UPSC Key: Import duty on gold, Storm and Withholding tax

Key Points to Ponder:

• What is Withholding tax?

• What is foreign portfolio investment (FPI)?

• What is Foreign Direct Investment (FDI)

• What is the difference between FDI and FPI?

• What is the primary objective behind reducing withholding tax?

• Why does Government wants greater foreign participation in the financial and debt market?

• What are the benefits and risks of increased foreign portfolio investment in India?

Key Takeaways:

• Withholding tax is akin to a tax deducted at source and is paid by foreign investors on interest income they receive on their holding of Indian bonds. At present, non-residents pay a withholding tax of about 20% on the interest they get on the government bonds they hold — one of the highest in the world — after a concessional rate of 5% ended in 2023.

• The discussions on some of these proposals have been on over the past few weeks with policy makers keen to conserve foreign exchange reserves and secure the external account amid the ongoing West Asia conflict.

• Prime Minister Narendra Modi too had recently appealed to the people to stop buying gold, use public transport and car pool to cut fuel consumption, avoid foreign travel and destination weddings overseas to save foreign exchange.

Do You Know

• On top of a foreign capital strike, depletion of forex reserves by $38 billion in two months has forced the government to not just conserve foreign exchange but also make Indian markets attractive for foreign capital. This will stabilise the capital account and prevent rupee fall.

• The RBI’s reduced forex intervention over the last year or so has meant the rupee has weakened by 11% against the US dollar over the period. Since the war began in late February, the rupee has fallen by 5%, with foreign portfolio investors having withdrawn about $22.5 billion so far in 2026 from Indian financial markets.

Other Important Articles Covering the same topic:

📍Why India hiked import duty on gold, silver amid rupee fall and rising oil prices

Previous year UPSC Prelims Question Covering similar theme:
1) Consider the following: (UPSC CSE, 2021)
1. Foreign currency convertible bonds
2. Foreign institutional investment with certain conditions
3. Global depository receipts
4. Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?
(a) 1, 2 and 3 only
(b) 3 only
(c) 2 and 4 only
(d) 1 and 4 only

2) Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly? (UPSC CSE, 2019)
(a) Certificate of Deposit
(b) Commercial Paper
(c) Promissory Note
(d) Participatory Note

Why minister, why not a neutral person in panel to pick ECs: SC

Preliminary Examination: Indian Polity and Governance-Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues, etc.

Main Examination: General Studies II: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies.

What’s the ongoing story: The bench of Justices Dipankar Datta and S C Mishra asked the Centre why put up a show of independence in the matter of selection of ECs by the committee when the decision is by a 2:1 majority.

Key Points to Ponder:

• The Chief Election Commissioner and other Election Commissioners (Appointment Conditions of Service and Term of Office) Bill, 2023-Know the key provisions

• What is the new selection process for the Chief Election Commissioner?

• How does the Chief Election Commissioner and Other Election Commissioners Act, 2023, elaborate the selection of the Chief Election Commissioner?

• How were the Election Commissioners appointed earlier?

• Election Commission of India and Article 324 of the Constitution-Know in detail

• Who appoints Chief Election Commissioner of India?

• What are the challenges associated with the current appointment process of the Chief Election Commissioner?

• What is the role of the judiciary in ensuring the independence of the Election Commission?

• Compare the selection process of the Election Commission of India with that of similar institutions in other democracies such as the USA and the UK.

Key Takeaways:

• Stating that the Election Commission of India must not only be independent but also appear to be so, the Supreme Court Thursday wondered why there can’t be an “independent member” in the three-member panel that picks the Election Commissioners (ECs) when even the committee for selecting the CBI Director has the Chief Justice of India in it.

• The bench of Justices Dipankar Datta and S C Sharma asked the Centre why put up a show of independence in the matter of selection of ECs by the committee, comprising the Prime Minister, the Leader of Opposition and a Cabinet Minister, when the decision is by a 2:1 majority and the Cabinet Minister is a PM pick.

Do You Know

• The bench was hearing petitions challenging the Chief Election Commissioner and Other Election Commissioners (Appointment, Conditions of Service and Term of Office) Act, 2023, which laid down that the CEC and ECs will be selected by a panel comprising the PM, LoP and a Cabinet Minister.

• In that ruling, the Supreme Court, while referring to Article 324 (2) which called for a law to be made by Parliament “fixing the criteria for selection, conditions of service and tenure” of the CEC and ECs, had directed that until such time the law is made, they shall be appointed on the advice of a committee comprising the Prime Minister, Leader of the Opposition in Lok Sabha, and in case there is no such leader, the leader of the largest party in the Opposition in Lok Sabha, and the Chief Justice of India.
Parliament then brought in the Chief Election Commissioner and Other Election Commissioners (Appointment, Conditions of Service and Term of Office) Act, 2023, which, however, left out the CJI.

Other Important Articles Covering the same topic:

📍The EC’s guardrails

Previous year UPSC Prelims Question Covering similar theme:
3) Consider the following statements (UPSC CSE, 2017)
1. The Election Commission of India is a five-member body.
2. The Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
3. Election Commission resolves the disputes relating to splits/mergers of recognised political parties.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 2 and 3 only
(d) 3 only

Nation

111 killed, 72 injured as violent storm ravages 26 UP districts

Preliminary Examination: Indian and World Geography

Mains Examination: General Studies I: Important Geophysical phenomena such as earthquakes, Tsunami, Volcanic activity, cyclone etc., geographical features and their location-changes in critical geographical features (including water-bodies and ice-caps) and in flora and fauna and the effects of such changes.

What’s the ongoing story: At least 111 people were killed and 72 were injured in the last 24 hours after a violent storm accompanied by heavy rain wreaked havoc in several districts of Uttar Pradesh on Wednesday, officials said.

Key Points to Ponder:

• What is called a storm?

• What are the types of storms?

• Is a storm a wind?

• How storm and wind are different?

• What is the difference between storms and thunderstorms?

• What happened in Delhi-NCR?

• Why did strong winds occur despite almost no rain?

• What specifically triggered these back-to-back storms?

Key Takeaways:

• This May, Delhi has been drier than recent years with only 13.61 mm rainfall reported against the normal of 30.7 mm, as per IMD records.

• Thunderstorms do not always bring widespread rain to every region they affect. In pre-monsoon storms, strong winds can occur because of downdrafts, which are currents of air that descend rapidly from storm clouds and spread out near the surface.

• When dry air exists in the middle atmosphere, some of the falling rain evaporates before reaching the ground. This evaporation cools the air, making it heavier and causing it to rush downward. Once it hits the ground, it spreads outward as gusty winds.

• This is why Delhi can experience intense winds, dust, thunder and lightning, even if rainfall remains very light or absent at many stations.

Do You Know

• A storm is a broad term for any severe atmospheric disturbance, whereas a thunderstorm is a specific type of storm strictly characterized by the presence of lightning and thunder. Simply put: all thunderstorms are storms, but not all storms are thunderstorms

• The thunderstorm is a specific type of localized storm produced by tall cumulonimbus clouds.

• Wind is the movement of air from a high-pressure area to a low-pressure area. A storm is a more intense weather disturbance with very strong winds, often accompanied by rain, thunder, and lightning. A cyclone is a very large, powerful, and rotating storm system that forms over warm ocean waters.

Other Important Articles Covering the same topic:

📍Why storms battered Delhi-NCR and turned deadly in UP

Previous year UPSC Prelims Question Covering similar theme:
4) During the thunderstorm, the thunder in the skies is produced by the (UPSC CSE, 2013)
1. meeting of cumulonimbus clouds in the sky
2. lightning that separates the nimbus clouds
3. violent upward movement of air and water particles
Select the correct answer using the codes given below.
(a) 1 only
(b) 2 and 3
(c) 1 and 3
(d) None of the above produces the thunder

Explained

Behind govt ban on sugar exports: Iran war, El Niño

Preliminary Examination: Economic and Social Development

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: Transport and marketing of agricultural produce and issues and related constraints

What’s the ongoing story: There are two words that have spooked Indian policymakers of late with regard to agriculture: Iran and El Niño. These also explain the thinking behind the government’s decision to ban exports of sugar, notwithstanding the reasonably comfortable domestic availability of the sweetener for now.

Key Points to Ponder:

• Why has the government banned sugar exports, moving it from the “restricted” (i.e. subject to quantitative caps) to the outright “prohibited” category?

• Know the importance of the sugar sector in India’s agricultural economy.

• Know the role of government intervention in agricultural commodity markets

• What are the implications of diverting sugarcane toward ethanol production?

• Know the impact of frequent export restrictions on India’s credibility as a reliable agricultural exporter.

Key Takeaways:

• The Directorate General of Foreign Trade (DGFT), on May 13, issued a notification placing exports of all raw, white and refined sugar in the “prohibited” category “with immediate effect till September 30, 2026”.

• In other words, no sugar – barring the 14,500-odd tonnes under preferential quotas at concessional duties to the European Union and United States – can go out of the country in the remaining part of the 2025-26 crushing year (October-September).

• Indian mills are expected to produce 279 lakh tonnes (lt) of sugar in 2025-26. With opening stocks on October 1, 2025, at over 50 lt, the total supply of 329 lt would exceed the projected domestic consumption of 280 lt.

Do You Know
There are three reasons-

• The first has to do with El Niño – an abnormal warming of the waters of the central and eastern equatorial Pacific Ocean that leads to increased evaporation and cloud-formation activity around South America, while depriving India, Southeast Asia and Australia of convective currents. El Niño is generally associated with subnormal monsoon rainfall and higher-than-average temperatures in India.

• It is the new cane that farmers have planted or will do so from July, for crushing only next year, which would bear the brunt of El Niño. This crop can also suffer from a shortage of fertilisers due to the ongoing West Asia supply crisis. And that links up with the second reason for the decision to ban exports; sugarcane requires high doses of fertilisers, in addition to water, for optimal growth and yields.

• The third reason is stocks. Sugar mills are supposed to file ‘P-II’ forms before the 10th of every month, furnishing data on the stocks held by them at the start of the month. Based on this data filed online, the department of food and distribution then allots (“releases”) the quota of sugar for each mill to sell in the whole of that month.

Other Important Articles Covering the same topic:

📍Amid West Asia crisis, government bans sugar exports until September 30

Previous year UPSC Prelims Question Covering similar theme:
5) Among the following, which one is the least water-efficient crop? (UPSC CSE, 2021)
(a) Sugarcane
(b) Sunflower
(c) Pearl millet
(d) Red gram

6) With reference to the usefulness of the by-products of sugar industry which of the following statements is/are correct? (UPSC CSE, 2013)
1. Bagasse can be used as biomass fuel for the generation of energy.
2. Molasses can be used as one of the feedstocks for the production of synthetic chemical fertilisers.
3. Molasses can be used for the production of ethanol.
Select the correct answer using the codes given below
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

What is PCOS and why does renaming it to PMOS matter

Preliminary Examination: Current events of national and international importance.

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

What’s the ongoing story: For years, the term Polycystic Ovary Syndrome (PCOS) has been widely used to describe one of the most common hormonal conditions affecting women of reproductive age.

Key Points to Ponder:

• What is Polycystic Ovary Syndrome (PCOS)?

• Why Polycystic Ovary Syndrome (PCOS) now to be called as Polyendocrine Metabolic Ovarian Syndrome (PMOS)?

• Why was there a need for renaming?

• How India played a significant role in reclassification?

• Why terminology matters?

• Why this matters for India?

• What are the challenges faced by India’s healthcare system in addressing chronic women’s health disorders such as PCOS?

Key Takeaways:

• In this condition, the ovaries produce excess androgens (hormones that regulate masculine characteristics), leading to irregular periods, ovarian cysts, acne, weight gain and fertility difficulties.

• But many experts have long argued that the name was incomplete, even misleading. By focusing only on the ovaries, it failed to capture the full spectrum of metabolic, hormonal, reproductive and psychological challenges associated with the condition

• That understanding has now prompted a major global shift in medical terminology. After a landmark global effort led by Monash University, PCOS will now be called Polyendocrine Metabolic Ovarian Syndrome (PMOS), which better reflects the condition’s complex, multisystem nature.

• According to Dr Garima Kachchawa, professor, obstetrics and gynaecology, All India Institute of Medical Sciences (AIIMS) Delhi, “the shift also underlines the need for women and clinicians to look beyond reproductive symptoms and recognise the broader health risks linked to the disorder”.

• In what was traditionally called PCOS, that maturation process gets disrupted. Instead of one follicle fully developing, many follicles stall midway. They remain small and immature rather than progressing to ovulation. These are called arrested follicles.

Do You Know

• The renaming of PCOS to PMOS reflects the understanding that the condition is a multisystem disorder, involving endocrine, metabolic, reproductive, psychological and dermatological features. The term “PCOS” focused mainly on the ovaries and did not adequately represent the broader nature of the condition. The new name will gradually be introduced globally over the next three years.

Other Important Articles Covering the same topic:

📍What is PCOS?

Previous year UPSC Prelims Question Covering similar theme:
📍Discuss the positive and negative effects of globalization on women in India. (UPSC CSE, GS1, 2015)

The World

Eagle -Dragon in tactful Tango, world watches

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.

What’s the ongoing story: In what is set to be one of the most consequential encounters in years, US President Donald Trump arrives today in Beijing, where he will meet with his Chinese counterpart, Xi Jinping.

Key Points to Ponder:

• The recent summit between Donald Trump and Xi Jinping-what are the key highlights?

• What are the major and minor dimensions of contemporary US–China relations?

• Why does Taiwan remain one of the most sensitive issues in US–China relations?

• Why India is relevant in the context of Trump–Xi discussions?

• What factors make India strategically important to both the US and China?

• What are the ‘5 Bs’ and the ‘3 Ts’?

Key Takeaways:

• The Trump-Xi summit is less about reconciliation than it is about managing an increasingly adversarial relationship in which economic interdependence survives despite collapsing strategic trust. Washington and Beijing are no longer negotiating the terms of partnership, but the boundaries of coexistence within an increasingly fragmented international order.

• The summit takes place amid a widening technological divide, continuing trade tensions, and the destabilising effects of the conflict in West Asia. The prolonged disruption around the Strait of Hormuz has intensified inflationary pressures globally while creating fresh political pressures for President Trump ahead of the November midterm elections.

• China has simultaneously used the crisis to position itself as a stabilising power with leverage over Tehran, particularly after hosting Iranian Foreign Minister Abbas Araghchi in Beijing shortly before Trump’s visit. For Washington, Chinese cooperation in restoring stability in the Gulf has become an important, if unstated, objective of the summit. Yet the challenges facing the summit extend far beyond immediate geopolitical bargaining.

• Domestic political pressures in the US further complicate the summit. Rising inflation, declining approval ratings, and the approaching elections increase the pressure on Trump to project the image of a diplomatic victory. Yet any overt attempt by Washington to frame the summit in triumphalist terms is unlikely to sit well with the Chinese leadership, which remains acutely sensitive to perceptions of strategic concession or “loss of face.”

Do You Know

• The competing priorities of both sides are reflected in what officials and analysts have described as Washington’s “5 Bs” and Beijing’s “3 Ts.”
Washington’s priorities revolve around Boeing aircraft, beef, beans (soyabeans), and the proposed Board of Trade and Board of Investment, a framework aimed at stabilising commerce in “non-sensitive” sectors while insulating strategic industries such as semiconductors and artificial intelligence from deeper confrontation. The approach reflects Washington’s growing preference for negotiated reciprocity over multilateral trade mechanisms that many within the Trump administration view as inadequate in dealing with China’s state-directed economic system.

• China’s priorities, meanwhile, revolve around Taiwan, tariffs, and technology. Beijing seeks a longer-term trade truce while pushing back against tightening US export controls, investment restrictions, and technology barriers.
US restrictions on advanced semiconductors and AI ecosystems have accelerated Beijing’s push for technological self-reliance even as slowing growth increases pressure on the leadership to stabilise external economic conditions. At the same time, Beijing wants greater access for its electric vehicles and other clean-energy exports to global markets as it recalibrates its export strategy amid growing geopolitical fragmentation.

• Whatever the immediate outcome of the Beijing summit, strategic and foreign policy circles in India will watch the developments closely. A prolonged phase of institutionalised rivalry between the US and China is likely to add new pressures to an already fragmenting global order.
India’s strategy of multi-alignment will increasingly be tested as trade networks, technological ecosystems, and geopolitical partnerships become more polarised. The challenge for New Delhi will lie in preserving strategic flexibility while continuing to build issue-based coalitions without becoming overly dependent on any single power bloc.

Other Important Articles Covering the same topic:

📍Mishandling of Taiwan could spark conflict, Xi tells Trump

Previous year UPSC main Question Covering similar theme:
📍The West is fostering India as an alternative to reduce dependence on China’s supply chain and strategically to counter China’s political and economic dominance.’ Explain this statement with examples. (UPSC CSE, GS2, 2024)

Economy

Govt caps duty-free gold imports

What’s the ongoing story: Coming close on the heels of Prime Minister Narendra Modi’s call for the adoption of austerity measures, the government has hiked customs duty on gold and silver imports to 10% from 5%, and Agriculture Infrastructure and Development Cess (AIDC) to 5% from 1%, taking the total effective import duty to 15% with effect from May 13. The effective import duty on platinum has also been increased to 15.4% from 6.4%.

Key Points to Ponder:

• What is import duty?

• What data and statistics about India’s gold imports?

• India is one of the world’s largest importers of gold-True or false?

• Why the Government raised import duty on gold?

• Why gold imports are often considered a concern for India’s external sector?

• Why does India import large quantities of gold and silver?

• What is the significance gold imports in the Indian economy?

• What is the role of import duties in managing external sector stability?

Key Takeaways:

• The government has also increased import duty on gold and silver findings — small components such as hooks, clasps, clamps, pins and screws used to hold the whole or a part of a piece of jewellery in place — to 5%. Platinum findings will attract a 5.4% import duty.

• The rupee hit an all-time low on Tuesday, falling to as much as 95.75 per dollar during the day before closing at 95.63 — the lowest it has ever ended a session. Since the war in West Asia began, the rupee has slumped by almost 5% against the US dollar and has been Asia’s worst-performing currency so far in 2026 — a period in which it has fallen by 6%.
Over the last few years, India has seen significant foreign exchange outflows on account of higher gold imports and spending on overseas travel under the Liberalised Remittance Scheme (LRS). The pressure on India’s external sector has been felt amid the ongoing West Asia war, with forex reserves plummeting by $38 billion in just two months since the onset of the conflict, and crude oil prices continuing to hover above $100 a barrel.

Do You Know

• Gold constitutes the second-largest item in India’s import bill after crude oil imports. In FY26, the country’s gold imports jumped by 24.1% to $71.97 billion compared to $58 billion in the previous financial year. This was largely due to the rise in gold prices, with gold imports falling to 721.04 tonnes in FY26 from 757.09 tonnes in the previous financial year, as per data from the Ministry of Commerce and Industry. Gold prices have surged over 40% in the last year, inflating the import bill.

• The current geopolitical situation has created significant volatility in global crude oil markets and international shipping routes, officials said, adding that as a large importer of crude oil, India remains vulnerable to elevated energy prices and supply-side disruptions, which can increase the import bill, exert pressure on inflation, and the CAD.

• A depreciating rupee is also adding to the country’s import bill burden. Officials said precious metals, while culturally and financially significant, are “predominantly consumption and investment driven” in nature and that such imports involve “substantial outflow of foreign exchange”.

Other Important Articles Covering the same topic:

📍Gold, silver import duty raised to 15% in bid to secure forex

Previous year UPSC Prelims Question Covering similar theme:
7) With reference to the international trade of India at present, which of the following statements is/are correct? (UPSC CSE, 2020)
1. India’s merchandise exports are less than its merchandise imports.
2. India’s imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
3. India’s exports of services are more than its imports of services.
4. India suffers from an overall trade/current account deficit.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 4 only
(c) 3 only
(d) 1, 3 and 4 only

8) Which of the following best describes the term ‘import cover’, sometimes seen in the news? (UPSC CSE, 2016)
(a) It is the ratio of value of imports to the Gross Domestic Product of a country
(b) It is the total value of imports of a country in a year
(c) It is the ratio between the value of exports and that of imports between two countries
(d) It is the number of months of imports that could be paid for by a country’s international reserves

9) The balance of payments of a country is a systematic record of (UPSC CSE, 2013)
(a) All import and export transactions of a country during a given period of time, normally a year
(b) Goods exported from a country during a year
(c) Economic transaction between the government of one country to another
(d) Capital movements from one country to another

 

PRELIMS ANSWER KEY

1.(a)  2.(d)  3.(d)  4.(d)  5.(a) 6.(c) 7.(d) 8.(d) 9.(a)

  

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