Important topics and their relevance in UPSC CSE exam for November 6, 2024. If you missed the November 5, 2024 UPSC CSE exam key from the Indian Express, read it here

FRONT PAGE

Decades of dispute later, SC: Not all pvt property can be taken over by state for ‘common good

Syllabus:

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

Main Examination: General Studies II: Indian Constitution—historical underpinnings, evolution, features, amendments, significant provisions and basic structure.

What’s the ongoing story: IN A landmark ruling that has implications on the citizen’s right to hold property, a nine-judge bench of the Supreme Court Tuesday ruled that not all private property can be deemed “material resource of the community” for redistribution under Article 39(b) of the Constitution.

Key Points to Ponder:

• What is Article 39(b) of the Constitution?

• What exactly Supreme Court Said?

• What is the phrase “material resource” in Article 39(b) of the Constitution means?

• Explain the Supreme Court’s recent stance on the balance between private property rights and community rights over material resources.

• What constitutional principles does the Supreme Court rely on to justify community control over certain material resources?

• Discuss the historical context of private property rights in India and how the recent Supreme Court verdict aligns with or diverges from past judgments.

• Analyze the implications of the verdict for property owners and community stakeholders. How might it affect future property-related cases?

• How does the ruling address compensation or restitution for individuals whose property rights may be overridden for community benefits?

• Which Article of the Indian Constitution is primarily concerned with property rights?

• Critically analyse the transformation of the Right to Property from a Fundamental Right to a Constitutional Right. Discuss how this shift has affected land acquisition policies and community rights over natural resources in India.

• Evaluate the Supreme Court’s interpretation of property rights with respect to the concept of ‘public purpose.’ How has the Court’s interpretation evolved in cases involving large-scale infrastructure projects and community displacement?

Key Takeaways:

• The phrase “material resource” in Article 39(b) of the Constitution “may include privately owned resources… not all privately owned resources fall within the ambit of the phrase”, the majority opinion of the SC said.

• Chief Justice of India D Y Chandrachud wrote the majority ruling for himself, and Justices Hrishikesh Roy, J B Pardiwala, Manoj Misra, Rajesh Bindal, Satish Chandra Sharma and Augustine George Masih. Justice B V Nagarathna partially disagreed with the majority judgment while Justice Sudhanshu Dhulia dissented.

• The ruling in the constitutional reference essentially undoes several decades of Supreme Court jurisprudence on the issue. A line of judgments holding that both public and private resources fell within the ambit of “material resources of the community” under Article 39(b) stem from a minority opinion by Justice V R Krishna Iyer in State of Karnataka v Shri Ranganatha Reddy (1977).

• A 1982 five-judge constitution bench ruling, authored by Justice O Chinnappa Reddy in the case Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd, had affirmed Justice Iyer’s view.

• The majority opinion of the SC has now disagreed with these judgments. It said Justice Iyer “cast the net wide, holding that all resources which meet material needs are covered by the phrase, and any attempts by the government to nationalize these resources would be within the scope of Article 39(b)”.

• In his dissenting judgment, Justice Dhulia said that “the broad and inclusive” meaning given to “material resources of the community” by Justice Iyer and Justice Reddy “has stood us in good stead and has lost none of its relevance, or jurisprudential value, nor has it lost the audience which appreciates these values”.

Do You Know:

• Falling under Part IV of the Constitution titled “Directive Principles of State Policy” (DPSP), Article 39(b) places an obligation on the state to create policy towards securing “the ownership and control of the material resources of the community are so distributed as best to subserve the common good”.

• DPSP are meant to be guiding principles for the enactment of laws, but are not directly enforceable in any court of law.

•The majority was of the view that Justice Iyer’s “interpretation amounts to endorsing a particular economic ideology. To declare that Article 39(b) includes the distribution of all private resources amounts to endorsing a particular economic ideology and structure for our economy”. It said that Iyer’s judgment followed in Sanjeev Coke “was influenced by a particular school of economic thought”.

• It added, “In essence, the interpretation of Article 39(b) adopted in these judgments is rooted in a particular economic ideology and the belief that an economic structure which prioritises the acquisition of private property by the state is beneficial for the nation.”

Other Important Articles Covering the same topic:

????Acquisition of pvt property not valid if proper procedure not followed, says Supreme Court

????2 verdicts flag: There was no need to be so harsh on previous judges

????PRIVATE, PUBLIC

Previous year UPSC Prelims Question Covering similar theme: 1.What is the position of the Right to Property in India? (UPSC CSE, 2021) (a) Legal right available to citizens only (b) Legal right available to any person (c) Fundamental Right available to citizens only (d) Neither Fundamental Right nor legal right

In new rules, UP to set up its own panel for appointing DGP

Syllabus:

Preliminary Examination: Current events of national and international importance.

 Main Examination: General Studies II: Role of civil services in a democracy.

What’s the ongoing story: Under new rules brought in by the Uttar Pradesh government, the state’s police chief will be selected by a committee chaired by a retired High Court judge. This is a departure from the earlier process, under which the state would send a list of names to the Union Public Service Commission, which would make the selection.

Key Points to Ponder:

• Explain the procedure for appointing a DGP in a state, highlighting the role of the UPSC and state governments.

• Why is a fixed tenure for DGPs recommended, and how does it contribute to police accountability and efficiency?

• What are the challenges faced by states in implementing the Supreme Court guidelines on DGP appointments, and what are the implications of non-compliance?

• Discuss the significance of the Prakash Singh vs. Union of India judgment on police reforms in India, particularly in DGP appointments.

• Critically analyze the Supreme Court’s guidelines for DGP appointments and the rationale behind implementing a fixed tenure for police officers. How does this impact police independence and governance in states?

• In the light of police reforms, discuss the importance of an independent and transparent DGP selection process for improving law and order administration in Indian states.

Key Takeaways:

• The ‘Director General of Police, Uttar Pradesh Selection and Appointment Rules, 2024’ was cleared by the state Cabinet recently.

• Officials said the decision was taken citing a Supreme Court order dated September 22, 2006, in which, according to officials, the apex court expressed its expectation that state governments enact a new Police Act that would be capable of keeping the police system free from pressures, safeguarding the rights of citizens and establishing the rule of law.

• The committee for the selection and appointment of the DGP will be headed by a retired judge of the High Court and will also include the Chief Secretary of the state, a nominee of the UPSC, the chairperson or nominee of the Uttar Pradesh Public Service Commission, the Additional Chief Secretary/Principal Secretary, Home Department, as well as a retired DGP as its members.

• Under the new rules, the nomination committee shall be constituted on the basis of merit of those officers, who have a minimum period of six months of service left from the date of creation of vacancy in the post of DGP.

• Further, the new rules would also fix the minimum tenure of the DGP at two years, i.e. once selected for appointment, the police chief should serve for a minimum of two years.

• Further, guidelines passed by the Supreme Court have been followed in the provisions relating to the removal of the DGP from his post.

Do You Know:

• Appointments of DGPs are now made on the basis of the Supreme Court judgment on police reforms in Prakash Singh vs Union of India 17 years ago. According to the SC’s guidelines on the appointment of police chiefs, the DGP is to be selected by the state government from among the three senior most officers who have been empanelled for promotion to that rank by the UPSC “on the basis of their length of service, very good record and range of experience for heading the police force”.

• The DGP should have a fixed tenure of two years in the post, irrespective of the date of retirement. A DGP can be removed only in exceptional circumstances.

• Based on the judgment, the UPSC issued its own guidelines in 2009 on the appointment of police chiefs of states. According to these guidelines, states are supposed to draw up and send to the UPSC a list of eligible officers with at least 30 years of service behind them, along with these officers’ service record, performance appraisal, and vigilance clearance.

• These officers are to be of the rank of ADG or the rank of police chief (and one below) stipulated for that state. The list is supposed to be given to UPSC six months before the incumbent DGP is to retire.

• An empanelment committee headed by the UPSC chairman, and with the union home secretary, state chief secretary, state DGP, and the chief of a central police organisation in it, is supposed to select a panel of three officers “based on merit”. For smaller states that may have only one cadre post of DGP, the committee is supposed to send two names.

• Under the rules, consent of an officer is not required for her posting. Also, the Centre has the power to not relieve an officer for posting in the state.

• UPSC also submitted that while the 30-year rule could be relaxed to 25 years in states like Himachal Pradesh, Manipur, Nagaland, Uttarakhand, Tripura, and Sikkim which may not have enough officers meeting this criterion, this is to be done with the consent of the Centre.

• Through two orders passed in 2018 and 2019, the SC has also stipulated that the UPSC shall not put in the panel any officer with less than six months to retirement.

Other Important Articles Covering the same topic:

????Explained: The 2006 Supreme Court ruling on police reforms; how states circumvent it to influence postings

THE SECOND PAGE

Chalo India drive: Free visa for friends of diaspora at World Travel Mart in UK

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

 Main Examination: General Studies II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

What’s the ongoing story: The Ministry of Tourism will launch its Chalo India campaign on the sidelines of the ongoing World Travel Mart in London.

Key Points to Ponder:

• Explain how India’s recent visa policy changes could encourage tourism and attract the global Indian diaspora.

• Describe the potential economic benefits of the ‘Chalo India’ campaign and similar initiatives focused on promoting Indian tourism.

• What are some key cultural or economic contributions made by the Indian diaspora to India’s development?

• Evaluate the significance of the ‘Chalo India’ campaign and other tourism initiatives aimed at re-engaging the diaspora. How do these initiatives benefit India’s soft power on the international stage?

Key Takeaways:

• The Ministry of Tourism is participating at WTM London, being held from November 5 to 7, with a delegation of 50 stakeholders including state governments, inbound tour operators, airlines and hoteliers to showcase India’s vibrant cultural diversity and the vast range of tourism products and immersive experiences.

• As the special portal goes live, the OCI cardholders will need to register on the same and key in the details of their nominated friends; they will be assigned a unique code after due verification. The designated friends can then use the special code to avail of a free visa.

• The focus of this year`s India pavilion is MICE, Mahakhumbh and wedding tourism, said the statement. A special mock Mandapam in the Pavilion has been created to give the look and feel of an Indian wedding. The India pavilion was inaugurated by High Commissioner Vikram Doraiswami and Director General, Ministry of Tourism, Mugdha Sinha, in the presence of Tourism Ministers of Telangana, Goa and Uttarakhand.

• Officials with the Tourism Ministry said the campaign is a formalisation of Prime Minister Narendra Modi’s invite to NRIs and overseas Indians to bring their friends and associates to visit India and contribute to building brand India as a tourism destination.

Do You Know:

• Chalo India is a first-of-its-kind initiative to bring more foreign tourists to India, wherein the government will allow “friends” of diaspora members to get free visas. Five foreign nationals nominated by each Overseas Citizen of India (OCI) cardholder on a special portal will be eligible for a gratis e-visa (visa granted without fees).

• There are about five million OCI card holders, as per government records. While each OCI holder can nominate up to five people, the total number of free e-visas to be granted under the said initiative is one lakh, officials said.

• The UK is the third largest source market for inbound tourists to India. At almost 1.9 million, it also has one of the biggest Indian diaspora.

• The foreign tourist footfall to India has been severely hit in the wake of the pandemic and numbers haven’t returned to pre-pandemic levels. Around 6.19 million and 1.52 million foreign tourists arrived in India in 2022 and 2021 respectively, compared to 10.93 million in 2019.

• A total of 9.5 million foreign tourists visited India during 2023 out of which 0.92 million visits were from the UK, making it the third largest source market for inbound tourists to India, as per statistics by the Tourism Ministry.

Other Important Articles Covering the same topic:

????Travelling behind the curve: Despite the outbound rush, why India’s foreign tourist arrivals are yet to touch pre-Covid levels

THE CITY

Delhi sees season’s first smoggy day

Syllabus:

Preliminary Examination: General issues on Environmental ecology, Bio-diversity and Climate Change – that do not require subject specialization.

Main Examination: General Studies III: Conservation, environmental pollution and degradation, environmental impact assessment.

What’s the ongoing story: Delhi saw its first smog episode on Tuesday morning, even as the AQI continued to be in the very poor range for the seventh day in a row.

Key Points to Ponder:

• What factors primarily contributes to the seasonal smog in Delhi?

• What are the key sources of pollution that contribute to the seasonal smog in Delhi? How do these sources vary by season?

• Explain the impact of Delhi’s smog on public health, particularly in terms of respiratory conditions.

• What role does stubble burning in neighbouring states play in the seasonal smog crisis in Delhi?

• Discuss how Delhi’s topography and meteorological conditions contribute to the persistence of smog during the winter months.

• Critically evaluate the effectiveness of the Graded Response Action Plan (GRAP) in tackling Delhi’s air pollution. What improvements can be made to ensure better outcomes in controlling seasonal smog?

• Discuss the economic and environmental consequences of persistent air pollution in Delhi. How do the short-term and long-term effects of smog affect public health, governance, and urban life?

• Examine the role of urban planning and infrastructure development in mitigating Delhi’s smog. How can sustainable development practices help improve the city’s air quality?

• Assess the challenges in implementing effective policies to control air pollution in Delhi. How can coordination between state and central governments be improved to address smog-related issues?

Key Takeaways:

• The visibility dropped to 800 metres, the first time that it has dropped below the 1,000 metres mark, at Safdarjung this winter. In 2023, the first shallow fog episode was recorded on October 31. In 2022, it was first observed on October 12.

• According to IMD officials, high temperatures this year have led to a delay in fog and smog formation. “Fog and smog formation is aided by high humidity, low temperatures and calm winds. This year, the temperatures have started dipping only in the past two-three days and the fog/smog episodes have been delayed,” an official said.

• As per the IMD forecast, the minimum temperature is expected to be between 16 and 18 degrees Celsius through the rest of the week, while the maximum is expected to be between 32 and 33 degrees Celsius.

• October this year was the warmest on record, which has also kept the AQI levels in the city from turning severe.

• As per IARI, the contribution of farm stubble burning to Delhi’s air on Monday was around 23%. So far, Punjab, Haryana, UP, Delhi, Rajasthan and MP have recorded a total of 10,693 farm fire incidents. The harvest season is still underway.

Do You Know:

• The predominant and consistent contributor to Delhi’s pollution, a recent CSE analysis has shown, is vehicular pollution at around 13-15% every day. It is only since October 31 that the contribution of stubble burning has been in the double digits.

• According to scientists at IARI, stubble burning is expected to end by the last week of November.

Other Important Articles Covering the same topic:

????Expert Explains: Why smog towers, cloud seeding won’t save us from air pollution

Previous year UPSC Prelims Question Covering similar theme: 2. Photochemical smog is a resultant of the reaction among (UPSC CSE 2013) (a) NO2, 03 and peroxyacetyl nitrate in the presence of sunlight (b) CO, 02 and peroxyacetyl nitrate in the presence of sunlight (c) CO, CO2 and N02 at low temperature (d) High concentration of N02, O3 and CO in the evening

GOVT & POLITICS

Jaishankar: Temple attack shows space for extremists in Canada

Syllabus:

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

What’s the ongoing story: EXPRESSING CONCERN over pro-Khalistan separatists targeting the Hindu Sabha Mandir in Brampton, Ontario, during a visit by Indian consular officials, External Affairs Minister S Jaishankar on Tuesday said the incident showed how “political space” was being given to “extremist forces” in Canada.

Key Points to Ponder:

• Discuss the key factors that have led to diplomatic tensions between India and Canada over the Khalistan issue.

• How does the pro-Khalistan movement impact the Indian diaspora in countries like Canada?

• Explain the significance of the Hindu temple clash in Canada in the context of India-Canada relations.

• Discuss the role of religious tensions in shaping the foreign policy dynamics between India and Canada, particularly in light of the recent clashes involving the Hindu temple.

• What role does the Canadian government play in addressing the concerns of the Indian government regarding Khalistan sympathizers within its borders?

• Evaluate India’s diplomatic response to the rise of pro-Khalistan activities in foreign countries like Canada. How should India balance its interests in protecting its sovereignty while respecting international norms of free expression?

• Critically assess the impact of the Khalistan movement on India’s relationship with countries having large Sikh populations. What diplomatic measures should India take to safeguard its interests?

Key Takeaways:

• Jaishankar was responding to queries related to the incident and the ongoing diplomatic row between India and Canada, during a joint press briefing with his Australian counterpart Penny Wong in Canberra. He is on an official visit to Australia from November 3-7.

• Prime Minister Narendra Modi condemned the “deliberate attack on a Hindu temple” and “cowardly attempts to intimidate our diplomats”. He also asked the Canadian government to “ensure justice and uphold the rule of law”.

• On the diplomatic row between India and Canada, following Canadian Prime Minister Justin Trudeau’s allegation of the Indian government’s “potential” involvement in the killing of Khalistan separatist Hardeep Singh Nijjar, Jaishankar reiterated that Canada has levelled allegations without providing specifics.

• Along with the US and Australia, who are also India’s Quad partners, Canada, UK and New Zealand make the Five Eyes intelligence-sharing alliance. Canada had briefed the grouping on the Nijjar probe.

Do You Know:

• Prime Minister Narendra Modi condemned the “deliberate attack on a Hindu temple” and “cowardly attempts to intimidate our diplomats”. He also asked the Canadian government to “ensure justice and uphold the rule of law”.

• Amid strained ties with Canada, this is the first time that Modi has spoken out publicly since September last year, when Canadian Prime Minister Justin Trudeau alleged “potential” involvement of the Indian government in the killing of Khalistan separatist Hardeep Singh Nijjar. —While Khalistan separatists have targeted Indians and Indian officials in the past, this is the first time that Modi has spoken out against the acts of violence — underlining the Indian government’s strong stand on Khalistan separatists in Canada. —In the past few months, especially after the fall of the Sheikh Hasina government in Bangladesh, Modi has spoken out against the targeting of Hindus — including in a phone call with US President Joe Biden.

Other Important Articles Covering the same topic:

????Pro-Khalistan men target temple; PM Modi to Canada: Cowardly, uphold the law

Previous year UPSC Prelims Question Covering similar theme: 3. In which one of the following groups are all the four countries members of G20? (UPSC CSE, 2020) (a) Argentina, Mexico, South Africa and Turkey (b) Australia, Canada, Malaysia and New Zealand (c) Brazil, Iran, Saudi Arabia and Vietnam (d) Indonesia, Japan, Singapore and South Korea

THE IDEAS PAGE

A positive secularism

Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: General Studies I: Social empowerment, communalism, regionalism & secularism.

What’s the ongoing story: Faizan Mustafa Writes: It reads minority rights alongside the right to equality and right to education

Key Points to Ponder:

• What is the Madarsa Act?

• Why did Allahabad HC quash the Act?

• Why did SC uphold the Act?

• Why did SC strike down higher education provisions of the Act?

• Which principle does the Supreme Court’s recent verdict on madrasas in Uttar Pradesh primarily uphold? (Hint: Negative Secularism, Positive Secularism, Religious Nationalism and Fundamentalism)

• What is the primary constitutional provision invoked in the context of religious institutions such as madrasas in India?

• In the context of the UP madrasa verdict, the term ‘positive secularism’ is best described as what?

• The Supreme Court’s stance on madrasas in its latest ruling reflects what?

• Discuss the significance of the Supreme Court’s ruling on the governance and regulation of madrasas in Uttar Pradesh.

• Explain how the concept of ‘positive secularism’ has evolved in India, particularly with respect to religious education and institutions.

• What role does the state play in regulating religious education in India while maintaining the principles of secularism?

• How does the Uttar Pradesh madrasa verdict relate to the broader discourse on religious education in India?

Key Takeaways:

• The three-judge bench of the Supreme Court (SC), led by Chief Justice of India D Y Chandrachud had promptly stayed the Allahabad High Court’s March 22 ruling and has now overruled it. The verdict in Anjum Qadri and Anr vs Union of India & Ors upholds the constitutionality of the UP Madarsa Act, 2004.

• The SC did not agree with the High Court’s decision to strike down the Madarsa Act based on secularism as part of the Basic Structure. Citing its Indira Nehru Gandhi judgment (1975), the SC categorically held that the doctrine of Basic Structure should be invoked to examine the validity of a constitutional amendment, not an ordinary piece of legislation like the UP Madarsa Act.

• Since the Madarsa Act was struck down in the name of secularism, the judgment discussed the concept at length. It relied on the nine-judge bench judgment in S R Bommai v. Union of India (1994), which had held that “secularism is a positive concept of equal treatment of all religions”.

• The judgment also said, in essence, that secularism is a facet of equality. It rightly observed that substantive equality shall remain an illusion unless the state is positively charged with the duty to provide equal treatment to all persons, irrespective of their religion, faith, or beliefs. It went on to hold that the right to manage its affairs given to a religious body is a fundamental right that cannot be abridged by any legislation.

• The Court recalled its leading judgments on Article 30 to explain the extent of state control of minority institutions in the name of regulation. It clarified that the minority character of an institution cannot be annihilated or destroyed.

Do You Know:

• The Madarsa Act provides a legal framework for these institutions in UP. It has established the Uttar Pradesh Board of Madarsa Education (the Board), which prepares and prescribes course material, and conducts exams for all courses. The Act also gives power to the state government to create rules to regulate madarsa education.

• Madarsas are entitled to state protection under Article 26, which gives religious denominations or any section thereof the right to establish and maintain institutions for religious and charitable purposes. Thus, purely religious institutions can legitimately be established and maintained. —Article 21-A does create a duty on the state to provide compulsory education between 6-14 years of age and thus the state has a legitimate interest in ensuring the quality of this education. But in Pramati Educational and Cultural Trust (2014), the SC held that the application of the RTE Act to minority educational institutions, whether aided or unaided, “may destroy the Article 30(1) guarantees to establish and administer educational institutions of their choice to religious and linguistic minorities.” —Accordingly, the SC refused to agree with the HC’s reasoning that madarsa education is hit by Article 21-A due to its poor quality as the RTE Act itself contains a provision exempting minority institutions.

• The SC ruled that a part of the Madarsa Act’s Section 9 — which allows the Board to prescribe coursework, conduct exams, and grant degrees to those who have finished Kamil and Fazil courses — is contrary to the UGC Act. Under Section 22 of the UGC Act, only universities which have been established under a central or state Act or have been “deemed” to be universities by the UGC can grant degrees. Therefore, the SC struck down a part of the Section 9.

Other Important Articles Covering the same topic:

????Why the Supreme Court upheld constitutional validity of UP Madarsa Act, 2004

????SC upholds UP madarsa Act, strikes down provisions on higher degrees

Previous year UPSC Prelims Question Covering similar theme: 4. Consider the following statements: (UPSC CSE, 2020) 1. The Constitution of India defines its ‘basic structure’ in terms of federalism, secularism, fundamental rights and democracy. 2. The Constitution of India provides for ‘judicial review’ to safeguard the citizens’ liberties and to preserve the ideals on which the Constitution is based. 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

5. What was the exact constitutional status of India on 26th January, 1950? (UPSC CSE, 2021) (a) A Democratic Republic (b) A Sovereign Democratic Republic (c) A Sovereign Secular Democratic Republic (d) A Sovereign Socialist Secular Democratic Republic

Previous year UPSC Mains Question Covering similar theme: ???? “Parliament’s power to amend the constitution is limited power and it cannot be enlarged into absolute power”. In light of this statement, explain whether parliament under article 368 of the constitution can destroy the basic structure of the constitution by expanding its amending power? (UPSC GS2, 2019)

ECONOMY

Bank deposit growth outpaces credit offtake for first time in 30 months

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc

Main Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: For the first time in 30 months, deposit growth in the banking system has outpaced credit growth after it registered a year-on-year growth of 11.8 per cent in the fortnight ended October 18, compared to a rise of 11.7 per cent in loan growth.

Key Points to Ponder:

• What all the factors which contributed to the recent rise in bank deposit growth outpacing credit off-take in India?

• As of the latest reports, which sector has shown a decline in credit off-take in India?

• What does an increase in bank deposits relative to loan growth typically indicate about the economy?

• Explain the possible reasons behind the growth of bank deposits outpacing credit off-take in the Indian economy.

• Discuss the implications of low credit growth on the overall economic development of India.

• How can increased savings in the form of bank deposits be beneficial to the financial sector and the economy?

• What role does the Reserve Bank of India (RBI) play in influencing the relationship between deposit growth and credit off-take?

• The banking sector in India is experiencing higher deposit growth, but businesses are reluctant to borrow. Discuss the possible reasons for this behaviour and suggest policy interventions to stimulate credit off-take.

Key Takeaways:

• The growth in deposits can be attributed to rising term deposit rates of scheduled commercial banks (SCBs). The slowdown in credit growth was due to a higher base effect because of the merger of HDFC Ltd with the HDFC Bank and the Reserve Bank of India’s (RBI) such as higher risk weights for unsecured loans and the proposed LCR (Liquidity Coverage Ratio) norms.

• In the fortnight ended October 18, bank credit increased to Rs 172.38 lakh crore, compared to Rs 154.57 lakh crore in the year-ago fortnight. In the same period, bank deposits grew to Rs 218.07 lakh crore, as against Rs 195.15 lakh crore in the same fortnight of last year.

• “On y-o-y (year-on-year) performance, credit saw a growth of 11.7 per cent (in the fortnight ended October 18, 2024), slower than the last year’s rate of 19.7 per cent. Meanwhile, deposits saw a growth of 11.8 per cent, compared to 13.4 per cent last year. Hence credit offtake has moderated relative to deposit growth,” according to a report by CareEdge Ratings.

• Since January 2024, deposits rose to 8.6 per cent as of October 18, 2024. Meanwhile, in absolute terms, deposits have expanded by Rs 17.3 lakh crore over the last 9 months. Deposits have remained prominent in FY25 as banks have intensified efforts to strengthen their liability franchise. Banks are also sourcing funds via the certificates of deposits (CDs) at a relatively higher cost, the report said.

• In November last year, the RBI increased risk weights on the exposure of banks towards consumer credit, credit card receivables and non-banking finance companies (NBFCs) by 25 per cent up to 150 per cent. • Banks are expected to witness a moderation in their credit growth targets in the run-up to the proposed implementation of revised LCR norms from April 1, 2025, resulting in an improvement (decline) in the CD ratio and increase in liquidity buffers.

Do You Know:

• According to Investopedia, Bank deposits consist of money placed into banking institutions for safekeeping. These deposits are made to deposit accounts such as savings accounts, checking accounts, and money market accounts at financial institutions.

• According to Investopedia, the deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited. When someone opens a bank account and makes a cash deposit, they surrender the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank.

Other Important Articles Covering the same topic:

????Why banks are witnessing a slowdown in bank deposit growth

Previous year UPSC Prelims Question Covering similar theme: 6. With reference to the Indian economy, consider the following statements: (UPSC CSE, 2020) 1. A share of the household financial savings goes towards government borrowings. 2. Dated securities issued at marked-related rates in auctions form a large component of internal debt. Which of the above statements is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

7. Consider the following liquid assets: (UPSC CSE 2013) 1. Demand deposits with the banks 2. Time deposits with the banks 3. Savings deposits with the banks 4. Currency The correct sequence of these decreasing order of Liquidity is (a) 1-4-3-2 (b) 4-3-2-1 (c) 2-3-1-4 (d) 4-1-3-2

How Dedicated Freight Corridors are adding to GDP growth, boosting Rail revenues

Syllabus:

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Main Examination: General Studies III: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

What’s the ongoing story: Dedicated Freight Corridors are improving India’s GDP and adding significantly to the Indian Railways’ revenue, a recent study by Australia’s University of New South Wales has said.

Key Points to Ponder:

• What are Dedicated Freight Corridors (DFCs)?

• Why were Dedicated Freight Corridors (DFCs) needed?

• What is the present status?

Key Takeaways:

• The study was published in the journal Elsevier. It analysed the Western Dedicated Freight Corridor (WDFC) data for FY 2019–20, and came up with its findings by using a Computable General Equilibrium model initiated by the central government. — The study said that reduction in freight cost and travel time due to the DFCs has helped reduce prices of commodities by up to 0.5%, and the corridors have contributed to 2.94% of the revenue growth realised by the Railways between FY 2022–23 and FY 2018–19.

• The need for the Dedicated Freight Corridors was felt for two reasons. First was the over utilisation of the Railways’ golden quadrilateral linking the four metropolitan cities of Delhi, Mumbai, Chennai and Howrah, and its two diagonals (Delhi-Chennai and Mumbai-Howrah). This stretch comprises only 16% of the route, but carried more than 52% of the passenger traffic and 58% of revenue-earning freight traffic for the Railways. —Another reason was the Railways’ dipping share in total freight traffic. This data was compiled as part of the National Rail Plan, which envisaged that the share of freight traffic by rail should go up to 45% by 2030.

• Currently, on an average, 325 trains are running per day, 60% more than last year. The freight trains on DFC are faster, heavier & safer. Since inception, the DFCs have carried over 232 billion Gross Tonne Kilometres (GTKMs) and 122 billion Net Ton Kilometers (NTKMs) payload.

• According to the DFCCIL, more than 10% of freight running of Indian Railways is now handled by DFC. A DFCCIL official said that a comprehensive and holistic study of the impact of the DFCs on the Indian Economy is underway, and the results are expected soon.

• The research is based on different kinds of data including freight costs, industry inputs, and population data. It also factors in regions, industries, consumers and the overall improvements in the freight transport network. The DFCCIL said that the accuracy of the model has been calibrated and validated using economic data as well as data from the Ministry of Road Transport and Highways and the Railways.

• The study found that the introduction of the DFCs provided great benefit in western regions due to significant reductions in freight costs. The findings also indicated a ‘social-equalising effect’, with states that have a lower per-capita GDP experiencing significant benefits.

Do You Know:

• Dedicated Freight Corridors (DFCs) are specific routes for freight transportation, which offer higher transport capacity due to the faster transit of freight trains, running of double stack container trains, and heavy haul trains. This improves the supply chain for the industries/logistics players located at economic centres along the way, leading to growth of export-import traffic too.

• The Ministry of Railways took up the construction of two DFCs — the 1,337-km Eastern Dedicated Freight Corridor (EDFC) from Sonnagar in Bihar to Sahnewal in Punjab; and the 1,506-km Western Dedicated Freight Corridor (WDFC) from Jawaharlal Nehru Port Terminal in Mumbai to Dadri in Uttar Pradesh — back in 2006.

• The EDFC is complete and commissioned, with feeder routes to different coal mines and thermal power plants. The WDFC is 93% commissioned, with feeder routes serving various cement plants and the large ports of Mundra, Kandla, Pipavav, and Hazira in Gujarat. It is expected to be fully complete by December 2025.

• As of March 31, 2024, Rs 94,091 crore had been spent on executing the DFC project, excluding land acquisition costs.

• The creation of DFCs was announced in Parliament during the Railway Budget for FY 2005-06. In September 2006, Dr. Manmohan Singh, the then Prime Minister, laid the foundation stone of EDFC at Ludhiana, and in October 2006, the foundation stone of WDFC at Mumbai.

• On October 30, 2006, Dedicated Freight Corridor Corporation of India Limited (DFCCIL) was incorporated as a Special Purpose Vehicle for the construction, operation, and maintenance of the corridors.

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EXPLAINED

What Trump 2.0 could mean for US-India trade

Syllabus:

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies II: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

What’s the ongoing story: Trump has branded India as a big trade abuser, which suggests that he could renew the trade tensions of his first term, and impose higher tariffs on more than $75 billion worth of Indian exports to the US. The broader US trend towards protectionism, however, continued under Biden as well.

Key Points to Ponder:

• Why trade with US matters

• India, US, WTO, trade agreements-Connect the dots

• How do the U.S. elections impact India’s trade and economic relations with the United States?

• Discuss the potential consequences of a change in leadership in the U.S. on the India-U.S. defense cooperation.

• What role does the Indian diaspora play in influencing the U.S. elections and subsequently India-U.S. relations?

• Explain the significance of Kamala Harris’s election for U.S.-India ties, considering her Indian heritage.

Key Takeaways:

• The tilt towards protectionism and trade isolationism of Trump 1.0 (2017-21) was not reversed under the Biden administration. Trump had blocked the World Trade Organization (WTO) dispute resolution process and invoked wartime trade provisions to launch trade conflicts with major trade partners, including India.

• In 2019, India lost duty-free access under the decades-old Generalised System of Preferences (GSP) programme, of which it had been the largest beneficiary. The tariff-free benefits accrued to approximately $5.7 billion of India’s exports to the US.

• According to Bernstein Research, a Trump presidency would hit China, but the benefits for India may be “limited”, as it could come under renewed tariff pressure. The “China-plus-one” strategy may gain momentum, but the inflation resulting from trade barriers could disrupt the expected interest rate-cut trajectory, affecting middle-class consumption in India, the research note said.

• Indian pharmaceutical exports to the US could face setbacks, and profits may reduce for IT services firms due to a likely hardening of stance on H-1B visas, where increased rejections are expected.

Do You Know:

• The US is India’s largest trade partner, with bilateral trade reaching almost $120 billion in FY24 — slightly higher than India’s China trade. However, unlike China, India’s trade relationship with the US is favourable, which makes the US a vital source of foreign exchange.

• Over the years, the US has gradually distanced itself from the liberal global trade order that it helped establish after World War II, especially since China became a member of the WTO in 2001. China’s entry did not trigger the expected economic liberalisation; it rather led to the spread of state capitalism, impacting US job markets. In response, the US has refrained from signing new free trade agreements (FTAs), even as bipartisan calls have grown for it to withdraw entirely from the WTO.

• During his first term, Trump invoked national security provisions to impose 25% tariff on steel and 10% on aluminium from India and other countries, breaking from the practice of not targeting friendly nations.

• Trump has repeatedly voiced his frustration at high tariffs in India, which affect US companies like Harley-Davidson.

• Higher US inflation could hit Indian exports of labour-intensive items such as textiles, gems and jewellery, and leather products, impacting millions of jobs. Higher inflation in the US hurts India disproportionately, as the US accounts for almost 20% of all Indian exports.

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????Whether it is President Trump or President Harris, US-India relations must continue on an upward arc

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