Mains Practice Questions for the Day
- Q. “Defending the rupee and allowing it to depreciate freely both have limitations.” Discuss in the context of India’s external sector challenges.
- Q. Kerala’s ageing population shows both the success and the challenge of human development. Discuss the need for a dedicated elderly welfare policy in India.
Q. “Defending the rupee and allowing it to depreciate freely both have limitations.” Discuss in the context of India’s external sector challenges.
(UPSC GS Paper III: Indian Economy, external sector)
Introduction:
The value of the rupee is determined by the demand and supply of rupees and foreign currencies, especially the US dollar. Recent pressure on the rupee has revived the debate on whether the Reserve Bank of India should defend the rupee through forex intervention or allow it to find its market level. India follows a managed float exchange rate system, where RBI does not fix a particular exchange rate but intervenes to prevent excessive volatility.
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Why Defending the Rupee is Important
- Financial stability: Sharp exchange rate movements can create uncertainty for importers, exporters, banks and investors.
- Control over imported inflation: A sudden fall in the rupee can make crude oil, fertilisers, edible oils and electronic imports costlier.
- Investor confidence: Orderly currency movement gives confidence to foreign investors.
- Protection of consumers: Rupee depreciation increases the cost of foreign education, travel and imported goods.
Limitations of Defending the Rupee
- Forex reserves are limited: RBI cannot continuously sell dollars because reserves are needed for essential imports.
- Temporary solution: Intervention can reduce volatility but cannot solve weak exports, high imports or capital outflows.
- Quality of reserves: A large part of India’s forex comes through foreign investment, which can be withdrawn quickly.
- Opportunity cost: Excessive defence may reduce reserve adequacy and external confidence.
Why Free Depreciation May Also be Risky
- Exports may not rise automatically: Many Indian exports depend on imported inputs. A weaker rupee increases their input cost.
- India is a price-taker: In sectors like textiles, global buyers may force Indian exporters to reduce dollar prices.
- Depreciation spiral: Importers may buy more dollars expecting further depreciation, while exporters may delay dollar receipts.
- Capital outflows: Foreign investors may avoid India if rupee depreciation reduces their dollar returns.
- Inflation risk: Costlier imports may raise domestic inflation.
Way Forward
India needs a balanced exchange rate strategy. RBI should intervene only to prevent disorderly movements, not to defend an artificial level. The government should focus on improving export competitiveness, reducing import dependence, strengthening manufacturing, attracting stable long-term investments, and maintaining macroeconomic stability.
Conclusion:
Neither excessive defence nor complete free fall of the rupee is suitable for India. A stable rupee requires strong fundamentals, competitive exports, manageable imports and investor confidence. Therefore, India’s exchange rate policy must combine RBI’s short-term market management with long-term structural reforms in the external sector.
Q. Kerala’s ageing population shows both the success and the challenge of human development. Discuss the need for a dedicated elderly welfare policy in India.
(UPSC GS Paper II: Governance, Welfare schemes for vulnerable sections, health, social justice)
Introduction:
Kerala has announced a separate department for the welfare of senior citizens, making it one of the first such initiatives in India. The move reflects Kerala’s advanced stage of demographic transition, where low fertility, high life expectancy and migration have increased the share of the elderly. Kerala’s elderly population is expected to rise sharply in the coming decades, making elderly welfare a major governance challenge.
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Ageing as a Sign of Human Development
- High life expectancy: Kerala’s strong public health system has helped people live longer.
- Low fertility rate: Kerala’s TFR is below the replacement level, showing better education, women’s empowerment and healthcare access.
- Better social indicators: Literacy, health awareness and welfare schemes have improved survival rates.
- Demographic maturity: Kerala’s population pattern is similar to many developed societies.
Challenges Created by Ageing
- Healthcare burden: More elderly people require treatment for chronic diseases such as diabetes, hypertension, arthritis, dementia and cardiovascular problems.
- Old age dependency: A rising old age dependency ratio increases pressure on working-age people and welfare systems.
- Elderly isolation: Migration of youth has left many aged parents living alone.
- Feminisation of ageing: Elderly women, especially widows, face higher risks of poverty, loneliness and poor health.
- Care workforce shortage: Kerala needs more geriatricians, trained nurses, physiotherapists and caregivers.
- Financial insecurity: Many elderly people depend on pensions or continue to work due to lack of stable income.
Need for Dedicated Elderly Welfare Policy
- Focused governance: A separate department can coordinate pensions, health services, legal protection and community care.
- Geriatric healthcare: Public hospitals need elderly-friendly services, dementia care, palliative care and rehabilitation.
- Community-based support: Local bodies, NGOs and self-help groups can provide home care, daycare and social support.
- Care economy: Training caregivers can create employment while meeting elderly care needs.
- Legal protection: Senior citizens need protection from neglect, abuse and property-related exploitation.
Way Forward
India should prepare a national ageing strategy with State-specific plans. Health systems must include geriatric departments, telemedicine, home-based care and mental health services. Social pensions should be strengthened and linked with inflation. Urban and rural planning should include elderly-friendly transport, housing and public spaces. Special support must be provided to elderly women, persons with disabilities and senior citizens living alone.
Conclusion:
Kerala’s experience shows that ageing is both a result of development and a test of governance. India must move from a family-dependent elderly care model to a rights-based and community-supported model. A dedicated elderly welfare policy can ensure dignity, security and active ageing for senior citizens.
