UPSC Key: Seva Teerth, BNP wins Bangladesh elections, and New CPI

— What was the need for this redevelopment project?

— Know about the blueprint of the Central Vista redevelopment project

— Who is the architect of the Central Vista project?

— Who designed the South Block and North Block?

— Know about the history of Central Vista project

— How does the redevelopment project is going to benefit governance and environment?

Key Takeaways:

— Addressing an event after inaugurating the Seva Teerth, as well as two Central Secretariat buildings, called Kartavya Bhavan 1 and 2, the PM said buildings in the North and South Block were “built as symbols of the British Empire and their purpose was to keep India chained in slavery for centuries”.

— The Executive Enclave complex or Seva Teerth, on Dara Shikoh Road (formerly Dalhousie Road), also houses the National Security Council Secretariat and the Cabinet Secretariat. It has been built under the Central Vista redevelopment project. In addition to Executive Enclave Part 1, a new residence for the PM, called Executive Enclave Part 2, is also under construction nearby.

— After moving to the new PMO, Modi garlanded a statue of Lord Ganesha and cleared a series of welfare measures, including a scheme for cashless treatment of up to Rs 1.5 lakh for accident victims under the PM RAHAT scheme.

— The PM also approved files relating to:

* Doubling the target of Lakhpati Didi scheme to 6 crore. The scheme aims to empower rural women in Self-Help Groups to become Lakhpati Didis (earning over Rs 1 lakh/year) through income-generating activities.

* Doubling the Agriculture Infrastructure Fund from Rs 1 lakh crore to Rs 2 lakh crore.

* A Startup India Fund of Funds 2.0 with a corpus of Rs. 10,000 crore, which the PM said will “encourage startups in early stages and deep-tech research.”

Do You Know:

— During the colonial era, leading British architects Edwin Lutyens and Herbert Baker envisaged the Central Vista complex as the centre of administration in India to house all facilities needed for efficient functioning of the Government.

— It was inaugurated in 1931 and comprised of the buildings, namely Rashtrapati Bhawan, Parliament House, North and South Blocks and the Record Office (later named as The National Archives), along with the India Gate monument and the civic gardens on either side of the Rajpath.

— As a part of the Central Vista redevelopment plan that was announced by the Ministry of Housing and Urban Affairs in 2019, all ministries will be moved into 10 new Common Central Secretariat (CCS) buildings constructed along the Central Vista, which stretches from India Gate to Rashtrapati Bhavan, after demolishing existing government office buildings. North Block and South Block will be repurposed into museums.

Other Important Articles Covering the same topic:

📍Explained: How Delhi’s Central Vista redevelopment project is being executed

📍At Central Vista, a flawed decolonisation project by BJP-RSS 

UPSC Prelims Practice Question Covering similar theme:

(1) Consider the following statements:

1. The Central Vista project was designed by Edwin Lutyens and Herbert Baker.

2. It was inaugurated in 1931.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Modi first to reach out, but Delhi-Dhaka ties not simple

Syllabus:

Preliminary Examination: Current events of national and international importance

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

What’s the ongoing story: Prime Minister Narendra Modi became the first leader to call and greet BNP chief Tarique Rahman Friday after it became clear that his centre-right party had secured a landslide two-thirds majority in elections to the Bangladesh parliament, one of the most watched elections in South Asia in recent years.

— How was the India-Bangladesh relationship in the past under BNP rule?

— Evaluate the India-Bangladesh relationship of the past 2 years.

— Know about the history of the India-Bangladesh relationship

— What is the issue related to Sheikh Hasina in the India-Bangladesh relationship?

— What is the significance of Bangladesh for India?

— What is the Neighbourhood First policy of India?

— Suggest measures that India can take in order to overcome the challenges in the India-Bangladesh relationship?

Key Takeaways:

— Modi’s outreach assumes significance given the acrimony and strain in ties between Delhi and Dhaka after the dramatic August 2024 ouster of Prime Minister Sheikh Hasina, one of India’s closest partners in the neighbourhood. Her presence in India will frame a diplomatic challenge for two countries, apart from irritants that include water-sharing, border, connectivity and illegals.

— Modi dialled Rahman even before the official results were announced by the Election Commission of Bangladesh.

— India had called for “inclusive elections”, apart from it being “free, fair and credible” – essentially meaning that the Awami League should be allowed to participate in the elections. But the Hasina-led party Awami League was banned from contesting the elections.

— Modi said “India will continue to stand in support of a democratic, progressive and inclusive Bangladesh.” This is an important framing since India has called for the security of Hindu minorities. This one issue contributed to strain in Delhi’s relations with the Mohammad Yunus-led interim government in Dhaka.

— BNP’s international relations advisor Humayun Kabir called Hasina a “terrorist”, and said she should be extradited.

— The presence of Hasina and senior leaders and activists of the Awami League in India will pose a challenge. She is considered a fugitive under law by the Bangladesh government and the political parties here.

— For Rahman, the emergence of Jamaat will be a challenge if it poses a threat to India, and Delhi will be looking at how he manages to put a lid on anti-India activities from Bangladesh. When the BNP-Jamaat combine was in power in 2001-2006, India had to bear the brunt of terrorism from Bangladesh soil, and it sowed distrust.

— India’s biggest apprehension is that Bangladesh could go back to the 2001-2006 days. It now expects Rahman to demonstrate good faith and actions.

— India had reached out to Rahman after his mother and former PM Khaleda Zia’s death in December 2025. External Affairs Minister S Jaishankar had travelled to Dhaka to convey condolences. Defence Minister Rajnath Singh had gone to the Bangladesh High Commission in New Delhi to pay tribute to the former PM.

— Rahman also did not make any anti-India statement during his poll campaign. For that matter, neither did the top leaders of the BNP, This set a positive tone for revival of bilateral ties.

From the Explained page: BNP landslide gives India a chance for a reset in ties

— India’s history with the BNP: India has dealt with the BNP since General Ziaur Rahman, Tarique Rahman’s father, founded the party in 1978. His wife, Khaleda Zia, took over after his assassination and was central in shaping the party’s ideology and actions since 1982. Tarique Rahman, 60, took over control after her death late last year, shortly after he returned to Bangladesh after 17 years of self-exile.

— It was during the Khaleda Zia-led BNP-Jamaat coalition government between 2001 and 2006 that a sense of bitterness with India emerged. For India, the fact that insurgent groups in the Northeast and other terror groups were allowed to operate from Bangladeshi soil, and reports of Jamaat leaders giving protection to those elements, constituted a major security threat.

— After 2008, when Hasina came to power, she cracked down on these organisations, marking the beginning of strong counter-terrorism cooperation between India and Bangladesh.

— Challenges for India: Firstly, there is the pressing issue of Hasina remaining in India. The BNP chief will face criticism from the Jamaat if it doesn’t press for her extradition. He would also not want Hasina to make politically provocative statements from India.

— Secondly, the economic ties are crucial for both sides. Bangladesh is India’s largest trading partner in South Asia, covering sectors like textiles and energy, and it would want trade to flourish in the interest of a stable Bangladesh. For Bangladesh, too, it would be prudent to maintain ties with a key trade partner.

— Thirdly, India would not want the security situation in Bangladesh to deteriorate and resemble the previous BNP tenure. This is an important ask from Delhi, and channels of communication have been opened with the Jamaat leadership to that end.

— Fourthly, Delhi is keen to continue its development and connectivity projects, with some networks being developed to link Assam, Meghalaya and Tripura to Sylhet and Dhaka for easier access. But given the prevalent anti-India sentiments on the streets of Bangladesh, that will have to be dealt with sensitively by India.

— Fifth, Bangladesh and India need to improve people-to-people ties. Bangladeshi citizens come to India for medical treatments, tourism and more, and India’s development of a system to cater to the demographic can go a long way in creating goodwill. Mechanisms like long-term and multiple-entry visa regimes matter in this regard.

— Sixth is the connected issue of the huge economic migration from Bangladesh to India. The issue of Bangladeshi immigration has already become a political issue in several Indian states, often raised as part of the BJP’s political platform. It must be managed amicably and sensitively.

— Seventh, India would not want an extremist and anti-minority turn in Bangladesh society, and it would be in the BNP’s interest to keep those elements under check. Statements from Delhi about the recent spate of attacks on Hindus and religious minorities can only go so far, and it is the leaders in Bangladesh who must match that sentiment.

— Eighth, ensuring cooperation in these areas can cumulatively help prevent Bangladesh from turning towards Pakistan or China.

From the Explained page: Family man, prodigal son, next PM: Can Rahman unite Bangladesh?

— Between ending a 17-year exile and likely becoming Bangladesh’s next Prime Minister, Tarique Rahman has seen quite the reversal in fortunes in the space of a couple of months.

— As is always the case with dynasts, Rahman’s active political involvement began early. He joined the BNP in 1988 as a 23-year-old and founded the Ziaur Rahman Foundation the same year. This was supposedly an apolitical organisation, but soft-launched his political career.

— After the end of the Zia-led government in 2006, Rahman came under the scanner of anti-corruption agencies. He was arrested on March 7, 2007 on corruption charges during the rule of the caretaker government.

Tarique Rahman, the son of former Prime Minister Khaleda Zia and chairman of the Bangladesh Nationalist Party (BNP), addresses supporters at an election rally in Dhaka. (AP file)

— In September 2008, he was released on bail to seek medical treatment in London. His aides alleged that he was so badly tortured in jail that he had to be taken to the plane in a wheelchair.

— Rahman would not return for 17 years. He secured political asylum and lived in London’s Kingston area with his wife, Zubaida, and daughter, Zaima. While abroad, the BNP elected him its senior vice-chairman in 2009 and re-elected him in 2016.

— In 2018, Rahman became acting BNP chairman after Zia was jailed. During the Awami League’s tenure, he was sentenced in five cases in absentia and faced nearly a hundred cases, many of them pertaining to corruption and terror. Rahman has consistently denied the charges. The Hasina government also barred the media from publishing or broadcasting his statements.

— Courts have since cleared him of all charges, clearing the way for his return on December 25 last year. By this time, his mother had become seriously ill. The BNP chairperson died on December 30.

— Rahman formally took over the position on January 9, at a meeting of the BNP Standing Committee. He got less than two months for his transition from a bereaved son of a former prime minister to virtually bagging the top job himself.

From the Editorial Page: In Bangladesh, a new political moment — and a fragile equilibrium

— Amitabh Mattoo writes: The BNP’s return restores one of the two poles that have shaped post-1990 politics. Founded by Ziaur Rahman and later led by Khaleda Zia, the party has long articulated a nationalism attentive to sovereignty, identity and strategic distance from India. Under Tarique Rahman, that tradition now enters a different phase.

— The constitutional referendum held alongside the parliamentary vote adds another layer to this transition. Public endorsement of the proposed Charter confers democratic legitimacy.

— But legitimacy at inception does not guarantee durability. Constitutions derive authority not from text alone, but from how power is actually exercised within their limits.

— Questions of inclusion remain central. Reports of vandalised Hindu homes and attacks on temples during periods of transition have generated unease. In any constitutional democracy, minority confidence is a quiet but essential measure of institutional health. Electoral victory cannot substitute for reassurance. The promise of 1971 was sovereignty anchored in equality. That promise retains moral force.

— For India, this transition calls for composure anchored in strategic realism. External Affairs Minister S Jaishankar’s condolence call on Rahman following the passing of Begum Khaleda Zia signalled early diplomatic engagement. It reflected a recognition that statecraft must endure beyond partisan cycles.

— The India–Bangladesh relationship rests on history, but it is sustained by geography: Shared rivers, integrated supply chains, border management, energy connectivity and maritime security in the Bay of Bengal. Geography imposes continuity even when politics introduces change. Yet, geography does not shield the relationship from strategic contestation.

— Bangladesh will determine its own future. But India cannot afford strategic complacency. Stability in Dhaka is integral to India’s eastern security architecture. In a region where influence accumulates incrementally and leverage compounds quietly, vigilance is not intrusion — it is prudence.

— In 1971, Bangladesh asserted its sovereignty before the world. In 2026, it confronts a quieter but no less consequential test: Whether decisive electoral victory can consolidate democratic order without narrowing plural space, and whether sovereignty can be exercised without becoming susceptible to competing strategic pulls.

Other Important Articles Covering the same topic:

📍Return of the Son: India’s challenges after BNP and Tarique Rahman’s landslide win 

📍UPSC Issue at a Glance | Bangladesh Crisis and India: 4 Key Questions You Must Know for Prelims and Mains

Previous year UPSC Prelims Question Covering similar theme:

(2) With reference to river Teesta, consider the following statements: (UPSC CSE 2017)

1. The source of river Teesta is the same as that of Brahmaputra but it flows through Sikkim.

2. River Rangeet originates in Sikkim and it is a tributary of river Teesta.

3. River Teesta flows into Bay of Bengal on the border of India and Bangladesh.

Which of the statements given above is/are correct?

(a) 1 and 3 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Previous year UPSC Mains Question Covering similar theme:

Critically examine the compulsions which prompted India to play a decisive role in the emergence of Bangladesh. (UPSC CSE 2013)

 

NATION

20 heads of states to attend AI Impact Summit next week

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-II, III: Important International institutions, agencies and fora- their structure, mandate; Achievements of Indians in science & technology; indigenization of technology and developing new technology.

What’s the ongoing story: AS MANY as 20 heads of states will be attending the AI Impact Summit to be hosted in New Delhi next week. They include the Prime Ministers of Bhutan, Croatia, Finland, Greece, Kazakhstan, Mauritius and the Netherlands, besides Presidents of Sri Lanka, Serbia, Slovakia and Estonia, among others, the Ministry of External Affairs (MEA) announced on Friday.

— What is the AI Impact Summit?

— Know about the past AI Impact Summit

— What is the objective of having the Summit?

— What is the application of AI in education, agriculture, health, and government?

— Know about the major AI tools used by the government and how is it helping in the governance

— What are the challenges of adoption of AI tools?

— What steps need to be taken to address it?

Key Takeaways:

— Besides, there will be ministerial delegations from around 45 countries. United Nations chief Antonio Guterres has also confirmed his presence in New Delhi for the summit being chaired by India.

— The state visits of French President Emmanuel Macron and Brazilian President Lula da Silva have already been announced by the MEA earlier, for participation in the Summit and later, bilateral talks with Prime Minister Narendra Modi.

— “India is hosting the India–AI Impact Summit 2026 in New Delhi from 16-20 February 2026,” said the MEA statement.

— The summit, hosted at the invitation of Prime Minister Narendra Modi, is being positioned as the first major global AI gathering in the Global South. It will be held from February 16 to 20, with global CEOs and representatives of international organisations also expected to deliberate on the future of artificial intelligence, its economic impact and governance frameworks. PM Modi is scheduled to address the main plenary on February 19.

Do You Know:

— Bhaskar Chakravorti writes: India is hosting a high-profile AI Impact Summit next week — the fourth in a series of global summits. When the first of these launched in Bletchley Park in the UK in 2023, the focus was all on AI safety; today, many of those worries have been tossed out as we witness a US-China race, with the EU vying to play referee.

— The AI Summit should avoid being co-opted into a platform for chest-thumping. India’s leadership will be demonstrated not just by engineering a Ferrari but by rebuilding the rutted road underneath it. We must build the Ferrari while fixing the dirt road. Consider 10 potholes:

— Close the internet connectivity gap: Only 24 per cent of rural households have internet access vs 66 per cent in urban areas. Of the 125 countries we study at my Digital Planet research centre, India is close to the bottom in digital gender parity.

— Harmonise energy, climate and AI goals: The inadequate energy infrastructure, grid unreliability and weak transmission capacity will be stressed further by the growing demands from AI use.

— Make the workforce work-ready: For every 10 AI roles in India, there is only one qualified engineer. Talent is a constraint.

— Cut the dependence on foreign supply chains: India imports over 90 per cent of its semiconductor chips along with high-purity chemicals, gases, and silicon wafers.

— Make the data more usable: India generates vast amounts of data, but lacks high-quality, well-annotated datasets, particularly for regional languages.

— Streamline AI governance: Regulatory uncertainty with complex customs clearance and documentation requirements that vary across states slow innovation.

— Engineer “good enough” AI: AI-for-purpose designs need to be versatile.

— Secure the infrastructure: Indian AI can accomplish its scale and reach through DPI that can be extended to AI-powered services. This must be secured.

— Bridge the capital chasm for late-stage start-ups: Seed funding for AI startups exceeds Series A through C investments, when companies need resources to scale. While early-stage funding has improved, start-ups still rely heavily on foreign capital beyond Series B.

— Fix the actual dirt road: Inadequate infrastructure, traffic congestion, and fragmented operations add costs.

Other Important Articles Covering the same topic:

📍AI basics: What are artificial intelligence and machine learning?

📍Best of Both Sides | 10 things that India needs to fix

Previous year UPSC Prelims Question Covering similar theme:

(3) With the present state of development, Artificial Intelligence can effectively do which of the following? (UPSC CSE 2020)

1. Bring down electricity consumption in industrial units

2. Create meaningful short stories and songs

3. Disease diagnosis

4. Text-to-Speech Conversion

5. Wireless transmission of electrical energy

Select the correct answer using the code given below:

(a) 1, 2, 3 and 5 only

(b) 1, 3 and 4 only

(c) 2, 4 and 5 only

(d) 1, 2, 3, 4 and 5

Previous year UPSC Mains Question Covering similar theme:

Introduce the concept of Artificial Intelligence (AI). How does Al help clinical diagnosis? Do you perceive any threat to privacy of the individual in the use of Al in healthcare? (UPSC CSE 2023)

 

THE EDITORIAL PAGE

Trade pact with America is first step, not diplomatic solution

Syllabus:

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

Mains Examination: General Studies-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests; Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora

What’s the ongoing story:  Riaan Dhankhar writes: The US-India trade deal marks a welcome thaw after months of tariffs, recriminations, and diplomatic strain. But the deal itself will not fix the trust deficit between Washington and New Delhi. It lowers the temperature but does not restore confidence.

— What are the key outcomes of the India-US interim budget?

— Why did the US impose a reciprocal tariff on India?

— What are the areas of cooperation between India and the US?

— What is rehyphenating in International relations?

— What is the ongoing issue between the USA and Iran?

— What are the reasons for protest in Iran?

— What is the status of the relationship between Iran and India?

— How far has the USA impacted the bilateral relationship between India and Iran?

Key Takeaways:

— The trust deficit began with coercive trade policy. After talks stalled, US duties on Indian exports shot up as high as 50 per cent, turning commerce into a public test of India’s reliability. Then the politics got sharper.

— Washington compounded the damage with muddled Pakistan-related optics: President Donald Trump claimed credit for ending the May 2025 India-Pakistan crisis and floated US mediation on Kashmir — precisely the kind of third-party framing New Delhi rejects and treats as interference.

— The trade deal addresses one part of that cascade: It de-escalates. The agreement reduces US tariffs on Indian goods to 18 per cent and rolls back additional penalties tied to India’s purchases of Russian oil.

— Still, tariffs were never just an economic variable. They became the symbol of unpredictability – of a relationship that could turn punitive. India’s Russian oil imports became a proxy fight over strategic autonomy and US signalling towards Pakistan became a proxy fight over whether Washington understands India’s red lines.

— The good news is that the bureaucratic machinery of the relationship has kept moving under the surface even as the relationship frayed. After the tariffs were announced, a new 10-year defence framework was signed, and the US also approved an Indo-Pacific Maritime Domain Awareness package for India.

— India conducts more military exercises with the US than with any other country, an indicator of how routine the security partnership has become.

— The trade deal should be treated as a bridge back to diplomacy, not a substitute for it. If Washington wants this thaw to become a durable reset, it will need leader-driven moves that create visible alignment.

— Two moves must happen quickly. First, de-risk the Pakistan optics. Washington does not need to abandon counterterrorism engagement with Islamabad. But it should make explicit what Indian strategists need to hear: The US is not rehyphenating India and Pakistan, and it is not seeking to mediate Kashmir.

— Second, go big at the leadership level. A presidential visit to India would be the cleanest confidence-building mechanism. The most plausible vehicle, politically and logistically, is a Quad leaders’ summit.

From the Ideas Page: Venezuela playbook will not work for Donald Trump in Iran

— Bernard Haykel writes: Over the past week, the United States has positioned two aircraft carrier strike groups near Iran, and rumours abound that the US — either alone or in coordination with Israel — may launch a military attack against the regime in Tehran.

— President Donald Trump seeks to compel Iran to abandon its nuclear enrichment programme, curtail its ballistic missile production, and end  its support for non-state actors such as Hezbollah in Lebanon, Hamas in the Palestinian territories, and the Houthis in Yemen.

— Negotiations between the US and Iran are ongoing, yet Tehran has made clear that any demand it views as a violation of its sovereignty — such as the denial of its right to nuclear enrichment — will be rejected outright.

— Such refusal may prompt Trump to resort to military action, raising critical questions about the nature of any attack and whether it could meaningfully alter Iran’s behaviour — or, more importantly, threaten the survival of the clerical regime itself.

— Iran was recently convulsed by violent demonstrations that began on December 28. Initially sparked by economic grievances following the dramatic devaluation of the rial, the protests rapidly spread nationwide and evolved into a broader indictment of regime misrule.

— These developments underscore the deeply entrenched nature of the Islamic Republic, with perhaps as much as 20 per cent of Iran’s population of roughly 90 million willing to support and defend the regime. The resulting power imbalance between the state and the rest of society remains such that dissent can still be suppressed.

— By contrast, the opposition is highly fragmented, lacking a clear leader, coherent ideology, or unified political movement capable of mobilising the country’s disaffected population. Calls during the protests for the return of the former Shah’s son, Reza Pahlavi, highlight this vacuum of leadership and underscore both desperation and disunity.

— Given this context, how should we understand what President Trump is attempting to achieve in Iran? It is important to recall that Trump’s political formation and economic imagination were shaped in the 1970s, when successive oil shocks in 1973 and 1979 produced one of the most significant transfers of wealth in modern history — from oil-consuming to oil-producing states.

— Accordingly, when Trump surveys what he perceives as the axis of resistance to American hegemony — China, Russia, North Korea, Iran, Venezuela, and Cuba — he identifies Iran and Venezuela as its weakest links. His strategy appears to be to pressure and separate them through military threats and economic sanctions.

— Normalising relations with Iran would unleash substantial oil and gas supplies onto global markets, driving down hydrocarbon prices. Trump believes this would stimulate the US economy, particularly ahead of this November’s midterm elections, which the Republicans risk losing.

— Given the resilience of the Iranian regime and Washington’s clear unwillingness to commit ground troops, can Trump realistically alter Tehran’s policies? The killing or abduction of Ayatollah Khamenei is virtually impossible. While US forces could destroy ballistic missile facilities, such actions would neither topple the regime nor fundamentally alter its behaviour.

— Arab Gulf states have publicly signalled their unwillingness to support a US attack on Iran, fearing retaliation, further constraining Trump’s options. The coming days and weeks will therefore be critical as this drama unfolds and Trump attempts to replicate in Iran what he claims to have achieved in Venezuela.

Do You Know:

— In case of an attack by the US on Iran, much like the Afghanistan war, India will be impacted again in its immediate neighbourhood.

— Diplomatically, India will find it difficult to support the US actions if there are air strikes and military intervention inside Iran.

— Economically, Delhi has almost zeroed out the oil import from Iran, and it is a bit player in the Indian energy basket now because of the US sanctions from Trump 1.0.

— Another complexity will occur if Iran chooses to attack — for its survival — against US bases in the region, in Saudi Arabia, UAE, Qatar among others.

— In that event, if the West Asian region goes into turmoil, Delhi will be on tenterhooks as it has stakes in the peace and stability in the region. It has about 8-9 million Indians living and working here. Delhi also relies heavily on the region for its energy needs, with almost 60 per cent of its energy needs coming from here. Any instability in the region threatens India’s energy security and that would have an inflationary impact.

Other Important Articles Covering the same topic:

📍Iran says it could dilute enriched uranium if all sanctions are lifted

📍UPSC Issue at a Glance | India-US Interim Trade Deal: Backdrop, key highlights, gains, and concerns

📍What the US could do in Iran, and what India will watch out for

Previous year UPSC Mains Question Covering similar theme:

In what ways would the ongoing US-Iran Nuclear Pact Controversy affect the national interest of India? How should India respond to its situation? (UPSC CSE 2018)

 

ECONOMY

Key themes in new CPI: Gold, silver to back-series

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: India finally has a brand-new Consumer Price Index (CPI) basket that not only uses a fairly recent year as the base for prices – 2024 – but also considers the prices of goods and services households buy now instead of a-decade-and-a-half ago when it comes to calculating the overall change in price levels.

— What is the purpose of base year?

— How is CPI calculated?

— What is the purpose of the CPI?

— How has the weightage of food items changed from the previous series?

— What is core inflation?

— How does inflation impact the economy?

— What is inflation targeting?

Key Takeaways:

— As per the old CPI series, headline retail inflation stood at 1.33% in December. So, in comparison, inflation more than doubled in January. But this comparison is not valid for several reasons. For one, new goods and services which previously weren’t a part of the CPI now are, while others have been excluded. And how the prices of these items change affect the overall inflation rate.

— In such situations, statisticians and economists like to have what is called a ‘back-series’: old data presented in the context of the new. Although MoSPI has provided a ‘back-series’ of the headline index numbers – whose year-on-year percentage changes are the inflation rates – of the CPI going back to 2013, it is only a mechanical exercise.

— For instance, using the back-series provided and the so-called ‘linking factor’ used to connect the old and new series, it can be found that CPI inflation in December 2025 was 1.17% in the new series versus 1.33% in the old.

— Making such a comparison is a rather simplistic way to understand what inflation may have been like in 2025 as per the new series because the old CPI basket has not undergone any change or been reconstructed to mirror the new one: one must compare apples and apples to see which is smaller or larger.

— It is well known that food items have become less prominent in the new CPI. Another key weight change is that of gold and silver.

— In the old CPI basket, gold had a weight of 1.08% and silver 0.11%. Now, gold/diamond/platinum jewellery together account for 0.62% of the new CPI, while silver jewellery makes up 0.31%.

— While the Reserve Bank of India (RBI) has a 4% target in terms of headline inflation, it keeps a close eye on underlying price pressures which respond to demand changes – something it can control through interest rate hikes or cuts.

— This is called core inflation and can be broadly defined as inflation excluding food and fuel items, which are things you would buy irrespective of their prices because they are needed to live (food) and make a living (fuel to travel to work).

— With no universal definition of core inflation, it is up to the RBI and economists to decide what items should be excluded to measure underlying price pressures. All food and fuel items, yes. What about certain fuel items like lubricants that can end up in non-fuel categories? And what about precious metals like gold and silver?

— If one uses the broadest definition the RBI has referred to in the past – no food or fuel product groups – then core inflation fell to around 3.4% or so in January from 4.6% in December 2025.

Do You Know:

— The modernisation of CPI inflation, India’s most important macroeconomic indicator, is part of a larger overhaul of India’s official statistics by MoSPI. Later this month, the new GDP series – with 2022-23 as the base year and sweeping methodological changes – will be released on February 27. Then, in May, the revised Index of Industrial Production will be released, also with a new base year of 2022-23.

— Inflation refers to the rate at which the general price level for goods and services increases over a period of time, causing a decrease in purchasing power of money or real income. In other words, as inflation rises, each unit of currency can buy fewer goods and services than before.

— Consumer Price Index (CPI): Inflation relates to consumer prices of all goods purchased by the consumer which may be either domestically produced or imported.

The formula for calculating inflation is ((CPI x+1 – CPI x )/CPI x ))*100.

CPI x = the value of the CPI in the initial/base year x.

Other Important Articles Covering the same topic:

📍Retail inflation at 2.75% in Jan under revised CPI data series

📍Knowledge Nugget: Why CPI with new base year 2024 matters for UPSC exam

Previous year UPSC Prelims Question Covering similar theme:

(4) Consider the following statements: (UPSC CSE 2020)

1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI).

2. The WPI does not capture changes in the prices of services, which CPI does.

3. The Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 3 only

(d) 1, 2 and 3

ALSO IN NEWS
After 4 years, India allows wheat export	The Centre on Friday allowed export of 25 Lakh Metric Tonnes (LMT) of wheat along with an additional 5 LMT of wheat products, moving to lift the ban on shipment of the cereal it imposed in May 2022. According to the Food Ministry officials, the Centre has decided to allow wheat export in view of lower prices and better availability in the domestic market. A formal notification will be issued by the Directorate General of Foreign Trade on Monday, an official said.
Germany’s Merz urges US, Europe to ‘repair & revive’ Trans-Atlantic ties	GERMAN CHANCELLOR Friedrich Merz called on Friday for the United States and Europe to “repair and revive trans-Atlantic trust together,” arguing that even the US isn’t powerful enough to go it alone in an increasingly tough world. Merz called for a “new trans-Atlantic partnership,” acknowledging that “a divide, a deep rift” has opened up across the Atlantic as he opened the Munich Security Conference, an annual gathering of top global security figures including many European leaders and US Secretary of State Marco Rubio.
Merz wants Germans to work more. They need incentives first	Germany is facing a strange reckoning. German Chancellor Friedrich Merz is asking Germans to work more if the country is to maintain its standards of living. The call for more work has been interpreted by many as Merz calling Germans lazy — a stark contrast from Germany’s image of efficiency and industriousness. There are many reasons why Germany has lagged far behind the US and was overtaken by China One reason is its population, which has largely been stagnant over the past 25 years. And even this stagnant level of population is propped up by immigrants because left to itself, Germany has been experiencing a negative population growth — death rate being higher than birth rate , But more specifically, Merz’s contention — that Germans have been putting in fewer hours — is true. As Germany became more and more prosperous (rising GDP per capita), the annual working hours per worker have dropped quite sharply.

 

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