1. India -EU Free Trade Agreement
GS PAPER II-IR
Context : India and the EU have finalized a landmark Free Trade Agreement (FTA) after nearly 20 years of negotiations, announced on January 27, 2026, during Ursula von der Leyen’s visit to Delhi. Called the “mother of all deals” by von der Leyen, it creates a $27 trillion market covering a quarter of global GDP and 2 billion people with unprecedented tariff liberalization on 96-99% of goods.
- Finalized amid US protectionism under President Trump, providing economic counterbalance.
- PM Modi hailed it as historic, boosting India’s global trade amid supply chain shifts.
What Happened
- EU and India concluded FTTA/FTA negotiations started in 2007, with key rounds in 2025.
- Agreement eliminates/reduces tariffs on 96.6% of EU exports to India by value, doubling EU exports by 2032.
Mother of All Agreements
- Massive economic size: Combines EU’s 27 nations and India’s 1.4B people, 25% global GDP.
- Unprecedented liberalization: 90-99% tariff lines covered, slashing India’s high duties (up to 150%).
EU Gains
Tariff Cuts on Agri-food
| Product | Current Tariff | Future Tariff |
| Wine (premium) | 150% | 20% |
| Wine (medium) | 150% | 30% |
| Beer | 110% | 50% |
| Olive oil/veg oils | Up to 45% | 0% |
| Chocolates/biscuits | Avg 36% | 0% |
- Opens India’s huge market for EU wines, cheeses, processed foods previously blocked by high tariffs.
Other Benefits
- Auto tariffs cut from 110% to 10% (quota 250K vehicles/year); parts eliminated in 5-10 years.
- Near-zero duties on 92% Indian tariff lines for EU spirits, textiles, pharma.
India Gains
Export Boost
- Textiles, pharma, gems/jewelry, autos get duty-free/near-zero EU access over 7 years.
- Boosts exports to EU (India’s largest partner), aligning with Make in India/PLI schemes.
Ending Disadvantages
- Counters FTAs India lacks with others; integrates into EU value chains as China+1 hub.
- Cuts EU non-tariff barriers, attracts €70B+ FDI yearly with protections.
Strategic Significance
- Counterweights US tariffs/protectionism post-Trump reelection.
- De-risks global supply chains, enhances defense/security ties, eases skilled worker mobility.
Timeline
- Legal scrub: 5-6 months; formal signing soon after.
- Implementation: Within 1 year, phased tariff cuts over 7-10 years
2. Halwa Ceremony
context : Finance Minister Nirmala Sitharaman participated in the traditional Halwa ceremony.
- Event marked the final stage of Union Budget 2026-27 preparation.
- Ceremony held on Tuesday (January 27, 2026) at North Block, New Delhi.
- Budget to be presented in Lok Sabha on February 1, 2026.
What is Halwa Ceremony
- Annual tradition in Finance Ministry before Union Budget presentation.
- Involves preparing and serving traditional Indian sweet dish ‘halwa’.
- Held in large vessel (kadhai) at North Block basement.
- Signals start of printing Budget documents.
Meaning and Symbolism
- Halwa represents sweetness for positive outcomes in important tasks.
- Symbolizes gratitude to officials for hard work on Budget.
- Reflects equality and collective responsibility among team.
- Marks final confidential phase with no major changes allowed.
What is Lock-in Period
- Strict isolation starts right after Halwa ceremony.
- Officials stay confined in North Block premises.
- No external contact or mobile use to prevent leaks.
- Ensures secrecy until Budget is presented on February 1.
Purpose of Ceremony
- Celebrates completion of Budget drafting work.
- Initiates secure printing process in controlled environment.
- Maintains confidentiality of tax, spending and policy details.
- Honors team effort before public announcement.
Who Participated in Halwa Ceremony
- Finance Minister Nirmala Sitharaman led the event.
- Minister of State for Finance Pankaj Chaudhary present.
- Secretaries of all Finance Ministry departments attended.
- Senior officials and staff involved in Budget preparation joined.
3. “Enhancing Circular Economy in End-of-Life Vehicles (ELVs)
NITI Aayog’s report warns that India’s end-of-life vehicles (ELVs) could surge to 50 million by 2030 from 23 million in 2025, creating pollution, safety, and waste challenges.
ELV Definition
- ELVs include vehicles no longer roadworthy, invalidly registered, or owner-declared waste.
- Focuses on recovering steel/resources while preventing unscientific dismantling hazards.
Major Trends
- ELV numbers doubling rapidly due to vehicle fleet growth and aging stock.
- BS-I vehicles pollute up to 8x more than BS-VI compliant ones.
- 98 million tonnes steel recoverable from 2005-2023 vehicles.
Infrastructure Shortfall
- Need 500 ATS by 2027; only 156 operational by Sep 2025.
- Formal RVSFs scrapped just 72,000 ELVs in FY24-25 vs informal’s 2-3 lakh yearly.
Policy Framework
- 2021 Scrappage Policy mandates fitness tests: private >20 yrs, commercial >15 yrs.
- RVSF Rules 2021 enable scrapping certificates; EPR Rules 2025 set OEM steel recovery targets.
- SASCI scheme allocates ₹2000 Cr for ATS setup; ATS mandatory for transport vehicles since Oct 2024.
Core Challenges
- Informal scrappers outbid formals by ₹15-20K (e.g., ₹38K vs ₹23K for Dzire).
- ATS/RVSFs uneven: Gujarat has 56 ATS, but NE states near zero.
- De-registration cumbersome: Ghost vehicles persist in VAHAN without penalties.
- RVSFs at <20% capacity, taking ~10 yrs to break even due to low inflows.
- ATS integrity issues: Fake certificates issued without vehicle checks.
Key Suggestions
- One ATS per district; PSU-private models for remote RVSFs.
- Formalize informals via Udyam Assist, waive legacy green liabilities.
- Tighten EPR: 35% steel recovery by 2035, exclude production scrap.
- Digital fixes: Aadhaar-linked transfers, CoD-mandatory de-registration.
- Add carbon credits (₹2000/vehicle) and formalize ELV spare parts trade.
4. The solution to the falling rupee lies in diplomacy
GS PAPER III-ECONOMY
The Indian rupee has fallen to record lows past ₹91/$ in January 2026 despite 7%+ GDP growth, driven by FPI outflows of $1.7B in equities amid global risk aversion.
Strong Economy vs. Falling Rupee
- Growth and Inflation: The economy is performing well with a projected growth rate of 7.4% and inflation at a low 1.33%.
- Manageable Deficits: The current account deficit is modest at 0.76% of GDP, significantly lower than the previous year.
- Currency Performance: Despite these strong fundamentals, the Rupee has fallen by about 6% since April 2025.
The Real Culprit: Capital Outflows
- Trade Deficit Stability: The trade deficit remains manageable and is not the primary driver of the currency’s decline.
- Negative Capital Flow: Net capital inflows turned from $10,615 million surplus to a $3,900 million outflow in late 2025.
- Geopolitical Influence: Outflows are driven by market fears following high U.S. tariffs and a perceived hostile trade stance.
Why This is a Diplomatic Issue
- Non-Economic Factors: Unlike 2022 interest rate hikes, current pressure stems from U.S. political decisions and trade threats.
- Tariff Weaponization: Diplomacy is required because economic remedies cannot solve issues caused by geopolitical “tariff weaponization”.
- Negotiation Stalemate: Ongoing negotiations with the U.S. have yet to reach an agreement, perpetuating market uncertainty.
The Role of the RBI
- Volatility Management: The RBI intervenes to reduce sudden fluctuations and ensure the Rupee slides smoothly to its natural level.
- No Fixed Peg: The RBI’s goal is not to peg the currency to a specific value but to minimize the cost of sudden shocks.
- Limitations: The RBI can only “smoothen” the fall; it cannot prevent depreciation caused by fundamental external pressures.
Why Devaluation is Not the Solution
- Limited Export Gains: Rising import content in Indian exports means devaluation provides very little actual stimulus to exporters.
- Costly Imports: A weaker Rupee raises the price of essential imports like crude oil, which fuels domestic inflation.
- Low Inflation Differential: Devaluation is typically for high-inflation countries; India’s inflation is currently lower than in the West.
- Currency Manipulation Risks: Deliberately keeping a currency undervalued can lead to international charges of currency manipulation.
The Vicious Cycle Risk
- Accelerated Outflows: Every fall in the Rupee’s value can trigger even faster capital outflows as investor confidence wavers.
- Stock Market Impact: Outflows caused by the sale of stocks have a direct, negative impact on the domestic stock market.
The Way Forward
- Diplomatic Resolution: Trade negotiators must reach an early understanding with the U.S. to stabilize market sentiment.
- RBI’s Transitional Role: The central bank must continue to moderate the pace of the fall until a diplomatic solution is reached.
5. ‘ASC ARJUN’
Indian Railways has deployed ‘ASC ARJUN’, an indigenously developed humanoid robot at Visakhapatnam station to boost security and passenger services.
Robot Overview
- AI-powered humanoid assisting RPF in surveillance, crowd control, and passenger aid.
- First such initiative across India’s railway network.
Development Details
- Fully designed in Visakhapatnam by Indian Railways team using local tech.
- Took over a year of dedicated effort for completion.
Deployment Site
- Launched at Visakhapatnam Railway Station, East Coast Railway zone.
- Unveiled by IG RPF Alok Bohra and DRM Lalit Bohra.
Primary Objectives
- Enhance safety/security, cut manpower needs, improve service efficiency.
- Supports peak-hour operations via tech integration.
Core Features
- FRS for intrusion detection; AI crowd monitoring with real-time RPF alerts.
- Fire/smoke sensors for emergency response.
- Multilingual announcements (English, Hindi, Telugu) for passenger guidance.
- Semi-autonomous path navigation with obstacle avoidance for 24/7 patrols.
- Interactive gestures: Namaste to passengers, salutes to RPF staff.
Strategic Value
- Showcases Railways’ innovation and Atmanirbhar push in advanced tech.
- Strengthens safety at busy stations via proactive monitoring.
6. A spark to drive Indias e-LVC transition
GS paper III-S&T
Context : India’s logistics sector relies heavily on Light Commercial Vehicles (LCVs) for e-commerce last-mile delivery, now targeted by new 2025 fuel efficiency standards for 2027-2032 to cut emissions.
LCV Role in Emissions
- LCVs form 48% of commercial goods fleet in 2024, key to freight and urban pollution.
- Average emissions at 147.5 g CO2/km; 2% electrification prevents rise to 150 g CO2/km.
Policy Shift
- BEE proposed mandatory LCV fuel standards in July 2025, ending regulatory exemption.
- Target: 115 g CO2/km, crossing threshold where EVs cheaper than ICE upgrades.
Industry Pushback
- Automakers seek exemptions citing price-sensitive market and upgrade costs.
- Government rejects dilution, learning from slow passenger car EV adoption (3%).
Economic Factors
- Conventional LCVs under ₹10 lakh vs costlier electrics despite lower running costs.
- No national schemes for LCVs; state incentives uneven, hurting scale-up.
Incentives Structure
- Super credits for EVs (zero CO2 compliance value) to spur early adoption.
- Hybrids/ICE also get credits, risking delay in full BEV shift.
Key Risks
- Weak targets favor ICE tweaks over electrification investments.
- Phasing super credits only for EVs while keeping hybrid support entrenches fossils.
Path Ahead
- Need stringent, time-bound BEV-focused incentives beyond regulation.
- Align policy to avoid passenger car pitfalls of slow clean mobility transition.
7. 6th ASEAN–India Digital Ministers’ Meeting
Context :India and Vietnam co-chaired the 6th ASEAN–India Digital Ministers’ Meeting virtually, themed “Adaptive ASEAN: From Connectivity to Connected Intelligence,” focusing on digital cooperation among 11 nations.
Meeting Overview
- Annual forum for Telecom/Digital Ministers from ASEAN states and partners (Australia, China, India, US).
- Reviews progress on joint digital initiatives and sets future collaboration agendas.
Key Outcomes
- Adopted ASEAN–India Joint Statement on Advancing Digital Transformation (2024).
- Reviewed 2025 Digital Work Plan; welcomed new 2026 ASEAN-India Digital Work Plan.
- Operationalized ASEAN-India Fund for Digital Future to support cybersecurity/tech projects.
Focus Areas
- Strengthens ties in Digital Public Infrastructure, Fintech, Cybersecurity, AI, capacity building.
- Sustainable financing for digital transformation across ASEAN-India partnership.
India’s Contributions
- Showcased 4G coverage, fastest 5G rollout, BharatNet rural broadband, mobile manufacturing hub.
- Offered DPI expertise (Aadhaar, UPI, DigiLocker) and Sanchar Saathi initiative sharing.
- Highlighted IndiaAI Mission for Safe/Trusted AI collaboration on standards and use cases.
