INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) KEY (18/06/2025)

INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY

 
 
 
 
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Shipki la pass and Current account deficit (CAD) and its significance for the UPSC Exam? Why are topics like India's nuclear ability,  Hydraulic system, Other Backward Classes (OBCs)  important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for June 18, 2025

 

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Critical Topics and Their Significance for the UPSC CSE Examination on June 18, 2025

Daily Insights and Initiatives for UPSC Exam Notes: Comprehensive explanations and high-quality material provided regularly for students

 

What is the significance of the Shipki La pass?

For Preliminary Examination:  Current events of national and international significance

For Mains Examination: GS I - Indian Geography

Context:

Himachal Pradesh has opened the Shipki La pass, a motorable mountain pass in the Kinnaur district, to domestic tourists, a step which locals hope will revitalise tourism and trade.

 

Read about:

Important passes of Himalayan range

Historical significance of these passes

 

Key takeaways:

 

  • Shipki La Pass, a motorable mountain pass in the Kinnaur district of Himachal Pradesh, has been recently opened to domestic tourists—a move that locals believe could rejuvenate both tourism and traditional trade.
  • Long before geopolitical boundaries shaped the region, Shipki La functioned as a major trade route connecting India and Tibet (now part of China). Perched at an altitude of 3,930 meters, the pass has been part of trade records since the 15th century, though oral traditions indicate its usage predates that.
  • As per local folklore, the trade was governed by a sacred vow between the communities on either side: “Until the waters of Kailash Manasarovar dry up, a black crow turns white, and Mount Rijo Pugal flattens, this trade shall continue.” This symbolic promise represented a bond that endured for generations until disrupted by political events.
  • The flourishing trade through Shipki La was first interrupted by the Sino-Indian War of 1962, with further disruptions after the Doklam standoff and the COVID-19 pandemic. Although commercial trade remains suspended, the recent decision by the Chief Minister to allow tourism access without prior permits—only requiring an Aadhaar card—has sparked hope throughout the region.
  • The tribal communities of Kinnaur, particularly those belonging to Scheduled Castes and Scheduled Tribes, have longstanding cultural and economic ties with their Tibetan counterparts.
  • Historically, trade involved the Bushahr State (now Rampur) in India and the Guge Kingdom in Tibet. The Kinnaur Indo-China Trade Association has formally requested the resumption of trade through Shipki La. The Chief Minister has promised to discuss the matter with the Ministry of External Affairs.
  • The historical trade route facilitated the exchange of a variety of goods. From Tibet, India received high-value imports like wool, yaks, goats, devotional items (including prayer wheels and thangkas), gold, turquoise, and borax.
  • In return, India exported grains (such as barley, rice, and wheat), spices, pulses, tobacco, dry fruits, vegetables, timber, and metal tools.
  • Items like gold and turquoise were particularly important, as they formed a vital part of Kinnauri women’s jewellery, helping sustain local craftsmanship and cultural traditions.
  • Although land trade through the three India-China border passes (in Arunachal Pradesh, Uttarakhand, and Himachal Pradesh) contributes minimally to overall bilateral trade, the potential lies in regional connectivity and opportunity.
  • Reopening Shipki La could reduce the Delhi to Mansarovar pilgrimage route by around two weeks, potentially transforming religious tourism and border access. This, in turn, could generate employment for local youth, improve infrastructure, and stimulate growth in hospitality and allied services.
  • Strategically, the move may also function as a community-driven diplomatic initiative. It reflects an alternative model of grassroots trust-building that operates beyond formal diplomatic channels. For an area often excluded from national discourse, this initiative could establish a new peace corridor shaped by local voices.
  • Unlike the India-Pakistan border, where cross-border family ties are common, the India-China frontier near Shipki La is connected through cultural and lifestyle similarities.
  • The pastoral communities on both sides share surnames—like Namgyal, found in both Leh and across Tibet.
  • Buddhism further strengthens this bond, with Upper Kinnaur and the neighboring Tibetan region following shared spiritual practices, monastic customs, and festivals that have withstood political separation.
  • In essence, reopening Shipki La is more than a tourism initiative. It represents a broader vision of heritage-based diplomacy and development-focused peacebuilding, potentially serving as a blueprint for future cross-border collaboration

 

 Follow Up Question

1.With reference to the Shipki La Pass, consider the following statements:

  1. Shipki La Pass connects Himachal Pradesh with the Tibet Autonomous Region of China.

  2. It has historically served as a significant trade route between the kingdoms of Bushahr (India) and Guge (Tibet).

  3. The pass has been recently opened for commercial trade with China.

  4. The pass lies in the Lahaul and Spiti district of Himachal Pradesh.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 1 and 3 only
(d) 2 and 4 only

 

Answer (a)
 
  • Statement 1 is correct: Shipki La is a mountain pass in the Kinnaur district of Himachal Pradesh that connects to the Tibet Autonomous Region (China).

  • Statement 2 is correct: Historically, the Bushahr State (India) and Guge (Tibet) engaged in cross-border trade through Shipki La.

  • Statement 3 is incorrect: While the pass has been recently opened to domestic tourists, commercial trade remains suspended post the 1962 war and further geopolitical tensions.

  • Statement 4 is incorrect: Shipki La lies in Kinnaur, not Lahaul and Spiti

 
 
 
For Preliminary Examination:  Current events of national and international significance
 
For Mains Examination: GS III - Economy
 
Context:
 
India’s overall trade deficit narrowed to $6.6 billion in May 2025, down nearly 30% from its level in May last year, as total imports fell largely due to a fall in oil prices while total exports grew on the back of a strong performance by the services sector, official data show
 
 
Read about:
 
Current account deficit (CAD)
 
Twin dilemma
 
Key takeaways:
 

 

  • India's trade deficit notably decreased to $6.6 billion in May 2025, marking a nearly 30% reduction compared to May of the previous year
  • This improvement was primarily driven by a decline in total imports, largely due to falling oil prices, while total exports saw an increase, bolstered by a robust performance in the services sector
  • Data released by the Ministry of Commerce and Industry indicates that total exports reached $71.1 billion in May 2025, a 2.8% rise from $69.2 billion in May 2024
  • This growth was largely propelled by a 9.4% surge in services exports, which hit $32.4 billion. Conversely, merchandise exports experienced a 2.2% contraction, totaling $38.7 billion, although non-petroleum exports within this category grew by 5.1%.
  • The decrease in merchandise imports was also linked to the drop in global oil prices. While overall merchandise imports fell by 1.7% in May 2025, non-petroleum imports saw a 10% increase during the same period. Services imports grew by 1.5%. Cumulatively, total imports declined by 1% in May 2025.
  • Commerce Secretary Sunil Barthwal attributed the less-than-expected performance in merchandise exports largely to the prevailing decline in global oil prices

 

 Current account deficit (CAD)
 

The Current Account is a key component of a country’s Balance of Payments (BoP), which records all economic transactions between residents of the country and the rest of the world. The Current Account Deficit occurs when a country imports more goods, services, and capital than it exports.

 

Components of the Current Account

  • Trade Balance: Exports – Imports of goods.

  • Services: Earnings from services such as IT, tourism, and shipping.

  • Income: Earnings from investments (interest, dividends) and compensation of employees.

  • Current Transfers: Remittances, gifts, grants, and pensions.

 
Current Account Deficit = When the value of imports of goods, services, income, and transfers exceeds the value of exports.
 
 

How is CAD Financed?

Through the Capital Account via:

  • Foreign Direct Investment (FDI)

  • Foreign Portfolio Investment (FPI)

  • External Commercial Borrowings (ECBs)

  • Loans and aid

 
 
Follow Up Question
 

1.Economic growth in country X will necessarily have to occur if (UPSC CSE 2013)

(a) there is technical progress in the world economy

(b) there is population growth in X

(c) there is capital formation in X

(d) the volume of trade grows in the world economy

Answer (c)
 

Economic growth refers to an increase in a country’s real output of goods and services over time, typically measured by growth in GDP.

Let's evaluate each option:

  • (a) Technical progress in the world economy
    This may influence global productivity, but it does not guarantee economic growth in country X unless that country adopts or benefits from such progress.

  • (b) Population growth in X
    More people do not automatically lead to more economic output. If not matched by productive employment, population growth can strain resources.

  • (c) Capital formation in X ✅
    This refers to investment in physical assets like machinery, infrastructure, and factories, which directly increases productive capacity. It is a key driver of economic growth.

  • (d) Volume of trade grows in the world economy
    Global trade expansion might offer opportunities for X, but economic growth is not assured unless X participates effectively in that trade.

 
 
 
For Preliminary Examination:  Current events of national and international significance
 
For Mains Examination: GS III - Science and technology
 
Context:
 
As per a Reuters reports, India is reportedly planning to ease its nuclear liability laws, with respect to accident-related fines on equipment suppliers, in order to attract more U.S. firms which have been holding back due to the risk of unlimited exposure.
 
Read about:
 
Convention on Supplementary Compensation (CSC)
 
Civil Liability for Nuclear Damage Act (CLNDA) 
 
Key takeaways:
 
 
  • Civil nuclear liability laws are designed to ensure that victims of nuclear accidents receive compensation and to identify the parties responsible for such compensation. The global framework for nuclear liability, formed through a series of treaties, was significantly reinforced after the Chernobyl disaster in 1986.
  • One of the key instruments in this system is the Convention on Supplementary Compensation (CSC), established in 1997, which sets a baseline amount for compensation by national governments. If this amount falls short, the convention permits additional funding from participating countries.
  • India, though an early signatory to the CSC, formally ratified it in 2016. Prior to ratification, India enacted the Civil Liability for Nuclear Damage Act (CLNDA) in 2010 to align with international standards.
  • The CLNDA mandates a strict and no-fault liability regime for nuclear plant operators, meaning they are responsible for damages regardless of fault. The law sets the operator’s liability at ₹1,500 crore and requires them to secure financial coverage, typically through insurance.
  • If claims exceed this amount, the government is expected to contribute up to approximately ₹2,100–2,300 crore, which corresponds to 300 million Special Drawing Rights (SDRs). The Act also defines limits on both the amount and timeframe for lodging compensation claims.
  • India currently operates 22 nuclear reactors, all managed by the Nuclear Power Corporation of India Limited (NPCIL), a state-owned enterprise, and has several additional plants planned.
  • Globally, civil nuclear liability frameworks like the CSC emphasize exclusive liability of the operator, a model adopted to prevent the nuclear industry, especially suppliers, from being discouraged due to the risks of large liability claims. This model simplifies legal proceedings and centralizes insurance obligations with the plant operator, not suppliers or contractors.
  • According to Section 10 of the CSC’s annex, there are only two instances where an operator can claim compensation from a supplier: (1) if such a right is specified in the contract, or (2) if the damage results from an intentional act or omission.
  • However, India diverged from this international norm by including an additional provision for supplier liability in its CLNDA. Drawing lessons from past industrial disasters like the Bhopal gas tragedy, lawmakers included Section 17(b), which allows the operator to seek recourse from suppliers if the nuclear incident was caused by defective equipment, materials, or substandard services.
  • This unique inclusion has made both domestic and international suppliers cautious about entering nuclear contracts in India, as the law could subject them to unlimited financial exposure.
  • The provisions most criticized are Sections 17(b) and 46. Section 46 permits civil or criminal proceedings against the operator outside the CLNDA, and due to the lack of a detailed definition of "nuclear damage," this opens a legal pathway for claims under general civil laws, potentially exposing suppliers to unquantifiable liabilities.
  • The Indian government maintains that the CLNDA aligns with the CSC framework. Regarding Section 17(b), it argues that the provision gives the operator the option, not the obligation, to pursue recourse against a supplier.
  • However, legal experts disagree, stating that the CLNDA treats Sections 17(a), (b), and (c) as distinct, meaning recourse can be sought even without a specific contract clause.
  • Public policy concerns also arise—if NPCIL were to waive this right of recourse, it might be seen as acting contrary to what the law allows.
  • Furthermore, although parliamentary debates may have rejected amendments to increase supplier liability, courts would interpret the law based on its actual text, not the legislative discussions. This has left the private sector wary, with lingering ambiguity over legal responsibilities in the event of a nuclear incident
 
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

Answer (d)
 
  • Thorium is more abundant than uranium
    Correct. Thorium is approximately three to four times more abundant in the Earth's crust than uranium. India has one of the world’s largest reserves of thorium.

  • Thorium can generate more energy per unit mass than natural uranium
    Correct. Natural uranium contains only about 0.7% of fissile U-235, while thorium-232, though not fissile itself, can be converted into fissile U-233 in a breeder reactor. U-233 is highly efficient as a nuclear fuel and can yield more energy.

  • Thorium produces less nuclear waste
    Correct. Compared to uranium-based reactors, thorium-based systems produce significantly less long-lived radioactive waste. The waste also has a shorter half-life, making storage and management easier.

 
 
 
For Preliminary Examination:  Current events of national and international significance
 
For Mains Examination: GS III - Science and technology
 
Context:
 
In a hydraulic system, pressure is created by applying a force to a fluid.And because it is subsequently transmitted equally in all directions, a small force applied over a small area can create a much larger force over a larger area
 
Read about:
 
Pascal's law
 
Hydraulic system
 
 
Key takeaways:
 
 
  • Have you ever noticed how cranes lift loads, excavators scoop earth, or airplane landing gear retracts and extends? These all rely on hydraulic systems, which transform energy from an electric motor or engine into adaptable mechanical force.
  • Hydraulic technology operates on Pascal’s Law, formulated by the French scientist Blaise Pascal. The principle explains that when pressure is exerted on a confined, incompressible fluid, the pressure spreads uniformly throughout the fluid. Here, pressure refers to the force applied per unit area.
  • In a hydraulic setup, applying force to a fluid generates pressure. This pressure, being distributed evenly, means a small input force over a smaller area can generate a much larger output force on a wider area — effectively multiplying force without changing the pressure itself.
  • While lifting is a basic application, hydraulic systems are capable of performing a wide range of complex operations. Their key benefits over traditional mechanical systems include smoother operation, high power-to-weight ratio, efficient heat dissipation, better precision, and responsive control.

Main Components of a Hydraulic System:

  • Pump – Converts mechanical input into pressurized fluid flow.

  • Pipes – Transport hydraulic fluid between components.

  • Valves – Manage fluid direction, pressure, and flow.

  • Actuators (Linear/Rotary) – Carry out physical work at the system's output end.

  • Tank and Filters – Store and purify hydraulic oil.

  • Sensors/Switches – Provide operational and safety feedback.

While components like pipes and tanks help move or hold the fluid, pumps, valves, actuators, and sensors are central to system functionality. Large systems may also include coolers to dissipate heat or heaters for cold conditions to ensure optimal oil viscosity.

There are various pump types—such as gear, axial piston, and variable displacement—chosen based on the required flow rate and pressure. Pumps can be electrically driven or mechanically coupled to engines (via power take-off units).

Valves come in three basic types: those that control flow, direction, and pressure. Depending on the application, they may be manually or electrically operated.

Actuators are the working end of the system. Linear actuators (or cylinders) use a piston to move rods in and out, converting fluid pressure into pushing or pulling force. These are frequently seen in machines like cranes and bulldozers. The oil pressure determines the force output, flow rate controls speed, and direction of flow decides movement direction.

Rotary actuators, also called hydraulic motors, create rotational motion, useful for devices like winches. Their speed, torque, and direction are again governed by the flow rate, pressure, and oil direction.

Applications:

  • Hydraulic systems are used extensively across sectors—from agriculture and construction to manufacturing and renewable energy.
  • Mobile systems (like excavators) and fixed systems (like presses or wind turbines) alike rely on hydraulics. Globally, the hydraulic industry is valued at $45–50 billion and continues to expand.
  • Modern hydraulic systems now incorporate sensors to monitor temperature, pressure, fluid flow, contamination, etc., not just for safety, but also for performance optimization and predictive maintenance.
  • However, energy efficiency remains a challenge—most hydraulic systems currently achieve only 30–40% overall efficiency. Despite this, the inherent advantages of hydraulics keep them in use for large-scale applications, where electric systems are often less practical or powerful
 
Follow Up Question
 

1.With reference to hydraulic systems, consider the following statements:

  1. Hydraulic systems operate based on Pascal's Law, which states that pressure applied to an incompressible fluid is transmitted equally in all directions.

  2. Linear actuators in hydraulic systems convert hydraulic pressure into rotational motion.

  3. Hydraulic systems are known for their high energy efficiency, typically exceeding 80%.

  4. Valves in hydraulic systems are used to control the flow, direction, and pressure of the fluid.

Which of the statements given above are correct?

(a) 1 and 2 only
(b) 1 and 4 only
(c) 2 and 3 only
(d) 1, 3 and 4 only

Answer (b)
 
  • Statement 1 is correct: Hydraulic systems follow Pascal’s Law, which is fundamental to their operation.

  • Statement 2 is incorrect: Linear actuators produce linear (not rotational) motion. Rotary actuators (hydraulic motors) are responsible for rotational output.

  • Statement 3 is incorrect: Hydraulic systems typically have an energy efficiency of 30–40%, not over 80%.

  • Statement 4 is correct: Valves manage the flow rate, pressure, and direction of hydraulic fluid.

 
 
 
For Preliminary Examination: Current events of national and international signifance
 
For Mains Examination: GS II - Indian Polity and Governance
 
Context:
 
The Narendra Modi-led NDA government is likely to use both the Central List and the State Lists of the Other Backward Classes (OBCs) for the proposed caste census
 
Read about:
 
Other Backward Classes (OBCs)
 
What is Census?
 
Key takeaways:
 
 
  • The Central List of Other Backward Classes (OBCs) includes 2,513 castes, organized state- and Union Territory-wise. This list is primarily used to determine eligibility for central government employment and admissions to educational institutions. However, many individual states maintain separate OBC lists, which might feature additional castes not acknowledged by the Centre or classify certain castes differently.

  • The government is considering introducing an additional column for OBCs in data collection, or possibly including all castes under a broader ‘Others’ category, which would encompass General category as well. This would involve a drop-down menu listing castes from both the Central and State OBC lists, along with other caste groups if necessary.

  • As a result, a particular caste might be recognized as OBC in one state but not in another, or it may be classified under a different category, such as Scheduled Caste (SC), depending on regional categorization.

  • It is noteworthy that a caste-based enumeration was carried out in 2011 during the Socio-Economic and Caste Census (SECC) by the UPA government. However, the findings of that exercise were never released publicly.

  • The government has now issued a notification to conduct India’s 16th Census between 2026 and 2027. Earlier announcements confirmed that the 2027 population count would include caste enumeration, marking the first such attempt since 1931.

  • According to Registrar General of India (RGI) Mrityunjay Kumar Narayan, the reference date for the 2027 Census will be March 1, 2027, at 00:00 hours, except for the Union Territory of Ladakh and snow-bound, non-synchronous regions in Jammu & Kashmir, Himachal Pradesh, and Uttarakhand, where the reference date will be October 1, 2026.

  • Government insiders highlighted that relying only on the Central OBC list could lead to inaccuracies, as many castes listed by states are not included in the central compilation. This could result in a misrepresentation of the actual OBC population in some states and possibly trigger political opposition. Hence, there’s a possibility that both lists might be merged or used together.

  • Nonetheless, officials clarified that these options are still under deliberation, and no final decision has been made yet

 
 
Follow Up Question
 
1.Who was appointed as the head of the OBC Sub-categorisation Commission?
(Maharashtra Talathi 2019) 
A. Justice Geeta Mittal
B. Justice Manjula Chellur
C. Justice Tahilramani
D. Justice G. Rohini
 
Answer (D)
 
Justice G. Rohini, former Chief Justice of the Delhi High Court, was appointed as the head of the Commission to examine the sub-categorisation of Other Backward Classes (OBCs) in 2017. The commission was tasked with studying the extent of inequitable distribution of reservation benefits among OBCs and recommending steps for sub-categorisation to ensure a more equitable distribution
 
 
 
 
For Preliminary Examination:  Current events of national and international significance
 
For Mains Examination: General Studies II: Bilateral, regional and global groupings and agreements
 
Context:
 
What is G7 group?
 
Who are the members of G7?
 
 
Key takeaways:
 
 
  • The Group of Seven (G7) is an informal coalition of the world’s most advanced industrial nations, comprising Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

  • In recent years, it has become common for leaders from non-G7 countries and global organizations to join certain sessions. Discussions typically span across topics such as economic strategies, international security, climate policies, energy needs, and gender-related concerns.

  • The inaugural summit took place in 1975 in France, originally involving six countries and focused on addressing the recession caused by the Arab oil embargo. Canada joined in 1976, expanding the group to seven. In 1998, Russia was included, forming the G8, but was suspended in 2014 following its annexation of Crimea.

  • While the G7 began as an economic dialogue platform, it has since expanded its agenda to include broader global issues. Despite not having a permanent administrative framework, the group functions under a rotating presidency, which also assumes the role of a temporary secretariat.

  • The annual summits end with a joint communiqué, laying out shared political commitments, and often shape global governance and policy directions.

  • In contrast, the G20, formed after the 2008 financial crisis, is seen as a more inclusive body. A study by Bruegel suggested that the G20's formation highlighted the G7's inability to respond to modern crises. However, the G20’s larger and more diverse composition makes swift decision-making challenging unless in times of major crises. The authors advocated for a revised G7+, which could include a representative for the eurozone, along with China, India, and Brazil, to better mirror today's global economic realities.

  • Former US President Donald Trump’s endorsement of Vladimir Putin represented a key disruption in the group's cohesion, particularly as the US has shown signs of withdrawing from multilateral cooperation.

  • Currently, G7 leaders and the European Union are gathering in Kananaskis, Canada, for their summit.

  • Speaking with Canada’s Prime Minister, Trump criticized Russia’s 2014 exclusion from the G8, calling it a mistake and suggesting that Russia may have refrained from invading Ukraine in 2022 had it remained in the group. French President Macron, however, opposed the idea, emphasizing that Russia, having launched an illegal war, cannot act as a mediator.

  • European leaders aim to use upcoming meetings with Ukrainian President Zelenskyy, NATO Secretary General Mark Rutte, and the NATO summit to persuade Trump to adopt a firmer stance.

  • To avoid the discord seen during the 2018 Quebec summit, where Trump retracted US support for the final communiqué post-summit, Canada has decided not to pursue a joint communique this time

 
Folllow Up Question
 
 
1.With reference to the "Look East Policy" of India, consider the following statements (UPSC 2011)
1. India wants to establish itself as an important regional player in East Asian affairs.
2. India wants to plug the vacuum created by the termination of the Cold War.
3. India wants to restore the historical and cultural ties with its neighbours in Southeast and East Asia.
Which of the statements given above is/are correct?
A. 1 only     
B.  1 and 3only       
C.  3 only     
D.  1, 2 and 3
 
Answer (B)
 

The Look East Policy was launched in the early 1990s by India with the following key objectives:

  1. To strengthen economic and strategic relations with the nations of Southeast Asia and East AsiaCorrect

  2. To re-establish historical and cultural ties with Southeast Asian nationsCorrect

  3. The idea that India wants to “plug the vacuum created by the termination of the Cold War” is not a stated objective of the Look East Policy — Incorrect

Hence, statements 1 and 3 are correct, and statement 2 is not

 
 
 
For Preliminary Examination: Current events of national and international significance
 
For Mains Examination: GS II: Important International institutions, agencies and fora- their structure, mandate
 
Context:
 
Condemning the “brutal terrorist attack” in Pahalgam on April 22, the Financial Action Task Force (FATF) — the global money laundering and terror financing watchdog — has noted that such attacks cannot occur “without money and the means to move funds between terrorist supporters”
 
 
Read about:
 
What is the Financial Action Task Force (FATF)?
 
What is FATF GREY list?
 
 
Key takeaways:
 
 
  • The Financial Action Task Force (FATF) functions as the international oversight body for issues related to money laundering and terrorist financing. Headquartered in Paris, it was created in 1989 as part of a G7 initiative to develop strategies to combat financial crimes. In 2001, its scope was broadened to include countering terrorist financing.

  • The FATF, comprising 40 member nations, has set forth a detailed framework of 40 Recommendations to assist countries in addressing illicit financial flows. These are grouped into seven broad categories:

    1. Anti-money laundering/combating the financing of terrorism (AML/CFT) policies and coordination

    2. Money laundering and asset recovery

    3. Financing of terrorism and proliferation

    4. Preventive actions

    5. Transparency and beneficial ownership of legal entities

    6. Roles and powers of regulatory bodies

    7. International collaboration

  • India joined FATF in 2010. After its initial assessment that same year, it was placed under the "regular follow-up" category but exited this category following a progress report in 2013. The FATF's evaluation process was delayed due to the COVID-19 pandemic, and India's latest onsite review took place in November 2023, with the findings discussed at the June 2024 FATF plenary.

  • The FATF performs mutual evaluations to ensure member countries are effectively implementing its standards to combat money laundering and terrorism-related financial flows. These evaluations involve in-depth analysis of each country's legal and institutional frameworks.

  • Following a terror attack in Pahalgam, Jammu and Kashmir, on April 22, 2025, that killed 26 people, India launched Operation Sindoor on May 7, targeting terror facilities in Pakistan and Pakistan-occupied Kashmir (PoK). This action triggered a brief military standoff between the two nations.

  • Although the FATF’s official statement did not single out any nation, India had earlier indicated it would raise concerns over Pakistan’s financing of terror activities and potentially push for its re-inclusion in the FATF grey list.

  • The FATF, condemning the April 22 attack, emphasized the vital role of financial support in enabling terrorism. The organization noted: “Such acts of terrorism would not be possible without the financial means and systems that allow funds to flow among those involved.”

  • In its post-plenary remarks, FATF highlighted its increasing focus on how effective national efforts are in countering terrorist financing, using evaluations to identify and close any existing loopholes.

  • Quoting FATF President Elisa de Anda Madrazo from the recent ‘No Money for Terror’ conference in Munich, the FATF reiterated that global cooperation is essential in fighting terrorism. She remarked, “Terrorists only need to succeed once, but we must be successful every single time to prevent them.”

 
Follow Up Question
 

1.With reference to the Financial Action Task Force (FATF), consider the following statements:

  1. FATF was established by the United Nations to combat global money laundering and terrorist financing.

  2. FATF has developed a set of 40 Recommendations which are recognized as the international standard for combating money laundering and terrorism financing.

  3. India became a full member of FATF in 2010.

Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer (b)
 
  • Statement 1 is incorrect: FATF was not established by the United Nations; it was formed in 1989 as an initiative by the G7 countries and is an intergovernmental body, not a UN agency.

  • Statement 2 is correct: The FATF has developed 40 Recommendations which are widely regarded as the global standard for anti-money laundering and counter-terrorism financing.

  • Statement 3 is correct: India became a full member of FATF in 2010

 
 

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