UPSC Key: West Asia turmoil, Carney lands in Delhi, and Strait of Hormuz

Key Points to Ponder:

— Know the history of the Iran-Israel relations.

— What are Operation ‘Lion’s Roar’, Operation “True Promise 4, and Operation “Epic Fury”?

— What key factors led to the United States and Israel’s attack on Iran?

— Read about the status of India’s relations with the US, Israel and Iran.

— What can be the impact of the US-Israel and Iran conflict on India?

(Thought Process: Build on the following points – India has invested in a strategic relationship with major Arab countries, Iran, and Israel – India’s economic interests, energy security, and risk to the Indian community that is based in the region.)

— What is India’s Middle East policy?

— How do tensions in West Asia affect global energy security?

— What diplomatic challenges can India face in balancing its ties with Israel, the US and Iran?

— Know about the Strait of Hormuz and its importance for oil flows.

— What is the Axis of Resistance?

— Read about the Gulf Cooperation Council. 

— Map work: Locate Iran, Israel, Oman, UAE, Strait of Hormuz, Israel, the Suez Canal, nuclear facilities in Iran (Isfahan, Fordow, Haifa, Natanz, etc.) and other places in the news related to the US-Israel attack on Iran on the map. 

Key Takeaways:

— As Iran fired renewed missile barrages across the region, Israel’s ambulance service said nine people were killed in the town of Beit Shemesh, the United Arab Emirates said Iranian attacks killed three people, and Kuwait reported one dead. 

— Three US servicepersons were also killed and five seriously wounded, the first American casualties of the operation, the US military said.

— U.S. and Israeli strikes – and Iranian retaliation – sent shockwaves worldwide through sectors from shipping to air travel to oil, amid warnings of rising energy costs and disruption to business in the Gulf region.

— U.S. President Donald Trump said the attack was intended to ensure Iran could not have a nuclear weapon, to contain its missile program and to eliminate threats to the United States and its allies. The U.S. has hit more than 1,000 Iranian targets since the start of the campaign, U.S. Central Command said.

— Trump said the Iranian military and police should lay down their arms, promising immunity for those who surrender and threatening “certain death” for those who resist. He reiterated calls for the Iranian people to revolt against the government.

From the Front Page- “Tectonic shifts in Tehran: Why they cast long shadow on region, world”

— The joint American and Israeli attack on Iran, launched over the weekend with the declared objective of regime change in Tehran, is aimed squarely at undoing the 1979 Islamic Revolution. — That revolution created a new model of religious politics, transformed the regional balance of power, upended global energy flows, and altered the very geometry of great-power relations.

— For India, the 1979 revolution — along with the Soviet intervention in Afghanistan — reshaped its regional political, economic, energy, and security landscape. As the future of the Islamic Republic hangs in the balance, New Delhi must factor the potential fallout into its own strategic calculus. India has limited capacity to influence the outcome of the conflict, but it will have to prepare for the cascading effects of the confrontation between the US-Israel alliance and Iran.

— The killing of Ayatollah Ali Khamenei, Iran’s Supreme Leader, raises two central questions: the resilience of the Islamic state and the prospects of a new, US-backed or US-friendly government in Tehran. Whether the Islamic Republic collapses, fractures, or adapts will shape regional and global politics for years.

— The regime’s harsh internal repression over the decades — and the deep popular revulsion against it — are no secret. Iran has seen major protest movements roughly every five years since the turn of the century, including the large demonstrations as recently as December and January. Yet each uprising was crushed by the entrenched security apparatus of the Islamic state.

— But that history does not mean opponents of the regime can now simply walk into the streets and take over. The next phase is likely to witness a mobilisation of the Islamic Republic’s supporters even as its detractors push for transformational change. For now, however, the means of violence and coercion remain concentrated in the hands of the old order. How far external intervention can weaken that monopoly will determine the political trajectory in Tehran.

— At the heart of the crisis lies the unique structure of clerical rule created by the 1979 revolution. Power is vested in a Supreme Leader — a cleric who exercises full religious and political authority. Many Iranian religious and political figures have contested this system of clerical rule, but Khamenei suppressed all challenges and consolidated complete control. The key question is whether his successor can hold this edifice together.

— History suggests that even rigid political systems change eventually, though not necessarily peacefully. What comes next depends on whether the Islamic state can maintain cohesion after Khamenei — and whether the US and Israel can effectively support domestic forces seeking to remake the state.

From the Front Page- “First signal from Delhi: PM tells MBZ ‘strongly condemn’ attack on UAE”

— Prime Minister Narendra Modi chaired a meeting of the Cabinet Committee on Security Sunday night and in what could be taken as New Delhi’s first comments following the US-Israel massive air strikes on Iran, he said, India strongly condemned the attack on UAE and supported “de-escalation, regional peace, security and stability”.

— While New Delhi did not release any statement after the CCS or the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei, Modi condoled the deaths in the UAE during a conversation with President Sheikh Mohamed bin Zayed Al Nahyan on Sunday.

— Indian expats account for 35 per cent of UAE’s population, and form its largest ethnic community.

— Beyond the nine million Indians living in the extended West Asian neighbourhood, what frames India’s diplomatic challenge at this juncture are its own beliefs on sovereignty and territorial integrity, a complicated relationship with Khamenei over the last few decades, sensitivities of the domestic minority community, and evolving partnership with the US.

— Over the last few days, and weeks, India is stretching its diplomatic muscle to navigate the current crisis — from a quiet trip to Iran by India’s Deputy NSA in January to Prime Minister Modi’s recent trip to Israel, and phone calls by to foreign ministers of countries in the Middle East — External Affairs Minister Jaishankar called up Oman’s Foreign Minister. Oman has been playing a key role in mediating between the US and Iran.

— The last statement from New Delhi before Khamenei’s killing expressed deep concern at the “recent developments” in Iran and the region. This was seen as neutral and well-hedged. It did not mention the attacks by US and Israel, and the counter-attacks by Iran, and appeared diplomatically distant and neutral. But some in the Gulf have perceived this as a non-acknowledgement of the serious nature of the violations of international law.

— So, the first big challenge will be to frame its response post the killing of the Iranian Supreme leader, his family members, and key officials including defence minister.

— The earlier statement did call for “respect” for sovereignty and territorial integrity— a thinly veiled reference to violation of Iran’s sovereignty — and asked for “dialogue and diplomacy”. This framing was seen as being supportive of Iran’s position, which — in its official statement —strongly condemned the attacks carried out by Israel and the US against the “sovereignty and territorial integrity” of Iran.

— India’s own engagement with Iran’s regime in the coming months is another aspect that New Delhi is very mindful of. The regime in Iran has held out on Sunday, and has signalled continuity as the Iranian state news agency IRNA said on Sunday morning that Iran’s president, the head of the judiciary and a jurist of the Guardian Council would be in charge during the transition period.

From the Front Page- “To hit back, Iran draws from its massive, diverse arsenal of missiles and drones”

— In response to the ongoing strikes carried out against it by Israel and the US, Iran launched waves of drones and missiles targeting Israeli territory and US-linked assets in the Gulf.

— Iran started developing its missile programme during the Iran-Iraq War of the 1980s and its stockpile has since grown in scale and diversity. Here’s a look at Iran’s diverse and massive drone, ballistic and cruise missile arsenal.

— Ballistic Missile Arsenal: Ballistic missiles work by taking a parabolic path through the atmosphere, and travel faster than drones and cruise missiles. They are usually harder to intercept. Iran possesses a substantial range of Short-Range Ballistic Missiles (SRBMs), Medium-Range Ballistic Missiles (MRBMs) and potentially Intermediate-Range Ballistic Missiles (IRBMs). Most of these have the capability to hit other West Asian countries, while European countries such as Britain, France and Germany fall within the range of Iran’s medium-range missiles. The US, however, remains out of range. 

— According to open-source studies, Iran’s long-range missiles, with a range of 2,000 km, include Sejil, Ghadr, Khorramshahr and Kheibar.

— Iran’s arsenal has a variety of medium-range missiles including Shahab-3, with a range of 1,300 km, Emad (1,700 km), Hoveyzeh (1,350 km), Haj Qasem (1,400 km), Fattah-1 and Fattah-2 solid-fuel hypersonic ballistic missiles with a strike range of upto 1,500 km.

— Iran also possesses SRBMs such as Shahab 1 and Shahab 2, with a range of 300 km and 500 km respectively; the Qiam 1 with a range of 700-800 km, Fateh-110 (300 km) and Zolfaghar (700 km).

— Drones: Iran possesses a variety of military UAVs in its arsenal for various missions—including surveillance, reconnaissance and precision strikes. The UAVs in its arsenal include Ababil 3, Mohajer 6, Shahed 129, Shahed 136, Shahed 199 and Kaman 22 – which range from 200 km to 3,000 km. Of these, Shahed 136, Hadid-110 and Arash can be used for suicide and Kamikaze-style strikes.

From the Front Page- “Missiles in sky, fear on phone: 10-mn Indian diaspora faces war”

— For nearly ten million Indians whose lives are entwined with West Asia, the attacks on Iran by the US and Israel, and the retaliation that has engulfed the Gulf, is their worst nightmare come true — plumes of smoke streaking across the sky, mobiles buzzing with alerts and messages full of concern from “back home”.

— The Indian diaspora in West Asia is among the largest overseas Indian populations, with more than nine million residents across the Gulf Cooperation Council (GCC) countries alone as of 2024, mainly concentrated in the UAE and Saudi Arabia (see chart). There are over 100,000 Indians in Israel and more than 10,000 in Iran, according to Government data, apart from thousands of students in the region.

— The GCC countries are also among India’s top remittance sources. According to the RBI’s Remittances Survey 2025, inward remittances to India totalled $118.7 billion in 2023-24. And on this list, the UAE ranked second after the US, contributing 19.2 per cent, followed by Saudi Arabia at 6.7 per cent (fourth), Qatar at 4.1 per cent (sixth), Kuwait at 3.9 per cent (seventh) and Oman at 2.9 per cent (ninth).

— In the UAE, Indians constitute the largest ethnic community, accounting for about 35 per cent of the population. The number of resident Indian nationals is estimated at 43 lakh in 2024, with around 15 per cent living in Abu Dhabi and the rest spread across the other six Emirates, including Dubai. Kerala has the highest representation, followed by Tamil Nadu, Andhra Pradesh and Telangana, with significant numbers also from UP, Bihar and Punjab.

 From the Explained Page- “Navigating uncharted waters: What next for Iran”

— For 45 of the Islamic Republic of Iran’s 47 years in existence, Ali Khamenei has held near-absolute power over the arc of its internal and external politics.

— On Sunday, as news reports of the Supreme Leader’s death in an airstrike trickled in, the Iranian regime found itself facing an unprecedented situation. In geopolitics, there are decades when weeks happen and weeks when decades happen. The seismic killing shows that there are also hours when decades happen. So, what’s next for Iran, the region, the world and India? These are the crucial questions before everyone as the fighting between Iranian forces and the US-Israel alliance continues.

— Supreme Leader Ayatollah Ruhollah Khomeini, who led the Iranian Revolution that ousted the Pahlavis, founded the Islamic Republic in 1979. Two years later, Ali Khamenei became Iran’s President. He succeeded Khomeini as Supreme Leader in 1989.

— Khamenei turned the theocratic state into a powerful player and an arch foe of US and Israel, setting up a network of proxies across the region — The Axis of Resistance.

— Besides Khamenei and some members of his family, including his daughter, son-in-law and grandson, senior members of the Iranian regime have also been killed.

— For Iran, there are three possible scenarios — continuity in the regime, a military takeover, and a collapse of the regime, according to Suzanne Maloney of Brookings in a Council on Foreign Relations report.

— The regime is already taking steps to ensure the first scenario goes through.  An 88-member body of clerics, the Assembly of Experts, will pick Khamenei’s successor. Until it chooses a name, the regime has announced a temporary council including the President that will oversee the transition.

— Iran’s most effective weapon is not even a weapon. It has closed down the Strait of Hormuz, a 21-km wide chokepoint through which about 20% of the global oil supply passes. This would jeopardise the energy security of many countries across the world that depend on the Gulf and the Middle East.

— Now, American fleets may find themselves forced to unblock the strait. This conflict has been brewing for decades, but a full-scale war and an unstable Iran is a situation no country in the world is prepared for.

— Europe has been at war for more than four years now, and the Afghanistan-Pakistan theatre has also been active with attacks and counter-attacks. In such a scenario, the war in the Middle East has strategic consequences for the world, as countries like the UAE, Qatar and Bahrain have more foreign nationals and expats than their local population.

— India has about nine million diaspora spread across the Gulf and Middle East region. Their safety and welfare has been the cornerstone of India’s diaspora diplomacy in the last three decades, when the population of the Indian community in these countries have grown.

—  These blue-collar workers are the sole breadwinners for many families in Kerala, UP, Bengal, Bihar, and Odisha — and are the biggest remittance senders to India. Estimates suggest that over a third of India’s remittances comes from the Middle East and the Gulf countries — the number is somewhere around 38% of India’s remittances.

— The other strategic impact is the blow to India’s energy security that can be the casualty of a prolonged conflict — as almost 60% of India’s energy imports come from the region, which include about 50% of oil imports and 70% of LNG imports.

— Any disruption in the energy supply chain would be catastrophic for India’s economy, especially at a time when India has been barred from buying oil from Russia, under threat of Trump tariffs. This puts India in a diplomatically and economically difficult, if not precarious, situation.

— India would also have to think of a plan B after the Iranian leader’s killing by the US — as it would have invested in the political landscape in the new cast of characters that might emerge.

India has had a long, historical relationship, and has strategic ties with most of them across the aisle, and Delhi’s diplomatic abilities will be tested in such an uncharted territory as it navigates the current turmoil.

Other Important Articles Covering the same topic:

📍UPSC Issue at a Glance | How did the Israel-Iran conflict escalate? A look from history to its impact

📍Knowledge Nugget | US-Israel war on Iran: 10 must-know tidbits for UPSC Exam

📍Iran agreed to unprecedented terms. But Trump had to save face

📍Long before he ruled Iran, Khamenei visited India

📍Supreme Leader gone, Revolutionary Guards hold key to Iran’s future

Previous year UPSC Prelims Questions Covering similar theme:

(1) The term “two-state solution” is sometimes mentioned in the news in the context of the affairs of (UPSC CSE 2018)

(a) China

(b) Israel

(c) Iraq

(d) Yemen

(2) What is the importance of developing Chabahar Port by India? (UPSC CSE 2017)

(a) India’s trade with African countries will increase enormously.

(b) India’s relations with oil-producing Arab countries will be strengthened.

(c) India will not depend on Pakistan for access to Afghanistan and Central Asia.

(d) Pakistan will facilitate and protect the installation of a gas pipeline between Iraq and India.

Previous year UPSC Main Question Covering similar theme:

“India’s relations with Israel have, of late, acquired a depth and diversity, which cannot be rolled back.” Discuss. (UPSC CSE 2018)

 

NATION

Carney lands in Delhi, will meet Modi today

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: Prime Minister Narendra Modi and his Canadian counterpart Mark Carney will meet on Monday, in an attempt to reset the ties between the two nations and move forward on tech, trade and energy.

Key Points to Ponder:

— What is the status of the India-Canada bilateral relations?

— What were the reasons for the constraints in the India-Canada relations?

— How significant is Canada for India in the current geopolitics?

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

— What efforts have been made by both the nations to mend their ties?

— What is the role of the Indian diaspora in strengthening ties with other countries?

Key Takeaways:

— According to officials, Carney, who landed in New Delhi on Sunday, will likely sign a 10-year US $2 billion uranium supply deal and smaller agreements on oil and gas, environment, artificial intelligence (AI), quantum computing, education and culture.

— Carney landed in the national Capital after spending two days in Mumbai where he met several industry leaders. In New Delhi, he was received at the airport by Union Minister of State for Commerce Jitin Prasada.

— Both leaders will review the progress achieved till date across diverse areas of the India-Canada Strategic Partnership, building on their earlier meetings in Kananaskis, Canada (June 2025) and Johannesburg, South Africa (November 2025).

— They will also take stock of ongoing cooperation in key pillars, including trade and investment, energy, critical minerals, agriculture, education, research, innovation and people-to-people ties. The two leaders will also exchange views on regional and global developments. Besides, the two PMs will attend the India-Canada CEOs Forum scheduled later in the day. 

— Carney’s visit comes at an important juncture in the normalisation of India-Canada bilateral relations, almost two-and-a-half years after former Canada PM Justin Trudeau wrecked it by alleging the role of the Indian government in the killing of a pro-Khalistan separatist figure. India had rejected the allegations as “absurd” and “politically motivated”.

Do You Know:

— With Canada’s vast natural resources and India’s expanding energy demand, energy cooperation remains a key pillar of the bilateral relationship. The partnership encompasses both conventional and renewable sources, with Canada pitching itself as a reliable supplier of oil, gas, LNG, LPG, crude oil, and critical minerals.

— The education sector has significantly strengthened people-to-people ties between the two countries. Indian students represent the largest group of international students in Canada. More than 3.92 lakh Indian students were studying in Canada as of December 31, 2024.

— With over 1.8 million Indo-Canadians and approximately a million non-resident Indians, Canada is home to one of the largest and most vibrant Indian diasporas in the world. Indo-Canadians have had a profound impact across a wide range of sectors, and their influence continues to grow.

— Canada is an important strategic partner for major western powers — it is part of the G7 grouping and shares the table with the US, UK, Germany, France, Italy, and Japan. It also shares intelligence with the Five Eyes grouping which also includes the US, the UK, Australia and New Zealand. All these countries are also close strategic partners for India.

Other Important Articles Covering the same topic:

📍How India and Canada mended their frayed ties

📍Mark Carney’s visit is about a vital reset in India-Canada ties

Previous year UPSC Mains Question Covering similar theme:

‘Indian diaspora has a decisive role to play in the politics and economy of America and European Countries’. Comment with examples. (UPSC CSE 2020)

 

EXPLAINED

Disruption at Strait of Hormuz: India covered, for now

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies-I, II, III: Geography, Effect of policies and politics of developed and developing countries on India’s interests, Indian Economy and issues relating to planning, mobilisation of resources, growth, development.

What’s the ongoing story: The ever-widening conflict involving Iran, US and Israel has severely disrupted oil and gas flows through the Strait of Hormuz — a critical artery for global energy supply.

Key Points to Ponder:

— Know about the Strait of Hormuz.

— What is the significance of the Strait of Hormuz?

— What can be the implication of the blocking of the Strait of Hormuz on global oil and gas flows?

— How can it affect India?

— Know about the portfolio of India’s crude oil imports.

— What is India’s dependence on Iranian oil?

— Read about the India’s strategic petroleum reserves. 

— How do tensions in West Asia affect global energy security?

— Map work: Locate Iran, Bab el-Mandeb, the Strait of Hormuz, and Israel on a map.

Key Takeaways:

— After Israel and the US launched military strikes in Iran, Tehran retaliated by targeting other Gulf countries that house American military interests. Late Saturday, Iran’s Islamic Revolutionary Guards Corps (IRGC) transmitted messages to vessels saying that the strait had been closed. There was no official declaration to this effect from Tehran.

— Whether or not Iran is blocking the Strait, a large number of trading houses, insurers and vessels have suspended shipments through the maritime passage. According to reports, hundreds of tankers have dropped anchor in open Gulf waters.

— Suspension or heavy curtailment of oil and gas flows through the Strait is bound to have implications for the global energy markets, including India, which depends on the waterway for receiving a bulk of its oil and gas imports. The impact will worsen with the duration of the disruption, though experts believe it won’t be a protracted one.

— According to industry insiders and experts, India is well positioned to stave off a major short-term supply shock when it comes to oil imports as it has alternative sources. It will, however, have to pay higher energy prices as a result of the conflict. In the case of liquefied petroleum gas (LPG) and liquefied natural gas (LNG) imports, where India’s dependence on the Strait of Hormuz is relatively higher than oil, the challenge could be greater — securing supplies while also paying a higher price for imports.

— The Strait of Hormuz, the world’s most important oil transit chokepoint, is a narrow waterway between Iran and Oman that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.

— It handles approximately one-fifth of global liquid petroleum consumption and global LNG trade. Around half of India’s total oil imports — roughly 2.5-2.7 million barrels per day (bpd) — pass through the strait from countries such as Iraq, Saudi Arabia, the UAE and Kuwait.

— India is the world’s third largest consumer of crude oil with an import dependency level of over 88%. The majority of the country’s gas consumption is also met through imports, and oil and gas supplies from West Asia are critical for India.

— Indian refiners already have crude inventories of over 10 days, along with around a week’s worth of fuel stocks. To cover any potential shortfall in import volumes, India could draw on its strategic petroleum reserves, accelerate spot procurement from non-Hormuz regions, and deepen supply contracts with alternative suppliers.

— Diversification options include increased sourcing from Russia, the US, West Africa, and Latin America. Moreover, there is continued availability of Russian cargoes in the Indian Ocean and Arabian Sea region, including volumes in floating storage. This volume build-up was a result of Indian refiners substantially reducing their intake of Russian crude.

— As tensions between Washington and Tehran refused to die down and the risk of possible US military strikes and regional conflict became increasingly credible, benchmark Brent crude prices ended the week well over $72 per barrel, the highest since late July of last year. With the major escalation in the conflict, the war premium in oil prices could jump when markets open after the weekend break.

— While Iran has frequently threatened to close the strait in the past, it has never actually never done it. This is because Gulf oil and gas producers, including Iran, depend on the passageway for uninterrupted revenues from energy exports.

From the Economy Page- “Insurers rush to cancel war risk covers amid halt in Hormuz ship transits”

— Global shipping lines have suspended vessel movements through the Strait of Hormuz, while war risk insurance firms acted quickly to issue cancellation notices for ships operating in the Middle East, signalling a sharp escalation in maritime risk after the US and Israel launched strikes on Iran, insurance circles said.

— Major container carriers have either halted or diverted vessels away from the Strait of Hormuz and rerouted traffic from the Suez Canal as tensions spiralled following Iran’s retaliatory strikes on US bases in the region. The rare move by insurers to submit cancellation notices even before markets reopen on Monday underscores the speed and seriousness of the unfolding crisis. Insurance costs are expected to spurt if the war continues for a long time, insurance sources said.

— A tanker anchored offshore near Oman was hit and evacuated, accentuating the shipping crisis in the region. War risk premiums for ships transiting the Gulf, which were around 0.25% of a vessel’s replacement value, are now expected to jump by as much as 50%, says a report. For a $100 million vessel, that would mean insurance costs rising from $250,000 to $375,000 per voyage. Premiums for ships calling at Israeli ports — previously about 0.1% of vessel value — could also surge by a similar margin as underwriters brace for further retaliation, according to a Financial Times report.

Do You Know:

— Oil imports top India’s merchandise imports, and the heavy reliance on imported crude oil makes its economy vulnerable to global oil price fluctuations. This also impacts the country’s trade deficit, foreign exchange reserves, the rupee’s exchange rate, and inflation rate, among others. Against that backdrop, the fall in international crude oil prices has been a positive for the Indian economy.

Other Important Articles Covering the same topic:

📍Expert Explains: ‘The Strait of Hormuz is simply too vital an artery to remain closed for too long’

UPSC Prelims Previous Year and Practice Questions Covering similar theme:

(3) In the context of global oil prices, “Brent crude oil” is frequently referred to in the news. What does this term imply? (UPSC CSE 2011)

1. It is a major classification of crude oil.

2. It is sourced from the North Sea.

3. It does not contain sulfur.

Which of the statements given above is/are correct?

(a) 2 only

(b) 1 and 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

(4) Which of the statements about the Strait of Hormuz is not correct?

(a) It is a critical region for international oil and gas supplies.

(b) It is a narrow waterway between Bahrain and Qatar.

(c) It connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.

(d) Disruption of shipping in this strait can significantly affect global energy prices.

 

ECONOMY

Centre’s debt target, $4-tn economy aim now more difficult to achieve

Syllabus:

Preliminary Examination: Current events of national importance and economic development.

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

What’s the ongoing story: The Ministry of Statistics and Programme Implementation’s (MoSPI) revamp of the GDP data has thrown up several interesting changes from what we previously thought of the Indian economy, chief among them being that growth in 2023-24 is now not as high as estimated earlier (9.2% in the old series, 7.2% in the new).

Key Points to Ponder:

— How is GDP calculated?

— What is the difference between nominal and real GDP?

— Why has the base year changed in the new GDP series?

— What is Centre’s debt-to-GDP target for FY 2026-27?

— What are the challenges in calculating GDP?

— What is the debt-to-GDP ratio?

— How can changes in GDP estimation methodology alter the perceived size of an economy?

— What challenges do GDP revisions pose for maintaining debt sustainability?

Key Takeaways:

— However, growth is only the year-on-year change in the GDP in rupee terms – so, that is where one must look to understand the consequences of the new GDP series. And the Indian economy is somewhat smaller than what the statistics ministry had previously calculated.

— The new series with 2022-23 as the base year for prices has led to a reduction in the GDP in nominal terms by 3-4% in 2025-26, as well as in the previous three years. This is because of changes in the sources of data used to compile the GDP, as well as the methods.

— A change in the size of the economy has knock-on effects. The Union Budget presented on February 1 said the fiscal deficit target of 4.4% of GDP for 2025-26 was set to be achieved. However, that ratio was calculated on the basis of the first advance estimate of GDP, released in January, which was as per the old series. If one were to use the second advance estimate under the new series released on Friday – which lowered this year’s nominal GDP by 3.3% to Rs 345 lakh crore – the fiscal deficit for 2025-26 edges up to 4.5%. And given that the nominal GDP in absolute terms has reduced for previous years too, fiscal deficits have risen: from 6.5% to 6.7% for 2022-23, 5.5% to 5.7% for 2023-24, and 4.8% to 4.9% for 2024-25.

— Chief Economic Advisor V Anantha Nageswaran took note of the same on Friday, although he said the GDP revisions do not alter the fiscal trajectory the government is on.

— For 2026-27, the picture is not so simple. The fiscal deficit target has been fixed at 4.3% of GDP, or Rs 16.96 lakh crore in absolute terms. Assuming the fiscal deficit in rupee terms is met, achieving the target in terms of the GDP will require nominal growth next year to be 13-14% – much higher than the Budget’s assumption of 10% – according to calculations by The Indian Express.

— The same applies for the new fiscal anchor, the debt-to-GDP ratio. Soumya Kanti Ghosh, State Bank of India’s Group Chief Economic Advisor, estimated that the Centre’s debt-to-GDP ratio will rise from 56.2% to 58.1% in 2025-26. Calculations show nominal growth of 10% in 2026-27 will leave the ratio at 57.5% – well above the target of 55.6% set out by the finance ministry in the Budget.

— While the government’s final objective is for India to be developed by 2047, one milestone on that journey is becoming a $4 trillion economy. A reduction in the nominal GDP under the new series does not help.

Do You Know:

— Last week, the National Statistics Office released the new GDP series, taking another step towards plugging gaps in the country’s data architecture. The series incorporates richer data sources spanning both the formal and informal sectors, revises estimation methodologies, and responds to criticisms of the earlier series. It is better equipped to reflect the evolving structure of the Indian economy and capture its many shifting facets. The new series follows several recent initiatives aimed at improving the accuracy and availability of economic data, including the new inflation series, surveys on household consumption and unincorporated enterprises, and more frequent labour market surveys.

— Among the new sources incorporated are GST figures, which help in estimating the quarterly data. The informal sector is being captured more accurately through annual surveys of unincorporated enterprises. The contentious issue of double deflation has also been addressed in the agriculture and manufacturing sectors, while several key ratios have been updated using more recent studies.

Other Important Articles Covering the same topic:

📍New GDP series, with sharper data, and clearer signals for the economy

UPSC Prelims Practice Question Covering similar theme:

(5) Consider the following statements:

1. The new base year for the GDP series is 2023-24.

2. The GDP series is released by the RBI.

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:

Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE 2021)

 

THE IDEAS PAGE

AI anxiety can turn into an advantage for Atmanirbhar India

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; Science and Technology- developments and their applications and effects in everyday life, Awareness in the field of IT.

What’s the ongoing story: Ashok Gulati writes- “Notwithstanding the “robodog” goof-up by Galgotias University at the AI Impact Summit or the “shirtless” demonstration by some misguided youths, the conference was successful in raising awareness of AI amongst young Indians. The fact that 91 countries and international organisations have endorsed the Delhi Declaration for the use of AI for the global good, sarvajana hitaya and sarvajana sukhaya (welfare for all and happiness for all), speaks to its success.”

Key Points to Ponder:

— What is Artificial Intelligence (AI) and its application?

— Know the key highlights of the India AI Impact summit 2026.

— What do you understand from sovereign AI?

— What are the challenges faced by the developing countries as the world is embracing the impact of AI?

— What are the opportunities and challenges posed by AI?

— What do you understand by the “process of creative destruction” ?

— What are the initiatives taken by India to integrate and promote AI?

Key Takeaways:

— “Three fundamental issues were discussed with much interest and concern: Will AI lead to faster growth? Will it create more jobs or take away jobs? Will its benefits be equally distributed?”

— “The majority of answers to the first question were positive — there is no doubt that it will accelerate overall development. Many have said that humanity is likely to leapfrog in its evolution of knowledge, efficiency and growth. It is a moment in history with an inflection point, a hockey stick situation.”

— “Over the next decade, there is likely to be explosive growth in AI, which will disrupt the functioning of nearly all sectors. Call it the “process of creative destruction”, based on the work of Joseph Schumpeter (1942). Those who want to remain in the business-as-usual mode risk being left far behind. Very soon, AI will be used across the globe the way the internet is being used today, raising productivity and saving time.”

— “But the biggest debate about AI is if the “process of creative destruction” will lead to massive job losses. Opinions are divided. IMF managing director Kristalina Georgieva has highlighted the risk of job losses and likened the arrival of AI in the job market to a tsunami. She estimates that 40 per cent of jobs are likely to be hit in emerging economies, while this figure can touch 60 per cent in advanced economies. That’s scary. But Mukesh Ambani, chairman and managing director of Reliance Industries, has said that there will not be job losses in the Indian industry as a result of the induction of AI.”

— “My take on this is that similar fears were expressed in India when, in the late 1980s, the then prime minister of India, Rajiv Gandhi, introduced computers. Employees in banks, railways, and many other sectors went on strike, fearing that they would lose their jobs, and they opposed and resisted the introduction of computers. It is hard to even think today of banks running without the use of computers. This is where Schumpeter’s “process of creative destruction” is salient.”

— “Every new technology demolishes the old one and creates massive disruption, but gives higher efficiency and growth. As a result, the size of the economy expands, creating new jobs that demand higher skills; these jobs also pay more. Most are better off as a result. There are always some losers, especially in the short term, who cannot ride the wave of new technology. Ways need to be found to upgrade their skills, or the state needs to minimise the pain of those who stand to lose out.”

— “The next question is that of equity. Who will gain and who will lose? The early starters will gain first, and that may increase inequality in the short run. This could also be because only very few countries can afford the massive investments that are needed to develop AI as well as meet its energy requirements. But as with many other technologies, cheaper options are likely to be available soon, and their use will expand exponentially, benefitting most people in turn.”

— “India’s comparative advantage is in finding low-cost solutions that the Global South can afford and use at a mass scale. Be it the case of vaccines during the Covid pandemic,the innovative technology of UPI, or the landing of ISRO’s Chandrayaan-3 on the Moon’s South Pole, India has demonstrated an ability to derive the maximum out of technology. It can emerge as the third global power in AI, after the US and China, and use the technology for global good.”

Do You Know:

— Artificial Intelligence is the ability of machines, especially computers, to perform tasks that typically require human intelligence. These tasks include things like understanding language, recognising patterns, solving problems, and making decisions.  Essentially, AI enables machines to think and learn from experience, just like humans do, but often at a much faster pace with access to vast amounts of data. 

Other Important Articles Covering the same topic:

📍UPSC Issue at a Glance | India AI Impact Summit 2026: Backdrop, key highlights, initiatives and concerns

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

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PRELIMS ANSWER KEY

1. (b)  2. (c)  3. (b)   4. (b)  5. (d)   6. (b)

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