Current Affairs — 11 June 2026

A New Phase in India-Nepal Relations

Nepal's new leadership under Balendra Shah is shifting from an emotionally charged "special relationship" framework with India towards one based on sovereign equality, economic pragmatism, and diplomatic dialogue. This shift comes against the backdrop of a long-standing boundary dispute over the Kalapani-Lipulekh-Limpiyadhura area.

The roots of this dispute go back to the Treaty of Sugauli of 1816, signed after the Anglo-Nepalese War, which fixed the Kali (Mahakali) River as Nepal's western boundary but did not clearly identify the river's source. Nepal claims the river originates at Limpiyadhura, which would place Kalapani, Lipulekh, and Limpiyadhura within its territory; it formalised this claim through a 2020 constitutional amendment and a redrawn political map. India maintains the river originates near Kalapani, treating the area as part of Pithoragarh district in Uttarakhand, which it administers and controls militarily. The region carries strategic weight because it lies close to China, and the Lipulekh Pass is an important route for trade and for the Kailash Mansarovar Yatra.

Recent developments suggest a more pragmatic phase: Nepal has agreed to export 10,000 MW of hydropower to India over the next decade, and Nepal's Foreign Minister's visit to India produced several outcomes. These include a Peer-to-Peer linkage connecting India's UPI with Nepal's National Payments Interface for real-time cross-border remittances, an MoU between Digital India Bhashini and Kathmandu University for a voice-first translation platform, the entry into force of a Mutual Legal Assistance Agreement in criminal matters, and the handover of 72 health facilities and 12 cultural heritage projects built under India's post-earthquake reconstruction programme.

From the UPSC Prelims perspective, this topic touches on India's "Neighbourhood First" policy, bilateral treaties such as the Kosi Agreement (1954), Gandak Agreement (1959), and the Mahakali Treaty (1996) covering the Pancheshwar Multipurpose Project, the Gorkha Regiment's roughly 32,000 Nepali soldiers in the Indian Army, the annual joint exercise Surya Kiran, and key connectivity projects such as the Jayanagar-Bijalpura-Bardibas rail line (Nepal's first broad-gauge line), the Motihari-Amlekhgunj petroleum pipeline (South Asia's first cross-border pipeline), and the Mechi Bridge linking West Bengal's Panitanki Bypass with Nepal. Students should also note Nepal's strategic role as a buffer state safeguarding the Siliguri Corridor, and the concern around China's Belt and Road Initiative projects such as the Pokhara International Airport.

Report on Datasets for State Finance Commissions

The Ministry of Panchayati Raj released a report identifying critical data gaps that weaken the functioning of State Finance Commissions, the constitutional bodies tasked with fiscal decentralisation to local governments.

The report finds that SFCs struggle with fragmented data across departments, making it difficult to track how much money actually reaches services like sanitation or roads. There is a severe shortage of trained accounting personnel at the Gram Panchayat level, leading to poor financial record-keeping. The 15th Finance Commission noted an average delay of 16 months in SFC report submissions, while the 16th Finance Commission found many SFC reports unusable due to inconsistent methodology, and recommended a constitutional amendment to remove the requirement that Central Finance Commission recommendations for local bodies be based on SFC reports.

Existing data sources each have limitations: the eGramSwaraj portal suffers from uneven data entry, the Panchayat Advancement Index is not yet structured for fiscal devolution, Census and SECC 2011 data is outdated, and CAG audit data lacks Gram Panchayat-level granularity.

Key recommendations include restructuring the Panchayat Advancement Index around needs, performance, and backwardness; building Gram Panchayat-level financial databases; requesting a CAG performance audit of the 73rd Constitutional Amendment's implementation; setting up permanent SFC Cells within state finance departments; adopting a common reporting format based on the 13th Finance Commission's template; and reviving the Local Statistics initiative through an expert group involving the Ministry of Panchayati Raj, MoSPI, the Ministry of Urban Development, and NITI Aayog.

For Prelims, this topic is anchored in Articles 243-I (constitution of SFCs to review Panchayat finances), 243-Y (SFC review of Municipalities), and Article 280 (Central Finance Commission's role in recommending support to local bodies based on SFC reports). The 73rd and 74th Constitutional Amendment Acts of 1992, which created the institutional basis for Panchayati Raj Institutions and Urban Local Bodies, are essential static linkages here.

RBI Holds Repo Rate and Lowers GDP Growth Forecast

In its June 2026 review, the RBI's Monetary Policy Committee unanimously kept the policy repo rate unchanged at 5.25% under the Liquidity Adjustment Facility, while revising India's FY27 real GDP growth forecast down to 6.6% from 6.9%, and raising the consumer inflation forecast by 50 basis points to 5.1%, with core inflation projected at 4.7%. The Standing Deposit Facility rate remains at 5.00%, the Marginal Standing Facility rate at 5.50%, and the Bank Rate at 5.50%. The committee retained its "Neutral" policy stance, which keeps it free to move rates in either direction depending on incoming data.

Key risks flagged include elevated crude oil prices, averaging around USD 110 per barrel during April-May 2026 due to international conflicts, which is raising input costs for plastics, chemicals, and base metals; and a forecast of a below-normal monsoon combined with emerging El Niño conditions, which could hurt agricultural output and rural demand.

To attract foreign capital and support the rupee, the government and RBI announced several measures. The Long-Term Capital Gains tax of 12.5% and income tax on interest earned by Foreign Portfolio Investors on government securities have been waived retroactively from 1st April 2026, after FPIs sold over Rs 2.6 lakh crore of Indian equities even as they remained net buyers of debt. The Fully Accessible Route for foreign investment in government securities has been expanded to include 15-year, 30-year, and 40-year bonds and Sovereign Green Bonds with no quantitative restrictions. General Route restrictions on FPI investments, such as concentration and security-wise exposure caps, have been removed, leaving only overall ceilings of 6% of outstanding central government securities and 2% of state government securities. Investment limits for NRIs, OCIs, and other persons resident outside India in listed equities have also been raised. The RBI will offer concessional forex swaps until 30th September 2026 to support external commercial borrowings by public sector undertakings, and will cover hedging costs for banks raising fresh FCNR(B) deposits until the same date. Separately, the time allowed for realising export proceeds has been reduced from 15 months back to 9 months to improve dollar liquidity.

For Prelims, remember the LAF corridor structure (SDF as floor, repo in the middle, MSF as ceiling), the meaning of a "Neutral" stance versus accommodative or hawkish stances, and the difference between the Fully Accessible Route and the General Route for foreign investment in government securities.

Infrastructure-Led Nation Building

A government progress report tracked twelve years of transformation in India's physical, financial, and digital infrastructure. Rail network electrification rose from about 20% before 2014 to 99.6% by March 2026, covering nearly 70,000 route kilometres. The indigenous train collision avoidance system, Kavach (Version 4.0), is now deployed across over 3,100 route km and on more than 4,200 locomotives, contributing to a sharp fall in train accidents. India's road network, at 63.73 lakh km, is the world's second-largest, with four-lane and above national highways expanding from about 18,400 km in 2014 to over 45,500 km by 2026. Under the Pradhan Mantri Gram Sadak Yojana, nearly all eligible rural habitations now have all-weather road connectivity.

In civil aviation, the number of operational airports has more than doubled since 2014, supported by the UDAN regional connectivity scheme, while the Digi Yatra facial recognition system is used by crores of passengers across major airports. India's metro network has grown to become the world's third-largest. Major port capacity has nearly doubled, cargo turnaround times have been roughly halved, and the number of operational national waterways has expanded dramatically.

On water, housing, and energy, rural tap water coverage under the Jal Jeevan Mission has reached close to 82% of households, PMAY-Urban and PMAY-Gramin have delivered large numbers of houses (with most urban units registered in women's names), the power supply deficit has nearly been eliminated, and LPG coverage now exceeds 100% of households (reflecting multiple connections per household in some cases). On digital infrastructure, internet connections have grown nearly fourfold, UPI now processes thousands of crores of transactions monthly and operates in several countries, and the PRAGATI platform has helped resolve delays in hundreds of large infrastructure projects.

Challenges that remain include fragmented approvals at the municipal and state level, difficult terrain in the Himalayas, underuse of public Wi-Fi hotspots due to cheap mobile data, and tribunal-related delays in land acquisition for highways and railways. The way forward includes expanding industrial hubs under the BHAVYA scheme, completing Kavach rollout, achieving universal rural tap water coverage, deepening Infrastructure Investment Trusts to mobilise capital, and extending UPI and DigiLocker internationally.

The Economics of Falling Net FDI in India

An economic analysis examined why India's net Foreign Direct Investment has fallen sharply even as gross inflows remain high. Net FDI dropped from a peak of $44.0 billion in 2020-21 to under $1 billion in 2024-25, recovering only mildly to $7.6 billion in 2025-26, even though gross inflows that year touched $94.6 billion.

The key distinction is between gross FDI, which measures total inflows, and net FDI, which subtracts outflows due to repatriation of capital, dividends, royalty payments, and disinvestment by foreign investors. Between 2022-23 and 2025-26, for every dollar of fresh equity coming in, around $1.50 flowed out, a ratio that has steadily worsened from about 56 cents per dollar in 2014-18 to 70 cents in 2018-22.

The analysis points to several underlying issues. Financial investors such as private equity, venture capital, and sovereign wealth funds now account for around 40% of effective inflows, comparable to traditional "real" FDI aimed at building productive assets. Large coordinated exits by such funds, like a major global investor's exit from an Indian company that turned an initial investment of a few hundred million dollars into a multi-billion-dollar payout, contribute to the outflow side. A significant share of gross inflows, around $40 billion between 2014-15 and 2025-26, reflects internal reorganisations, share swaps, and debt conversions rather than fresh capital. On the outbound side, a large share of India's outward FDI has gone into holding companies and special purpose vehicles in financial hubs such as Singapore and the UAE, raising questions about whether this represents genuine global expansion or capital flight. Royalty and intellectual property payments by multinationals have also drained tens of billions of dollars out of the country in recent years.

The way forward suggested includes shifting policy focus from the quantity of inflows to their quality, mandating clearer RBI reporting that separates genuine fresh equity from internal restructurings, aligning incentive schemes like the Production-Linked Incentive scheme to attract long-term manufacturing investment, tightening oversight of double tax treaty routes, and capping intra-corporate royalty payments.

The Pink Saheli Cards

Transgender persons in Delhi are reportedly facing difficulties obtaining 'Pink Saheli' smart cards, despite being officially recognised as beneficiaries of Delhi's free bus travel scheme. Pink Saheli is a smart-card-based scheme launched by the Delhi government in March 2025 for free travel on DTC and cluster buses for women and transgender persons. It replaces older paper-based tickets with a reusable digital card linked to identity records, with issuance tied to Aadhaar-based verification.

The scheme is significant because it formally treats transgender persons as equal beneficiaries of a public welfare programme, reducing financial barriers to mobility and improving access to education, employment, and healthcare. For Mains, this links to themes of social justice, inclusive governance, and the practical implementation gaps that often separate welfare policy design from delivery on the ground.

Foreign Currency Non-Resident (Bank) Deposits

The RBI has introduced a special arrangement to encourage commercial banks to raise fresh three-to-five-year Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. These are fixed-term foreign currency accounts that NRIs, OCIs, and Persons of Indian Origin can open in India, allowing them to retain savings in foreign currencies such as the US Dollar, Pound Sterling, Euro, Yen, Australian Dollar, or Canadian Dollar, rather than converting to rupees.

Under the new mechanism, a bank that receives such a deposit sells the foreign currency to the RBI weekly in lots of $1 million at the official FBIL Reference Rate, and agrees to buy it back at the same rate at maturity. Because the buyback happens at par, the RBI absorbs the forward premium, removing the bank's hedging cost. Interest earned on FCNR(B) deposits is fully exempt from Indian income tax for non-residents, and fresh deposits under this window are exempt from the Cash Reserve Ratio and Statutory Liquidity Ratio requirements, making them attractive for banks to mobilise. FCNR(B) deposits are part of India's broader NRI deposit base, which also includes rupee-denominated NRE and NRO accounts.

The Made in India Airbus C-295

The first domestically assembled Airbus C-295 military transport aircraft completed its maiden test flight from the Final Assembly Line in Vadodara, Gujarat. The C-295 is a twin-turboprop tactical transport aircraft meant to replace the Indian Air Force's ageing transport fleet, capable of operating in harsh and high-altitude conditions for roles ranging from paratrooper drops to electronic surveillance.

Under a contract for 56 aircraft, the first 16 are being delivered directly from Airbus's facility in Seville, Spain, while the remaining 40 are being manufactured in India through a partnership between Airbus Defence and Space and Tata Advanced Systems Limited. More than 85% of the structural components and final assembly of the India-made aircraft will be done domestically, including over 13,000 distinct parts, with 21 specialised aerospace manufacturing processes now certified in India. The aircraft has Short Take-Off and Landing capability suited to mountainous border regions and can be configured for troop transport, cargo, medical evacuation, disaster relief, and maritime surveillance roles. This marks the first large-scale military aircraft production by India's private sector.

The Disqualification of Rajya Sabha Candidature

The Rajya Sabha nomination of a senior Congress leader from Madhya Pradesh was rejected by the Returning Officer during candidate scrutiny, bringing attention to the legal framework governing disqualification from contesting for Parliament.

Article 102 of the Constitution lays out broad grounds for disqualification of members of either House, including holding an office of profit, being of unsound mind as declared by a court, or being an undischarged insolvent. The Representation of the People Act, 1951 provides detailed statutory grounds. Under Section 8, conviction for certain serious offences such as bribery, rape, corruption, or promoting communal hatred leads to immediate disqualification, while conviction for hoarding, profiteering, or food and drug adulteration with at least six months' imprisonment also disqualifies a person, as does any conviction resulting in two years or more of imprisonment, for the period of imprisonment plus six years. Section 8A covers disqualification for corrupt electoral practices like bribery or booth capturing. Other provisions cover dismissal from government service for corruption (Section 9), holding subsisting government contracts (Section 9A), holding managerial posts in government companies (Section 10), and failing to lodge election expense accounts (Section 10A). The Conduct of Elections Rules, 1961 require candidates to file a Form 26 affidavit disclosing criminal cases, assets, liabilities, education, and tax status; concealment of such information can also lead to rejection of nomination.

The GI-Tagged Tezpur Litchi

The Agricultural and Processed Food Products Export Development Authority facilitated the first international export of GI-tagged Tezpur Litchi from Assam to Dubai. Tezpur Litchi, grown in the Sonitpur district of Assam, is protected under India's Geographical Indication registry and is known for its bright red rind, sweet translucent pulp, and distinctive aroma. It thrives in the alluvial soils of the Brahmaputra basin under a humid subtropical climate with frost-free winters and warm, humid summers. The export has reportedly enabled farmers to earn about 10% higher prices than in domestic markets, illustrating how GI tagging and export facilitation can support farmer incomes from the North East.

The Sitapur 250 MW Solar-BESS Project

The Ministry of Defence has approved a 250 MW Solar Power Project with an integrated Battery Energy Storage System on around 850 acres of vacant defence land at the former Sitapur Cantonment in Uttar Pradesh, to be implemented by NTPC Limited through competitive bidding.

The project works as an integrated microgrid: solar panels generate electricity that is converted to usable AC power or stored in lithium-ion or sodium-ion battery banks when generation exceeds demand. A Battery Management System and Energy Management System monitor battery health and dispatch stored power during the night or cloudy periods, a process known as peak shaving or time-shifting. The project is significant for providing reliable, independent power to defence installations, reducing dependence on fossil-fuel generators, and productively using vacant defence land for renewable energy without affecting military operations.

Jordan and the West Asia Crisis

Iran's Islamic Revolutionary Guard Corps launched a barrage of ballistic missiles targeting a US-linked airbase in Jordan, raising concerns about the country's neutral foreign policy stance and regional airspace security.

Jordan is a constitutional monarchy in Southwest Asia, formerly under Ottoman control until 1918 and then a British mandate before becoming sovereign in 1946, with its capital at Amman. It shares borders with Syria, Iraq, Saudi Arabia, Israel, and the West Bank. Geographically, over 80% of Jordan is covered by the Great Syrian Desert in the east, while the Eastern Uplands form a limestone plateau containing Mount Ramm, the country's highest point. To the west lies the Jordan Valley, part of the Great Rift Valley, containing the Dead Sea, the lowest point on Earth's land surface at about 430 metres below sea level. The Jordan River drains into the Dead Sea, and the country's climate ranges from Mediterranean in the west to desert in the east, with chronic water scarcity. Missile strikes crossing Jordanian airspace test its neutral posture and could lead to flight rerouting and disruption of regional trade routes.

Other Notable Developments

The SAPLING Dialogue 2026, organised by the Ministry of Food Processing Industries with the World Bank Group in Ahmedabad, focused on advancing food processing for employment and sustainable growth in South Asia, aligning with the World Bank's AgriConnect initiative targeting 300 million farmers by 2030. A report released at the dialogue showed India's food processing levels rising from about 10% in 2016 to nearly 17% in 2023, with significant untapped potential in fruits, vegetables, and dairy.

M1xchange, an RBI-approved digital platform under the Trade Receivables Discounting System framework, helps MSMEs raise working capital by discounting invoices raised on large corporates and government buyers, with the risk of non-payment borne by financiers rather than MSMEs. Its new M1NXT ITFS platform in GIFT City is India's first International Trade Financing Services platform, connecting Indian MSMEs to global trade finance.

Kerala became the first state to integrate its HAWK (Hostile Activity Watch Kernel) wildlife crime management system with the judiciary through an e-court API, enabling real-time tracking of wildlife offence cases from initial reports to court verdicts. HAWK was developed by the Kerala Forest Department with the Wildlife Trust of India and has since been adopted by Karnataka, Tamil Nadu, and Odisha.

The government announced an interim allocation of about Rs 95,692 crore for VB-GRAM G (Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin), the scheme replacing MGNREGS from 1st July 2026. It guarantees 125 days of wage employment per rural household per year, with wages payable within 15 days, funded on a 60:40 Centre-State basis (90:10 for northeastern and Himalayan states, and fully centrally funded for Union Territories without legislatures), and allows states to declare a combined 60-day agricultural pause during peak sowing and harvesting seasons.

The National Disaster Management Authority has begun a drive to strengthen disaster preparedness across central ministries under the "Resilient India 2047" vision, guided by the Disaster Management Act, 2005. This involves hazard-specific plans under Section 35, where multiple ministries coordinate on a single hazard such as floods, and ministry-level plans under Section 37, where each ministry prepares for hazards relevant to its own functions. The NDMA, established under the same Act, is chaired ex-officio by the Prime Minister and has nine other members, one of whom serves as Vice-Chairperson.