Key Points to Ponder:
— What are the reciprocal tariffs? What was the rationale behind imposing reciprocal tariffs by the Trump administration?
— What is the International Emergency Economic Powers Act (IEEPA)?
— What is Section 122 of the Trade Act of 1974?
— What tariffs did the US Supreme Court strike down?
— What is the difference between sanctions and tariffs?
— How does Trump’s tariff impact the Indian economy?
— What are the areas of cooperation between India and the USA?
— Know about the interim trade framework between India and the USA.
Key Takeaways:
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— India and the US had agreed to a framework but were yet to officially sign the deal. Negotiators were expected to give legal shape to the agreement this week. The talks assumed significance as the agreement, like all Trump deals in this regard, was unconventional in nature and could fall out of the ambit of traditional World Trade Organisation (WTO) norms.
— The delay in negotiations could mean that India may not have to immediately give market access to American products as agreed during negotiations. However, Trump on Friday said that nothing has changed in the India-US deal.
— Government officials had said that market access from the Indian side would only be possible after the legal agreement is signed. The US has signed framework agreements with nearly 20 trade partners. US Trade Representative Jamieson Greer had argued that all these 20-odd trade deals stand as negotiated but Singapore-based Heinrich Foundation said the legal authority for the White House to embark on these agreements, none of which have been approved by Congress, is unclear.
— After the US Supreme Court order, the Trump administration switched to Section 122 of the country’s 1974 Trade Act that gives the President temporary powers to impose tariffs, which would take the overall rate to 15 per cent.
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From the Explained Page- “Tariffs trumped: lower tax not all good news for India”
— Soon after the US Supreme Court struck down tariffs imposed by the Donald Trump administration, the US President said he would impose a 10% levy on all goods coming into America, using another legal provision. Hours later, he jacked this up to 15%.
— The 15% tariffs announced Saturday (February 21) are the maximum allowed under this never-used trade law (under Section 122 of the 1974 Trade Act). Secondly, this is temporary, given that the provision only allows the new tariffs to stay in place for around five months. After that, the American government must seek US Congressional approval.
— At least for now, with this flat rate of 15%, most major countries are in a better situation than before Friday’s court ruling. India, China, South Korea, Japan, almost all of ASEAN, Kazakhstan, Turkey, South Africa, Libya, Brazil, Mexico and Canada are now at a lower rate, to be implemented from February 24.
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— On the other hand, Russia, Australia, the UK, Saudi Arabia, the UAE, Qatar, most of north and central Africa, Argentina and Colombia are now at a higher tariff rate. The EU and the Scandinavian nations are at where they were under the earlier differential tariffs slapped under the IEEPA, which the top court struck down.
New vs old tariffs.
— India has been facing a cumulative tariff of 50% into the US since August 2025 (reciprocal tariff plus additional tariffs for import of Russian oil), which meant that its effective incidence of duties into the US was marginally higher than China.
— After the framework for a trade deal was agreed upon by both sides earlier this month, the
rate currently being levied on Indian goods is 25%, given that the Russian oil penalty has been removed. This was further slated to come down to 18% — the ‘reciprocal tariff’ decided after the deal was to kick in.
— Meanwhile, China was faced with reciprocal tariffs, as well as the fentanyl tariffs under IEEPA (alongside Mexico and Canada), all cumulatively adding up to 45%. With IEEPA now gone, the prospect of a flat 15% means it could be even-stevens for India and China, at least till Trump pushes for new tariffs under other laws on either or both countries.
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— However, with IEEPA use outlawed by the American SC, the days when Trump could impose tariffs of his choosing through a Truth Social post or a signed executive order are gone. The other options at Trump’s disposal are more limited and require government agencies to produce detailed reports to justify imposing tariffs on countries, besides being limited in their scope and applicability.
— The SC decision, while diluting Trump’s air of invincibility, substantially enfeebles him when trying to bulldoze other countries to make concessions to the US. America’s trading partners may play hardball with the US now that Trump’s tariff powers have been curtailed. Add to that the possibility that the Trump administration may have to give back much of the tariff revenue it collected over the past year, something that rubs in the insult.
— Partner countries may now reconsider — or abandon — agreements negotiated under tariff pressure, according to Delhi-based trade think-tank GTRI’s Ajay Srivastava.
– Section 232 tariffs, however, remain, which includes 50% on steel & aluminium and 25% on certain auto components. Roughly 40% of exports — including smartphones, petroleum products, and medicines — remain exempt.
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From the Explained Page- “Trump’s hand-picked SC judges: When they backed, opposed him”
— The US Supreme Court, in a 6-3 decision on Thursday, struck down President Donald Trump’s sweeping global tariffs. The court ruled that Trump had exceeded his authority by using the 1977 IEEPA — a law meant for national emergencies — to impose tariffs.
— This was a stunning rebuke for the President, especially from a court with a heavy conservative majority. In fact, two of the judges who ruled against the tariffs were appointed by Trump during his first term in office.
— In response, the US President held a furious 45-minute press conference where he went after all of these judges, including his handpicked appointees, and claimed, extraordinarily, that the Supreme Court had “been swayed by foreign interests”.
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— Trump’s comments were a highly unusual attack on the nine-member Supreme Court, which has six members appointed by his Republican party and has often ruled in his favour. Notably, The US Supreme Court has nine judges. Its six conservative faces are Chief Justice John Roberts, and Justices Neil Gorsuch, Amy Coney Barrett, Brett Kavanaugh, Clarence Thomas and Samuel Alito.
From the Editorial Page- “US Court constrains unilateral tariffs. Can trade multilateralism be far behind?”
— Manoj Pant writes- “In a ruling that was not entirely unexpected, the US Supreme Court (SC) has struck down the Trump administration’s “reciprocal tariffs,” holding that the sweeping duties imposed under the International Emergency Economic Powers Act (IEEPA) were unjustified. Arguing before the Court, former Acting Solicitor General Neal Katyal contended that the United States could not plausibly claim a national security emergency against every country simultaneously. Trade deficits have existed for decades, raising the question of why they would suddenly constitute a security threat.”
— The implication is clear: The additional 25 per cent across-the-board “reciprocal” tariffs now stand withdrawn…However, in a show of defiance, Trump invoked Section 122 of the Trade Act of 1974 to impose a 10 per cent tariff, and then reportedly raised it to 15 per cent, on all imports, valid for 150 days. The effective tariff, therefore, sits at approximately 13.7 per cent. Until further clarity emerges, Canada and Mexico remain the lowest-tariff zones. Notably, tariffs imposed under the IEEPA on steel, automobiles, and aluminium remain in place.”
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— “Three issues arise. Will Trump use other legal instruments to restore his broader tariff regime? How will refunds be addressed? And what does this mean for countries such as India?”
— “One point is clear: The Supreme Court ruling does not deny the President authority to impose tariffs. Rather, it holds that emergency powers under the IEEPA cannot be used as a revenue-raising device. For broader authority, the President must seek explicit Congressional sanction…In effect, the Court has restored Congress’s primary tariff-imposing authority, leaving the President with limited tools such as Section 122 or country-specific action under the Omnibus Trade and Competitiveness Act (“Super 301”), which requires USTR (US Trade Representative) investigations over time.”
— “The most immediate challenge for the administration is refunds. In proceedings before the Trade Court, Trump’s lawyers reportedly agreed that tariff revenues would be refunded if the measures were overturned, according to The New York Times. The potential cost could exceed $175 billion.”
— “The ruling also casts doubt on trade arrangements negotiated under the now-invalid tariff framework. Unless ratified by Congress, such agreements rest on uncertain legal ground. None were submitted to the World Trade Organisation.”
— “What lies ahead? If Trump wishes to restore broader tariff authority, he must return to Congress. His principal argument will likely centre on countering Chinese assertiveness in technological competition and addressing China’s control over rare earths. This framing reinforces the emerging “new Cold War,” defined more by economic and technological rivalry than military confrontation — language a Republican-controlled Congress would likely find persuasive.”
— “For India, the ruling raises significant economic and strategic considerations. It makes little sense to proceed with an arrangement offering access at 18 per cent while promising zero duties on many Indian industrial imports. Under the Court’s decision, the administration can currently offer only a temporary 10 per cent (now reportedly 15 per cent) across-the-board tariff, valid for 150 days unless approved by Congress. The much-discussed “trade deal” was, in any case, largely a statement of intent.”
— “It would be more prudent for India to negotiate targeted concessions for labour-intensive exports while ensuring alignment with the forthcoming India-EU Free Trade Agreement. As I noted earlier in The Indian Express (‘Why is India pursuing FTAs? It’s not just economics’, IE, December 15), trade agreements also serve a diplomatic function, particularly in the context of the emerging economic Cold War. The ruling may provide additional leverage for India to seek improved terms.”
— “Amid the uncertainty, one positive outcome may be a revival of trade multilateralism. If unilateral tariff measures are constrained by judicial oversight and congressional authority, renewed emphasis on rules-based global trade frameworks could follow. This may be the most optimistic global scenario the SC ruling offers, even as it promises immediate turbulence in trade circles. A revival of the multilateral framework under the WTO may yet lie ahead.”
Other Important Articles Covering the same topic:
📍Trump hikes tariffs from 10% to 15%: What’s next for the world
📍UPSC Issue at a Glance | India-US Interim Trade Deal: Backdrop, key highlights, gains, and concerns
UPSC Prelims Practice Question Covering similar theme:
(1) Consider the following statements:
1. India’s agricultural export to the United States has consistently increased from 2020 to 2025.
2. India maintained a trade surplus in agricultural exports to the United States in the last decade.
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
Previous year UPSC Mains Question Covering similar theme:
‘What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem and ambitions’. Explain with suitable examples. (UPSC CSE 2019)
EXPLAINED
Syllabus:
Preliminary Examination: Current events of national and international importance.
Main Examination: General Studies-II: India and its neighbourhood- relations. Role of external state and non-state actors in creating challenges to internal security. Security challenges and their management in border areas – linkages of organized crime with terrorism.
What’s the ongoing story: Pakistan on Sunday carried out strikes along its border with Afghanistan, claiming to target militant camps. The Afghanistan government said the strikes in Nangarhar and Paktika regions had killed “innocent civilians” and vowed retaliation.
Key Points to Ponder:
— Read about the India-Pakistan relations.
— What are the issues of Pakistan-Afghanistan ties?
— How has India’s relationship with Afghanistan evolved in recent years?
— Know about the history of the Taliban group and how they came to power.
— What is the strategic significance of Afghanistan for India?
— What are the security challenges faced by India on the LoC?
— How can India effectively use its global partnerships and public diplomacy to address the challenges posed by Pakistan?
— Map work: Locate Afghanistan and its bordering countries, the Durand Line, and the Indian states bordering Pakistan (refer to the atlas).
Key Takeaways:
— Before this, three major headlines came out of Islamabad on Thursday (February 19), together underlining the paradox Pakistan today faces: more international relevance than it has been used to, and more internal instability than it can handle. For India, all these developments have implications.
— First, Pakistan Prime Minister Shehbaz Sharif travelled to Washington DC for the inaugural meeting of the Donald Trump-led Board of Peace. Second, Islamabad issued a demarche to the Taliban regime in Afghanistan, after 11 soldiers and a child were killed in a vehicle blast in Khyber-Pakhtunkhwa’s Bajaur region on February 16. Pakistan blames Afghanistan for harbouring terrorists. Third, the government announced compensation for the families of the 40 people killed in a suicide attack at a Shia imambargah on February 6.
— For the past few years, New Delhi’s approach to Pakistan had been one of determined ignoring. The idea was that that terror and talks can’t go together, and India, a stable democracy and rising economic power, should not be engaging with Pakistan, with its economy collapsing and its international reputation dented.
— Yet, today, Pakistan is among the few countries that can count both Donald Trump and Xi Jinping among friends. Trump singled out Shehbaz Sharif for thanks at the Gaza ceasefire summit at Sharm El-Shaikh last year, and has called the head of Pakistani military, Asim Munir, his “favourite field marshal”. In December, the Trump administration announced it would invest $1.3 billion in Balochistan’s Reko Diq mine, which has copper and gold reserves. Geopolitically, the US has signalled it sees a role for Pakistan in the Gaza as well as the Iran conflict.
— Also, in the past few months, Pakistan has signed a mutual defence pact with Saudi Arabia, and has agreed to or is in talks with to supply arms to Sudan, Libya, and Bangladesh, in deals worth billions.
— This rise can be attributed to Islamabad’s successful wooing of Trump, and its successful selling of its Operation Sindoor performance as impressive, however far from the truth that may be.
— “All the defence deals that Pakistan has signed recently will not help it with domestic terrorism. But they do make Islamabad look like a relevant actor globally. On the home front, Pakistan’s policy of nurturing terror networks has backfired, as the attacks are now happening within its territory,” TCA Raghavan, India’s former High Commissioner to Pakistan, told The Indian Express.
— The Bajaur attack on Monday is far from isolated. And while attacks in the restive Balochistan and Khyber Panktunkhwa are common, even the fortified Islamabad has seen two attacks in the past four months — the mosque attack earlier this month and a suicide attack outside a court in November 2025 that killed 12.
— Attacks in Pakistan are generally carried out by the Tehrik-e-Taliban (TTP), also called the Pakistan Taliban, Baloch militants, and occasionally other groups like the Islamic State splinter factions. There has been a rise in terror attacks in the last two years.
— The TTP wants Pakistan run on a strict interpretation of Islamic law. It wishes to overthrow the current government, which it believes is not Islamic enough. The TTP also opposes the Pakistan government’s assistance to the US ‘war on terror’.
— The Baloch Liberation Army, meanwhile, launched ‘phase 2 of Operation Herof’ in January (the first phase was in August 2024). Balochistan — where the US recently announced investment — is the most resource-rich of Pakistan’s four provinces, but lags in development and economic growth. It has witnessed a long separatist movement, with grievances including unfair treatment economically and brutalities by security agencies. Pakistan blames Afghanistan for encouraging the TTP and India for supporting the Baloch.
— There is significant violence by the Pakistani State too. This month, the Human Rights Commission of Pakistan released a report stating the Punjab police had carried out 670 encounters “over the course of eight months in 2025, resulting in the deaths of 924 suspects, with only two police officers killed during the same period.”
— Even a quick scan at the decades post Independence shows that Pakistan has attacked India — officially or through proxies — irrespective of how things were going for it. The 1965 war came when Pakistan was going through a golden period economically and had earned respect abroad. The Kargil war came when its affairs were collapsing on all fronts. What stands out is that Pakistan’s military in ascendance is never good news for India. Major terror attacks have come when the civilian leadership has pushed for better ties with India.
— And the current Pakistani paradox has at its heart the rise and rise of Asim Munir. While he has flexed muscle abroad, internally, there has been a brutal crackdown on insurgents, worsening instability.
— For India, the best case scenario is a relatively stable Pakistan with a civilian leadership in control. But with Shehbaz Sharif happily playing second fiddle to the field marshal, that doesn’t seem likely soon.
Do You Know:
— Except for brief periods since 1947, Pakistan-Afghanistan ties have been marked by mutual distrust, rancour, recriminations, and hostility. This has led sometimes to armed clashes, as were seen recently.
— This negativity between Pakistan and Afghanistan has continued during both civilian and direct military rule in the former, and fundamental system transformations, turmoil and two failed superpower interventions in the latter— by the Soviet Union (1979-1989) and the United States (2001-2021). During both, Pakistan has helped the Afghan resistance.
— The issues that divide Afghanistan and Pakistan range from Afghanistan’s refusal to recognise the Durand Line as the international border, to control over transit and trade, and social contradictions despite the bonds of Islamic faith.
— Afghans governments and peoples have the persistent resentment that Pakistan has insensitively tried to control and exploit them, especially since their monarchical system was overthrown.
— Pakistan continues to consider Afghans ahsanfaramosh (ungrateful). For, they hosted millions of Afghan refugees and enabled Afghan insurgencies to defeat two super powers.
Other Important Articles Covering the same topic:
📍Pakistan-Afghanistan ties: Long history of differences, from Durand Line to the India angle
📍Afghanistan vows retaliation after Pak kills ‘dozens’ in cross-border strikes: What we know so far
📍Pakistan-Afghanistan ties: Past imperfect, present tense, future uncertain
Previous year UPSC Prelims Questions Covering similar theme:
(2) Consider the following countries: (UPSC CSE 2022)
1. Azerbaijan
2. Kyrgyzstan
3. Tajikistan
4. Turkmenistan
5. Uzbekistan
Which of the above have borders with Afghanistan?
(a) 1, 2 and 5 only
(b) 1, 2, 3 and 4 only
(c) 3, 4 and 5 only
(d) 1, 2, 3, 4 and 5
(3) Arrange the following agreements between India and Pakistan in chronological order:
1. Tashkent Declaration
2. Indus Water Treaty
3. Agreement on the Prohibition of Attack Against Each Other’s Nuclear Installations and Facilities
4. Agreement on Reducing the Risk from Accidents Relating to Nuclear Weapons
Select the correct answer using the code given below: (UPSC-CDS (II) – 2024)
(a) 1, 2, 3, 4
(b) 2, 3, 4, 1
(c) 2, 1, 3, 4
(d) 1, 4, 2, 3
Previous year UPSC Mains Question Covering similar theme:
Terrorist activities and mutual distrust have clouded India – Pakistan relations. To what extent the use of soft power like sports and cultural exchanges could help generate goodwill between the two countries? Discuss with suitable examples. ( UPSC CSE 2015)
THE EDITORIAL PAGE
Syllabus:
Preliminary Examination: General issues on Environmental ecology, Bio-diversity and Climate Change.
Mains Examination: General Studies-II, III: Government Policies and interventions, conservation, environmental pollution and degradation, environmental impact assessment.
What’s the ongoing story: R. R. Rashmi writes- “In a world where the US has exited many major international treaties and decided to walk away from its commitment to protect climate, multilateralism is clearly under great stress. The moral and ethical architecture of international climate policy is shaken.”
Key Points to Ponder:
— What is climate finance?
— What is the Conference of the Parties, or COP?
— What measures have been taken globally and nationally to tackle the issue of climate change?
— How does the US withdrawal from major international treaties weaken global climate cooperation?
— What are the implications of the shift from multilateral agreements to bilateral or plurilateral deals?
— How do unilateral climate-related trade measures impact countries?
— What is the significance of rule-based global governance for climate action?
— What challenges does India face in achieving its Net Zero target?
Key Takeaways:
— “It is not just the absence of the largest economy from multilateral bodies that poses a threat to global cooperation. There is also a long-term threat to rule-based engagements. Increased preference for bilateral and plurilateral deals indicates loss of confidence in the consensus-based legal order and replacement by arrangements that are driven by reciprocal gains rather than internationally agreed goals.”
— “This exposes the climate to a double whammy. As per scientific assessments, we are on our way to miss the global climate goal and overshoot the temperature stabilisation target of 1.5 degree Celsius. The policy shift in the US is likely to dampen both public and private sector investments in clean energy transition and further accentuate the gap in achievement of the global goal.”
— “It was the recognition of this challenge that prompted the presidency of COP30 to focus more on the implementation of agreed climate actions than on seeking consensus-based legal legitimacy for future actions. The Global Implementation Accelerator is a result of this recognition. It reflects an awareness that the threat to multilateralism can be partially tackled through the reengineering of global processes. The two-tier arrangement evolved at Belém, one aimed at continued efforts at enhancing legal commitments, and the other aimed at implementation was a step in this direction.”
— “In the current scenario, it makes sense to avoid getting entangled in procedural legitimacy and focus more on actions that all major stakeholders can take. While the presidency prioritised a few actions of its own choice in the form of non-CO2 mitigation, ecosystem restoration, among others, the larger international community is still struggling with the perennial issues of climate finance, just energy transition, and equity based global framework of actions.”
— “Finance remains the stickiest issue. A recent NITI Aayog report on the financing needs of India’s Net Zero transition underscores the global and national financing gap. Current global flows estimated at about $1.9 trillion annually are far short of $6-9 trillion required to stay on the 1.5-degree trajectory. India alone needs $10-20 trillion or $250-450 billion annually by 2070 to meet its goal while current flows are only about $135 billion. This implies huge additional and upfront investments to protect domestic consumption and avoid welfare losses. The need for greater and closer engagement amongst willing partners to keep the momentum of global financial flows for a clean and just energy transition has never been greater.”
— “It is also important that multilateral cooperation is insulated from the threat of unilateral trade actions in the name of protecting climate. There is a tendency amongst global powers to use trade as an instrument of enforcing domestic environmental goals. Forcing global standards for carbon consumption is an example. The world urgently needs a mutually shared understanding of domestic policies that are compatible with a legally mandated international climate regime.”
Do You Know:
— Climate finance refers to large-scale investments required for actions aiming to mitigate or adapt to the consequences of climate change.
— Adaptation involves anticipating the adverse effects of climate change and taking appropriate action to prevent or minimise the damage they can cause. One example of adaptation measures includes building infrastructure to protect coastal communities against sea-level rise.
— Meanwhile, mitigation involves reducing the emission of greenhouse gases (GHG) into the atmosphere so that impacts of climate change are less severe. Mitigation is done by increasing the share of renewable energy sources, expanding forest cover, etc.
Other Important Articles Covering the same topic:
📍Climate finance: India takes lead in cornering developed nations
Previous year UPSC Prelims Question Covering similar theme:
(4) With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (UPSC CSE 2016)
1. The Agreement was signed by all the member countries of the UN, and it will go into effect in 2017.
2. The Agreement aims to limit the greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2ºC or even 1.5ºC above pre-industrial levels.
3. Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.
Select the correct answer using the code given below:
(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:
Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference? (UPSC CSE 2021)
ECONOMY
Syllabus:
Preliminary Examination: Current events of national importance and economy.
Mains Examination: General Studies-III: Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.
What’s the ongoing story: Amid trade tensions with America several months now, India has reduced its exposure to US Treasuries in calendar year 2025 (CY25), signalling a cautious shift in the country’s foreign exchange reserve strategy.
Key Points to Ponder:
— What are foreign exchange reserves?
— What is the significance of maintaining forex reserves?
— How do the United States’ economic policies affect India’s foreign exchange reserve strategy and the Indian market?
— What is the role of the Reserve Bank of India in managing India’s foreign exchange reserves?
— What are the strategic implications of reducing dependence on US Treasury securities?
— Why is the diversification of foreign exchange reserves important?
Key Takeaways:
— According to US Department of Treasury data, India’s holdings in US securities have come down by $42.8 billion, or 18.96%, from $225.7 billion in January 2025 to $182.9 billion as of December 31, 2025. The reduced holding is more than enough to cover India’s net government borrowing of Rs 11.73 lakh crore as proposed in the Union Budget for 2026-27.
— India, which is now the 15th largest holder of US Treasuries, had held $247.2 billion in September 2024, before cutting down gradually over the last several months. In December alone, India’s holding had come down by $3.6 billion.
— India’s investment in American securities technically means it is lending money to the US government indirectly. As the US government needs money to fund spending in the case of defence, healthcare, infrastructure, among other heads, it issues Treasury securities and countries like India buy them. That money goes into the US government’s financing pool.
— Significantly, China has also reduced its US Treasury holding from $760.8 billion to $683.5 billion during CY25. However, Japan, the largest holder of US securities, increased its holding from $1,079.3 billion to $1,185.5 billion. The UK increased its holdings of US Treasuries from $740.2 billion to $866 billion, as per US Treasury Department TIC data.
— With foreign exchange reserves touching new highs, the calibrated reduction in US securities by the Reserve Bank of India — which manages India’s foreign reserves — and the rise in gold holdings reflect its cautious approach amid global financial uncertainty. By spreading investments across sovereign debt, supranational bonds, deposits and gold, the RBI’s aim is to apparently strike a balance between liquidity, security and returns while safeguarding the financial stability.
— Meanwhile, aided by the spurt in the value of gold holdings, India’s forex reserves jumped by $90 billion on a year-on-year basis to $725.72 billion as of February 13, 2026. It holds gold reserves worth $128.46 billion now, a rise of $54 billion in a year.
— The reduction in India’s holdings came amid speculation that US President Donald Trump, who imposed steep tariffs on Indian imports last year, could bring restrictions on investments by countries which don’t sign agreements with America. Following Russia’s invasion of Ukraine, the US and its allies blocked Moscow’s access to a significant share of its foreign reserves held overseas, including dollar and euro-denominated assets. The episode showed that, in extreme circumstances, the US can effectively cut off a country’s access to its Treasury holdings through the US financial system.
— India and the US recently announced a trade deal before the US Supreme Court struck down the tariffs imposed by Trump and he imposed an across the board 15% duty on all imports.
— The Reserve Bank says its investments in bonds/ Treasuries represent debt obligations of highly rated sovereigns, central banks and supranational entities. Apart from investment in securities, other allocations include deposits with central banks and the Bank for International Settlements (BIS), alongside physical gold. This broad diversification ensures that India’s reserves are not overly dependent on one asset class or geography.
— US Treasury securities, issued by the Department of Treasury to finance the government’s spending needs, are considered one of the safest investments because they are backed by the US government. They’re issued in different maturities, ranging from a few days to 30 years, allowing investors to choose the term that best fits their investment goals, according to Vanguard Group.
— US Treasuries are usually sold at auction, and their prices are determined by market demand. They offer a fixed rate of return, making them a stable investment option. Interest earned from Treasury securities is exempt from state and local taxes.
— Central banks and sovereign wealth funds invest significantly in US Treasury securities, viewing them as among the world’s safest and most liquid assets. The yield on the US 10-year Treasury note is holding steady at approximately 4.08%, down by 35 basis points in the last one year.
Do You Know:
— The RBI maintains a component of forex reserves, with foreign currency assets forming the largest part. The second-highest allocation is in gold. Gold reserves help the central bank diversify its foreign exchange holdings and also play a role in the de-dollarisation process.
Previous year UPSC Prelims Question Covering similar theme:
(5) Indian Government Bond Yields are influenced by which of the following? (UPSC CSE 2021)
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
Syllabus:
Preliminary Examination: Current events of national and international importance.
Mains Examination: General Studies-III: Science and Technology- developments and their applications and effects in everyday life, Awareness in the fields of IT, Conservation, environmental pollution and degradation.
What’s the ongoing story: India’s power system is headed towards a “paradigm shift” as artificial intelligence (AI)-driven data centres scale up across the country, Samir Chandra Saxena, chairman and managing director of Grid India, said at the India AI Impact Summit at Bharat Mandapam on Tuesday (February 17).
Key Points to Ponder:
— What is AI and its various applications?
— What is the distinction between AI data centres and traditional data centres?
— What are the concerns associated with the use of AI?
— What specific challenges do continuous, high-load AI data centres pose to electricity grids designed for variable industrial and household demand?
— How might integrating data centres into long-term grid planning alter investment priorities in transmission, storage, and firm power capacity?
— How can India learn from international approaches to powering AI infrastructure while accounting for its unique development and climate constraints?
Key Takeaways:
— While AI runs on algorithms, it also requires electricity, and in large volumes. In India, total installed data centre capacity currently stands at about 1.2 gigawatts (GW) and is projected to grow fourfold by 2030, according to government estimates, as AI-led computing demand accelerates.
— This rapid expansion could reshape the country’s power landscape as data centres are emerging as large, complex and highly dynamic loads on modern grids. Saxena said the rapid expansion of data centres over the next few years would significantly alter grid planning and operations.
— Unlike conventional industrial loads, data centres exhibit sharp variability. “It is variable, it is spiky, it has sharp ramps,” he said, adding that they can also make “silent exits” from the grid.
“Anything happens on the grid side, the data centres prefer to quietly isolate themselves.” Since most are inverter-based, he warned that a sudden withdrawal of 1–1.5 GW — or even a couple of gigawatts — “simply walking out of the system quietly creates a disturbance kind of situation for the grid.”
— “This needs to be planned for…We need to handle this in a more planned manner rather than having it in random fashion,” he said.
— While emphasising the need for meticulous infrastructure planning — including a reliable and robust transmission network, strong connectivity and clear compliance mechanisms — he also highlighted the equally critical challenge of ensuring resource adequacy.
Do You Know:
— An AI data centre is different from a traditional data centre in terms of it being specifically tailor-made to support AI applications. Traditional data centres typically consist of CPU-powered servers that support tasks such as website hosting, cloud storage, and business applications.
— An AI data centre, on the other hand, is needed to process vast amount of data, and is equipped with more cutting edge hardware such as GPUs to handle tasks like image and video production, generative AI, etc. Since these data centres handle high-performance GPUs, they require robust power infrastructure and cooling solutions, making them significantly more energy-intensive than traditional data centres.
Other Important Articles Covering the same topic:
📍How rapid growth of AI data centres reflects on India’s energy governance
📍Google’s $15 bn AI hub in AP: Decoding its importance for India
Previous year UPSC Prelims Question Covering similar theme:
(6) 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
THE IDEAS PAGE
Syllabus:
Preliminary Examination: Current events of national and international importance.
Mains Examination: General Studies-II, III: Government policies and interventions, Issues relating to development and management of Social Sector/Services relating to Health, Science and Technology- developments and their applications and effects in everyday life.
What’s the ongoing story: Sanjay Nagral and Uma Ladiwala write- “This is an exciting time in humankind’s quest to seek effective treatments for diseases. Thanks to spectacular advances in science, especially molecular and cellular biology, difficult-to-treat diseases are seeing the emergence of highly effective treatments. For example, we now see cancers melting away with immune or targeted therapy. Gene-based therapies, immunomodulators and transplanting human cells or tissues are breaking barriers as never before.”
Key Points to Ponder:
— What are stem cells?
— What are the ethical concerns associated with stem cell therapy?
— What is the importance of clinical trials before approving new medical treatments?
— What are the concerns related to promoting unproven therapies in healthcare?
— What are the challenges of regulating private healthcare?
— What steps should be taken to balance access to innovative therapies with patient safety?
Key Takeaways:
— “But outside the developed world, there are huge barriers before these therapies reach ordinary people. They have astronomical costs and are subject to patent laws and monopolisation. This is a bigger battle that will have to be fought even in India.”
— “But there is another challenge intrinsic to our healthcare ecosystem. Lack of scientific protocols, poor regulation and a large private sector seeking to monetise all care result in many new therapies being pushed without proven scientific efficacy. The best way to understand this is by observing the enormous growth of India’s stem cell therapy industry, which attracts desperate patients from all over the world with fantastic promises of a cure.”
— “Therefore, when on January 30, the Supreme Court delivered a judgment banning the use of stem cells as “therapy” for autism, it was a milestone. Though it addresses only autism, it sets a precedent for how any novel treatment should be regulated. It unpacks the worrying state of healthcare regulation and predatory commercialisation. The verdict also provides protection for citizens from fraudulent and harmful misuse of expensive medical advances.”
— “Stem cells are unique unspecialised cells, normally present in the embryo, after birth and in adulthood. They self-renew by dividing repeatedly or transform into specialised cells performing different functions. Scientists are trying to harness this property, particularly when the body is unable to self-repair, and no cure exists. They have been tried in neurological problems like Parkinson’s disease, Alzheimer’s and spinal cord injuries.”
— “Their use in most diseases is currently confined to research. Bone marrow transplant, used successfully in treating blood disorders, especially cancers, is a form of stem cell therapy and the only one approved by the US FDA and ICMR. It is commonly used in India.”
— “Autism is a neuro-developmental condition, characterised by social communication deficits and repetitive behaviours. It can usually be managed with behavioural and supportive therapies. Those mildly affected are socially well-integrated, but those with severe disease face difficulties. Sadly, they are vulnerable to a plethora of unsubstantiated “cures”, including stem cell “therapy”.”
— “In order to determine whether any therapy is effective, well-designed clinical trials are mandatory using a globally accepted method. There have been clinical trials of stem cell therapy in autism, but the results are mostly inconclusive due to poor methodology, inconsistent doses and short follow-ups. High-quality randomised, controlled trials concluded that it was of no benefit for autism. Besides, the procedure is invasive. Despite claims that it’s “safe”, data shows worrying side effects such as epilepsy, headache and infection at the site of injection.”
— “India is a hot spot for stem cell centres claiming cures not only for autism but also for many diseases, and “medical tourism” for this therapy is a thriving industry. This is strange because stem cells is one area where India has regulations. However, taking advantage of the regulators’ inaction, practitioners brazenly advertise this therapy for a host of other conditions for which no cure exists. The charges are exorbitant, running into lakhs per injection.”
— “The Ethics and Medical Registration Board of the National Medical Commission deemed stem cell therapy as not recommended. Further, the use of the therapy, its promotion or advertisement was labelled as professional misconduct. The SC verdict concluded from a perusal of the ICMR and NMC guidelines that the use of stem cells for the treatment of autism is not recommended as routine treatment due to the lack of scientific support for its efficacy. And, that any use must be as an approved and monitored clinical trial. Also, the use of stem cells outside an approved clinical trial is unethical and constitutes medical malpractice. Medical practitioners using it would attract consequences of professional misconduct, including cancellation of registration and a penalty.”
— “The judgment also says that patients have no right to demand unproven therapies outside clinical trials. This may be a response to the argument that unproven therapies are offered because of patient demand, and they provide “consent” for it. This is a noteworthy part of the judgment which may have far-reaching consequences beyond stem cells and autism.”
Previous year UPSC Mains Question Covering similar theme:
“Besides being a moral imperative of a Welfare State, primary health structure is a necessary precondition for sustainable development.” Analyse. (UPSC CSE 2021)
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| PRELIMS ANSWER KEY |
| 1. (b) 2. (c) 3. (c) 4. (b) 5. (d) 6.(b) |
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New vs old tariffs.
