For Admissions Contact @ 9133527733

Menu

Leave a Comment / By /

Topic – India-Nepal Economic Relations

Source: The Hindu

Q1. Examine how the Reserve Bank of India’s recent rupee-lending measures can reshape India–Nepal economic relations. Analyse their implications for bilateral trade, investment, and regional monetary stability. (15 marks, 250 words)

IntroductionIndia and Nepal share a unique economic and monetary relationship anchored in geography, open borders, and a long-standing currency peg — where the Nepalese rupee (NPR) remains fixed at 1.6 per Indian rupee (INR). In October 2025, the Reserve Bank of India (RBI) announced three policy initiatives to promote internationalisation of the INR, which carry strategic significance for India–Nepal economic cooperation. These measures not only expand financial linkages but also aim to stabilise Nepal’s fragile post-pandemic economy and deepen regional monetary integration.
Body
  • The RBI’s Rupee-Lending Measures
  • Significance for Nepal’s Financial and Industrial Revival
  • Strengthening Bilateral Trade and Investment Linkages
  • Macroeconomic and Monetary Implications
  • Way Forward
ConclusionThe RBI’s rupee-lending measures mark a quiet but transformative phase in India–Nepal economic diplomacy. By extending the reach of the Indian rupee, they reduce Nepal’s dollar dependence, stimulate its credit-starved industries, and strengthen bilateral trade integration. If implemented prudently with mutual safeguards, these initiatives can evolve into a model of regional financial cooperation, where shared stability and prosperity replace asymmetry and dependence in South Asia’s economic landscape.
UPSC SyllabusInternational Trade
Why was this question asked?Q. China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbour. [2017]
IntroductionIndia and Nepal share a unique economic and monetary relationship anchored in geography, open borders, and a long-standing currency peg — where the Nepalese rupee (NPR) remains fixed at 1.6 per Indian rupee (INR). In October 2025, the Reserve Bank of India (RBI) announced three policy initiatives to promote internationalisation of the INR, which carry strategic significance for India–Nepal economic cooperation. These measures not only expand financial linkages but also aim to stabilise Nepal’s fragile post-pandemic economy and deepen regional monetary integration.
BodyThe RBI’s Rupee-Lending Measures: A New Framework for Connectivity

 

  • Rupee lending to non-residents: Authorised Dealer (AD) banks in India can now lend Indian rupees to non-residents from Nepal, Bhutan, and Sri Lanka for cross-border transactions — a move enabling Nepalese businesses to access working capital directly from Indian financial institutions.
  • Special Rupee Vostro Accounts: Foreign banks in Nepal can now use INR Vostro accounts to invest in Indian corporate bonds and commercial papers, in addition to central government securities, strengthening capital linkages.
  • Transparent currency reference rate: A benchmark rate for INR vis-à-vis major trading currencies aims to facilitate INR-based trade settlements and reduce dependence on the U.S. dollar.
  • Together, these steps reflect India’s broader push to internationalise the rupee and embed South Asian economies within its financial ecosystem.

Significance for Nepal’s Financial and Industrial Revival

  • Nepal’s economy has faced post-COVID stagnation, weak industrial recovery, and low domestic credit availability.
  • Nepalese banks, often controlled by large business houses, remain risk-averse, constraining credit flow to MSMEs and export-oriented sectors.
  • INR-based lending can provide cheaper and more predictable financing for Nepalese industries, particularly in:
  • Textiles, edible oils, coffee, and jute, which dominate exports to India.
  • Value-addition ventures using Indian imports for re-export.
  • Reduced transaction costs and exchange rate stability can enhance Nepal’s production capacity, employment, and export competitiveness.

Strengthening Bilateral Trade and Investment Linkages

  • India accounts for 65% of Nepal’s total international trade, with bilateral trade exceeding $9 billion (India’s exports: ~$8 billion; Nepal’s exports: ~$1 billion).
  • Indian firms contribute 33% of Nepal’s FDI stock (~$670 million) across energy, banking, telecom, and manufacturing.
  • Greater INR liquidity will:
  • Ease trade settlements and reduce forex stress.
  • Encourage joint ventures and integration of Nepalese supply chains with Indian manufacturing.
  • Foster cross-border investment in hydropower and services under the framework of the India–Nepal Joint Commission on Economic Cooperation.

Macroeconomic and Monetary Implications

  • The INR–NPR peg at 1:1.6 has long insulated Nepal from severe currency volatility.
  • INR-denominated trade and investment will:
  • Reduce dependence on the U.S. dollar, mitigating Nepal’s current account deficit pressures.
  • Stabilise forex reserves and protect domestic purchasing power.
  • Strengthen regional monetary stability by promoting a South Asian rupee zone concept in practice.
  • However, the Nepal Rastra Bank (NRB) must ensure robust prudential norms, borrower screening, and regulatory alignment to prevent external vulnerabilities.

Way Forward

  • Institutional coordination: RBI and NRB should establish a joint technical task force for compliance, currency management, and anti-money laundering oversight.
  • Policy synergy: Align with India’s External Sector Strategy (2023) and South Asia Subregional Economic Cooperation (SASEC) financial integration framework.
  • Infrastructure for financial access: Encourage digital cross-border payment systems and fintech-driven rupee settlements, complementing India’s Unified Payments Interface (UPI) expansion into Nepal.
  • Inclusive financing: Prioritise SME borrowers and cooperative sectors in Nepal to maximise employment generation.
  • Monetary prudence: Ensure transparency and macro-stability through periodic RBI–NRB consultations and sovereign guarantee mechanisms for large projects.
ConclusionThe RBI’s rupee-lending measures mark a quiet but transformative phase in India–Nepal economic diplomacy. By extending the reach of the Indian rupee, they reduce Nepal’s dollar dependence, stimulate its credit-starved industries, and strengthen bilateral trade integration. If implemented prudently with mutual safeguards, these initiatives can evolve into a model of regional financial cooperation, where shared stability and prosperity replace asymmetry and dependence in South Asia’s economic landscape.

Topic – India’s Scientific Awards

Source: The Hindu

Q 2. The Rashtriya Vigyan Puraskar (RVP) aims to enhance the prestige of India’s scientific honours. Critically examine how maintaining a ‘hands-off’ government approach can ensure credibility, autonomy, and meritocracy in recognising scientific excellence. (15 marks, 250 words)

IntroductionScience advances through freedom, peer review, and the courage to challenge authority. The Rashtriya Vigyan Puraskar (RVP), instituted in 2023, sought to consolidate multiple departmental awards into a single national framework to celebrate scientific excellence. However, the 2024 and 2025 award cycles have been marred by delays, lack of transparency, and perceptions of ministerial discretion. For these honours to command respect, the government must act not as the arbiter of scientific worth but as a facilitator of fair, peer-driven recognition.
Body
  • Objectives and Design of the RVP
  • Centralisation and Concerns over Executive Influence
  • Autonomy and Peer Recognition as the Foundation of Scientific Credibility
  • Transparency and Accountability as Safeguards
  • Way Forward
ConclusionThe Rashtriya Vigyan Puraskar reflects India’s ambition to dignify science as a pillar of nation-building. Yet prestige cannot be legislated; it must be earned through credibility. A hands-off yet accountable government—guided by open governance principles and global best practices—will ensure that the RVP remains a beacon of scientific excellence, rewarding innovation, not ideology.
UPSC SyllabusScience and technology in India
Why was this question asked?Q. Scientific research in Indian universities is declining, because a career in science is not as attractive as our business operations, engineering or administration, and the universities are becoming consumer oriented. Critically comment. (2014)
IntroductionScience advances through freedom, peer review, and the courage to challenge authority. The Rashtriya Vigyan Puraskar (RVP), instituted in 2023, sought to consolidate multiple departmental awards into a single national framework to celebrate scientific excellence. However, the 2024 and 2025 award cycles have been marred by delays, lack of transparency, and perceptions of ministerial discretion. For these honours to command respect, the government must act not as the arbiter of scientific worth but as a facilitator of fair, peer-driven recognition.
BodyObjectives and Design of the RVP

 

  • The RVP features four categories — Vigyan Ratna (lifetime achievement), Vigyan Shri (recent distinguished work), Vigyan Yuva–Shanti Swarup Bhatnagar (scientists under 45 years), and Vigyan Team Award (collaborative innovation).
  • Conceived after a 2022 inter-ministerial review, the scheme aimed to raise the stature of science awards to the level of the Padma series, replacing cash incentives with symbolic prestige.
  • It consolidated over 300 departmental awards under one umbrella to eliminate duplication.
  • Yet, centralisation brought the risk of bureaucratic control and loss of peer autonomy that earlier characterised awards such as the Shanti Swarup Bhatnagar Prize.

Centralisation and Concerns over Executive Influence

  • The Rashtriya Vigyan Puraskar Committee (RVPC), chaired by the Principal Scientific Adviser (PSA), recommends awardees to the Minister of Science and Technology.
  • The absence of clarity on whether ministerial approval is merely procedural or discretionary raises doubts about independence.
  • Reports of scientists being informed and later dropped have deepened scepticism.
  • Such opacity risks politicising recognition and weakening morale in the research ecosystem.
    In effect, what was meant to be a reform for coherence risks becoming a mechanism of centralised control.

Autonomy and Peer Recognition as the Foundation of Scientific Credibility

  • Scientific recognition must arise from peer judgment, not administrative endorsement.
  • Autonomy ensures that innovation, dissent, and criticism of government policy coexist within the scientific temper.
  • UNESCO’s Recommendation on Science and Scientific Researchers (2017) stresses independence of research evaluation as essential to integrity.
  • Global parallels such as the Royal Society Fellowships (UK) and National Academy of Sciences Awards (USA) demonstrate that state funding can coexist with complete professional self-governance.

Transparency and Accountability as Safeguards

  • Transparent publication of eligibility criteria, timelines, and reasoning enhances credibility.
  • Establishing a permanent secretariat under the PSA—rather than ministerial staff—can depoliticise administration.
  • Periodic audits by academies such as INSA, IASc, and NASI would ensure procedural integrity and diversity.
  • Public reporting of gender and regional representation would align with STIP 2020 draft goals of inclusivity and open science.

Way Forward

  • Adopt NITI Aayog’s “National Innovation and Science Governance Framework (2022)”, which advocates independent oversight of research evaluation bodies.
  • Implement UNESCO’s 2021 “Open Science Recommendations” to make award data, nominations, and criteria publicly available.
  • Constitute an Independent Science Awards Council (ISAC) with representation from national academies, akin to the Election Commission model, to separate executive sanction from evaluation.
  • Integrate periodic review under STIP 2020 to ensure alignment with ethics, diversity, and transparency benchmarks.
  • Publish an annual Science Recognition Report, similar to the UK’s Research Excellence Framework (REF), mapping selection metrics and impact indicators.
  • These steps would institutionalise transparency, guarantee peer autonomy, and make the awards immune to transient political pressures.
ConclusionThe Rashtriya Vigyan Puraskar reflects India’s ambition to dignify science as a pillar of nation-building. Yet prestige cannot be legislated; it must be earned through credibility. A hands-off yet accountable government—guided by open governance principles and global best practices—will ensure that the RVP remains a beacon of scientific excellence, rewarding innovation, not ideology.
UPSC CARE Mains Practice 29th October 2025
UPSC CARE Mains Practice 24th october 2025
Scroll to Top