23rd August 2025 – Current Affairs

1. RBI Warns Against Raising the 4% Inflation Target – Economy

Why in News?

The Reserve Bank of India (RBI) has released a discussion paper on the Monetary Policy Framework, cautioning that any increase in India’s current inflation target (4%) may:

• Undermine the credibility of monetary policy
• Threaten macroeconomic stability
• Send negative signals to investors and global markets

The RBI has invited public feedback on whether inflation targeting should continue to focus on headline CPI or shift to core inflation.

Key Takeaways

1. What is Inflation Targeting?

• Inflation targeting is a central bank strategy where a specific inflation rate is set as the goal for monetary policy.
• In India:
  • Introduced in 2016
  • Target: 4% Consumer Price Index (CPI) inflation
  • Tolerance band: +/- 2% → Acceptable range: 2%–6%
  • Current framework valid till March 2026

2. RBI’s Stand: Why Not Raise the Target?

• Raising the target may:
  • Be seen as a policy compromise
  • Trigger expectations of higher inflation, weakening currency and investor sentiment
  • Undo hard-won gains of the last decade in containing inflation volatility
• Lowering the target is also not advisable as:
  • It may conflict with India’s structural inflation pressures (e.g., food prices, fuel costs)

Credibility is central to inflation targeting — if people believe the RBI is soft on inflation, it reduces the framework’s effectiveness.

3. Headline vs. Core Inflation Debate

RBI argues that in an economy like India’s, food and fuel prices significantly impact households, so targeting headline inflation ensures broader price stability.

4. Why the Discussion Now?

• Global uncertainties (e.g., geopolitical tensions, commodity price shocks)
• Suggestions by some economists to increase tolerance to support growth
• Rising debates on whether strict inflation targeting limits fiscal and economic flexibility

5. Historical Context

• Since 2016, India’s adoption of Flexible Inflation Targeting (FIT) has:
  • Stabilized inflation expectations
  • Reduced monetary policy shocks
  • Boosted investor confidence
• This credibility could be undermined if the target is arbitrarily adjusted

Significance of Maintaining the Target

Way Forward

• Maintain 4% CPI target with 2–6% band
• Focus on transparent communication of monetary policy goals
• Consider food and energy volatility in designing responsive tools
• Use forward guidance and data-driven approaches to manage inflation shocks

Exam Connect – Possible Questions

Prelims

1. India adopted the flexible inflation targeting framework in:
   A. 2012
   B. 2014
   C. 2016
   D. 2018
   Answer: C. 2016
   

2. Which of the following best describes core inflation?
   A. Inflation rate excluding food and fuel prices
   B. Inflation measured by WPI
   C. Inflation in rural India
   D. Headline inflation for urban areas
   Answer: A. Inflation rate excluding food and fuel prices
   

3. What is the current inflation target set under India’s Monetary Policy Framework?
   A. 6% ± 2%
   B. 4% ± 1%
   C. 4% ± 2%
   D. 3% ± 1%
   Answer: C. 4% ± 2%

Mains

1. “Credibility is the cornerstone of any inflation targeting framework.” In light of RBI’s recent discussion paper, evaluate the implications of changing India’s inflation target.
2. Compare and contrast headline inflation and core inflation. Should India shift its inflation targeting framework from headline to core inflation?
3. Discuss the role of flexible inflation targeting in maintaining macroeconomic stability in India. What challenges does the RBI face in the current global context?

2. Simplified Two-Rate GST Structure Proposed – Economy

Why in News?

The Group of Ministers (GoM) on Rate Rationalisation has approved a proposal from the Centre to simplify the Goods and Services Tax (GST) into a two-rate structure. The recommendation will be tabled at the GST Council for final approval.

The new structure is expected to be implemented by October 2025, aligning with the Diwali festive season, a high-consumption period.

Key Takeaways

1. What is GST?

• Introduced on July 1, 2017, GST is a comprehensive, multi-stage, destination-based tax.
• It replaced a complex web of indirect taxes (excise, VAT, service tax, etc.).
• Objectives:
  • “One Nation, One Tax”
  • Eliminate cascading tax effects
  • Widen the tax base
  • Improve ease of doing business

2. Current GST Structure

3. What’s Changing? — Proposed Two-Rate Model

Only two effective slabs (5% and 18%) will remain for most goods and services, streamlining the structure.

4. Exemptions & Exclusions

• Items like petroleum products, alcohol, and electricity remain outside the GST regime, under state taxation.
• Essential goods like unbranded food grains, education, and health services remain under the 0% slab.

Why Reform the GST Structure?

A simpler GST regime could boost tax compliance, reduce revenue leakages, and attract more MSMEs into the formal economy.

Implementation Timeline

• Targeted for October 2025
• Strategic timing around Diwali — a major economic and retail season

Broader Economic Implications

For Consumers:

• Possible price reduction for many items currently taxed at 12% and 28%
• Demerit goods (e.g., tobacco, luxury cars) will get costlier

For Businesses:

• Lower compliance burden
• More predictable tax rates
• Encourages formalization of smaller enterprises

For Government:

• Potential short-term revenue impact
• Long-term benefits from higher compliance, wider base, and better enforcement

Exam Connect – Possible Questions

Prelims

1. Which of the following items currently falls outside the purview of the GST regime?
   A. Packaged food
   B. Petroleum products
   C. Mobile phones
   D. Footwear
   Answer: B. Petroleum products
   

2. The proposed simplified GST structure aims to retain how many core tax slabs?
   A. 1
   B. 2
   C. 3
   D. 4
   Answer: B. 2
   

3. Which of the following is a key objective of introducing GST in India?
   A. Promote imports
   B. Increase direct tax collection
   C. Ensure “One Nation, One Tax”
   D. Abolish income tax
   Answer: C. Ensure “One Nation, One Tax”

Mains

1. “GST reform is a continuous process.” In light of the proposed two-rate GST structure, discuss how rationalizing tax slabs can enhance tax compliance and ease of doing business in India.
2. Examine the benefits and challenges of removing the 12% and 28% GST slabs in favour of a simplified tax regime. What could be the implications for consumers, producers, and the government?
3. The Goods and Services Tax (GST) was envisioned as a transformative tax reform in India. Evaluate its performance so far and suggest key reforms needed to improve its efficiency and equity.
   

3. NTCA Restricts Tiger Corridors to Minimal Pathways, Easing Project Clearances – Environment

Why in News?

The National Tiger Conservation Authority (NTCA) has revised its definition of tiger corridors, limiting them to just 32 designated “least cost pathways”. This policy shift, while streamlining infrastructure project clearances, has triggered concerns among conservationists regarding tiger movement, habitat connectivity, and long-term ecological stability.

The issue is currently under judicial scrutiny by the Bombay High Court, indicating legal pushback and uncertainty around implementation.

Key Takeaways

1. What Are Tiger Corridors?

• Natural linear habitats connecting tiger reserves, national parks, and other protected areas.
• Allow safe movement of tigers and other wildlife across fragmented landscapes.
• Vital for:
  • Maintaining genetic diversity
  • Avoiding inbreeding
  • Reducing human-wildlife conflict
  • Sustaining healthy prey-predator dynamics

A fragmented landscape without corridors leads to isolated tiger populations, increasing the risk of local extinction.

2. NTCA’s New Policy (2025)

3. Rationale Behind the Change

• Ease of project clearances for infrastructure, mining, and development activities
• Provides certainty for developers and the Standing Committee of NBWL
• Aims to avoid project delays due to corridor-related objections

It aligns with the government’s infrastructure push, but at the cost of ecological flexibility.

4. Legal & Policy Context

• Wildlife (Protection) Act, 1972:
  • Requires SC-NBWL clearance for projects within or near protected areas and wildlife corridors.
• NTCA Guidelines:
  • Mandate landscape-level planning to ensure free tiger movement.

Any weakening in the legal definition of corridors could undermine judicial oversight and conservation enforcement.

5. Conservation Concerns

6. Judicial Oversight

• The Bombay High Court is hearing a petition against NTCA’s redefinition.
• Experts argue that scientific assessments, wildlife telemetry, and ground reports must guide policy, not administrative convenience.

Balancing Development and Conservation

To ensure sustainable development, NTCA and MoEFCC must:

• Adopt a dynamic corridor mapping approach
• Integrate real-time data from conservation biology and wildlife movement studies
• Enable inter-agency coordination between forest, road, and urban planning departments
• Expand community-based conservation in buffer zones

Significance for India’s Wildlife Policy

• India hosts ~70% of the world’s wild tigers.
• Tiger corridors are not just about tigers; they preserve entire ecosystems and biodiversity hotspots.
• Aligning development with Project Tiger and Wildlife Action Plans is essential for long-term conservation.

Exam Connect – Possible Questions

Prelims

1. Which of the following statements regarding tiger corridors is correct?
   A. They are artificial enclosures that restrict tiger movement
   B. They are legal terms mentioned under the Indian Forest Act
   C. They connect fragmented habitats and enable safe wildlife movement
   D. They are defined only for national parks
   Answer: C. They connect fragmented habitats and enable safe wildlife movement
   

2. The National Tiger Conservation Authority (NTCA) operates under which Ministry?
   A. Ministry of Environment, Forest and Climate Change (MoEFCC)
   B. Ministry of Tribal Affairs
   C. Ministry of Agriculture
   D. Ministry of Home Affairs
   Answer: A. Ministry of Environment, Forest and Climate Change (MoEFCC)
   

3. Which legal body must approve projects near designated wildlife corridors in India?
   A. Central Pollution Control Board
   B. Standing Committee of National Board for Wildlife
   C. State Biodiversity Board
   D. National Green Tribunal
   Answer: B. Standing Committee of National Board for Wildlife

Mains

1. “Tiger corridors are essential for ensuring the long-term survival of tiger populations in India.” Critically examine the recent NTCA decision to limit corridor identification and its ecological implications.
2. In the context of balancing development and environmental protection, evaluate the role of wildlife corridors in India’s conservation strategy.
3. Discuss the significance of a dynamic, science-based approach to wildlife corridor identification. How can India better integrate ecological data into its policy decisions?
   

4. Lipulekh Pass and India-Nepal Border Dispute – Geography

Why in News?

India has rejected Nepal’s renewed territorial claims over the Lipulekh Pass, amid recent developments where India and China resumed border trade through this high-altitude Himalayan gateway.

The move has geopolitical and geographic significance, reviving historical tensions and emphasizing Lipulekh’s strategic role in trade and pilgrimage.

Key Takeaways

1. Where is Lipulekh Pass?

• Location: In the Kumaon region of Pithoragarh district, Uttarakhand (India)
• Near the trijunction of:
  • India
  • Nepal (Darchula district)
  • China/Tibet Autonomous Region
• Altitude: Approx. 5,334 meters (17,500 feet)

It connects India with Tibet (China) via Tibet Autonomous Region (TAR).

2. Geographical and Strategic Importance

3. Trade History

• Lipulekh was the first Indian post opened for trade with China (1992)
• Other trade passes include:
  • Shipki La (Himachal Pradesh) – opened in 1994
  • Nathu La (Sikkim) – reopened in 2006

These routes are critical for cross-border exchange of goods like wool, salt, herbs, and consumer items.

4. Religious and Cultural Significance

• Part of the route for the Kailash Mansarovar Yatra — a sacred journey for Hindus to Mount Kailash and Lake Mansarovar in Tibet.
• Attracts pilgrims and spiritual tourists, making it both a religious and economic asset.

5. India-Nepal Dispute Over Lipulekh

• Nepal claims Lipulekh, Kalapani, and Limpiyadhura as part of its Darchula district.
• India maintains the area is part of its Pithoragarh district, Uttarakhand.
• Tensions escalated in 2020 after India inaugurated a road to Lipulekh for Kailash Mansarovar pilgrims.

The dispute revolves around historical maps, treaties (Sugauli Treaty 1815-16), and differing interpretations of the Kalapani River’s source.

Map-Based Clarity

Understanding river origins and historical cartography is key to decoding the boundary dispute.

Exam Connect – Possible Questions

Prelims

1. Lipulekh Pass connects India to which of the following regions?
   A. Afghanistan
   B. Myanmar
   C. Tibet
   D. Bhutan
   Answer: C. Tibet
   

2. Which of the following is NOT among the passes used for border trade between India and China?
   A. Lipulekh
   B. Shipki La
   C. Nathu La
   D. Rohtang La
   Answer: D. Rohtang La
   

3. The dispute over Lipulekh Pass involves which three countries?
   A. India, Nepal, Pakistan
   B. India, China, Bhutan
   C. India, Nepal, China
   D. India, Bangladesh, China
   Answer: C. India, Nepal, China

Mains

1. “Strategic mountain passes in the Himalayas are crucial not only for defense but also for diplomacy and development.” Discuss the geographical and geopolitical relevance of Lipulekh Pass.
2. Examine the historical and cartographic roots of the India-Nepal border dispute over the Kalapani-Lipulekh region. How can geography help resolve such conflicts?
3. Highlight the economic and religious significance of Himalayan passes such as Lipulekh. In what ways do such passes influence regional cooperation and tension?
   

5. Overhauling India’s Vocational Education and Training (VET) System – A Pathway to Viksit Bharat – Economy

Why in News?

In his Independence Day address (August 15, 2025), the Prime Minister emphasized the need to:

• Foster demand-driven growth
• Recalibrate policies like GST
• Enhance productivity through education and skill development

Despite India’s demographic edge, the country suffers from a low-skilled workforce, making vocational education and training (VET) a critical lever for economic transformation and Viksit Bharat 2047.

Key Takeaways

1. State of Vocational Education in India

Despite infrastructure, India’s VET system lags in effectiveness, enrolment, and employment outcomes.

2. Key Challenges in India’s VET System

3. International Best Practices

4. Recent Indian Government Schemes (Limited Impact)

These initiatives are piecemeal and lack integration with long-term career planning or formal employment.

Reforms Needed for a Robust VET System

1. Early Integration:
   • Implement NEP 2020 recommendations to start VET from school level (Classes 6–12)
   • Encourage blended vocational-academic education
2. Academic Mobility:
   • Accelerate the National Credit Framework to allow credit transfers between VET and higher education
   • Promote multi-exit, multi-entry pathways
3. Curriculum Modernization:
   • Align training to local industry and emerging sector needs (AI, EVs, green jobs)
   • Regular review of NSQF-aligned curriculum with industry input
4. Strengthening PPPs:
   • Involve Private Training Partners (PTPs)
   • Offer CSR incentives for MSMEs to support apprenticeships
5. Increase Funding:
   • Target at least 10% of education budget towards VET
   • Ensure faculty training and infrastructure upgradation via NSTIs

Why VET is Critical for Viksit Bharat 2047

Exam Connect – Possible Questions

Prelims

1. What percentage of India’s workforce is formally skilled, as per recent estimates?
   A. 4%
   B. 14%
   C. 24%
   D. 40%
   Answer: A. 4%
   

2. Which policy recommends early integration of vocational education into the school curriculum?
   A. National Policy on Skill Development 2015
   B. NEP 2020
   C. Digital India Mission
   D. Skill India Mission
   Answer: B. NEP 2020
   

3. The ‘dual system’ of vocational training—combining classroom learning with paid apprenticeship—is followed in which country?
   A. Japan
   B. Germany
   C. Brazil
   D. Indonesia
   Answer: B. Germany

Mains

1. “India’s demographic dividend will turn into a liability unless its workforce is equipped with industry-relevant skills.” In light of this, critically examine the challenges and reforms needed in India’s Vocational Education and Training system.
2. Compare India’s VET system with that of Germany and Singapore. What lessons can India draw to enhance employability and productivity?
3. Discuss the role of public-private partnerships (PPPs) in transforming India’s vocational education landscape. Suggest mechanisms to improve industry participation in skill development.
   

6. Exercise Samanvay Shakti 2025: Strengthening Civil-Military Synergy – Defence & Security

Why in News?

The Indian Army, in collaboration with state authorities, has launched Exercise Samanvay Shakti 2025 in Laipuli, Tinsukia district of Assam. This joint initiative focuses on enhancing military-civil integration, especially in the strategically sensitive Northeastern region.

The exercise is seen as a multi-agency effort to bolster regional preparedness, coordination, and national integration, particularly in Assam and Manipur.

Key Takeaways

1. What is Exercise Samanvay Shakti?

• A joint civil-military exercise initiated in 2025.
• Held in Upper Assam, a region with complex ethnic, security, and disaster-related challenges.
• Emphasizes collaboration, coordination, and communication among multiple stakeholders.

2. Key Participants

The exercise creates a practical rehearsal platform for real-world emergencies, including natural disasters, insurgencies, and infrastructure disruptions.

3. Objectives of the Exercise

• Strengthen civil-military communication protocols
• Enhance operational readiness across institutions
• Promote inter-agency trust and information sharing
• Prepare for complex contingencies in Northeast India
• Build community confidence in state and defence institutions
• Support national integration and internal security strategy

4. Strategic Importance of the Region

• Assam and Manipur lie near the India-China-Myanmar trijunction, making them geopolitically sensitive.
• The region faces challenges like:
  • Ethnic tensions
  • Insurgency movements
  • Cross-border infiltration
  • Natural disasters (floods, landslides)

Strengthening coordination here is vital for counter-insurgency, disaster response, and border management.

5. Significance for National Security

• Builds a comprehensive security architecture based on cooperation, not isolation.
• Prepares institutions for multi-dimensional threats (hybrid warfare, natural disasters, sabotage).
• Aligns with India’s internal security doctrine focusing on whole-of-government approach.

Broader Implications

Exam Connect – Possible Questions

Prelims

1. Exercise Samanvay Shakti 2025 was launched to improve coordination among:
   A. Defence and external affairs ministries
   B. Military, civil authorities, and industrial stakeholders
   C. India and ASEAN nations
   D. Indian Navy and coastal police
   Answer: B. Military, civil authorities, and industrial stakeholders
   

2. Laipuli, where Exercise Samanvay Shakti 2025 was held, is located in which state?
   A. Arunachal Pradesh
   B. Manipur
   C. Assam
   D. Sikkim
   Answer: C. Assam
   

3. Which of the following agencies is NOT typically involved in a civil-military integrated exercise like Samanvay Shakti?
   A. Indian Army
   B. NDRF
   C. RBI
   D. State police forces
   Answer: C. RBI

Mains

1. “Integrated civil-military exercises are essential for India’s internal security and disaster response framework.” Critically analyse the significance of initiatives like Exercise Samanvay Shakti.
2. Examine the importance of inter-agency coordination in managing complex regional security challenges in Northeast India.
3. Discuss the role of exercises like Samanvay Shakti in enhancing national preparedness against hybrid threats, particularly in strategic border regions.