UPSC Key: Draft rules on obscenity online, LR-AShM missile and V2V safety technology

Key Points to Ponder:

— Why is the government planning to introduce a draft rule to address obscenity in online content?

— What are fundamental rights?

— What are reasonable restrictions on fundamental rights?

— What are laws against obscenity in India?

— How does the court decide what is obscene?

— What are the recent cases related to obscenity in India?

— How does obscenity affect society, especially youth?

— What is the hicklin test?

Key Takeaways:

— Last March, the Supreme Court had asked the Solicitor General to draft proposals safeguarding free speech under Article 19(1)(a) of the Constitution while ensuring the constitutionally permissible “reasonable restrictions” under Article 19(2).

— This came in the backdrop of public backlash against social media influencers Ranveer Allahbadia and Samay Raina over their comments. The case is scheduled to be heard on January 29.

— According to sources, the Information and Broadcasting Ministry has proposed the draft IT (Digital Code) Rules, 2026, under Section 87 (1) of the IT Act, 2000, — to be read with Sections 67, 67A, 67B and 66B of the Act. Section 67 of the IT Act provides for imprisonment and fine for publishing or transmitting obscene material in electronic form.

— The draft code mandates the classification of all digital content with labels based on themes and messages, including violence, obscenity, nudity, sex, language, drugs and horror. It also proposes classification of all digital content by age suitability: ‘U’ for all ages, 7+, 13+, 16+, adult-only, and specific categories for professionals like doctors or scientists.

— It suggests that all digital content should display a prominent content descriptor and age rating at the beginning to inform users and enable informed viewing decisions. Content rated U/A 13+ or higher must have parental control mechanisms, while adult-only content should implement a reliable age verification system.

— All the provisions of the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, would also apply to these rules.

— Industry sources said the proposed strategy of amending the IT Rules to introduce “civil consequences” for obscenity on Online Curated Content Providers (OCCPs) threatens to undo years of “nuanced legal distinction” between linear broadcast and on-demand digital streaming.

— Sources said that OCCPs have a “pull” nature, where content is accessed by choice. The digital ecosystem is already equipped with age-gating, content descriptors, parental locks, and curation tools that allow adults to make informed choices as opposed to the push nature of Linear TV, which is beamed into homes uninvited, necessitating a programme code to protect inadvertent viewers.

— Sources further said the upcoming Supreme Court hearing was largely precipitated by concerns over insensitive and unregulated content on User Generated Content (UGC) platforms, like YouTube, and it would have been more appropriate to clarify to the Court that the core issue relates to such content, not curated content.

Do You Know:

— With no clear definition in the laws, what can be considered as obscene as per the Indian courts has changed and evolved over the years. Until 2014, the judiciary used the Hicklin test to determine if something is obscene or not.

— The Hicklin Test was established in English Law after the case of Regina vs Hicklin (1868). According to it, a work can be considered obscene if any portion of it is found to “deprave and corrupt those whose minds are open to such influences”.

— The test was most famously used by the Supreme Court to ban DH Lawrence’s Lady Chatterley’s Lover in the case of Ranjit D Udeshi vs State Of Maharashtra (1964).

— However, years before the SC’s judgmentin 1964, the standard for obscenity in the UK had changed. The Obscene Publications Act, 1959, stated that a work must be considered “as a whole” before considering its effect on likely audiences.

— The United States had also shifted the goalpost away from the Hicklin test in 1957 in the case of Roth v. United States. The US Supreme Court held that the test for obscenity was “whether to the average person, applying contemporary community standards, the dominant theme of the material taken as a whole appeals to prurient interest”.

— Notably, this marked a crucial shift. While the Hicklin test defined obscenity using the lowest common denominator, the US and the UK accounted for shifting and evolving societal mores.

— The Roth case, in particular, influenced the Indian Supreme Court’s choice to adopt the “community standards” test in the case of Aveek Sarkar v. State of West Bengal (2014), which was regarding the publication of a semi-nude picture of Boris Becker and his fiancee.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: Ranveer Allahbadia controversy — ‘Obscenity’ laws, Hicklin Test and more for your UPSC Exam?

Previous year UPSC Prelims Question Covering similar theme:

(1) Other than the Fundamental Rights, which of the following parts of the Constitution of India reflect/reflects the principles and provisions of the Universal Declaration of Human Rights (1948)? (UPSC CSE 2020)

1. Preamble

2. Directive Principles of State Policy

3. Fundamental Duties

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Previous year UPSC Mains Question Covering similar theme:

Discuss Section 66A of IT Act, with reference to its alleged violation of Article 19 of the Constitution. (UPSC CSE 2013)

Europe & India to work together to shape a new global order: EU chief

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.

What’s the ongoing story: AS New Delhi hosted leaders from the European Union on the occasion of India’s 77th Republic Day celebrations, European Commission President Ursula von der Leyen said a “successful India makes the world more stable, prosperous and secure”.

Key Points to Ponder:

— What is the significance of the EU for India?

— How important is the Free Trade Agreement with the EU for India?

— What are the other areas of cooperation that are explored other than trade between India and the EU?

— What are the major trade deals signed by India in recent times?

— How significant are these trade deals considering the current geopolitical situation?

— Marketwise, how significant is India for the EU?

— India and EU are expected to sign a memorandum of understanding on facilitating the mobility of Indians to Europe. Why is it significant?

Key Takeaways:

— European Council President Antonio Luis Santos da Costa and von der Leyen were the chief guests at the Republic Day function on Monday.

— As the two European leaders co-chair the EU-India Summit along with Prime Minister Narendra Modi on Tuesday, the key outcomes include announcements about a ‘comprehensive strategic agenda for 2026-2030’, conclusion of a Free Trade Agreement, a Security and Defence Partnership, and a mobility framework for students and skilled professionals.

— Von der Leyen, who is former German Defence minister, described the participation of an EU military contingent at the Republic Day parade as a powerful symbol of the deepening security cooperation between the two sides.

— After witnessing the Republic Day ceremony, EU’s Commissioner for Trade and Economic Security Maros Sefcovic, indicated that the India-EU free trade agreement will be concluded on Tuesday.

President Droupadi Murmu,PM Narendra Modi and Defence Minister Rajnath SIngh with the guests of honour, President of the European Council Antonio Costa and the President of the European Commission ( EU) Ursula Von Der Leyen at the 77th Republic Day parade celebrations on the Kartavya path in New Delhi on Monday. (Express Photo by Tashi Tobgyal)

— After the negotiations are concluded, sources said the FTA will have to go through “legal scrubbing” and “internal consultations” so the concluded pact can proceed to “European Parliament” for consent and then, it will go to the European Council’s authorization as quickly as possible.

— Sources said the two sides will aim to minimise time between summit conclusion and Parliament vote, and after the European Council’s authorisation, it will be signed between the two sides.

— Usually it takes 6-8 months to complete that entire process —as was seen in the EU-UK Free Trade agreement. After it is signed, a date for operationalisation will be arrived at, and the effort will be to put a date by end of the year — so that the FTA becomes operational in 2026 itself.

— The EU and India had first launched negotiations for the free trade agreement in 2007, before the talks were suspended in 2013 due to a gap in ambition. The negotiations were relaunched in June 2022.

— The two sides are also expected to sign a memorandum of understanding on facilitating the mobility of Indians to Europe — it will launch a new cooperation framework on mobility covering students, researchers, seasonal workers and highly skilled professionals to better support Indian talent coming to Europe.

— The two sides will also start exploratory talks on India’s association with Horizon Europe to scope collaboration in research and innovation. They will also hold the first EU-India Business Forum back-to-back with the summit (organize leaders’ participation and business engagement).

— Sources said they will also “inject momentum into preparatory work for the India-Middle East-Europe economic corridor to advance connectivity (transport, digital and energy connections)”.

Do You Know:

— The EU, as a bloc, is India’s largest trading partner in goods. For the financial year 2024-25, India’s total trade in goods with the EU was worth about US$ 136 billion, with exports around US$ 76 billion and imports at US$ 60 billion.

— The European Union is a group of 27 countries in Europe. These countries came together to make things better, easier and safer for people. They agreed to work together and help each other.

— India established diplomatic relations with the European Economic Community — the first pillar of the future European Union — back in 1962. The Joint Political Statement signed in 1993 and the Cooperation Agreement of 1994 paved the way for the strengthening of ties between India and Europe.

Other Important Articles Covering the same topic:

📍India-EU trade deal would be largest of its kind

Previous year UPSC Prelims Question Covering similar theme:

(2) Consider the following statements: (UPSC CSE 2023)

The ‘Stability and Growth Pact’ of the European Union is a treaty that:

1. limits the levels of the budgetary deficit of the countries of the European Union

2. makes the countries of the European Union to share their infrastructure facilities

3. enables the countries of the European Union to share their technologies

How many of the above statements are correct

(a) Only one

(b) Only two

(c) All three

(d) None

Previous year UPSC Mains Question Covering similar theme:

The expansion and strengthening of NATO and a stronger US-Europe strategic partnership works well for India. What is your opinion about this statement? Give reasons and examples to support your answer. ( UPSC CSE 2023)

 

EDITORIAL

As rules-based order crumbles, only reforms can shield the economy

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-III: Indian Economy and issues relating to planning, mobilisation, of resources, growth, development and employment; Inclusive growth and issues arising from it

What’s the ongoing story: Sajjid Z. Chinoy writes: 2026 has begun with a sense of cautious optimism that the economy is experiencing a cyclical upswing. Recent GDP prints have surprised to the upside, credit growth is accelerating and some surveys reveal business sentiment may be firming. Near-term buoyancy should not be surprising.

Key Points to Ponder:

— How important is private investment for the growth of the economy?

— Weak consumption and exports are discouraging private investment. How to address this?

— What are the reasons for the increase in Fiscal deficits?

— What are the structural reforms introduced by the government in the economy?

— Why is labour-intensive growth crucial for India’s demographic transition?

— What is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPPTP)?

Key Takeaways:

— The economy has benefitted from a raft of supports in 2025: GST and income tax cuts, monetary and regulatory easing, positive terms-of-trade impulses from lower crude prices, and a second successive strong monsoon. Together, these tailwinds are driving a cyclical lift.

— The economy must successfully navigate two rotations. The first rotation is of demand drivers. Post-pandemic growth was driven by a surge in public investment, a revival of the real estate sector, and strong service exports. But several of these impulses are fading.

— Urban and rural consumption have been in a game of whack-a-mole since the pandemic. Can they finally grow in unison? Rural consumption has lifted smartly in recent quarters. Can urban consumption complement it? Autos have picked up nicely post the GST cuts, but the rest of urban consumption looks more tentative.

— Goods exports have been resilient in the face of punitive US tariffs, with exporters finding alternative markets. That said, non-oil export growth rates slowed to 3 per cent (in nominal dollars) by the end of last year. Exports therefore have their work cut out in 2026.

— What does all this imply for private capex? In a world floating with Chinese excess capacity and riddled with US policy capriciousness, a broad-based private investment recovery will require both strong domestic demand visibility and animal spirits.

— The second rotation is the cyclical making way for the structural. The space for more cyclical support is exhausted. Rampant Chinese excess capacity is likely to keep inflation contained but also pull nominal GDP growth into single digits.

— Assuming 9 per cent nominal growth for the foreseeable future, the combined (central and state) fiscal deficit will need to be reduced by another percentage point of GDP just to keep public debt/GDP at 80 per cent. There is no further space for fiscal support.

— The implication: Cyclical supports must make way for structural underpinnings. Policymakers must be commended for jumpstarting this process both by bringing reforms back on the table (GST rationalisation, new labour codes, 100 per cent FDI in insurance) and not succumbing to export pessimism (by signing a slew of free trade agreements).

— Human capital augmentation is India’s biggest imperative over the next decade. If industrial policy is to be exercised, it must be in labour-intensive sectors and formalisation must not push up the marginal cost of labour to the point that businesses, paradoxically, turn more capital-intensive.

— Meanwhile, the export push must be taken to its logical conclusion by joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPPTP), a large free trading block that accounts for 15 per cent of global trade.

— The upcoming budget is the perfect opportunity to simplify, rationalise and liberalise customs duties, imports tariffs and non-tariff barriers such as QCOs. The old adage — an import tariff is an export tax — has never been truer in a world of global supply chains.

— Over the last 10 years, per capita GDP growth in US dollars has clocked 5.9 per cent. To reach $15,000 per capita by 2047, the asking rate of per capita growth in dollars is 8 per cent for the next 22 years, at a time when India’s working age population growth — which averaged 1.5 per cent over the last decade — will progressively go to zero.

— At a time when the rules-based global order is falling apart and being replaced by the law of the jungle, only sustained economic reforms will induce investment, attract capital flows, create jobs, and thereby create a protective sheath around the economy against a hostile and precarious global backdrop.

Do You Know:

— CPTPP is a free trade agreement (FTA) that was agreed in 2018 between 11 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. UK is also a member.

— C. Raja Mohan writes: Success with Europe must now spur Delhi to accelerate the upgradation of the Australia agreement, revive prospects with Canada, and nudge Washington toward a more stable trade compact.

— India should also begin exploratory discussions with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Unlike the RCEP, dominated by China, the CPTPP excludes both Beijing, the manufacturing hegemon, and Washington, now an increasingly capricious trade partner

Other Important Articles Covering the same topic:

📍India-Europe deal isn’t a byproduct of Trump’s America. It’s been long in the making 

📍Why is Britain joining a trans-Pacific trade pact?

Previous year UPSC Mains Question Covering similar theme:

Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India. (UPSC CSE 2022)

 

EXPLAINED

India to expand its hypersonic arsenal with LR-AShM missile

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.

What’s the ongoing story: At the 77th Republic Day Parade on Kartavya Path, the highlight of the Defence Research and Development Organisation (DRDO) display is the Long Range Anti-Ship Hypersonic Missile (LR-AShM), which it is showcasing for the first time.

Key Points to Ponder:

— What are ballistic missiles?

— What are scramjet engines?

— How is it different from Ramjets?

— What are the major missiles indigenously developed by India?

— Understand hypersonic glide and hypersonic cruise technology

— What major defence equipment were displayed at the Republic Day parade?

Key Takeaways:

— The DRDO is displaying LR-AShM along with its launcher. The missile system is designed to meet the coastal battery requirements of the Indian Navy. The LR-AShM is capable of engaging static and moving targets and is designed to carry various payloads to a range of around 1,500 kilometers.

— This missile follows a quasi-ballistic trajectory with hypersonic speeds starting at Mach 10 (multiples of speed of sound) and maintaining average Mach 5 with multiple skips.

— Ballistic missiles are boost-powered initially and then travel unpowered on a high, arched trajectory. Quasi-ballistic missiles begin ballistically but fly lower and manoeuvre in flight to change course and evade interception.

— As this missile flies at low altitudes with high speed and manoeuvrability, enemy ground and ship-based radars cannot detect it. The LR-AShM is configured with a two-stage solid propulsion rocket motor system. These propulsion systems boost the missile to the required hypersonic velocities.

— Stage-1 of the vehicle is separated after it is spent. After Stage-II burnout, the vehicle performs an unpowered glide with required manoeuvres in the atmosphere before engaging the target, the DRDO has said.

— The obvious advantages of the hypersonic speed is it makes it difficult for missiles to be detected. It can cover its range around 1,500 kilometers in 15 minutes. Versions with higher ranges upto 3,500 kilometers are currently at various stages of development.

— As part of the further development cycle, the missile warhead and sensor mechanisms will be integrated soon, before its induction into the Navy in two to three years.

— This missile takes some key components from the submarine-launched ballistic missile Sagarika or K-15, which is from the K missile family and also from the Brahmos supersonic cruise missile.

— Amidst cutthroat global competition in hypersonic weapons, DRDO is working on two key hypersonic technologies. One is hypersonic glide and another is hypersonic cruise. LR-AShM is a hypersonic glide vehicle and includes in itself major achievements in indigenous technologies like materials and control systems needed for sustained hypersonic flight.

— Hypersonic cruise missiles fly within the atmosphere at hypersonic speeds using scramjet engines for sustained powered flight and manoeuvrability.

— Ramjets are air-breathing engines that compress incoming air using forward motion, with fuel igniting in a combustion chamber; they require an assisted take-off and work best around Mach 3, losing efficiency at hypersonic speeds.

— Scramjets improve on ramjets by keeping airflow supersonic in the combustion chamber, enabling efficient operation above Mach 5, but are far more complex to design and operate.

Do You Know:

— IN ITS first Republic Day celebrations after Operation Sindoor, India showcased its military might with a display of fighter jets, indigenously built missiles, newly raised units and lethal weapons used during the military operations last year.

— BrahMos supersonic missiles, Akash weapon systems, ‘Suryastra’ universal rocket launcher system, Main Battle Tank Arjun, Dhanush artillery guns and Divyastra battery were among the major weapon systems displayed at the parade.

— The Ministry of Defence declared 2025 as the “Year of Reforms”. While progress on theatre command integration was incremental and at best cautious, the objectives of “self-reliance” and “defence preparedness” were validated by the numbers as much as the test of war.

— Since January 2025, the Defence Acquisition Council has approved capital acquisition proposals worth over Rs 3.84 lakh crore, focusing mainly on indigenisation. Defence production hit a record Rs 1.54 lakh crore, and import dependency dropped below 35 per cent for the first time.

— The rigorous enforcement of “Positive Indigenisation Lists” continues to drive this shift away from imports. With defence exports touching Rs 23,622 crore, the target of Rs 50,000 crore by 2029 seems less elusive.

Other Important Articles Covering the same topic:

📍77th Republic Day: Military might, with a dash of Sindoor

📍Republic Day 2026: Behind tomorrow’s salute, indigenous steel and a year of reform

Previous year UPSC Prelims Question Covering similar theme:

(3) What is “Terminal High Altitude Area Defense (THAAD)”, sometimes seen in the news? (UPSC CSE 2018)

(a) An Israeli radar system

(b) India’s indigenous anti-missile programme

(c) An American anti-missile system

(d) A defence collaboration between Japan and South Korea.

India has most road accident deaths in the world. Can ‘talking cars’ curb these?

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.

What’s the ongoing story: The government is planning to launch Vehicle-to-Vehicle (V2V) safety technology to prevent road accident deaths and reduce traffic. In a meeting of the parliamentary consultative committee on January 22 in New Delhi, the Union Minister of Road Transport and Highways, Nitin Gadkari, said that the Department of Telecommunications has allocated 30 GHz radio frequency for the development of vehicle-to-vehicle communication systems, which will help reduce road accidents and fatalities.

Key Points to Ponder:

— What are the reasons for rising road accidents in India?

— Why is Road Safety a must in India?

— What position does India have in terms of Road safety?

— Road accidents are a multi-causal phenomenon and are the result of an interplay of various factors. What are those factors?

— What are the initiatives taken by the government to prevent road accidents?

Key Takeaways:

— V2V or vehicle-to-vehicle communication is a wireless technology that will enable the vehicles to communicate or talk with one another to share real-time information like speed, location, acceleration, braking, etc. It is the sub-category of Vehicle-to-Everything (V2X) and comes under the umbrella of the Intelligent Transport System.

— The system is similar to the aviation sector technology, where aircraft broadcast their position, speed, altitude, and the nearby aircraft and ground stations receive it. While this system is fortified in the aviation sector across the world, the road sector is still evolving, and V2V is working in a few countries, mostly developed nations.

— According to the MoRTH officials, for the V2V system, an On Board Unit (OBU) will be installed in cars so that the nearby vehicles can exchange information among vehicles wirelessly. It will alert the driver about the black spots, obstacles, parked vehicles on roadsides, fog or any potential threats.

— Usually, V2V systems have a range of 300 metres and can detect vehicles in this range. For instance, if a car applies brakes suddenly, the nearby vehicles will get an alert to slow down before seeing it. This will help in reducing crashes.

— India ranks first in the world in total road accident fatalities, far ahead of second- and third-ranked countries: China accounts for just 36%, and the United States for 25%, of India’s road deaths.

— The government has not yet announced any specific date for rolling out this system. However, it is MoRTH’s key initiative as part of its road safety program for the year.

— The V2V system offers a solution for road accidents and managing traffic better. However, there are some limitations and privacy concerns as well. The frequency band allocated for the system might not support all the vehicles. It means that if information is miscommunicated, it can lead to accidents and fatalities.

— The other issue is that it will store a large amount of data about the vehicles, their location, details about the driver, etc., which puts the whole intelligent transport infrastructure at the potential risk of being misused. It would certainly require government regulations and rules to implement it.

— The cyber attack is another concern for this system. If an attacker gains complete control of the system, it can be misused to create a major security threat for the region.

— The US is the leader in V2V communication system research and its implementation with strong regulation. Apart from this, some of the European countries like Germany, France, the United Kingdom, etc., are incorporating V2V into new vehicles and smart city projects.

Do You Know:

— The National Road Safety Month is being observed by Ministry of Road Transport and Highways during 1st January – 31st January, 2026.

— The Stockholm Declaration on Road Safety, adopted at the 3rd Global Ministerial Conference on Road Safety in February 2020, set a global target to reduce road traffic deaths and injuries by 50% by 2030. India is also a signatory.

— Brasilia Declaration on Road Safety, 2015: The declaration was signed at the second Global High-Level Conference on Road Safety, which was held in Brazil. Under the declaration, the countries plan to achieve Sustainable Development Goal 3.6, which is to halve the number of global deaths and injuries from road traffic accidents by 2030.

— India is a signatory to the declaration and is committed to a reduction in fatalities.

— Decade of Action for Road Safety 2021-2030: The UN General Assembly adopted resolution “Improving global road safety” with the ambitious target of preventing at least 50% of road traffic deaths and injuries by 2030.

— The Global Plan aligns with the Stockholm Declaration, by emphasizing the importance of a holistic approach to road safety.

— Bloomberg Initiative for Global Road Safety (BIGRS) 2020-2025: It aims to reduce road crash fatalities and injuries in low and middle-income countries and cities by implementing a comprehensive set of actions that are proven to save lives.

Other Important Articles Covering the same topic:

📍India’s road deaths are not accidents — they are a public health crisis 

📍Most road accidents occur in known zones, solutions lie in focused efforts

Previous year UPSC Prelims Question Covering similar theme:

(4) Consider the following statements Brasilia declaration:

1. It was signed at the first Global High-Level Conference on Road Safety.

2. India is not a signatory to the declaration.

3. Under the declaration, the countries plan to achieve Sustainable Development Goal 1.

How many of the statements given above is/are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

ECONOMY

Trump’s policies, sanctions turn central banks to gold, drive de-dollarisation

Syllabus:

Preliminary Examination: Current events of national and international importance

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

What’s the ongoing story: On Monday, even as the US dollar fell to a four-month low, the price of gold crossed the $5,000-per-ounce mark for the first time. The yellow metal’s historic rally is showing no signs of slowing down, with even the smartest and biggest institutions in the world – and not just small-time investors like households – continuing to pile in on gold. One category of these smart and big investors is central banks.

Key Points to Ponder:

— What is foreign exchange reserve?

— What are the components of foreign exchange reserves?

— What is de-dollarisation?

— How did the dollar become the world currency?

— What are the reasons for the weakening of the US dollar?

— How does it impact India?

Key Takeaways:

— Take the Reserve Bank of India (RBI), for instance. Last week, data from the Indian central bank showed that its foreign exchange reserves were up more than $14 billion as on January 16 – the biggest weekly increase in 10 months. However, nearly a third of this rise was due to the RBI’s gold kitty of 880 tonnes appreciating in value.

— Over the past year, the value of RBI’s foreign currency assets – which predominantly make up the forex reserves – has increased by just 5% even as total reserves rose 12%. What has been the primary driver? Gold, with the value of the RBI’s holdings up 70%.

— The RBI, though, hasn’t even been the biggest buyer of gold over the last year. In fact, the RBI’s gold holdings only increased by 4 tonnes or so in 2025. Leading the charge were the central banks of Poland (95 tonnes), Kazakhstan (49 tonnes), and Brazil (43 tonnes), as per World Gold Council data until November 2025.

— But central banks buying gold is not news. What matters is gold’s relative position in what these banks hold as reserves; the RBI, for example, now holds 17% of its forex reserves as gold, up from 12% a year ago. The reason, directly and indirectly, is US President Donald Trump.

— In a note last week, economists from Morgan Stanley said that Trump’s policies on trade and sanctions, among other factors, and the shift to a multipolar world are key to pushing people away from the US dollar.

— Trump has made no secret about maintaining the US dollar’s global supremacy, even threatening the BRICS nations with 100% additional tariff should they move forward with a common currency to “degenerate” and “destroy” the dollar.

— De-dollarisation, after all, can shift the balance of power away from the US and weaken its ability to shape the world economy and global financial markets in its image.

— At the same time, everything Trump has done has weakened the greenback’s status in the eyes of foreign beholders, resulting in the US dollar weakening by 9% in 2025 – the most in almost a decade. This has helped drive the rise in gold prices, with the demand for safe-haven assets on the up amid Trump’s sabre-rattling and policy uncertainty.

— According to JP Morgan analysts, de-dollarisation has been most visible in commodity markets. In a note last year, the investment bank said that “a large and growing proportion of energy is being priced in non-dollar-denominated contracts”. However, this is also showing up in sovereign debt.

— The RBI, for instance, has sharply lowered its holdings of US government bonds: in November 2025, holdings by India stood at $186.5 billion, down for the sixth month in a row. In November 2024, the figure was $234 billion. Meanwhile, China’s holdings of US government debt are at a 16-year low.

— The diversification of forex reserves away from the dollar and assets denominated in it received a big push after the US froze Russia’s reserves following its invasion of Ukraine in February 2022.

Do You Know:

— Dollarisation is the process by which a country decides to recognize the U.S. dollar (stronger currency) as a medium of exchange alongside or in place of its domestic currency. It is a form of currency substitution where governments may choose to partially or fully adopt a foreign currency.

— For the past 80 years, the US dollar has been the dominant global reserve currency. Central banks, corporations, and travelers rely on the dollar to facilitate international trade and financial transactions. Today, the dollar is the most widely held reserve currency, playing a role in an estimated $6.6 trillion in daily transactions. Its supremacy underpins the global financial system.

— Notably, the history of the beginning of ‘Dollarisation‘ goes back to the Bretton Woods Conference of 1944, which redefined the global monetary order with participation from 44 Allied countries, including the US, Canada, and much of Western Europe.

— In response to Europe’s need for financial stability post- second world war, the US established the dollar as the central reserve currency, pegging global currencies to it and making it convertible to gold at a fixed rate.

— De-dollarisation, in simple terms, is the process of reducing dependence on the dollar. Discussions about ‘de-dollarization’ have gained momentum in recent decades. This trend is driven by U.S. sanctions and a growing shift toward multipolarity.

Other Important Articles Covering the same topic:

📍Knowledge nugget of the day: Dollarisation and De-dollarisation

Previous year UPSC Prelims Question Covering similar theme:

(5) Which one of the following groups of items is included in India’s foreign-exchange reserves? (UPSC CSE 2013)

(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign Countries

(b) Foreign-currency assets, gold holdings of the RBI and SDRs

(c) Foreign-currency assets, loans from the World Bank and SDRs

(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank

Previous year UPSC Mains Question Covering similar theme:

Craze for gold in Indians has led to a surge in import of gold in recent years and put pressure on balance of payments and external value of rupee. In view of this, examine the merits of the Gold Monetization Scheme. (UPSC CSE 2015)

ALSO IN NEWS

Israel says remains of last hostage in Gaza recovered

The Israeli military has announced that they have retrieved the remains of the final hostage in Gaza, which has potentially cleared the way for the next phase of ceasefire as it fulfills US President Donald Trump’s key condition to end the Gaza war. In the first phase of Gaza’s ceasefire deal, returning all remaining hostages, living or dead, was a key part and Gvili’s family had urged the Israeli government to not enter into the second phase of ceasefire until his remains were recovered and returned. Israel had earlier said that it would reopen Gaza’s Rafah border crossing with Egypt, which is the enclave’s main gateway to the world, once the remains of Gvili returns or the search operation for his body concludes.

 

PRELIMS ANSWER KEY

1. (d)   2. (a)   3. (c)    4. (d)   5. (b)

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