18, with the negative shocks of demonetisation, GST, and the pandemic having a lingering impact on an economy that has a large informal sector, and one that was already on the downswing.
This is reflected in the unemployment situation, which the think tank Centre for Monitoring Indian Economy (CMIE) projected at a high 9.2% in November 2023, and which the opposition flagged repeatedly during the campaign for the recent Assembly elections. While the recently released edition of the government’s Periodic Labour Force Survey (PLFS) counters this narrative, worries about jobs seem reflected in the demand across states for quotas, and the increasing promises of freebies from almost all parties now.

• Headline indicators for India have been stuck at the same level for several decades-Why?

• ‘There are multiple tailwinds, both internal and external’-Know in detail

• “India’s growth rate can become faster if private capital formation moves into higher gear”-Know how?

• “Consumption is a consequence of economic growth,…not the cause for economic growth”-Analyse

• What are the major challenge for India’s economy?

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INS Imphal inducted into the Navy: Its features, combat capabilities

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies III: Achievements of Indians in science & technology; indigenization of technology and developing new technology.

Key Points to Ponder:

• What’s the ongoing story-INS Imphal (Pennant D68), the third of four warships of Project 15B that together form the Visakhapatnam class stealth-guided missile destroyers, is set to be commissioned into the Indian Navy on Tuesday (December 26). Here is all you need to know about the development, technological assets, weaponry and strategic significance of the Visakhapatnam class of ships – the youngest in the lineage of Delhi and Kolkata classes of indigenous destroyers.

• What is Project 15B?

• Do You Know-Between 2014 and 2016, the Indian Navy commissioned three guided missile destroyers of Kolkata class under a project codenamed ‘15A’. The Kolkata class included INS Kolkata, INS Kochi and INS Chennai. These ships were a step ahead of their precursor Delhi class of ships, which included INS Delhi, INS Mysore and INS Mumbai, built under Project 15 and commissioned between 1997 and 2001.
Mazagon Dock Shipbuilders Limited (MDSL), one of India’s key Defence Public Sector Undertakings (PSUs), has built all these ships. A ship class signifies a group of ships built with similar tonnage, usage, capabilities and weaponry.
For building the advanced variants of the Kolkata class guided missile destroyers, a contract for construction under the project codenamed ‘15B’ was signed in January 2011. The lead ship of Project 15B, INS Visakhapatnam (Pennant No D66), was commissioned into the Indian Navy in November 2021 and the second ship INS Mormugao (D67) in December 2022. The fourth ship, D69, which when commissioned will be christened INS Surat, was launched in May last year.
Designed by the Indian Navy’s in-house warship design entity Warship Design Bureau, and built by MDSL in Mumbai, the four ships of Project 15B are christened after major cities from all four corners of the country — Visakhapatnam, Mormugao, Imphal and Surat. The class is identified by its lead ship, in this case INS Visakhapatnam.

• What four major ceremonial events mark a ship’s life?

• What are the technological Characteristics of Visakhapatnam class?

• Why destroyers are significant?

• “Visakhapatnam class is arguably one of the most advanced classes of ships in the Indian Navy”-Know its key features

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📍Second stealth-guided missile destroyer under Project 15B delivered to the Navy

ECONOMY

CAD narrows to 1% of GDP in Q2 on smaller merchandise trade deficit

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

Key Points to Ponder:

• What’s the ongoing story- The country’s current account deficit (CAD) narrowed sharply to $8.3 billion, or 1 per cent of the gross domestic product (GDP), in the second quarter (July-September) of financial year 2023-24 (FY24) compared to $30.9 billion, or 3.8 per cent of GDP, in the same period last year. During the first quarter (April-June) of FY24, CAD stood at $9.2 billion, or 1.1 per cent of GDP.

• What do you understand by ‘Current account deficit’?

• What do you understand by “Current account surplus”?

• Why country’s current account deficit (CAD) narrowed sharply to $8.3 billion?

• Do You Know-Current account deficit is the difference between exports and imports of goods and services. It is a key indicator of the country’s external sector.
Underlying the lower CAD on a year-on-year (y-o-y) basis in Q2 FY24 was the narrowing of merchandise trade deficit to $61 billion from $78.3 billion in the same quarter of the previous fiscal, the Reserve Bank of India (RBI) said in a release.
“India’s current account deficit for Q2 FY24 printed at $8.3 billion, well below our expectation of around $13 billion, led primarily by a smaller-than-anticipated merchandise trade deficit,” said Aditi Nayar, Chief Economist, Head-Research and Outreach, ICRA.
Following the expansion in the merchandise trade deficit in October 2023, Nayar expects the CAD for the ongoing (October-December 2023) quarter to widen appreciably, to around $18-20 billion. “Nevertheless, we now foresee the FY24 CAD in a range of 1.5-1.6 per cent of GDP, unless commodity prices chart a sharp rebound,” she said.
In the first half (April-September) of FY24, CAD moderated to $17.5 billion, or 1 per cent of GDP, from $48.8 billion, or 2.9 per cent of GDP, in the year-ago period on the back of a lower merchandise trade deficit. In Q2 FY24, services exports grew by 4.2 per cent on a y-o-y basis on the back of rising exports of software, business and travel services, the RBI data showed.
Net outgo on the primary income account, primarily reflecting payments of investment income, increased to $12.2 billion from $11.8 billion a year ago. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $28.1 billion, an increase of 2.6 per cent from their level during the corresponding period a year ago.
In the financial account, net foreign direct investment witnessed an outflow of $0.3 billion as against an inflow of $6.2 billion in Q2 FY23.
Foreign portfolio investment (FPI) recorded net inflow of $4.9 billion, lower than $6.5 billion during Q2 FY23. External commercial borrowings to the country recorded net outflow of $1.8 billion in Q2 FY24 as compared with net outflow of $0.5 billion in the same period last year.
Non-resident deposits recorded net inflow of $3.2 billion as compared with net inflow of $2.5 billion in July-September quarter of FY23.
In the reporting quarter, there was an accretion of foreign exchange reserves (on a balance of payment (BoP) basis) to the tune of $2.5 billion as against a depletion of $ 30.4 billion in Q2 FY23. In April-September 2023, there was an accretion of $27 billion to the foreign exchange reserves, on a BoP basis.

• Why this is a worrying sign?

• What do you understand by ‘Exports’ and ‘Imports’?

• Exports of India and Imports of India-Key Items under Exports and Imports

• What Is Balance of Trade (BoT) and Balance of Payments (BoP)?

• Balance of Trade (BoT) and Balance of Payments (BoP)-How they Connected?

• India’s CADs have both desirable and undesirable components-What is desirable and undesirable components?

• The countercyclical nature of India’s CAD is a matter of concern-Why?

• India is currently facing the twin-deficit problem of high fiscal and CADs-Elaborate further

• What is meant by foreign exchange reserves?

• Which country has highest forex reserves as of now? How do foreign exchange reserves increase?

• What is a Currency Reserve?

• Currency Reserve is a part of foreign exchange reserves?

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📍Explained: What is the Current Account Deficit, which widened in Q3 of the last FY?

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