UPSC Key: Fire Safety in India, Daraxonrasib and Mountbatten Plan

WHO says Ebola response catching up as confirmed Congo cases hit 344

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies II: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

What’s the ongoing story: Authorities in the Central African country of the Democratic Republic of Congo (DRC) are scrambling to control a spiralling Ebola outbreak that is suspected to have infected more than 1,000 people so far and killed at least 246.

Key Points to Ponder:

• Map Work-Democratic Republic of the Congo, Ituri and North Kivu in DRC, Rwanda, Uganda

• What mineral is the Democratic Republic of the Congo famous for?

• Cobalt in Democratic Republic of the Congo-know in brief

• What is the Bundibugyo strain?

• Why did WHO issue a global alert?

• How dangerous is Ebola?

• What is being done now?

• Is this a pandemic like Covid-19?

• What is Public Health Emergency of International Concern?

• Why WHO declares any outbreak a Public Health Emergency of International Concern?

• How is globalization affecting rates of disease?

• World Health Organization (WHO)-Know in detail

• What are the contributions of WHO?

• How do armed conflicts complicate disease-control efforts during public health emergencies?

Key Takeaways:

• Neighbouring Uganda, meanwhile, has reported nine confirmed cases and one death. The World Health Organization (WHO), in mid-May, declared this outbreak a public health emergency of international concern and experts have raised concerns over the speed of its spread.

• One of the factors behind this rapid transmission is the strain of Ebola that has caused this outbreak. The Bundibugyo virus, named after a district in Uganda where it was first detected in 2007, has no vaccine and reportedly kills about a third of those infected.

• But there’s another key factor. Health officials are battling the outbreak in one of the world’s most conflict-ridden regions, where years of conflicts between armed groups have weakened healthcare systems and thus hampered response efforts.

• Central and Western African nations have seen repeated outbreaks of Ebola, which spreads through infected bodily fluids, since it was first identified in 1976. The largest ever outbreak of the disease was in 2014-16, when 28,600 people in West Africa were infected, and over 11,000 were killed.

• The current outbreak has sparked serious concerns. “Never before has an Ebola outbreak recorded so many cases so soon after its declaration,” said Médecins Sans Frontières deputy director Dr Alan Gonzales according to a BBC report. Health experts also say international aid cuts last year by the US and other rich nations were devastating for eastern Congo. Health and aid workers are also facing anger from local communities owing to scepticism as well as the strict protocols around the burial of suspected victims.

Do You Know:

• The DRC outbreak is unfolding in the provinces of Ituri and North Kivu, regions long scarred by armed violence and humanitarian crises. Over a hundred armed groups operate across these eastern provinces. To understand armed violence in the DRC, one must go back to a tragedy that took place in DRC’s eastern neighbour: Rwanda.

—The Rwandan Genocide of 1994 saw ethnic Hutu extremists killing an estimated one million minority ethnic Tutsis and moderate Hutus.

Following the Tutsi takeover, two million Hutu refugees crossed the border into DRC, mostly settling in camps in the North Kivu and South Kivu provinces.

—Following the Tutsi takeover, two million Hutu refugees crossed the border into DRC, mostly settling in camps in the North Kivu and South Kivu provinces. According to the US-based think tank Council on Foreign Relations, some of these Rwandans who entered DRC were Hutu extremists who formed militias and started targeting Tutsi locals in the country. Tutsi militias, too, organised against the Hutu groups.

—Today, the Hutu armed group FDLR and Tutsi-led groups like the M23 are still fighting with each other, aside from several other militant groups and the army.

These armed groups have been able to sustain themselves by taking control of the mineral-rich land of eastern Congo where cobalt, coltan and copper, all used in electronic devices, can be found.

—While the Congolese government still largely controls the north-eastern Ituri province, that control is tenuous, the Associated Press reported. The Allied Democratic Forces, a Ugandan Islamist group linked to IS, is also one of the dominant rebel groups there and responsible for violent attacks against civilian targets. Ghebreyesus has called for a ceasefire, stating: “No cause, no conflict, no grievance is worth condemning innocent people to death from a preventable disease.”

• Since 2019, the UN has reported around 300 attacks on healthcare personnel, resulting in six deaths and 70 injuries among workers and patients. In 2023 alone, 115 cases of obstruction or violence against healthcare facilities were reported in the DRC, with 41 doctors being kidnapped and health supplies being looted at least 34 times. In other attacks, vital medicines, equipment and solar panels were looted from health centres and pharmacies.

Other Important Articles Covering the same topic:

📍More than 750 suspected Ebola cases in DRC, health worker says no isolation beds available

Previous year UPSC Prelims Question Covering similar theme:

1) Consider the following statements: (UPSC CSE, 2025)

I. No virus can survive in ocean water.

II. No virus can infect bacteria.

III. No virus can change the cellular transcriptional activity in host cells.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All the three

(d) None

Previous year UPSC Main Question Covering similar theme:

📍The coronavirus disease (COVID-19) pandemic has quickly spread to various countries. As on May 8th, 2020, in India 56342 positive cases of corona had been reported. India with a population of more than 1.35 billion had difficulty in controlling the transmission of coronavirus among its population. Multiple strategies became necessary to handle this outbreak. The Ministry of Health and Family Welfare of India raised wareness about this outbreak and to take all necessary actions to control the spread of COVID-19. Indian Government implemented a 55-day lockdown throughout the country to reduce the transmission of the virus. Schools and colleges had shifted to alternative mode of teaching-learning-evaluation and certification. Online mode became popular during these days. India was not prepared for a sudden onslaught of such a crisis due to limited infrastructure in terms of human resource, money and other facilities needed for taking care of this situation. This disease did not spare anybody irrespective of caste, creed, religion on the one hand and ‘have and have not’ on the other. Deficiencies in hospital

beds, oxygen cylinders, ambulances, hospital staff and crematorium were the most crucial aspects. You are a hospital administrator in a public hospital at the time when coronavirus had attacked large number of people and patients were pouring into hospital day in and day out. (UPSC, GS IV, 2021)

(a) What are your criteria and justification for putting your clinical and non-clinical staff to attend to the patients

knowing fully well that it is highly infectious disease and resources and infrastructure are limited?

(b) If yours is a private hospital, whether your justification and decision would remain same as that of a public hospital?

FRONT PAGE

21 killed in hotel blaze, 12 foreign nationals; building had 26 rooms but permit only for 6

Syllabus:

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies III: Disaster and disaster management

What’s the ongoing story: Twenty-one people, including 12 foreign nationals, were killed in a fire that destroyed a ground-plus-five-storey building operating as a bed and breakfast (B&B) establishment in Malviya Nagar in South Delhi on Wednesday morning.

Key Points to Ponder:

• Delhi Malviya Nagar Fire Tragedy-Know the Story so far

• Delhi Malviya Nagar Fire Tragedy– Know the Causes of Fire Accidents in India

• Facts and Data’s given on Fire Safety in India by Ministry of Home Affairs, National Crime Records Bureau (NCRB) and India Risk Surveys-Know the facts

• Fire Services is a State subject or Concurrent Subject or Union Subject?

• What is the key to fire safety?

• National Building Code (NBC) of India, 2016 and Fire and Life Safety-Know the provisions

• Ministry of Urban Development, Model Building by Laws 2016 and Fire Safety-Connect the dot

• What National Disaster Management Authority (NDMA) says on Fire and Fire Safety?

• Supreme Court of India’s Guidelines on Fire Safety-Know in Detail

• Why are fire accidents emerging as a major urban governance challenge in India?

Key Takeaways:

• Police said the foreign nationals belonged to Liberia, Nigeria, and Mozambique in Africa, and Bangladesh. Most of them were medical tourists who had come to India for treatment, or were accompanying patients.

• The hotel, called Flourish Stays B&B, is located in a narrow lane in Hauz Rani, diagonally across the street from Max Hospital in Saket. Senior police officers said there were 26 rooms in the establishment, more than four times the maximum permissible number of six. Most or all rooms in the building are believed to have been occupied at the time of the fire. The building had only one entry and exit. It allegedly did not have a No-Objection Certificate from the Fire Department.

• The tragedy, among the biggest fire disasters of the past few decades in Delhi, came four days after a building undergoing illegal additions collapsed in Saidulajab, another urban village a couple of kilometres away, killing six people, including five young medical and engineering graduates.

• Wednesday’s death toll is the highest in a fire in Delhi since the May 2022 fire in Mundka in west Delhi in which 27 people were killed. Before that, 43 people were killed in the Anaj Mandi fire of 2019, and 59 had perished in the Uphaar cinema tragedy of 1997.

Do You Know:

• According to a recent working paper by the PM-EAC, India’s “hidden urbanisation” phenomenon has meant that far more Indians live in urban clusters than most estimates suggest; going by the satellite data from the Global Human Settlements Layer, India was already 63 per cent urban in 2015.

• According to global standards, India would need about one firefighter for every 1,000 people to ensure adequate coverage. Given India’s population of 1.4 billion, this translates to approximately 1.8 million firefighters. However, the current number of firefighters in India is only around 3,00,000, meaning we are falling short by about 1.5 million firefighters — a staggering gap. On average, each state is short by 14,382 firefighters, and states like Uttar Pradesh, Bihar, and Maharashtra are facing the worst deficits.

• In addition to firefighters, a set of sophisticated fire-fighting equipment is essential to minimise large-scale loss of life and property. Fire trucks and equipment are the tools firefighters need to do their jobs, but even here, the numbers are shockingly inadequate. Uttar Pradesh needs 4,155 more fire trucks, making it the worst-hit state once again. Bihar (2,775 trucks short) and Maharashtra (2,640 trucks short) also face massive shortages. On average, each state is short by 707 fire trucks, indicating that, even when firefighters are available, they often lack the vehicles and tools needed to respond swiftly.

• A fire station is the central hub for firefighters — a trained force is stationed on high alert to respond fast in case a fire breaks out. But India doesn’t have enough of these either. Maharashtra is missing 917 fire stations, the highest in the country, followed by states like Rajasthan (748) and Bihar (543), which also face significant gaps. On average, every state is short by 144 fire stations.

Other Important Articles Covering the same topic:

📍Capital tragedy, national shame

📍In India, fire safety remains elusive. Why – and how to fix this?

📍South Delhi blaze: Why residential areas in India’s cities are so vulnerable to fire

Previous year UPSC Main Question Covering similar theme:

📍Discuss the recent measures initiated in disaster management by the Government of India departing from the earlier reactive approach. (UPSC, GS3, 2020)

Amid trade talks, US proposes fresh tariffs of 12.5% on India

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: The Trump administration Wednesday proposed 12.5% tariffs on India and 53 other countries, including China, the UK and Japan, after a United States Trade Representative (USTR) trade investigation under Section 301 of the US Trade Act of 1974 declared that these countries have failed to impose a legal prohibition on “importation of goods produced wholly or in part with forced labour”.

Key Points to Ponder:

• What is a United States Trade Representative?

• What are tariffs?

• What are the objectives and implications of tariffs in international trade?

• What is Section 301 of the of the U.S. Trade Act of 1974 ?

• What is the difference between Section 301 and 232 tariffs?

• India–US economic and trade relations-know in detail

• Know the significance of the United States as a trade and investment partner for India.

• What are the key areas of convergence and divergence in India–US trade negotiations?

• How could tariff barriers affect India’s manufacturing ambitions and export competitiveness?

Key Takeaways:

• The proposed tariffs, which can come into effect by July, have been announced while US and Indian negotiators are in the midst of talks in New Delhi to finalise a bilateral trade agreement.

• The USTR has proposed a lower rate of 10% on six countries — Pakistan, Canada, Ecuador, the European Union, Indonesia and Mexico — stating that they have demonstrated a commitment to addressing forced labour imports and have committed to imposing and enforcing a forced labour import prohibition through a formal Agreement on Reciprocal Trade (ART) with the US.

• The new set of Section 301 tariffs assumes significance as it could serve as the legal basis for the trade deals which were signed by the Trump administration. All the trade deals signed by the administration lost its legal standing after its reciprocal tariffs were declared invalid by the US Supreme Court in February.

• While India has agreed to an agreement, a formal signing is due. The ongoing four-day talks are expected to iron out pending issues. The Commerce and Industry Ministry, meanwhile, said that India remains engaged with the US on the matter as a part of Section 301 proceedings. India is also simultaneously engaged with the US for finalisation of a framework agreement, as was announced on February 2, 2026 and in accordance with the joint statement released on February 7, 2026.

Do You Know:

• The announcement of Section 301 tariffs on India and 59 other countries has yet again turned the India-US trade deal negotiations into a familiar carrot-and-stick game for the Indian trade negotiators, as concessions offered by the Indian side would now determine the level of tariffs that the US would impose next month.

—The US has launched two Section 301 investigations against India: one for not restricting imports of products produced through forced labour, and the second on excess capacity. Excess capacity refers to a situation when a business produces less than its maximum possible output, that is, the gap between a company’s total supply (at peak efficiency) and the actual amount it currently produces and sells.

—While 12.5% tariffs have already been announced, the current tariff level could go up when the probe on excess capacity is released.

• The Switzerland-based think-tank Global Trade Alert (GTA), in a report last year, pointed out that the US has incorporated restrictive third-country provisions — informally referred to as “poison pills” — in three trade instruments: the 2018 US-Mexico-Canada Agreement (USMCA), the 2025 US-Malaysia Agreement on Reciprocal Trade (ART), and the 2025 US-Cambodia ART.

• For India, however, any such provision could become challenging for its industrial growth and infrastructure development. For instance, due to tensions with China, India was unable to procure tunnel boring machines from China owing to a lack of customs clearances.

The machines finally managed to reach India last month after tensions with China eased.

Other Important Articles Covering the same topic:

📍India’s approach to US trade deal needs an urgent rethink

📍Why fresh US tariffs turn talks into carrot-&-stick game for India

Previous year UPSC Main 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, GS2, 2019)

EXPLAINED

How new pancreatic cancer pill doubles survival rate?

Syllabus:

Preliminary Examination: Current events of national and international importance.

Main Examination: General Studies II: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

What’s the ongoing story: A new experimental pill is offering hope for patients of pancreatic cancer, one of the deadliest and hardest-to-treat forms of the disease.

Key Points to Ponder:

• What Is Pancreatic Cancer?

• What is the new drug for pancreatic cancer?

• What does Daraxonrasib do?

• What does KRAS mean in cancer?

• What role does the KRAS gene play in pancreatic cancer?

• Why has pancreatic cancer remained so difficult to treat compared with some other cancers?

• What makes daraxonrasib different from existing treatments?

• The drug appeared to cause fewer severe side-effects than chemotherapy. What kinds of side-effects did patients experience?

Key Takeaways:

• Results from a large international trial presented at the American Society of Clinical Oncology (ASCO) annual meeting showed that daraxonrasib, a once-daily oral drug, nearly doubled survival time in patients with advanced pancreatic cancer whose disease had progressed despite earlier treatment.

• “For years, the average (median) survival for patients with advanced pancreatic cancers has hovered around one year. It was six months in the late 1990s and just about 9-12 months three decades later. Improvements in survival have been minimally incremental despite active research over the last two decades,” says Professor Anant Ramaswamy, specialist in GI cancers and Geriatric Oncology, Tata Memorial Centre, Mumbai.

• “In such a scenario, the impact of an oral pill improving or rather, doubling survival in pre-treated patients with pancreatic cancer is great news. Also, this is just the beginning for this new class of drugs. Patients and oncologists can expect more improvements in the times to come,” he told The Indian Express.

Do You Know:

• The drug works by targeting KRAS, a cancer-driving gene mutation found in the vast majority of pancreatic tumours and one that researchers have spent decades trying to effectively shut down. The findings have generated excitement among oncologists because progress in treating pancreatic cancer has historically been slow.

• RAS is a protein that is ubiquitously expressed in almost all cell types in the human body. It is encoded for by a gene called RAS gene. Mutations (damaging alterations in the gene which cause cancer) in the RAS gene family (of which KRAS is the most common) affect approximately 20% of all cancers. Approximately 80% of pancreatic cancers have alterations in the KRAS gene, which has made it a major area of research in pancreatic cancers.

• Basically, when the KRAS gene is mutated, it becomes continually active or ‘ON’ mode by binding to some small molecules in the cells and then ensures that there is disruption of activity in normal cells. That’s how these cells become dysregulated and cancerous. Daraxonrasib inhibits this state from inside the cell and suppresses pathways that are involved in perpetuating cancer cell growth. It is the first drug of its class that has shown such successful results, though many drugs with similar activity are in the pipeline and should emerge in a few years.

Other Important Articles Covering the same topic:

📍Why pancreatic cancer goes unnoticed: Here’s how you can control risk factors

Previous year UPSC Prelims Question Covering similar theme:

2) ‘RNA interference (RNAi)’ technology has gained popularity in the last few years. Why? (UPSC CSE, 2019)

1. It is used in developing gene silencing therapies.

2. It can be used in developing therapies for the treatment of cancer.

3. It can be used to develop hormone replacement therapies.

4. It can be used to produce crop plants that are resistant to viral pathogens.

Select the correct answer using the code given below.

(a) 1, 2 and 4

(b) 2 and 3

(c) 1 and 3

(d) All of the above

3) What is Cas9 protein that is often mentioned in news? (UPSC CSE, 2019)

(a) A molecular scissors used in targeted gene editing

(b) A biosensor used in the accurate detection of pathogens in patients

(c) A gene that makes plants pest-resistant

(d) A herbicidal substance synthesized in genetically modified crops

Mountbatten Plan at 79: How it redrew the subcontinent

Syllabus:

Preliminary Examination: History of India and Indian National Movement.

Main Examination: General Studies I: Modern Indian history from about the middle of the eighteenth century until the present- significant events, personalities, issues.

What’s the ongoing story: Seventy-nine years ago, people from all walks of life gathered in streets, public parks, and marketplaces to listen to a historic broadcast scheduled for 7 pm. Shops installed loudspeakers so that passers-by could hear the announcement.

Key Points to Ponder:

• What you know about Mountbatten Plan?

• What factors led to the announcement of the June 3 Plan of 1947?

• What were the major features of the Mountbatten Plan?

• Why did the British government abandon earlier constitutional arrangements and opt for Partition in 1947?

• How communal politics shaped the events leading to the June 3 Plan?

• What made Indian National Congress to accept the June 3 Plan?

• Know the implications of the June 3 Plan for India’s constitutional development.

• How did the June 3 Plan reshape the political geography of the Indian subcontinent?

Key Takeaways:

• When Lord Mountbatten arrived in Delhi on March 22, 1947, to assume office as Viceroy, he carried a clear mandate from British Prime Minister Clement Attlee: power was to be transferred to Indian hands no later than June 30, 1948. He entered a country already gripped by escalating communal violence. The Calcutta killings of August 1946 had been followed by riots in Noakhali and Bihar, while tensions had spread to Bombay and other parts of the country. Punjab was also descending into conflict, with major outbreaks of violence in Amritsar, Taxila, and Rawalpindi.

• Mountbatten quickly concluded that the idea of Pakistan had become unavoidable. Following consultations in India and a visit to London in mid-May, he returned to unveil the Partition Plan on the evening of June 3, 1947.

Do You Know:

• At its core, the plan accepted the division of British India. It proposed that the Legislative Assemblies of Punjab and Bengal would vote on whether their provinces should be partitioned; Sindh’s Assembly would decide whether to join India or Pakistan; and referendums would be held in the North-West Frontier Province (NWFP) and the Sylhet district to determine their future. If partition occurred, a Boundary Commission would demarcate the borders, particularly in Punjab and Bengal.

• The plan also provided for the creation of two independent dominions, India and Pakistan, each with its Constituent Assembly. Princely states were required to accede to one of the two dominions, and the transfer of power was advanced to August 15, 1947.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: From Plassey to Emergency: 5 key June events in Indian history

Previous year UPSC Prelims Question Covering similar theme:

4) The ‘Swadeshi’ and ‘Boycott’ were adopted as methods of struggle for the first time during the (UPSC CSE, 2016)

(a) Agitation against the Partition of Bengal

(b) Home Rule Movement

(c) Non-Cooperation Movement

(d) Visit of the Simon Commission to India

Previous year UPSC Main Question Covering similar theme:

📍Trace India’s consolidation process during early phase of independence in terms of polity, economy, education and international relations. (UPSC GS1, 2025)

📍Distinguish between religiousness/religiosity and communalism giving one example of how the former has got transformed into the latter in independent India. (UPSC GS1, 2017)

ECONOMY

Centre clears Rs 10,000 cr to keep ATF prices stable

Syllabus:

Preliminary Examination: Current events of national and international importance.

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

What’s the ongoing story: Amid elevated prices of aviation turbine fuel (ATF), or jet fuel, in the international market, the Union Cabinet on Wednesday approved a one-time budgetary support of Rs 10,000 crore to public sector oil marketing companies (OMCs) for them to provide stable fuel pricing for scheduled Indian airlines for their domestic as well as international flight operations.

Key Points to Ponder:

• What is ATF in aviation?

• What is the ATF pricing mechanism in India?

• Know the role of global geopolitical developments in shaping domestic aviation economics.

• What kind of impact will ATF prices have on the cost of operations?

• What will be the immediate impact on customers?

• What will be the impact on the aviation industry?

• What is Sustainable Aviation Fuel (SAF)?

• How cost asymmetry between domestic and international operations affects airline network sustainability?

Key Takeaways:

• The government expects this arrangement, which will be in place for three years, to ease the pain for the OMCs as well as Indian airlines in the prevailing environment of extreme fuel price volatility. It also expects the move to rein in runaway airfares due to fuel price pressure.

• According to the government, this price stabilisation fund mechanism will provide greater predictability in fuel costs by adopting a fixed-price arrangement, thereby reducing the airlines’ exposure to sudden fuel price spikes. The facility will only be available to Indian airlines, and not to foreign carriers. It will be implemented through an agreement between the airlines and the OMCs, under which the carriers will have to procure ATF exclusively from the OMCs for up to three years, “subject to annual review or until the advance amount is fully recovered, whichever is earlier”.

• The strain forced Air India to substantially curtail its international flight operations for the June-August period. The airline has also reduced domestic flights due to the impact of high international fuel prices on its overall operations. Indian airlines had made repeated pleas to the government to stabilize jet fuel prices, while also seeking parity between fuel prices for domestic and international flights.

• The implementation will be overseen by a monitoring committee of the Ministry of Civil Aviation (MoCA), Ministry of Petroleum & Natural Gas (MoPNG), and the Department of Expenditure. This committee will also oversee claim verification, reconciliation, and settlement, and all claims and recoveries shall be subject to audit.

Do You Know:

• According to PIB, the Government has notified an amendment to the Aviation Turbine Fuel (ATF) (Regulation of Marketing) Order, 2001 (ATF Control Order) vide notification dated 17 April 2026. The amendment has been issued as an administrative measure to bring Aviation Turbine Fuel blended with Sustainable Aviation Fuel (SAF) under the ambit of the ATF Control Order.

• SAF consists of specially processed aviation grade hydrocarbons, that are chemically similar to ATF and fully compatible with aircraft engines. SAF does not alter the fundamental nature, safety, or performance of aviation fuel. Inclusion of SAF for aviation use undergoes International Civil Aviation Organization (ICAO) recognised rigorous testing process for aviation engines as per ASTM International and only after such extensive procedure, SAF is accepted for use in aviation.

• As recognised by ICAO, SAF is a renewable fuel derived from alternative feedstocks such as crops, biogenic residues, and waste materials, offering significant reductions in GHG emissions.

Other Important Articles Covering the same topic:

📍‘On the verge of closing down’: What airlines want govt to do about fuel prices

Rate hike to forex deposits: What does ‘undervalued’ rupee really need

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: The Reserve Bank of India’s Monetary Policy Committee began its three-day meeting on Wednesday. And while the committee is widely expected to retain the policy repo rate at 5.25%, a small but vocal segment is predicting an interest rate hike on Friday due to the tremendous pressure the rupee has been under and to ‘pre-emptively’ stamp out upside risks to inflation.

Key Points to Ponder:

• What are the instruments of monetary policy?

• Will RBI change repo rate in the upcoming policy?

• Will there be a change in monetary policy stance?

• Will RBI revise inflation and GDP projections?

• What happens to lending rates if repo rate is left steady?

• What happens when repo rate is increased?

• Repo rate is the rate at which central bank of a country (in our case Reserve Bank of India) lends money to whom?

• In reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from whom?

• If Repo Rate is increased or say decreased then it impacts common people?

• Who decides the repo rate and reverse repo rate?

• How repo rate and reverse repo rate are decided?

• What is the difference between repo rate and interest rate?

• What Marginal Standing Facility?

• What is Monetary policy?

• What is the primary objective of the monetary policy?

• There are two aspects to any monetary policy-What are they?

• The Monetary Policy Committee (MPC) is a Statutory Body-True or False?

• Under Section 45ZB of the amended (in 2016) RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee (MPC)- What is the Monetary Policy Committee (MPC)?

• What is the composition of Monetary Policy Committee (MPC)?

Key Takeaways:

• After a prolonged period of stability, the exchange rate has over the last one year become the primary topic of discussion, with the RBI employing various instruments to stem its fall: foreign currency sales in spot and forward markets, swap windows and auctions, tightening norms to stop speculative bets, and reportedly even selling gold to save on foreign exchange reserves (something the central bank has denied).

• Back in 2013, the RBI had raised interest rates to defend the rupee. But that did not work. What did work was quickly raising Foreign Currency Non-Resident (Bank) Deposits. Of course, such a scheme, wherein banks get a subsidy of sorts from the RBI on the interest they pay on these deposits, would be far more expensive now as global interest rates are much higher than they were in 2013. Moreover, as Nomura economists point out, “if large rate hikes are used to defend FX, then weaker growth prospects will trigger more capital outflows.”

• Another option is a subsidised window to encourage public sector enterprises to borrow more from abroad. Whatever route the authorities choose, the amount that needs to be raised is substantially more than the $26 billion mobilised in 2013 through the FCNR(B) scheme.

• Having fallen by more than 10% against the US dollar over the last year, the RBI thinks the rupee is now undervalued, with Governor Sanjay Malhotra saying as much in an interview last week, pointing at the currency’s Real Effective Exchange Rate, which fell to 90.96 in April – the lowest since September 2013.

• The REER measures the rupee’s value against a basket of 40 currencies, affording weights to each depending on India’s non-service trade in that currency. Depending on whether it’s below or above 100, the REER shows if a currency is under or overvalued. This means a REER of 90.96 indicates the rupee is roughly 9% undervalued against these 40 currencies.

Do You Know:

• Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee (MPC) to determine the policy interest rate required to achieve the inflation target. The first such MPC was constituted on September 29, 2016.

• Section 45ZB lays down that “the Monetary Policy Committee shall determine the Policy Rate required to achieve the inflation target”, and that “the decision of the Monetary Policy Committee shall be binding on the Bank”.

• In May 2016, the RBI Act was amended to provide a legislative mandate to the central bank to operate the country’s monetary policy framework. The framework, according to the Reserve Bank of India website, “aims at setting the policy (repo) rate based on an assessment of the current and evolving macroeconomic situation; and modulation of liquidity conditions to anchor money market rates at or around the repo rate.”

• The MPC fixes the benchmark interest rate — or the base or reference rate that is used to set other interest rates — in India. The primary objective of the RBI’s monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.

Other Important Articles Covering the same topic:

📍Monetary Policy: Why RBI will keep rates steady & revise inflation and growth forecasts

Previous year UPSC Prelims Question Covering similar theme:

5) If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (UPSC CSE, 2020)

1. Cut and optimize the Statutory Liquidity Ratio

2. Increase the Marginal Standing Facility Rate

3. Cut the Bank Rate and Repo Rate

Select the correct answer using the code given below:

(a) 1 and 2 only

(b) 2 only

(c) 1 and 3 only

(d) 1, 2 and 3

Previous year UPSC Main Question Covering similar theme:

📍What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation. (UPSC GS3, 2024)

PRELIMS ANSWER KEY

1.(d)  2.(a)  3.(a)  4.(a) 5.(b)

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