17 May | Daily Current Affairs :India’s total trade deficit narrows to $6.6 billion as total exports grow And More

GS PAPER 1

Indian Economy

India’s overall trade deficit narrowed to $6.6 billion in May 2025, reflecting an improving external trade position driven by services exports growth and decline in oil imports. This development highlights both the resilience of India’s services sector and the impact of volatile global energy prices on the country’s trade dynamics.

Key Trends in the Data:

• Services Sector Leads the Way
  • Services exports rose by 9.4% to $32.4 billion, showcasing India’s strength in IT, business process outsourcing, and digital services.
  • The robust services performance helped offset weakness in merchandise trade.
• Merchandise Exports Under Pressure
  • Overall merchandise exports fell 2.2% to $38.7 billion.
  • Non-petroleum merchandise exports, however, grew by 5.1%, reflecting demand for engineering goods, pharmaceuticals, and electronics.
  • The decline in petroleum exports was attributed to the fall in global oil prices and market volatility.
• Import Trends and Oil Price Impact
  • Total merchandise imports fell by 1.7%, primarily due to a drop in oil imports.
  • Non-petroleum imports grew by 10%, possibly indicating strong domestic demand for capital and consumer goods.
  • Services imports saw a marginal growth of 1.5%, keeping overall import growth in check at just -1%.

Analysis and Implications:

• Oil Price Sensitivity:
  • India’s trade balance remains highly sensitive to global crude oil prices, given that oil constitutes a major share of imports and export products (like petroleum derivatives). A decline in prices helps reduce the import bill, but also reduces export earnings from refined products.
• Structural Strength in Services Trade:
  • The services sector continues to act as a buffer to the trade deficit, providing a consistent source of foreign exchange earnings. This is a strategic strength in India’s external sector and needs further support via policy incentives.
• Trade Diversification Imperative:
  • The fall in merchandise exports underlines the importance of diversifying export baskets and expanding into new markets, especially amidst global uncertainties like geopolitical tensions and slowing global demand.
• Short-Term Relief, Long-Term Vigilance:
  • While the narrowing of the trade deficit is a positive signal for macroeconomic stability, India must remain vigilant to external shocks, particularly related to energy security and geopolitical tensions in oil-producing regions.

Conclusion:

• India’s narrowed trade deficit in May 2025 reflects a favorable interplay of lower oil prices and strong services exports, but the data also underline the need for greater resilience in merchandise trade. Strategic planning to expand non-oil exports, enhance services competitiveness, and secure energy supply chains will be essential for sustaining long-term trade stability.

UPSC Mains Practice Question

Ques : India’s trade deficit narrowed in May 2025, aided by strong services exports and falling oil prices. Discuss the implications of these trends for India’s external sector stability and long-term trade policy.(250 words)

GS PAPER 2

International Relations

Prime Minister Narendra Modi’s participation in the G7 Outreach Summit in Calgary, Canada, marks a significant moment in India’s evolving multilateral diplomacy. It is his first major multilateral engagement following Operation Sindoor, India’s targeted counter-terror campaign in May 2025, and comes amid rising geopolitical tensions, including the Israel-Iran and Russia-Ukraine conflicts.

G7 Outreach: What It Signifies for India

• Platform for Strategic Dialogue:
  • Though India is not a G7 member, its consistent presence in outreach sessions underscores its growing influence in global decision-making and its strategic value to advanced economies.
• Post-Operation Sindoor Diplomacy:
  • This is Modi’s first multilateral appearance after Operation Sindoor. The summit provides a critical forum to shape international perception of India’s counter-terror posture and to garner support or neutrality from key global players.
• Reset in India-Canada Relations:
  • The visit holds additional weight as Modi is expected to engage with new Canadian PM Mark Carney, potentially resetting strained ties following accusations by former PM Justin Trudeau over the Nijjar assassination case. Carney’s recent remarks indicating openness toward India provide diplomatic room for rapprochement.

Key Themes and India’s Interests:

• Energy Security & Digital Transition:
  • India is expected to advocate for a balanced energy policy, emphasizing clean energy, affordability, and just transition, while pushing for digital inclusion, AI regulation, and quantum innovation in the Global South.
• Global Security and Counter-Terrorism:
  • Against the backdrop of Israel-Iran and Russia-Ukraine wars, India may reiterate its position on respect for sovereignty, strategic restraint, and zero tolerance for cross-border terrorism.
• Partnerships of the Future:
  • India will aim to enhance ties with G7 members and guest countries like Brazil, South Korea, and South Africa, promoting Global South solidarity, digital cooperation, and supply chain diversification.

Broader Implications:

• Strengthening Multilateral Clout:
  • India’s continued presence in G7 outreach reflects its growing stature as a bridge between developed and developing worlds, and as a voice for the Global South in multilateral forums.
• Narrative Control Post-Sindoor:
  • By attending a high-level summit soon after a controversial military operation, India seeks to control the narrative, project strength, and secure international legitimacy for its security concerns.
• Bilateral Diplomacy on the Sidelines:
  • The summit provides room for multiple bilateral meetings with G7 leaders, including possible discussions with U.S., France, and EU on defence cooperation, tech partnerships, and Indo-Pacific strategy.

Conclusion:

• The 2025 G7 Outreach Summit is not just a diplomatic event but a strategic arena where India aims to balance national security concerns, promote technological and economic cooperation, and revive strained bilateral ties, particularly with Canada. As global geopolitics grows more fractured, India’s active engagement at such forums will be crucial in shaping new power alignments, defending its sovereign interests, and projecting itself as a responsible global actor.

UPSC Mains Practice Question

Ques: India’s participation in global groupings like the G7 Outreach Summit reflects its rising diplomatic profile. Discuss the strategic importance of such engagements for India in the current global context.(250 words)

GS PAPER 3

International Relations

The Financial Action Task Force (FATF) – the world’s premier inter-governmental body focused on combatting money laundering and terror financing – has issued a rare and strong condemnation of the April 22, 2025 terrorist attack in Pahalgam, Jammu & Kashmir. Significantly, the FATF is set to release a report that, for the first time, will identify state sponsorship as a distinct source of terror financing – a move seen as highly relevant to India’s long-standing concerns about Pakistan’s role in cross-border terrorism.

Why This Matters:

• Rare FATF Condemnation:
  • This is only the third time in a decade that the FATF has publicly condemned a terrorist attack – underlining the severity and international concern surrounding the Pahalgam incident.
• Spotlight on State-Sponsored Terror:
  • The forthcoming FATF report is expected to explicitly acknowledge state-backed entities as terror financiers. This legitimizes India’s repeated assertions that Pakistan has enabled and supported terrorist groups operating from its territory.
• Policy Shift in FATF Approach:
  • Historically focused on non-state actors and illicit financial networks, the FATF’s move to consider state complicity represents a paradigm shift in how terror finance is conceptualized and regulated internationally.
• Strategic Leverage for India:
  • India, which had submitted dossiers urging greater scrutiny of Pakistan’s financing networks, is now better placed to press for its re-inclusion in the FATF ‘grey list’ – a move that can economically and diplomatically constrain Islamabad.
• FATF’s Global Toolkit Expansion:
  • The introduction of a new Terror Financing Risk & Context Toolkit will allow FATF assessors to better identify jurisdiction-level risk, thereby reducing the scope for countries like Pakistan to mislead or obfuscate during evaluations.

Implications for India:

• Counter-Terror Diplomacy Enhanced:
  • India can leverage the FATF’s evolving stance to mobilize global consensus against countries providing material or financial support to terrorist organizations.
• Legitimacy of India’s Narrative:
  • The recognition of state-sponsored terrorism in a global regulatory framework bolsters India’s security narrative at international forums, including the UN and G20.
• Tightening Domestic Risk Assessment:
  • India’s National Risk Assessment (NRA) already acknowledges Pakistan’s state-sponsored terror as a major financing threat. This alignment with FATF gives credibility to India’s domestic intelligence and financial oversight apparatus.
• Impact on Indo-Pak Relations:
  • This development could further strain bilateral ties and add pressure on Pakistan to rein in terror networks, especially ahead of any FATF review of its compliance status.

Conclusion:

• The FATF’s rare and forceful condemnation of the Pahalgam terror attack and its planned report on state-sponsored terrorism signal a historic shift in global terror financing discourse. For India, this represents a strategic victory, enhancing its moral and diplomatic authority in the fight against terrorism and enabling greater international coordination on security and financial intelligence.

UPSC Mains Practice Question

Ques: The Financial Action Task Force (FATF) plays a critical role in global counter-terrorism efforts. Discuss the significance of its evolving stance on state-sponsored terrorism in the context of India’s national security concerns. (250 Words )

GS Paper 4

Culture & Geography

The Shipki La Pass in Himachal Pradesh’s Kinnaur district, once a thriving trade corridor between India and Tibet, has been reopened to domestic tourism for the first time without permits. While trade remains suspended, the move has revived aspirations for cultural exchange, economic revival, and religious tourism, with potential long-term strategic and diplomatic implications.

Historical Significance of Shipki La

• Ancient Trade Route: Shipki La has been a key trans-Himalayan trade route since at least the 15th century, connecting Bushahr State (India) with Guge (Tibet).
• Symbolic Trade Pact: Oral traditions narrate a sacred trade agreement, symbolizing enduring cross-border trust and cultural affinity.
  • The route was not merely economic but civilisational, shaping livelihoods, customs, and religious traditions for centuries.

Why Was Trade Discontinued?

• Trade through Shipki La ceased due to:
  • The Sino-Indian War of 1962
  • Doklam standoff and geopolitical distrust
  • The COVID-19 pandemic
• The pass, like those in Uttarakhand (Lipulekh) and Arunachal Pradesh (Nathu La), remains closed for formal commercial exchange with China.

Current Developments: Domestic Tourism Begins

• Himachal Pradesh removed the permit system, allowing Indian tourists to visit Shipki La using only Aadhaar.
• The local Indo-China Trade Association has formally urged the central government to reopen trade through the pass.
• The Chief Minister has committed to raising the issue with the Ministry of External Affairs (MEA).

Cultural and Spiritual Ties

• The region shares a Tibeto-Buddhist heritage with Tibet, including monastic traditions, festivals, and overlapping surnames.
• Reopening the route may support religious tourism to Mount Kailash-Mansarovar, potentially reducing the pilgrimage route by 14 days.
• The pass represents shared pastoral and spiritual lifestyles rather than political borders.

Economic and Strategic Implications

• Trade Volume: While not large in macroeconomic terms, trade via Shipki La sustains artisan communities and strengthens local economies.
• Key commodities included wool, yaks, devotional items, and gold from Tibet; grains, tools, spices, and copper from India.
• Tourism Potential: Could boost hospitality, infrastructure, and local youth employment.
• Strategic Soft Diplomacy: Encourages community-led trust-building in a tense geopolitical landscape — a “peace corridor” model.

Conclusion

• The reopening of Shipki La to tourism may seem minor in geopolitical terms, but it holds enormous cultural, economic, and diplomatic potential. It reflects a bottom-up model of diplomacy, where local identity, heritage, and livelihoods shape a narrative of connectivity over conflict. In the long run, such gestures can play a pivotal role in confidence-building measures (CBMs) along sensitive borders like India-China.

UPSC Mains Practice Question

Ques: Reopening the Shipki La Pass holds significance beyond trade. Discuss its implications for cultural diplomacy, regional development, and India-China relations.(250 words)

GS PAPER 5

Science and Technology

India’s Civil Liability for Nuclear Damage Act (CLNDA), 2010, was enacted to ensure prompt compensation for victims of nuclear accidents and to establish clear liability norms. However, the law’s unique supplier liability provisions — especially Sections 17(b) and 46 — continue to deter foreign suppliers from entering India’s nuclear energy market, leading to delays in strategic projects like Jaitapur and Kovvada. A possible move by the Indian government to ease these provisions reflects an attempt to reconcile investor confidence with public safety and legislative intent.

Key Provisions of the Law:

• Strict Liability of Operator:
  • Operators are held strictly liable up to ₹1,500 crore without needing to prove fault. Beyond this, the government may step in up to 300 million SDR (~₹2,300 crore).
• Right of Recourse (Section 17):
  • The operator can claim compensation from a supplier if:
    • The contract allows it (17a)
    • The incident results from intent to cause damage (17c)
    • There are latent or patent defects in supplied equipment (17b)
  • Section 46:
    • Does not limit other civil or criminal liability, raising concerns of unlimited exposure to tort or civil suits outside CLNDA.

Ambiguities and Challenges:

• Supplier Liability (17b):
  • India is the only country to impose statutory supplier liability, diverging from the international norm (CSC) where only the operator bears liability.
  • Creates uncertainty over how much insurance suppliers must carry.
  • Perceived overreach beyond global legal standards.
• Civil and Criminal Exposure (46):
  • While intended to allow additional remedies (e.g., criminal prosecution), it undermines legal certainty by potentially subjecting suppliers to unlimited liability under other laws — discouraging investment.
• Government Position vs Legal Text:
  • The government maintains that recourse is permissive, not mandatory.
  • Legal experts argue all sub-clauses (17a, 17b, 17c) are independently enforceable, creating legal ambiguity.
• Impact on Strategic Projects:
• Projects like Jaitapur (with France’s EDF) and Kovvada (with U.S. partners) have seen no movement, despite signed MoUs.
• Only Russia’s Kudankulam project, initiated before CLNDA, has progressed – highlighting investor hesitation post-2010.

Why India Introduced Supplier Liability:

• India’s unique approach stems from past industrial disasters- particularly the 1984 Bhopal Gas Tragedy, where corporate negligence and lack of accountability led to mass casualties and no significant reparations.
• Supplier liability was seen as a moral and sovereign imperative to ensure accountability, especially when foreign players are involved.

Implications of Proposed Easing:

• Positives:
  • May revive foreign interest in India’s nuclear sector, aligning with clean energy goals.
  • Facilitates technology transfer and diversification of energy sources.
• Concerns:
  • Risk of compromising victim compensation mechanisms.
  • May be viewed as dilution of accountability, if not carefully balanced.
  • Could lead to legal challenges if not backed by statutory amendment, especially if done only via executive clarification.

Conclusion:

• India’s nuclear liability regime reflects its historical emphasis on victim rights and public accountability. However, ambiguities in the law – especially around supplier exposure and overlapping liabilities – have hindered global partnerships in the nuclear energy sector. A well-calibrated reform, that ensures investor confidence without compromising public safety, is essential to unlock India’s civil nuclear potential in line with energy security and climate goals.

UPSC Mains Practice Question

Ques: India’s Civil Liability for Nuclear Damage Act, 2010, seeks to balance public safety with international obligations. Discuss the challenges posed by its supplier liability provisions in the context of India’s nuclear energy policy. (250 Words)

GS PAPER 6

Editorial Analysis

Context :

• India’s Bay of Bengal engagement has entered a complex phase. Despite commendable progress in maritime infrastructure and BIMSTEC integration, New Delhi’s recent decision to withdraw Bangladesh’s transshipment facility and restrict certain imports signals a shift in tone – from cooperative regionalism to a transactional assertion of strategic interests. This move risks unsettling regional partners and undermining India’s credibility as a benign regional leader.

Key Developments and Context:

• Withdrawal of Transshipment Facility to Bangladesh (April 2025):
  • Previously allowed Dhaka to route exports via Indian ports for global access.
  • Revoked citing port congestion, but perceived in Bangladesh as retaliation for Dhaka’s growing China ties and a remark about India’s northeastern states being “landlocked”.
• Import Restrictions on Bangladeshi Goods (May 2025):
  • Affects garments, plastics, and processed foods; now restricted to entry via seaports only, not land routes through Northeast India.
  • Seen as disproportionate and retaliatory, especially amid slowing global demand for Bangladesh’s exports.
• Regional Context – BIMSTEC Revitalisation:
  • India has led efforts to strengthen BIMSTEC and foster a rules-based, integrated regional economic architecture.
  • Initiatives like the BIMSTEC Maritime Transport Cooperation Agreement and Sagarmala aim to improve multimodal linkages and coastal trade.

Strategic and Diplomatic Tensions:

• Perceived Political Signalling:
  • India’s withdrawal of economic concessions is viewed as a strategic nudge to discourage Bangladesh’s increasing proximity to China and Pakistan.
• Blurring Lines Between Trade and Strategy:
  • What was once seen as neutral, shared infrastructure is now subject to political recalibration -unsettling smaller BIMSTEC members.
• Credibility at Stake:
  • While India has the best port infrastructure in the region, leadership depends on predictable, rules-based engagement, not unilateral action.
• Impact on Regional Trust:
  • Moves seen as coercive may prompt hedging strategies by neighbours — undermining the very connectivity ecosystem India aims to lead.

Implications for India’s Regional Ambitions:

• Positive Developments:
  • Port infrastructure in Visakhapatnam, Haldia, Paradip is expanding.
  • Coastal cargo movement and shipping incentives have boosted trade volumes.
• Challenges:
  • India’s actions are creating a perception that access is conditional on political alignment.
  • Could derail BIMSTEC’s evolving integration framework, especially the proposed Free Trade Agreement.

Way Forward:

• Reinstate or Replace with Rules-Based Access:
  • Reopening transshipment for Bangladesh with clear, rules-based criteria would signal a return to predictable and inclusive diplomacy.
• Decouple Strategic Irritations from Trade Facilitation:
  • Avoid using economic connectivity as leverage, especially in regional groupings where cooperation and consensus are the pillars.
• Enhance Regional Dialogue Platforms:
  • Expand confidence-building mechanisms within BIMSTEC to manage emerging frictions without economic fallout.

Conclusion:

• India’s maritime and regional leadership in the Bay of Bengal must be grounded not just in infrastructure and trade, but in predictability, inclusiveness, and trust. Using economic access as a strategic tool may offer short-term leverage, but risks long-term fragmentation of the very regional architecture India seeks to build. Balancing assertiveness with accommodation is essential if India is to be seen not merely as a powerful neighbour, but a responsible regional anchor.