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Critical Topics and Their Significance for the UPSC CSE Examination on June 04, 2025

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India’s new EV policy

For Preliminary Examination:  Current events of national and international significance

For Mains Examination: GS III - Science and Technology

Context:

Electric Vehicle (EV) major Tesla is not interested in manufacturing in India but is looking at opening two stores, Union Heavy Industries Minister H D Kumaraswamy said on Monday.

Read about:

EV's regenerative braking

India’s new EV policy

Key takeaways:

• When the Indian government unveiled its electric vehicle (EV) scheme in March 2024, just ahead of the Lok Sabha elections, expectations were high that Elon Musk would visit India and commit over $2 billion to set up a Tesla manufacturing facility. However, Musk canceled the trip, citing pressing responsibilities at Tesla. Interestingly, shortly after postponing his India visit, Musk traveled to China, which is Tesla’s second-largest market.

• In February, shortly after Prime Minister Narendra Modi’s meeting with Elon Musk in Washington, Tesla posted 13 job openings in India. These roles included positions such as store manager, service advisor, customer engagement manager, and business operations analyst.

• According to the Global Trade Research Initiative (GTRI), although the launch of the EV scheme’s guidelines is a positive development, the journey to market-ready EVs will take time. The application process is yet to begin and is expected shortly. GTRI notes that it could take at least another six months to finalize participating companies. Until then, approved manufacturers are permitted to import fully assembled EVs at a reduced customs duty of 15%.

• Companies like Mercedes-Benz, Hyundai, Kia, and Volkswagen-Škoda have already expressed interest in the scheme. However, Tesla may not be joining them. At a media interaction, Kumaraswamy noted that Tesla plans to open two showrooms in India but does not appear interested in local manufacturing.

• Former U.S. President Donald Trump criticized Tesla's potential expansion in India in February, calling it unfair to the United States. He remarked that while building a factory in India is permissible, it disadvantages American interests. Trump has echoed similar concerns about Apple’s growth in the Indian market.

• On Monday, India’s heavy industries ministry released detailed guidelines for the EV manufacturing scheme and will soon open the online application process. The scheme mandates a minimum investment of ₹4,150 crore from approved applicants, with specific targets for domestic value addition.

• In return, selected companies can annually import up to 8,000 completely built electric vehicles priced at $35,000 or more, benefiting from a reduced import duty of 15% for five years. The scheme is designed for global automotive manufacturers with annual revenues exceeding ₹10,000 crore and fixed assets worth at least ₹3,000 crore.

India’s New EV Policy

India has introduced a new EV manufacturing policy aimed at attracting global electric carmakers to set up local production facilities while offering short-term import benefits as an incentive.

What the Policy Offers

• Lower Import Duty: Approved manufacturers can import up to 8,000 fully built electric vehicles (CBUs) per year at a reduced 15% customs duty (normally it’s much higher), provided each car costs at least $35,000.

• 5-Year Benefit Window: This import benefit is available for five years, giving companies time to set up local operations

 Follow Up Question

1.With reference to ‘fuel cells’ in which hydrogen-rich fuel and oxygen are used to generate electricity, consider the following statements: (UPSC 2015)

Which of the statements given above is/are correct?

(a) 1 only       

(b) 2 and 3 only     

(c) 1 and 3 only         

(d) 1, 2 and 3

Tariffs

For Preliminary Examination: Current events of national and international significance

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

Context:

 The United States has rejected India’s notice at the World Trade Organization (WTO), which proposed retaliatory action against the 25 per cent US tariffs on steel and aluminium, arguing that the tariffs were imposed on national security grounds. The US also pointed out procedural errors in India’s case

Read about:

Why are tariffs imposed?

Tariffs, Non-Tariffs, dumping

Key takeaways:

India–US Trade Dispute: Tariffs and WTO Developments

• On May 9, India submitted a formal communication to the World Trade Organization (WTO), arguing that the United States' new metal tariffs, effective from March 12, should be categorized as “safeguard measures”. Under the WTO’s Agreement on Safeguards, such measures are allowed when a surge in imports risks causing serious harm to a domestic industry.

• India stated that the new tariffs affect $7.6 billion worth of Indian exports to the US, with about $1.91 billion in duties expected to be collected. In retaliation, India proposed levying an equivalent amount in duties on unspecified US-origin goods.

• In a reply dated May 23, the United States disputed India's classification of the tariffs as safeguard measures. The US maintained that the tariffs were enacted under Section 232, which permits restrictions based on national security concerns. The US also alleged that India failed to follow proper procedures for initiating consultations on the issue.

• Presently, India is subject to a 26% retaliatory tariff under the International Emergency Economic Powers Act (1977). Although the US suspended these tariffs on April 9, litigation over both this and the standard 10% import tariff continues in American courts. The White House defended its tariff policies by pointing out India’s own high import duties—70% on passenger vehicles, 10–20% on networking gear, and 50% on paddy rice.

• Furthermore, Indian exports face Section 232 duties of 25% on steel, aluminium, and automobiles—set to double to 50% starting June 4. The US has long been a top destination for Indian aluminium, with FY24 exports totaling $946 million, following over $1 billion in the previous two years—up sharply from $350 million in 2016–17, when Trump was elected. Similarly, the US was India’s largest buyer of iron and steel products, with $2.8 billion worth exported in FY24.

• In its May 23 note, the US again emphasized that India was misclassifying these tariffs as safeguards. It reiterated that Section 232 allows the US to impose duties on imports that may compromise national security.

• The issue gained attention after former President Donald Trump announced plans to double tariffs on steel imports to 50%, a move criticized by Indian exporters who said they had already lost $5 billion in revenue due to prior tariffs and feared further financial damage.

• Addressing the WTO’s Council for Trade in Goods, the US explicitly rejected India’s claim, saying it would not entertain discussions on Section 232 tariffs under the Safeguards Agreement, as it does not recognize these duties as safeguard measures.

• In FY25, Indian exports of iron, steel, and aluminium to the US totaled $4.56 billion, including $587.5 million in raw iron and steel, $3.1 billion in steel products, and $860 million in aluminium and related goods. These now face higher duties, raising concerns over export viability and profitability.

• The US also criticized India for procedural lapses, stating that India had not acknowledged a US offer to negotiate, sent on April 16, 2025, thus failing to meet the procedural requirements under the Safeguards Agreement—which, according to the US, does not apply to these tariffs.

• Commenting on the situation, Ajay Srivastava, former trade officer and founder of the Global Trade Research Initiative (GTRI), suggested India might consider initiating a WTO dispute, not through the Safeguards Agreement, but under the broader General Agreement on Tariffs and Trade (GATT) framework

Instruments of monetary policy

For Preliminary Examination: Current events of national and international significance

For Mains Examination: GS III - Economy

Context:

The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) is expected to cut the repo rate – the key policy rate – by 25 basis points (bps) in the policy meeting scheduled from June 4 to 6, to support growth as inflation continues to remain below the 4 per cent target

Read about:

What are the instruments of monetary policy?

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

Key takeaways:

Monetary Policy Overview and Tools

Monetary policy governs the availability and cost (interest rates) of money within the economy. The Reserve Bank of India (RBI), through its Monetary Policy Committee (MPC), meets bi-monthly to review economic conditions and adjust the repo rate — the rate at which it lends to commercial banks — to manage inflation and stabilize price levels.

According to the RBI, the following are the key instruments used to implement monetary policy:

• Repo Rate: This is the interest charged by the RBI when providing short-term liquidity to banks via the Liquidity Adjustment Facility (LAF), using approved securities as collateral.

• Standing Deposit Facility (SDF) Rate: Introduced in April 2022, this is the rate at which the RBI accepts overnight, uncollateralised deposits from banks. It acts as both a liquidity tool and a financial stability mechanism, placed 25 basis points below the repo rate, replacing the fixed reverse repo as the LAF floor.

• Marginal Standing Facility (MSF) Rate: This penal rate allows banks to borrow overnight from the RBI by tapping into their Statutory Liquidity Ratio (SLR) reserves within a capped limit (2%). It offers a buffer against unexpected liquidity crunches and is 25 basis points above the repo rate.

• Liquidity Adjustment Facility (LAF): A key monetary tool, LAF includes repo and reverse repo operations (both fixed and variable rate), SDF, and MSF. Additional instruments for liquidity management include open market operations (OMOs), forex swaps, and the Market Stabilisation Scheme (MSS).

• Reverse Repo Rate: This is the rate at which the RBI absorbs excess liquidity from banks using government securities. Since the SDF was introduced, the RBI now uses the fixed reverse repo selectively.

• Bank Rate: This is the rate at which the RBI buys or rediscounts commercial paper. It also serves as the penalty rate for banks failing to meet reserve requirements. The bank rate is aligned with the MSF and changes in tandem with the policy rate.

• Cash Reserve Ratio (CRR): A mandatory reserve that banks must maintain with the RBI as a percentage of their net demand and time liabilities (NDTL).

• Statutory Liquidity Ratio (SLR): Banks must maintain a specific portion of their liabilities in liquid assets (like cash, gold, or government securities), as notified by the RBI.

• Open Market Operations (OMOs): These involve direct buying or selling of government securities by the RBI to regulate long-term liquidity

 Follow Up Question

CHINA-PAKISTAN Economic Corridor (CPEC)

For Preliminary Examination:  Current events of national and international significance

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

Context:

THE CHINA-PAKISTAN Economic Corridor (CPEC) is set to be expanded to Afghanistan with the foreign ministers of the three countries agreeing on it as part of broader efforts to boost “trilateral” cooperation.

Read about:

China-Pakistan Economic Corridor (CPEC)

What is the Belt and Road Initiative?

Key takeaways:

— The China-Pakistan Economic Corridor (CPEC) forms a key component of China's broader Belt and Road Initiative (BRI).
— In 2023, China commemorated the tenth anniversary of its extensive global infrastructure strategy, the Belt and Road Initiative, originally proposed by President Xi Jinping.
— The concept of the Silk Road Economic "Belt" was introduced by President Xi during his 2013 visit to Kazakhstan. The goal was to rejuvenate historic trade and infrastructure networks connecting Asia and Europe, with a particular emphasis on routes passing through Central Asia.
— Later, Xi unveiled a complementary maritime initiative, termed the "Road," aimed at enhancing sea trade connectivity between China and regions such as Southeast Asia, Europe, and Africa. This segment has emphasized the construction of ports, bridges, industrial zones, and other infrastructure across Southeast Asia and the Indian Ocean.
— Initially known as the One Belt One Road (OBOR) initiative, the project has been more commonly referred to as the BRI since 2015.
— Since its inception, India has consistently expressed concerns over the BRI, primarily due to sovereignty issues stemming from CPEC's route through Pakistan-occupied Kashmir (PoK), as well as broader strategic concerns regarding China's activities in the Indian Ocean.
— A recent announcement on the expansion of CPEC followed a trilateral meeting in Beijing involving Chinese Foreign Minister Wang Yi, Pakistan’s Foreign Minister Ishaq Dar, and Afghanistan's Acting Foreign Minister Amir Khan Muttaqi, as per a Pakistani official statement.
— India has strongly objected to the CPEC, given its passage through PoK, and has extended this criticism to the BRI as a whole due to its inclusion of the corridor.
— The trilateral talks took place at the conclusion of Dar’s three-day trip to Beijing, marking the first high-level engagement since India launched Operation Sindoor on May 7 — a counter-terror strike in response to the deadly April 22 Pahalgam terror attack that claimed 26 lives

Follow Up Question

1.Belt and Road Initiative’ is sometimes mentioned in the news in the context of the affairs of (UPSC CSE 2016)

(a) African Union
(b) Brazil
(c) European Union
(d) China

Nuclear energy push

For Preliminary Examination: Current events of national and international significance regarding general science

For Mains Examination: GS III - Science and technology

Context:

IN WHAT could set the stage for an unprecedented opening up of the civil nuclear sector, the government is likely to move two crucial amendments in the laws governing the country’s atomic energy sector in the upcoming monsoon session of Parliament, according to sources aware of the developments.

Read about:

What is Nuclear Energy?

What are the types of nuclear reactors?

Key takeaways:

• India has long faced regulatory hurdles in acquiring the necessary ‘10CFR810’ authorization under the U.S. Atomic Energy Act of 1954, which governs nuclear exports. This regulation, while allowing American companies like Holtec to export nuclear equipment under stringent safeguards, strictly prohibits them from carrying out manufacturing or nuclear design work within India.
• From New Delhi’s perspective, this restriction posed a significant obstacle, as India was keen on jointly producing Small Modular Reactors (SMRs) and manufacturing nuclear components domestically to support its own energy infrastructure.
• In a major policy shift, the Union Budget for 2025–26 signaled a strong commitment to expanding India’s nuclear energy program as a cornerstone of its long-term clean energy strategy.
• The government has announced a bold target of reaching 100 GW of nuclear power capacity by 2047, aligning with the broader vision of Viksit Bharat (Developed India). This move aims to ensure energy security while cutting reliance on fossil fuels. To make this vision a reality, the government is focusing on indigenous nuclear technology, infrastructure upgrades, and increased collaboration with the private sector.
• As part of this renewed push, a new initiative titled the Nuclear Energy Mission for Viksit Bharat has been launched. This mission seeks to strengthen domestic capabilities in the nuclear sector, foster private participation, and speed up the adoption of advanced technologies like SMRs.
• To implement this mission, the government plans to amend key legislations, including the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. These changes are intended to attract private investment in nuclear energy by removing legal uncertainties.
• One proposed amendment aims to limit the liability of equipment suppliers in the event of a nuclear accident, potentially capping it at the original contract value and introducing a timeframe for claims.
• Another proposed reform would allow private firms, including foreign players with minority stakes, to operate nuclear power plants in India—an area traditionally reserved for state-owned entities like NPCIL and NTPC.
• India’s atomic energy sector has long remained closed to private and foreign investment. These twin amendments are being seen as a significant reform effort, potentially revitalizing the commercial potential of the Indo-U.S. civil nuclear agreement signed nearly two decades ago.
• New Delhi also sees these developments as an opportunity to integrate nuclear cooperation into a broader trade and investment partnership with the United States, which could eventually lead to a comprehensive trade deal currently under discussion.
• The proposed legislative changes aim to resolve lingering legal concerns that have deterred foreign companies from entering India’s nuclear sector.
• The Civil Liability for Nuclear Damage Act, 2010, which outlines compensation mechanisms for nuclear accidents and assigns liability, has been viewed by companies like GE-Hitachi, Westinghouse, and Areva (now Framatome) as a major barrier.
• Meanwhile, the government is also initiating amendments to the Atomic Energy Act, 1962, to open up nuclear power generation to private companies—and eventually foreign operators. As of now, only government-owned corporations are allowed to manage such projects.
• The Union Budget reaffirmed the government’s commitment to getting both pieces of legislation passed, though the path to enacting them—particularly one of the two—is expected to be politically and procedurally complex.
• These policy shifts come shortly after a significant breakthrough: On March 26, the U.S. Department of Energy (DoE) granted a key regulatory clearance to Holtec International, based in Camden, New Jersey. This unprecedented approval allows the company to move forward with its business plans under the Indo-U.S. civil nuclear framework.
• Specifically, the authorization (SA IN2023-001) under 10CFR810 permits Holtec to conditionally transfer its unclassified Small Modular Reactor technology to its Indian affiliate, Holtec Asia, as well as to Tata Consulting Engineers Ltd and Larsen & Toubro Ltd, marking a crucial step forward in bilateral nuclear cooperation

Follow Up Question

1.To meet its rapidly growing energy demand, some opine that India should pursue research and development on thorium as the future fuel of nuclear energy. In this on text, what advantage, does thorium hold over uranium? (UPSC 2012)

1. Thorium is far more abundant in nature than uranium.
2. On the basis of per unit mass of mined mineral, thorium can generate more energy compared to natural uranium.
3. Thorium produces less harmful waste compared to uranium.

Which of the statements given above is/are correct?

(a) 1 only         

(b) 2 and 3 only           

(c) 1 and 3 only             

(d) 1, 2 and 3