The Hindu Daily Current Affairs – 24 October 2026
Saturday, 24 October 2026
The Hindu – Important News Articles & Editorial
Today’s edition covers the MEA’s admission of fresh friction on the LAC, the redesign of the Periodic Labour Force Survey to count gig and unpaid work, India’s diplomatic reset with Azerbaijan, India’s “legitimacy deficit” critique of the UN Security Council and the latest FDI trends from the RBI Bulletin, along with a static topic on Inflation.
LAC ‘Disturbed’ by PLA’s Behaviour, Admits MEA
The Ministry of External Affairs (MEA) has officially acknowledged that the Line of Actual Control (LAC) has been “disturbed” by the patrolling behaviour of China’s People’s Liberation Army (PLA). The statement followed a report in The Hindu quoting outgoing ITBP Director-General Shatrujeet Kapur on continuing face-offs in Arunachal Pradesh since July. It is the first official admission that, two years after the Modi–Xi détente of October 2024, the border remains tense – raising questions about border management, transparency and the pace of India–China normalisation.
Key Facts
- MEA spokesperson Randhir Jaiswal said the situation “gets disturbed from time to time” when Chinese forces depart from established patrolling patterns – placing the responsibility on the PLA.
- Both sides continue to use existing diplomatic and military mechanisms to avoid misunderstanding and miscalculation, and are in touch on improving their understanding of the LAC for better border management.
- Specific operational queries were referred to the Ministry of Defence.
- Government position since 2020: peace and tranquillity in border areas is essential for overall bilateral relations.
- The video of Mr. Kapur’s speech at Alwar was deleted from ITBP’s official YouTube channel, even though the MEA confirmed the situation.
- Opposition criticism:
- Mallikarjun Kharge asked whether patrolling access had been compromised and whether the pre-May 2020 status quo was restored, and said the PM’s June 2020 “no one entered” remark emboldened China.
- Pawan Khera accused the government of suppressing information, while praising ITBP’s Shaurya Commandos.
- Jairam Ramesh cited a record trade deficit with China of $112 billion in 2025-26 (up from $99 billion) and criticised the easing of curbs on Chinese investment.
Static Dimensions
- LAC: the undefined, de facto boundary between India and China (about 3,488 km), with differing perceptions on both sides. It is distinct from the Line of Control (LoC) with Pakistan.
- Agreements: 1993 and 1996 border agreements (no use of force, confidence-building measures), 2005 Political Parameters and Guiding Principles, 2013 Border Defence Cooperation Agreement (BDCA), and the October 2024 patrolling arrangement (Depsang and Demchok).
- Mechanisms: Working Mechanism for Consultation and Coordination (WMCC), Special Representatives (SR) talks, Corps Commander talks and Border Personnel Meetings.
- Related events: Galwan clash (June 2020); earlier confrontation at Asaphila/Taksing in Upper Subansiri (Arunachal Pradesh).
- Concepts: status quo ante, patrolling points, buffer zones, disengagement (pulling back from face-off points) versus de-escalation (reducing the troop build-up in depth), and information transparency in national security.
- Policy links: easing of Press Note 3 (2020) in 2026, and concerns over the record trade deficit with China.
The Three Sectors of the LAC
| Sector | Length (approx.) | State / UT | Key features |
|---|---|---|---|
| Western | 1,597 km | Ladakh | Aksai Chin dispute; friction points at Galwan, Depsang, Pangong Tso and Demchok |
| Middle | 545 km | Himachal Pradesh, Uttarakhand | Least contested sector; Shipki La (HP) and Lipulekh (Uttarakhand) trade passes; Barahoti dispute |
| Eastern | 1,346 km | Sikkim, Arunachal Pradesh | McMahon Line (1914 Simla Convention); China claims Arunachal Pradesh; Tawang, Yangtse and Asaphila face-offs |
Analysis
- Official acknowledgement: the MEA’s wording shifts the narrative from normalisation to managed tension, and places responsibility on the PLA.
- Transparency question: deleting the video while confirming the situation sends mixed signals and fuels the Opposition’s charge of suppression.
- Mechanisms at work: the emphasis on existing diplomatic and military channels shows India still prefers dialogue and risk reduction.
- Understanding of the LAC: talk of clarifying the LAC hints at renewed interest in narrowing perception gaps – a long-stalled idea.
- Economic–security link: the Opposition ties border tension to the widening trade deficit and eased investment curbs, reviving the debate on engagement without a border settlement.
- Political contest: the issue is becoming a domestic political matter, while the government prefers a measured tone to protect diplomatic space.
Challenges
- An undefined LAC and repeated patrolling friction.
- Prolonged high-altitude stand-offs with a risk of escalation.
- Limited public information on ground realities.
- Trade dependence on China despite security concerns.
- Balancing deterrence with normalisation.
Way Forward
- Continue WMCC, SR and military talks for disengagement and de-escalation in the Eastern sector.
- Exchange maps or clarify the LAC through confidence-building measures.
- Provide timely, official briefings through the MoD and MEA to maintain public trust.
- Strengthen border infrastructure, surveillance and force modernisation (drones, counter-drone systems).
- Link economic openness to progress on border peace and reduce critical dependence on China.
India Implications
- Security: a fragile LAC means continued heavy deployment in the Eastern sector, raising defence costs and limiting a full return to normal ties.
- Economy: easing Press Note 3 and a record trade deficit sit uneasily with border friction – the “economics first” model of engagement remains contested.
- Governance: consistent official communication from the MEA and MoD is needed to counter speculation and misinformation on border incidents.
Himachal Pradesh shares about 240 km of border with Tibet (China) in Kinnaur and Lahaul-Spiti, in the LAC’s Middle sector, guarded by the ITBP. Friction elsewhere on the LAC shapes security planning in these districts, the development of HP’s border villages under the Vibrant Villages Programme, and the prospects of reviving India–China border trade through Shipki La in Kinnaur.
ConclusionThe MEA’s admission shows that normalisation with China is incomplete and the LAC remains fragile. India must combine military readiness, dialogue and greater transparency, so that border stability underpins any wider economic and diplomatic engagement.
Prelims Practice
Q. The Indo-Tibetan Border Police (ITBP) primarily performs which of the following functions?
- (a)Conducting India’s foreign trade negotiations
- (b)Guarding India’s border with China and supporting border security operations
- (c)Managing India’s maritime boundaries in the Indian Ocean
- (d)Regulating international civil aviation
Click to reveal answer
Answer: (b)
Raised in 1962 after the India–China war, the ITBP is a Central Armed Police Force under the Ministry of Home Affairs that guards the 3,488 km India–China border from the Karakoram Pass in Ladakh to Jachep La in Arunachal Pradesh.
Q. Explain the significance of the Line of Actual Control (LAC) in India–China relations. How can differing perceptions of the LAC contribute to recurring border confrontations?
(10 Marks, 150 Words)
Govt. to Revise Labour Survey to Track Gig, Household Work
The Union government will redesign the Periodic Labour Force Survey (PLFS) from January 2027 so that it can track digital platform (gig) workers and measure unpaid household, caregiving, volunteer and trainee work. The National Sample Survey Office (NSSO) under the Ministry of Statistics and Programme Implementation (MoSPI) has issued a concept note and invited public comments for 15 days. The aim is labour statistics that reflect new forms of work and women’s hidden economic contribution.
Key Facts
- Changes proposed from January 2027, with a revised survey schedule.
- A separate Second Stage Stratum (SSS) will identify households with at least one digital platform worker. A new questionnaire entry will ask whether any member did platform work in the reference period.
- Sample design: four SSSs in rural areas and five in urban areas, with 14 households canvassed in each First Stage Unit (FSU).
- New questions will capture unpaid household and caregiving work (cooking, cleaning, childcare, elder and sick care), own-use production of goods, volunteer work and unpaid trainee work – none of which PLFS has measured separately so far.
- Additional questions will measure labour underutilisation.
- Criteria for sample allocation and stratification are updated to improve efficiency and representation.
- Comments are invited from policymakers, researchers, institutions and the public within 15 days.
PLFS: Current Design vs Proposed Design (from January 2027)
| Aspect | Current PLFS | Revised PLFS |
|---|---|---|
| Gig / platform workers | Not identified separately | Separate SSS for households with at least one platform worker, plus a direct question on platform work |
| Unpaid household & care work | Not measured separately (captured only in the occasional Time Use Survey) | Dedicated questions on cooking, cleaning, childcare, elder and sick care |
| Own-use production, volunteer & trainee work | Not captured separately | Captured as distinct forms of work |
| Labour underutilisation | Mainly the unemployment rate | Additional measures of underutilisation |
| Sample stratification | Existing allocation criteria | Four rural and five urban SSSs; 14 households per FSU; updated allocation criteria |
Key Labour Indicators Produced by PLFS
| Indicator | What it measures | Formula |
|---|---|---|
| Labour Force Participation Rate (LFPR) | Share of the population that is working or seeking work | (Employed + Unemployed) ÷ Population × 100 |
| Worker Population Ratio (WPR) | Share of the population that is employed | Employed ÷ Population × 100 |
| Unemployment Rate (UR) | Share of the labour force without work | Unemployed ÷ Labour force × 100 |
Static Dimensions
- PLFS: launched in 2017 by the National Statistics Office (MoSPI). It gives LFPR, WPR and the unemployment rate, with an annual (rural and urban) and quarterly (urban) design, using the Usual Status and Current Weekly Status approaches.
- Gig and platform workers: the Code on Social Security, 2020 defines gig and platform workers and provides for social security schemes funded partly by aggregator contributions (1–2% of annual turnover, capped at 5% of payments to workers). Rajasthan, Karnataka and other States have passed their own gig worker laws. NITI Aayog estimated about 1 crore gig workers in 2024-25, rising to 2.35 crore by 2029-30.
- e-Shram portal: a database of unorganised workers, now registering platform workers; PM-JAY health cover was extended to gig workers in Budget 2025.
- Time Use Survey (2019, NSO): earlier measured unpaid domestic work and found women spend far more time than men on unpaid care.
- International standards: the 19th International Conference of Labour Statisticians (ICLS, 2013) redefined “work” as production for pay or profit, treating unpaid household and care activities and volunteer work as separate categories. Labour underutilisation includes unemployment, time-related underemployment and the potential labour force.
- Related concepts: unpaid care economy, feminisation of labour, the SNA production boundary, and SDG 5.4 (recognise and value unpaid care and domestic work).
Analysis
- Measuring a new economy: platform work is growing but stays hard to see in standard surveys; a dedicated stratum improves coverage and supports evidence-based social security design.
- Visibility of women’s work: separating unpaid care work shows its scale and its link to low female labour force participation.
- A fuller underutilisation picture: headline unemployment can hide people who want more work or have given up looking; extra measures fill that gap.
- Policy use: the data will guide gig worker schemes, care infrastructure and employment policy, and allow comparison with international standards.
- Process: public consultation is welcome, though 15 days is short for technical feedback.
- Limits: a household survey may still undercount informal and multiple-job platform work, and unpaid work will be measured but not valued in GDP.
Challenges
- Defining and identifying platform workers who hold fluctuating or multiple platform jobs.
- Respondent recall and under-reporting of unpaid work.
- Comparability of the new series with earlier PLFS data.
- A longer questionnaire, higher respondent burden and survey cost.
- Keeping gig worker definitions consistent across the Code on Social Security, State laws and the survey.
Way Forward
- Use the data to roll out social security for gig workers and link it with e-Shram.
- Conduct regular time-use surveys alongside PLFS.
- Explore valuing unpaid care work through satellite accounts and in policy design.
- Invest in care services (creches, elder care) to raise women’s workforce participation.
- Ensure clear definitions, field training and transparent release of the methodology and a back-series.
- Extend the consultation period and engage platform firms, worker unions and researchers.
India Implications
- Social security: reliable counts of platform workers are the base for schemes under the Code on Social Security and for targeting through e-Shram.
- Gender policy: recognising unpaid care work can reshape gender budgeting and public spending on care infrastructure.
- Employment policy: underutilisation measures give a truer picture of job quality than the unemployment rate alone.
Himachal Pradesh has one of the highest female labour force participation rates in India, much of it as unpaid helpers in family farming, orchards and livestock rearing. Separate measurement of unpaid and own-use work will show the real economic weight of hill women’s labour. The new design will also capture the State’s growing platform workforce – cab and food-delivery workers in tourism towns such as Shimla, Manali and Dharamshala.
ConclusionRevising the PLFS to capture gig work, unpaid care and labour underutilisation modernises India’s labour statistics. Better data can inform fairer social protection and recognise the economic value of women’s unpaid work, provided definitions and comparability are handled carefully.
Prelims Practice
Q. The Worker Population Ratio (WPR) is best described as:
- (a)The proportion of the population that is employed
- (b)The proportion of unemployed persons in the total labour force
- (c)The proportion of the population enrolled in skill-development programmes
- (d)The proportion of workers employed exclusively in the organised sector
Click to reveal answer
Answer: (a)
WPR = employed persons ÷ total population × 100. Option (b) describes the Unemployment Rate.
Q. Examine the challenges in identifying and measuring gig and digital platform workers in India. How can improved labour statistics support their social security?
(10 Marks, 150 Words)
Jaishankar Visits Azerbaijan to Ease Strain in Ties over Operation Sindoor
External Affairs Minister S. Jaishankar met Azerbaijani President Ilham Aliyev and Foreign Minister Jeyhun Bayramov in Baku, saying the visit charted a “pathway” for future ties. Relations had soured after Azerbaijan condemned Operation Sindoor – India’s May 2025 strikes on terror targets in Pakistan. It is the first bilateral visit by an Indian External Affairs Minister in eight years and is being seen as a diplomatic reset.
Key Facts
- Jaishankar and Bayramov agreed to deepen political consultations, exchange visits, enhance economic activity, build connectivity and foster people-to-people ties.
- Areas named: political dialogue, trade and investment, energy, tourism and cultural ties.
- Jaishankar called terrorism, conflict and instability “common enemies” and extended India’s support to the Azerbaijan–Armenia peace process.
- Bayramov acknowledged “different viewpoints on different issues” in the past and downplayed differences, including on Kashmir.
- On 7 May 2025, Azerbaijan’s Foreign Ministry condemned the Indian strikes on Pakistan; Azerbaijan has also often called internationally for a “resolution” of Kashmir.
- The last EAM visit was by Sushma Swaraj in April 2018 (NAM Ministerial in Baku).
- Official sources say India hopes to exert pressure on Türkiye and Pakistan by drawing Azerbaijan closer.
Static Dimensions
- Azerbaijan: a South Caucasus country on the Caspian Sea, rich in oil and gas, with Baku as its capital. Neighbours: Russia, Iran, Armenia, Georgia and Türkiye (via the Nakhchivan exclave).
- Connectivity: a key node of the International North–South Transport Corridor (INSTC) linking India, Iran, Azerbaijan and Russia, and of the Middle Corridor.
- Alignments: Azerbaijan, Türkiye and Pakistan have close ties, and Azerbaijan backs Pakistan on Kashmir; India has defence and energy ties with Armenia.
- Nagorno-Karabakh: conflict between Azerbaijan and Armenia; Azerbaijan regained control in 2023, and peace efforts continue.
- Multilateral links: member of the Organisation of Islamic Cooperation (OIC), NAM (chaired 2019–2023) and CICA.
- Energy: ONGC Videsh holds a stake in the Azeri-Chirag-Guneshli (ACG) oil field.
- Related policy: India’s Connect Central Asia and “Think West” policies, and strategic autonomy.
India–Azerbaijan: Convergences and Divergences
| Area | Convergence | Divergence |
|---|---|---|
| Connectivity | Shared stake in the INSTC and Caspian trade routes | Slow INSTC operationalisation; Russia–Iran–Türkiye competition in the region |
| Energy | ONGC Videsh stake in the ACG field; Azerbaijani crude supplies | Low overall trade and investment volumes |
| Security | Both describe terrorism and instability as common threats | Azerbaijan condemned Operation Sindoor (May 2025) |
| Kashmir & Pakistan | Baku now downplays past differences | Support for Pakistan on Kashmir; Türkiye–Pakistan–Azerbaijan alignment; OIC solidarity |
| South Caucasus | India backs the Azerbaijan–Armenia peace process | India’s defence ties with Armenia |
Analysis
- Repairing damage: the visit shows India’s preference for engaging countries that opposed it over Operation Sindoor rather than isolating them.
- Strategic hedging: engaging Azerbaijan is meant to dilute the Türkiye–Pakistan–Azerbaijan axis.
- Connectivity logic: INSTC and energy interests give both sides reasons to cooperate despite differences on Kashmir.
- Balancing act: supporting the Azerbaijan–Armenia peace process lets India keep ties with both sides.
- Limits: Azerbaijan’s closeness to Pakistan and Türkiye and its stand on Kashmir are unlikely to change quickly; downplaying differences is not the same as resolving them.
Challenges
- Azerbaijan’s positions on Kashmir and OIC solidarity with Pakistan.
- Competing interests in the Caucasus involving Russia, Iran and Türkiye.
- Delays in INSTC operationalisation.
- Low trade and investment levels.
- Managing ties with Armenia alongside Azerbaijan.
Way Forward
- Hold regular political consultations and ministerial visits.
- Expand energy cooperation, trade, tourism and cultural exchange.
- Speed up INSTC and Middle Corridor connectivity.
- Use counter-terrorism dialogue to build shared positions.
- Continue balanced engagement with Armenia and neutral support for peace.
India Implications
- Connectivity: engagement keeps the INSTC’s Caspian link open, which is vital for trade with Russia and Central Asia.
- Diplomacy: weakening the Türkiye–Pakistan–Azerbaijan alignment helps India in multilateral forums such as the OIC and NAM, where Kashmir is raised.
- Energy security: Caspian hydrocarbons diversify India’s import basket.
Faster INSTC routes to Russia and Central Asia could help exporters from the Baddi–Barotiwala–Nalagarh pharmaceutical hub reach these markets at lower cost. The same corridors also carry cheaper fruit from the region – Iranian apples are already a concern for HP orchardists – so connectivity gains need to go with fair-trade safeguards for hill horticulture.
ConclusionThe visit signals a pragmatic recalibration after a year of strained ties. Sustaining it will depend on turning the stated “pathway” into concrete cooperation in energy, connectivity and trade, while managing differences on Pakistan and Kashmir.
Prelims Practice
Q. Which of the following countries are directly involved in the peace process mentioned by S. Jaishankar during his visit to Baku?
- (a)Azerbaijan and Armenia
- (b)Azerbaijan and Iran
- (c)Armenia and Georgia
- (d)Türkiye and Pakistan
Click to reveal answer
Answer: (a)
The peace process concerns the Azerbaijan–Armenia conflict over Nagorno-Karabakh, which Azerbaijan brought back under its control in 2023.
Q. Analyse the role of economic diplomacy in improving India’s relations with countries where political differences exist.
(10 Marks, 150 Words)
UN Security Council Faces a ‘Legitimacy Deficit’, Says India
India’s Permanent Representative to the UN, Parvathaneni Harish, told the UN General Assembly that authority derived from victory in the Second World War cannot make up for the “deficit in legitimacy” of an unrepresentative Security Council. He spoke during the debate on the “Question of Equitable Representation on and Increase in the Membership of the Security Council”. The message ties into India’s push for UNSC reform and its bid for a non-permanent seat for 2028-29.
Key Facts
- India said the UNSC struggles to deliver peace in some of the gravest conflicts, and its credibility is being questioned as conflicts multiply.
- Key line: “History can be a guide for what not to do. It cannot determine today’s choices.” An organisation that cannot renew its principal organ will find it harder to command authority in a world far beyond 1945.
- India criticised the neglect of sacrifices made by many nations in the world wars, and described the UN as built by and for the victors.
- The Asia-Pacific Group, with over 60% of the world’s population, has limited representation – an injustice that has continued too long, India said.
- India wants expansion in both permanent and non-permanent categories; expanding only non-permanent seats leaves the central imbalance untouched and entrenches the status quo.
- The UNSC has 15 members: five permanent veto-holders (China, France, Russia, UK, US) and ten elected for two-year terms.
Static Dimensions
- UN Charter: Chapter V (Articles 23–32) covers the Security Council. Article 23 names the P5; Article 27 provides the veto; Articles 108–109 govern Charter amendment (two-thirds of the General Assembly plus ratification by two-thirds of members, including all P5).
- Past reform: the Council was expanded only once, in 1965, from 11 to 15 members.
- Intergovernmental Negotiations (IGN): the UNGA process on UNSC reform since 2009, built around five clusters – categories of membership, the veto, regional representation, size and working methods, and Council–Assembly relations.
- Regional groups for elected seats: Africa, Asia-Pacific, Eastern Europe, Latin America and the Caribbean (GRULAC), and Western Europe and Others (WEOG).
- India’s record: eight non-permanent terms (latest 2021–22), large peacekeeping contributions, and the Voice of Global South approach.
- Related events: India’s candidature for 2028-29 (election in June 2027), with Tajikistan as a rival candidate.
UNSC Reform: Key Groupings and Their Positions
| Group | Members | Position |
|---|---|---|
| G4 | India, Brazil, Germany, Japan | Expansion in both categories; mutual support for permanent seats |
| Uniting for Consensus (“Coffee Club”) | Italy, Pakistan, Argentina and others | Opposes new permanent seats; favours more elected seats |
| African Union (Ezulwini Consensus) | 54 African states | Two permanent seats with veto and five non-permanent seats for Africa |
| L.69 | Developing countries from Asia, Africa, Latin America, the Caribbean and the Pacific (includes India) | Expansion in both categories with greater developing-country representation |
Analysis
- Legitimacy argument: India uses legitimacy, not power or contribution alone, to argue that a 1945 structure cannot represent today’s world – especially Africa, Asia and Latin America.
- Two-category expansion: opposing non-permanent-only reform shows India will not accept a compromise that blocks its path to a permanent seat.
- Global South framing: highlighting forgotten wartime sacrifices and under-representation appeals to developing countries whose votes matter for India’s 2027 election.
- Credibility of the UN: Council paralysis, often due to vetoes, in conflicts such as Ukraine and West Asia strengthens the case for reform.
- Structural obstacle: the P5 can block Charter amendments and rivals oppose new permanent seats, so progress remains slow.
- Consistency: India’s stand has been stable for years, but the IGN has still produced no negotiating text.
Challenges
- The P5 veto over any Charter change.
- Opposition from the Uniting for Consensus group.
- Disagreement among aspirants and groups on veto rights and regional seats.
- No time-bound negotiating text in the IGN.
- Geopolitical rivalry that blocks Council action.
Way Forward
- Move the IGN to text-based negotiations with a clear timeline.
- Build wider support among the African Union, L.69 and G4 for a common model.
- Consider interim or compromise options (such as long-term seats) while keeping the permanent-seat goal.
- Improve Council working methods: veto restraint, transparency and consultation with troop-contributing countries.
- Use India’s 2028-29 candidature and Global South leadership to sustain momentum.
India Implications
- Permanent-seat claim: India’s case rests on population, economic weight, peacekeeping and Global South leadership; a non-permanent-only reform would freeze it out of the top table.
- 2028-29 term: a non-permanent seat would give India a platform to shape the Council’s agenda on terrorism, peacekeeping and maritime security.
- Coalition-building: African and small-island votes will decide both the 2027 election and any reform outcome.
Himachal Pradesh contributes a share of Armed Forces personnel far larger than its population, and many Himachali soldiers serve in UN peacekeeping missions. India’s peacekeeping record – a central plank of its claim to a permanent seat – is built in part on the service of troops from the State.
ConclusionIndia’s argument is that legitimacy, not wartime history, must anchor the Council’s authority. Meaningful reform needs expansion in both categories and broader representation; otherwise the UN risks losing relevance in handling modern conflicts.
Prelims Practice
Q. The demand for equitable representation in the UN Security Council is primarily associated with which of the following concerns?
- (a)Unequal representation of countries and regions in global decision-making
- (b)Absence of all developing countries from the United Nations
- (c)Lack of a General Assembly in the UN system
- (d)Replacement of international law by domestic law
Click to reveal answer
Answer: (a)
The demand concerns the under-representation of regions such as Africa, Asia-Pacific and Latin America in a Council whose permanent membership reflects the world of 1945.
Q. What is meant by a “legitimacy deficit” in the context of the United Nations Security Council? Examine the factors contributing to this concern.
(10 Marks, 150 Words)
Net FDI at $3.3 bn in August, Stays Positive for Third Straight Month: RBI Bulletin
Net foreign direct investment (FDI) into India stayed positive for the third straight month in August 2026, at $3.3 billion, according to the RBI’s monthly Bulletin. Strong gross inflows and moderating outward FDI by Indian firms drove the improvement – a turnaround from five consecutive months of negative net FDI between August and December 2025.
Key Facts
- Net FDI (inflows minus outflows) was $3.3 billion, and has been positive in seven of the last eight months.
- Gross FDI inflows were $11.1 billion – 24% lower than July but about 68% higher than August 2025.
- Sources and sectors:
- The US, Singapore and Mauritius accounted for about 72% of inflows.
- Communication, miscellaneous services and manufacturing received over two-thirds of inflows.
- Total outflows were $7.7 billion (July: $7.2 billion; August 2025: $6.7 billion), driven mainly by repatriation by foreign firms in India rather than outward investment.
- Outward FDI by Indian firms was $1.9 billion – down over 43% from July and 11% from August 2025. More than half went to Singapore, the Netherlands and the US, mainly in agriculture and mining; financial, insurance and business services; and manufacturing.
- Repatriation and disinvestment rose to $5.8 billion (52% above July, 28% above August 2025).
- Over April–August, both gross and net FDI were higher than a year earlier.
FDI Snapshot – August 2026
| Indicator | August 2026 | vs July 2026 | vs August 2025 |
|---|---|---|---|
| Gross FDI inflows | $11.1 bn | 24% lower | About 68% higher |
| Repatriation / disinvestment | $5.8 bn | 52% higher | 28% higher |
| Outward FDI by Indian firms | $1.9 bn | Over 43% lower | 11% lower |
| Total outflows | $7.7 bn | Up from $7.2 bn | Up from $6.7 bn |
| Net FDI | $3.3 bn | Positive for the third straight month; positive in 7 of the last 8 months | |
Static Dimensions
- FDI: investment giving lasting interest and control (generally 10% or more of equity), unlike FPI (portfolio investment below 10%), which is more volatile.
- Gross vs net FDI: net FDI = gross inflows − repatriation/disinvestment − outward FDI by Indian entities.
- Routes: automatic route and government route, with sectoral caps under the FDI policy (DPIIT). FEMA, 1999 governs foreign exchange, and the RBI regulates reporting.
- Press Note 3 (2020): mandatory government approval for investment from countries sharing a land border with India; eased in 2026.
- Mauritius and Singapore: major conduits because of tax treaties (DTAA); the India–Mauritius treaty was amended in 2016.
- Related schemes: Make in India, PLI, Invest India, National Single Window System, and the India–EFTA TEPA investment pledge (USD 100 billion over 15 years).
- External sector links: balance of payments (capital account), forex reserves and rupee stability.
FDI vs FPI
| Feature | FDI | FPI |
|---|---|---|
| Equity threshold | 10% or more | Below 10% |
| Control | Lasting interest and management say | No control; financial investment only |
| Stability | Long-term, relatively stable | Short-term, volatile (“hot money”) |
| Economic benefits | Brings capital, technology, jobs and management skills | Adds liquidity and depth to capital markets |
Analysis
- Turnaround: rising gross inflows and slower outward FDI reflect renewed investor confidence and the growing appeal of Indian manufacturing and services.
- Repatriation effect: higher repatriation shows mature foreign firms booking profits or exiting, so net figures can lag gross strength.
- Rupee and reserves: steady net FDI is a stable source of capital at a time when high oil prices strain the current account.
- Concentration: heavy reliance on a few source countries and conduits raises questions about the real origin of capital (round-tripping).
- Quality of FDI: the share going to manufacturing is positive, but services dominate overall.
- Caution: monthly data are volatile – inflows fell 24% between July and August.
Challenges
- Volatile monthly flows and global uncertainty.
- High repatriation and disinvestment.
- Concerns over regulatory and policy predictability, taxation and litigation.
- Geopolitical risks and trade friction (US tariffs, West Asia conflict).
- Concentration in a few sectors and States.
Way Forward
- Maintain policy stability, simplify approvals and speed up FTAs and investment treaties.
- Promote manufacturing and export-oriented FDI through PLI, logistics and skilled labour.
- Spread investment to lagging States and sectors.
- Monitor round-tripping and improve data transparency.
- Encourage reinvestment of earnings and long-term capital.
India Implications
- External stability: positive net FDI supports the capital account, forex reserves and the rupee when oil prices pressure the current account.
- Industrial policy: sustaining the manufacturing share of inflows is key to the PLI and Make in India goals.
- Federal spread: FDI remains concentrated in a handful of States, widening regional gaps.
Himachal Pradesh attracts only a small share of national FDI. Its main draws are the Baddi–Barotiwala–Nalagarh pharma and industrial belt, the Bulk Drug Park at Una, hydropower and tourism. Spreading investment to States like HP needs faster single-window clearances, clarity on land access under Section 118 of the HP Tenancy and Land Reforms Act, 1972 (which restricts land transfer to non-agriculturists), and better logistics in hill terrain.
ConclusionPositive net FDI for three straight months shows improving investor sentiment and supports the external sector. Sustaining it requires policy predictability, a strong manufacturing base and close attention to repatriation trends.
Prelims Practice
Q. Net FDI is calculated as:
- (a)Gross FDI inflows minus FDI outflows
- (b)Gross FDI inflows plus foreign exchange reserves
- (c)Total exports minus total imports
- (d)Foreign remittances minus government expenditure
Click to reveal answer
Answer: (a)
Outflows include repatriation/disinvestment by foreign firms and outward FDI by Indian firms. For August 2026: $11.1 bn − $7.7 bn ≈ $3.3 bn (RBI figures are rounded). Option (c) defines the trade balance.
Q. “Foreign Direct Investment can support economic growth, but its benefits depend on the quality and sectoral distribution of investment.” Discuss.
(10 Marks, 150 Words)
Inflation – Meaning, Types, Measurement and Control
Inflation is a sustained rise in the general price level of goods and services over a period of time. Each unit of currency buys less, so purchasing power falls. It is usually measured as the annual percentage change in a price index such as the CPI or the GDP deflator, calculated from the average price rise of a fixed basket of goods and services. Deflation is the opposite: prices fall and purchasing power rises.
Types of Inflation – Based on Rate
| Type | Rate | Key point |
|---|---|---|
| Creeping (mild) | Below 3% a year | Manageable; can stimulate demand and investment |
| Walking (trotting) | 3–10% a year | Can cause overheating if unchecked |
| Galloping (running) | 10–50% a year | Disrupts stability and erodes purchasing power |
| Hyperinflation | Above 50% a month | Destroys the currency’s value (Weimar Germany, Zimbabwe) |
Types of Inflation – Based on Cause
- Demand-pull: demand grows faster than the economy’s productive capacity, usually because of excess money and credit.
- Cost-push: input costs rise (raw materials, labour, energy), often after a supply shock, and producers pass them on.
- Built-in: adaptive expectations – people assume current inflation will continue and demand higher wages and prices.
- Structural: rigid supply chains or monopolistic markets cause recurring price hikes in particular sectors.
- Protein inflation: price rises in protein-rich foods (pulses, eggs, meat) due to demand shifts or supply constraints.
Causes of Inflation
- Demand-pull factors: demand exceeds supply, often when cash or credit floods the economy.
- Cost-push factors: higher input and labour costs are passed on to consumers.
- Supply shocks: disasters, conflicts or pandemics cut supply (e.g., COVID-19 supply-chain disruptions).
- Increased money supply: too much money chasing too few goods.
- Wage-price spiral: workers demand higher wages, firms raise prices to cover them, and the cycle repeats.
- Inflation expectations: people buy early and demand more pay, reinforcing inflation; central banks try to keep expectations anchored.
- Fiscal policy: tax cuts or higher public spending raise demand, which is inflationary if the economy is already at full capacity.
Measurement of Inflation in India
| Index | What it tracks | Published by | Notes |
|---|---|---|---|
| WPI | Wholesale prices of goods (no services) | Office of the Economic Adviser, DPIIT | Base year revised from 2011-12 to 2022-23 (new series from June 2026) |
| CPI | Retail prices of goods and services | NSO, MoSPI | New series with base year 2024 from 2026, with updated rural and urban baskets |
| PPI | Producers’ input and output prices | Office of the Economic Adviser, DPIIT | Launched in 2026 alongside the new WPI; an early signal of cost pressures |
| GDP Deflator | Price changes across the whole economy | NSO, MoSPI (from national accounts) | No fixed basket; covers all goods and services produced in the economy |
GDP Deflator = (Nominal GDP ÷ Real GDP) × 100
In India, CPI and WPI are the two main indices. The RBI uses CPI (Combined) inflation as its key measure for setting policy rates.
Impacts of Inflation
- Lower purchasing power: the standard of living falls.
- Higher interest rates: central banks tighten policy, which slows borrowing, investment and growth.
- Income inequality: the poor suffer more because essentials take a bigger share of their income.
- Lower real returns: fixed-income assets lose value, which discourages saving.
- Weaker export competitiveness: higher domestic prices make exports costlier.
- Business difficulties: higher input and labour costs squeeze margins and complicate planning.
Inflation Control Measures
- Monetary policy: the Monetary Policy Committee (MPC) sets the benchmark policy (repo) rate, with an inflation target of 4% ± 2%. The RBI can also raise margins on loans against speculative or hoardable commodities and use Open Market Operations (selling government securities) to absorb liquidity.
- Fiscal measures: cut government spending or raise taxes.
- Supply-side policies: improve infrastructure, encourage innovation and remove regulatory barriers to lower production costs.
- Exchange rate policy: a stronger currency lowers import prices.
- Price controls and subsidies: temporary controls or subsidies on food and fuel stabilise prices in the short term.
- Targeted interventions: release buffer stocks or change import policy to ease sector-specific pressure, such as food inflation.
India Implications
- Monetary policy limits: food carries a large weight in CPI, so supply shocks to vegetables and pulses can push headline inflation beyond what the repo rate alone can control.
- Better measurement: the new CPI (base 2024), the rebased WPI (2022-23) and the new PPI give policymakers more current and more granular price signals.
Himachal Pradesh brings much of its foodgrain, pulses and fuel from the plains, so freight costs and monsoon landslides that close highways push up local prices – supply-side inflation that interest-rate changes cannot fix. At the same time, higher prices for apples and off-season vegetables raise farm incomes in the State, showing that inflation affects consumers and producers differently.
ConclusionInflation is a sustained rise in the general price level that reduces the purchasing power of money. It is classified by rate (creeping, walking, galloping, hyperinflation) and by cause (demand-pull, cost-push, built-in, structural, protein). In India it is measured mainly through CPI and WPI, with the RBI targeting CPI inflation at 4% (± 2%). Mild inflation can support growth, but high inflation hurts savings, widens inequality and weakens export competitiveness – so control needs monetary policy, fiscal discipline and supply-side measures working together.
Prelims Practice
Q. Consider the following statements:
- The RBI’s Monetary Policy Committee targets CPI (Combined) inflation at 4% with a tolerance band of ± 2%.
- The GDP deflator is calculated on the basis of a fixed basket of goods and services.
- Hyperinflation is commonly defined as a price rise of more than 50% a month.
Which of the statements given above are correct?
- (a)1 and 2 only
- (b)1 and 3 only
- (c)2 and 3 only
- (d)1, 2 and 3
Click to reveal answer
Answer: (b)
Statement 2 is incorrect: the GDP deflator has no fixed basket – it covers all goods and services produced in the economy, which is why it is the broadest measure of the price level.
Q. What are the causes of persistent high food inflation in India? Comment on the effectiveness of the RBI’s monetary policy in controlling this type of inflation. 2024
Q. Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. 2019
