Prelims-Pinpointer-for-02-12-2025 Current Affairs notes

Prelims Oriented.

Masala Bonds

Context: Enforcement Directorate issued show-cause notice to Kerala CM Pinarayi Vijayan for alleged FEMA violations linked to KIIFB masala bond, involving ₹466.91 crore in prohibited land purchases.

Masala Bonds

• Overview

• • Masala Bonds are rupee-denominated debt instruments issued outside India by Indian entities.
  • They allow government and private companies to raise funds in Indian Rupees from foreign investors.
  • Named to promote Indian culture globally, with “masala” symbolising Indian spices.
  • The first Masala Bond was issued in 2014 by International Finance Corporation (IFC) for Indian infrastructure.

• Key Features

• • Issued in INR, so exchange rate risk is borne by investors, not issuers.
  • Used by Indian entities such as HDFC, NTPC and Indiabulls Housing to raise external capital.
  • Eligible investors include foreign individuals and institutions seeking exposure to Indian assets.
  • As per RBI norms, bonds up to USD 50 million must have a minimum maturity of 3 years; above USD 50 million require 5 years.
  • Investors must belong to countries that are members of FATF or IOSCO.
  • Regional and multilateral financial institutions where India is a member may also subscribe.

• RBI Mandate: Prohibited Use

• • Masala Bond proceeds cannot be used for:
    • Real estate activities, except integrated townships and affordable housing.
    • Activities barred under FDI guidelines.
    • Purchase of land.
    • Investing in capital markets or domestic equity.

• Benefits

• • Useful for refinancing rupee loans and non-convertible debentures.
  • Supports infrastructure development such as townships.
  • Provides working capital and portfolio diversification for borrowers.
  • Offers higher interest returns to foreign investors and boosts investor confidence.
  • Encourages foreign investment and strengthens the domestic bond market.
  • Capital gains from INR appreciation are tax-exempt.

• Shortcomings

• • Frequent RBI rate cuts may reduce investor interest.
  • Bonds can be used only for restricted sectors.
  • Emerging markets face currency risks, discouraging some investors.
  • Possibility of higher taxation reduces appeal.

Conclusion

• Masala Bonds are a viable tool for financing India’s development projects and attracting foreign capital.
• However, excessive dependence may affect sovereign ratings and heighten external debt vulnerabilities.

Cesses and Surcharges

Context: Centre introduced Bills in Parliament raising excise duty on tobacco products and imposing cess on pan masala manufacture to replace GST compensation cess revenue discontinuing soon.

More in News:

• Finance Minister Nirmala Sitharaman tabled Health Security se National Security Cess Bill, 2025 and Central Excise (Amendment) Bill, 2025.
• GST compensation cess introduced in 2017 to compensate States for losses due to GST implementation for five years; proceeds fell short during COVID-19 pandemic years 2020-21, 2021-22.
• Centre borrowed money to compensate States during pandemic; compensation cess on tobacco to be discontinued once government repays interest on loans within next few months.
• Central Excise Amendment Bill aims to give government “fiscal space” to increase Central excise duty rates on tobacco and tobacco products to protect tax incidence after cess removal.
• Health Security cess proposes to augment funding for health and national security through levy on “machines installed or processes undertaken” in pan masala manufacture and other notified goods.
• Cess linked to production capacity of machines rather than quantity actually produced; Bill provides for taxable persons to self-declare all machines or processes for each factory or premises location.
• GST rates on tobacco products were reduced significantly in 2017 to allow for compensation cess levy without large impact on tax incidence at that time during GST implementation.

Cesses and Surcharges

• Constitutional Basis

• • • Article 271 empowers the Union government to levy cesses and surcharges for Union purposes.
    • These levies are imposed over and above existing taxes collected by the Centre.

• Cess: Meaning and Features

• • A cess is essentially a tax on tax, calculated on the total tax liability including surcharge.
  • It is collected for a specific, pre-identified public purpose, and the cess is named after its objective.
  • Common examples include Infrastructure Cess, Krishi Kalyan Cess, Swachh Bharat Cess, Education Cess, and Crude Oil Cess.
  • Its proceeds form part of the Consolidated Fund of India (CFI) but are earmarked for the designated purpose.

• Surcharge: Meaning and Features

• • A surcharge is an additional charge on income tax, imposed on individuals, companies, or entities within specified tax brackets.
  • Unlike cess, a surcharge does not have a specific purpose attached; its use is determined by the Union government.
  • Surcharge proceeds also flow into the Consolidated Fund of India.

• Fiscal Implications

• • Revenue from both cesses and surcharges is not shared with States, unlike divisible taxes under Article 270.
  • This gives the Union exclusive control over these funds and increases fiscal space for central expenditure.
  • Such revenues frequently support centrally sponsored schemes, which offer indirect benefits to States without formal revenue devolution.

• Significance

• • Cesses ensure targeted funding for national priorities.
  • Surcharges help the Union expand revenue without altering the basic tax base.
  • However, increasing reliance on these levies reduces the tax pool shareable with States, influencing fiscal federalism debates.

Index of Industrial Production (IIP)

Context: Industrial production growth slowed to 14-month low of 0.4% in October 2025, pulled down by electricity and consumer non-durables contractions, and slow manufacturing growth.

Index of Industrial Production (IIP)

• Overview

• • The Index of Industrial Production (IIP) measures short-term changes in industrial production volume across India.
  • It reflects monthly growth or contraction in industrial activity, serving as a key economic indicator for policymakers.
  • Published by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation (MoSPI).

• Base Year and Evolution

• • The current base year is 2011–12, selected to align with the contemporary industrial structure.
  • Earlier revisions occurred from base years such as 1937, 1946, 1951, and 1956, reflecting evolving production patterns.

• Sectoral Composition (Weight-wise)

• • Manufacturing: 77.63% weight; covers 809 items—largest contributor to overall IIP.
  • Mining: 14.37% weight; includes 29 items.
  • Electricity: 7.99% weight; represented by one composite item.

• Eight Core Industries (Weight in IIP: 40.27%)

• • • Ranked by decreasing weightage:
      • Refinery Products
      • Electricity
      • Steel
      • Coal
      • Crude Oil
      • Natural Gas
      • Cement
      • Fertilisers

• These core sectors act as growth drivers and significantly influence overall industrial performance.

• Significance

• • Helps assess industrial health, guides monetary and fiscal policy, and supports forecasting.
  • Acts as a leading indicator for GDP growth trends in the industrial sector.

Heron Mark-2 UAV

Overview

• Heron Mark-2 is an upgraded version of the Heron Mark-1, used by the IAF since 2009.
• It offers longer range, higher endurance, and advanced sensor integration.

Technical Features

• Classified as a Medium-Altitude Long-Endurance (MALE) drone.
• Has a maximum range of 3,000 km and endurance of 24 hours.
• Equipped with Synthetic Aperture Radar (SAR) enabling all-weather and day-night imaging.
• Features an Electro-Optical/Infrared (EO/IR) camera for target identification and tracking.
• Includes a laser designator to mark targets for precision strikes.
• Comes with an advanced datalink system to relay real-time imagery and intelligence to ground stations.

Operational Advantages

• SAR ensures surveillance irrespective of clouds, terrain, or light conditions.
• EO/IR system strengthens reconnaissance and situational awareness.
• Real-time data transmission enhances decision-making and target engagement.
• Enables the IAF to track and neutralise enemy forces without risking pilots.
• Strengthens India’s intelligence, surveillance, and reconnaissance (ISR) architecture.

IAF’s Drone Fleet Context

• The IAF now operates multiple MALE UAVs, including the Heron Mark-1, Predator XP, and MQ-9 Reaper.
• The Heron Mark-2 represents a significant capability enhancement within this fleet.

Significance for the IAF

• Offers a major upgrade over its predecessor in sensors, range and endurance.
• Enhances India’s ability to perform persistent surveillance and precision targeting.
• Strengthens India’s edge in the modern battlespace, aligning with expanding unmanned warfare needs.
• Acts as a force multiplier, supporting both surveillance and strike mission profiles.

Sanchar Saathi App Pre-Installation Mandate

Background

• The Department of Telecommunications (DoT) has ordered all smartphone makers to pre-install the Sanchar Saathi app on devices sold from March 2026.
• Manufacturers must ensure that the app’s functionalities are not disabled or restricted on any device.

Purpose of the Mandate

• The order aims to verify authenticity of IMEIs used in mobile devices.
• It seeks to protect citizens from purchasing non-genuine or blacklisted handsets.
• The app will support easy reporting of telecom-resource misuse, strengthening the Sanchar Saathi platform launched in 2023.

Features and Functions of Sanchar Saathi

• Allows reporting of scam calls and identification of SIM cards registered in a user’s name.
• Enables users to remotely disable stolen phones using the CEIR facility.
• Helps check blacklisted or blocked IMEIs, critical in India’s large second-hand device market.
• Dashboard data shows 2.48 lakh complaints and 2.9 crore requests to view associated mobile connections.

Rationale Behind the Decision

• Spoofed or tampered IMEIs allow the same identifier to appear simultaneously across devices, complicating enforcement.
• Stolen or blacklisted smartphones are frequently resold, causing financial loss and unintentionally making buyers abettors in crime.
• DoT emphasised that the app does not collect user data, addressing privacy concerns.

Link to SIM-Binding Directions

• DoT defended its separate order for SIM-binding on OTT communication apps.
• Noted that app accounts remain active even after SIM removal, enabling digital arrest scams, government-impersonation calls, and cross-border fraud.

Industry Response

• Some companies globally resist mandatory pre-installed apps.
• Apple earlier opposed TRAI’s spam-reporting app due to extensive permissions requirements.

Recent Impact

• Sanchar Saathi helped recover 50,000 stolen or lost devices in October, signalling growing effectiveness.

UMEED Portal

Introduction

• The Unified Waqf Management, Empowerment, Efficiency, and Development (UMEED) Portal is a centralised digital platform for registering Waqf properties across India.
• It aims to improve management, strengthen transparency, and streamline oversight of Waqf assets.

Legal and Administrative Framework

• Developed under Rule 8(2) of the Unified Waqf Management, Empowerment, Efficiency and Development Rules, 2025.
• Rules are framed under Section 3(r)(iv) of the Unified Waqf Management, Empowerment, Efficiency and Development Act, 1995.
• Nodal Ministry: Ministry of Minority Affairs.
• Linked to the Waqf (Amendment) Bill, 2025.
• State Waqf Boards will facilitate registrations.

Key Features

• All Waqf properties must be registered within six months of portal launch.
• Registration requires complete property details, including measurements and geotagged coordinates.
• Properties registered in women’s names cannot be classified as Waqf property.
• However, women, children, and economically weaker groups remain priority beneficiaries of Waqf assets.
• Properties facing technical issues may receive a 1–2 month extension for registration.

Post-Deadline Actions

• Properties not registered within the permitted timeline will be marked disputed.
• Such cases will be forwarded to the Waqf Tribunal for adjudication.

Beneficiary and Governance Features

• Portal uses Aadhaar-based authentication to verify beneficiary identity.
• Provides a fully online application and approval system managed by State/UT Waqf Boards.
• Supports Direct Benefit Transfer (DBT) for maintenance assistance directly into beneficiaries’ bank accounts.

Fugitive Economic Offenders Act, 2018

Context: Fifteen fugitive economic offenders declared wanted under FEOA as of October 31, 2025; nine linked to large-scale PSU bank frauds involving ₹26,645 crore principal amount.

Fugitive Economic Offenders Act, 2018

• Purpose and Objective

• • The Act aims to confiscate properties of economic offenders who leave India to avoid criminal prosecution.
  • Applies to offenders who refuse to return despite pending legal proceedings.

• Definition: Fugitive Economic Offender (FEO)

• • A person against whom an arrest warrant exists for offences listed under the Act.
  • The value involved must be ₹100 crore or more.
  • Listed offences include counterfeiting currency/stamps, cheque dishonour, money laundering, and fraudulent transactions harming creditors.

• Declaration of FEO

• • A Special Court under PMLA, 2002 examines applications for declaring an individual as an FEO.
  • After declaration, the court may confiscate all properties, including:
    • Proceeds of crime.
    • Benami assets.
    • Any other assets located in India or abroad.
  • All rights and titles vest in the Central Government free from encumbrances.
  • Government may appoint an administrator to manage or dispose of confiscated assets.

• Bar on Civil Claims

• • Civil courts/tribunals may prohibit an FEO from filing or defending civil claims.
  • Companies/LLPs where the FEO is a majority shareholder, promoter, or key managerial person may also face similar restrictions.
  • Authorities may provisionally attach properties while the case is pending.
• Powers under the Act
  • Enforcement officers under PMLA, 2002 exercise powers under this Act.
  • Powers mirror those of a civil court, including:
    • Searching individuals in possession of proceeds of crime.
    • Conducting searches of premises on suspicion of harbouring an FEO.
    • Seizing relevant documents or materials.

Supplementary, Excess and Additional Grants

Context: Centre sought Parliamentary approval for ₹41,455.39 crore additional expenditure and ₹90,812.17 crore budgetary re-prioritization for financial year 2025-26 through first Supplementary Demand for Grants.

More in News:

• Finance Minister Nirmala Sitharaman tabled first Supplementary Demand for Grants for 2025-26 totaling ₹1.32 lakh crore of additional expenditure on Monday in Parliament session.
• Additional spending of ₹41,455.39 crore involves new expenditure allocation, while ₹90,812.17 crore spending will come from savings made in other areas through budgetary reallocation measures.

Constitutional Basis

• Article 115 provides for supplementary, additional or excess grants.
• These arise when the amount authorised under Article 114 (Appropriation Act) is insufficient.

Supplementary Grants

• Supplementary Grants are sought when budgeted allocations fall short for approved government expenditure.
• The President places a demand before both Houses when authorised funds prove inadequate.
• These grants must be passed before the end of the financial year.
• They follow the same legislative procedure as the annual budget.
• Three types of supplementary demands:
  • Token Grant – a nominal amount (e.g., ₹1 lakh) to activate a new expenditure head.
  • Technical Grant – utilisation of savings within a ministry for another purpose requiring funds.
  • Substantive/Cash Grant – fresh allocation requiring additional withdrawal from the Consolidated Fund of India.

Excess Grants

• Raised when actual expenditure exceeds the amount approved by Parliament.
• The CAG reports such excesses to Parliament.
• The Public Accounts Committee (PAC) examines the excess expenditure and recommends corrective action.
• A Demand for Excess Grants is made after the expenditure occurs and is presented after the end of that financial year.
• Ministries of Finance usually initiate such demands.

Additional Grants

• Additional Grants are sought when new services or expenditures, not included in the Budget, become necessary.
• The President places such demands before both Houses of Parliament.
• These grants supplement the budget to accommodate unforeseen requirements.

Purchasing Managers’ Index (PMI)

Context: India’s manufacturing PMI fell to nine-month low of 56.6 in November from 59.2 in October, showing softer sales and production growth amid challenging market conditions.

Purchasing Managers’ Index (PMI)

• Overview

• • Purchasing Managers’ Index (PMI) measures business activity in manufacturing and services sectors.
  • It is a survey-based economic indicator, reflecting month-on-month changes in key business variables.
  • PMI is released separately for manufacturing and services, and a Composite PMI combines both.
  • It indicates whether market conditions are expanding, contracting, or stable, based on perceptions of purchasing managers.

• Types of PMI
  • Manufacturing PMI
  • Services PMI
  • Both provide early signals on economic performance before official statistical data is released.

• • How Manufacturing PMI is Calculated
    • Based on monthly surveys sent to a large sample of manufacturing firms.
    • Respondents answer factual questions on five key variables:
      • New orders
      • Output
      • Employment
      • Suppliers’ delivery times
      • Stock of items purchased

• Responses reflect whether conditions have improved, worsened, or remained unchanged from the previous month.

• Interpretation

• • PMI > 50 → Expansion in business activity.
  • PMI < 50 → Contraction in business activity.
  • The distance from 50 indicates the strength of expansion or contraction.
  • Comparison with previous months shows momentum in the sector.

• Releasing Agency

• • In India, PMI data is compiled and released by S&P Global, a leading provider of financial information and analytics.

Current Account Deficit (CAD)

Context: India’s current account deficit moderated to $12.3 billion (1.3% of GDP) in Q2 FY26 from $20.8 billion (2.2% of GDP) in Q2 FY25.

More in News:

• Merchandise trade deficit narrowed to $87.4 billion in Q2 FY26, compared to $88.5 billion in the same quarter last year.
• Net services receipts rose to $50.9 billion, up from $44.5 billion in Q2 FY25, driven by higher computer services and business services exports.
• Net primary income outgo increased sharply to $12.2 billion, from $9.2 billion, mainly due to higher investment income payments.
• Personal transfer receipts (largely overseas remittances) increased to $38.2 billion, compared to $34.4 billion last year.
• FDI recorded a net inflow of $2.9 billion, reversing the net outflow of $2.8 billion seen in the same quarter last year.
• Foreign Portfolio Investment (FPI) saw a net outflow of $5.7 billion, against a net inflow of $19.9 billion a year earlier.
• External Commercial Borrowings (ECBs) saw net inflows of $1.6 billion, lower than the $5 billion in the previous year.

Current Account Deficit (CAD)

• • Current Account Deficit (CAD) occurs when a nation’s imports of goods and services exceed its exports.
  • CAD and fiscal deficit together form twin deficits, influencing markets and macroeconomic stability.
  • Fiscal Deficit reflects the gap between government expenditure and revenue, indicating additional borrowing needs.

• Significance

• • CAD impacts overall economic stability, investor confidence, and market behaviour.
  • A lower CAD improves sentiment and strengthens the country’s external position.
  • A current account surplus signals net foreign exchange inflows and boosts currency value and reserves.

• Recent Trends in India

• • CAD in H1 of 2022–23 stood at 3.3% of GDP.
  • It moderated in Q3 of 2022–23 due to softer global commodity prices and reduced imports.

• Negative Impacts of CAD

• • Currency Depreciation: Excess imports weaken currency demand, causing depreciation and costlier imports.
  • Imported Inflation: A weaker currency raises import costs, lowering purchasing power.
  • Debt Rise: Inability to attract foreign investment may force the country to borrow, increasing external debt.

• How India Can Reduce CAD

• • Boost Exports: Provide incentives, simplify export procedures, and negotiate favourable trade agreements.
  • Promote Import Substitution: Encourage domestic manufacturing through incentives and selective tariffs.
  • Enhance Competitiveness: Invest in infrastructure, technology, and skill development to raise productivity.

• Conclusion

• • Recent CAD reduction, driven by lower imports, is encouraging but must persist to ensure external stability.
  • Maintaining a sustainable CAD is crucial for currency strength and long-term economic resilience.