CITIZENSHIP AMENDMENT ACT (CAA)
1. Context
The Supreme Court on Tuesday said conferment of rights associated with Indian citizenship to people claiming to be religious minorities who fled persecution from Pakistan, Afghanistan, and Bangladesh and protected under the Citizenship (Amendment) Act, would be wholly dependent on whether their claims turn out to be true.
2. About the Citizenship Amendment Act 2019
The Citizenship Amendment Act (CAA) of 2019 is a controversial piece of legislation enacted by the Government of India on December 12, 2019. The act amends the Citizenship Act of 1955 to provide a pathway to Indian citizenship for certain religious minorities from neighbouring countries.
Key features of the Citizenship Amendment Act include
- Eligibility Criteria: The CAA grants eligibility for Indian citizenship to Hindu, Sikh, Buddhist, Jain, Parsi, and Christian migrants who arrived in India from Afghanistan, Bangladesh, and Pakistan on or before December 31, 2014, and have faced religious persecution on their home countries.
- Exclusion of Muslims: Notably, the CAA excludes Muslims from its purview, leading to criticisms of religious discrimination and accusations of violating the secular principles enshrined in the Indian Constitution.
- Criticism and Protests: The Citizenship Amendment Act sparked widespread protests across India, with critics arguing that the act undermines the secular fabric of the nation and discriminates against Muslims. Protesters also raised concerns about the potential marginalisation of Muslim communities and the exclusionary nature of the legislation.
- Support from Government: The government defended the Citizenship Amendment Act, asserting that it aims to provide refuge and protection to persecuted religious minorities from neighbouring countries. The government argued that the act does not infringe upon the rights of Indian Muslims and is in line with the country's secular ethos.
- Legal Challenges: Several petitions challenging the constitutional validity of the Citizenship Amendment Act were filed in the Supreme Court of India. The court has heard arguments from both sides and is expected to deliver its judgment on the matter.
3. The current status of the Citizenship Amendment Act, of 2019
- The Ministry of Home Affairs (MHA) on March 11 notified the Citizenship Amendment Rules, 2024 that would enable the implementation of the Citizenship Amendment Act (CAA) passed by the Parliament in 2019.
- Though the legislation facilitates citizenship to undocumented people belonging to Hindu, Sikh, Buddhist, Parsi, Christian and Jain communities from Pakistan, Bangladesh and Afghanistan, the rules state that the applicants will have to provide six types of documents and specify “date of entry” in India.
4. The concerns associated with the Citizenship Amendment Act, of 2019
The Citizenship Amendment Act (CAA) of 2019 has sparked various concerns and criticisms, both domestically within India and internationally.
- One of the primary concerns regarding the CAA is its exclusion of Muslims from the list of religious minorities eligible for citizenship under the act. Critics argue that this selective approach based on religion goes against the secular principles enshrined in India's constitution and promotes religious discrimination.
- The CAA's focus on granting citizenship based on religious identity raises concerns about the secular nature of India's democracy. Critics argue that the act undermines the inclusive and pluralistic ethos of the country by favouring specific religious communities.
- Opponents of the CAA fear that the act, coupled with other proposed policies like the National Register of Citizens (NRC) and National Population Register (NPR), could have implications for the demographic composition of India. They raise concerns about the marginalisation and exclusion of certain communities, particularly Muslims, and the potential for statelessness among vulnerable populations.
- The constitutionality of the Citizenship Amendment Act has been challenged in the Supreme Court of India. Critics argue that the act violates the fundamental rights guaranteed by the Indian Constitution, including the right to equality and non-discrimination.
- The implementation of the CAA has led to social and political polarization within India. The act has become a contentious issue, leading to protests, debates, and divisions along religious and ideological lines.
- The CAA has also attracted international attention and scrutiny, with concerns raised by human rights organizations and foreign governments regarding religious freedom, minority rights, and the potential impact on vulnerable communities.
5. The Indian ideas and rules of citizenship in the Constitution before the Citizenship Amendment Act (CAA), 2019
Before the enactment of the Citizenship Amendment Act (CAA) in 2019, the principles and rules of citizenship in India were primarily governed by the Constitution of India, which came into effect on January 26, 1950. The Constitution lays down the framework for citizenship and enshrines certain fundamental rights and principles related to citizenship.
- Citizenship by Birth: According to Article 5 of the Indian Constitution, any person born in India on or after January 26, 1950, but before July 1, 1987, was automatically considered a citizen of India by birth, regardless of the nationality of their parents.
- Citizenship by Descent: Individuals born outside India on or after January 26, 1950, but before July 1, 1987, were eligible for Indian citizenship if either of their parents was a citizen of India at the time of their birth.
- Citizenship by Registration: The Constitution provides provisions for certain categories of persons to acquire Indian citizenship through registration. This includes persons of Indian origin who have resided in India for a specified period and meet other criteria prescribed by law.
- Citizenship by Naturalization: Foreigners who have resided in India for a specified period and fulfilled other conditions prescribed by law were eligible to apply for Indian citizenship through naturalization.
- Citizenship by Incorporation of Territory: Any territory that became part of India through accession or merger automatically conferred Indian citizenship on its inhabitants as per the provisions of the Constitution.
- Fundamental Rights: The Constitution guarantees certain fundamental rights to all citizens of India, regardless of their religion, ethnicity, or place of birth. These rights include the right to equality, freedom of speech and expression, freedom of religion, and the right to life and personal liberty.
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Citizenship Act, 1955: This act, enacted based on the Constitution's provisions, outlined ways to acquire Indian citizenship. Here are the main routes:
- Birth: Being born in India (with some limitations) granted citizenship.
- Descent: Children born to Indian parents abroad could become citizens.
- Registration: People of Indian origin residing in India for seven years could register.
- Naturalization: Foreigners meeting specific residency requirements could apply for naturalization.
The Indian Constitution before the Citizenship Amendment Act (CAA) of 2019 outlined principles of citizenship that were based on inclusivity, equality, and non-discrimination, with provisions for acquiring citizenship through birth, descent, registration, naturalization, and territorial incorporation. The CAA introduced amendments to these principles, particularly regarding eligibility for citizenship based on religious identity.
6. Section 6A of the Citizenship Act
Section 6A is a special provision inserted into the Indian Citizenship Act, 1955, in 1985, as part of the Assam Accord. It deals with the citizenship of people who migrated to Assam from Bangladesh:
- It applies to people who entered Assam on or after January 1, 1966, but before March 25, 1971.
- It grants citizenship to these people if they can prove that they were "ordinarily resident" in Assam on March 24, 1971.
- People who claim citizenship under Section 6A must apply to a Foreigners Tribunal. The Tribunal will then decide whether or not to grant them citizenship based on the evidence they provide.
7. What does NRC mean?
- NRC stands for the National Register of Citizens. It is a register maintained by the Government of India containing names and certain relevant information for the identification of Indian citizens in the state of Assam.
- The purpose of the NRC is to create a list of genuine Indian citizens residing in Assam and identify individuals who are not legal residents of the state.
- The NRC process in Assam has its origins in the Assam Accord of 1985, which aimed to address the issue of illegal immigration from Bangladesh and determine the citizenship status of individuals living in Assam.
- The NRC process requires individuals to provide documentary evidence to prove their citizenship based on criteria set by the government.
- The NRC process involves extensive documentation and verification to establish citizenship status, and it has been a contentious issue due to its impact on individuals' rights and concerns about exclusion and discrimination.
- The implementation of the NRC in Assam has led to debates, legal challenges, and social tensions regarding citizenship and immigration issues in India.
8. What is NPR?
- NPR stands for the National Population Register. It is a register of usual residents of India, which includes both citizens and non-citizens who have resided in a local area for at least six months or intend to stay for the next six months or more.
- The NPR is prepared at the local, sub-district, district, state, and national levels under the provisions of the Citizenship Act, 1955, and the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003.
- The main purpose of the NPR is to create a comprehensive identity database of residents in India. It collects demographic and biometric information to establish the identity of individuals and households.
- The data collected in the NPR includes details such as name, age, gender, marital status, occupation, educational qualification, address, and other relevant information.
- The NPR process involves house-to-house enumeration and collection of data by government officials or designated enumerators. The data collected is used for various purposes, including government planning, policy formulation, and social welfare schemes.
- It's important to note that the NPR is distinct from the National Register of Citizens (NRC). While the NPR focuses on creating a comprehensive database of residents, the NRC specifically deals with determining the citizenship status of individuals, particularly in the state of Assam, based on documentary evidence.
- The NPR has been a topic of discussion and debate in India, with concerns raised about privacy, data security, and potential misuse of information.
9. The difference between the NRC, NPR and CAA
| Term | Description | Purpose | Focus |
| NRC (National Register of Citizens) | Register of Indian citizens in Assam | Identify legal residents and non-citizens | Citizenship status in Assam |
| NPR (National Population Register) | Register of usual residents (citizens and non-citizens) | Create a comprehensive identity database | Residents of India for planning purposes |
| CAA (Citizenship Amendment Act) | Law providing path to citizenship for religious minorities | Grant citizenship based on religion and persecution |
Specific religious minorities facing persecution |
10. Is NPR connected to NRC?
11. Who are ‘Citizens’?
In general terms, citizens are individuals who hold citizenship in a particular country. Citizenship is a legal status that grants individuals certain rights, privileges, and responsibilities within the nation-state to which they belong. The concept of citizenship varies across different countries, but some common characteristics of citizenship include.
- Legal Recognition: Citizens are legally recognized members of a country or state. They are entitled to the protection of the state and have access to its legal system.
- Rights and Privileges: Citizens typically enjoy certain rights and privileges that non-citizens may not have, such as the right to vote, the right to work and reside in the country, access to social services, and the right to participate in the political process.
- Responsibilities: Along with rights and privileges, citizenship also entails certain responsibilities, such as obeying the laws of the country, paying taxes, serving on juries if called upon, and sometimes participating in military service.
- National Identity: Citizenship often involves a sense of national identity and belonging to a particular community or nation. This can include shared cultural, historical, and linguistic ties that bind citizens together.
- Acquisition and Loss: Citizenship can be acquired through birth (jus soli or jus sanguinis), naturalization, or descent from a citizen parent. It can also be lost or renounced voluntarily or involuntarily, depending on the laws of the country.
12. The Way Forward
By adopting the strategies, stakeholders can work towards addressing concerns related to the Citizenship Amendment Act, promoting inclusivity, protecting minority rights, and upholding democratic values in India's citizenship policies and practices.
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For Prelims: Citizenship Amendment Act, Minorities, Secularism, NPR, NRC,
For Mains:
1. The Citizenship Amendment Act (CAA) of 2019 has sparked significant controversy in India. Critically examine the Act's provisions, highlighting the key concerns and potential implications. In your opinion, does the CAA violate the secular principles enshrined in the Indian Constitution? (250 words)
2. Considering the debates surrounding the CAA, critically analyze the concept of citizenship in India. How has the concept evolved, and what are the challenges in defining and managing citizenship in a diverse democracy like India? (250 words)
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Previous Year Questions
Consider the following statements: (2018) 1. Aadhaar card can be used as a proof of citizenship or domicile.
2. Once issued, the Aadhaar number cannot be deactivated or omitted by the Issuing Authority.
Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
2. What is the position of the Right to Property in India? (UPSC 2021) (a) Legal right available to citizens only
(b) Legal right available to any person
(c) Fundamental Rights available to citizens only
(d) Neither Fundamental Right nor legal right
3. With reference to the Delimitation Commission, consider the following statements: (UPSC 2012)
1. The orders of the Delimitation Commission cannot be challenged in a Court of Law.
2. When the orders of the Delimitation Commission are laid before the Lok Sabha or State Legislative Assembly, they cannot effect any modifications in the orders.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
4. Barak Valley in Assam is famous for which among the following? (MSTET 2019)
A. Bamboo Industry
B. Petroleum Production
C. Cottage Industries
D. Tea Cultivation
5. Which one of the following is an important crop of the Barak Valley? (Karnataka Civil Police Constable 2019)
A. Sugarcane B. Jute C. Tea D. Cotton
6. Under Assam Accord of 1985, foreigners who had entered Assam before March 25, _____ were to be given citizenship. (DSSSB JE & Section Officer 2022)
A. 1954 B. 1971 C. 1981 D. 1966
Answers: 1-D, 2-B, 3-C, 4-D, 5-B, 6-B
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Source: The Indian Express
SPECIAL INTENSIVE REVISION (SIR)
1. Context
The Supreme Court on Tuesday remonstrated with the Election Commission of India (EC) for giving “mechanical and cyclostyled” answers every time a human problem is presented in court by anxious voters about the ongoing special intensive revision (SIR) of electoral rolls.
2. What is the Special Intensive Revision?
- The Special Intensive Revision (SIR) of the Electoral Rolls is an important exercise undertaken by the Election Commission of India (ECI) to ensure that the voter lists (electoral rolls) are accurate, updated, and inclusive before any major election or as part of the annual revision cycle.
- In simpler terms, the SIR is a comprehensive verification and correction process of the electoral rolls — aimed at including eligible voters, removing ineligible ones, and rectifying errors in the existing list.
- It is called “special” because it involves an intensified, house-to-house verification and greater public participation compared to the routine annual summary revision
- The purpose of the Special Intensive Revision is to maintain the purity, accuracy, and inclusiveness of India’s democratic process. Clean and updated voter rolls are essential for free, fair, and credible elections, as they prevent issues like bogus voting, disenfranchisement, and duplication.
- In summary, the Special Intensive Revision (SIR) is a focused, large-scale voter verification campaign conducted by the Election Commission to ensure that the electoral rolls are error-free, inclusive, and reflective of the current eligible voting population. It plays a crucial role in strengthening the integrity and transparency of India’s electoral system
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During the Special Intensive Revision, Booth Level Officers (BLOs) visit households to verify voter details such as name, address, age, and photo identity. This exercise helps identify:
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3. Election Commission of India, its powers and functions
- Article 324(1) of the Indian Constitution empowers the Election Commission of India (ECI) with the authority to oversee, guide, and manage the preparation of electoral rolls as well as the conduct of elections for both Parliament and the State Legislatures.
- As per Section 21(3) of the Representation of the People Act, 1950, the ECI holds the right to order a special revision of the electoral roll for any constituency, or part of it, at any time and in a manner it considers appropriate.
- According to the Registration of Electors’ Rules, 1960, the revision of electoral rolls may be carried out intensively, summarily, or through a combination of both methods, as directed by the ECI.
- An intensive revision involves preparing an entirely new roll, while a summary revision deals with updating or modifying the existing one
4. How is SIR different from the National Register of Citizens (NRC)?
| Aspect | Special Intensive Revision (SIR) | National Register of Citizens (NRC) |
| Purpose | To verify, update, and correct the electoral rolls so that all eligible voters are included and ineligible names are removed | To identify legal citizens of India and detect illegal immigrants |
| Authority / Governing Body | Conducted by the Election Commission of India (ECI) | Conducted under the Ministry of Home Affairs (MHA) |
| Legal Basis | Based on Article 324(1) of the Constitution, Section 21(3) of the Representation of the People Act, 1950, and the Registration of Electors' Rules, 1960. | Governed by the Citizenship Act, 1955 and the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003 |
| Scope | Focuses only on Indian citizens aged 18 years and above who are eligible to vote | Covers all residents of India (or a particular state) to determine their citizenship status |
| Nature of the Exercise | A regular, recurring administrative exercise carried out to maintain accurate voter lists | A special, large-scale verification exercise conducted under specific legal or political mandates. |
| Relation to Citizenship | Does not determine citizenship — only eligibility to vote | Directly determines citizenship status |
5. What are the concerns related to SIR?
One of the major concerns is the erroneous deletion of eligible voters from the rolls.
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Mistakes during house-to-house verification or data entry may lead to legitimate voters—especially migrants, daily-wage workers, and marginalized communities—being left out.
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Such exclusions can directly affect voter participation and undermine the democratic process.
Despite the intensive verification, fake or duplicate names often remain due to poor coordination or outdated records.
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Deaths, migrations, or multiple registrations in different constituencies are not always updated accurately.
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This raises questions about the accuracy and credibility of the electoral rolls.
The SIR is a large-scale field operation requiring trained personnel, coordination among departments, and robust data systems.
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Booth Level Officers (BLOs) are often overburdened with multiple duties and may not have sufficient time or training for thorough verification.
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Limited digital infrastructure in rural areas can also hamper real-time data updates.
Electoral roll revisions, especially when conducted close to elections, can spark political allegations of bias or manipulation.
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Parties may accuse each other or the Election Commission of targeting specific communities or constituencies.
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Even unintentional errors can lead to trust deficits in the electoral process.
6. Way Forward
While the Special Intensive Revision is essential for ensuring clean and updated electoral rolls, its effectiveness depends on transparent procedures, proper training, digital accuracy, and public awareness.
Addressing these concerns is vital to maintain trust in the Election Commission and uphold the credibility of India’s democratic system
Addressing these concerns is vital to maintain trust in the Election Commission and uphold the credibility of India’s democratic system
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For Prelims: Special Intensive Revision (SIR), National Register of Citizens (NRC), Election Commission of India (ECI)
For Mains: GS II - Indian Polity
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Previous year Question1. Consider the following statements: (UPSC 2017)
1. The Election Commission of India is a five-member body.
2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.
3. Election Commission resolves the disputes relating to splits/mergers of recognized political parties.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 only
C. 2 and 3 only
D. 3 only
Answer: D
2. Consider the following statements : (UPSC 2021)
1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.
2. In the 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies.
3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. 1 and 3
D. 2 and 3
Answer: B
Mains
1.To enhance the quality of democracy in India the Election Commission of India has proposed electoral reforms in 2016. What are the suggested reforms and how far are they significant to make democracy successful? (UPSC CSE 2017)
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Source: Indianexpress
COMPTROLLER AUDITOR GENERAL OF INDIA (CGI)
1.Context
Odisha recorded a sharp decline in the gross enrollment ratio (GER) during the transition of students from the secondary to the higher-secondary level, according to a Comptroller and Auditor General of India (CAG) report tabled in the Assembly on Tuesday.
2. Comptroller and Auditor General of India (CAG)
- The Comptroller and Auditor General (CAG) of India is a constitutional authority responsible for auditing and overseeing the financial operations of the Government of India and state governments. The role of the CAG is defined in the Constitution of India, primarily in Article 148
- The Comptroller and Auditor General of India (CAG) plays a pivotal role within the democratic framework, ensuring transparency, accountability, and financial integrity in the government's operations.
- It actively contributes to upholding the separation of powers between the legislature and executive by verifying that the government's financial activities align with legislative intentions.
- Through its audit discoveries and recommendations, the CAG advocates for good governance practices, aiding governments in streamlining operations, minimizing inefficiencies, and adhering to financial discipline.
- In the evolving landscape of India's democracy, the CAG's role becomes increasingly crucial, promoting good governance and safeguarding the interests of the people.
- Notably, the 73rd and 74th Constitutional amendments represent a significant advancement in India's democratic structure, establishing tiers of self-governance below the state level.
- The roots of organized local governance in India trace back to the historical "Janpadi and Pancha" system. Looking ahead to independent India, the recommendations of the 1958 Balwant Rai Mehta Committee laid the groundwork for a three-tier structure for rural self-governance, ultimately materializing in the 73rd and 74th amendments.
3. Appointment and Tenure of CAG
- The President of India appoints the CAG.
- The appointment is made based on the recommendation of the Prime Minister, who consults with other authorities
- The President is required to consult with:
- The Speaker of the Lok Sabha (House of the People).
- The Vice President, who is also the Chairman of the Rajya Sabha (Council of States).
- The Leader of the Opposition in the Lok Sabha.
- The qualifications for the appointment of the CAG are similar to those of a judge of the Supreme Court
- The CAG holds office for a term of six years from the date they assume office or until they attain the age of 65, whichever is earlier.
- The CAG can be removed from office only in the manner and on the grounds prescribed for the removal of a judge of the Supreme Court
- The constitutional provisions related to the appointment of the CAG are primarily outlined in Article 148 of the Indian Constitution
4. Functions and Powers
- The primary function of the CAG is to audit the accounts related to the revenue and expenditure of the Government of India and state governments
- The CAG also audits the accounts of bodies and authorities substantially financed by the government
- The CAG audits the accounts of public sector undertakings and other entities where the government has a substantial financial stake
- The CAG audits the accounts of various statutory bodies and authorities to ensure compliance with financial regulations and legal requirements
- The audit reports prepared by the CAG are submitted to the President of India in the case of the central government and to the Governors in the case of state governments.
- These reports are then laid before each House of Parliament or the State Legislature.
- The CAG operates independently and is not subject to the control or influence of the executive in the performance of their duties.
- The CAG has the authority to access all records, books, and documents related to the accounts being audited
5. CAG of India vs CAG of the United Kingdom
| Subject | CAG of India | CAG of the United Kingdom |
|---|---|---|
| Constitutional Status | Constitutional authority | Not a constitutional office, part of the National Audit Office (NAO) |
| Appointment | Appointed by the President of India | Appointed by the monarch on the advice of the Prime Minister |
| Independence | Independent | Emphasizes independence but appointment process may raise questions |
| Functions | Audits government accounts, conducts performance audits | Audits central government departments, agencies, and public bodies |
| Reports | Submitted to the President/Governors, laid before Parliament/State Legislatures | Reports directly to the UK Parliament |
| Legal Framework | Outlined in the Constitution of India | Based on various statutes, operates under the Public Audit Act 2001 |
| Role in Public Accounts Committees (PACs) | Plays a crucial role in assisting PACs at central and state levels | Supports the UK Parliament's Public Accounts Committee |
6.How Independently does the Office of CAG Function?
- The office of the Comptroller and Auditor General (CAG) is designed to function independently to ensure impartiality and integrity in auditing government expenditures. The independence of the CAG's office is crucial for maintaining transparency, accountability, and public trust in the financial management of the government
- The CAG is a constitutional authority, and its independence is enshrined in the Constitution of India. This constitutional status provides a strong foundation for the CAG's autonomy.
- The CAG is appointed by the President of India based on the recommendations of the Prime Minister in consultation with other authorities. The appointment process aims to ensure the CAG's impartiality and independence
- The CAG holds office for a fixed term of six years or until the age of 65, whichever is earlier. This security of tenure helps insulate the CAG from external pressures
- The conditions of service of the CAG, once appointed, cannot be varied to their disadvantage. This ensures that the CAG can perform their duties without fear of adverse changes in service conditions
- The CAG operates independently and is not subject to the control or influence of the executive in the performance of their duties. This separation is crucial for conducting objective and unbiased audits.
7.What is the Public Accounts Committee (PAC)?
- The Public Accounts Committee (PAC) is a parliamentary committee that plays a crucial role in overseeing government expenditures and ensuring financial accountability.
- Its primary function is to examine the audit reports prepared by the supreme audit institution (such as the Comptroller and Auditor General, CAG) and to scrutinize the government's financial transactions, policies, and programs.
- Members of the PAC are typically drawn from the legislature and reflect the political composition of the parliament or legislative body
- The PAC is headed by a Chairperson, who is usually a member of the opposition party to ensure impartiality.
- The primary mandate of the PAC is to examine the audit reports produced by the supreme audit institution, which highlights instances of financial irregularities, inefficiencies, or non-compliance with laws and regulations.
- The PAC scrutinizes government expenditures to ensure that public funds are used efficiently and effectively
- The PAC often follows up on its recommendations to ensure that the government has taken appropriate actions in response to identified issues
- The PAC enhances public accountability by holding the government accountable for its financial decisions and ensuring transparency in the use of public funds
- The PAC plays a critical role in upholding democratic principles by ensuring that public funds are utilized in the best interest of the citizens and that the government is held accountable for its financial decisions
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For Prelims: Indian Polity and Governance For Mains: General Studies II: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies |
Source: indianexpress
GROSS DOMESTIC PRODUCT (GDP)
1. Context
India’s latest GDP figures position the Indian economy to be producing at a significantly higher level than last year, emphasised by the ₹48.63 lakh crore output projected to be realised in a single quarter.
2. Gross Domestic Product (GDP)
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It is often used as a measure of a country's economic health
GDP provides insight into the overall economic health of a nation and is often used for comparing the economic output of different countries.
There are three primary ways to calculate GDP:
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Production Approach (GDP by Production): This approach calculates GDP by adding up the value-added at each stage of production. It involves summing up the value of all final goods and services produced in an economy.
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Income Approach (GDP by Income): This approach calculates GDP by summing up all the incomes earned in an economy, including wages, rents, interests, and profits. The idea is that all the income generated in an economy must ultimately be spent on purchasing goods and services.
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Expenditure Approach (GDP by Expenditure): This approach calculates GDP by summing up all the expenditures made on final goods and services. It includes consumption by households, investments by businesses, government spending, and net exports (exports minus imports).
3. Measuring GDP
GDP can be measured in three different ways:
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Nominal GDP: This is the raw GDP figure without adjusting for inflation. It reflects the total value of goods and services produced at current prices.
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Real GDP: Real GDP adjusts the nominal GDP for inflation, allowing for a more accurate comparison of economic performance over time. It represents the value of goods and services produced using constant prices from a specific base year.
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GDP per capita: This is the GDP divided by the population of a country. It provides a per-person measure of economic output and can be useful for comparing the relative economic well-being of different countries.
The GDP growth rate is the percentage change in the GDP from one year to the next. A positive GDP growth rate indicates that the economy is growing, while a negative GDP growth rate indicates that the economy is shrinking
The GDP is a useful measure of economic health, but it has some limitations. For example, it does not take into account the distribution of income in an economy. It also does not take into account the quality of goods and services produced.
Despite its limitations, the GDP is a widely used measure of economic health. It is used by economists, policymakers, and businesses to track the performance of an economy and to make decisions about economic policy
4. Gross Value Added (GVA)
Gross Value Added (GVA) is a closely related concept to Gross Domestic Product (GDP) and is used to measure the economic value generated by various economic activities within a country. GVA represents the value of goods and services produced in an economy minus the value of inputs (such as raw materials and intermediate goods) used in production. It's a way to measure the contribution of each individual sector or industry to the overall economy.
GVA can be calculated using the production approach, similar to one of the methods used to calculate GDP. The formula for calculating GVA is as follows:
GVA = Output Value - Intermediate Consumption
Where:
- Output Value: The total value of goods and services produced by an industry or sector.
- Intermediate Consumption: The value of inputs used in the production process, including raw materials, energy, and other intermediate goods.
5. GDP vs GNP
Gross Domestic Product (GDP) and Gross National Product (GNP) are both important economic indicators used to measure the size and health of an economy, but they focus on slightly different aspects of economic activity and include different factors. Here are the key differences between GDP and GNP:
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Definition and Scope:
- GDP: GDP measures the total value of all goods and services produced within a country's borders, regardless of whether the production is done by domestic or foreign entities. It only considers economic activities that take place within the country.
- GNP: GNP measures the total value of all goods and services produced by a country's residents, whether they are located within the country's borders or abroad. It takes into account the production of residents, both domestically and internationally.
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Foreign Income and Payments:
- GDP: GDP does not consider the income earned by residents of a country from their economic activities abroad, nor does it account for payments made to foreigners working within the country.
- GNP: GNP includes the income earned by a country's residents from their investments and activities abroad, minus the income earned by foreign residents from their investments within the country.
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Net Factor Income from Abroad:
- GDP: GDP does not account for net factor income from abroad, which is the difference between income earned by domestic residents abroad and income earned by foreign residents domestically.
- GNP: GNP includes net factor income from abroad as part of its calculation.
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Foreign Direct Investment:
- GDP: GDP does not directly consider foreign direct investment (FDI) flowing into or out of a country.
- GNP: GNP considers the impact of FDI on the income of a country's residents, both from investments made within the country and from investments made by residents abroad.
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Measurement Approach:
- GDP: GDP can be calculated using three different approaches: production, income, and expenditure approaches.
- GNP: GNP is primarily calculated using the income approach, as it focuses on the income earned by residents from their economic activities.
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For Prelims: GDP, GVA, FDI, GNP
For Mains: 1.Discuss the recent trends and challenges in India's GDP growth
2.Examine the role of the service sector in India's GDP growth
3.Compare and contrast the growth trajectories of India's GDP and GNP
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Previous Year Questions
1.With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (b)
2.A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (a)
Previous year UPSC Mains Question Covering similar theme: Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC CSE GS3, 2020) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE GS3, 2021) |
Source: indianexpress
OPEN MARKET OPERATIONS (OMO)
1. Context
In view of the evolving liquidity conditions and the outlook, the Reserve Bank of India (RBI) on Friday announced to conduct Open Market Operation (OMO) purchases of government securities of ₹1,00,000 crore and a three-year USD/INR Buy Sell swap of $5 billion this month to inject durable liquidity into the system.
2. Open market operations by RBI
- Open market operations (OMOs) are a monetary policy tool used by central banks to influence the money supply and interest rates.
- It involves buying and selling government securities in the open market. When the central bank buys government securities, it injects money into the economy. When it sells government securities, it withdraws money from the economy.
- Open market operations (OMOs) are the buying and selling of government securities in the open market by the Reserve Bank of India (RBI) to influence the money supply and interest rates.
- When the RBI buys government securities, it injects money into the economy. This is because the RBI pays for the securities using cash.
- This increase in the money supply can lead to lower interest rates and higher economic growth.
- When the RBI sells government securities, it withdraws money from the economy. This is because the RBI receives cash in exchange for the securities.
- This decrease in the money supply can lead to higher interest rates and lower economic growth.
2.1. Examples of OMOs by RBI
The RBI uses OMOs to achieve its monetary policy objectives, which are to maintain price stability and promote sustainable economic growth. For example, the RBI may conduct OMOs to:
- inject liquidity into the economy to support economic growth during a recession.
- Withdraw liquidity from the economy to control inflation.
- Manage the exchange rate of the rupee.
The RBI has used OMOs to inject liquidity into the economy to support economic growth. For example, in March 2020, the RBI conducted a series of OMOs to inject ₹30,000 crores into the economy in response to the COVID-19 pandemic.
The RBI has also used OMOs to withdraw liquidity from the economy to control inflation. For example, in October 2022, the RBI announced that it would conduct OMO sales of government bonds to withdraw ₹50,000 crores from the economy.
2.2. Advantages and Disadvantages of OMOs by RBI
- OMOs are a flexible tool that the RBI can use to quickly and precisely adjust the money supply and interest rates.
- They are also a relatively transparent tool, as the RBI typically announces its OMO plans in advance.
- OMOs can be complex and difficult to understand. They can also be less effective in influencing the economy during times of financial market stress.
- OMOs are a powerful tool that the RBI can use to manage the money supply and interest rates. They are an important part of the RBI's monetary policy toolkit.
3. Monetary Policy Committee
The Monetary Policy Committee (MPC) is a committee or group responsible for setting the monetary policy of a country, including key interest rates. It is an important institution in many central banks worldwide, including the Reserve Bank of India (RBI).
Key features and functions of a Monetary Policy Committee:
- The MPC typically consists of a group of experts, including both members from the central bank and external members. In the case of the RBI, the MPC is composed of six members: three from the RBI, including the RBI Governor, and three external members appointed by the Government of India.
- The primary function of the MPC is to make decisions regarding the central bank's monetary policy, including setting key policy interest rates. This group assesses various economic indicators, financial market conditions, and other factors to make informed decisions.
- Many MPCs, including the RBI's MPC, operate under a framework of inflation targeting. This means that their primary objective is to achieve and maintain a specific inflation rate within a target range. The committee uses interest rate adjustments to control inflation.
- MPCs aim to operate transparently and communicate their decisions to the public. They often release statements explaining the rationale behind their decisions and their economic outlook.
- The independence of the MPC from political interference is crucial. It allows the committee to make decisions solely based on economic and financial considerations, free from political pressures.
- MPCs typically meet at regular intervals, such as every quarter or month, to review the economy, assess the impact of previous policy decisions, and make adjustments if necessary.
- MPCs engage in economic forecasting to anticipate future economic conditions, including inflation trends. These forecasts guide their monetary policy decisions.
- One of the primary tools at the disposal of an MPC is setting key policy interest rates. For example, the RBI's MPC sets the repo rate (the rate at which banks can borrow money from the central bank) and the reverse repo rate (the rate at which banks can lend money to the central bank).
- Decisions made by the MPC can have a significant impact on financial markets. Changes in policy rates can affect interest rates, exchange rates, and asset prices.
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For Prelims: RBI, Monetary Policy Committee, COVID-19 pandemic, Open market operations, interest rates, inflation,
For Mains:
1. Explain the concept of Open Market Operations (OMO) as a monetary policy tool. How do OMOs impact the money supply and interest rates in an economy? Provide examples of OMOs conducted by the Reserve Bank of India (RBI) to achieve its monetary policy objectives. (250 Words)
2. Explore the concept of inflation targeting and how it influences the primary objective of the Monetary Policy Committee. Discuss the significance of interest rate adjustments in controlling inflation. (250 Words)
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Previous Year Questions
1. Consider the following statements: (UPSC 2021)
1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his natural power from the RBI Act.
Which of the above statements is/are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: C
2. Concerning the Indian economy, consider the following: (UPSC 2015)
Which of the above is/are component(s) of Monetary Policy? (a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4 Answer: C 3. An increase in Bank Rate generally indicates: (UPSC 2013) (a) Market rate of interest is likely to fall. (b) Central bank is no longer making loans to commercial banks. (c) Central bank is following an easy money policy. (d) Central bank is following a tight money policy. Answer: D 4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017) 1. It decides the RBI's benchmark interest rates. 2. It is a 12-member body including the Governor of RBI and is reconstituted every year. 3. It functions under the chairmanship of the Union Finance Minister. Select the correct answer using the code given below: A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only Answer: A 5. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. An increase in the Nominal Effective Exchange Rate (NEER) indicates the appreciation of the rupee.
2. An increase in the Real Effective Exchange Rate (REER) indicates an improvement in trade competitiveness.
3. An increasing trend in domestic inflation relative to inflation in other countries is likely to cause an increasing divergence between NEER and REER.
Which of the above statements are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: C
6. In the context of vaccines manufactured to prevent COVID-19 pandemic, consider the following statements: (UPSC 2022)
1. The Serum Institute of India produced COVID-19 vaccine named Covishield using mRNA platform.
2. Sputnik V vaccine is manufactured using vector based platform.
3. COVAXIN is an inactivated pathogen based vaccine.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
7. In the context of Indian economy, 'Open Market Operations' refers to (UPSC 2013)
A. borrowing by scheduled banks from the RBI
B. lending by commercial banks to industry and trade
C. purchase and sale of government securities by the RBI
D. None of the above
Answer: C
8. If the interest rate is decreased in an economy, it will (UPSC 2014)
A. decrease the consumption expenditure in the economy
B. increase the tax collection of the Government
C. increase the investment expenditure in the economy
D. increase the total savings in the economy
Answer: C
9. With reference to the Indian economy, consider the following statements: (UPSC 2022)
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
10. Read the following passage and answer the question that follows. Your answers to these items should be based on the passage only.
Policymakers and media have placed the blame for skyrocketing food prices on a variety of factors, including high fuel prices, bad weather in key food producing countries, and the diversion of land to non-food production. Increased emphasis, however, has been placed on a surge in demand for food from the most populous emerging economics. It seems highly probable that mass consumption in these countries could be well poised to create a food crisis.
With reference to the above passage, the following assumptions have been made: (UPSC 2021)
1. Oil producing countries are one of the reasons for high food prices.
2. If there is a food crisis in the world in the near future, it will be in the emerging economies. Which of the above assumptions is/are valid?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: D
11. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)
1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.
Which of the statements given above are correct?
A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3
Answer: B
12. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)
A. Controlling the inflation in India is the responsibility of the Government of India only
B. The Reserve Bank of India has no role in controlling the inflation
C. Decreased money circulation helps in controlling the inflation
D. Increased money circulation helps in controlling the inflation
Answer: C
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Source: Indianexpress
